203248--3/1/2007--SOUTHERN_UNION

related topics

{gas, price, oil}

{capital, credit, financial}

{operation, natural, condition}

{financial, litigation, operation}

{cost, regulation, environmental}

{investment, property, distribution}

{acquisition, growth, future}

{control, financial, internal}

{customer, product, revenue}

RISKS THAT RELATE TO SOUTHERN UNION Southern Union has substantial debt and depends on its ability to access the capital markets. Credit ratings downgrades would increase the Company s financing costs and limit its ability to access the capital markets. The Company s growth strategy entails risk for investors. The Company depends on distributions from its subsidiaries and joint ventures to meet its needs. The Company is subject to operating risks. The Company is subject to extensive federal, state and local laws and regulations regulating the environmental aspects of its business that may increase its costs of operation, expose it to environmental liabilities and require it to make material unbudgeted expenditures. Terrorist attacks, such as the attacks that occurred on September 11, 2001, have resulted in increased costs, and the consequences of the War on Terror and the Iraq conflict may adversely impact the Company s results of operations. Service may challenge the like-kind exchange treatment the Company has taken or expects to take. The success of the pipeline and gathering and processing businesses depends, in part, on factors beyond the Company s control. The success of the pipeline and gathering and processing businesses depends on the continued development of additional natural gas reserves in the vicinity of their facilities and their ability to access additional reserves to offset the natural decline from existing wells connected to their systems. The pipeline and gathering and processing business revenues are generated under contracts that must be renegotiated periodically. RISKS THAT RELATE TO THE COMPANY S TRANSPORTATION AND STORAGE BUSINESS The Company s transportation and storage business is highly regulated. The pipeline businesses are subject to competition. Substantial risks are involved in operating a natural gas pipeline system. Fluctuations in energy commodity prices could adversely affect the pipeline businesses. The pipeline businesses are dependent on a small number of customers for a significant percentage of their sales. The Company is exposed to the credit risk of its transportation and storage customers in the ordinary course of business. RISKS THAT RELATE TO THE COMPANY S NATURAL GAS GATHERING AND PROCESSING BUSINESS The Company s natural gas gathering and processing business is unregulated. The Company s natural gas gathering and processing business is subject to competition. The Company s profit margin in the natural gas gathering and processing business is highly dependent on energy commodity prices. Operational risks are involved in operating a natural gas gathering and processing business. The Company s natural gas gathering and processing business accepts some credit risk in dealing with customers. The inability to continue to access independently owned and publicly owned lands could adversely affect the Company s ability to operate and/or expand its natural gas gathering and processing business. RISKS THAT RELATE TO THE COMPANY S DISTRIBUTION BUSINESS The distribution business is highly regulated and the Company s revenues, operating results and financial condition may fluctuate with the distribution business ability to achieve timely and effective rate relief from state regulators. The distribution business operating results and liquidity needs are seasonal in nature and may fluctuate based on weather conditions and natural gas prices. Operational risks are involved in operating a natural gas distribution business. CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

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203248--3/1/2007--SOUTHERN_UNION_CO