Southern Union Reports Improved First Quarter Earnings; Investor Call & Webcast Scheduled for Today at 2 P.M. ET

Business Wire, May 10, 2006

HOUSTON -- Southern Union Company (NYSE: SUG):

--Earnings from continuing operations of $73.4 million up 30 percent

--Earnings per share from continuing operations of 60 cents up 25 percent

--Increase driven by interstate pipeline segment and midstream business

Southern Union Company (NYSE: SUG) today reported earnings from continuing operations of $73.4 million ($.60 per diluted share) on operating revenues of $547.2 million for the quarter ended March 31, 2006, compared with earnings from continuing operations of $56.4 million ($.48 per diluted share) on operating revenues of $452.1 million for the comparable 2005 period. For the same periods, net earnings available for common shareholders was $93.6 million ($.82 per diluted share) in 2006 compared with $87.9 million ($.81 per diluted share) in 2005.

Earnings from discontinued operations relate to the Company's planned sales of its Pennsylvania and Rhode Island natural gas distribution businesses announced earlier this year. Contracts to sell the Pennsylvania and Rhode Island assets were entered into in early 2006. The sales are expected to close during the third quarter of 2006.

The increase in earnings from continuing operations was driven primarily by improvement in Southern Union's transportation and storage segment as well as the acquisition of the Sid Richardson Energy Services business on March 1, 2006, partially offset by weaker results in its ongoing distribution segment. The Sid Richardson entities have been renamed and are operating as Southern Union Gas Services. Southern Union's transportation segment, including its investment in CCE Holdings, LLC ("CCEH"), recorded earnings before interest and taxes ("EBIT") of $86.8 million for the quarter ended March 31, 2006, compared with $78.2 million for the same period in 2005. This improvement was primarily due to increased liquefied natural gas ("LNG") terminalling revenue and higher pipeline reservation revenues coupled with a reduction in operating expenses. Southern Union Gas Services, for one month of operations, contributed EBIT of $7.1 million. The Company recorded EBIT from continuing operations in its distribution segment of $30.0 million for the quarter as compared to $35.3 million in 2005. This decrease was primarily due to warmer weather across its service territories during the quarter.

"The first quarter of 2006 reflected a transition period in which we purchased and began integration of our new midstream business and moved two of our distribution platforms into discontinued operations. Even after a short period of ownership, we are excited about the significant growth opportunities and strong cash flow generation that Southern Union Gas Services will provide to our portfolio of energy infrastructure assets. We are also optimistic that our recently filed rate case in Missouri will help Missouri Gas Energy earn a fair rate of return for our shareholders," said George L. Lindemann, chairman, president and CEO.

Key Factors Impacting First Quarter 2006 Performance Relative to Prior Year

--For the quarter ended March 31, 2006, EBIT for the transportation and storage segment, excluding earnings from unconsolidated investments, increased $12.4 million. A significant contributor to the improved results was a $6.3 million increase in LNG terminalling revenue primarily due to the expanded vaporization capacity that went into service at the Trunkline LNG Lake Charles, LA facility in September 2005. Another key contributor was increased transportation and storage revenue of $1.3 million, primarily comprised of $4.1 million of higher average reservation rates, partially offset by $1.4 million in hurricane related impacts and a $1.2 million decrease in parking revenues. The segment also benefited from a $3.8 million net reduction in operating, maintenance and general expenses.

--Earnings from unconsolidated investments, primarily the Company's investment in CCEH, decreased $3.8 million year over year. The decrease was due to lower equity earnings of $1.3 million related to CCEH's equity investment in Citrus Corp. due primarily to higher depreciation expense. In addition Transwestern Pipeline realized lower capitalized equity cost during construction of $1.1 million due to the completion of the San Juan lateral in May 2005, higher depreciation of $722,000 primarily related to the San Juan expansion and approximately $568,000 of increased interest expense due to higher LIBOR rates.

--The gathering and processing segment contributed $7.1 million of EBIT since its inclusion upon the closing of the Sid Richardson Energy Services acquisition on March 1, 2006. Operating cash flow for the segment, which is calculated as earnings before interest and taxes, plus depreciation expense, plus any cash settlement related to the Company's put options, less any other non-cash items was $18.1 million for the month. The gathering and processing segment is comprised of an integrated network of natural gas and natural gas liquids pipelines and treating and processing facilities located in West Texas and Southeast New Mexico.