Kinder Morgan Energy Partners, L.P. (NYSE: KMP), today announced that it
will acquire 100 percent of Tennessee Gas Pipeline (TGP) and a 50
percent interest in El Paso Natural Gas (EPNG) pipeline from Kinder
Morgan, Inc. (NYSE: KMI) for approximately $6.22 billion, including
about $1.8 billion in assumed debt at TGP and approximately $560 million
of proportional debt at EPNG. The transaction, which is expected to
close this month and be effective Aug. 1, was approved by the
independent members of the boards of directors of both KMI and Kinder
Morgan Management, LLC (NYSE: KMR) following the receipt by each board
of separate fairness opinions from different investment banks.
The company previously announced that KMI would offer to sell (drop
down) these assets to KMP to more than replace cash flow from certain
assets KMP is divesting pursuant to an agreement KMI reached with the
Federal Trade Commission in order to complete the El Paso Corporation
acquisition. KMP expects to complete the divestiture process during the
third quarter of 2012. It is anticipated that the combination of the
divestitures and the dropdowns will be slightly accretive to KMP’s
distributable cash flow in 2012 and nicely accretive thereafter.
“We are delighted to announce the drop down of two premier natural gas
pipelines, which will generate substantial, stable cash flow to KMP and
its unitholders for many years to come,” said Kinder Morgan Chairman and
CEO Richard D. Kinder. “TGP serves the Northeast and has access to the
growing Marcellus and Utica shale plays, while EPNG serves much of the
West, including southern California, Arizona and northern Mexico. A
number of expansion projects are already underway on both of these
pipeline systems (see July 18, 2012, KMP earnings release) and we are
pursuing additional opportunities. This is a great transaction for both
KMI and KMP. KMP is purchasing world-class assets with tremendous growth
opportunities at an attractive price, and KMI is reducing its debt
outstanding and continuing to participate in the cash flows from the
assets through its general and limited partner interests in KMP.”
KMP is purchasing the assets at about eight times 2012 EBITDA and
expects that the purchase price will be an even lower multiple of 2013
EBITDA, given the full-year benefit of cost savings and expansion
projects. KMP plans to fund 10 percent of the transaction value, net of
debt assumed, with KMP units that will be issued to KMI at closing
valued at approximately $387 million. The remaining value is expected to
be funded with borrowings under a new $2.0 billion credit facility, and
equity and debt issuances. Any issuances of equity or debt post closing
of this transaction, as well as proceeds from the assets to be divested
that were noted above, will be used to repay the credit facility. KMI
intends to use the proceeds from the drop-down sales to reduce debt.
TGP is a 13,900-mile pipeline system with a design capacity of about 7.5
billion cubic feet (Bcf) per day. It transports natural gas from
Louisiana, the Gulf of Mexico and south Texas to the northeastern United
States, including the metropolitan areas of New York City and Boston.
EPNG is a 10,200-mile pipeline system with a design capacity of about
5.6 Bcf per day. It transports natural gas from the San Juan, Permian
and Anadarko basins to California, other western states, Texas and
northern Mexico. Combined, TGP and EPNG have more than 200 Bcf of
working natural gas storage capacity.
Kinder Morgan Energy Partners, L.P. (NYSE: KMP) is a leading pipeline
transportation and energy storage company and one of the largest
publicly traded pipeline limited partnerships in America. It owns an
interest in or operates approximately 29,000 miles of pipelines and 180
terminals. The general partner of KMP is owned by Kinder Morgan, Inc.
(NYSE: KMI). Kinder Morgan is the largest midstream and the third
largest energy company in North America with a combined enterprise value
of approximately $100 billion. It owns an interest in or operates
approximately 75,000 miles of pipelines and 180 terminals. Its pipelines
transport natural gas, gasoline, crude oil, CO2 and other products, and
its terminals store petroleum products and chemicals and handle such
products as ethanol, coal, petroleum coke and steel. KMI owns the
general partner interest of KMP and El Paso Pipeline Partners, L.P.
(NYSE: EPB), along with limited partner interests in KMP, Kinder Morgan
Management, LLC (NYSE: KMR) and EPB. For more information please visit www.kindermorgan.com.
This news release includes forward-looking statements. Although
Kinder Morgan believes that its expectations are based on reasonable
assumptions, it can give no assurance that such assumptions will
materialize. Important factors that could cause actual results to differ
materially from those in the forward-looking statements herein are
enumerated in Kinder Morgan’s Forms 10-K and 10-Q as filed with the
Securities and Exchange Commission.