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Kinder Morgan Paying $300M for Half-Stake in El Paso JV

To give Kinder Morgan Inc. (KMI) complete control of a joint venture (JV) in which merger partner El Paso Corp. now owns one-half, its partnership on Wednesday agreed to buy a 50% interest in the Altamont gathering and processing system in Utah's Uinta Basin, as well as the Camino Real Gathering System in the Eagle Ford Shale in Texas.

Kinder Morgan Energy Partners LP (KMP) agreed to pay $300 million in common units for the half-stake to an investment group affiliated with Kohlberg Kravis Roberts & Co. LP (KKR). KMI is acquiring El Paso in a $38 billion buyout due to close by the end of May (see Shale Daily, Oct. 18, 2011). KMP's deal with KKR is expected to close subsequent to the buyout's completion, and once both of the transactions are completed, KMI would have sole ownership of the JV -- 50% at KMP and 50% at KMI.

"Today's transaction with Kinder Morgan reflects the strategic investments made by the partnership in both the Altamont and the Camino Real systems, with both of these assets benefiting from attractive long-term fundamentals," said KKR's Marc Lipschultz, global head of energy and infrastructure.

With more than 1,100 miles of pipeline infrastructure, the Altamont system includes more than 450 well connections with producers and operates a processing plant with 60 MMcf/d of design capacity and a 5,600 b/d natural gas liquids fractionator. The Camino Real Gathering System has 150 MMcf/d of gas gathering capacity and 110,000 b/d of oil gathering capacity.

KKR and El Paso agreed in 2010 to work together on the Camino Real Pipeline project, and KKR agreed to acquire a half stake in the Altamont system for $125 million (see Daily GPI, Dec. 8, 2010).

The announcement comes two months after KMP and Martin Midstream Partners LP formed a JV to develop a multi-commodity rail terminal in Pecos, TX, to serve oil and gas producers in the Permian Basin of West Texas (see Shale Daily, Feb. 28).

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