KMI Nears End of Massive Asset Divestiture Program
Kinder Morgan Inc. (KMI) transferred the 2,600-mile Kinder
Morgan Texas Pipeline (KMP) system and several Rocky Mountain
region gathering and treating assets to Kinder Morgan Energy
Partners last week for $300 million, which nearly wraps up the
massive asset divestiture program KMI started last year following
its merger with KN Energy.
The largest asset to be contributed is the former MidCon Texas
pipeline, a system that extends from South Texas to Houston along
the Texas Gulf Coast. The other assets include the Casper and
Douglas Gas Gathering and Processing Systems, KMI's 50% interest in
Coyote Gas Treating and KMI's 25% interest in Thunder Creek Gas
Services. As consideration for the assets, KMI will receive $300
million, 50% in cash and 50% in KMP partnership units. KMI expects
the transaction to be completed in the fourth quarter.
"This transaction represents a true win-win for both KMI and
KMP," said Kinder Morgan CEO Richard Kinder. "It is expected to be
accretive to cash available for distribution to KMP's unitholders
by between 5-10 cents in 2001."
Kinder Morgan Texas Pipeline accounts for about two-thirds of
the EBITDA of the transferred assets. "As we previously announced,
we firmed up several large long term firm contracts on this system,
which now leads to a very stable cash flow, but also a cash flow
that has some nice growth potential as more and more electric
generation load comes on line along the Gulf Coast, which is the
primary market served by Kinder Morgan Texas.
"The other three assets are good sets operationally with other
KMP assets," Kinder added during a conference call. "The
Casper-Douglas system gathers and treats gas that is then shipped
the Kinder Morgan Interstate system, which we already transferred
to KMP... Thunder Creek is really the same thing, except it has a
more rapid growth profile. It transports gas out of the Powder
River Basin, which as most of you know is a very rapidly growing
producing area in Wyoming, down to Kinder Morgan Interstate. The
final asset, Coyote Gulch, is the facility which removes excess CO2
from the gas gathered by our red cedar gathering system - we own
49% of that at KMP, and the Southern Ute Indian tribe owns the
other 51%. That's a very profitable gathering system moving over
600 MMcf/d in the part of the San Juan Basin that lies in
Kinder noted that because the mix of consideration paid will
include equity issued to KMI, it will not be necessary to raise
funds for the transaction via a public offering of KMP units. "KMI
will also benefit from the transaction, as it will be able to
reduce its debt by $150 million," Kinder said. "Additionally, the
transaction is expected to be modestly accretive to KMI's earnings
per share in 2001. By increasing its stake in the master limited
partnership, KMI will enjoy greater participation in the expected
future growth of KMP." KMI holds about a 21% share of KMP.
Upon closing of this latest transfer, KMP will have completed in
excess of $600 million of acquisitions in 2000. In total, KMI's
asset contribution to KMP has reached more than $1 billion, far
exceeding the original goal of $500 million stipulated when Kinder
Morgan merged with KN Energy last July.
"We have less than $50 million of assets left in discontinued
operations, and we expect to complete the rest of the divestiture
program within the next few weeks," Kinder said.
He said despite the large amount of acquisitions already this
year for KMP, the company should make "significant additional
acquisitions by KMP between now and year-end 2000."