Kinder Morgan Energy Partners LP (KMP) has completed the acquisition of 100% of Tennessee Gas Pipeline (TGP) and a 50% interest in El Paso Natural Gas (EPNG) pipeline from Kinder Morgan Inc. (KMI) for $6.22 billion, KMP said Monday.
The deal includes about $1.8 billion in assumed debt at TGP and $560 million of proportional debt at EPNG. KMP said previously that KMI would offer to sell (drop down) the 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 its $38 billion acquisition of El Paso Corp. (see Daily GPI, April 20, May 25). The drop down was announced just last week (see Daily GPI, Aug. 8).
KMP said it expects that the combination of the divestitures and the purchase of the assets from KMI will be slightly accretive to its distributable cash flow in 2012 "and nicely accretive thereafter."
KMP purchased the assets at about eight times 2012 earnings before interest, taxes, depreciation and amortization (EBITDA) and said it 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 planned to fund 10% of the transaction value, net of debt assumed, with KMP units that will be issued to KMI at closing valued at $387 million. The remaining value is expected to be funded with borrowings under a new $2 billion credit facility, and equity and debt issuances.
The 13,900-mile TGP system, which transports natural gas from Louisiana, the Gulf of Mexico and south Texas to the northeastern United States, has a design capacity of about 7.5 Bcf/d. EPNG, a 10,200-mile pipeline system with a design capacity of about 5.6 Bcf/d, transports gas from the San Juan, Permian and Anadarko basins to Texas, northern Mexico, California and other western states. The two pipeline systems combined have more than 200 Bcf of working natural gas storage capacity.
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