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Kinder Morgan Buys Pipe, Reports Huge Q3 Growth

Kinder Morgan Buys Pipe, Reports Huge Q3 Growth

Kinder Morgan Energy Partners LP has picked up a 32.5% stake in the Cochin Pipeline System from NOVA Chemical Corp. The 1,900 mile, 12-inch pipeline operates in the Canadian sedimentary basin between Fort Saskatchewan, AL and Sarnia, ON, carrying high vapor pressure ethane, ethylene, propane, butane and natural gas liquids to the Midwestern U.S. and eastern Canadian markets.

The Cochin Pipeline transverses three Canadian provinces and seven U.S. states, with an estimated system capacity of 112,000 barrels a day. Formed in the late 1970s, the system is a joint venture of BP, Conoco, Shell and NOVA. NOVA, a commodity chemical company, had recently increased its share in the pipeline when it purchased assets from Dow Chemicals Canada Inc., but said at the time that it did not intend the purchase to be long term. The monetary details of the sale to KMI were not disclosed.

The purchase is still subject to rights of first refusal from the other Cochin Pipeline owners, but pending regulatory approval, the acquisition is expected to be immediately accretive to cash available for distribution to KMP shareholders. Based in Houston, KMP said the acquisition would give the company "a foothold in the important western Canadian sedimentary basin, which will play an integral role relative to the future supply of natural gas and gas liquids in North America." NOVA will continue to hold a 20% interest in the pipeline after the sale.

In this year alone, KMP has purchased more than $750 million in assets. Officials said "additional acquisitions" are scheduled before the end of the year.

"We're excited to be acquiring a significant interest in the Cochin Pipeline, which is a large, stable system with a solid track record that fits into our core pipeline business," said KMP CEO Richard D. Kinder.

On Oct. 19, Kinder Morgan Inc. reported a 351% increase in its third quarter income from its continuing operations of $26.6 million, or 23 cents per diluted common share, compared with $5.9 million, or 23 cents per share in 1999. Net income for the third quarter was also $26.6 million, or 23 cents a share, compared to a loss of $14.5 million, or a loss of 20 cents a share a year ago. The loss included a $20.4 million after-tax loss from discontinued operations.

CEO Kinder said the company was "delighted" with the third quarter results, and said that all of its "major business segments delivered increased earnings." In the past year, its merger with KN Energy was finalized (see NGI, Sept. 20, 1999, July 12, 1999), and Kinder said KMI's "back-to-basics strategy" had positioned the company for future growth.

The KMI board declared a common stock dividend of 5 cents a share payable Nov. 14 to shareholders of record on Tuesday (Oct. 31).

Carolyn Davis, Houston

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