Kinder Morgan Inc. (KMI) has sold its 300-mile TransColorado Gas Transmission system to affiliate Kinder Morgan Energy Partners LP (KMP) for $275 million, including $210 million in cash and 1.4 million KMP common units. CEO Richard D. Kinder said the sale should be immediately accretive to earnings and cash flow at KMP, producing first-year distributable cash flow of $35 million. It also is expected to be modestly accretive to KMI earnings.

“TransColorado is a very stable asset, as we have entered into long-term, fixed-price contracts for most of the pipeline’s transportation capacity through 2007,” said Kinder. “Growth opportunities are also positively impacting TransColorado’s financial performance.”

TransColorado transports gas from the Piceance Basin in western Colorado to the Blanco Hub in northwestern New Mexico. A $33 million expansion project completed in August increased transportation capacity on the system by more than 40%, and the company recently announced plans for a $20 million expansion project expected to be completed in January 2006 that will enable gas on the northern end of the pipeline to flow both northward and southward. Both of the expansions were secured by long-term contracts that will generate substantial fee-based income, the company said.

KMI will use the cash proceeds of the sale to reduce debt outstanding and repurchase shares. “We expect to use about $50 million of the proceeds to reduce debt in addition to the $100 million of budgeted debt reduction in 2004,” Kinder said. “The remaining $160 million will be used to repurchase KMI shares, which is also incremental to the $60 million of share repurchase in our 2004 budget.”

The KMI board has authorized an increase of $200 million to the share repurchase program, taking the total authorized to $750 million. Since inception of KMI’s common stock repurchase program in August 2001, KMI has repurchased $510 million of its own shares.

Kinder Morgan also announced Monday that KMP has purchased an additional 5% ownership stake in the Cochin gas liquids pipeline system from ConocoPhillips for $11 million. That purchase also is expected to be immediately accretive to earnings and cash flow at KMP, which now owns 50% of Cochin. BP continues to operate the 1,900-mile pipeline system, which transports high vapor pressure ethane, ethylene, propane, butane and natural gas liquids to petrochemical and fuel markets in the Midwest and Eastern Canada.

So far in 2004, Kinder Morgan has made $600 million in acquisitions and will invest a total of $650 million in capital expansion projects, for a total of $1.25 billion invested this year.

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