Kinder Morgan, Inc. (KMI) yesterday completed one of the keymoves that highlighted its merger with KN Energy in July. Thecompany announced that it intends to contribute more than $700million of assets to its publicly traded master limitedpartnership, Kinder Morgan Energy Partners LP (KMP). The assetsincluded are the Kinder Morgan Interstate pipeline system (formerlyKN Interstate Gas Transmission), a 49% interest in Red CedarGathering and a 33% interest in Trailblazer Pipeline.

In return, Kinder Morgan Inc. will receive 9.81 million KMPcommon units and $330 million in cash. The boards of directors ofboth companies preliminarily approved the transaction. It isexpected to be completed during the first quarter of 2000.

“This transaction represents a true win-win for both KMI andKMP,” said Rich Kinder, chairman and CEO of Kinder Morgan. “Thetransaction will be substantially accretive to cash available fordistribution to KMP’s unitholders. As a result, it is our intentionto raise KMP’s distribution per unit to $3.10 annually from itscurrent $2.90 annual rate once the transaction has closed.”

Kinder said the assets are a good fit for KMP because they arefee-based, have long-term contracts and deliver consistent cashflows. In addition, they have significant growth opportunities.”Because the mix of consideration paid will include equity issuedto KMI, there will be no immediate need to raise funds for thetransaction via a public offering of units,” he explained.

Kinder Morgan, Inc. also will benefit from the transaction intwo principal ways. “First, KMI will be able to reduce its debt byapproximately $330 million. Second, the transaction is expected tobe modestly accretive to KMI’s earnings per share in 2000, andsubstantially accretive thereafter. By significantly increasing itsstake in the master limited partnership, KMI will enjoy greaterparticipation in the expected future growth of KMP.”

The transaction is conditioned upon approval by the boards ofdirectors of Kinder Morgan, Inc. and Kinder Morgan GP Inc. (thegeneral partner of Kinder Morgan Energy Partners LP), financialreview by an independent financial advisor and regulatory approval.In addition, the transfer of the Red Cedar interest is conditionedupon the approval of the Southern Ute Indian Tribe.

Kinder Morgan, Inc. owns a 49% interest in the Red Cedar, asystem that gathers 600 MMcf/d of gas in La Plata County, CO. Thecompany jointly owns this gathering system with the Southern Utes.The assets include more than 450 miles of pipe, 17 compressorstations and a CO2 processing plant.

Kinder Morgan Interstate has more than 6,500 miles of gaspipeline that extend from Northwestern Wyoming east into Nebraskaand south through Colorado and Kansas. Delivery capacity is 950,000MMBtu/d.

Trailblazer is an Illinois partnership that owns and operates a436-mile pipeline system that extends from Colorado throughsoutheastern Wyoming to Beatrice, NE. Trailblazer has acertificated capacity of 492 MMcf/d. It is owned by three partners,each with a 33.5% interest. The three partners are affiliates ofKinder Morgan, Columbia Energy Group and Enron Corp.

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