El Paso Pipeline Partners, L.P. today announced that it will acquire from Kinder Morgan, Inc. (KMI) the latter’s 50% interest in Ruby Pipeline, 50% interest in Gulf LNG and 47.5% interest in Young Gas Storage. The transaction value is approximately US$ 2 billion, including US$ 1.012 billion of proportionate debt at Ruby and Gulf LNG, resulting in an equity purchase price of US$ 972 million (consistent with EPB’s budget). The purchase, which is expected to close in May and be effective by 30 April 2014, was approved by the independent members of the board of directors of KMI, and by the conflicts committee and the board of directors of EPB’s general partner following the receipt of separate fairness opinions from different investment banks. The company previously announced that KMI would offer to sell (drop down) these assets to EPB.
Chairman and CEO Richard D. Kinder said, “This is a win-win transaction for EPB and KMI. These assets will generate substantial, stable cash flow to EPB unitholders for many years to come, and KMI will reduce its debt outstanding and continue to participate in the cash flows from these assets through its general and limited partner interests in EPB. Market conditions continue to support the view that natural gas, which is domestic, clean, abundant and reasonably priced, is the future play for America’s energy needs. As mentioned on our first quarter earnings call, a recent study [by Wood Mackenzie] calls for US natural gas demand to increase by over 30% in the next 10 years to approximately 94.5 billion ft3/d. EPB, which is comprised entirely of natural gas assets, will be a significant player in helping meet this growing demand and is well positioned for future growth.”
Upon closing, this transaction will be immediately accretive to EPB, which is purchasing the assets at approximately nine times 2013 EBITDA. EPB plans to fund 10% of the transaction value, net of the proportionate debt, with EPB common units that will be issued to KMI at closing valued at approximately US$ 97.2 million. The remaining value is expected to be funded with the proceeds of one or more equity or debt issuances and/or borrowings under EPB’s revolving credit facility. KMI intends to use the proceeds from the dropdown sales to reduce debt.
Ruby Pipeline is a 680-mile, 42-inch dia. pipeline system that extends from Wyoming to Oregon and provides natural gas supplies from the major Rocky Mountain basins to consumers in California, Nevada and the Pacific Northwest. The Gulf LNG terminal, located in Pascagoula, Miss., has 6.6 billion ft3/d of storage capacity and 1.5 billion ft3/d of peak vaporisation send-out capacity, and is developing the proposed Gulf LNG Liquefaction Project, which will add liquefaction and export capabilities at the existing terminal. Young Gas Storage is located in Morgan County, Colo., and has a working natural gas storage capacity of approximately 6 billion ft3.
Adapted from press release by Ted Monroe
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/29042014/el_paso_pipeline_partners_acquires_kinder_morgan_assets_including_gulf_lng/