Kinder Morgan, Inc. (NYSE: KMI) today announced it has reached a
verbal tentative agreement with Federal Trade Commission (FTC)
staff to divest certain Kinder Morgan Energy Partners, L.P. (NYSE:
KMP) assets in order to receive regulatory approval for its
proposed acquisition of El Paso Corporation (NYSE: EP), which was
announced in October of 2011. Subject to final FTC management and
Commission approval, Kinder Morgan has agreed to sell Kinder Morgan
Interstate Gas Transmission, Trailblazer Pipeline Company, its
Casper-Douglas natural gas processing and West Frenchie Draw
treating facilities in Wyoming, and the company’s 50 percent
interest in the Rockies Express Pipeline.
“We would prefer to retain all of these assets, but as we
anticipated when the transaction was announced, we must sell
certain assets in the Rockies to obtain FTC approval,” Chairman and
CEO Richard D. Kinder said. “The amount of divestitures is
reasonably consistent with our original financial model. We are
very excited about the 43,000 miles of El Paso natural gas
pipelines that we will be adding to our Kinder Morgan portfolio. In
addition, we anticipate significant interest in the Kinder Morgan
assets that will be sold, particularly the Rockies Express
Pipeline, which was the largest natural gas pipeline to be built in
the United States when it was fully completed in 2009. We are
nearing the final stages in the regulatory process, and we look
forward to becoming the largest midstream and the fourth largest
energy company in North America when the acquisition is completed,
which is expected to occur in mid to late May.”
KMI expects to offer (drop down) EP assets to KMP to replace the
assets that KMP will divest. KMI expects the divestitures and these
dropdowns to occur contemporaneously, but subsequent to the close
of the KMI-EP transaction. Now that the required asset divestitures
are tentatively known, EP also expects to offer EP assets to El
Paso Partners, L.P. (NYSE: EPB). Such a dropdown transaction to EPB
could be completed by EP before the close of the KMI-EP
transaction.
Shareholder Votes
On March 9, El Paso shareholders overwhelmingly approved the
KMI-EP merger, with more than 95 percent of the shares that voted
cast in favor of the transaction. KMI shareholders approved the
transaction on March 2 with all shares that voted cast in favor of
the transaction.
Sale of E&P Assets
In late February, EP entered into a definitive agreement to sell
its exploration and production business, EP Energy Corporation (EP
Energy), for approximately $7.15 billion to affiliates of Apollo
Global Management, LLC and Riverstone Holdings, LLC, who are joined
by Access Industries, Inc. and other parties. The sale of EP
Energy, which is dependent upon completion of the KMI-EP
transaction and customary regulatory approvals, is also expected to
close about the same time as that transaction. As previously
announced, EP’s net operating loss carryforwards will largely
offset taxes associated with the sale of the exploration and
production assets, and thus almost the entire proceeds from this
sale will be used to reduce substantially the debt borrowed by KMI
to fund the cash portion of its purchase of El Paso.
Integration and Growth
Expectations
KMI and EP integration teams are working together to plan for
combining the two companies, subject to limitations imposed by
anti-trust regulations. “I’m very pleased with the effort that is
taking place among the integration teams of both companies,” Kinder
said. “As previously announced, we expect to realize cost savings
and other synergies totaling approximately $350 million per
year.”
As a result of this transaction and KMI’s normal expected annual
growth, KMI still expects its dividend per share to grow at an
average annual rate of around 12.5 percent through 2015 from its
budgeted 2011 dividend per share of $1.16.
Over the next several years, the average annual growth rate in
KMP distributions per unit and KMR dividends per share is expected
to be around 7 percent, higher than the prior estimate of 5 percent
annually, with the expected increase driven by the dropdowns
resulting from this transaction.
Kinder Morgan management expects EPB to grow its distributions
per unit at an average annual growth rate of about 9 percent
through 2015 as a result of this transaction.
About Kinder Morgan, Inc.
Kinder Morgan, Inc. (NYSE: KMI) is a leading pipeline
transportation and energy storage company in North America. It owns
an interest in or operates more than 38,000 miles of pipelines and
180 terminals. Its pipelines transport natural gas, gasoline, crude
oil, CO2 and other products, and its terminals store petroleum
products and chemicals and handle such products as ethanol, coal,
petroleum coke and steel. KMI owns the general partner interest of
Kinder Morgan Energy Partners, L.P. (NYSE: KMP), one of the largest
publicly traded pipeline limited partnerships in America, along
with limited partner interest in KMP and Kinder Morgan Management,
LLC (NYSE: KMR). It also operates and owns a 20 percent interest in
Natural Gas Pipeline Company of America. Combined, KMI, KMP and KMR
constitute the largest midstream energy entity in the United States
with an enterprise value of over $65 billion. For more
information please visit www.kindermorgan.com.
IMPORTANT ADDITIONAL INFORMATION FILED WITH THE SEC
KMI has filed with the SEC a Registration Statement on Form S-4
in connection with the proposed transaction including a definitive
Information Statement/Prospectus of KMI and a definitive Proxy
Statement of EP. The Registration Statement was declared effective
by the SEC on January 30, 2012. KMI and EP mailed the definitive
Information Statement/Prospectus of KMI and definitive Proxy
Statement of EP on or about January 31, 2012. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND
THE DEFINITIVE INFORMATION STATEMENT/PROXY STATEMENT/PROSPECTUS AND
ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED BY KMI OR EP
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors and security
holders are able to obtain free copies of the Registration
Statement and the definitive Information Statement/Proxy
Statement/Prospectus and other documents filed with the SEC by KMI
and EP through the web site maintained by the SEC at www.sec.gov or
by phone, e-mail or written request by contacting the investor
relations department of KMI or EP at the following:
Kinder Morgan,
Inc.
El Paso
Corporation
Address: 500 Dallas Street, Suite 1000 1001 Louisiana Street
Houston, Texas 77002 Houston, Texas 77002 Attention: Investor
Relations Attention: Investor Relations Phone: (713) 369-9490 (713)
420-5855 Email:
kmp_ir@kindermorgan.com
investorrelations@elpaso.com
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Statements in this document regarding the proposed transaction
between KMI and EP, the expected timetable for completing the
proposed transactions, future financial and operating results,
benefits and synergies of the proposed transactions, future
opportunities for the combined company, the expected timetable for
completing the sale of EP’s exploration and production assets, the
possible drop down or divestiture of assets and any other
statements about KMI or EP managements’ future expectations,
beliefs, goals, plans or prospects, including those related to KMP
or EPB, constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Any
statements that are not statements of historical fact (including
statements containing the words “believes,” “plans,” “anticipates,”
“expects,” “estimates” and similar expressions) should also be
considered to be forward looking statements. There are a number of
important factors that could cause actual results or events to
differ materially from those indicated by such forward looking
statements, including: the ability to consummate the proposed
transactions; the ability to obtain the requisite regulatory
approval and the satisfaction of other conditions to consummation
of the transactions; the possibility that financing might not be
available on the terms agreed to; the ability to consummate
contemplated asset sales; the ability of KMI to successfully
integrate EP’s operations and employees; the ability to realize
anticipated synergies and cost savings; the potential impact of
announcement of the transaction or consummation of the transaction
on relationships, including with employees, suppliers, customers
and competitors; the ability to achieve revenue and dividend and
distribution growth; national, international, regional and local
economic, competitive and regulatory conditions and developments;
technological developments; capital and credit markets conditions;
inflation rates; interest rates; the political and economic
stability of oil producing nations; energy markets, including
changes in the price of certain commodities; weather conditions;
environmental conditions; business and regulatory or legal
decisions; the pace of deregulation of retail natural gas and
electricity and certain agricultural products; the timing and
success of business development efforts; terrorism; and the other
factors described in KMI’s Annual Report on Form 10-K for the year
ended December 31, 2011 and EP’s Annual Report on Form 10-K for the
year ended December 31, 2011, both filed with the SEC. KMI and EP
disclaim any intention or obligation to update any forward-looking
statements as a result of developments occurring after the date of
this document.
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