Kinder Morgan Sheds Rockies Express, Other Assets

As a condition of regulatory approval for its acquisition of El Paso Corp., Kinder Morgan Energy Partners L.P. (NYSE: KMP) agreed to divest some assets in the Rocky Mountains. Today the company made good on its promise, selling a number of pipelines and facilities to privately held Tallgrass Energy Partners L.P. for $1.8 billion in cash and the assumption of Kinder Morgan's proportionate amount of debt on the Rockies Express pipeline. The total value of the deal is $3.3 billion.

Kinder Morgan sold its 50% interest in the Rockies Express pipeline - the other 50% is split evenly between ConocoPhillips (NYSE: COP) and a division of Sempra Energy (NYSE: SRE). Also gone are the Interstate Gas Transmission and Trailblazer pipelines, as well as processing and treating facilities in Wyoming.

Kinder Morgan's chairman and CEO Richard Kinder said:

As I previously stated, we would prefer to keep all of these assets, but we anticipated divestiture of certain assets in the Rockies would be necessary to obtain FTC approval [for the El Paso acquisition].

Kinder Morgan Energy Partners recently completed the purchase of 100% of the Tennessee Gas Pipeline company and 50% of the El Paso Natural Gas pipeline in a drop-down transaction with Kinder Morgan Inc. (NYSE: KMI). Kinder Morgan Energy Partners plans to use the proceeds of the sale announced today to repay a $2 billion credit facility that the company used in the acquisition of Tennessee Gas Pipeline and El Paso Natural Gas pipeline.

Regardless of what Richard Kinder had to say about wanting to keep the Rockies Express, the company has to be relieved to be out of the business of sending coal to Newcastle. REX, as its called, can transport up to 1.8 billion cubic feet of natural gas a day from western gas fields to eastern Ohio. The rapid development of gas production in Ohio and Pennsylvania has reduced the demand on that pipeline, and there has been some talk of reversing the flow to transport gas from the Appalachians west to Chicago.

Shares of KMP are down 0.2% at $82.33 in a 52-week range of $65.00 to $90.60. Shares of KMI are up 1.6% at $34.76 in a 52-week range of $23.51 to $40.25.

Paul Ausick

Filed under: 24/7 Wall St. Wire, Mergers & Acquisitions, Oil & Gas, Private Equity Tagged: COP, KMI, KMP, SRE