Kinder Morgan Energy Partners LP (NYSE: KMP) has completed the acquisition (drop down) of 50% of El Paso Natural Gas Co. LLC (EPNG) and 50% of former El Paso Midstream assets in Utah and South Texas from Kinder Morgan Inc. (NYSE: KMI).
The transaction has a total value of approximately $1.655 billion, including approximately $560 million of proportional debt at EPNG.
The transaction is expected to be immediately accretive to cash available for distribution to KMP unitholders. KMP now owns 100% of both EPNG and the midstream assets. The transaction, which closed and is effective March 1, was approved by the independent boards of both KMI and Kinder Morgan Management LLC (NYSE: KMR).
KMP purchased the assets at about eight times 2013 EBITDA. KMP funded 10% of the transaction value, net of debt assumed, with KMP units valued at approximately $110 million that were issued to KMI at closing. The remaining value was funded with cash. KMI intends to use the proceeds from the dropdown to pay down debt that was associated with the May 2012 purchase of El Paso Corp.
EPNG is a 10,200-mile pipeline system with a design capacity of about 5.6 billion cubic feet per day (Bcf/d) of gas. It transports natural gas from the San Juan, Permian and Anadarko basins to California, other western states, Texas and northern Mexico. EPNG has up to 44 Bcf of working natural gas storage capacity.
The midstream assets include Altamont gathering, processing and treating assets in the Uinta Basin in Utah and the Camino Real gathering system in the Eagle Ford shale in South Texas. The Altamont System has over 1,200 miles of pipeline infrastructure, over 450 well connections with producers, and it operates a processing plant with a design capacity of over 60 million cubic feet per day (MMcf/d) of gas being expanded to 80 MMcf/d and a 5,600 barrel per day (bpd) natural gas liquids fractionator. The Camino Real Gathering System has 150 MMcf/d of gas gathering capacity and 110,000 bpd of oil gathering capacity.
In connection with the transaction, BofA Merrill Lynch provided certain financial advisory services to the board of directors of Kinder Morgan Inc. Greenhill & Co. LLC provided certain financial advisory services to the conflicts and audit committee of the board of directors of Kinder Morgan GP Inc. and Kinder Morgan Management LLC.