Kinder Morgan’s Buyout Deal Includes Niobrara Assets

Map showing Kinder Morgan Colorado Natural Gas Pipeline Assets

Map showing Kinder Morgan Colorado Natural Gas Pipeline Assets – Source: Kinder Morgan

In an article at FuelFix by Collin Ean – August 10, 2014,  Kinder Morgan to unite a house divided in $44 billion deal, it was reported that Houston-based Kinder Morgan said Sunday it is planning to buy out three companies it controls indirectly for $44 billion in cash and stock, bringing its network of North American pipelines and energy storage terminals under one corporate roof. It also will assume $27 billion in debt.

Taken together, the three purchases rank as the second-largest energy deal and 16th-largest acquisition overall in U.S. history, according to data compiled by Bloomberg.

In an interview with Fuelfix, Richard Kinder — the chairman and CEO of Kinder Morgan Inc. — said the massive buyout is an effort to accelerate the firm’s North American growth by getting rid of Kinder Morgan Inc.’s rights to cash infusions paid by its main pipeline and terminal companies, Kinder Morgan Energy Partners and El Paso Pipeline Partners.

Kinder Morgan Energy Partners and El Paso Pipeline Partners are master limited partnerships, tax-advantaged corporate structures that are required to distribute its most or all of their cash flow to investors. The third company in the deal, Kinder Morgan Management, was formed in 2001 to hold a stake in Kinder Morgan Energy Partners.

Two decades ago, Kinder’s firm was the first master limited partnership to put a laser focus on growing its distributions by acquiring or investing in new assets – and the strategy paid off: All told, the Kinder Morgan companies have boosted their enterprise value – their stock value plus debt – from about $300 million in the mid-1990s to a combined $140 billion, operating the largest network of U.S. pipelines and energy storage terminals, with 80,000 miles of pipelines and 180 terminals.

Now, after years of rapid growth, Kinder Morgan is shedding the MLP structure – in a bid to grow even faster.

The Niobrara connection comes with Kinder Morgan’s purchase of subsidiary El Paso Pipeline Partners which owns both Colorado Interstate Gas and Cheyenne Plains Gas Pipeline.

El Paso Pipeline Partners owns and operates Colorado Interstate Gas (CIG) – a 4,300 mile pipeline system that transports natural gas from production areas in the U.S. Rocky Mountains and the Anadarko Basin directly to customers in Colorado and Wyoming and indirectly to the midwest, southwest, California and Pacific Northwest.

Cheyenne Plains Gas Pipeline, owned and operated by El Paso Pipeline Partners, is a 400-mile, 36-inch diameter natural gas pipeline extending from near the Wyoming-Colorado border to south-central Kansas. The Cheyenne Plains Pipeline initially went into service in January 2005, and serves market areas in the Midwest with connections to several mid-continent pipelines in south-central Kansas. Cheyenne Plains has a throughput capability to 800 MDth/d.

The consolidation of El Paso Pipeline Partners and Colorado Interstate Gas makes Kinder Morgan a big player in Niobrara midstream operations.

Read the article Kinder Morgan to unite a house divided in $44 billion deal at FuelFix.

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