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Kinder Morgan to divest assets per regulatory agreement

August 21, 2012
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HOUSTON — Kinder Morgan Energy Partners, L.P. has entered into a purchase and sale agreement with Tallgrass Energy Partners, LP to sell Kinder Morgan Interstate GasTransmission (KMIGT), Trailblazer Pipeline Co., the Casper-Douglas natural gas processing and West Frenchie Draw treating facilities in Wyoming and the company’s 50% interest in the Rockies Express Pipeline (REX).

Tallgrass is owned by The Energy & Minerals Group, Kelso & Company and the management team of Tallgrass, including CEO David G. Dehaemers, Jr. KMP will receive approximately $1.8 billion in cash from the transaction. Including the proportionate amount of REX debt, this amount is equivalent to a value of $3.3 billion. The transaction is expected to close in the fourth quarter. Barclays and Citi acted as financial advisors to KMP on this transaction.

In March 2012, Kinder Morgan, Inc. announced that it had reached an agreement with the FTC to divest certain KMP assets in the Rockies in order to obtain regulatory approval of its acquisition of El Paso Corp., which closed in May. “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,” Chairman and CEO Richard D. Kinder says.

Dehaemers previously served as CFO and EVP of corporate development at Kinder Morgan from 1997 to 2003. He served as the EVP of corporate development at Inergy, LP from 2003 to 2007 and was one of the owners of Inergy, LP’s general partner, NRGP, when it went public in 2005. In his career he has led more than $14 billion of midstream energy merger, acquisition and development opportunities.

“The conversion of the Pony Express Pipeline portion of KMIGT into oil service, the seamless transitioning of its gas customers, and placing it in service during the second half of 2014 will be a significant focus for near term growth. In addition, we will be exploring some promising growth projects on the east end of Rockies Express to maximize the potential of this state-of-the-art pipeline,” Dehaemers says.

The Energy & Minerals Group is the management company for a series of highly specialized private equity funds with total investor commitments of approximately $4.8 billion. Since inception in 2006, EMG has invested in nine midstream energy transactions comprising approximately $2.6 billion of equity capital.

Effective Aug. 1, KMP acquired 100% of Tennessee Gas Pipeline (TGP) and a 50% interest in El Paso Natural Gas (EPNG) pipeline from KMI to more than replace the cash flow from the KMP assets being divested. KMP intends to use the proceeds from the divestiture sales to repay a $2 billion credit facility that was issued when KMP acquired TGP and EPNG.

Kinder Morgan Energy Partners, L.P. is a pipeline transportation and energy storage company and one of the largest publicly traded pipeline limited partnerships in America. It owns an interest in or operates approximately 29,000 miles of pipelines and 180 terminals. The general partner of KMP is owned by Kinder Morgan, Inc. Kinder Morgan is the largest midstream and the third largest energy company in North America with a combined enterprise value of approximately $100 billion. It owns an interest in or operates approximately 75,000 miles of pipelines and 180 terminals.

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