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EPB To Purchase Natural Gas Assets From Kinder Morgan, Inc. For Approximately $2 Billion

El Paso Pipeline Partners, L.P. (NYSE: EPB), today announced that it will acquire from Kinder Morgan, Inc. (NYSE: KMI) KMI’s 50 percent interest in Ruby Pipeline, 50 percent interest in Gulf LNG and 47.5 percent interest in Young Gas Storage. The transaction value is approximately $2 billion, including $1.012 billion of proportionate debt at Ruby and Gulf LNG, resulting in an equity purchase price of $972 million (consistent with EPB’s budget). The purchase, which is expected to close in May and be effective April 30, 2014, was approved by the independent members of the board of directors of KMI, and by the conflicts committee and the board of directors of EPB’s general partner following the receipt of separate fairness opinions from different investment banks. The company previously announced that KMI would offer to sell (drop down) these assets to EPB.

Chairman and CEO Richard D. Kinder said, “This is a win-win transaction for EPB and KMI. These assets will generate substantial, stable cash flow to EPB unitholders for many years to come, and KMI will reduce its debt outstanding and continue to participate in the cash flows from these assets through its general and limited partner interests in EPB. Market conditions continue to support the view that natural gas, which is domestic, clean, abundant and reasonably priced, is the future play for America’s energy needs. As mentioned on our first quarter earnings call, a recent study (Wood Mackenzie) calls for U.S. natural gas demand to increase by over 30 percent in the next 10 years to approximately 94.5 billion cubic per day (Bcf/d). EPB, which is comprised entirely of natural gas assets, will be a significant player in helping meet this growing demand and is well positioned for future growth.”

Upon closing, this transaction will be immediately accretive to EPB, which is purchasing the assets at approximately nine times 2013 EBITDA. EPB plans to fund 10 percent of the transaction value, net of the proportionate debt, with EPB common units that will be issued to KMI at closing valued at approximately $97.2 million. The remaining value is expected to be funded with the proceeds of one or more equity or debt issuances and/or borrowings under EPB’s revolving credit facility. KMI intends to use the proceeds from the dropdown sales to reduce debt.

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