El Paso Acquires Pipeline Assets From Kinder Morgan

HOUSTON (The Deal) -- El Paso Pipeline Partners LP (EPB) of Houston said after the markets closed Monday it agreed to acquire from crosstown affiliate Kinder Morgan Inc. (KMI) its half of the Ruby Pipeline and Gulf LNG and 47.5% of Young Gas Storage for $2 billion, including $1.012 billion of debt at Ruby and Gulf LNG. Global Infrastructure Partners owns the other half of the Ruby pipeline.

The purchase is expected to close in May.

The deal was approved by independent members of Kinder Morgan's board and the conflicts committee and the board of El Paso Pipeline's general partner. Kinder Morgan previously said it would offer to sell, or drop down, the assets to El Paso Pipeline.

Kinder Morgan chairman and CEO Rich Kinder said it's a win-win for both companies, as the assets will generate substantial, stable cash flow to El Paso Pipeline unitholders for many years, and Kinder Morgan will be able to cut its outstanding debt but continue to participate in the assets' cash flows through its general and limited partner interests in El Paso Pipeline. He added that market conditions continue to support the view that natural gas is the future play for America's energy needs, with research firm Wood Mackenzie expecting U.S. natural gas demand to increase by 30% in the next 10 years to 94.5 billion cubic per day.

The transaction will be immediately accretive to El Paso Pipeline, which is purchasing the assets at 9 times last year's Ebitda. It plans to fund 10% of the deal with units valued at $97.2 million and the rest through equity or debt issuances and borrowings under its revolving credit facility.

Ruby is a 680-mile pipeline that extends from Wyoming to Oregon and provides natural gas supplies from Rocky Mountain basins to consumers in California, Nevada and the Pacific Northwest. The Gulf LNG terminal, in Pascagoula, Miss., has 6.6 billion cubic feet per day of storage capacity and 1.5 billion cubic feet per day of peak vaporization send-out capacity. It's also developing the proposed Gulf LNG liquefaction project, which will add liquefaction and export capabilities at the terminal. Young Gas Storage is in Morgan County, Colorado, and has a working natural gas storage capacity of 6 billion cubic feet equivalent.

JPMorgan advised Kinder Morgan.

Tudor, Pickering, Holt & Co. Securities Inc.'s Lance Gilliland and Scott Simmons advised El Paso Pipeline's conflicts committee. The independent members of KMI's board were advised by Greg Bopp, W. Cleland Dade, Gary Orloff, Heather Brown, Scott Sanders, Aaron Roffwarg, Daniel Hemli, Jacqueline Java, Lytch Tornow, Elizabeth Behncke and Caroline Wells of Bracewell & Giuliani LLP. The conflicts committee of EPB's general partner El Paso Pipeline GP Co. LLC were advised by J. Vincent Kendrick, Patrick Hurley and Frederick Feldman of Akin Gump Strauss Hauer & Feld LLP.

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