The owners of the Natural Gas Pipeline Co. of America, a major interstate gas transporter, are interviewing financial advisers for a sale and will mandate a firm this week, said a source familiar with the matter. The process is expected to kick off by the end of November, the source added.
Credit Suisse Group, Citigroup Inc. and Barclays plc are among the investment banks seen vying for the sellside mandate, the source said.
"Gas pipelines are highly desirable so this asset should fetch a good valuation," said an industry banker. "Now is a good time to sell."
NGPL was sold in 2007 in a deal valued at $6.6 billion at an 11.6 times Ebitda multiple. Then, in February 2008, Kinder Morgan Inc. (KMI) sold an 80% stake in NGPL to Myria Acquisition for $5.9 billion.
An industry source familiar with the asset said it likely will fetch around 12 times its Ebitda of $300 million, or around $3.6 billion — not as much as the last big comparable deal in the space, Global Infrastructure Partners' sale of half of Ruby Pipeline Holding Co. LLC to Canada's Veresen Inc. for $1.4 billion, or around 15 times Ebitda.
The source said the pipeline has had its challenges since 80% of it was sold, as shippers called for a rate hearing and Ebitda fell 20% to 25% after that. The asset has other issues, the source said, including a lot of competing pipeline projects.
Part of the Rockies Express Pipeline is going to be reversed to send natural gas from the Utica and Marcellus Shales to where it's needed in the Midwest (versus its original direction from the Rockies to the Northeast), which will create some competition, the source said. "It [NGPL] has a lot of debt on it, too," the industry source said.