EP EL Paso Corp. (Holding Co.)

Natural gas pipeline operator Kinder Morgan Energy Partners LP (KMP) has entered into an agreement with a private equity and venture capital firm, Kohlberg Kravis Roberts & Co. (KKR) to purchase the latter’s 50% interest in a joint-venture for $300 million.

The joint-venture was originally formed by Kohlberg Kravis Roberts & Co. (hereafter referred to as KKR) and Houston-based El Paso Corp. (EP) in the later half of 2010. KKR had paid $125 million to secure a 50% stake in Altamont assets and Camino real gathering system.

The deal is expected to close by the end of next month, following the completion of the El Paso takeover by Kinder Morgan Inc. (KMI), for $21.1 billion. Kinder Morgan Inc. – which owns the general partner interest and incentive distribution rights of Kinder Morgan Energy Partners – will have a 100% stake in the joint venture following the finalization of the deal.

The Altamont asset comprises 1,100 miles of pipeline infrastructure, natural-gas processing capacity of 60 million cubic feet per day, natural-gas liquid-fractionation capacity of 5,600 barrels per day and 450 well connections with producers. On the other hand, Camino Real Gathering System consists of oil gathering capacity of 110,000 barrels per day together with gas gathering capacity of 150 million cubic feet per day.

Houston-based Kinder Morgan Energy Partners L.P is the largest independent owner and operator of petroleum- product pipelines in the U.S. Founded in 1992, its pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide and other products, while its terminals store petroleum products and chemicals and handle bulk materials such as coal and petroleum coke.

It owns or operates more than 29,000 miles of pipeline and approximately 180 terminals. The terminals store petroleum products and chemicals, besides handling bulk materials such as coal and petroleum coke.

Founded in 1976, New York-based KKR is a leading investment firm which manages $59.0 billion worth of assets on behalf of its investors as of last year-end. The company uses its operational efficiencies and expertise knowledge to provide best results to its portfolio group and is engaged in various activities related to acquisitions, leverage buy-out, management buy-out etc.

Both Kinder Morgan Energy Partners LP and Kohlberg Kravis Roberts & Co. maintain Zacks #3 Ranks, which is equivalent to a short-term Hold rating.

We are maintaining our long-term Neutral recommendation on Kinder Morgan Energy Partners LP.

 
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