Kinder Morgan divests Rockies assets

Kinder Morgan Energy Partners LP (KMEP) has agreed to sell Kinder Morgan Interstate Gas Transmission (KMIGT), Trailblazer Pipeline Co., the Casper-Douglas natural gas processing and West Frenchie Draw treating facilities in Wyoming, and its 50% interest in the Rockies Express Pipeline (REP) to Tallgrass Energy Partners LP.

KMEP will receive $1.8 billion in cash from the transaction. Including the proportionate amount of REP debt, this amount is equivalent to a value of $3.3 billion.

In March, parent Kinder Morgan Inc. reached agreement with the US Federal Trade Commission to divest certain KMEP assets in the Rockies to obtain regulatory approval of its acquisition of El Paso Corp., which closed in May (OGJ Online, June 20, 2012).

Tallgrass emphasized conversion of the Pony Express Pipeline portion of KMIGT into oil service, the transitioning of its gas customers, and placing it in service second-half 2014 as among its initial focuses. The company will also explore what it describes as promising growth projects on the east end of REP.

Effective Aug. 1, KMEP acquired 100% of Tennessee Gas Pipeline (TGP) and a 50% interest in El Paso Natural Gas (EPNG) from KMI to replace the cash flow from the KMEP assets being divested (OGJ Online, Aug. 14, 2012).

Tallgrass is owned by The Energy & Minerals Group, Kelso & Co., and the management team of Tallgrass, including Chief Executive Officer David G. Dehaemers, Jr.

KMEP intends to use the proceeds from the divestiture sales to repay a $2 billion credit facility issued when it acquired TGP and EPNG. KMEP expects the transaction to close in the fourth quarter, subject to FTC approval.

Contact Christopher E. Smith at chriss@ogjonline.com.

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