Kinder Morgan Energy Partners to buy GATX US pipeline business

GATX Terminals Corp., a subsidiary of Chicago-based GATX Corp., has agreed to sell its US pipeline and terminal businesses to Kinder Morgan Energy Partners LP (KMP), of Houston, for $1.15 billion cash and assumed debt.

MP said Thursday the acquisition would make it the second largest independent petroleum storage operator and second largest independent chemical terminal operator in the US.

Assets included in the sale are CALNEV Pipe Line Co. and Central Florida Pipeline Co. (CFPL), along with 12 terminals that store petroleum products and chemicals. The 550-mile CALNEV pipeline, which originates in Colton, Calif., transported an average 112,000 b/d of gasoline, diesel and jet fuel to the Las Vegas market in 1999. CALNEV interconnects in Colton with KMP's Pacific operations, a 3,300-mile refined petroleum products pipeline system that transports more than 1 million b/d of gasoline, diesel and jet fuel to destination markets in Arizona, California, Nevada, New Mexico, and Oregon.

"CALNEV is an ideal fit with our existing operations in the West," Richard D. Kinder, chairman and CEO of KMP, said. "We believe rapid population growth in Las Vegas and other western markets will continue to drive consumption of refined petroleum products. As a result, we project volumes on Pacific and CALNEV to grow more than 3% annually."

The 195-mile CFPL system, which originates in Tampa, Fla., and consists of a 16-in. gasoline pipeline and a 10-in. jet fuel and diesel pipeline, transported an average 85,000 b/d of gasoline, diesel and jet fuel last year from Tampa to Orlando, Fla. "CFPL fits perfectly into KMP's strategy of acquiring fee-based assets in high-growth markets," Kinder said.

KMP is also acquiring 12 terminals from GATX, which have a storage capacity of 35.6 million bbl for both petroleum products and chemicals. The largest of these terminals are located in Houston, New York, Los Angeles, and Chicago, with a total capacity of 31.2 million bbl. Other terminals are located in Philadelphia, Portland, Ore., San Francisco and Seattle. KMP also is acquiring six other GATX terminals, with 3.6 million bbl capacity. These terminals are part of the CALNEV and CFPL pipeline systems.

Kindell said the terminals are essential to the distribution of petroleum products and chemicals in the US. "They also are a good match for our existing assets, as KMP pipelines currently receive petroleum products from or inject them into three of the terminals that we are acquiring on the West Coast."

Kinder said the transaction is expected to be immediately accretive to cash available for distribution to KMP unit holders by between 10 to 15�/year. It will also raise earnings for Kinder Morgan Inc. shareholders by 15 to 20�/share/year. "We are comfortable with the lower end of these ranges even if we assume no additional acquisitions in 2001, and we are targeting the higher end of these ranges assuming that we make a reasonable amount of acquisitions in 2001," Kinder said.