Houston-based Kinder Morgan’s $70 billion tax-friendly deal to bring all of its energy assets under one corporate umbrella and stock symbol will not have an impact on the pipeline giant’s Arkansas operations, company officials said.
Kinder Morgan spokeswoman Melissa Ruiz said the company’s blockbuster announcement earlier last week to acquire all of the outstanding stock of its former master limited partnerships — Kinder Morgan Energy Partners, L.P. (KMP), Kinder Morgan Management, LLC (KMR) and El Paso Pipeline Partners, L.P. (EPB) — will not impact the company’s day-to-day operations “at all.”
“It is still business as usual,” Ruiz told Talk Business and Politics.
Once the deal is completed, Kinder Morgan-owned subsidiaries will have a stake in or operate nearly 80,000 miles of pipelines and 180 terminals across the U.S. Kinder Morgan’s pipelines transport natural gas, gasoline, crude oil and other products. Its terminals store petroleum products and chemicals, including ethanol, coal, petroleum coke and steel.
Kinder Morgan now owns or has an interest in two major natural gas pipelines that originate or transport product through Arkansas. Ruiz said the company also operates two product terminal facilities in Pine Bluff and Blytheville that employ 327 active local workers.
The Fayetteville Express Pipeline (FEP) is a 185-mile natural gas pipeline system that originates in Conway County, continues eastward through White County and terminates at the Trunkline Gas Co. in Panola County, Miss. The pipeline has a capacity of nearly 2 billion cubic feet per day and brings natural gas from the Fayetteville Shale to other pipelines serving Midwest and Northeast markets. (Link here for a Kinder Morgan asset map.)
Kinder Morgan’s Natural Gas Pipeline Co. of America (NGPL) is the largest transporter of natural gas into the high-demand Chicago market, and one of largest interstate pipeline systems in the U.S. The 9,200-mile pipeline enters Arkansas from Northwest Texas and crosses the state into Southeast Missouri transporting natural gas into the nation’s third largest metropolitan area. Kinder Morgan operates NGPL and owns a 20% interest in the pipeline company. Myria Holdings Inc. owns the remaining 80% stake.
Besides the massive breadth and size of the combined company, the deal will also bring huge benefits to Kinder Morgan shareholders when the Houston-based pipeline giant begins trading as a single, publicly-traded stock, under the symbol “KMI.”
“This transaction dramatically simplifies the Kinder Morgan story, by transitioning from four separately traded equity securities today to one security going forward, and by eliminating the incentive distribution rights and structural subordination of debt,” said Richard Kinder, company president and CEO.
Shares in the new Kinder Morgan will have a projected dividend of $2 in 2015, a 16% premium over the anticipated 2014 dividend of $1.72. Kinder said the company expects to grow the dividend by nearly 10% each year from 2015 through 2020, with excess coverage anticipated to be greater than $2 billion over that same period.
Additionally, the combined company will be the largest energy infrastructure company in North America and the third largest energy company overall with an estimated enterprise value of approximately $140 billion, behind only ExxonMobil and Chevron. Analysts also estimate the deal will generate about $20 billion in income-tax savings for the Houston pipeline giant over the next 14 years.
And although Ruiz said the company’s operations will not be impacted immediately, Kinder told Wall Street analysts during a conference call that by lowering the cost of equity and debt capital – the deal would open the door for “growth and acquisition opportunities” in the midstream energy market.
“We believe that KMI will be a valuable acquisition currency and have a significantly lower hurdle for accretive investments in new energy infrastructure,” Kinder said. “In the opportunity-rich environment of today’s energy infrastructure sector, we believe this transaction gives us the ability to grow KMI for years to come.”
Kinder Morgan said the deal is expected to close by the end of the year.