KMP Acquires Remaining 50% Stake In KKR-El Paso JV

Kinder Morgan Energy Partners (NYSE:KMP) has announced that it will purchase the remaining 50% stake in KKR-El Paso JV for $300 million. The 50-50 JV was formed in 2010 between private equity firm Kohlberg Kravis Roberts & Co. (KKR) and El Paso Corp., with each contributing nearly $125 million. ^[1] KMI recently completed its acquisition of El Paso and procured interests in the JV as part of the acquisition.

Our price estimate of $87 for KMP, implying an 15% premium to the current market price.

See our complete analysis for Kinder Morgan Partners here

The acquisition will give KMP a 100% stake over assets in Altamont in Utah and the Camino Real Gathering System. The Altamont assets include 1,100 miles of pipeline, 60 million cubic feet per day of natural gas processing capacity, 5,600 barrels per day capacity of NGL fractionation. The Camino Real Gathering System situated in Texas includes 110,000 barrels per day of oil gathering capacity and 150 million cubic feet per day of gas gathering capacity.

Natural gas processing assets and gas gathering facilities will add capacity to the natural gas pipelines business, whereas NGL fractionation units will add capacity to the products pipeline division of KMP. Besides that, the oil gathering facilities will add capacity to KMP’s terminals business.

Natural gas pipelines, product pipelines and terminals are core KMP businesses and contribute 28%, 12% and 21%, respectively, to our price estimate of $87.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Kinder Morgan Closes JV Stake Buy, yahoo.com, June 5, 2012 [↩]