Back to top

Analyst Blog

Pipeline operator, Kinder Morgan Energy Partners, L.P. (KMP - Analyst Report) plans to acquire stakes of Tennessee Gas Pipeline (TGP) as well as El Paso Natural Gas (EPNG) from its parent company Kinder Morgan Inc. (KMI - Analyst Report). This is part of Kinder Morgan Inc.’s acquisition of El Paso Corp. that entails the divestiture of three U.S. natural gas pipelines.

Per the deal, the partnership will receive 100% of TGP and 50% of EPNG for a total consideration of $6.22 billion. The transaction amount includes an assumed debt of about $1.8 billion at TGP and about $560 million of proportional debt at EPNG.

In May, KMI completed the acquisition of El Paso Corporation for a total $38 billion, including the $17 billion outstanding debt of El Paso and its subsidiaries. The acquisition created the largest natural gas pipeline system in North America, providing a boost to KMI’s standing as a major midstream operator in the U.S.

In conjunction with this acquisition, KMI was entitled to sell these assets to KMP to replace cash flow from certain assets that KMP has sold as part of an agreement with the Federal Trade Commission.

The latest deal − which is expected to close this month − will generate substantial stable cash flow to KMP and its unitholders for the future. The partnership intends to fund 10% of the transaction value through units to KMI − valued at $387 million. The remaining value will likely be financed through borrowings under a new $2.0 billion credit facility and equity or debt issuance.

The to-be-acquired properties include the 13,900 mile TGP pipeline system that has a capacity of about 7.5 billion cubic feet (Bcf) per day. The line ships natural gas from Louisiana, the Gulf of Mexico and south Texas to the northeastern U.S., including the metropolitan areas of New York City and Boston.

EPNG is 10,200 miles long with a design capacity of about 5.6 Bcf per day. This line transports natural gas from the San Juan, Permian and Anadarko basins to California, other western states, Texas and northern Mexico. Together, the pipelines possess more than 200 Bcf of natural gas storage capacity.

For the long term, we maintain our Neutral recommendation for KMP and Underperform recommendation for KMI. 

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%