TEXT-S&P: Kinder Morgan Energy Partners to acquire pipelines

Tue Aug 7, 2012 1:53pm EDT

Aug 7 - Standard & Poor's Ratings Services said today that Kinder Morgan
Energy Partners L.P.'s (KMP; BBB/Stable/--) Aug. 6, 2012, announcement
that it will acquire 100% of Tennessee Gas Pipeline Co. (TGP; BB/Watch Pos/--)
and a 50% interest in El Paso Natural Gas Co. (EPNG; BB/Stable/--) from Kinder
Morgan Inc. (KMI; BB/Stable/--) would not affect ratings at the
companies. The price is about $6.22 billion, including about $1.8 billion in
assumed debt at TGP and about $560 million of proportional debt at EPNG. Ratings
for KMI, KMP, TGP, and EPNG are not affected because the asset sale, KMP's
associated financing plans, and KMI's debt-reduction plans are in line with the
expectations we factored into our analysis in late May 2012 when KMI closed its
purchase of El Paso Corp. (EP; BB/Stable/--). At that time, we affirmed the
corporate credit ratings on KMI, KMP, EP, TGP, and EPNG (see "Research Update:
Kinder Morgan And El Paso Corp. 'BB' Rtgs Affirmed, El Paso Pipeline Raised to
'BBB-' After $38 Bil. Acquisition Closes," published May 24, 2012). 

We expect to equalize our ratings on TGP with those on KMP when the sale is 
complete in August 2012 because TGP will become a wholly owned subsidiary of 
KMP. We expect to still consolidate EPNG's rating with that of EP's rating, 
which is aligned with KMI, when KMP acquires a 50% interest in EPNG. We expect 
KMI's acquisition debt will go down and debt leverage measures will improve, 
based on actions taken such as the planned asset drop-downs, with stand-alone 
and consolidated debt to EBITDA expected to be about 3.25x and 5.75x, 
respectively, by year-end 2012. We expect KMP's capital spending plan will 
remain aggressive, yet the acquisition financings are manageable, the acquired 
assets will increase the percentage of cash flows coming from relatively 
low-risk natural gas pipelines, and debt to EBITDA will be adequate for the 
rating at about 4x in 2012.