8-KLeadership ChangesAcquisitions & DispositionsMaterial Agreements+1

KINDER MORGAN, INC. 8-K Report, Material Agreement (Aug 15, 2012)

Filed August 15, 2012For Securities:KMIEP-PC

Summary

Kinder Morgan, Inc. (KMI) filed an 8-K on August 14, 2012, reporting on two significant events. The primary event detailed is the completion of a "Drop-Down Transaction" where Kinder Morgan Energy Partners, L.P. (KMP), a subsidiary of KMI, acquired substantial natural gas pipeline assets from KMI's other subsidiaries for approximately $6.22 billion. This transaction involved the acquisition of 100% of Tennessee Gas Pipeline Company, L.L.C. (TGPC) and 50% of El Paso Natural Gas Company (EPNG), which together represent extensive pipeline networks serving critical regions in the U.S. Additionally, the filing reports on a sale of 58,000,000 shares of Class P common stock by selling stockholders, raising approximately $2,001.6 million. Importantly, KMI itself did not sell any shares and did not receive proceeds from this offering. This sale led to a reduction in the board representation for certain investment firms, namely The Carlyle Group, Riverstone Holdings LLC, and Goldman, Sachs & Co., as their ownership stakes fell below thresholds triggering director appointment rights.

Key Highlights

  • 1Kinder Morgan Energy Partners, L.P. acquired TGPC and 50% of EPNG for approximately $6.22 billion.
  • 2The "Drop-Down Transaction" effectively transferred significant natural gas pipeline assets to KMP.
  • 3KMI's selling stockholders sold 58,000,000 shares of Class P common stock, generating about $2,001.6 million in proceeds for the sellers.
  • 4KMI did not sell any shares and received no proceeds from the stock offering by selling stockholders.
  • 5The sale of shares by certain investors resulted in the resignation of their representatives from KMI's Board of Directors.
  • 6The board size was reduced and specific supermajority voting provisions for the board are no longer in effect.

Frequently Asked Questions

The "Drop-Down Transaction" involved Kinder Morgan Energy Partners, L.P. (KMP) acquiring substantial natural gas pipeline assets, specifically Tennessee Gas Pipeline Company, L.L.C. (TGPC) and a 50% stake in El Paso Natural Gas Company (EPNG), from KMI's subsidiaries. This is significant as it moves these valuable infrastructure assets under the KMP partnership, potentially impacting KMP's revenue streams and KMI's consolidated financial position through its ownership of KMP.

No, Kinder Morgan, Inc. (KMI) did not sell any of its own shares. The 58,000,000 shares of Class P common stock that were sold were offered by 'Selling Stockholders,' and KMI did not receive any proceeds from this sale.

The sale of shares by investment firms like The Carlyle Group and Riverstone Holdings LLC resulted in their ownership falling below certain thresholds. Consequently, their appointed directors, R. Baran Tekkora and Glenn A. Youngkin, resigned from the KMI board. Similarly, directors Henry Cornell and Kenneth A. Pontarelli, associated with Goldman, Sachs & Co., also resigned due to reduced ownership. This led to a decrease in the board's size.

In the "Drop-Down Transaction," KMP assumed approximately $1.8 billion of debt at TGPC and approximately $560 million of debt at EPNG (representing 50% of EPNG's total debt).