It was announced this weekend that Kinder Morgan is disbanding its unique M.L.P. structure and will be reorganising into a traditional corporation.
Kinder Morgan, which encompasses a huge network of oil and gas pipelines across North America, will acquire its three associated companies and reorganise as one corporation based in Houston.
The new Kinder Morgan will have an estimated enterprise value of about US$ 140 billion — US$ 100 billion of market value and US$ 40 billion of debt — making it the third-largest energy company in the USA, after ExxonMobil and Chevron.
“This simplifies the structure and will allow us to get to this turbocharged growth,” Richard D. Kinder, Chief Executive and co-founder of Kinder Morgan, said in an interview.
Mr. Kinder pioneered the M.L.P. structure in the 1990s and became a billionaire by overseeing Kinder Morgan’s growth for nearly two decades. He will own 11% of the new company, a stake that will account for about US$ 11 billion of his fortune.
Under the deal’s terms, Kinder Morgan will acquire its two related M.L.P.s — Kinder Morgan Energy Partners and El Paso Pipeline Partners — and a third related company, Kinder Morgan Management, for US$ 71 billion.
The simplified structure will allow Kinder Morgan to become more acquisitive in a new North American oil and gas boom. The move will also free up funds for the company to invest in new capital expenditures needed to accommodate new reserves of natural gas being tapped across North America.
Under the existing structure, Kinder Morgan’s related companies were obliged to pay out a majority of their profits to investors, including significant payments to Kinder Morgan itself.
The distributions had grown so large in recent years that Kinder Morgan was lending money back to the related companies so they could fund growth. It was a profitable arrangement, but became overly complex and ultimately constricted the combined companies’ growth, Mr. Kinder said.
Kinder Morgan and its related companies oversee a vast network of pipelines and terminals that ferry oil and natural gas from their sources to refineries. The companies have grown steadily for more than a decade by building new lines and acquiring rivals.
“This combined entity will be the largest energy infrastructure company in North America and the third largest energy company overall,” CEO Kinder said in a statement.
Kinder, a former Enron Corp executive, formed Kinder Morgan in 1997, growing the company from one with 175 employees to one that now has about 11 000 employees.
Worth an estimated US$ 10 billion, according to Forbes, he has pledged much of his fortune to charity.
Kinder Morgan, the largest midstream company in North America, has an interest in or operates some 80,000 miles of pipelines that move natural gas, refined products, carbon dioxide and crude oil.
Edited from various sources by Elizabeth Corner
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