El Paso Pipeline Partners L.P. (EPB) priced its 10 million units at $28.80 per unit. The partnership intends to use the $288 million proceeds of the offering as a partial consideration for the purchase of an additional 16% interest in Southern Natural Gas Company from El Paso Corporation (EP). The offer closes on June 23, 2010.
El Paso Pipeline Partners also granted the underwriters a 30-day option to purchase up to an aggregate of 1,500,000 additional common units. If the underwriters exercise their option to purchase additional units, the partnership would use the proceeds to buy the additional 4% general partner interest in Southern Natural Gas Company offered by El Paso Corporation, and/or to reduce outstanding borrowings under its revolving credit facility.
On June 17, 2010, El Paso Pipeline Partners agreed with general partner El Paso Corporation to acquire an additional 16% interest in Southern Natural Gas Company (“SNG”) for $394 million. The acquisition will increase the partnership’s interest in SNG to 41%.
The agreement also contains a 90-day option for El Paso Pipeline Partners to purchase up to an additional 4% of El Paso Corporation’s interest in SNG. The purchase consideration would be approximately $25 million for every percentage of the optional 4% stake on offer. The transaction is expected to close by the end of June 2010.
SNG’s strategically located assets are supported by consistent, strong cash flows and continued organic growth opportunities. The partnership expects the acquisition to be immediately accretive to distributable cash flow.
Also, the partnership announced plans to increase its quarterly cash distribution to $0.40 per unit, or $1.60 per unit on an annualized basis, beginning with the second quarter 2010 distribution. The distribution, which will be declared and paid in the third quarter 2010, represents an increase of 5% from the first quarter 2010 distribution of $0.38 per unit and an increase of 21% above the partnership’s second quarter 2009 distribution of $0.33 per unit.
El Paso Pipeline Partners L.P. is a Delaware limited partnership formed by El Paso Corporation to own and operate natural gas transportation pipelines and storage assets. El Paso Corporation currently owns approximately 62% of limited partner units, and 2% general partner interest in El Paso Pipeline Partners.
Read the full analyst report on “EPB”
Read the full analyst report on “EP”
Zacks Investment Research
