El Paso Pipeline Partners L.P. (EPB) has agreed to buy interests in two energy companies for $810 million. Separately, the company announced the commencement of a $425 million debt offering, which is due in 2020.
Acquisition
The Partnership will acquire 51% interest in both Southern LNG Company L.L.C. and El Paso Elba Express Company L.L.C. from general partner, El Paso Corporation (EP).
Southern LNG owns the Elba Island liquefied natural gas (LNG) terminal near Savannah, Georgia, which has a 1.8 billion cubic feet (Bcf) per day of send-out capacity and 7.3 Bcf of storage capacity. The terminal is expected to increase storage capacity to 11.5 Bcf this summer and is operating under agreements with subsidiaries of Shell Oil Company and BG Energy Holdings Limited with an average life of more than 20 years.
El Paso Elba Express Company owns the Elba Express Pipeline, a 190-mile natural gas pipeline with current capacity of 945 million cubic feet (MMcf) per day, which went into service on March 1, 2010. It is operating under a 30-year contract with a subsidiary of Shell. The pipeline is expected to undergo a $30 million expansion that will increase capacity by up to 1.17 million cubic feet per day, with in-service expected as early as January 2014.
El Paso Corp. will continue to own the remaining interests of each company. The deal is expected to close by the end of March 2010.
El Paso Pipeline is paying for the acquisition with $236 million in cash, $149 million of equity from issuing 5.3 million common units to El Paso Corp., a $3 million general partner capital contribution, and new debt.
Distribution Increase
Together, El Paso Pipeline’s management announced plans to recommend to the Board of Directors of the general partner for a $0.02 per unit or 6% increase in the quarterly cash distribution to $0.38 per unit. On an annualized basis, the distribution will increase to $1.52 per unit. Management expects the distribution to be declared and paid in the second quarter 2010.
Debt Offering
Separately, El Paso Pipeline Partners Operating Company L.L.C., a wholly owned operating subsidiary of El Paso Pipeline Partners L.P., announced that it has priced $425 million of its 6.50% senior notes due 2020.
The partnership intends to use the net proceeds from the offering as partial consideration for the previously announced acquisition of a 51% member interest in each of Southern LNG Company L.L.C. and El Paso Elba Express Company L.L.C. from El Paso Corp.
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 owns approximately 60% of the limited partner units, and the 2% general partner interest.
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