El Paso Pipeline Partners, L.P. (NYSE: EPB) announced today that it
has agreed to acquire an additional 30-percent interest in Colorado
Interstate Gas Company (CIG) and an additional 15-percent interest
in Southern Natural Gas Company (SNG) from El Paso Corporation
(NYSE: EP) for $736 million. The acquisition will increase El Paso
Pipeline Partners' interest in CIG to 40 percent and its interest
in SNG to 25 percent.
"We are delighted to announce the partnership's first
acquisition from El Paso Corporation," said Jim Yardley, president
and chief executive officer for the general partner of El Paso
Pipeline Partners. "The partnership is acquiring additional
interests in premier market- and supply-related pipeline assets
that generate stable cash flows. This purchase improves an already
excellent organic growth platform. Based solely on our current
backlog of committed growth projects, we expect to achieve 8- to
10-percent average annual growth in distributable cash flow through
2012."
In conjunction with the acquisition, El Paso Pipeline Partners
announced an agreement for $175 million of private placement debt
with an average annual rate of 7.6 percent, due 2011 through 2013.
At closing, the acquisition will be financed with the private
placement, $65 million from the partnership's existing revolving
credit facility, a $10 million note to El Paso and 27,761,611
common units, all of which will be issued to El Paso. With the
issuance of the additional units, El Paso's ownership of limited
partner units will increase from 65 percent to 73 percent. The
general partner will acquire 0.6 million general partner units for
$10 million, maintaining its 2-percent interest.
"This transaction demonstrates El Paso's alignment with
unitholders and our commitment to grow the partnership," said Doug
Foshee, president and chief executive officer of El Paso
Corporation.
As a result of the increased distributable cash flow expected to
result from the acquisition, management intends to recommend to the
Board of Directors of the general partner an increase in the
quarterly cash distribution to $0.32 per unit, beginning with the
distribution to be declared and paid in the first quarter 2009.
This represents an 8.5-percent increase from the current quarterly
rate of $0.295 per unit and an 11.3-percent increase above the
partnership's original minimum quarterly distribution rate.
The transaction is effective July 1, 2008 and will close
contemporaneously with the closing of the debt financing, which is
expected by September 30, 2008.
The terms of the transaction were unanimously approved by El
Paso Pipeline GP Company, L.L.C.'s Board of Directors, based in
part on the unanimous approval and recommendation of the Board's
conflicts committee, which is comprised entirely of independent
directors. The conflicts committee engaged Tudor, Pickering, Holt
& Co. to act as its financial advisor and to render a fairness
opinion.
A summary of El Paso Pipeline Partners' significant organic
project backlog can be found at
http://www.eppipelinepartners.com/EPBprojects
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 56.2 million limited partner units, increasing to
83.9 million following the close of the announced acquisition and
1.7 million general partner units, increasing to 2.3 million
following the close of the announced acquisition. El Paso Pipeline
Partners, L.P. owns Wyoming Interstate Company, an interstate
pipeline system serving the Rocky Mountain region, and a 10-percent
interest, increasing to 40 percent following the close of the
announced acquisition, in Colorado Interstate Gas Company which
operates in the Rocky Mountain region and a 10-percent interest,
increasing to 25 percent following the close of the announced
acquisition, in Southern Natural Gas Company, which operates in the
southeastern region of the United States. For more information
about El Paso Pipeline Partners, visit
www.eppipelinepartners.com.
Disclosure of Non-GAAP Financial Measures
The SEC's Regulation G applies to any public disclosure or
release of material information that includes a non-GAAP financial
measure. In the event of such a disclosure or release, Regulation G
requires (i) the presentation of the most directly comparable
financial measure calculated and presented in accordance with GAAP
and (ii) a reconciliation of the differences between the non-GAAP
financial measure presented and the most directly comparable
financial measure calculated and presented in accordance with
GAAP.
El Paso Pipeline Partners uses the non-GAAP financial measure
"Distributable Cash Flow" to measure its cash generation ability.
The partnership defines Distributable Cash Flow as Adjusted EBITDA
less cash interest expense, maintenance capital expenditures, and
other income and expenses, net, which primarily includes non-cash
allowance for funds during construction and other non-cash items.
Distributable Cash Flow does not reflect changes in working capital
balances. Adjusted EBITDA is defined as net income plus
depreciation and amortization expense, interest and debt expense,
net of interest income and the partnership's share of cash
distributions from equity interests, less equity in earnings.
El Paso Pipeline Partners believes that the non-GAAP financial
measures described above are also useful to investors because these
measurements are used by many companies in the industry as a
measurement of operating and financial performance and are commonly
employed by financial analysts and others to evaluate the operating
and financial performance of the partnership and to compare the
operating and financial performance of the partnership with the
performance of other publicly traded partnerships within the
industry.
These non-GAAP financial measures may not be comparable to
similarly titled measurements used by other companies and should
not be used as a substitute for net income, earnings per unit, cash
flow from operating activities or other GAAP operating
measurements.
Cautionary Statement Regarding Forward-Looking Statements
This release includes forward-looking statements and
projections. El Paso Pipeline Partners has made every reasonable
effort to ensure that the information and assumptions on which
these statements and projections are based are current, reasonable,
and complete. However, a variety of factors could cause actual
results to differ materially from the projections, anticipated
results or other expectations expressed in this release, including,
without limitation, that the amount of cash distributions declared
will be determined on a quarterly basis by the board of directors
of our general partner, in their sole discretion, and will depend
on many factors including El Paso Pipeline Partner's financial
condition, earnings, cash flows, capital requirements, financial
covenants, legal requirements and other factors deemed relevant by
the board of directors of our general partner; the ability to close
the debt private placement is subject to execution of definitive
agreements, and our ability to achieve projected growth rates will
depend on many different factors, including without limitation, the
ability to obtain necessary governmental approvals for proposed
pipeline projects and to successfully construct expansion projects
on time and within budget; operating hazards, natural disasters,
weather-related delays, casualty losses and other matters beyond
our control; the risks associated with recontracting of
transportation commitments; regulatory uncertainties associated
with pipeline rate cases; actions taken by third-party operators,
processors and transporters; conditions in geographic regions or
markets served by El Paso Pipeline Partners and its affiliates and
equity investees or where its operations and affiliates are
located; the effects of existing and future laws and governmental
regulations; competitive conditions in our industry; changes in the
availability and cost of capital; and other factors described in El
Paso Pipeline Partners' (and its affiliates') Securities and
Exchange Commission filings. While these statements and projections
are made in good faith, El Paso Pipeline Partners and its
management cannot guarantee that anticipated future results will be
achieved. Reference must be made to those filings for additional
important factors that may affect actual results. El Paso Pipeline
Partners assumes no obligation to publicly update or revise any
forward-looking statements made herein or any other forward-looking
statements made, whether as a result of new information, future
events, or otherwise.
Contacts: Investor-Media Relations Bruce L. Connery Vice
President (713) 420-5855 Media Relations Bill Baerg Manager (713)
420-2906
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