Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

El Paso Corporation (EP)

October 17, 2011 8:30 am ET

Executives

Richard D. Kinder - Chairman and Chief Executive Officer

David D. Kinder - Vice President of Corporate Development and Treasurer

Douglas L. Foshee - Chairman, Chief Executive Officer and President

Analysts

Gregg Brody - JP Morgan Chase & Co, Research Division

Rebecca Followill - U.S. Capital Advisors LLC, Research Division

S. Ross Payne - Wells Fargo Securities, LLC, Research Division

Elvira Scotto - RBC Capital Markets, LLC, Research Division

Stephen J. Maresca - Morgan Stanley, Research Division

Kelly J. Krenger - BofA Merrill Lynch, Research Division

Brian J. Zarahn - Barclays Capital, Research Division

Kevin A. Smith - Raymond James & Associates, Inc., Research Division

Craig Shere - Tuohy Brothers Investment Research, Inc.

Harry Mateer - Barclays Capital, Research Division

Brad Olsen - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Carl L. Kirst - BMO Capital Markets U.S.

Gabriel P. Moreen - BofA Merrill Lynch, Research Division

Yves Siegel - Crédit Suisse AG, Research Division

Darren Horowitz - Raymond James & Associates, Inc., Research Division

Unknown Analyst -

Faisel Khan - Citigroup Inc, Research Division

Operator

Welcome to the Kinder Morgan Analyst Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may wish to disconnect at this time. I'll now turn the meeting over to Mr. Rich Kinder, Chairman and CEO of Kinder Morgan. Sir, you may begin.

Richard D. Kinder

Okay. Thank you, Susan, and thank you, all, for calling in this morning. I'll remind you as usual, we'll be making comments that may fall within the Securities Act of 1933 and the Securities Exchange Act of 1934.

I have with me today Doug Foshee from El Paso, together with the Kinder Morgan management team. And what I thought I would do is give you a brief overview of the transaction, and then we'll take any and all questions that you may have.

There are not a lot of times in your career when you can say that a transaction of this size and magnitude is really a win-win for both the acquirer and the company being bought, but I think that's particularly true here today. First of all, I think putting these 2 companies together strategically is a great fit. When we put these 2 companies together, we'll have 80,000 miles of pipeline, 67,000 of which will be natural gas pipes. It will create a company that when you take the whole family of companies, including the 2 MLPs together, will have an enterprise value of approximately $94 billion. So the result is that we will be, by far, the largest midstream energy player in North America and also in terms of enterprise value, the fourth largest energy company of any kind in North America. We will be the largest natural gas transporter. We're already the largest pipeline producer -- products pipeline system in America. We’re the largest transporter of CO2 and the largest independent owner operator of terminals, both liquids and bulk.

Obviously, when you look at it from the standpoint of the investing community, this is obviously a good deal, we think, for the El Paso shareholders. The price being paid represents a 37% premium to Friday's close, but we think it's very good for the shareholders of KMI, KMP, KMR and El Paso Partners, EPB, and let me take just a couple of minutes to explain why we think that. KMI, of course, the acquiring company -- it will be immediately accreting to the dividends payable at KMI, as we said in our release. We estimate that pro forma on a full year basis, this will take our dividends from the present run rate of $1.20 per year to $1.45. Now we'll probably do a little less than that because we don't anticipate that this transaction will close right at the beginning of the year. We're targeting the second quarter, but any rate, a very nice increase in dividends at KMI. More importantly, probably, we believe it raises the long-term growth rate in dividends at KMR from the 10% range, which we talked about when we did our IPO of KMI back in February to 12.5% now.

As far as the game plan is concerned, and this is all contained in the release yesterday, our intention would be to sell the E&P assets of El Paso as soon as practical. We would anticipate and hope we'll be able to do most of that or maybe all of it contemporaneous with the closing of this merger transaction. We'll use all that money to pay down the debt incurred for the cash portion of the buyout of El Paso, and then we will proceed very expeditiously to drop down all the pipeline assets to the 2 MLPs: KMP and EPB.

Now if you turn to KMP, why is it a great story for KMP? It's a great source of assets to be dropped down over the next few years. There are literally billions of dollars of assets that will go to KMP and EPB. We think that it will raise the long-term growth rate at KMP from the 5% targeted range that we have to 7%. We think that makes it one of the highest growth rates for a large-scale MLP in the entire market.

From a more subtle standpoint, we think it will also benefit both KMP and KMR in this way. We will use some of the -- we will issue KMR as part of the financing at KMP. Now they will issue some KMP and some KMR in a going-forward basis. Now as you know, KMR, we pay the dividends in stock but have to accumulate the cash as if we were paying in cash. So it's really equivalent to a giant DRIP program, which leaves a lot of cash at KMP. We think, in fact, that, that cash as a result of the KMR issuance, will be sufficient that by the end of this drop-down period in the next 3 to 4 years, KMP will actually be able to finance all its normal capital needs without accessing the equity markets at all. So I think we can look forward to KMP becoming, in essence, a self-funding MLP, and there's really no other company that can say that, and I think that will be a very great advantage for KMP and also a benefit to the KMR shares.

With regard to EPB, it will also be the recipient of the assets. If you look at this in the broadest terms, we now have 2 sizable MLPs that we'll be able to drop assets into, which will mean we can proceed more quickly with the drop-downs and we would anticipate that EPB will continue to grow. In fact, we're projecting a growth rate of about 9% per year in dividends at KMP, and we will continue to drop to both companies.

So with that, we think it's a good fit. It's a win-win, and we'll take any questions that you may have.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Sachin Shah [ph], Tullett Prebon.

Unknown Analyst -

I just wanted to understand the comfort level of getting any trust approval on the transaction and so you did mention kind of the second half, is there kind of any narrowing of time frame for that? That's the first question. The second question is any kind of indication of what you plan on doing with EPB and KMP and KMR as a rollup? Or are you going to allow them to be a public entity going forward in the not-too-distant future after the transaction completes?

Richard D. Kinder

Okay. Well, first on the antitrust side, one of the benefits of this merger is that these pipeline systems are very complementary. There's not a lot of overlap between the 2 companies. We certainly anticipate we will obviously have to comply with the regulator, in this case, the FTC, and we'll work with them to satisfy whatever their concerns are, but we don't see that as a major obstacle, and we do expect to close, we're thinking in the second quarter of next year. With regard to EPB and KMP, I think the answer is that for right now, we would see them both as publicly traded entities. At some point in time, if and only if it made sense for the unit holders of both KMP and EPB to look at combining, and we'd certainly do that in the future, but that's not part of the immediate game plan. And I sort of neglected to say, Doug, anything you wanted to add to the overall conversation here?

Douglas L. Foshee

No.

Richard D. Kinder

Okay. He'll wait and take the tough questions. All right. But anyway, does that answer your question?

Unknown Analyst -

Yes. Just as a confirmation, the assets are complementary and so any scrutiny that you're going to face, you feel more than confident that it's going to get approval to close the deal.

Richard D. Kinder

We think we'll get approval. Yes.

Operator

Our next question comes from Darren Horowitz, Raymond James.

Darren Horowitz - Raymond James & Associates, Inc., Research Division

A couple of quick questions for you. The first, as it relates to the monetizations of the E&P assets, any thoughts on valuation, given the foreign commodities curve and possibly a higher risk premium applied to monetizing the proved and probable reserves at EP?

Richard D. Kinder

Well, we obviously looked at that very, very carefully and had a lot of experts assisting us and looking at it, and we obviously want to get the highest price we can for it. So I'm not very interested in going into the range of what we expect to get at this point in time given the fact that we probably have a couple of hundred people on this line, but we do have a range in mind and we expect to be at least at the midpoint of that range, and that's what's baked into our model.

Darren Horowitz - Raymond James & Associates, Inc., Research Division

Okay. And what level of debt, Rich, is associated with those assets or that spin-out?

Mark Leland

Again, this is Mark. I mean, there's very little debt associated with the E&P assets and depending upon in what form they're sold, whether they're sold as an entire package or whether they're broken into smaller packages, there may be a little bit of debt goes with it or maybe no debt goes with it, and we use the proceeds to pay down, again, just the small amount of debt that's associated with it now. Doug, are all of that correct?

Douglas L. Foshee

Yes, that's correct. The only thing I'd add is that we have -- since we announced that we were going to separate our 2 businesses back in May for the tremendous amount of effort in getting the E&P business ready to be a stand-alone business and in essence now, we just divert our attention away from a tax-free spin and toward a successful sale, and I'm highly confident we're going to get that done.

Darren Horowitz - Raymond James & Associates, Inc., Research Division

Rich, last question for me. When you consider all the organic pipeline growth ops across the pro forma asset chain, does this change the way that you view the CO2 business and more importantly, the way that you view capital allocation?

Richard D. Kinder

No, I think our CO2 business is very successful, has a return on investment in excess of 20%. That investment's kind of beginning to decline now as we've moved along the SACROC, but certainly, we still think that's a very viable business and we'll continue to allocate capital in the most expeditious way possible. We are very excited about the opportunities that the split print gives us though, and I think and you've heard me say this before, we've never been a believer in size for size's sake, but the advantage of being large if you have a big footprint, whether it's in pipelines or terminals is it gives you the opportunity to do expansions and extensions and tuck-in acquisitions. If you look, for example, at what the Tennessee Pipeline will be able to do coming out of the Marcellus, which Doug and his team have already put in motion, that's going to be some great opportunities. We think there are great opportunities in the Southeastern Florida, so just a lot of opportunities. And one thing on the E&P sale, of course, as we said in the release, but I would remind you again that we'll have NOLs that we believe will cover the taxes on that sale, so we'll be able to take the gross proceeds from that sale and use them to apply to the acquisition debt and pay off a huge chunk of the acquisition debt at that time.

Operator

Bradley Olsen, Tudor, Pickering, Holt.

Brad Olsen - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

So first off, as far as El Paso's assets, very strong footprint in the northeast and the southeast. So far, on the El Paso side, they have mostly focused on building out the long-haul pipeline franchise. As you look forward, given your business diversity, do you see the El Paso assets as perhaps giving you the ability to build out gathering and processing assets or other complementary assets in the northeast around the TGP assets or in the southeast around FNG and Florida Gas?

Richard D. Kinder

Well, we would certainly look at all those things, and it's pretty early in the game to predict exactly how we did, but as you know, we've -- in the Eagle Ford through a couple of joint ventures, we're doing a lot of gathering and then the Haynesville, of course. KinderHawk is the largest gatherer in the Haynesville. So we think there may be some upstream opportunities like that. We'll just continue to look at the whole system, but I just think enormous opportunities -- as someone once said, big pipes get bigger, and I think that's what we'll have here that we'll just have enormous opportunities with this footprint.

Brad Olsen - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

So when you think about the underlying MLP forecasting, an increase in the growth rate from 5% to 7%, is that really just looking at the expected kind of G&A synergies, as well as just accretion from the drop-downs that doesn't include kind of business opportunities that might arise as a result of this transaction?

Richard D. Kinder

Mark?

Mark Leland

Yes. I mean, in our projections, we do have some expectations for continued expansion and CapEx opportunities, but most of the benefit is really the middle point that you made, which is the accretion from drop-downs. It's most of the uplift from 5% to 7%. We do get a little bit of a benefit in the cost savings and synergies that are incorporated into the model and a little bit of a benefit from expected expansion CapEx opportunity. But in general, if we look forward, we count and include in our model the project that we already know we're going to execute on and then we'll include a little bit of unidentified, but typically, the unidentified amounts are lower than what we've realized historically because we're just conservative around what we don't yet know. If we look at the opportunity set and what's likely to happen, we're likely to find more opportunities than what we had historically and totally as we go forward and statistically identify those projects. Our expansion capital opportunities are actually greater than what they have been.

Brad Olsen - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Okay, and I guess I was kind of interested by the fact that you guys are putting more of an emphasis on using KMR as a currency to pay for some of these drop-down transactions. I guess given the fact that recently, KMR has traded at a fairly wide discount to KMP, how do you think about the fact that paying with more KMR reduces the accretion on those transactions? Do you think that there's something you might do before these drop-downs take place to close that KMR gap and therefore kind of reduce the discount involved with paying in KMR units? Or do you just think the market will take care of that on the back of this acquisition?

Richard D. Kinder

I think the market will take care of that over time. We're going to create a lot more liquidity in KMR, obviously, and we're not going to use it for all of the equity portion, funding the drop-downs, but we will use it for part of it, and I think that's a conservative assumption. We assume that it continues trading at a discount to KMP and we'll just see where that comes out, but certainly, we think this transaction and what's going to happen with the drop-downs will close that gap over a period of time.

Mark Leland

Yes, and the right way to think about it is we have modeled that a portion of the equity raised to fund the drop-downs will be KMR, and we've modeled it with KMR trading at a discount to KMP. What that means is if either we modeled it solely using KMP issuance or if the discount to KMP is lower than what we have in the model, then the accretion that KMP realizes would be greater than what we have in the model. So that would be a positive. Now the reason that we've done it is we believe that this has the potential to transform KMP and KMR along the lines of what Rich mentioned earlier. As we issue more KMR, the quarterly dividends go up, the cash that we're retaining that support those dividends goes up. That reduces our need to issue additional equity in the public, and that is a positive for KMP as a whole. In addition, you potentially get to a point where you're retaining more cash than you need to fund your investment program, to fund the equity portion of your investment program, and that excess cash you can use to repurchase KMR in the market. And what that means is you have a positive pressure on the KMR price, which would help to close that gap as well. Now as we've said many times in the past, we don't believe that there is a fundamental reason why KMR trades at a discount. We have included that discount in our projections and in our model and in the accretion that's here, but we certainly hope that, that discount collapses and then this transaction and the drop-downs are even more positive than what's reflected in these assumptions.

Brad Olsen - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Okay, great, and just one last one. As far as the E&P assets go, I'm sure there are prices at which you would probably refrain from selling the E&P assets if the market kind of experiences some more volatility, but is there any kind of thought process around not just continuing the IPO process as possibly giving yourselves another out in terms of spinning off those E&P assets as you go forward?

Richard D. Kinder

We don't anticipate that. We would anticipate that we will sell it for cash to third parties, and our preference would, obviously, be to sell it as a whole. If that's not the case, if we can realize more by breaking it into pieces, it readily lends itself to that. It has some very good positions in various of the shale plays, for example, that could be separated out. I think they have a great management team, Brent Smolik and his team have done a fine job, and as I think Doug was saying earlier, they were already positioned on a trajectory to be a separate company, and so that's what we're rechanneling that energy we hope into a sale process.

Operator

Our next question comes from Gabe Moreen, Bank of America Merrill Lynch.

Gabriel P. Moreen - BofA Merrill Lynch, Research Division

So I want to follow up on Brad's question on the $350 million in cost saves. I know you mentioned it was conservative in your presentation. I'm just wondering kind of when you think you can realize that by, maybe a little more granularity, whether that's coming from OpEx, maintenance CapEx, G&A and whether finally, that's going to be something at the KMP level entirely or is that also with the KMI level and if there's a split between the 2?

Richard D. Kinder

Well, I think to answer the last part of the question first, obviously, as these assets get dropped down, whatever the cost savings are, we'll attach to those assets. So wherever they reside, we'll get the benefit of that in both cases, whether it's KMP or EPB after the drop-down, part of that comes back to KMI. So ultimately, KMI gets a large portion of the benefits but...

Mark Leland

Yes, I'm sorry, Rich. Just to clarify, and so Gabe, I mean, those benefits will be realized not just KMI and KMP, but also at EPB.

Richard D. Kinder

Right.

Mark Leland

And some of that will happen immediately at all 3 entities, and some of it will be associated with the drop-downs.

Richard D. Kinder

Yes, but we do think -- to put that in perspective, $350 million sounds like a lot of money, but whenever you put big companies together, I think you find a lot of opportunities to improve efficiencies and take advantage of the scalability of the enterprise. And this is not the first rodeo we've done going all the way back to when we bought Santa Fe Pacific. It actually closed at the beginning of '98. We took about 11%, I think, out of that combined cost structure -- 11% of EBITDA. When we did the KN Energy merger in 1999, I think we took about 8% out. So this represents about 5% of the combined EBITDA of the 2 companies. So it's less than we have done in prior mergers and again, we think that we will start immediately with integration teams staffed by people from both companies, working together to identify what's the most effective way to achieve these efficiencies, and we're very confident we can get them.

Gabriel P. Moreen - BofA Merrill Lynch, Research Division

Great. And then my second question and it relates to the NOLs and I know you'd mentioned no expectation of tax leakage around an E&P sale, but the way this is structured, part equity, part cash, just wondering on future drop-downs to KMP and to EPB, what's your modeling or expectations for tax leakage around future pipeline drop-downs?

Richard D. Kinder

Mark?

Mark Leland

Yes, we expect to do that on essentially a letter of disposition basis so that it won't be immediately taxable but essentially tax-deferred and that tax will come back to us over time.

Gabriel P. Moreen - BofA Merrill Lynch, Research Division

Okay. So it's fair to assume it will be pretty efficient, if you do it over time.

Mark Leland

Yes.

Operator

Our next question comes from Stephen Maresca, Morgan Stanley.

Stephen J. Maresca - Morgan Stanley, Research Division

My first question is for you, Rich. You're going through with the E&P sale. I guess my question is why not, with a spin seemingly so close for El Paso, was there consideration and why not wait until the spin was done and then you could just have El Paso in the pipes and not have to deal with the potential risk of selling the E&P business?

Richard D. Kinder

Well, I think we liked the company as a whole and this was an opportune time to do it, and so we went ahead. We were willing to take on the issue and time and effort of selling off the E&P assets.

Stephen J. Maresca - Morgan Stanley, Research Division

Okay. Secondly, on the drop-downs, you mentioned, Rich, them being more expeditious now. I guess 2 things: One, how quickly do you think things will ramp up? EP had been selling at quite a steady clip in the EPB. Do you think it will be even faster or bigger than that? And then as a subset to that, how are you going to decide what goes into potentially KMP versus EPB? And how do you manage that conflict?

Richard D. Kinder

Yes, good question. First of all, the speed of the drop-downs, as I said earlier, will be increased because we now have 2 MLPs out there, and in KMP, we have a much larger MLP with access to capital markets, can do more capital raising on the equity side, but we would continue to drop significant assets to EPB as we drop them to KMP and having the 2 MLPs out there, we think will work very well together. We haven't gone through all the details on how we separate it and, of course, we're not the only company to have more than one MLP managed by the same general partner, but just in broadest terms, our thinking is that, obviously, to the extent EPB has certain pipeline assets, the opportunities to grow those assets, extend them, do tuck-in acquisitions would be done at EPB. To the extent that KMP has pipeline assets, the same thing. When those assets get expanded or extended or there are acquisitions associated with them, that would be at KMP. And we think that's a pretty clear divider, and again, when you look at the map and you see this geographic scope, you can see that it's pretty easy to put these into discrete MLPs. You can have one asset at Tennessee and one MLP citrus [ph] and another El Paso natural gas and one or the other and so on and so forth, and it’s pretty discrete in those terms.

Mark Leland

The only thing I'd add with respect to pace is and this is in the press release, we expect we will be done with all of the drop-downs by 2015, and that is important because we want KMI to be a pure GP. And by 2015, our expectation is that KMI is back to essentially a GP plus the LP units and KMR shares [indiscernible].

Stephen J. Maresca - Morgan Stanley, Research Division

Okay, and then my final question would be a little bit more for Doug. I'm not sure how much you can say, Doug, but just can you walk us through if there were other considerations out there, how you thought about this? You were pretty close to kind of, I think, unlocking value with the spin-off, and were there other considerations that you looked at other than this one?

Douglas L. Foshee

Yes. Up until about the end of August, that was 100% of our focus. I think there's a saying that says, "Opportunity only knocks when you're ready," and so that changed toward the end of August, but our analysis was pretty simple. We thought we knew what we had in terms of a value proposition for our shareholders with the separation, and the question was whether the transaction being offered from the point of view of our shareholders was better than that, and I think, as I said to our shareholders in May, when we looked at all the information on the separation, in the end, the answer was actually pretty clear, and so we were quite enthusiastic about making that recommendation to our board. The same thing happened yesterday morning, and management unanimously recommended this transaction and the board unanimously approved.

Operator

Our next question comes from Harry Mateer, Barclays Capital.

Harry Mateer - Barclays Capital, Research Division

So a couple of questions for you. I guess first, maybe, Mark, you can comment just on -- first of all, with the E&P asset sale, what is the debt that gets repaid? Is that the acquisition financing of the KMI? And then related to that, can you just talk a little bit about what happens with the El Paso Corp. box and those bonds beyond any details you gave on Slide 13?

Mark Leland

Sure. And you are right that with the cash raised in the E&P sale, that will go initially towards repaying the acquisition debt. And with the remaining EP debt, some of that is associated with pipelines, and we moved with those pipelines down to either KMP or EPB. The remainder, we would expect to pay off with proceeds from the drop-down transactions.

Harry Mateer - Barclays Capital, Research Division

Okay. And in terms of the acquisition financing, can you give us a little bit more color in terms of how it's structured, secured, unsecured? Is it a bridge facility and what is the maturity of the bank debt?

Mark Leland

Well, I mean, it is a combination of those things that you mentioned. It is fully underwritten by Barclays. At this point, it's likely to be syndicated to some other bank, and those terms, we will work out as we go through this process. I mean, we have a set of terms with Barclays right now that gives us the full financing, and we'll continue to work on that through the syndication process. David, anything you'd add to that?

David D. Kinder

No, I think that's the right approach. I mean, as far as the debt itself, it's going to be secured, senior secured debt up at the NOV [ph] that has the same -- the KMI debt currently in place.

Harry Mateer - Barclays Capital, Research Division

Okay. So the new acquisition bank debt, at least at the outset, will be pari structurally with the existing KMI bonds? Is that right?

Mark Leland

That is correct.

Richard D. Kinder

That is correct.

Harry Mateer - Barclays Capital, Research Division

Okay. And then just my last question, can you just talk about credit ratings at all these entities, I guess specifically KMP and EPB, what your expectations are there?

Richard D. Kinder

Go ahead, David.

David D. Kinder

I mean, I guess the way that I'd say it is we've talked to the agencies just recently in that regard. I think they're going to go through their process and will put their releases out, I would assume shortly, but obviously, that's in their control. We feel like this is a good transaction for both the MLPs in that regard and for the parent entities, as well as for El Paso Corp. They have to make their own decision on that, and I think that will come out again here in the next day or 2.

Mark Leland

And we put some of this in the release at a very high level, but especially from an EPB and a KMP perspective, I think this has got to be a positive.

Harry Mateer - Barclays Capital, Research Division

Okay. So is it fair to say the goal is investment grade ratings at not only can KMP but EPB as well?

Mark Leland

Yes.

Richard D. Kinder

Yes.

Operator

Yves Siegel, Crédit Suisse.

Yves Siegel - Crédit Suisse AG, Research Division

Just on that line of questioning, the leverage ratio at KMP is going to pretty darn low, below 2.5. What's the rationale there for setting that as at the ratio?

Mark Leland

I think we do have a fair amount of flexibility at that level. I mean, if you contrast KMP with EPB, I mean, EPB does have almost purely fee-based revenues, and so it is a very, very stable cash flow stream. We do have now a lot of cash flow volatility at KMP but a little bit more than what you see at EPB, and so we would expect that we would run it at a slightly lower leverage ratio, and I think that's what you see. Now the 3.3x, I think, is a very conservative level for KMP given the strength of its assets.

Yves Siegel - Crédit Suisse AG, Research Division

And then if I could just follow up with that, any sort of dispositions at KMP? Clearly, this enhances, I think, the cash flow stability at KMP. Any thoughts on perhaps dispositions as well?

Richard D. Kinder

No. Yves, we think we'll move forward. We have a great portfolio of assets there, and what we will be doing is adding to it. Today, the whole KMP structure, if you put the products pipelines with the natural gas pipelines, is 58% or so and it obviously moves up substantially, approaching 70% will be from those 2 pipeline sets. So it lessens any issues anybody may have with the CO2, which, as I said, performs very well, but -- so we think we're improving the stability of the cash flows at KMP, but we like to add mix. It's been a great growth machine for us over the years, and we would intend to keep it going.

Mark Leland

Yves, and I don't know if this is exactly what you're getting at, but we did get this question essentially offline and the request that we answer it online, so I'm happy to do so. I mean, there was at least a question around, since we're selling El Paso's E&P, whether we would be selling SACROC and Yates in conjunction with that, and the answer is no. As Rich said, we like our investment in SACROC and Yates. We earn great returns there. We believe we will continue to do so. We believe those fields offer tremendous opportunity for us. The reason we're there is because of our CO2 expertise, and that's really what we're focused on, and so I think the CO2 business, again, will offer us tremendous opportunities to continue to earn great returns at SACROC and Yates, and I think people shouldn't ignore the opportunity on the S&T business, sales and transportation business, on the CO2 side. With oil prices where they are and the tremendous interest in domestic oil fields, we believe there's going to be tremendous growth opportunity in our base CO2 business as well.

Operator

Faisel Khan, Citigroup.

Faisel Khan - Citigroup Inc, Research Division

On some of the potential antitrust issues, you guys will control a significant amount of pipeline capacity out of the Rockies, do you think you'll be able to hold on to all the pipes that both you and El Paso control today?

Richard D. Kinder

Well, that is the only area where there's any overlap on the systems, and we'll just work with the regulator on that. We don't think it's a significant problem, but we'll have to get into that and work with the regulator and we don't anticipate any issues with getting this deal approved, but that is the one area of overlap.

Mark Leland

And the other thing, just to keep in mind, is all of these assets are already regulated from a price perspective.

Faisel Khan - Citigroup Inc, Research Division

Okay, fair enough. And then on your Slide 13, where you walked through the leverage metrics at KMI, KMP and EPB, do the consolidated credit metrics that you guys report for KMI at 4.7x for 2012? Does that include the bridge financing and the net -- and the potential sale of the E&P assets? Or how has that number been calculated?

Mark Leland

Right. That's essentially a number for year end 2012 and it's essentially assuming that the sale of E&P has already taken place.

Faisel Khan - Citigroup Inc, Research Division

Okay, and it's pro forma for the bridge financing, too.

Mark Leland

It is. It's pro forma for the acquisition debt and then the sale of E&P, and so those things would have already happened, and that's where we expect we'd be at the end of 2012. Of course, there are also some drop-down transactions assumed to have occurred by then as well.

Faisel Khan - Citigroup Inc, Research Division

Okay. So does it assume that there will still be debt left on the bridge financing? Or will it be completely paid off by then?

Mark Leland

Yes. I mean, there will still be some remaining acquisition debt, I think is the right way to say it, at that time.

Faisel Khan - Citigroup Inc, Research Division

Okay. And just going back your last comments on the E&P business and specifically SACROC and Yates. I mean, isn't it -- could you execute a transaction where you could swap out just the oil-producing assets like SACROC and Yates into El Paso and then spin off or IPO the entire E&P portfolio, in that way leave the S&T business down at KMP and have a more streamlined sort of fee-producing, non-commodity-based sort of business at KMP? Is that something you guys ever thought about or how -- I mean, how do you think about that given that you have this E&P business now to potentially sort of monetize in that sort of manner?

Richard D. Kinder

Well, again, I think referring to this E&P business is a little bit of a misnomer. As we said so many times, we're not really an E&P company. We have, we think, probably the best CO2 team in the business. They all came over from Shell in 2001, and the whole team is still -- the senior team – are still with us. We've done a very good job of finding -- we got into the business as a transporter and we're the largest transporter of CO2, and we found now 3 fields that make sense to go ahead and flood that weren't being flooded, and we've gone ahead and done that and produced very good results. So it's sort of a niche business for us and again, we don't think about it as a pure E&P play and we're happy with it and intend to keep it at KMP.

Operator

Carl Kirst, BMO Capital.

Carl L. Kirst - BMO Capital Markets U.S.

All my questions have been ticked. So I'm going to leave it with hearty congratulations to both of you.

Operator

Elvira Scotto, RBC Capital Markets.

Elvira Scotto - RBC Capital Markets, LLC, Research Division

Most of mine have been asked. I just wanted to follow up on EPB though. So when you looked at this transaction initially, was there ever a thought of just also acquiring EPB or was the thought specifically that by having the 2 MLPs, you'd be able to drop down faster or bigger assets? And then the second part of that, so when we think about the drop-downs, are we thinking about a greater number of drop-downs per year or similar to what EP was doing but just larger in scale?

Richard D. Kinder

Well, I think it's -- we'll just see exactly what the markets are with regard to the MLP equity situation, but we would think we could move faster than we could expedite those drop-downs. And yes, I think having 2 MLPs out there, particularly when the MLP being added has enterprise value of the size of KMP and the equity value that it does, it just gives us a lot more opportunity to get those assets down more quickly. As Mark was saying, that's our intent. Now again, at some point in time, if it made sense to combine the 2 MLPs, we might do that. Again, they both have independent directors and they would have to evaluate on behalf of their limited partners whether that made sense to do, and only if it made sense for both of those would we do it. In the meantime, we're perfectly happy with having the 2 MLPs outstanding.

Operator

Kelly Krenger, Bank of America Merrill Lynch.

Kelly J. Krenger - BofA Merrill Lynch, Research Division

Just a follow-up on an earlier question regarding the outstanding El Paso Corp. I guess box on [ph] debt, I just want to make sure that I have this clear. So El Paso Corp. will remain outstanding as a separate, I guess, intermediate holding company within the whole structure, presumably somewhere below KMI.

Mark Leland

Yes, that's correct.

Kelly J. Krenger - BofA Merrill Lynch, Research Division

And then its assets are sold out of El Paso Corp. to EPB or KMP, then proceeds will be used to pay down the remaining debt at El Paso Corp. and presumably some of the debt at KMI. Is that also -- is that?

Mark Leland

Yes, it'll be a combination.

Kelly J. Krenger - BofA Merrill Lynch, Research Division

Okay. Any thought about the -- I know you talked about KMP and EPB, but any thought about the ratings at KMI or El Paso Corp. for that matter or kind of where you ultimately want those?

Mark Leland

We believe that it will be a positive for those entities as well and that is laid out on Page 13 of the presentation that's available on our website. Now as David mentioned, we've had some preliminary discussions with the rating agencies. We're giving them more information. We'll probably spend a little bit more time with them, and so they will need some time to get their hands around the transaction, and they will be eager to see us execute on our plans, but we believe we have a pretty clear path towards really strengthening all of these entities from a balance sheet perspective, and so we believe it should be a positive. Anything you can add to that?

Douglas L. Foshee

No, I think that all makes sense for us.

Operator

Ross Payne, Wells Fargo.

S. Ross Payne - Wells Fargo Securities, LLC, Research Division

Basically, it sounds like KMP has expectations that you guys are going to keep your rating where it is. It looks like it's going to be a positive, but in the long term, is it fair to say you guys think you'll keep the current rating levels on KMP bonds?

Richard D. Kinder

Yes, I think and we think there are positive aspects of this transaction and at the very least, it should be -- KMP should not be in any way negatively affected, and again, on all the drop-downs, as we've said, we anticipate financing like we always have, which is 50% equity, 50% debt. So we can't see if there are any negatives. We think the positives are that we'll be dropping down very solid fee-based assets that will even improve the cash flow stability of KMP. So we think it's a positive, but certainly in no way a negative. We're not leveraging up KMP in any way whatsoever nor EPB.

S. Ross Payne - Wells Fargo Securities, LLC, Research Division

Right, right. And finally, too, on the NOLs, can you talk about roughly how much you have there to use for some of these tax-efficient drop-downs?

Mark Leland

I'm going to think that later disclosure from El Paso would have been the 10-K and is around $3 billion.

Richard D. Kinder

That's right, $3 billion.

Operator

Zack Pow [ph], Knight Capital.

Unknown Analyst -

Most of my questions have been answered, but I'm just trying to figure out why this is a good transaction for EPB. Earlier, they were going to be the primary beneficiaries of all the El Paso pipelines, but now, it seems KMI is going to be the primary beneficiary simply because it has a lower cost of capital and more access to the market. So it seems like EPB's growth rate is going to be much slower going forward and they're going to be further away from investment grade ratings. Is that it? I believe you disagree, but can you tell us why?

Mark Leland

Yes, and especially if you're just talking about the debt side. I mean, I think that EPB's credit profile will strengthen as it continues to acquire very stable fee-based cash flows in a reasonable manner. Using a combination of equity and debt and so -- and EPB will also benefit by being a part of a family of entities that will have a stronger credit profile overall. As a result, the transactions that we've laid out here, one of which is the sale of E&P for cash up above, and so again, from a credit perspective, I think that's a benefit for EPB as well. From an equity perspective, I think that EPB will continue to benefit again from drop-down transactions done at very accretive multiples and that will lead to very nice growth in the distributions at EPB.

Unknown Analyst -

Would you be surprised if rating agencies came out and put a negative outlook on KMI or KMP or EPB? At one time, I guess you were saying you're very positive, but what happens in the next 12 months? Would you be surprised if they put out a negative outlook on any of the 3 entities?

Mark Leland

Let me say that they do their own analysis and by no means are we speaking for the rating agencies. We absolutely will work with them. We'll provide them the information that they need, but we believe that these transactions are a positive for all of these entities.

Unknown Analyst -

And my last question. If the CO2 business is as accretive and as nice as you say, why haven't you guys made any acquisition in the CO2 business? I mean, you probably can buy E&P CO2 assets at 5, 6 multiple as opposed to buying pipeline assets for 12, 13 multiples.

Richard D. Kinder

Well, again, we have made acquisitions over the years. We bought, first of all, the SACROC unit and then we bought 50% of the Yates unit from Marathon, and then we recently bought up the Catch [ph] unit, which is our newest flood area. So we have made acquisitions. We obviously, the way we allocate capital around here, demand a higher return north of 20% on an unlevered basis for assets in the E&P part of the CO2 business, so it doesn't -- not every asset that may be out there fits our pistol, but we've done very well with what we have acquired. And again, I would emphasize the real guts of the CO2 business is what we're good at, which is the pipeline business. And today, we move about 1.3 billion cubic feet a day of CO2 out of the Southwest Colorado fields that we and Exxon own down to the Permian Basin, and that's about 75% or 80% of all the CO2 consumed in the Permian. We believe, as we’ve said publicly, that the opportunity is to increase that by perhaps another 300 million cubic feet a day or so, which would all be under long-term contracts with major producing entities in the basin. The demand for CO2 is the best it's been in the 10 years we've been out there. So we see a lot of growth on the S&T side, which is just a pipeline arrangement that we have with the various users of CO2 in the Permian Basin. So it's very much an integrated operation to CO2 transportation business.

Mark Leland

If I can just augment that and really just – at a high level, as Rich said, if we're going to take exposure to commodity prices, then we demand a higher return. We were able to buy assets in the past on that basis and have done very well with them. At this point in time though, knowledge, familiarity and willing to take on CO2 projects has increased, and that means we are less able to buy those types of properties at the prices that we were before when we had the CO2 knowledge and fewer other people did, but the other thing that it means is as there are more people out there CO2 playing, that is a huge positive for our base CO2 sales and transportation business, and so that's just the way that this market has moved, and really, it's moved in our favor.

Unknown Analyst -

I just have one quick one, I apologize. You talked about your balance sheet, what it'll look like at the end of 2013, and you made an assumption for E&P. Can you share with us what are you -- in order to get these multiple, what do you think you'll get for the E&P assets?

Richard D. Kinder

As I said earlier, we probably have a couple of hundred people on this call and we obviously are not going to put out there what we expect to get. We have what we think is a very fair and conservative price built into the model, and we're obviously going to seek to get as much as we can, and these are very valuable assets located in very good basins.

Operator

Craig Shere, Tuohy Brothers.

Craig Shere - Tuohy Brothers Investment Research, Inc.

Just 2 quick follow-up questions, one off Dave's question. I think he asked about where the synergies were coming from, the $350 million, and also the timing of it, and I don't know if the timing was specifically answered, but there was a statement made that some is associated with the drop-downs, which kind of made me think that, "Well, maybe it might take 2 or 3 years to realize all that." So I wonder if you could comment on that, and then I had another quick question.

Mark Leland

Yes, I'm sorry. I made that statement. I'm sorry if it wasn't clear. Really, what I meant by that is we were talking about the fact that KMP and EPB will realize some of those synergies, some of those benefits. Now, of course, they won't realize that those savings associated with pipe that they don't own until or unless those pipes are sold from KMI down to those MLPs, and so that's really all I was saying there is if you were just looking at KMP or EPB and you're looking at the savings that they will realize, those savings will change over time as the drop-downs occur.

Craig Shere - Tuohy Brothers Investment Research, Inc.

With the aggregate savings across all the companies, is it that the $350 million is realized very quickly? I'm just curious with any drop-downs to the MLP affiliates. Or is it that you need the drop-down to the MLP affiliates to get operational synergies among pipes that would then be owned and operated directly by them?

Mark Leland

No. It's the former because, of course, the general partner operates all of the assets, and so from the beginning, the operations will all be consolidated and the savings will be realized from the beginning.

Craig Shere - Tuohy Brothers Investment Research, Inc.

Okay, great. And just one more follow-up. Rich, I think in response to one of the questions, you rightly said we'll see what the market offers in terms of MLP equity situation. Clearly, you'll have, on a combined entity, much more firepower than El Paso alone in terms of drop-down choices, but in the last 2 years, we have had some turmoil in terms of liquidity in the market, scares. I remember years back, I think it was '94, the Fed actually raised rates 6x. We’re not going to stay at 0% forever. So can you comment about your thoughts on the ability to execute this complete drop-down plan over the next 3 to 4 years and maybe the risk of some market hiccups in between?

Richard D. Kinder

Well, let me just say, again, the proof is in what happens and what has happened in the past, and at KMP, we have raised equity through every kind of market. We had an equity offering in December of 2008 when the market was obviously just on its butt and we will continue to be able to do that, and we've done it for 15 years now. We have financed half equity, half debt, about $23 billion worth of assets at KMP over the last 15 years. We started out -- when Bill and I formed this, as a $300 million company, so we have grown it and continued to finance it in very conservative fashion. So sure, there can be hiccups and black swan events, but we believe year in and year out, we have the ability to finance at KMP and we believe EPB has the same ability, and we think having all this additional firepower -- I mean, KMP has a market value in excess of $20 billion, and so the ability to finance acquisitions and drop-downs of this kind is very prevalent. And then we also have the KMR arrow in the quiver that allows us to issue KMR and retain that cash and then utilizing that in the future, so we think it's very positive. We think we certainly feel very comfortable about our ability to finance these things as the drop-downs occur.

Operator

Our next question comes from Gary Stromberg [ph], Barclays Capital.

Unknown Analyst -

Just a quick question. Page 13, you guys mentioned a very helpful slide for bondholders. There's a footnote talking about El Paso Holdco leverage getting to 4.5x. What's the timing on getting there? Also, will there be debt remaining at El Paso Corp. once all the drop-downs are complete, I think you said by 2015?

Mark Leland

Yes, I mean, the timing on getting the 4.5x will somewhat be a function of how the cash proceeds really from the drop-downs is allocated between what pays down debt at El Paso Corp. and what pays down acquisition debt, and that's really yet to be determined, but I mean, it'll happen fairly quickly and really, we believe it's more appropriate to look at it on a total consolidated basis. And then your second question, actually, I think it was even easier to answer, but now I’ve forgotten what it was.

Unknown Analyst -

Just will there be debt left at EP Holdco?

Mark Leland

Right. There will not. Once all the drop-downs are done, there will not.

Unknown Analyst -

And will there be a merger of the 2 entities, you think, over time, EP and KMI?

Mark Leland

I haven't -- we haven't figured that out yet. Right now, we don't plan on that, although I don't know that there's anything that would prevent that, and that's just something that we'll work out in time. That’s a number of years off.

Operator

Your next question comes from Becca Followill, U.S. Capital Advisors.

Rebecca Followill - U.S. Capital Advisors LLC, Research Division

Just 2 quick ones. Would you keep any of El Paso's E&P assets and blend them in with your existing business?

Richard D. Kinder

We do not intend to do that. We intend to sell all of the El Paso E&P assets.

Rebecca Followill - U.S. Capital Advisors LLC, Research Division

Okay. Second and then to clarify, I know you budgeted that KMR would be at a discount. Would you issue KMR units at a discount to KMP, use that as your source of equity if it continued this rate of your discount?

Richard D. Kinder

Yes, we budgeted that in the model, and as Mark pointed this out earlier, I think that's a very conservative modeling. We modeled it as if the discount continued and still assumed we would put a portion of that out as KMR. So to the extent that gap closes, and we believe it will, but to the extent the gap closes, that would be an upside to the way we modeled this.

Operator

Sachin Shah [ph], Tullett Prebon.

Unknown Analyst -

Just a follow-up, 2 things. You mentioned that you started the negotiations end of August, so less than a full year, but I just wanted to clarify, was that just with KMI or was that with other entities as well? So it wasn't clear if that was just KMI. The second part is, I do see a termination fee of $650 million for other -- for certain conditions that EP has to pay KMI, what's the termination fee for KMI for termination? Is it the same?

Richard D. Kinder

There is no reverse to termination fee in the merger agreement, and I'll let Doug answer. I was the suitor. I came to him on bended knee and made the offer at the end of August, and it took us about 7 weeks to get this deal put together and get both boards to approve, but I'll let Doug comment on that.

Douglas L. Foshee

Sure. As Rich said, we started our discussions at the end of August, and so for most of the last 7 weeks, we've sort of been running down parallel tracks, making sure that we preserved the option to do what we had told our shareholders we were going to do back at May, which is the separation and then working hard to see if there was a transaction between our 2 companies that made more sense for our shareholders than that, and as of yesterday morning, we approved just that.

Unknown Analyst -

Okay. And just to clarify, why again isn't there a reverse termination fee here?

Mark Leland

There is not a reverse termination fee, yes, in the agreement.

Unknown Analyst -

But the rationale for it?

Mark Leland

Because we decided it was better not to have one.

Operator

Kevin Smith, Raymond James.

Kevin A. Smith - Raymond James & Associates, Inc., Research Division

At this point, is El Paso Pipeline Partners in a holding period until the EP-KMI transaction is complete as far as further drop-downs from EP?

Richard D. Kinder

No.

Kevin A. Smith - Raymond James & Associates, Inc., Research Division

Okay. And then lastly, as far as El Paso's organic growth pipeline initiatives, do you perceive any slowdown or changes or anything to the publicly announced projects?

Richard D. Kinder

No, we do not, and Doug, go ahead.

Douglas L. Foshee

No. I mean, we've been fairly public about talking about the conclusion to an $8 billion backlog of organic projects. Most of those projects will be complete by the end of this year, but as you know, we continue to work to capture more organic growth opportunities and that's going to continue right through the date that this transaction closes.

Mark Leland

Right. We all hope we find more opportunities for good projects.

Richard D. Kinder

Yes.

Operator

Steven Carpel [ph], Crédit Suisse.

Unknown Analyst -

Just some clarity. I wanted to make sure I understood this. You talked about the committed loan. You said it was secured. What will it be secured by? So that was unclear. You mentioned about the KMI bonds.

Mark Leland

Basically, it's going to have the same security package that the KMI bonds have. It's going to be ratably secured. There will also be security interest associated with the ownership interest in the stock of El Paso Corp. And just to clarify further, the intent at El Paso Corp. to just kind of cut through this and obviously, this would be conditioned on the merger occurring, is there's a senior secured facility, credit facility in place at El Paso Corp. Our intent is to remove that facility and payoff at closing, so those bondholders will actually be in a better position than where they currently are from a security package perspective at the EP Corp. level.

Unknown Analyst -

As part of this facility, will any of the El Paso Corp. assets be pledged?

Mark Leland

It relates to the stock ownership that we had in El Paso Corp.

Unknown Analyst -

So the loan will then be backed by the -- will be secured directly by the equity or the ownership of El Paso Corp. as well as KMI in the stock?

Mark Leland

That's right. It's again -- that's right. It's the stock interest though. Let's be clear. That's right.

Unknown Analyst -

The stock. And the KMI bonds are secured by the stock today is what you're saying?

Mark Leland

That's correct. Those bonds are ratably secured just as our current KMI credit facility is as well.

Unknown Analyst -

Right. So the KMI facility, the new facility and the KMI bonds will all have the same security?

Mark Leland

That is correct.

Operator

Ian McCullis [ph], Morgan Stanley.

Unknown Analyst -

Could we see a drop-down of some of the pipeline assets or at least an agreement prior to close by next year?

Richard D. Kinder

Oh, yes. I think that there's a likelihood that El Paso will continue to drop down to EPB between now and the time of closing, and we would anticipate between now and the time of closing that we will get ready with the package to move into KMP also. So I think we made this clear, but Doug and I are both very committed to making sure that we keep the interest of everybody, all our shareholders in mind here, and the last thing we want to do is do anything to stop the progress on drop-downs and asset expansions that's going on at El Paso, and clearly, we're just going to move ahead in anticipation of the merger.

Unknown Analyst -

That's great. So theoretically, you can really accelerate not only the paydown of the financing for the acquisition, but also the paydown of El Paso Corp. debt prior to close?

Mark Leland

Potentially, yes.

Unknown Analyst -

Okay. And once you end up doing that, paying off the El Paso Corp. debt, would you end up just collapsing that box and doing away with El Paso Corp. altogether and so you have a simplified structure of just KMI owning KMP and EPB?

Mark Leland

We might.

Operator

Gregg Brody, JPMorgan Chase.

Gregg Brody - JP Morgan Chase & Co, Research Division

Just to beat the EP question to death on the debt, just the last question, I'm sorry if I missed this. Do you have any intentions of guaranteeing the EP box with [indiscernible] from KMI's level?

Mark Leland

We can't hear.

Richard D. Kinder

Could you repeat that? You're fading out a little bit.

Gregg Brody - JP Morgan Chase & Co, Research Division

Sure. Is that better?

Richard D. Kinder

Yes.

Gregg Brody - JP Morgan Chase & Co, Research Division

I'm just curious, do you have any intention to guarantee EP's corporate bond level or corporate issuer last from the KMI level, providing guarantee from there?

Richard D. Kinder

Sorry, we were still trying to hear the question.

Mark Leland

Yes, the question is whether we would guarantee the EP debt, whether KMI would guarantee the EP debt. No. That's not the plan.

Operator

Our next question comes from Brian Zarahn, Barclays Capital.

Brian J. Zarahn - Barclays Capital, Research Division

On the KMP expansion CapEx, your prior baseline was about $1.5 billion. Is there -- obviously, a lot of moving parts, but do you expect any change or average range going forward the next few years on organic projects at KMP?

Richard D. Kinder

Well, again, Mark mentioned this earlier, we've been very conservative in assuming what kind of capital we would spend, but I think that, and this is not in the model right now, I think we will find additional opportunities to raise that number meaningfully as we drop down more assets. For instance, we started out this year at KMP, thinking that we were going to spend about $1.4 million on expansion CapEx and acquisitions and we ended up north of $2.5 billion primarily because of buying the other half of KinderHawk. So I think we will have a lot of opportunities, and we haven't baked all that into the model. We'll just kind of chase those rabbits as they come along, but I think there's a lot of potential there, and that's one of the reasons we're doing this. As I said at the start, is the ability to take this huge footprint and leverage off of it with the expansions and extensions.

Brian J. Zarahn - Barclays Capital, Research Division

Okay. And then on -- I note earlier, you commented on taxes, but is there any change in your assumed tax rate for KMI going forward?

Mark Leland

No.

Operator

Pedula Marti [ph], CDP Capital.

Unknown Analyst -

I'm wondering with your Canadian operations and with El Paso also having some international E&P assets, can you help us a little bit with kind of what you're thinking the cash that might be kind of trapped as it may be, could accumulate to be?

Mark Leland

I don't think we're expecting any significant trapped cash. The international E&P operations at El Paso are expected to be sold with the other E&P assets.

Unknown Analyst -

Okay. And secondarily, I'm wondering what -- in terms of the various action plans here, you answered this in some respect already, but what can you not do that you've discussed here until after the close?

Richard D. Kinder

Well, we can't do El Paso drop-downs to KMP until after the close but we can get them ready, and by the way, we've already talked to the KMP board. They're enthusiastic about this and I've also talked to Ron Kuehn at the EPB board level and told him we intend to go forward with continued drop-downs there, and so we could get all this ready and in the case of EPB, we can continue drop-downs before closing. I think you will see a lot of activity that will be substantially complete by the time the actual merger closes. I think we hope to have the E&P assets sold by that time or shortly thereafter. We hope to have drop-downs ready to go with both entities, and I think you'll see some pretty massive paydowns of debt, particularly given the fact that the E&P sale is sheltered by the NOLs.

Operator

Our next question comes from Mitch Norton [ph], Diamondback Capital [ph].

Unknown Analyst -

With regard to the E&P sale, if you were able to sell those assets prior to closing, would you do so? And with regards to the warrants, can you tell us what the dividend assumptions were when you came up with your $1.50 valuation?

Richard D. Kinder

On the E&P sale, it's anticipated now that it would be at the earliest, contemporaneous with the closing.

Mark Leland

Yes, and then on the warrants, I mean, essentially, our expected dividend profile that went into that and clearly, warrant value now will be a function of a number of assumptions that will drive that and the $1.50 for one warrant and just going out yet. I think everyone realizes that these shareholders are actually going to get 0.64 of a warrant, but $1.50 for one warrant was just an estimate that was consistent with the range of values that come up when you model the value of that security.

Operator

[Operator Instructions]

Richard D. Kinder

Okay. Well, thank you very much for calling in this morning. We think it's a great transaction, and we'll be in New York, Boston, Denver and Los Angeles over the next couple of days, and we'll see some of you then, I'm sure. Thank you.

Operator

This concludes today's conference. Thank you for joining. You may disconnect at this time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: El Paso Corp., Kinder Morgan, Inc. - M&A Call
This Transcript
All Transcripts