Kinder Morgan To Buy Jones Act Tankers In U.S. For $962 Mln

(RTTNews) - Pipeline transportation and energy storage company Kinder Morgan Energy Partners, L.P. (KMP) agreed Monday to acquire American Petroleum Tankers (APT) and State Class Tankers (SCT) from private equity firms Blackstone Group (BX) and Cerberus Capital Management in an all-cash deal valued at $962 million. The deal, which is subject to regulatory approvals, is expected to close in the first quarter of 2014.

"This is a strategic and complementary extension of our existing crude oil and refined products transportation business. Product demand is growing and sources of supply continue to change, in part due to the increased shale activity. As a result, there is more demand for waterborne transportation to move these products," said John Schlosser, president of KMP's Terminals segment.

The two tanker companies, APT and SCT, are engaged in the marine transportation of crude oil, condensate and refined products in the U.S. This domestic trade is commonly referred to as the Jones Act trade.

APT runs a fleet of five medium range Jones Act tankers, each with 330,000 barrels of cargo capacity. APT currently generates about $55 million of annual EBITDA.

Meanwhile, SCT has commissioned the construction of four medium range Jones Act tankers, each with 330,000 barrels of cargo capacity. The vessels are scheduled to be delivered in 2015 and 2016.

Kinder Morgan Energy noted that it will invest about $214 million to complete the construction of the SCT vessels. Following the completion of the vessels, Kinder Morgan Energy expects combined annual EBITDA of about $140 million.

Kinder Morgan Energy said the purchase of the two Jones Act tankers will be will be immediately accretive to cash available to its unitholders upon closing.

Additionally, Kinder Morgan Energy's general partner Kinder Morgan, Inc. (KMI) has agreed to waive its incentive distribution amounts of $16 million in 2014 and $19 million in 2015 and $6 million in 2016 to facilitate the closure of the deal.

KMP closed Friday's regular trading session at $79.26, up $0.87 on a volume of 1.58 million shares. In the past 52-week period, the stock has been trading in a range of $77.13 to $92.99.