December 15, 2010 [OPIS] - Kinder Morgan Energy Partners LP said late on Wednesday that it will invest up to $150 million in a short-rail transportation firm, Watco Companies, over the next year in exchange for a preferred equity position in the rail company.
Kinder Morgan’s initial investment will be $50 million upon closing, which is scheduled to occur in January of 2011.
Based in Pittsburg, Kan., Watco Companies owns the largest privately held short line railroad company in the United States. Watco also operates transload/intermodal and mechanical services divisions.
The transaction provides capital to Watco for further expansion of specific projects and offers Kinder Morgan the opportunity to share in the subsequent growth.
“This investment complements Kinder Morgan’s existing terminal network, and provides our customers more transportation services for many commodities that we handle,” said Jeff Armstrong, president of Kinder Morgan’s terminals business.
The relationship with Watco will produce additional growth opportunities through new projects such as crude unit train operations and incremental business at Kinder Morgan’s terminal storage facilities.
The transaction is expected to be immediately accretive to cash distributable to KMP unitholders.
Kinder Morgan is one of the largest pipeline transportation and energy storage companies in North America with approximately 37,000 miles of pipelines and 180 terminals.
It transports, stores and handles energy products like natural gas, refined petroleum products, crude oil, ethanol, coal and carbon dioxide (CO2). These products are essential for generating electricity, heating homes, powering cars and much more.
