SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
January 20, 2000
(Date of earliest event reported)
KINDER MORGAN ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 1-11234 76-0380342
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1301 McKinney, Suite 3400
Houston, Texas 77010
(Address of principal executive offices, including zip code)
713-844-9500
(Registrant's telephone number, including area code)
<PAGE> 2
Item 2. Acquisition of Assets.
On December 30, 1999, Kinder Morgan Energy Partners, L.P., a
Delaware limited partnership (the "Partnership"), entered into a
Contribution Agreement among the Partnership, Kinder Morgan G.P.,
Inc., a Delaware corporation ("KMGP"), Kinder Morgan, Inc., a
Kansas corporation ("KMI"), Natural Gas Pipeline Company of
America, a Delaware corporation ("NGPL"), and KN Gas Gathering,
Inc., a Colorado corporation ("KNGG"). On January 20, 2000, but
effective as of December 31, 1999, the contribution of assets by
KMI, NGPL and KNGG to the Partnership was completed.
In exchange for the contribution to the Partnership of:
(i) all of KMI's interest in Kinder Morgan Interstate Gas
Transmission, LLC, a Colorado single-member limited liability
company ("KM Interstate"),
(ii) all of NGPL's interest in Kinder Morgan
Trailblazer LLC, a Delaware single-member limited liability
company ("KM Trailblazer"), and
(iii) all of KNGG's interest in Red Cedar Gathering
Company, a Colorado general partnership ("Red Cedar"),
the Partnership took the following actions:
(1) issued an aggregate of 9,810,000 common units
representing limited partnership units of KMEP to KMI, NGPL and
KNGG,
(2) made a special distribution in the amount of
$200,000,000 in cash to KMI, and
(3) has the obligation to pay KMI $130,000,000 within 90
days of the closing.
Upon the contribution, the Partnership acquired (i) the
assets of KM Interstate, including an interstate natural gas
transmission system, consisting of approximately 6,600 miles of
pipeline, that transports natural gas eastward from the Rocky
Mountains, (ii) KM Trailblazer's one-third partnership interest
in Trailblazer Pipeline Company, an Illinois general partnership
whose assets include an interstate natural gas transmission
system, consisting of approximately 430 miles of pipeline and one
compression station, that transports natural gas eastward from
the Rocky Mountains and (iii) KNGG's 49% interest in Red Cedar,
whose assets consist of over 450 miles of gathering pipeline
connecting more than 600 producing gas wells and provide natural
gas gathering and treating facilities for natural gas producers
in certain regions of Colorado. The Partnership intends to
continue the same use of all of these assets.
The Partnership's distribution and issuance of common units
in exchange for the contribution was determined pursuant to an
arms-length negotiation between the parties, with both sides
receiving a fairness opinion from independent financial advisors.
The source of funds for the $200 million special distribution was
a borrowing under the Partnership's existing 364-Day,
$300,000,000 Credit Agreement, dated as of September 29, 1999,
among the Partnership, the lenders party thereto and First Union
National Bank, as administrative agent for such lenders. The
source of funds for the remaining $130 million has not been
determined.
In connection with the Contribution, KMGP amended the
Partnership's Second Amended and Restated Agreement of Limited
Partnership, as allowed by that agreement, to provide for (i) the
special distribution of $330 million to KMI, (ii) a revision to
the definition of "Conflicts and Audit Committee" to remove an
outdated reference, (iii) a revision to the definition of "Record
Holder" to indicate that KMI, NGPL and KNGG shall not receive
dividends on any common units of the Partnership held by them for
the fiscal quarter ended December 31, 1999, and (iv) a revision
to the provisions related to priority allocations to properly
match allocations of income to distributions of cash.
<PAGE> 3
The general partner of the Partnership, KMGP, is responsible
for the operation and day-to-day management of the Partnership
and is an indirect, wholly-owned subsidiary of KMI. Certain of
the directors and officers of KMI are also directors and officers
of KMGP.
<PAGE> 4
Item 5. Other Events.
On January 20, 2000, the Partnership issued a press release
announcing, among other things, the closing of the transaction
referenced in Item 2 above. A portion of this press release is
filed herewith as Exhibit 99.1 and is incorporated herein by
reference.
<PAGE> 5
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Financial Statements.
It is impractical to provide the financial statements
required by Item 7 of this report on Form 8-K at the time of
filing hereof. Such financial statements will be filed not later
than April 4, 2000.
(b) Pro Forma Financial Information.
It is impractical to provide the pro forma financial
information required by Item 7 of this report on Form 8-K at the
time of filing hereof. Such pro forma financial information will
be filed not later than April 4, 2000.
(c) Exhibits.
The following materials are filed as exhibits to this
Current Report on Form 8-K.
Exhibit
Number Description
2.1 Contribution Agreement, dated as of
December 30, 1999, by and among the
Partnership, KMGP, KMI, NGPL and KNGG
(incorporated by reference from Exhibit
99.1 to the Partnership's Current Report
on Form 8-K filed January 14, 2000).
4.1 Amendment No. 1 to Second Amended and
Restated Agreement of Limited
Partnership of the Partnership dated as
of January, 20, 2000, by KMGP in its
individual capacity and as attorney-in-
fact for the limited partners of the
Partnership.
99.1 Portion of the Press Release of the Partnership
issued January 20, 2000.
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
KINDER MORGAN ENERGY PARTNERS, L.P.
By: KINDER MORGAN G.P., INC.,
its general partner
By: /s/ Joseph Listengart
------------------------------
Joseph Listengart
Vice President, General Counsel
and Secretary
Date: February 4, 2000
<PAGE> 7
EXHIBIT INDEX
Exhibit
Number Description
------ ------------
2.1 Contribution Agreement, dated as of
December 30, 1999, by and among the
Partnership, KMGP, KMI, NGPL and KNGG
(incorporated by reference from Exhibit
99.1 to the Company's Current Report on
Form 8-K filed January 14, 2000).
4.1 Amendment No. 1 to Second Amended and
Restated Agreement of Limited
Partnership of the Partnership dated as
of January, 20, 2000, by KMGP in its
individual capacity and as attorney-in-
fact for the limited partners of the
Partnership.
99.1 Portion of the Press Release of the Partnership
issued January 20, 2000.
AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
KINDER MORGAN ENERGY PARTNERS, L.P.
This Amendment No. 1 to Second Amended and Restated Agreement of
Limited Partnership of Kinder Morgan Energy Partners, L.P. (this
"Amendment") is made as of the 20th day of January, 2000, by
Kinder Morgan G.P., Inc., a Delaware corporation (the "General
Partner"), in its individual capacity and as attorney-in-fact for
the Limited Partners of Kinder Morgan Energy Partners, L.P., in
accordance with Article XV of the Partnership Agreement (as such
capitalized terms are defined below).
R E C I T A L S
A. The General Partner is the sole general partner of
Kinder Morgan Energy Partners, L.P., a Delaware limited
partnership (the "Partnership") organized under a Second Amended
and Restated Agreement of Limited Partnership effective as of
February 14, 1997 (the "Partnership Agreement").
B. The General Partner and the Partnership entered into a
Contribution Agreement dated December 30, 1999 (the "Contribution
Agreement") among Kinder Morgan, Inc., a Kansas corporation
("KMI"), Natural Gas Pipeline Company of America, a Delaware
corporation ("NGPL"), KN Gas Gathering, Inc., a Colorado
corporation ("KN Gas"), the General Partner and the Partnership.
C. The Contribution Agreement contemplates, among other
things, the contribution (i) of all of KMI's equity interest in
KN Interstate Gas Transmission Co., a Colorado corporation to be
converted into a single-member Colorado limited liability
company, (ii) of all of NGPL's equity interest in NGPL-
Trailblazer Inc., a Delaware corporation to be converted into a
single-member Delaware limited liability company, and (iii) of
all of KN Gas' equity interest in Red Cedar Gathering Company, a
Colorado general partnership, in exchange for the issuance by the
Partnership to KMI, NGPL and KN Gas of an aggregate of 9,810,000
common units representing limited partnership units of the
Partnership.
D. Pursuant to the Contribution Agreement, the Partnership
has agreed to incur debt in such amount and on such terms as may
be acceptable to the Partnership (the "KMEP Debt") sufficient in
amount to allow the Partnership to use the proceeds of the KMEP
Debt to fund a distribution to KMI in the amount of $330,000,000
(the "Special Distribution") which shall be declared and paid to
KMI upon its contribution pursuant to the Contribution Agreement.
E. To effect the Special Distribution as contemplated by
the Contribution Agreement, it is necessary to amend the
Partnership Agreement as provided herein.
F. Section 15.1 of the Partnership Agreement provides that
the General Partner, as the general partner of Partnership, may
amend the Partnership Agreement without the consent of any
limited partner of the Partnership to reflect a change that, in
the sole discretion of the General Partner, does not adversely
affect the limited partners of the Partnership in any material
respect. In addition, Section 15.1 of the Partnership Agreement
provides that the General Partner, as the general partner of the
Partnership, may amend the Partnership Agreement without the
consent of any limited partner of the Partnership to reflect a
change that is required to effect the intent of the provisions of
the Partnership Agreement or is otherwise contemplated by the
Partnership Agreement.
G. The General Partner is authorized to execute and
deliver this Amendment on behalf of the limited partners pursuant
to Sections 15.1 and 1.4 of the Partnership Agreement.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, the Partnership Agreement is hereby amended
as follows:
1. Article II. The reference to "Enron" in the definition
of "Conflicts and Audit Committee" in Article II of the
Partnership Agreement is eliminated and replaced with "the
General Partner."
2. Article II. The following sentence shall be added to
the end of the definition of "Record Holder" in Article II of the
Partnership Agreement:
Solely for purposes of the distribution of Available Cash
pursuant to Section 5.4 of this Agreement for the calendar
quarter ended December 31, 1999, the holders of Common Units
issued pursuant to the Contribution Agreement (as defined
herein) shall not be treated as Record Holders and shall not
be entitled to participate in such distribution.
3. Section 5.1(d)(iii). Section 5.1(d)(iii) of the
Partnership Agreement shall be deleted and replaced with the
following:
(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value
of any property distributed (except cash or property
distributed pursuant to Section 14.3 or 14.4) to any Limited
Partner holding Common Units with respect to a taxable year
is greater (on a per Unit basis) than the amount of cash or
the Net Agreed Value of property distributed to the other
Limited Partners holding Common Units (on a per Unit basis),
then (1) each Limited Partner holding Common Units receiving
such greater cash or property distribution shall be
allocated gross income in an amount equal to the product of
(aa) the amount by which the distribution (on a per Unit
basis) to such Limited Partners holding Common Units exceeds
the distribution (on a per Unit basis) to the Limited
Partner holding Common Units receiving the smallest
distribution and (bb) the number of Units owned by the
Limited Partners holding Common Units receiving the greater
distribution; and (2) the General Partner shall be allocated
gross income in an aggregate amount equal to 1/99 of the sum
of the amounts allocated in clause (1) above.
(B) After the application of Section
5.1(d)(iii)(A), all or any portion of the remaining items of
Partnership gross income or gain for the taxable period, if
any, shall be allocated 100% to the General Partner, until
the aggregate amount of such items allocated to the General
Partner pursuant to this paragraph 5.1(d)(iii)(B) for the
current taxable period and all previous taxable periods is
equal to the cumulative amount of all Incentive
Distributions made to the General Partner (or its assignee)
from the Closing Date to a date 45 days after the end of the
current taxable period.
4. Section 5.9. A new Section 5.9 is hereby added to the
Partnership Agreement, to follow Section 5.8 and to read in full
as follows:
5.9 Special Distribution. Notwithstanding anything to
the contrary set forth in this Agreement, following the
contribution by Kinder Morgan, Inc., a Kansas corporation
("KMI"), of all of its equity interest in Kinder Morgan
Interstate Gas Transmission LLC, a Colorado limited
liability company, as contemplated by the Contribution
Agreement dated December 30, 1999 (the "Contribution
Agreement"), among KMI, Natural Gas Pipeline Company of
America, a Delaware corporation, KN Gas Gathering, Inc., a
Colorado corporation, the General Partner and the
Partnership, the Partnership shall distribute $330,000,000
in cash to KMI, without a corresponding distribution to the
General Partner or the Limited Partners, as provided for in
the Contribution Agreement. Notwithstanding anything to the
contrary set forth in this Agreement, KMI shall not receive
<PAGE> 3
an allocation of income (including gross income) or gain as
a result of the distribution provided for in the preceding
sentence.
5. Ratification. Except as expressly amended hereby, the
Partnership Agreement is hereby ratified and confirmed, and shall
continue in full force and effect.
[remainder of page intentionally left blank]
<PAGE> 4
IN WITNESS WHEREOF, the General Partner has executed and
delivered this Amendment, in its individual capacity and as
attorney-in-fact for the limited partners of the Partnership, in
accordance with Section 15.1 of the Partnership Agreement, as of
the date first above written.
KINDER MORGAN G.P., INC.,
as General Partner
By: /s/ David G. Dehaemers, Jr.
--------------------------------
Name: David G. Dehaemers, Jr.
------------------------------
Title: Vice President
-----------------------------
KINDER MORGAN G.P., INC.,
as Attorney-in-Fact for the limited partners
By: /s/ David G. Dehaemers, Jr.
-------------------------------
Name: David G. Dehaemers, Jr.
------------------------------
Title: Vice President
-----------------------------
[KINDER MORGAN ENERGY PARTNERS, L.P.]
www.kindermorgan.com
Larry Pierce Irene Twardowski
Media Relations Investor Relations
(303) 914-4751 (713) 844-9543
KINDER MORGAN ENERGY PARTNERS, L.P. NET INCOME INCREASES 20% FOR
FOURTH QUARTER; UP 76% FOR 1999
Houston, Jan. 20, 2000 - Kinder Morgan Energy Partners, L.P.
(NYSE:KMP) today reported fourth quarter 1999 net income of $45.6
million, or $0.63 per unit, as compared to fourth quarter 1998
net income of $37.8 million, or $0.55 per unit. The company's
distribution to unitholders of $0.725 for the fourth quarter of
1999 (an annualized rate of $2.90) will be paid on Feb. 14, 2000
to unitholders of record as of Jan. 31, 2000.
The company announced net income before extraordinary
charges for early extinguishment of debt of $184.9 million for
1999, or $2.63 per unit, compared to $117.2 million, or $2.09 per
unit, in 1998. After the extraordinary charges, 1999 net income
was $182.3 million, or $2.57 per unit, compared to $103.6
million, or $1.75 per unit, the previous year.
"We are delighted with our financial results for the fourth
quarter and the year," said Richard D. Kinder, chairman and CEO
of Kinder Morgan. "These strong results reflect solid operating
performance from all of our business segments. We also continue
to benefit from our lack of exposure to variations in commodity
prices."
The company's Pacific operations experienced another solid
quarter, recording an 11 percent increase in net income compared
to the fourth quarter of 1998. Mainline delivery volumes in the
fourth quarter increased 6 percent over the same period a year
ago. For the year, net income in this segment rose 30 percent
and mainline delivery volumes increased 22 percent. These
increases reflect higher demand for transportation of refined
products in the West and a full year of earnings contributions
from the Pacific operations, which the company only owned for 10
month in 1998.
(more)
<PAGE> 2
KMP Earnings Page 2
Mid-Continent operations reported a 21 percent increase in
earnings for the fourth quarter compared to the same period in
1998, and a 57 percent increase for all of 1999. This reflects
an increase in transmix income through the company's acquisition
of assets from Primary Corp. and its increased ownership in
Plantation Pipe Line Company. These gains were offset in part in
the fourth quarter, however, by the loss of income following the
sale of the company's 25 percent indirect interest in the Mt.
Belvieu fractionator.
Net income in the Bulk Terminal operations increased by 16
percent for the fourth quarter and 82 percent for the year, due
primarily to the addition of the Pier IX and Shipyard River
terminals in December of 1998, and higher throughput and revenues
at existing terminals.
Additionally, the board of directors of Kinder Morgan Energy
Partners reaffirmed its previously announced intention to
increase the company's distribution to unitholders for the first
quarter of 2000 to no less than $0.775 per quarter, or $3.10
annually, based on the anticipated increase in cash available for
distribution.
"Our intent to increase the distribution to unitholders
reflects the expected accretion resulting from the acquisition of
more than $700 million of Kinder Morgan, Inc. assets," Kinder
explained. "This transaction has now closed, effective Dec. 31,
1999. We anticipate the resulting distribution increase will be
payable on May 12, 2000 to unitholders of record on April 30,
2000. Moving forward, we will continue to work diligently to
grow cash distributions through revenue enhancements, accretive
acquisitions and cost efficiencies."
Assets transferred to Kinder Morgan Energy Partners
included KN Interstate Gas Transmission Co., a 49 percent
interest in Red Cedar Gathering Company and a 33 percent interest
in Trailblazer Pipeline Company. As consideration for the
assets, Kinder Morgan, Inc. received 9.81 million KMP common
units and approximately $330 million in cash. In the fourth
quarter, the company also acquired an additional 33 1/3 percent
indirect interest in Trailblazer Pipeline Company, increasing its
ownership stake in this natural gas pipeline system to 66 2/3
percent.
(more)
<PAGE> 3
KMP Earnings Page 3
Kinder Morgan Energy Partners, L. P., which has an
enterprise value of approximately $3.7 billion, is the nation's
largest pipeline master limited partnership. It owns and
operates one of the largest product pipeline systems in the
United States, serving customers in sixteen states with more than
5,000 miles of pipeline and over twenty associated terminals.
Kinder Morgan also operates over 20 bulk terminal facilities
which transload more than 40 million tons of coal, petroleum coke
and other products annually. In addition, Kinder Morgan owns 51%
of Plantation Pipe Line Company and 20% of Shell CO2 Company,
Ltd.
The general partner of Kinder Morgan Energy Partners, L. P.
is owned by Kinder Morgan, Inc., one of the largest midstream
energy companies in America, operating more than 30,000 miles of
natural gas and product pipelines in 26 states. It also has
significant retail distribution, marketing, gathering, electric
generation and terminal assets.
This news release includes forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Although
Kinder Morgan believes that its expectations are based on
reasonable assumptions, it can give no assurance that such
assumptions will materialize.
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