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Acquisitions and Divestitures Acquisitions and Divestitures (Notes) | 3 Months Ended
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Mar. 31, 2013
Acquisitions and Divestitures [Abstract] |
Acquisitions and Divestitures [Text Block] | Acquisitions and Divestitures KMI Acquisition of El Paso Corporation Effective on May 25, 2012, we acquired all of the outstanding shares of EP for an aggregate consideration of approximately $23 billion (excluding assumed debt). In total, EP shareholders received $11.6 billion in cash, 330 million KMI Class P shares with a fair value of $10.6 billion as of May 24, 2012 and 505 million KMI warrants with a fair value of $863 million as of May 24, 2012. The warrants have an exercise price of $40 per share and a 5-year term. Pro Forma Statements of Income The following summarized unaudited pro forma consolidated statement of income information for the three months ended 2012 is presented as if the EP acquisition had been completed on January 1, 2012. The summarized unaudited pro forma consolidated statement of income information is not necessarily indicative of what the actual results of operations or financial position of KMI would have been if the transactions had in fact occurred on the date or for the period indicated, nor does it purport to project the results of operations or financial position of KMI for any future periods or as of any date. The following summarized unaudited pro forma consolidated statement of income information is in millions, except per share amounts.
|  | Three Months Ended
|  | March 31, 2012
Revenues |  | $ | 2,625 |
Income from continuing operations |  | $ | 424 |
Loss from discontinued operations |  | $ | (357 | )
Net income attributable to Kinder Morgan, Inc. |  | $ | 95 |
Basic and diluted earnings per common share |  |
Class P shares |  | $ | 0.09 |
Class A shares |  | $ | 0.07 |
__________ The summarized unaudited pro forma consolidated statement of income information includes adjustments to:
• | include the results of EP;
• | include the results of discontinued operations from (i) EP Energy and (ii) KMP’s FTC Natural Gas Pipelines disposal group (see below) including $428 million of losses (net of income taxes) on the remeasurement of the asset disposal group for the three months ended March 31, 2012;
• | include incremental interest expense related to financing the transactions;
• | include incremental depreciation and amortization expense on assets and liabilities that were revalued as part of the purchase price allocation;
• | reflect income taxes for the above adjustments at our effective income tax rate; and
• | reflect the increase in KMI Class P shares outstanding.
Copano Energy, L.L.C. Acquisition On May 1, 2013, KMP completed the acquisition of Copano Energy, L.L.C., referred to in this report as Copano, for a total purchase price of approximately $5 billion, including the assumption of debt. The transaction, which was approved by Copano’s unitholders and the boards of directors of each of KMR, Kinder Morgan G.P., Inc., as KMP’s general partner, and Copano was a 100% unit for unit transaction with an exchange ratio of 0.4563 of KMP’s common units for each Copano unit. Copano is a midstream natural gas company that provides comprehensive services to natural gas producers, including natural gas gathering, processing, treating and natural gas liquids fractionation. Copano owns an interest in or operates approximately 6,900 miles of pipelines with 2.7 billion cubic feet per day of natural gas transportation capacity, and also owns nine natural gas processing plants with more than 1 billion cubic feet per day of natural gas processing capacity and 315 million cubic feet per day of natural gas treating capacity. Its operations are located primarily in Texas, Oklahoma and Wyoming. Most of the acquired assets will be included in the Natural Gas Pipelines business segment. KMP’s FTC Natural Gas Pipelines Disposal Group – Discontinued Operations As described above in Note 1, we began accounting for KMP’s FTC Natural Gas Pipelines disposal group as discontinued operations in the first quarter of 2012 (prior to our sale announcement, we included the disposal group in the Natural Gas Pipelines business segment). During that quarter, the disposal group’s net assets were remeasured to reflect the initial assessment of its fair value as a result of the FTC mandated sale requirement, and based on this remeasurement, we recognized a $428 million loss. We reported this loss amount separately as “Loss on sale and the remeasurement of KMP’s FTC Natural Gas Pipelines disposal group to fair value, net of tax” within the discontinued operations section of our accompanying consolidated statement of income for the three months ended March 31, 2012. The final consideration was trued up in the first quarter of 2013 resulting in a $2 million additional loss recorded as “Loss on sale and the remeasurement of KMP’s FTC Natural Gas Pipelines disposal group to fair value, net of tax.” As a result of our remeasurement of net assets to fair value and the sale of net assets, we recognized a combined $937 million loss for the year ended December 31, 2012. Summarized financial information for KMP’s FTC Natural Gas Pipelines disposal group is as follows (in millions):
|  | Three Months Ended
|  | March 31, 2012
Operating revenues |  | $ | 71 |
Operating expenses |  | (37 | )
Depreciation and amortization |  | (7 | )
Earnings from equity investments |  | 22 |
Interest income and Other, net |  | 1 |
Income from operations of KMP’s FTC Natural Gas Pipelines disposal group, net of tax |  | $ | 50 |
Express Pipeline System Effective March 14, 2013, KMP sold both its one-third equity ownership interest in the Express pipeline system and its subordinated debenture investment in Express to Spectra Energy Corp. for $403 million in cash. We recorded a pre-tax gain of $225 million with respect to this transaction, and we reported this amount separately as “Gain on sale of investments in Express pipeline system” in our accompanying consolidated statement of income for the three months ended March 31, 2013. We also recorded an income tax expense of $84 million related to this gain amount, and we included this expense within “Income Tax Expense” in our accompanying consolidated statement of income for the three months ended March 31, 2013. As of the date of sale, KMP’s equity investment in Express totaled $67 million and its note receivable due from Express totaled $110 million. Prior to KMP’s sale, we (i) accounted for KMP’s equity investment under the equity method of accounting; (ii) accounted for KMP’s debt investment under the historical amortized cost method of accounting; and (ii) included the financial results of the Express pipeline system within the Kinder Morgan Canada-KMP business segment. As of December 31, 2012, KMP’s equity and debt investments in Express totaled $65 million and $114 million, respectively, and we included the combined $179 million amount within “Assets held for sale” on our accompanying consolidated balance sheet as of that date. BBPP Holdings Ltda As of December 31, 2012, we owned a 33 1/3% interest in BBPP Holdings Ltda which we acquired as a part of the May 25, 2012 EP acquisition. The remaining interest is owned 33 1/3% by British Gas International Holdings B.V. and 33 1/3% by Total. BBPP Holdings Ltda owns a 29% interest in Transportadora Brasileira Gasoduto Bolivia-Brasil S.A. which is referred to as the Bolivia to Brazil Pipeline. On January 18, 2013, we completed the sale of our equity interests in the Bolivia to Brazil Pipeline for $88 million. As of December 31, 2012, our $88 million equity interests in the Bolivia to Brazil Pipeline was included within “Assets held for sale” on our accompanying consolidated balance sheet. Drop-Down of EP Assets to KMP March 2013 Effective March 1, 2013, KMP acquired from us the remaining 50% ownership interest it did not already own in both the El Paso Natural Gas pipeline system and the El Paso midstream assets for an aggregate consideration of approximately $1.7 billion (including a proportional 50% of assumed debt borrowings as of March 1, 2013). The drop-down transaction was accounted for as a transfer of net assets between entities under common control. Specifically, we have retrospectively adjusted our consolidated financial statements to reflect the recognition by KMP of the acquired assets and assumed liabilities at our carrying value, including our El Paso purchase accounting adjustments as of May 25, 2012. In this report, we refer to this acquisition of assets from KMI as the drop-down transaction; the combined group of assets acquired from KMI as the drop-down asset group; the El Paso Natural Gas pipeline system or El Paso Natural Gas Company, L.L.C. as EPNG; and the El Paso midstream assets or Kinder Morgan Altamont LLC (formerly, El Paso Midstream Investment Company, L.L.C.) as the midstream assets. The consideration that we received from KMP consisted of (i) $988 million in cash; (ii) 1,249,452 common units (valued at $108 million based on the $86.72 closing market price of KMP’s common units on the New York Stock Exchange on the March 1, 2013 issuance date); and (iii) $557 million in assumed debt (consisting of 50% of the outstanding principal amount of EPNG’s debt borrowings as of March 1, 2013, excluding any debt fair value adjustments). We used the proceeds from the March 1, 2013 drop-down transaction to (i) pay down $947 million of our senior secured term loan facility and (ii) reduce borrowings under our credit facility. Also, see Note 3. The terms of the drop-down transaction were approved on our behalf by the independent members of our board of directors and on KMP’s behalf by Kinder Morgan G.P., Inc., as KMP’s general partner, and KMR’s audit committees and the boards of directors of both Kinder Morgan G.P., Inc. and KMR, in its capacity as the delegate of Kinder Morgan G.P., Inc., following the receipt by our independent directors and by the audit committees of Kinder Morgan G.P., Inc. and KMR of separate fairness opinions from different independent financial advisors. August 2012 Effective August 1, 2012, KMP acquired the full ownership interest in the Tennessee Gas natural gas pipeline system and an initial 50% ownership interest in EPNG from us for an aggregate consideration of approximately $6.2 billion. For additional information about this acquisition, see Note 3 “Acquisitions and Divestitures-Drop-Down of EP Assets to KMP” to our consolidated financial statements included in our 2012 Form 10-K. Income Tax Impact on the Drop-Down of EP Assets to KMP As discussed above, we accounted for the acquisition of EP as a business combination and for the subsequent March 2013 and August 2012 drop-down transactions as transfers of net assets between entities under common control. For income tax purposes, the March 2013 transaction was treated as a contribution and the August 2012 drop-down transaction was treated as a partial sale, and a partial contribution. Our accounting policy is to apply the look-through method of recording deferred taxes on the outside book tax basis differences in our investments without regard to non tax deductible goodwill. As a result of the drop-down transactions, a deferred tax liability arose related to the portion of the outside basis difference associated with the underlying goodwill that was contributed to KMP by us. However, since the drop-downs were transactions between entities under common control, we recognized an offsetting deferred charge of $448 million for the August 2012 and $53 million for the March 2013 drop-down transactions. These balances will be amortized to income tax expense over the remaining useful lives of the transferred assets of approximately 25 years. Similar to the impact described above, KMP’s acquisition of a 50% ownership interest in the EP Midstream joint venture, also generated the recognition of a deferred charge and corresponding deferred tax liability and is included in the amount above. The amortization of the deferred charge will result in incremental income tax expense of approximately $20 million per year. For the three months ended March 31, 2013, total income tax expense related to the amortization of the deferred charges was approximately $5 million.

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- Definition The entire disclosure for equity investments, for which combined disclosure is appropriate AND Disclosure of all information related to any significant acquisition and disposal. Disclosure may include methodology and assumptions, type of asset, asset classification, useful life, useful purpose, acquisition cost, method of acquisition or disposal, depreciation method, gain or loss on disposal pretax and net of tax, date of acquisition or disposal and restrictions on amount of proceeds from donated assets. + References No definition available. + Details
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