El Paso Sells ANR and Great Lakes Interests to TransCanada
El Paso has sold the ANR Pipeline Company, its Michigan storage assets and its 50-percent interest in Great Lakes Gas Transmission to TransCanada Corporation and TC PipeLines, LP for $4.135 billion, including the assumption of $744 million of debt. Because El Paso will utilize tax loss carryovers in this transaction, the company expects its after-tax cash proceeds to be roughly $3.3 billion. In addition, El Paso expects to have approximately $1 billion of tax loss carryovers remaining after the close. Closing of the transaction is subject to customary conditions and regulatory approvals, and is expected to occur during the first quarter of 2007.
"The sale of ANR Pipeline, our Michigan storage assets and our interest in Great Lakes is a transformational event for El Paso," said Doug Foshee, president and chief executive officer of El Paso. "Coupled with the restructuring efforts over the last three years, this transaction immediately elevates our credit statistics to a level that is at or very near an investment grade level, one of our primary long-term objectives. We also preserve our earnings outlook and our position as North America's largest interstate natural gas pipeline franchise with approximately 43,000 miles of pipelines." In addition, the transaction will result in the following:
* A neutral to slightly positive impact on earnings per share
* An increase in the pipeline group long-term growth rate
* A clear benchmark for the value of El Paso's pipeline franchise
* Significantly improved balance sheet and financial flexibility
* The elimination of any discount on El Paso's common stock due to leverage
Over the past three years, El Paso has successfully sold non-core assets and narrowed its focus to its two core businesses -- interstate natural gas pipelines and exploration & production. The opportunities for natural gas infrastructure development remain excellent. The pipeline group has more than $2 billion of committed projects in various stages of development and is pursuing others. El Paso's pipelines will become more competitive as this transaction will reduce their cost of capital. The E&P business will continue with a balanced drilling program in its Onshore, Texas Gulf Coast, Gulf of Mexico and International regions. Both core businesses will benefit from El Paso's improved financial flexibility as the company will be much better equipped to respond to new opportunities. El Paso will provide more details on its 2007 plan at its annual analyst meeting on February 21, 2007.
Goldman Sachs & Co. acted as the financial advisor to El Paso on this transaction. Andrews Kurth LLP acted as legal counsel.
El Paso Corporation provides natural gas and related energy products in a safe, efficient, dependable manner. The company owns North America's largest natural gas pipeline system and one of North America's largest independent natural gas producers.
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