Acquisitions and Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2014

Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

Acquisitions and Divestitures

Acquisitions

American Petroleum Tankers and State Class Tankers

Effective January 17, 2014, we acquired APT and State Class Tankers (SCT) for aggregate consideration of $961 million in cash (the APT acquisition). APT is engaged in the marine transportation of crude oil, condensate and refined products in the U.S. domestic trade, commonly referred to as the Jones Act trade. APT’s primary assets consist of a fleet of five medium range Jones Act qualified product tankers, each with 330 MBbl of cargo capacity, and each operating pursuant to long-term time charters with high quality counterparties, including major integrated oil companies, major refiners and the U.S. Military Sealift Command. As of the closing date, the vessels’ time charters had an average remaining term of approximately four years, with renewal options to extend the terms by an average of two years. APT’s vessels are operated by Crowley Maritime Corporation.

SCT has commissioned the construction of four medium range Jones Act qualified product tankers, each with 330 MBbl of cargo capacity. The SCT vessels are scheduled to be delivered in 2015 and 2016 and are being constructed by General Dynamics’ NASSCO shipyard. We expect to invest approximately $214 million to complete the construction of these four SCT vessels, and upon delivery, the vessels will be operated pursuant to long-term time charters with a major integrated oil company. Each of the time charters has an initial term of five years, with renewal options to extend the term by up to three years. The APT acquisition complements and extends our existing crude oil and refined products transportation and storage business. We include the acquired assets as part of our Terminals business segment.

As of September 30, 2014, our preliminary purchase price allocation related to our APT acquisition, as adjusted to date, was as follows (in millions). Our evaluation of the assigned fair values is ongoing and subject to adjustment.



Purchase Price Allocation:
Current assets	$	6
Property, plant and equipment	951
Goodwill	67
Other assets	3
Total assets acquired	1,027
Current liabilities	(5		)
Unfavorable customer contracts	(61		)
Cash consideration	$	961

The “Goodwill” intangible asset amount represents the future economic benefits expected to be derived from this acquisition that are not assignable to other individually identifiable, separately recognizable assets acquired. We believe the goodwill was primarily generated by the value of the synergies created by expanding our non-pipeline liquids handling operations. Furthermore, we expect to fully deduct for tax purposes the entire amount of goodwill we recognized. The “Unfavorable customer contracts” figure represents the amount, on a present value basis, by which the customer contracts were below market day rates at the time of acquisition. This amount is being amortized as a noncash adjustment to revenue over the remaining contract period.

Other

Effective May 1, 2013, we acquired all of Copano’s outstanding units for a total purchase price of approximately $5.2 billion (including assumed debt and all other assumed liabilities). The transaction was a 100% unit for unit transaction with an exchange ratio of 0.4563 of our common units for each Copano common unit. We issued 43,371,210 of our common units valued at $3,733 million as consideration for the Copano acquisition (based on the $86.08 closing market price of a common unit on the NYSE on the May 1, 2013 issuance date). Also, due to the fact that our Copano acquisition included the remaining 50% interest in Eagle Ford that we did not already own, we remeasured our existing 50% equity investment in Eagle Ford to its fair value as of the acquisition date. As a result of our remeasurement, we recognized a $558 million non-cash gain, which represented the excess of the investment’s fair value ($704 million) over our carrying value as of May 1, 2013 ($146 million), and we reported this gain separately as “Gain on remeasurement of previously held equity interest in Eagle Ford to fair value” on our accompanying consolidated statement of income for the nine months ended September 30, 2013.

As of September 30, 2014, our final purchase price allocation related to the Copano acquisition was as follows (in millions):



Purchase Price Allocation:
Current assets (including cash acquired of $30)	$	218
Property, plant and equipment	2,788
Investments	300
Goodwill	1,248
Other intangibles	1,375
Other assets	13
Total assets	5,942
Less: Fair value of previously held 50% interest in Eagle Ford	(704		)
Total assets acquired	5,238
Current liabilities	(208		)
Other liabilities	(28		)
Long-term debt	(1,252		)
Noncontrolling interests	(17		)
Common unit consideration	$	3,733

The table above reflects changes we made in the first six months of 2014 to our preliminary purchase price allocation as of December 31, 2013. Based on our final measurement of fair values for all of the identifiable tangible and intangible assets acquired and liabilities assumed on the acquisition date, we reduced the preliminary value assigned to (i) “Investments” by $87 million; (ii) “Property, plant and equipment” by $17 million; and (iii) combined working capital items by $3 million.

The “Goodwill” intangible asset amount represents the future economic benefits expected to be derived from this acquisition that are not assignable to other individually identifiable, separately recognizable assets acquired. We believe the goodwill was primarily generated by the value of the synergies created by expanding our natural gas gathering and refined product transportation operations. This goodwill is not deductible for tax purposes, and is subject to an impairment test at least annually. The “Other intangibles, net” asset amount represents the fair value of acquired customer contracts and agreements. We are currently amortizing these intangible assets over an estimated remaining useful life of 25 years.

Effective June 1, 2013, we acquired certain oil and gas properties, rights, and related assets located in the Goldsmith Landreth San Andres oil field unit in the Permian Basin of West Texas from Legado Resources LLC for an aggregate consideration of $298 million, consisting of $280 million in cash and assumed liabilities of $18 million (including $12 million of long-term asset retirement obligations).

For additional information about our Copano and Goldsmith Landreth acquisitions (including our preliminary purchase price allocations as of December 31, 2013), see Note 3 “Acquisitions and Divestitures—Business Combinations and Acquisitions of Investments” to our consolidated financial statements included in our 2013 Form 10-K.

Pro Forma Information

The following summarized unaudited pro forma consolidated income statement information for the nine months ended September 30, 2013 assumes that our acquisitions of (i) APT, (ii) Copano and (iii) the Goldsmith Landreth oil field unit had occurred as of January 1, 2013. We prepared the following summarized unaudited pro forma financial results for comparative purposes only. The summarized unaudited pro forma financial results may not be indicative of the results that would have occurred if we had completed these acquisitions as of January 1, 2013, or the results that will be attained in the future. Amounts presented below are in millions, except for the per unit amounts:



	Pro Forma
	Nine Months Ended September 30, 2013
	(Unaudited)
Revenues	$	9,837
Income from Continuing Operations	2,465
Loss from Discontinued Operations	(2		)
Net Income	2,463
Net Income Attributable to Noncontrolling Interests	(27		)
Net Income Attributable to KMP	2,436
Limited Partners’ Net Income per Unit:
Income from Continuing Operations	$	2.70
Loss from Discontinued Operations	(0.01		)
Net Income	$	2.69

Divestitures

Express Pipeline System

Effective March 14, 2013, we sold both our one-third equity ownership interest in the Express pipeline system and our subordinated debenture investment in Express to Spectra Energy Corp. We received net cash proceeds of $402 million (after paying $1 million in the third quarter of 2013 for both a final working capital settlement and certain

transaction-related selling expenses), and we reported the net cash proceeds received separately as “Proceeds from sale of investments in Express pipeline system” within the investing section of our accompanying consolidated statement of cash flows for the nine months ended September 30, 2013. Additionally, we recognized a combined $224 million pre-tax gain with respect to this sale, and we reported this gain amount separately as “(Loss) Gain on sale of investments in Express pipeline system” on our accompanying consolidated statement of income for the nine months ended September 30, 2013. We also recorded an income tax expense of $84 million related to this gain on sale for the nine months ended September 30, 2013, and we included this expense within “Income Tax Expense.” As of the date of sale, our equity investment in Express totaled $67 million and our note receivable due from Express totaled $110 million.

Business Acquisition, Pro Forma Information [Table Text Block]

Acquisitions

American Petroleum Tankers and State Class Tankers



Purchase Price Allocation:
Current assets	$	6
Property, plant and equipment	951
Goodwill	67
Other assets	3
Total assets acquired	1,027
Current liabilities	(5		)
Unfavorable customer contracts	(61		)
Cash consideration	$	961

Other

As of September 30, 2014, our final purchase price allocation related to the Copano acquisition was as follows (in millions):



Purchase Price Allocation:
Current assets (including cash acquired of $30)	$	218
Property, plant and equipment	2,788
Investments	300
Goodwill	1,248
Other intangibles	1,375
Other assets	13
Total assets	5,942
Less: Fair value of previously held 50% interest in Eagle Ford	(704		)
Total assets acquired	5,238
Current liabilities	(208		)
Other liabilities	(28		)
Long-term debt	(1,252		)
Noncontrolling interests	(17		)
Common unit consideration	$	3,733

The “Goodwill” intangible asset amount represents the future economic benefits expected to be derived from this acquisition that are not assignable to other individually identifiable, separately recognizable assets acquired. We believe the goodwill was primarily generated by the value of the synergies created by expanding our natural gas gathering and refined product transportation operations. This goodwill is not deductible for tax purposes, and is subject to an impairment test at least annually. The “Other intangibles, net” asset amount represents the fair value of acquired customer contracts and agreements. We are currently amortizing these intangible assets over an estimated remaining useful life of 25 years.

Pro Forma Information



	Pro Forma
	Nine Months Ended September 30, 2013
	(Unaudited)
Revenues	$	9,837
Income from Continuing Operations	2,465
Loss from Discontinued Operations	(2		)
Net Income	2,463
Net Income Attributable to Noncontrolling Interests	(27		)
Net Income Attributable to KMP	2,436
Limited Partners’ Net Income per Unit:
Income from Continuing Operations	$	2.70
Loss from Discontinued Operations	(0.01		)
Net Income	$	2.69

Kinder Morgan Energy Partners, L.P. [Member] | American Petroleum Tankers and State Class Tankers [Member]

Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed - APT [Table Text Block]



Purchase Price Allocation:
Current assets	$	6
Property, plant and equipment	951
Goodwill	67
Other assets	3
Total assets acquired	1,027
Current liabilities	(5		)
Unfavorable customer contracts	(61		)
Cash consideration	$	961