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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (158604)	10/19/2011 12:56:36 PM
From: Dennis Roth	1 Recommendation Respond to of 206099

El Paso Pipeline Partners, LP 9% Ain't So Bad; Reiterate Outperform 6 pages Download Link: sendspace.com KMI Acquisition of EP a Modest Negative: We believe Kinder Morgan Inc.’s (KMI) acquisition of El Paso Corp. (EP) is a modest negative for El Paso Pipeline Partners (EPB). Kinder Morgan Partners (KMP) will likely garner a share of the drop downs from EP that would have previously gone directly to EPB. As a result, EPB’s distribution growth rate over the next five years is expected to be 9%, which is lower than the 11.3% we had previously been expecting. We estimate the impact of this lower distribution growth rate equates to ~$3/sh. Stock Reaction More than Discounts this Impact: While we expected a negative reaction to the news, we believe the current sell off (~$4/sh) more than discounts the near-term negative. Longer Term Positives: We believe the transaction has longer term positive implications which investors may be overlooking: (1) the transaction likely strengthens EPB’s credit profiile with an investment grade sponsor, (2) the value of stable, long-term, fee-based cash flow and (3) the potential exists for a KMP/EPB merger longer term to simplify Kinder Morgan structure. Maintain Outperform; TP to $41 (from $44): We lower our target price to $41 (from $44) to reflect a lower than previously estimated five year distribution growth rate of 9.9% (vs. 11.3%) and maintain our Outperform rating. While slower distribution growth is a near-term negative, we believe EPB shares already discount this risk and continue to offer an attractive total return of 28% (assuming a $33.75/share price).