Kinder Morgan Gearing Up for $2.3 Billion IPO

Kinder Morgan Inc expects to raise as much as $2.3 billion in an initial public offering, the largest U.S. energy debut since Conoco Inc went to market more than a decade ago.

The offering, which originally was seen raising $1.5 billion, would be the biggest in the energy field since Conoco's $4.4 billion IPO in 1998, according to data from Thomson Reuters.

Kinder Morgan's shares are expected to price in a range of $26 to $29, the private equity-backed company said in an updated filing with regulators on Thursday.

Kinder Morgan Inc, backed by Carlyle Group and Goldman Sachs Group Inc's (NYSE:GS) buyout fund, will not sell any shares in the IPO, so the stock will be offered by selling shareholders.

After completion of the offering, Kinder Morgan's private equity investors and management will retain nearly 90% of the company and Chief Executive Officer Rich Kinder will hold on to his entire 30.6% stake, according to the filing with the U.S. Securities and Exchange Commission.

The shares are expected to trade on the New York Stock Exchange under the symbol "KMI." Kinder Morgan Inc owns 11% of master limited partnership (MLP) Kinder Morgan Energy Partners LP (NYSE:KMP).

The partnership holds most of the company's assets, so investors buying shares in the offering will essentially be investing in Kinder Morgan Inc's financial interest in its MLP.

MLPs are favored by owners of cash-generating pipeline and other energy infrastructure assets because of the low tax liability. Those tax advantages provide MLPs with a lower cost of capital.

The public offering is seen as a means for Kinder's private equity partners to monetize their investment, but it also may attract investors looking for a way to buy into Kinder Morgan Partner's vast network of pipelines, analysts said.

"It will be somewhat easier for retirement accounts for pension funds to invest in this entity," said Jason Stevens, an analyst at Morningstar. "The other factor is that this gives most mutual funds who want to avoid the back-office tax hassles related to an MLP a way to invest in the company's underlying cash flows."

Paying taxes on MLPs is a complicated process that a number of investors would rather avoid.

Goldman Sachs and Barclays Capital (BARC.L) are leading the underwriters on the offering, the company said in a regulatory filing. Underwriters will have the option to purchase an additional 12 million shares of common stock from the selling stockholders, the filing said.

Kinder Morgan Partners owns 8,400 miles of refined petroleum product pipelines in the United States that deliver gasoline, diesel fuel, jet fuel and natural gas liquids, as well as 15,000 miles of natural gas pipelines and gas storage facilities.

It also owns 1,400 miles of U.S. carbon dioxide pipelines, stakes in eight West Texas oil fields, 120 fuel terminals and 2,500 miles of pipeline in Canada.

CEO Kinder led a group of investors in 2007 -- including Goldman Sachs' buyout fund, Carlyle and Riverstone Holdings -- in taking the company private.

Kinder previously was president of energy company Enron Corp, but left in 1996 -- years before it became embroiled in an accounting scandal and declared bankruptcy.