Tallgrass

Energy

Leawood, KS

Current

September 2012

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Tallgrass Energy is a growth-oriented midstream energy company operating across 10 states with transportation, storage, terminal and processing assets that serve some of the nation’s most prolific crude oil and natural gas basins.

Highlights

Partnership Aspects That Led Sourcing of Transaction

Kelso evaluated the assets with multiple strategic partners during Kinder Morgan’s FTC-mandated divestiture of certain pipelines and other midstream assets prior to working with Tallgrass.  We worked closely with our KSN members, many of whom had direct experience previously operating the assets, to identify the opportunity and develop an understanding of the value of the midstream asset portfolio.  As a result, we were able to give management confidence that Kelso was the right choice when securing a financial partner and negotiating the transaction.

History of Success in Midstream Sector

Our deep experience in the energy sector, specifically our strong track record in midstream, along with the experience of our KSN team, gave us the insights and confidence to pursue this very large acquisition, which required a differentiated perspective on the potential of its key assets. 

Substantial Upside To Be Unlocked Under New Ownership

Management developed a unique perspective on the assets which was not apparent to all bidders in the process, including a large development project (Pony Express Pipeline) and a large asset repositioning (Rockies Express Pipeline).  Through our independent due diligence, we ultimately developed a similar perspective with management on the substantial upside embedded in the asset portfolio.

Partnership with a Highly Experienced and Respected Management Team

Management, led by CEO David Dehaemers, had a strong track record of successfully operating midstream assets and creating significant value for investors.  Our energy experience and perspectives aligned well with those of management as they searched for a financial partner.

Post Investment Highlights

 

  • Completed a $314mm MLP IPO just six months after closing the transaction, creating Tallgrass Energy Partners, LP (NYSE: “TEP”).
  • Completed a $1.4bn IPO of its general partner, Tallgrass Energy Partners GP, LP (NYSE: “TEGP”), two years after the IPO of TEP. 
  • To date, Tallgrass Development has successfully completed approximately $2.2bn of drop downs transactions to TEP, and has a substantial inventory of future drop downs remaining.  In addition, TEP has also completed over $500mm of third party acquisitions.
  • Successfully completed multiple development / repositioning projects across the asset base, including:
    • Development of Pony Express, creating an approximate 320,000 bbl/d crude oil pipeline serving multiple production basins in the Rockies
    • Transformation to bi-directional gas flows in and expansion of Zone 3 on Rockies Express Pipeline, repositioning the pipeline as a bi-directional header system capable of serving producers and end markets from the Rockies to the Utica Shale in Ohio
    • Development of Tallgrass Terminals, with over 3.5mm barrels of capacity across its systems

Kelso Team

Frank Loverro
Co-Chief Executive Officer
Sandy Osborne
Investment Partner
Alec Hufnagel
Vice President
Jeff Derbyshire
Associate

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