Brookfield Infrastructure (BIP 1.28%) (BIPC -1.05%) and Kinder Morgan (KMI 1.44%) have agreed to sell a 25% interest in Natural Gas Pipeline Company of America (NGPL) to funds controlled by ArcLight Capital Partners. The partners will receive $830 million for this stake that they'll split evenly. They'll each retain a 37.5% interest in NGPL, which Kinder Morgan will continue operating. The deal values NGPL at $5.2 billion.
NGPL is one of the largest interstate pipeline systems in the U.S. The 9,100-mile pipeline transports gas to the Chicago area and to large liquefied natural gas (LNG) facilities along the U.S. Gulf Coast.
Kinder Morgan and Brookfield Infrastructure acquired full control of NGPL in 2015. They paid a combined $242 million for a 53% interest in the company, valuing it at $3.4 billion. The partners have since invested capital into expanding that pipeline and reducing its debt. They're now cashing in on this investment at a much higher valuation.
The sale is part of Brookfield Infrastructure's ongoing capital recycling program. It also recently agreed to sell its stake in district energy operator Enwave for $4.1 billion. Brookfield hopes to put those proceeds to use by offering to buy Canadian oil infrastructure company Inter Pipeline (IPL) in a deal valuing it at 13.5 billion Canadian dollars ($10.3 billion).
Meanwhile, Kinder Morgan has been selling assets to shore up its financial profile. It sold its interest in Kinder Morgan Canada and the U.S. portion of the Cochin pipeline for $3.3 billion in 2019. These sales have given it the flexibility to return more cash to shareholders by increasing its dividend and repurchasing stock.
This sale will boost the financial flexibility of these companies, increasing their ability to achieve their strategies.