IPO Report: Columbia Pipeline Partners LP (CPPL)

Francis Gaskins |

columbia_pipeline_logo_2014.jpgColumbia Pipeline Partners LP (CPPL) is a fee-based, growth-oriented Delaware limited partnership formed by NiSource (NYSE: NI) $13.4 billion market cap) to own, operate and develop a portfolio of natural gas pipelines, storage and related midstream assets. It is based in Houston, TX.

Ten other companies are scheduled for the week of Feb. 2, 2015. The full IPO calendar is available at IPOpremium.

Manager, Joint-managers: Barclays, Citigroup, BofA Merrill Lynch, Goldman Sachs, J.P. Morgan, Morgan Stanley; Wells Fargo Securities
Co-managers: BNP PARIBAS, Credit Suisse, RBC Capital Markets, Fifth Third Securities, KeyBanc Capital Markets, MUFG, Mizuho Securities, Scotiabank- Howard Weil, Huntington Investment Company

CPPL scheduled an $800 million IPO with a market capitalization of $1.9 billion at a price range midpoint of $20 for Friday, Feb. 6, 2015 on NYSE. Priced at $23, no change in conclusion.  SEC Documents

Columbia Pipeline Partners LP Overview

CPPL is a fee-based, growth-oriented Delaware limited partnership formed by NiSource ($13.4 billion market cap) to own, operate and develop a portfolio of natural gas pipelines, storage and related midstream assets.

Columbia Pipeline Partners LP Valuation

Glossary

Per share dilution

.

.

-$11.86

     

-----------------------------------------------------------------------

     

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Yield at $20

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Dec '15 proforma

       

Columbia Pipeline Partners LP (CPPL)

$1,872

1.3

3.35%

1.8

2.5

43%

             

COMPARE with parent

 

Current yield

     

NiSource (NI)

$13,400

2.1

2.37%

2.2

6.4

 
             

COMPARE with competitors mentioned in the SEC filing

   

EQT Midstream Partners LP (EQM)

$5,350

13.5

2.67%

8.2

8.2

 

Dominion Transmission (D)

$46,120

3.6

3.04%

4.0

5.4

 
             

Columbia Pipeline Partners LP Conclusion

Neutral plus

Natural gas storage & midstream pipeline spinoff

Concerns: pipeline is dependent on fracking & shale drilling

Ave contract life of 5.2 years

CPPL yields 3.35%; parent ($13bb market cap NI) yields 2.37%

Competitors in SEC filing yield: EQM, 2.67%; D, 3.04%

Price-to-bk discount from parent & competitors

CPPL will own 16.5% of the operating company

$4.9 billion in expansion by related entities to be completed by 2018

Selling  43% on the IPO

Columbia Pipeline Partners LPBusiness

CPPL is a fee-based, growth-oriented Delaware limited partnership formed by NiSource(NYSE: NI) $13.4 billion market cap) to own, operate and develop a portfolio of natural gas pipelines, storage and related midstream assets.

CPPL’s business and operations will be conducted through Columbia OpCo, a recently formed partnership between CEG and CPPL.

At the completion of this offering, CPPL’s assets will consist of a 14.6% limited partner interest in Columbia OpCo, as well as the non-economic general partner interest in Columbia OpCo.

Through its ownership of Columbia OpCo’s general partner, CPPL will control all of Columbia OpCo’s assets and operations.

Columbia OpCo owns substantially all of the natural gas transmission and storage assets of privately held  Columbia Energy Group(CEG), including approximately 15,000 miles of strategically located interstate pipelines extending from New York to the Gulf of Mexico and one of the nation’s largest underground natural gas storage systems, with approximately 300 MMDth of working gas capacity, as well as related gathering and processing assets.

Columbia Pipeline Partners LP Firm Contracts

For the year ended December 31, 2013, 93% of Columbia OpCo’s revenue, excluding revenues generated from cost recovery under certain regulatory tracker mechanisms, which CPPL refers to as “tracker-related revenues,” was generated under firm revenue contracts.

As of December 31, 2013, these contracts had a weighted average remaining contract life of 5.2 years.

Columbia Pipeline Partners LP Growth

CPPL expects the revenues generated from Columbia OpCo’s businesses will increase as CPPL executes on its significant portfolio of organic growth opportunities, which include estimated capital costs of approximately $4.9 billion for identified projects that CPPL expects will be completed by the end of 2018.

Additionally, CPPL expects to increase its ownership interest in Columbia OpCo over time pursuant to its preemptive right to purchase additional limited partner interests in Columbia OpCo in connection with its issuance of any new equity interests.

Columbia Pipeline Partners LP Competition

Columbia Gas Transmission competes with a number of other interstate pipeline companies in various markets, such as Texas Eastern Transmission Company, Tennessee Gas Pipeline Company, Transcontinental Gas Pipeline Company, Dominion Transmission Inc., Equitrans, and National Fuel Gas Company.

Increased competition from alternative options could have a significant financial impact on Columbia Gas Transmission; however, this risk is mitigated through the use of long-term contracts.

Continued growing supply as a result of the Marcellus and Utica shale could reduce the demand for storage services.

Columbia Pipeline Partners LP 5% shareholders Pre-IPO

NiSource           14.6%  

Columbia Pipeline Partners LP Dividends

The board of directors of CPPL’s general partner will adopt a cash distribution policy pursuant to which CPPL intends to distribute at least the minimum quarterly distribution of $0.1675 per unit ($0.67 per unit on an annualized basis) on all of its units to the extent CPPL has sufficient cash after the establishment of cash reserves and the payment of its expenses, including payments to its general partner and its affiliates.

CPPL expects that if it is successful in executing its business strategy, it will grow its business in a steady and sustainable manner and distribute to its unitholders a portion of any increase in its cash available for distribution resulting from such growth.

Columbia Pipeline Partners LP Use of Proceeds

CPPL expects to receive $755 million from its IPO and use it for the following:

to purchase an additional approximate 6.2% limited partner interest in Columbia OpCo. The approximate 6.2% interest in Columbia OpCo purchased with the proceeds from this offering, when combined with an approximate 8.4% interest in Columbia OpCo contributed to CPPL in connection with the formation transactions, will result in its ownership of a 14.6% limited partner interest in Columbia OpCo following the closing of the offering.

Columbia OpCo will use $500.0 million of the net proceeds it receives from CPPL to make a distribution to CEG as a reimbursement of preformation capital expenditures with respect to the assets contributed to Columbia OpCo and the remaining proceeds it receives from CPPL to fund expansion capital expenditures. CPPL would expect the remaining net proceeds of $255.0 million to be completely utilized during the twelve months ended December 31, 2015, for these purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CPPL Columbia Pipeline Partners LP representing Limited 17.13 -0.03 -0.15 36,310

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