Rich Kinder was a rising star at Enron Corp. until his informal agreement with college buddy and company chairman Ken Lay to become chief executive fell apart in 1996.
Lay instead named Jeff Skilling to the No. 2 position at Enron. Kinder resigned from the Houston-based energy company.
Today, Lay and Skilling face lengthy prison terms after last week’s fraud and conspiracy convictions. Kinder, 61, faces the prospect of taking his Kinder Morgan Inc. private in a $22 billion buyout that would be the largest management-led buyout in history.
Colorado plays a key role in Kinder Morgan’s operations, with 600 employees in the state, 80,000 natural-gas customers, the major TransColorado pipeline across western Colorado, and the starting point for the company’s $4 billion Rockies Express pipeline, the nation’s biggest pipeline project in at least 20 years.
The 1,323-mile line will move Rockies gas to markets in the Midwest and Northeast, helping alleviate a bottleneck caused by insufficient transportation from the Rocky Mountains.
Shipping more gas out of state is likely to raise prices for Rockies gas – a boon for producers but a negative for consumers who have grown accustomed to local gas being priced cheaper than national averages.
“Rich Kinder is a disciplined and thoughtful businessman who has demonstrated time and again that he has a lot of insight into energy markets,” said Marc Smith, executive director of the Independent Petroleum Association of Mountain States.
Even before he left Enron, Kinder’s fondness for the low- tech energy-pipeline business took him in a different direction from Enron’s growing enchantment with fast-paced energy trading.
It was that infatuation with pipelines that led Kinder to merge with Lakewood-based KN Energy in 1999, a deal that launched Kinder Morgan into national prominence.
Rich Kinder “is a firm believer in the strategy of using hard assets – pipelines and terminals – to build a company. We don’t have a trading entity,” said Kinder Morgan spokesman Rick Rainey.
Kinder’s $100-a-share offer for Kinder Morgan Inc. includes other members of the company’s management, plus private-equity investors Goldman Sachs Capital Partners, American International Group, the Carlyle Group and Riverstone Holdings.
Kinder Morgan shares climbed 19 percent to $100.37 Tuesday on the New York Stock Exchange and were as high as $103. Analysts said some investors may be betting Kinder Morgan’s board will seek a higher bid from the investor group.
“I think it’s almost a certainty that there will be a higher bid from the existing group,” said Robert Weible, a partner at Baker & Hostetler LLP. “In the typical going-private transaction, the first bid is almost never as good as it gets.”
“It may be a little more difficult for a competing group to lodge a bid that would take the company, although not impossible, because existing management has perhaps as much as 20 percent of this company as it stands,” Weible said.
Citing the increase in debt envisioned in the buyout, Standard & Poor’s and Moody’s Investors Service said Tuesday that they might cut their ratings on existing Kinder Morgan Inc. debt below investment grade.
Bloomberg News contributed to this report.
Staff writer Steve Raabe can be reached at 303-820-1948 or sraabe@denverpost.com.
