Fitch Ratings has upgraded the Issuer Default Rating (IDR) and senior unsecured rating of Tennessee Gas Pipeline Company, LLC (TGP) to ‘BBB+’ from ‘BBB’ and affirmed the IDR and senior unsecured ratings of El Paso Natural Gas Company, LLC (EPNG) at ‘BBB’.
The Ratings Outlook for both issuers is Stable. Approximately $2.9 billion of debt is affected by the rating actions.
The upgrade of TGP reflects the operating strength of the pipeline, as a premier system which serves and accesses growing demand and supply areas, and the structural superiority that TGP debt has to that of Kinder Morgan Partners, LP (TGP; rated ‘BBB’; Stable Outlook) its parent company. As part of the Kinder Morgan family, TGP is part of the largest natural gas network in the country, making it a more integrated, core piece of national infrastructure. Additionally, TGP sits directly over the emerging Marcellus and Utica shales, providing significant growth opportunities and an ability to expand its system to offer increased optionality for shippers. The upgrade also reflects TGP’s better than expected credit metrics and expectations that TGP’s leverage remains between 2.5x to 3.0x on a sustained basis.
The affirmation of EPNG reflects the low-risk nature and cash flow stability of the system’s interstate FERC regulated pipeline operations. In contrast to TGP, EPNG serves a geographic region where Fitch expects to see muted natural gas demand growth over the next several years, although EPNG will benefit from expected demand growth in Mexico.
Press Release, May 18, 2014; Image: KMI