Bank Of America Reiterates Buy Rating On El Paso Pipeline

According to Bank of America, El Paso Pipeline EPB announced the acquisition of an additional 28% interest in Colorado Interstate Gas Company (CIG) and the remaining 15% interest in Southern Natural Gas Company (SNG) from El Paso Corporation, (EP), EPB's general partner (GP), for a total consideration of $745mn. Bank of America said that the Buy rating is reiterated. “After incorporating the drop-down into our model, we increase our cash distribution estimates but maintain our PO at $41 based on a 5.25% target yield on our annualized 2Q12 distribution estimate of $2.12 (previously $2.08). In our view, EPB should be capitalized at among the lowest yields in the Energy MLP sector, given its lower business risk assets, solid growth profile, and well-stocked arsenal of potential GP asset drop-downs from EP.” El Paso Pipeline closed yesterday at $34.47.