Shares of Kinder Morgan Inc
On Thursday, Houston based Kinder Morgan sold 95.5 million shares for $30 each in the largest U.S. energy IPO since 1998, according to Thomson Reuters data, raising $2.86 billion.
Backed by private-equity investors including Carlyle Group
A lot of appeal of this is related to the company's assets that generate stable recurring cash flows, Jason Stevens, analyst at Morningstar, said.
Buying shares of Kinder Morgan Inc also gives institutional investors, who have historically shunned investment in partnerships due to tax complications, a way to add pipeline and storage assets to their portfolio.
The offering represents Kinder Morgan Inc's interest in its master limited partnership (MLP), Kinder Morgan Energy Partners LP
MLPs are favored by owners of cash-generating pipeline and other energy infrastructure assets because of the low tax liability. Those tax advantages provide MLPs with a lower cost of capital.
Kinder Morgan, which originally filed to raise up to $1.5 billion, is the biggest U.S. energy IPO since Conoco Inc's $4.4 billion offering more than a decade ago.
The IPO is seen as a means for Kinder's private equity partners to monetize their investment and an opportunity for investors to access its vast network of pipelines spanning the United States and stretching 2,500 miles into Canada.
Shares of Kinder Morgan climbed $1.85, or 6.1 percent to $31.84 in late morning trading on the New York Stock Exchange.
(Additional reporting by Alina Selyukh in New York, editing by Gerald E. McCormick, Phil Berlowitz)