Pipeline company Kinder Morgan Inc sold more shares and priced them above the expected range, an underwriter said on Thursday, raising about $2.86 billion in the largest U.S. energy initial public offering since 1998.

Kinder Morgan sold 95.5 million shares for $30 each in a deal that values the company at more than $21 billion.

Backed by private-equity investors including Carlyle Group and Goldman Sachs Group Inc's buyout fund, Kinder Morgan upsized its IPO from the original plan to sell 80 million shares for $26 to $29 each.

The upsizing -- following an above-range pricing by Nielsen

-- is a good sign for private equity firms looking to begin the process of selling portfolio companies bought during the height of the buyout boom of 2005 to 2007.

Hospital operator HCA, which hopes to raise up to $4.6 billion and retailer Toys R Us , which hopes to raise up to $800 million, are also expected to come public in the United States this year.

Kinder Morgan, which originally filed to raise up to $1.5 billion, is the biggest U.S. energy IPO since Conoco's $4.4 billion offering in 1998, according to Thomson Reuters data.

The IPO is seen not just as a means for Kinder's private equity partners to monetize their investment, but also a chance for investors to access its vast network of pipelines spanning the United States and stretching 2,500 miles into Canada.

In the United States, the company owns 15,000 miles of natural gas pipelines and 8,400 miles of refined petroleum product pipelines running gasoline, diesel fuel, jet fuel and natural gas liquids. It also has 120 fuel terminals, gas storage facilities, carbon dioxide pipelines and stakes in eight West Texas oil fields.

Pipeline investments could increase as power plants begin burning more natural gas instead of coal, as new shale gas sources are developed, or even to feed the need for facilities to export U.S. gas at cheaper prices.

Pricier crude could also lead to a greater need for more oil storage, as well as pipeline capacity for the output of quickly expanding projects in the Canadian oil sands.


Even though all shares in the offering are being sold by existing shareholders, Kinder Morgan's private equity investors and management will retain control of nearly 90 percent of the company. Chief Executive Officer Rich Kinder, who led the 2007 buyout of the company, is keeping his entire 30.6 percent stake.

CEO Kinder previously was president of energy company Enron Corp, but left in 1996 -- years before it became caught up in an accounting scandal and went bankrupt.

Kinder Morgan owns 11 percent of master limited partnership (MLP) Kinder Morgan Energy Partners LP , which holds most of the company's assets. Investors buying shares in the Kinder Morgan IPO are effectively investing in Kinder Morgan Inc's financial interest in its MLP.

MLPs are favored by owners of cash-generating pipeline and other energy infrastructure assets because of the low tax liability that lowers the MLPs' cost of capital.

Shares of Kinder Morgan's MLP have been generally on a climb since June, holding steady around $71 to $72 since the Kinder Morgan set its IPO terms earlier this month.

Shares of Kinder Morgan are expected to begin trading on the New York Stock Exchange on Friday under the symbol KMI.

Underwriters on the offering were led by Goldman Sachs and Barclays Capital .

(Additional reporting by Clare Baldwin in New York, Anna Driver in Houston and Braden Reddall in San Francisco, editing by Matthew Lewis, Gary Hill)