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Item 1.01.
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Entry into a Material Definitive Agreement.
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On May 31, 2021, Crestwood Pipeline and Storage Northeast LLC (“Crestwood Pipeline”), a Delaware limited liability company and wholly owned subsidiary of Crestwood Equity Partners LP, a Delaware limited partnership (“Crestwood Equity”), Con Edison Gas Pipeline and Storage Northeast, LLC (“CEGPS”), a New York limited liability company and wholly owned subsidiary of Consolidated Edison, Inc., a New York corporation (“Con Ed”), Stagecoach Gas Services LLC, a Delaware limited liability company (“Stagecoach”) and Kinder Morgan Operating LLC “A”, a Delaware limited lability company (“Kinder Morgan”) entered into a Purchase and Sale Agreement (the “Purchase Agreement”) wherein Crestwood Pipeline and CEGPS will sell Stagecoach and its subsidiaries to Kinder Morgan for an aggregate base purchase price of $1.225 billion.
Under the Purchase Agreement, Stagecoach will sell to Kinder Morgan (i) 100% of the equity interests in Stagecoach Pipeline & Storage Company, LLC, a New York limited liability company (“Stagecoach Pipeline”), Arlington Storage Company, LLC, a Delaware limited liability company, Crestwood Gas Marketing LLC, a Delaware limited liability company (“Crestwood Gas Marketing”), Crestwood Storage Inc., a Delaware corporation and (ii) Stagecoach Operating Services LLC, a Delaware limited liability company (“Service Company”). Stagecoach’s sale of these equity interests is referred to herein as the “First Closing Interests”, and the closing of the First Closing Interests is referred to herein as the “First Closing”. At the First Closing, Kinder Morgan will pay to Stagecoach $1.195 billion, subject to certain adjustments contemplated by the Purchase Agreement in exchange for the First Closing Interests, which we anticipate will result in an approximate $35.0 million to $40.0 million reduction in Crestwood Pipeline’s earnings from unconsolidated affiliates during the three months ended June 30, 2021 related to Crestwood Pipeline recording its proportionate share of Stagecoach’s loss related to the sale of these assets to Kinder Morgan. We do not expect this loss to result in any cash expenditures.
Following the First Closing, subject to the fulfillment of certain conditions set forth in the Purchase Agreement, Crestwood Pipeline and CEGPS will sell and transfer 100% of the equity interests in Stagecoach and its wholly-owned subsidiary, Twin Tier Pipeline LLC, a Delaware limited liability company (“Twin Tier” and together with the First Closing Interests, the “Acquired Interests”). Crestwood Pipeline’s and CEGPS’ sale of 100% of the equity interests in Stagecoach and Twin Tier is referred to herein as the “Second Closing Interests”, the closing of the Second Closing Interests is referred to herein as the “Second Closing”, and the transactions contemplated by the First Closing and the Second Closing are referred to herein as the “Transactions. At the Second Closing, Kinder Morgan will pay $30.0 million in the aggregate to Crestwood Pipeline and CEGPS, subject to certain adjustments contemplated by the Purchase Agreement for the Second Closing Interests.
The Purchase Agreement includes certain representations, warranties, and covenant provisions customary for transactions of this nature. The consummation of the First Closing is subject to, among other specified closing conditions, the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The consummation of the Second Closing is subject to, among other specified closing conditions, authorization from the New York Public Service Commission. The First Closing and Second Closing are also subject to other customary closing conditions, including, subject to certain materiality exceptions, the accuracy of each party’s representations and warranties and each party’s compliance with its obligations and covenants under the Purchase Agreement.
The Purchase Agreement may be terminated under certain customary circumstances, including, mutual agreement of the parties and certain uncured breaches, as well as if the initial closing does not occur on or before December 1, 2021, subject to possible extension.
The foregoing description of the Purchase Agreement and certain exhibits thereto is summary in nature and is qualified in its entirety by reference to the Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated in this Item 1.01 by reference.
Crestwood Midstream Partners LP, a Delaware limited partnership (“CMLP”) is a party to the Purchase Agreement to guarantee certain obligations of Crestwood Pipeline under the Purchase Agreement. CMLP’s obligations under its guaranty are customary for this type of agreement.
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