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Kinder Morgan fielding 'strong interest' from potential Trans Mountain partners

Kinder Morgan Inc. has seen "strong interest" from potential joint venture partners for its C$6.8 billion Trans Mountain expansion project, which recently cleared a regulatory milestone, executives said on an earnings call.

Executive Chairman Richard Kinder said the company is weighing either a joint venture or an IPO for the oil pipeline expansion, a project that on Jan. 11 received approval from the government of British Columbia. "Both are very good potential alternatives, and we think we're going to have the ability to make the selection between the good and the better," Kinder said.

Potential shippers' willingness to pay for capacity on Trans Mountain is unlikely to be affected by President-elect Donald Trump's comments in support of TransCanada Corp.'s rejected Keystone XL pipeline, CEO Steven Kean said. "[Trans Mountain] is a project where they can access world market price," he said. "There's a strong interest in it, and that strong interest has continued after Trump's election and after his comments on Keystone."

Following British Columbia's approval of Trans Mountain, analysts have pointed to a joint venture as a way the company could pay down its debt. Deutsche Bank analyst Kristina Kazarian said in a Jan. 11 note that such a deal is "crucial to the story" and added that while executives have mentioned an IPO of all of the company's Canada assets, "we see this as more of a method to backstop pricing on [the] JV bid process."

Kean also said the company is considering a joint venture for its Elba Island LNG export terminal, which is under construction near Savannah, Ga. "We have this project identified as a JV candidate and believe that the prospects for concluding something on that front are very good," Kean said. "As we said before, we don't have to JV the project, but we believe it's a good candidate, will attract good value from investors, and we believe the prospects of concluding something there are very good."

Kinder Morgan also said on the call that it made "significant progress" securing right of way for the Utopia project, which would add about 215 miles of 12-inch-diameter pipeline from Harrison County to Fulton County in Ohio, transporting ethane and ethane-propane mixtures bound for petrochemical companies in Ontario for plastics production. "We still have mixed results, meaning that some have found eminent domain status and public utility status in eminent domain, but we can't wait for all that to resolve itself," Kean said. "So I think the way to think about it is we believe we are going to get it done. ... We acquired a substantial amount of right of way."

Kinder Morgan reported net income attributable to common stockholders of $170 million, or 8 cents per share, in the fourth quarter of 2016, compared to a loss of $721 million, or 32 cents per share, in the same quarter of 2015. The 2016 fourth-quarter earnings included a $250 million writedown of Kinder Morgan's investment in the Ruby pipeline.

The earnings release came shortly after markets closed Jan. 18. By about 6:30 p.m. ET, the company's shares were down 2.7%, at $21.83, in evening trading.