Kinder Morgan’s Key Investments Driving Growth

Kinder Morgan Energy Partners (NYSE:KMP) has been expanding its business across all divisions and during Q2 many projects were completed, which will start to contribute to revenues going forward. Some ongoing or completed investments are the Transmountain expansion, the Ethanol Pipeline between Carteret and Linden, new CO2 sales contracts, Cochin reversal project in Canada, and crude/condensate pipeline. In this article, we have summarized the important expansion plans and some of the impacts on KMP’s business divisions going forward.

Our price estimate of $87 for KMP, implying an 5% premium to the current market price.

See our complete analysis for Kinder Morgan Partners here

Impact of key happenings during the quarter

Transmountain expansion: A major source of future revenue for Kinder Morgan Canada is going to be from the expansion of existing Transmountain pipeline from 300,000 barrels per day to 750,000 barrels per day. However, during the quarter, the project faced many headwinds, which may slightly delay the project. (See Kinder Morgan Updates: Trans Mountain Expansion & Investment In Gulf Coast Terminals)

Ethanol Pipeline Between Carteret and Linden: During the quarter, the construction of the pipeline was completed. This pipeline will add value to both – Terminals business and Product pipeline business. ^[1] 

5 New CO2 sales contract: In April, KMP announced CO2 contracts aggregating more than 2 trillion cubic feet of CO2. The company is working over its $255 million expansion at Doe Canyon in southwestern Colorado to increase capacity from 105 MMcfd to 170 MMcfd. This will support CO2 division. ^[2]

KMI’s El Paso acquisition: KMP may not be directly impacted by this acquisition, but the deal will impact the company as it is required to sell some of its natural gas pipeline assets. (For more detail See What The KMI-El Paso Merger Means To KMP) However, going forward, KMI, the holding company will transfer assets to KMP, which will add value to KMP. This deal will also enable partnerships to build liquefied natural gas facilities along the Gulf coast.

Acquired rest 50% stake in KKR-El Paso JV: This deal will impact 3 divisions – natural gas pipeline, product pipeline and terminals. (For more detail see KMP Acquires Remaining 50% Stake In KKR-El Paso JV)

Cochin reversal project in Canada: Kinder Morgan received binding commitments for more than 100,000 barrels per day for a minimum 10-year term. This project involved approximately $225 million investment and connects Kankakee County to Fort Saskatchewan to transport light condensate. This will add value to Kinder Morgan Canada. ^[3]

Crude/condensate pipeline (KMCC): In June, KMP announced that its $215 million KMCC pipeline is in service, which has a capacity of 300,000 bpd. It starts from the Eagle Ford Shale and ends in multiple terminal facilities in Texas Gulf Coast, providing access to local refineries, petrochemical plants and docks. This will add value to terminals business and products pipeline business. ^[4]

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Kinder Morgan Completes Dedicated Ethanol Pipeline Between Carteret and Linden, N.J., Press Release, April 3, 2012 [↩]
2. Kinder Morgan Enters into Significant CO2 Sales Contracts, Press Release, April, 4, 2012 [↩]
3. Kinder Morgan Receives Strong Binding Commercial Support to Move Light Condensate on Cochin, Seekingalpha.com, June 5, 2012 [↩]
4. Kinder Morgan’s Crude/Condensate Pipeline in Service, Press Release, June 14, 2012 [↩]