Kinder Morgan's Final Investment Decision For Trans Mountain
Zacks Investment Research | May 25, 2017 10:19PM ET
Kinder Morgan, Inc. (NYSE:KMI) , along with its indirect subsidiary Kinder Morgan Canada Limited (“KML”), recently announced a final investment decision for its Trans Mountain Expansion Project.
Kinder Morgan has priced its initial public offering (IPO) of 102.9 million shares of common stock at a price to the public of C$17.00 per share. It is expected to generate total gross proceeds of C$1.75 billion.
The final investment decision is subject to the successful completion of the IPO, which is anticipated to take place by not later than May 31, 2017.
The C$7.4 billion Trans Mountain Expansion Project is expected to provide western Canadian oil producers with an additional shipping capacity of about 590,000 barrels per day along with tidewater access to Western United States and global markets. The expansion is projected to take the total pipeline capacity to 890,000 barrels per day.
The project is supported by 15- and 20-year shipper commitments of 707,500 barrels per day, or about 80% of the capacity on the expanded pipeline. The other 20% is apportioned for spot volumes, as required by the National Energy Board. Construction on the project is anticipated to commence in Sep 2017, with completion scheduled for Dec 2019.
The final investment decision depended on securing financing. Despite an unfavorable political climate, the process continued because the Trans Mountain Expansion Project financing contingency period, as stated in shipper agreements, closes at the end of May.
The IPO comprised spinning off a portion of Kinder Morgan’s interest in its Canadian business. The business comprises the Trans Mountain pipeline system (including associated terminals assets), the Puget Sound pipeline, the Jet Fuel pipeline system, the Canadian portion of the Cochin pipeline system, the Vancouver Wharves Terminal and the North 40 Terminal, as well as three jointly controlled investments – the Edmonton Rail Terminal, the Alberta Crude Terminal and the Base Line Terminal.
Kinder Morgan is likely to use the proceeds to reduce its debt. The company now expects to end the year at about 5.2x debt to EBITDA compared with its estimate of 5.4x.This is in line with its strategy to return additional value to shareholders. The company is likely to announce the revised dividend guidance for 2018 in the latter part of this year. On closure of the IPO, Kinder Morgan will own about 70% interest in the business, which will be operated and administered by Kinder Morgan Canada and its affiliates.
Kinder Morgan’s price chart, however, is unimpressive. Shares of the company have lost 9.3% in the last three months, while the Zacks Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.