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Kinder Morgan (KMI) Completes Sale of Trans Mountain Project

Zacks Equity Research
Updated
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Kinder Morgan Canada Limited, a subsidiary of Kinder Morgan, Inc KMI, announced that the Trans Mountain Pipeline system and the Trans Mountain Expansion Project have been indirectly purchased by the Government of Canada. The transaction was completed through Trans Mountain Corporation, a subsidiary of the Canada Development Investment Corporation. The total purchase consideration was $4.5 billion in cash.

A final decision related to the utilization of the after-tax net proceeds of the transaction is expected to be announced after market close on Sep 4, 2018, once the board of Kinder Morgan Canada concludes ongoing negotiations.

With respect to the closing, Kinder Morgan Canada also swapped existing $500-million secured revolving credit facility with a period of four years with a new $500-million unsecured revolving credit facility for working capital purposes.

The Trans Mountain Pipeline system, which is intended to nearly triple the transportation capacity to carry crude from Alberta's oil sands to a facility in the Pacific province of British Columbia, is struggling with approval issues and oppositions from various groups. The Government of Canada approved the Trans Mountain expansion project on Nov 29, 2016.

The pipeline expansion has been facing antagonism from various provincial governments of British Columbia as well as municipalities, native groups and environmental activists. These emphasize the uncertainty over the key energy projects in Canada.

The shortage of pipelines and rail transportations has disrupted the production schedule of the companies in Western Canada. The companies had to slow activities due to obstruction in crude transportation. In view of this, Alberta's provincial government supports the project that has also received approval from Canada's federal government.

About Kinder Morgan Canada Limited

Kinder Morgan holds about 70% majority voting interest in Kinder Morgan Canada and an economic interest in Kinder Morgan Canada’s business and assets. Kinder Morgan Canada has a minority interest of about 30% in a portfolio of strategic energy infrastructure assets in Western Canada. It focuses on secure, fee-based energy transportation and storage assets that are vital to the energy infrastructure of Western Canada.

Price Performance

In the past year, Kinder Morgan’s shares have lost 8.6% compared with the industry’s 9.7% decline.



 

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Zacks Rank & Stocks to Consider

Kinder Morgan currently carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Petroleo Brasileiro S.A. PBR, or Petrobras SA, Helix Energy Solutions Group, Inc HLX and TC Pipelines, LP TCP. All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Petrobras is the largest integrated energy firm in Brazil and one of the major players in Latin America. It pulled off an average positive earnings surprise of 10.4% in the last four quarters.

Helix Energy offers specialty services to the offshore energy industry. The company delivered an average positive earnings surprise of 66.7% in the trailing four quarters.

TC Pipelines purchases, owns and actively participates in the management of U.S.-based natural gas pipelines and related assets. The company delivered an average positive earnings surprise of 3.7% in the last four quarters.

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Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report
 
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