$1.8 billion acquisition of 462 miles of pipeline with 4.9 billion cubic feet per day of transport capacity
Kinder Morgan, Inc. (NYSE: KMI) today announced that it has agreed to acquire NextEra Energy Partner’s South Texas assets, STX Midstream, for $1.815 billion. The STX Midstream pipeline system includes a set of integrated, large diameter high pressure natural gas pipelines that connect the Eagle Ford basin to key growing Mexico and Gulf Coast demand markets. STX Midstream includes a 90% interest in the NET Mexico pipeline; MGI Enterprises, a PEMEX affiliate, owns the other 10%. STX Midstream owns and operates Eagle Ford Midstream, a 158-mile residue line connecting the Eagle Ford basin to the Agua Dulce Hub in Nueces County, Texas. Eagle Ford Midstream is connected to multiple pipeline systems, including KMI’s Tennessee Gas Pipeline, Kinder Morgan Tejas Pipeline and Natural Gas Pipeline Company of America. STX Midstream also owns a 50% interest in Dos Caminos LLC, which is operated by, and the other 50% interest owned by, Howard Energy Partners (HEP). Dos Caminos has placed in service a 62-mile pipeline that connects HEP’s existing midstream pipeline and facilities in Webb County, Texas to KMI’s new Eagle Ford pipeline, which was recently placed in service. The portfolio of assets is highly contracted, with an average contract length over 8 years. Approximately 75% of the business is supported by take-or-pay contracts.
“This is a very attractive acquisition for KMI,” said Sital Mody, KMI President of Natural Gas Pipelines. “STX Midstream nicely complements our existing assets and will enable us to capture incremental opportunities serving LNG, power generation, LDC customers and exports to Mexico.”
KMI expects the investment to be accretive to its shareholders, with the purchase price representing a 2024 EBITDA multiple of 8.6 times and a long-term investment-to-EBITDA multiple of approximately 7.0-7.5 times, based on KMI’s financial projections and inclusive of commercial synergies. Initially, we plan to fund the transaction with cash on hand and short-term borrowings, increasing our Net Debt-to-EBITDA ratio by approximately 0.1 times after including a full year EBITDA contribution from the asset. Based on our longer-term funding plans, we expect this transaction to be neutral to KMI’s balance sheet.
The transaction requires clearance under Hart-Scott-Rodino and is expected to close in the first quarter of 2024. A presentation including information relating to this transaction has been posted to the Investor Relations page on KMI’s website.
About Kinder Morgan, Inc.
Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy infrastructure companies in North America. Access to reliable, affordable energy is a critical component for improving lives around the world. We are committed to providing energy transportation and storage services in a safe, efficient and environmentally responsible manner for the benefit of the people, communities and businesses we serve. We own an interest in or operate approximately 82,000 miles of pipelines, 140 terminals, 700 billion cubic feet of working natural gas storage capacity and have renewable natural gas generation capacity of approximately 5.4 Bcf per year with an additional 1.5 Bcf in development. Our pipelines transport natural gas, refined petroleum products, crude oil, condensate, CO2, renewable fuels and other products, and our terminals store and handle various commodities including gasoline, diesel fuel, jet fuel, chemicals, metals, petroleum coke and ethanol and other renewable fuels and feedstocks. Learn more about our work advancing energy solutions on the lower carbon initiatives page at www.kindermorgan.com.
Important Information Relating to Forward-Looking Statements
This news release includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities and Exchange Act of 1934. Generally, the words “expects,” “believes,” anticipates,” “plans,” “will,” “shall,” “estimates,” and similar expressions identify forward-looking statements, which are not historical in nature. Forward-looking statements in this news release include express or implied statements concerning the proposed transaction and the business of STX Midstream, including the parties’ ability to satisfy customary conditions to closing (such as with respect to Hart-Scott-Rodino and any other required regulatory approvals); and the anticipated timing and benefits to KMI’s business and stockholders of the proposed transaction and the Dos Caminos expansion project. Forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, based on information currently available to them. Although KMI believes that these forward-looking statements are based on reasonable assumptions, it can give no assurance as to when or if any such forward-looking statements will materialize or their ultimate impact on KMI’s operations or financial condition. Important factors that could cause actual results to differ materially from those expressed in or implied by these forward-looking statements include the timing of any review of the proposed transaction under Hart-Scott-Rodino and the risks and uncertainties described in KMI’s reports filed with the Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K for the year-ended December 31, 2022 (under the headings “Risk Factors” and “Information Regarding Forward-Looking Statements” and elsewhere) and its subsequent reports, which are available through the SEC’s EDGAR system at www.sec.gov and on KMI’s website at ir.kindermorgan.com. Forward-looking statements speak only as of the date they were made, and except to the extent required by law, KMI undertakes no obligation to update any forward-looking statement because of new information, future events or other factors. Because of these risks and uncertainties, readers should not place undue reliance on these forward-looking statements.