Kinder Morgan Inc. (KMI) subsidiaries propelled the midstream giant to big profits during the first quarter of 2013, allowing it to raise the quarterly dividend 19% and aligning it for more than $12 billion of expansion and joint venture (JV) projects across North America.
During a conference call to discuss quarterly performance last week, CEO Richard Kinder said KMI had raised its dividend to 38 cents/share, and had $513 million in cash on hand to pay dividends in the future, compared with $303 million available after 1Q2012. KMI’s “strong performance was driven by good results” for the pipeline assets, he said, especially by Kinder Morgan Energy Partners LP (KMP) and El Paso Pipeline Partners LP (EPB), which raised their quarterly distributions to $1.30/unit (up 8% from 1Q2012) and 62 cents/unit (up 22%), respectively.
Kinder said the company was excited about liquefied natural gas (LNG) export opportunities through EPB’s partnership with Royal Dutch Shell plc subsidiary Shell US Gas & Power LLC at Southern LNG Co. LLC’s Elba Island LNG Terminal near Savannah, GA (see NGI, Feb. 4a). EPB owns 51% of the project and serves as operator. Kinder said EPB is also planning to purchase KMI’s Gulf LNG Terminal in Pascagoula, MS.
During the subsequent question and answer session with financial analysts, Kinder said the company was focusing on LNG exports to countries that have free trade agreements (FTA) with the United States, citing uncertainty from the U.S. Department of Energy (DOE) over LNG exports to non-FTA countries.
“We’re not sure what the non-FTA process is,” Kinder said. “I mean, just as recently as [last week]y at a conference, the [DOE] undersecretary who’s in charge with making these decisions said he didn’t know when they would make the decision [see related story].
“Our view is that there will be substantial amounts of non-FTA [exports] approved, particularly for those plants that have good contracts with viable, creditworthy companies. But we can’t guarantee that that’s going to happen. So we’ve concentrated on the FTA. And as I said in my remarks, the beauty of the deal with Shell at Elba Island is that whole first phase is not contingent on getting the non-FTA approval.
“Now at the Gulf [LNG] where we have more space, more opportunity there in terms of sizing, we’re working with some customers there to do an FTA train and we’re working with other customers to work on non-FTA volumes, too. But again, our first preference is to get FTA signed up because there, we have projects we can depend on and know that they’re going forward.”
KMP’s natural gas division is expected to add 2.7 Bcf/d of transportation capacity and grow from 62,000 to 70,000 miles of pipelines in May after it closes on its acquisition of Copano Energy LLC (see NGI, Feb. 4b). Copano is also expected to add 1 Bcf/d of processing capacity and 315 MMcf/d of treating capacity, the CEO said.
“Aside from Copano, we have lots of other projects underway in our natural gas segment at KMP.” Specifically, he cited KMI’s binding open season through May for the proposed 1,025-mile Freedom Pipeline, and the company’s $900 million investment in another subsidiary, Tennessee Gas Pipeline Co. LLC (TGP), for the latter’s Northeast Upgrade Project. “Let me emphasize, as we said before, we won’t build [the Freedom Pipeline] unless we have customer support through binding long-term contracts,” Kinder said.
Notwithstanding that uncertainty, KMI’s products pipelines business segment “had a very good first quarter” due to increased volumes and margins from its Transmix operations, higher volumes and revenues from its Cochin Pipeline, which transports natural gas liquids in three Canadian provinces and seven northern states, and the addition of the Kinder Morgan Crude Condensate pipeline during 2Q2012.
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