Kinder Morgan To Delay Port Westward Coal Terminal Project

by Trefis Team
-18.72%
Downside
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Market
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Trefis
KMP
Kinder Morgan Partners
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Kinder Morgan (NYSE:KMP) is slowly positioning to gain on the growing demand for coal exports through its terminals along Gulf Coast but its strategy faced a major setback in northwest on opposition for its coal export terminal project in port of St. Helens at port Westward. [1] The port is on Columbia river about 60 miles northwest of Portland and forms a part of the company’s plans to cater to the coal export traffic from northwest of America to Asia. The company’s primary strategy in its terminals business includes claiming rate increases on existing contracts and increase coal throughput.

We currently have a price estimate of $90 for Kinder Morgan, implying a 15% premium to the current market price.

See our complete analysis for Kinder Morgan Partners here

Portland General Electric, which holds sub-leasing rights for 852 acres of land at Port Westward has denied Kinder Morgan land for its export terminal project. Portland has a power plant in that region and it fears that coal dust from the Kinder Morgan facility might interfere with its generator. Kinder Morgan is presently evaluating alternate locations at the port from where it can access rail and water traffic of coal.

Kinder Morgan is planning to invest nearly $150 million to $200 million for building this facility to export 15 million tons of coal annually to Asia. This terminal can eventually support a peak load of 30 million tons per annum. The terminal would provide export channel for coal received from Powder River Basin in Montana and northeast Wyoming. Montana and Wyoming hold significant coal reserves, collectively forming nearly 40% of all coal reserves in the country, which bodes well with KMP’s plans. [2]

Kinder Morgan owns 90 dry-bulk terminals in the United States and Canada. In 2011, it handled nearly 100.6 million tons of dry bulk including coal and petroleum coke. The Westward project will provide supplemental coal handling capacity to the company, but delays could postpone the coal volume growth. The project is presently withheld while the company searches for a suitable location. However, the company is expected to file for permits for the project by the end of 2012 and would start construction by the end of 2013.

The only other similar project coming up in the region is by an Australian company Ambre Energy, which will be able to handle at most 8 million tons, much less than that by Kinder Morgan. [3] In view of this, Kinder Morgan’s facility will have an edge over the region, which could enable it to claim better realizations from its customers. The revenues from long-term lease agreements at the port is expected to be in the range of $2.5 to $5 million per year. [4]

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Notes:
  1. Kinder Morgan coal plans pushed back, tdn.com, July 29, 2012 []
  2. Coal Reserves, wma-minelife.com []
  3. The Facts about Kinder Morgan, sightline.org, April, 2012 []
  4. Port Westward Project, portwestwardproject.com []
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