Kinder Morgan Updates: Trans Mountain Expansion & Investment In Gulf Coast Terminals

KMP: Kinder Morgan Energy Partners logo
Kinder Morgan Energy Partners

Kinder Morgan Partners (NYSE:KMP) is in the process of deciding on its $3.8 billion Trans Mountain pipeline expansion by the end of March as it recently received commercial support for the project. At the same time, the company is also looking to invest in coal handling facilities along the Gulf Coast and it recently formed a joint venture with Martin Midstream Partners (NASDAQ:MMLP) to develop a new rail terminal in the Permian Basin. These developments will make the company’s midstream segment much more valuable given the companies long term focus on growth.

Kinder Morgan Partners is a midstream energy company which operates in North America and Canada and owns pipelines for products, natural gas, CO2 and terminals for liquids and bulk material handling. It competes with players like Enterprise Products Partners (NYSE:EPD) and Enbridge Inc. (NYSE:ENB).

See our complete analysis for Kinder Morgan Partners here

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Trans Mountain expansion which would be a 1,150 kilometer line from Edmonton to Burnaby, B.C. will connect the growing Alberta oilsands production with Canada’s west coast. This could double existing capacity of 300,000 barrels per day and will also open up global oil markets to landlocked oilsands projects. The oilsands producers as a result may escape primary U.S. market where they have to offer heavy discounts to international prices, due to supply glut nearby. If the project goes through, the company’s Canada segment could get a major boost in revenues through increased production and better bargaining power with the oilsands producers.

The company will invest approximately $140 million in its coal handling facilities expansion in the Gulf Coast terminal. Moreover, Arch Coal (NYSE: ACI) which competes with Alpha Natural Resources (NYSE:ANR) has confirmed a throughput agreement with KMP for coal shipments through KMP-owned facilities on the East Coast. This will help in supporting the expansion of these export facilities. KMP’s terminals in the Gulf Coast and East Coast will provide incremental port capacity for Arch, which has largely been focusing on global coal supply. 

Our current price estimate for Kinder Morgan Partners stock stands at $78.24, which is about 10% below the current market price. We are in the process of revisiting our forecasts to incorporate these recent developments.

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