Kinder Morgan Billion-Dollar Move: Kinder Morgan plans to buy NextEra Energy Partners’ South Texas gas pipelines for $1.82 billion. The oil and gas pipeline business has been consolidating due to rising U.S. output and difficulties obtaining licenses for new pipeline projects. This trend highlights the rising value of existing pipeline operators who play a pivotal role in the energy transportation ecosystem.
NextEra Energy Partners, under the name STX Midstream, manages a Texas natural gas pipeline portfolio that primarily comprises seven pipelines. These pipelines are essential for the transportation of natural gas to Mexico, serving power producers and municipalities in the South Texas region. Collectively, these pipelines boast a substantial transport capacity of 4.9 billion cubic feet per day.
Kinder Morgan has outlined its financing plans for this significant acquisition. The company intends to utilise its cash reserves and short-term borrowings to facilitate the transaction, with the deal expected to be finalised in the first quarter of 2024.
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The acquisition is valued at approximately 10 times the estimated adjusted core profit for the Texas natural gas pipeline portfolio in the calendar year 2023. This valuation aligns with recent trading multiples for midstream sector constituents and is notably below certain benchmarks set by previous transactions.
Analysts at Guggenheim Securities have observed that this deal introduces a level of flexibility in credit metrics, making it a noteworthy development in the ongoing consolidation within the energy industry. As established players like Kinder Morgan continue to optimise their existing infrastructure, they are well-positioned to capitalise on the growing demand for energy transportation in the United States.
The energy sector’s continued growth, coupled with the increasing need for efficient resource transportation, places companies like Kinder Morgan at the forefront of shaping the industry’s future. This consolidation trend reflects the industry’s efforts to streamline operations and maximise the potential of its existing assets.