The North American energy infrastructure giant was considering several alternatives for its majority-owned Canadian subsidiary Kinder Morgan Canada(TSX: KML) earlier this year, including an outright sale or merger. But it chose to keep that entity independent after it didn't find any attractive offers. It will exchange 0.3068 of its shares for each share of Kinder Morgan Canada, including Kinder Morgan's 70% stake in the company. At that exchange ratio, Pembina Pipeline is paying a whopping 38% premium for Kinder Morgan Canada based on the closing price of both stocks before the deal's announcement. The pipeline giant began its departure last year when it sold the controversial Trans Mountain pipeline to the Canadian government. While the company will initially receive 25 million shares of Pembina (a slightly less than 5% stake), it ultimately expects to sell those shares for cash.
Canada's Pembina Pipeline makes storage play with $3.3 bln Kinder Morgan deal. (Reuters) - Canada's Pembina Pipeline Corp <PPL.TO> has agreed to buy Kinder Morgan Canada <KML.TO> and the U.S. portion of the Cochin pipeline for C$4.35 billion ($3.28 billion), bulking up its storage resources in Canada. Pembina's deal follows an unsolicited bid for rival Inter Pipeline Ltd <IPL.TO>, highlighting growing interest in the midstream business of transporting and storing crude. The acquisition, including terminals at Vancouver, British Columbia and Edmonton, Alberta, would make Pembina a logical operator of the Trans Mountain pipeline, which the Canadian government is attempting to expand and sell, Dilger said. But the company is not interested for now in buying the project, which has attracted fierce opposition from environmental and some indigenous groups.
Also, Kinder Morgan Canada Limited (KML.TO) announced that it reached an agreement with Pembina under which Pembina has agreed to acquire all the outstanding common equity of KML (which includes KMI’s 70 percent stake), subject to the terms of the arrangement agreement between KML and Pembina. With the cash proceeds from the sale of Cochin alone, and assuming the transaction were to close at the end of 2019, KMI would expect to end 2019 with a Net Debt-to-Adjusted EBITDA ratio of approximately 4.4 times, improved from the approximately 4.6 times year-end projection announced in the second quarter 2019 earnings release. Pembina has an integrated asset base serving multiple energy commodities. While KMI expects to ultimately convert these shares into cash, the company plans to do so in an opportunistic and non-disruptive manner. Net Debt is calculated by subtracting from debt (i) cash and cash equivalents, (ii) the preferred interest in the general partner of Kinder Morgan Energy Partners L.P., (iii) debt fair value adjustments, (iv) the foreign exchange impact on Euro-denominated bonds for which we have entered into currency swaps and (v) 50 percent of the outstanding KML preferred equity.
The energy infrastructure giant expects to continue revving up this year, with cash flow per share on track to increase by 4%, even though it sold a large pipeline at the end of last year. Kinder Morgan began this year with a backlog of $5.7 billion in expansion projects, including $3.9 billion of investments focused on expanding its natural gas infrastructure empire. Given its visible growth prospects and improving financial profile, Kinder Morgan continues to believe it can increase its 5%-yielding dividend by another 25% next year. Even with that higher level, the company will pay out less than 55% of its cash flow, which is one of the lowest percentages in the pipeline sector. Kinder Morgan has been working hard to lock up new projects so that it can keep growing at a healthy rate in the coming years. While the company ended the second quarter with the same backlog level as it had at the start of the year, there's a lot more to the story.
CALGARY , Aug. 9, 2019 /CNW/ - Representatives of Kinder Morgan , Inc. (KMI), which owns a controlling interest in Kinder Morgan Canada Limited (KML), intend to participate in investor meetings at the Goldman Sachs Power, Utilities, MLPs and Pipelines Conference on Tuesday, August 13, 2019 in New York City to discuss the business and affairs of KMI. Interested parties will be able to view the materials to be presented on the day of the event by visiting KML's website at https://ir.kindermorgancanadalimited.com/presentations-and-webcasts or KMI's website at: https://ir.kindermorgan.com/presentations-webcasts. About Kinder Morgan Canada Kinder Morgan Canada Limited (KML) focuses on stable, fee-based energy transportation and storage assets that are central to the energy infrastructure of Western Canada. We strive to promote shareholder value by increasing utilization of our existing assets while controlling costs and operating in a safe and environmentally responsible way. For more information, visit kindermorgancanadalimited.com. SOURCE Kinder Morgan Canada Limited.
Kinder Morgan(NYSE: KMI) and Williams Companies(NYSE: WMB) are two of the largest natural gas pipeline operators in North America. Those systems provide these companies with predictable cash flow that they use to pay high-yielding dividends. The company is currently using that extra cash to finance expansion projects. However, it expects to increase its dividend by 25% next year, which will put its yield and payout ratio closer to Williams' level. Aside from that, Williams Companies gets a slightly greater percentage of its cash flow from stable and predictable sources like fee-based contracts. Because of that, it has less volatility in its cash flow than Kinder Morgan, which has some direct exposure to oil prices due to its oil production business in Texas. Shares of Kinder Morgan have been on fire this year, surging by about 35% overall, so shares of the pipeline giant aren't as cheap as they were a few months ago. However, with the stock recently trading at $20.50 apiece and Kinder Morgan on track to haul in $2.20 per share in cash flow, it's selling for about 9.3 times cash flow.
Kinder Morgan(NYSE: KMI) recently reported mixed second-quarter results. While cash flow edged up by 1%, earnings slipped around 2% because of weakness in most of the company's business units. Those underperformers overshadowed another strong showing by its natural gas pipeline operations where earnings surged 7% thanks to healthy volume growth. The reason the company is so focused on natural gas is that "we are very bullish on the future of natural gas from both a supply and demand perspective," according to Kinder. He further noted that: "Natural gas is critical to our American economy. We satisfy the growing energy needs around the world and, very importantly, to reducing our greenhouse gas emissions in a cost-effective manner."