US Midstream Companies with the Largest Capital Spending Plans

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Part 7
US Midstream Companies with the Largest Capital Spending Plans PART 7 OF 15

Kinder Morgan’s Expansion Plans for 2017 and Beyond

Kinder Morgan’s capital expenditure

Kinder Morgan’s (KMI) capital expenditure fell to $2.9 billion in 2016 compared to $3.9 billion in the previous year, a YoY (year-over-year) decrease of 26.0%. It was KMI’s first fall in capital expenditure over the last five fiscal years. The decline was mainly due to the cancellation or postponement of projects that were not attractive in 2016 due to the challenging price environment, the project stake sale, and project delays.

Kinder Morgan’s Expansion Plans for 2017 and Beyond

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However, the company expects a slight increase in capital spending this year. It’s targeting capital spending of $3.1 billion by the end of the year, which is slightly less than the original capital spending budget of $3.2 billion. KMI’s 2017 capital budget excludes capital spending related to Kinder Morgan Canada, which completed its IPO (initial public offering) in May 2017. Kinder Morgan Canada owns 30.0% in Kinder Morgan’s Canadian business, which includes the Trans Mountain Pipeline system and other pipeline and terminaling assets. KMI’s Trans Mountain Pipeline expansion project continues to face some hurdles despite clearance by the Canadian government. For details, read Controversy in the Pipeline: The Top 5 Hot-Button Projects.

About 57.0% of Kinder Morgan’s 2017 capital budget is allocated to its Natural Gas Pipelines segment. It’s been bullish on the expansion of its natural pipeline network to take advantage of the expected rise in natural gas demand from LNG (liquefied natural gas) exports, power utilities, LDCs (local distribution companies), and industrial customers. Natural Gas Pipelines is followed by Terminals. The company is expected to spend ~20.0% of its 2017 capital budget on this segment.

Kinder Morgan’s project backlog

Kinder Morgan’s project backlog increased to $12.2 billion at the end of the second quarter of 2017 compared to $11.7 billion in the previous quarter, representing a 4.3% rise. The increase was mainly driven by the addition to the Natural Gas Pipelines and CO2 segments. According to Steve Kean, KMI’s CEO (chief executive officer), “Excluding the CO2 segment projects, we expect the projects in our backlog to generate an average capital-to-EBITDA1 multiple of approximately 6.9 times.”

In the next part, we’ll look at Kinder Morgan’s financial position.

  1. earnings before interest, tax, depreciation, and amortization

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