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How Are Kinder Morgan’s Capital Projects Progressing?

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Permian Highway Pipeline project

Kinder Morgan (KMI) made a final investment decision on the $2 billion Permian Highway Pipeline project in September. The company is developing the project in partnership with EagleClaw Midstream Ventures. All of the pipeline’s capacity is secured under long-term contracts with shippers. The pipeline is expected to be in-service in 2020. The pipeline is designed to transport up to 2.0 Bcf/d (billion cubic feet per day) of natural gas from Waha, Texas, to the US Gulf Coast and Mexico markets.

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Apache (APA) has the option to acquire an interest in the project from the initial partners—Kinder Morgan and EagleClaw Midstream Ventures. The above graph shows Kinder Morgan’s capital expenditure over the last four years. The company raised its expected capital expenditure guidance for 2018 by $300 million to $2.5 billion.

Gulf Coast Express project

The first nine miles of pipeline in Kinder Morgan’s $1.75 billion Gulf Coast Express project was placed in-service in August. The construction on the remaining 40 miles started in September. The project is expected to be in-service in October 2019. The pipeline is designed to transport ~2 Bcf/d of natural gas from the Permian Basin to the Texas area. The project is fully subscribed.

Kinder Morgan owns 50% of the project with DCP Midstream (DCP) and Targa Resources (TRGP), which each hold 25% interest. Apache has the right to purchase up to a 15% stake in the project.

Elba Liquefaction project

The $2 billion Elba Liquefaction project has been delayed by two quarters. Now, the project is expected to be in-service in the first quarter of 2019. Kinder Morgan expects its 2018 budgeted distributable cash flow to be impacted due to the delay. However, the company still expects its Natural Gas segment to exceed its budget for 2018.

Kinder Morgan doesn’t expect the delay to impact the project’s construction cost materially.

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