The Canada-based unit of energy infrastructure provider Kinder Morgan, Inc. (NYSE:KMI) recently raised C$5.5 billion ($4.16 billion) for the controversial Trans Mountain pipeline expansion despite strong opposition. The company appreciated the support extended by the financial community.
Although Kinder Morgan Canada is yet to reveal the credit source, the fund is expected to come from a group of various banks, which includes the underwriters of the company’s public offering last month. Per Kinder Morgan's prospectus, The Toronto-Dominion Bank (TO:TD) and Royal Bank of Canada (NYSE:RY) were the main underwriters.
The North American company entered into agreements for C$4.0 billion revolving credit, C$1 billion contingent credit and C$500 million revolving working capital.
We would like to remind investors that even though the project has received federal and regulatory approvals, the alliance of New Democratic Party and Green Party of British Columbia that won the May 9 election poses threats to the project. Environmental groups and indigenous communities – through whose land the project passes – have also been fierce opponents. Kinder Morgan however believes that the political and environmental oppositions will not hamper the expansion.
Project Details
The 1,150 kilometer Trans Mountain Pipeline carries crude and refined oil from Alberta to the west coast of British Columbia. The $7.4 billion expansion project will help the company to nearly triple the size of the existing pipeline enabling Kinder Morgan to carry 890,000 barrels a day of crude from Edmonton, Alberta, to Barnaby, British Columbia.
About the Company
Kinder Morgan is engaged in energy transportation and storage in North America. The company handles energy products like natural gas, refined petroleum products, crude oil, ethanol, coal, and carbon dioxide (CO2). It operates natural gas pipelines in the Rocky Mountains, the Midwest, and Texas as well as refined petroleum products pipeline in North America. Kinder Morgan also operates terminals for the storage of petroleum products and chemicals and CO2 pipelines and oil producing fields. Kinder Morgan is headquartered in Houston, TX.
We note that Kinder Morgan is spending significantly on acquisitions and asset expansion, which helps the company to generate high distributable cash flow. Investors should also know that for supporting these investments, the company’s total debt now stands higher than equity capital, reflecting balance sheet weakness.
Price Performance
In the last one month, Kinder Morgan’s shares have underperformed the Zacks categorized Oil and Gas - Production and Pipelines industry. During this period, the industry registered a decrease of 2% while Kinder Morgan’s stock fell 2.4%.
Zacks Rank and Stock to Consider
Kinder Morgan presently has a Zacks Rank #3 (Hold). A better-ranked stock in the oil and energy sector is Enbridge Energy, L.P. (NYSE:EEP) . It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enbridge Energy’s sales for the second quarter of 2017 are expected to increase 13.17% year over year. The partnership delivered an average positive earnings surprise of 38.22% in the last four quarters.
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Enbridge Energy, L.P. (EEP): Free Stock Analysis Report
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