U.S. pipeline operator Kinder Morgan said on Nov. 6 it would acquire NextEra Energy Partners' gas pipelines in South Texas for $1.82 billion.
The oil and gas pipeline business has seen increased consolidation this year as U.S. production grows and persisting problems related to permits for new pipelines have made existing operators more valuable.
RELATED: NextEra Energy Aims to Sell Texas Pipeline Portfolio by Year’s End
NextEra Energy Partners' (NEP) Texas natural gas pipeline portfolio, STX Midstream, primarily consists of seven pipelines that provide natural gas to Mexico and power producers and municipalities in South Texas. The pipelines together have a transport capacity of 4.9 Bcf/d.
"Initially, we plan to fund the transaction with cash on hand and short-term borrowings," Kinder Morgan said in a statement. The deal is expected to close in first-quarter 2024.
Shares of NEP, a unit of NextEra Energy created to acquire, manage and own contracted energy projects, have lost about 44% of their value since Sept. 27 when the company trimmed its distribution growth forecast through at least 2026.
Higher interest rates have raised project costs for NEP, hurting its growth, according to analysts.
"Upon closing, the proceeds would be sufficient to pay off the outstanding project-related debt," NextEra Energy Partners' CEO John Ketchum said in a statement.
The sale price represents a 10x multiple on the estimated calendar year 2023 adjusted core profit for the Texas natural gas pipeline portfolio, NEP said.
"The valuation falls in line with recent trading multiples for midstream sector constituents and below some of the transaction marks," analysts at Guggenheim Securities said.
However, the deal provides some flexibility in credit metrics, the analysts added.
Recommended Reading
Belcher: Election Outcomes and Their Impacts on Future US Policy
2024-10-14 - Trump would back ‘energy dominance,’ while Harris would pursue a climate change agenda.
Industry Warns Ruling Could Disrupt GoM Oil, Gas Production
2024-09-12 - The energy industry slammed a reversal on a 2020 biological opinion that may potentially put an indefinite stop to oil and gas operations in the Gulf of Mexico—by December.
EQT’s Rice: ‘Wake Up’ to Anti-Energy Movement
2024-11-08 - In the face of growing opposition to fossil fuels and energy infrastructure, EQT CEO Toby Rice pulled out a rallying cry at Hart Energy’s DUG Appalachia conference: “Wake up!”
Construction on Kinder Morgan’s Tennessee Pipeline Delayed by Stay
2024-10-15 - An appeals court panel put two permits on hold for Kinder Morgan’s pipeline to consider the project’s implications on the Clean Water Act.
New FERC Commissioner Calls Slow Permitting Process ‘Huge Problem’
2024-09-17 - FERC Commissioner David Rosner said the commission is aware that the permitting process is too slow overall at Gastech Houston 2024.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.