Kinder Morgan Inc【KMI】株式ニュース

Kinder Morgan and Neste Partner on Major Renewable Fuels Logistics Project in the United States

09/13/2021

https://ir.kindermorgan.com/news/news-details/2021/Kinder-Morgan-and-Neste-Partner-on-Major-Renewable-Fuels-Logistics-Project-in-the-United-States/default.aspx

Kinder Morgan, Inc. (NYSE: KMI), one of North America’s largest energy infrastructure companies, is partnering with Neste, one of the leading providers of renewable and circular solutions, to create a premier domestic raw material storage and logistics hub in the United States, supporting increased production of renewable diesel, sustainable aviation fuel and renewable feedstock for polymers and chemicals. Upon completion of the project, Kinder Morgan’s Harvey, Louisiana facility will serve as the primary hub where Neste will store a variety of raw materials including, for example, the used cooking oil it collects from more than 40,000 restaurants across the United States.

As part of the initial, committed phases of the project, Kinder Morgan will modify existing tanks and piping to enable segregated storage for a variety of raw material across 30 tanks. The scope of work also includes the installation of a new boiler for heating tanks and railcars and infrastructure improvements for rail, truck and marine movements. The project, which is supported by a long-term commercial commitment from Neste, is expected to commence operations in the first quarter of 2023. At Neste’s option, the facility can be further expanded.

“This clearly shows the positive role America’s existing energy infrastructure can play in creating a sustainable future and fighting climate change,” says Jeremy Baines, President of Neste U.S. “Neste and Kinder Morgan are transforming existing terminal assets into what can be considered green infrastructure, which will ultimately enable more American businesses and cities to power their fleets and supply chains with renewable fuels and other products.”

The commitment is one of Neste’s largest to date in the U.S., supporting a more resilient, flexible and sustainable supply chain that can keep pace with the company's growing production capacity and increasing global demand for lower-emission products. It enhances Neste’s leading position, building on the company’s more than 15-year head start in creating an end-to-end renewable product value chain.

In the long term, the project could also help improve the lifecycle climate benefits and competitiveness of Neste’s renewable products through more efficient and less carbon intensive supply chain operations. Renewable fuels offer an immediate way to reduce greenhouse gas emissions from aviation, and heavy duty road transport in the US. Neste’s renewable feedstock for polymers and chemicals manufacturing can also significantly reduce the carbon footprint of the end products.

In fact, Neste’s renewable products prevented over 40 million tons of new GHG emissions from entering the atmosphere over the last five years - the same climate benefits as building 8,300 wind turbines or making 10.8 million cars zero emission according to the U.S. EPA’s GHG calculator.

Kinder Morgan is a trusted partner for Neste, with a strong history of collaboration between the two companies. In 2020, Neste began supplying sustainable aviation fuel (SAF) directly to San Francisco International (SFO) airport via a Kinder Morgan pipeline. More than 1 million gallons of SAF have been supplied into SFO to date.

With this project, Kinder Morgan is further demonstrating its commitment to offer low carbon infrastructure solutions to the country's fast growing renewable fuels industry.

“We are thrilled to partner with Neste, a global leader in renewable fuels, on this important logistics project. As North America’s largest terminal operator with existing infrastructure including 80 million barrels of storage, 266 docks, 462 truck bays and 6,800 rail car spots, Kinder Morgan Terminals is uniquely positioned to play a leading role in the transition to renewable fuels,” said John Schlosser, president of Kinder Morgan Terminals.

Because renewable products work with existing energy infrastructure, the U.S.’s vast network of pipelines, storage tanks, and distribution sites can be used to rapidly scale their availability. This is a major advantage, enabling renewable products to replace fossil products faster and more affordably.

Further information:

Theodore Rolfvondenbaumen, Communications Manager for Neste S. Theodore.rolfvondenbaumen@neste.com | +1 832 799 7029
Neste’s media service, +358 50 458 5076 / media@neste.com (weekdays from 8.30 a.m. to 4.00 p.m. EET)
Melissa Ruiz, Corporate Communications Director for KMI Melissa_Ruiz@kindermorgan.com | 713 369 8060
KMI Investor Relations km_ir@kindermorgan.com | 800 348 7320
About Neste

Neste (NESTE, Nasdaq Helsinki) creates solutions for combating climate change and accelerating a shift to a circular economy. We refine waste, residues and innovative raw materials into renewable fuels and sustainable feedstock for plastics and other materials. We are the world’s leading producer of renewable diesel and sustainable aviation fuel, developing chemical recycling to combat the plastic waste challenge. We aim at helping customers to reduce greenhouse gas emissions with our renewable and circular solutions by at least 20 million tons annually by 2030. As a technologically advanced refiner of

high-quality oil products with a commitment to reach carbon-neutral production by 2035, we are also introducing renewable and recycled raw materials such as waste plastic as refinery raw materials. We have consistently been included in the Dow Jones Sustainability Indices and the Global 100 list of the world’s most sustainable companies. In 2020, Neste's revenue stood at EUR 11.8 billion, with 94% of the company’s comparable operating profit coming from renewable products. Read more: neste.com

About Kinder Morgan

Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy infrastructure companies in North America. Access to reliable, affordable energy is a critical component for improving lives around the world. We are committed to providing energy transportation and storage services in a safe, efficient and environmentally responsible manner for the benefit of the people, communities and businesses we serve. We own an interest in or operate approximately 83,000 miles of pipelines, 144 terminals, and 700 billion cubic feet of working natural gas storage capacity. Our pipelines transport natural gas, refined petroleum products, crude oil, condensate, CO2 and other products, and our terminals store and handle various commodities including gasoline, diesel fuel, chemicals, ethanol, metals and petroleum coke. For more information, please visit www.kindermorgan.com.

This news release includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities and Exchange Act of 1934. Generally the words “expects,” “believes,” anticipates,” “plans,” “will,”

“shall,” “estimates,” and similar expressions identify forward-looking statements, which are not historical in nature. Forward-looking statements in this news release include express or implied statements concerning KMI’s capital projects, including expected completion timing and benefits of the renewable fuels logistics project, and KMI’s role in the transition to renewable fuels and ability to use its existing assets for energy-transition opportunities.

Forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, based on information currently available to them. Although KMI believes that these forward-looking statements are based on reasonable assumptions, it can give no assurance as to when or if any such forward-looking statements will materialize or their ultimate impact on KMI’s operations or financial condition. Important factors that could cause actual results to differ materially from those expressed in or implied by these forward-looking statements include the risks and uncertainties described in KMI’s reports filed with the Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K for the year-ended December 31, 2020 (under the headings “Risk Factors” and “Information Regarding Forward-Looking Statements” and elsewhere) and its subsequent reports, which are available through the SEC’s EDGAR system

at www.sec.gov and on KMI’s website at ir.kindermorgan.com. Forward-looking statements speak only as of the date they were made, and except to the extent required by law, KMI undertakes no obligation to update any forward-looking statement because of new information, future events or other factors. Because of these risks and uncertainties, readers should not place undue reliance on these forward-looking statements.

We Are Buying Midstream Hand Over Fist

Feb. 03, 2021 8:30 AM ETAMLP, EBBNF, EBRGF...3 Comments5 Likes
Be sure to catch graphics and the video interview embedded in the article link here:

https://seekingalpha.com/article/4402955-are-buying-midstream-hand-over-fist
Summary

COVID-19 has led to energy demand disruption and hit the midstream space pretty hard in 2020.

That said, we believe that - with large scale vaccinations being administered - there is a clear light at the end of the tunnel.

Midstream fundamentals and valuations have never been more attractive.

We love investing in the midstream sector because many of its businesses fit in well with our investment philosophy of investing in businesses with understandable business models, years of proven profitability and free cash flow generation, and a shareholder-friendly dividend policy

Right now, we find the risk-reward to be particularly attractive in the sector for the following three reasons:

1. Exceptionally Attractive Valuations

Their valuations are extremely opportunistic right now:

Best Yields: There is no better place to get yield in today's marketplace than in the midstream sector. Midstream index (AMLP) yields are 2-3x greater than REIT (VNQ) and utility (XLU) index yields and 5-10x greater than stock (SPY) and bond (BND) index yields. Furthermore, despite interest rates (GOVT) hitting historic lows and many midstream businesses slashing their distributions in 2020 to free up cash flow for debt reduction and buybacks, midstream index yields sit 130-200 basis points above their 5-year averages:

source

Lowest Multiples: Furthermore, midstream indexes offer the lowest multiples and trade at a steep discount to their historical averages in contrast to virtually every other sector which trades at inflated multiples due in large part to record low interest rates.
source: Alerian EV/EBITDA EV/EBITDA (10-YR AVG)
Midstream MLPs 8.7x 11.5x
Midstream Sector 9.8x 12.2x
S&P 500 12.7x 10.3x
Historic Yield Spreads: Finally, MLP yield spreads are at all-time highs relative to both the stock market and bonds:
Chart

Data by YCharts
2. Increasingly Strong Moats

Increasing regulatory and legal roadblocks for major pipeline projects and the recent anti-pipeline actions by the Biden administration only increase the moats for blue chip fully-integrated midstream businesses such as Enterprise Products Partners (EPD), Enbridge (ENB), and Kinder Morgan (KMI). With fewer new pipelines being built, their existing networks will have less competition, thereby sustaining their volumes and pricing power.

3. Resilient Fundamentals

Furthermore, though the entire midstream sector suffered a scare, significant market volatility, and even some headwinds to otherwise quite stable cashflows, overall the industry seems to have emerged from 2020 in nearly as good of shape as it entered.

For example, as part of a sector-wide trend, all five of our HYI midstream picks are projecting to be free cash flow positive after distributions in 2021. Some of them are even engaging in equity buyback programs.

All of our picks report that the energy crash in 2020 actually strengthened their customer base moving forward as it weeded out the weak contracts and put all current contract terms on much firmer footing. Furthermore, they expect it will pave the way for further consolidation in the upstream energy sector, leading to stronger business models and balance sheets and therefore stronger contracts for midstream businesses.

In part due to many projects coming online and the sharp rebound in energy prices, but also due to the resilience of the business model,

WTI crude oil prices

midstream companies across the sector have remarkably stable or even favorable EBITDA estimates for 2021 relative to 2019 results.

Why Mr. Market Doesn't Like Midstream
If midstream businesses are such a great investment right now, why the deep discount?

1. Energy Market Volatility: There is no question about it that COVID-19 impacts have reduced demand for fossil fuels, which have in turn reduced volume demand through midstream pipelines.

Furthermore, the rough ride for oil prices over the past 6 years has limited the midstream sector's growth opportunities and ultimately meaningfully damaged Mr. Market's sentiment on the entire midstream space.

Chart

Data by YCharts
While strong fully-integrated pipeline networks like those we hold at High Yield Investor have remained relatively insulated from the worst effects of the energy industry carnage, their cash flows have still taken a slight hit and their future growth prospects have definitely been reduced.

2. Renewable Energy's Rise: As President Biden's recent decision to nix the Keystone XL pipeline project indicates, the increasing political and cultural emphasis on moving towards renewable energies and away from fossil fuels is impacting the midstream pipeline industry as well. As a result, Mr. Market is concerned about the future growth prospects and even viability of the midstream business model.

Furthermore, the rise of ESG investing has caused many investors and even institutions to shun any businesses that are in any way related to fossil fuels, resulting in reduced demand for midstream equity.
Watch the video here:

3. K-1 Tax Form: Many midstream businesses (the MLPs) issue a K-1 to common and preferred equity investors. Given that many foreign investors face a prohibitively high withholding tax on K-1 issuing securities and many others do not want to deal with the headache of filling out the tax form, this further reduces demand for midstream equity.

Why We Are Optimistic Here
In addition to the opportunistic valuation, we think the fundamentals of the industry are much more resilient than the market is giving it credit for.

As has already been stated, the COVID-19 hit to midstream has not been as pronounced as what has been witnessed in other sectors and the businesses themselves are healthier than ever. Furthermore, vaccines are rolling out and we fully expect the worst of COVID-19 to be over within a few months, with society returning to mostly normal sometime over the next year. As a result, we expect energy demand to recover significantly over the next 6-12 months.

Of course, concerns over renewable energy's rise and President Biden's hostility to fossil fuels and the pipeline industry are legitimate and should not be ignored.

However, the cancellation of the Keystone XL project and new restrictions on oil and gas leasing on federal lands was fully expected. Furthermore, these actions have minimal near-to-medium term impact on our fully-integrated midstream holdings and in fact even come with the silver lining of reducing competition for their well-diversified businesses.

Additionally, we believe that demand for fossil fuels and natural gas in particular will not be declining significantly for a long time as the International Energy Agency's World Energy Outlook 2018 estimates that global energy demand will have grown 25%+ by 2040. With much of this demand coming from developing markets overseas, export infrastructure held in many midstream portfolios should see strong demand in the years to come.

Furthermore, ~50% of the world’s oil consumption is for industrial uses and lacks a viable replacement.

As a result, even a worst-case scenario sees fossil fuel demand only declining very slowly.

See the source image

source

An additional cause for optimism is that many midstream businesses have prudently fortified their balance sheets by capitalizing on increasingly cheap debt to refinance and extend their debt maturity dates and even pay down debt to deleverage. The vast majority of midstream businesses are not only self funding all CapEx and reducing CapEx via high grading investments, but are generating substantial amounts of free cash flow after paying out hefty distributions.

As a result, today we see a sector filled with investment grade balance sheets, record high spreads between distribution yields and interest rates, and even some buying back equity.

Finally, the superior value and yields being offered by the sector should continue to attract strong demand from private equity investors and others needing income in a yield-less world with sky-high valuations everywhere else.

Investor Takeaway
In a sector ripe with opportunities, we prefer to lean towards investment grade balance sheets or preferred equity, well-covered yields, and fully-integrated asset portfolios that have the best chance of weathering headwinds while still offering us plenty of upside potential and lucrative income.

We believe this approach will lead to long-term alpha in the midstream space and that the sector as a whole provides us with a very favorable risk-reward profile at present.

Disclosure: I am/we are long EPD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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