Kinder Morgan to expand Texas footprint with $1.8bn acquisition of STX Midstream from NextEra Energy Partner

In a significant expansion of its natural gas pipeline network, Kinder Morgan, Inc. (NYSE: KMI) has agreed to acquire NextEra Energy Partner‘s South Texas assets, known as STX Midstream, for a total of $1.815 billion. This strategic move highlights Kinder Morgan’s commitment to enhancing market access and connecting key energy demand areas in Mexico and the Gulf Coast with the rich natural gas reserves of the Eagle Ford basin.

STX Midstream: A Strategic Asset for Energy Transport

STX Midstream boasts an impressive infrastructure with a set of integrated, large-diameter, high-pressure natural gas pipelines. These pipelines are crucial for linking the Eagle Ford basin to increasingly vital Mexico and Gulf Coast demand markets. STX Midstream’s portfolio includes a 90% stake in the NET Mexico pipeline, with the remaining 10% owned by PEMEX affiliate MGI Enterprises.

Connecting Networks: Strengthening Kinder Morgan’s Pipeline Presence

Kinder Morgan’s acquisition of STX Midstream is not just an addition of assets but a consolidation of network connections. STX Midstream operates the Eagle Ford Midstream, a 158-mile pipeline that merges the Eagle Ford basin to the Agua Dulce Hub. Furthermore, STX Midstream’s 50% interest in Dos Caminos LLC represents a partnership with Howard Energy Partners to service a 62-mile pipeline, linking to KMI’s new Eagle Ford pipeline.

KMI’s Financial Strategy and Expectations

KMI President of Natural Gas Pipelines, Sital Mody, asserts that the acquisition will bring attractive benefits to KMI’s portfolio, anticipating accretive results for shareholders. With a purchase price implying a 2024 EBITDA multiple of 8.6 times, Kinder Morgan expects this investment to align well with long-term financial projections, promising robust commercial synergies.

The transaction, which is currently pending regulatory clearance under Hart-Scott-Rodino, is poised for completion in the first quarter of 2024. Kinder Morgan plans to initially fund the acquisition using cash on hand and short-term borrowings, suggesting only a minimal increase in their Net Debt-to-EBITDA ratio.

Conclusion: A Win for KMI’s Strategic Growth

This acquisition is set to make Kinder Morgan a key player in meeting the demand from LNG projects, power generation, local distribution companies (LDC), and exports to Mexico. With contracts averaging over eight years and a significant portion based on take-or-pay agreements, STX Midstream’s integration into Kinder Morgan’s extensive pipeline network signals a robust future for energy transport in South Texas.