• About
    • Which Energy Mix is this?
  • Climate News Network Archive
  • Contact
The climate news that makes a difference.
No Result
View All Result
The Energy Mix
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
SUBSCRIBE
DONATE
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
SUBSCRIBE
DONATE
No Result
View All Result
The Energy Mix
No Result
View All Result
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
  FEATURED
‘Remarkable Rebuke’: 130 U.S, EU Legislators Ask UN to Ditch Fossil CEO as COP 28 Chair May 23, 2023
Ontario Overrules Cities to Push Gas Plant Expansions May 23, 2023
Climate Concerns Drive Job Choices for 40% of Workers Under 40 May 23, 2023
PEROVSKITES: Qcells Plans First Production Line for ‘Miracle’ Solar Cell May 23, 2023
Tokyo Residents Rally to Protect Trees, Stop Skyscrapers in Iconic Urban Park May 21, 2023
Next
Prev

2017 Could Be Death Knell for Kinder Morgan, Analyst Warns

January 23, 2017
Reading time: 4 minutes

WhisperToMe/Wikipedia

WhisperToMe/Wikipedia

 
WhisperToMe/Wikipedia

Rising project costs and regulatory delays could imperil Kinder Morgan’s intensely controversial Trans Mountain pipeline expansion by the end of this year and undermine the company’s wider efforts to rebuild its finances, according to a Texas-based investment analyst who says his due diligence on Kinder “uncovered key concerns that alarmed me greatly.”

With the numbers and timeline behind the project becoming more and more tenuous, warns David Alton Clark on the Seeking Alpha investment site, “the cancellation of the Trans Mountain project would essentially be a death knell for Kinder Morgan.”

  • Concise headlines. Original content. Timely news and views from a select group of opinion leaders. Special extras.
  • Everything you need, nothing you don’t.
  • The Weekender: The climate news you need.
Subscribe

Megaprojects almost always come in late and over budget, Clark writes. (Analysts at Ernst & Young would agree.) Kinder’s problem is that Trans Mountain has already hit the ceiling on cost, and will run out of time if it doesn’t receive final regulatory approval by the end of this year.

“Kinder Morgan has a solid plan to get out from under its huge mountain of debt,” he concedes, but “the successful completion of [the] Trans Mountain Expansion Project is a key part of that plan.” Clark says he got nervous when he dug into the details of the pipeline deal, citing a 2015 post from the National Observer as a primary reference.

“Not exceeding the C$6.8-billion limit is critical to the viability of the project,” he explains, because “$6.8 billion represents the upper limit of costs the project can incur while still maintaining contracts with shippers…The pipeline’s customers have the ability to back out of their contracts, or renegotiate rates with Kinder Morgan, if the cost goes over $6.8 billion or the regulatory approval is pushed past the end of 2017.”

All of which looks more likely than not when you consider the uncertainties that still plague the project. Trans Mountain “is getting more and more expensive by the day,” and “we are nowhere near tallying up all the costs yet,” he writes. “Tunneling through Burnaby Mountain, changes in scope, thicker pipe, routing changes, and the strong dollar are listed as the primary culprits.” And “there is still a great divide between [Alberta and British Columbia] at present regarding two main issues—an environmental plan for marine mammals. and financial agreement.”

The tight timeline also gives Clark reason to fret about the array of community interests still determined to fight the project. “The mayors of Vancouver, Victoria and Burnaby still oppose the project. Many First Nations oppose it, as well, and have already filed multiple lawsuits. Furthermore, Greenpeace Canada, Sierra Club BC, and Raincoast Conservation also oppose the project.”

He cites Washington tribes’ recent defeat of the Cherry Point coal terminal and the campaign by the Standing Rock Sioux and their allies against the Dakota Access Pipeline, arguing that “if the protesters succeed in significantly delaying [Trans Mountain] it may fall under its own weight,” just as lost time could prove fatal to DAPL. Last November, ex-B.C. premier Mike Harcourt warned that the Trudeau government “could be facing a Clayoquot or North Dakota type of insurrection” along the last leg of the Trans Mountain project if it isn’t rerouted—a move that would push the project above its $6.8-billion ceiling.

What many analysts have missed, Clark adds, is how important the project is to Kinder Morgan’s growth and cash flow—and, ultimately, to its survival. “The Trans Mountain expansion represents an increase in cash flow of six times what it currently generates on only a three-fold increase in capacity,” he explains. “The financial windfall for Kinder Morgan was approved by the [National Energy Board] and effectively doubled the toll rates charged on the current pipeline volume. So it’s very important to increasing Kinder Morgan’s ability to dig its way out of debt.”

The project is tying up nearly 60% of the company’s capital budget, and its completion has already been delayed to December 2019, when it was supposed to start contributing to the company’s cash flow and reducing its debt load in 2017.

“I believe the Trans Mountain pipeline will be completed at some point,” Clark writes, but “I seriously question the current projected cash flows from the project and the completion date. I expect a substantial revision downward of the project’s distributable cash flow once it’s all said and done, particularly if a joint venture partner is brought in.” In the end, Kinder might get rid of some of its debt, but it’ll also have to give up much of the revenue on the project.

“Once everyone receives their ‘fair share’ of the profit pie, there may not be as much left over for Kinder Morgan as originally forecast.”

Clark isn’t the only one keeping a watchful eye on Kinder Morgan. Reuters reports that the company has now missed its revenue targets for nine straight quarters, although its quarterly profit, at US$170 million or 8¢ per share, was an improvement over its $721-million loss last year.

“Pipeline companies, once seen as more insulated from commodity price swings due to fixed-fee contracts, were hit hard by a more than 60% slump in oil prices since mid-2014, as cash-strapped oil and gas companies renegotiated their contracts,” the news agency notes.

But none of these concerns seem to have filtered through to front-line investment advisors, two-thirds of whom still see Kinder Morgan as a stock worth buying, reports the Market Realist blog. “According to Kinder Morgan, it has a significant backlog of capital projects,” the site states. “As these projects are placed into service, the company will generate additional cash flows which can be used to increase dividends in the future.”



in Canada, Climate & Society, Climate Action / "Blockadia", Community Climate Finance, Fossil Fuels, Jurisdictions, Pipelines / Rail Transport

The latest climate news and analysis, direct to your inbox

Subscribe

Related Posts

Arctic Circle/flickr
COP Conferences

‘Remarkable Rebuke’: 130 U.S, EU Legislators Ask UN to Ditch Fossil CEO as COP 28 Chair

May 23, 2023
344
Inspiration 4 Photos/flickr
Climate Impacts & Adaptation

Cooling Upper Atmosphere Has Scientists ‘Very Worried’

May 23, 2023
209
Jon Sullivan/flickr
Clean Electricity Grid

Ontario Overrules Cities to Push Gas Plant Expansions

May 23, 2023
836

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

Trending Stories

François GOGLINS/wikimedia commons

Corrosion Problem Shutters Half of France’s Nuclear Reactors

August 2, 2022
3.5k
Activités culturelles UdeM/Flickr

Climate Concerns Drive Job Choices for 40% of Workers Under 40

May 23, 2023
153
University of Oxford Press Office/flickr

PEROVSKITES: Qcells Plans First Production Line for ‘Miracle’ Solar Cell

May 23, 2023
381
McDonald's/flickr

McDonald’s Failing to Follow Through on Climate Promises, Critics Say

December 17, 2021
1.4k
Jon Sullivan/flickr

Ontario Overrules Cities to Push Gas Plant Expansions

May 23, 2023
836
Inspiration 4 Photos/flickr

Cooling Upper Atmosphere Has Scientists ‘Very Worried’

May 23, 2023
209

Recent Posts

Arctic Circle/flickr

‘Remarkable Rebuke’: 130 U.S, EU Legislators Ask UN to Ditch Fossil CEO as COP 28 Chair

May 23, 2023
344
Andrés Nieto Porras/wikimedia commons

‘Carbon Neutral’, ‘Net-Zero’ Claims Face Global Greenwash Crackdown

May 23, 2023
186
peellden/Wikimedia Commons

Scientists Sound Alarm on Methane Emissions, Habitat Hazards at U.S. Hydro Dams

May 23, 2023
142
nakashi/flickr

Tokyo Residents Rally to Protect Trees, Stop Skyscrapers in Iconic Urban Park

May 21, 2023
466
http://news.nationalpost.com/news/canada/unrecognizable-from-the-original-design-suburban-renovations-disprove-cookie-cutter-stereotype

Embrace Suburbs, Exurbs in Climate Planning, Researchers Urge Cities

May 21, 2023
45
Trocker767/wikimedia commons

Renewable-Powered Greenhouse Brings Fresh Produce Bounty to Gjoa Haven Inuit

May 21, 2023
55
Next Post

Climate change issues get digital boost

The Energy Mix - The climate news you need

Copyright 2023 © Energy Mix Productions Inc. All rights reserved.

  • About
  • Contact
  • Privacy Policy and Copyright
  • Cookie Policy

Proudly partnering with…

scf_withtagline
No Result
View All Result
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities

Copyright 2022 © Smarter Shift Inc. and Energy Mix Productions Inc. All rights reserved.

Manage Cookie Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behaviour or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage vendors Read more about these purposes
View preferences
{title} {title} {title}