As it approaches its own self-declared deadline to begin construction on its controversial Trans Mountain pipeline expansion, Kinder Morgan is again drawing speculation on whether the project will go ahead—and what it will mean for the Houston-based company if it does not.
“Kinder Morgan’s Trans Mountain Pipeline Expansion, which has already fallen behind schedule, will likely be scrapped, resulting in significant financial damage to the company,” writes analyst Jesse Donovan, in a post for the Seeking Alpha investment site. “Actions taken by the new provincial government in British Columbia, strategic litigation by various groups, and the spectre of Indigenous-led civil disobedience decimate the likelihood that the Expansion will succeed.”
That means investors “will likely see a shrunken share price and diminished dividend payments” while Kinder “deals with the financial carnage wrought by the massive, stranded investment that is the Expansion”. That analysis prompts Donovan to urge his readers to “avoid this risky company until after it scuttles the Trans Mountain Expansion.”
While construction on the project was supposed to begin in September, Trans Mountain “is about to enter an immensely turbulent period,” he explains. “In June, I thought Kinder Morgan had a 50% chance of completing the Expansion project on schedule. After reassessing the threats to the Expansion, I believe that there is a minuscule chance of on-schedule completion.”
And Donovan hastens to add that he isn’t alone in that risk assessment: “The development and construction of the Trans Mountain Expansion Project and other major expansion projects, are subject to significant risk and, should any number of risks arise, such projects may be inhibited, delayed, or stopped altogether,” Kinder Morgan told investors in its own investment prospectus in May.
While Kinder Morgan and the company running the project, Kinder Morgan Canada, are two separate corporate entities, Donovan notes that the parent company owns 70% of the subsidiary. “Kinder Morgan is clearly exposed to what goes on in British Columbia during the next few months,” he writes. “Shareholders, therefore, should become familiar with this unique Canadian province and the threats to the Trans Mountain which lie within it.”