Kinder Morgan Takes Over NextEra Energy Partner's South Texas Pipelines In Billion-Dollar Energy Shakeup

Kinder Morgan, Inc. KMI has agreed to acquire NextEra Energy Partners, LP's NEP South Texas assets, STX Midstream, for $1.815 billion.

The STX Midstream pipeline system includes a set of integrated, large-diameter, high-pressure natural gas pipelines that connect the Eagle Ford basin to the growing Mexico and Gulf Coast demand markets.

KMI expects the investment to be accretive to its shareholders, with the purchase price representing a 2024 EBITDA multiple of 8.6 times and a long-term investment-to-EBITDA multiple of approximately 7.0-7.5 times, based on KMI's financial projections and inclusive of commercial synergies.

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The company plans to fund the transaction with cash on hand and short-term borrowings, increasing the Net Debt-to-EBITDA ratio by approximately 0.1 times after including a full-year EBITDA contribution from the asset. 

Based on KMI's longer-term funding plans, the company expects this transaction to be neutral to KMI's balance sheet, which has cash and equivalents worth $80 million as of September 30. The company's net debt at the end of Q3 was $30.92 billion.

"STX Midstream nicely complements our existing assets and will enable us to capture incremental opportunities serving LNG, power generation, LDC customers and exports to Mexico," said Sital Mody, KMI President of Natural Gas Pipelines. 

STX Midstream includes a 90% interest in the NET Mexico pipeline; MGI Enterprises, a PEMEX affiliate, owns the other 10%. 

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STX Midstream owns and operates Eagle Ford Midstream, a 158-mile residue line connecting the Eagle Ford basin to the Agua Dulce Hub in Nueces County, Texas. Eagle Ford Midstream is connected to multiple pipeline systems, including KMI's Tennessee Gas Pipeline, Kinder Morgan Tejas Pipeline and Natural Gas Pipeline Company of America. STX Midstream also owns a 50% interest in Dos Caminos LLC, which is operated by, and the other 50% interest owned by, Howard Energy Partners (HEP). 

The transaction requires clearance under Hart-Scott-Rodino and is expected to close in the first quarter of 2024.

Price Action: KMI shares are trading lower by 1.23% to $16.47 on the last check Tuesday.