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Kinder Morgan (KMI) & Partner Divest NGPL Stake for $830M

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Kinder Morgan, Inc. (KMI - Free Report) recently announced that it has agreed to divest a minority stake in Natural Gas Pipeline Company of America LLC (“NGPL”) to a fund controlled by private equity firm, ArcLight Capital Partners. Kinder Morgan has Brookfield Infrastructure Partners L.P. (BIP - Free Report) as a partner in the NGPL interstate pipeline system.

Kinder Morgan and Brookfield Infrastructure will divest a 25% interest in the interstate pipeline system for $830 million. Both the partners are expected to share the proceeds equally among themselves. Following the divestment, Kinder Morgan and Brookfield Infrastructure will hold a 37.5% stake in the pipeline system each. Houston, TX-based Kinder Morgan will remain the operator of the project.

Notably, the deal is expected to close in the March quarter of 2021. The pipeline serves the markets in the Chicago area, where demand for the commodity is high. Moreover, the 9,100-mile pipeline system ships natural gas to large LNG export units along the U.S. Gulf Coast. NGPL has more than 1 million compression horsepower. Also, it owns natural gas storage of 288 billion cubic feet.

Importantly, Kinder Morgan reported strong fourth-quarter 2020 earnings aided by huge contributions from NGPL and Texas Intrastate systems. The divestment is significant for the company as it brings ArcLight on as another partner in the project, which reduces risk and will provide proceeds that can be further used in growth projects. In 2021, the leading North American energy infrastructure company is expected to invest $800 million in expansion projects and as contribution to joint ventures.

The deal also signifies Kinder Morgan’s efforts to generate high value from investments. In 2015, the partnership’s deal with Myria Holdings valued the pipeline system at $3.4 billion. Markedly, the latest deal with ArcLight Capital values the NGPL pipeline system at $5.2 billion.

Price Performance

Kinder Morgan’s shares have increased 6.5% over the past six months compared with 9.8% rise of the industry it belongs to.

Zacks Rank & Stocks to Consider

Currently, Kinder Morgan has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include ConocoPhillips (COP - Free Report) and Altus Midstream Company (ALTM - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ConocoPhillips’ sales for 2021 are expected to increase 258.8% year over year.

Altus Midstream’s bottom line for 2021 is expected to increase 380.5% year over year.

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