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Brookfield Infrastructure Partners (BIP) Divests 12.5% NGPL Stake

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Brookfield Infrastructure Partners L.P. (BIP - Free Report) sold an additional 12.5% stake in Natural Gas Pipeline Company of America LLC ("NGPL") to an associate of ArcLight Capital Partners, LLC ("ArcLight"). Following the buyout, BIP has a 25% stake in NGPL, while ArcLight holds 37.5%. Kinder Morgan, Inc. (KMI - Free Report) has a 37.5% interest and continues to operate the pipeline.

NGPL has a pipeline network of around 9,100 miles, a compression capacity of more than 1 million horsepower, and operating natural gas storage capacity of 288 billion cubic feet (Bcf). Through its extensive interconnects with intrastate and interstate pipeline systems, NGPL provides its customers with direct access across all major natural gas supply basins.

Divestment of Pipeline Interest

In November 2015, Brookfield Infrastructure Partners paid $106 million to increase its ownership from 27% to 50%. Similarly, Kinder Morgan also paid $136 million (to raise its interest from 20% to 50%) to Myria Holdings, placing the pipeline system’s value at $3.4 billion.

In February 2021, BIP and Kinder Morgan jointly sold a 25% stake in NGPL (to a fund controlled by ArcLight) for $830 million, which marked the value of the NGPL pipeline system at $5.2 billion.

Focus on Natural Gas

Natural gas distribution pipelines play a vital role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter pipes. The natural gas network in the United States has nearly 3 million miles of pipeline. Increasing consumption of natural gas in the United States and abroad is driving distribution pipelines’ demand.

Recently, the country has witnessed a rise in domestic natural gas production. This is due to increased exports and public awareness of carbon emissions. As the demand for natural gas from various consumer segments rises, the need for additional distribution pipes will also increase.

Per a U.S. Energy Information Administration (“EIA”) report, natural gas consumption for electricity generation is expected to increase 41% and 39% in 2023 and 2024, respectively. The EIA also expects the second highest U.S. natural gas consumption for electricity generation on record this summer, behind last year, and averaging about 38 billion cubic feet per day. The agency anticipates U.S. electric power sector generation from natural gas to be 1,651 billion kilowatthours (kWh) and 1,575 billion kWh in 2023 and 2024, respectively.

Price Performance

In the past three months, shares of Brookfield Infrastructure Partners have rallied 12.8% compared with the industry’s 1.8% growth.

 

Zacks Investment Research
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Zacks Rank & Other Stocks to Consider

Brookfield Infrastructure Partners currently carries a Zacks Rank #2 (Buy).

A couple of other top-ranked stocks from the same industry are EastGroup Properties Inc. (EGP - Free Report) and Equity Commonwealth (EQC - Free Report) , each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term (three to five years) earnings growth rate for EastGroup Properties and Equity Commonwealth is 6.5% and 12.54%, respectively.

The Zacks Consensus Estimate for EastGroup Properties and Equity Commonwealth’s 2023 earnings per share implies a year-over-year improvement of 8% and 109.5%, respectively.

 

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