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Kinder Morgan tries to adjust its financial stake as expensive projects move forward

Kinder Morgan is looking to sell off interest in two proposed Georgia projects, the Palmetto Pipeline and the expansion of the Elba Island LNG facility on the Savannah River.

The Houston-based energy infrastructure giant shared the information at an investor conference Wednesday.

Documents posted on the company website indicate Kinder Morgan expects to keep less than a 50 percent share of the $1.1 billion Palmetto Pipeline, listing its own cost going forward as $524.7 million.

A similar breakdown was not provided for Elba Island, where the company is planning a $2 billion expansion to allow natural gas to be liquefied there for export.

Chief Financial Officer Kim Dang said the company is already in talks with private equity groups but did not name them.

Savannah Riverkeeper Tonya Bonitatibus, who has organized opposition to the pipeline, said the company’s move pointed to the weakness of that project.

“If it’s really that strong an investment, they wouldn’t be trying to divest,” she said in a telephone interview Thursday.

Kinder Morgan spokespeople Melissa Ruiz and Richard Wheatley did not respond to multiple requests for comment.

The company has struggled over the last year, its stock price plummeting from more than $40 a share this time last year to about $15 a share Thursday. In November it slashed its dividend 75 percent. It’s cutting its spending as its cost of capital increases, Dang said.

She said the move to sell off stakes in the pipeline and Elba Island was needed for the company to fund its five-year $18.2 billion backlog of projects with internally generated cash.

Kinder Morgan is targeting its “stand-alone projects” attractive to infrastructure funds.

“That’s where the most firepower is today in terms of ability to participate in these projects,” Dang said. “We don’t need that.”

The Palmetto Pipeline would move gasoline, diesel and ethanol from the northern part of South Carolina through Georgia and into Jacksonville. About 210 miles of the pipeline would run through the Peach State, with a proposed terminal in Richmond Hill.

The project hit a regulatory snag in May when the state denied it a certificate of public convenience and necessity required for the company to condemn property along the hundreds of parcels on the original route.

The company appealed, and a decision is pending from Fulton Superior Court Judge Kimberly Adams.

Kinder Morgan pushed back the pipeline’s expected in-service date to January 2018, but it indicates construction will begin this spring.

CEO Steven Kean told investors Wednesday the regulatory setback was not a deal breaker.

“We don’t need that in order to build the project, but we do need it in order to have eminent domain, which is the ability to ultimately condemn a property, land, a parcel of land for fair compensation,” he said at the investor conference. “It’s a power that we rarely use but it’s a point of finality in getting something resolved.”

In the meantime the company has been trying to obtain rights of way on a consensual basis.

“We’re doing all right on that,” he said.

Kinder Morgan is looking at alternate routes “as we pick our way through,” Kean said.

The company, which owns an interest in or operates more than 84,000 miles of pipeline, hasn’t previously built an interstate pipeline without having eminent domain to fall back on.

It expects to have more certainty on the project by the end of the second quarter, Kean said.

“Frankly, getting rid of that uncertainty is an important part of doing a (joint venture) on that particular asset,” he said. 

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