El Paso Natural Gas (EPNG) − a business unit of
Kinder Morgan Energy Partners, L.P.
Kinder Morgan, Inc.
) − has inked a long-term deal to build a new pipeline to Mexico.
The 25-year agreement calls for El Paso to initially provide 200
million cubic feet per day of natural gas transportation capacity
via a new pipeline. This new 60-mile pipeline is expected to
stretch existing pipelines near Tucson, Arizona and join with a
pipeline to be built in Mexico.
The financial terms of the agreement were not disclosed and the
construction is yet to receive federal regulatory approvals. El
Paso plans to file applications for the required permits early
2013. Upon approval, construction work is expected to commence in
the first quarter of 2014, and will likely be operational in
The latest agreement will support the ongoing development of the
around $200 million Sasabe Lateral pipeline. It is expected to
create employment in Arizona, along with a market for shipping
profuse, low-priced U.S. gas production to Mexico. Additionally,
the project will enable Mexico in meeting its environmental
Kinder Morgan is one of the largest publicly-traded master
limited partnerships (MLP) and generally serves as a benchmark
for the pipeline MLP group. A focus on fee-based and diversified
businesses has enabled the partnership to dilute its business
Kinder Morgan acquired stakes of Tennessee Gas Pipeline (TGP) as
well as EPNG from its parent company Kinder Morgan Inc. (KMI).
This was a part of Kinder Morgan Inc.'s acquisition of El Paso
Corp. that entailed the divestiture of three U.S. natural gas
Various agreements/modifications have been lined up for these
assets in the coming years. These are expected to augment the
partnership's revenues. Kinder Morgan foresees growth
opportunities on TGP and EPNG systems beyond the existing
projects in the Marcellus and near the Mexico border. The
partnership is also evaluating a potential gas-to-crude pipe
conversion on a portion of EPNG to transport West Texas crude to
refineries in California.
Kinder Morgan currently retains a Zacks #3 Rank (short-term Hold
rating). Longer term, we maintain a Neutral recommendation on the
KINDER MORGAN (KMI): Free Stock Analysis
KINDER MORG ENG (KMP): Free Stock Analysis
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