KMI to Buy NextEra’s Texas Pipelines for $1.82B
Energy infrastructure giant Kinder Morgan (KMI) has agreed to acquire NextEra Energy Partner’s South Texas assets, STX Midstream, for $1.815 billion in cash and short-term borrowings.
The STX Midstream portfolio consists mostly of seven pipelines that deliver natural gas to Mexico as well as power producers and communities in South Texas, totaling 462 miles of pipeline with a transit capacity of 4.9 billion cubic feet per day.
The portfolio is highly contracted, with an average contract length of more than eight years, and approximately 75% of the business is supported by take-or-pay contracts, KMI said.
“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.
KMI expects the investment to be accretive to its shareholders, with the purchase price representing a 2024 EBITDA multiple of 8.6x and a long-term investment-to-EBITDA multiple of approximately 7-7.5x.
Juno Beach, FL-based NextEra intends to use the proceeds to pay off the outstanding Texas pipeline portfolio’s project-related debt and associated interest rate swaps of approximately $425 million; complete the $1.1 billion buyout remaining under the NEP Renewables II CEPF by June 2025; and pay down a portion of the outstanding corporate revolver.
The transaction is expected to close in the first quarter of 2024.