Kinder Morgan to Purchase Renewable Natural Gas Developer Kinetrex Energy

Rhea-AI Summary

Kinder Morgan (NYSE: KMI) has agreed to acquire Kinetrex Energy, a leading Midwest supplier of liquefied natural gas (LNG) and renewable natural gas (RNG), from Parallel49 Equity. Kinetrex operates Indiana's largest RNG facility and plans to construct three additional RNG facilities, expected to produce over four billion cubic feet annually. The acquisition aims to enhance KMI’s portfolio in renewable energy, anticipated to be accretive to shareholders with an estimated purchase price below six times expected 2023 EBITDA. The deal awaits regulatory approval and is projected to close in Q3 2021.

Positive

• Acquisition of Kinetrex Energy enhances KMI's position in the renewable natural gas market.
• Kinetrex's existing contracts and facilities will contribute to KMI's revenue growth.
• Expected to be accretive to shareholders with a purchase price below six times expected 2023 EBITDA.

Negative

• None.

Kinder Morgan, Inc. (NYSE: KMI) today announced it has agreed to acquire Indianapolis-based Kinetrex Energy from an affiliate of Parallel49 Equity. Kinetrex is the leading supplier of liquefied natural gas (LNG) in the Midwest and a rapidly growing player in producing and supplying renewable natural gas (RNG) under long-term contracts to transportation service providers.

Kinetrex has a 50% interest in the largest RNG facility in Indiana as well as signed commercial agreements to begin construction on three additional landfill-based RNG facilities. Once operational next year, total annual RNG production from the four sites is estimated to be over four billion cubic feet. RNG is derived from abundant renewable sources, including organic waste in landfills, wastewater treatment plants and agricultural operations. By capturing methane produced from the decomposition of organic waste, the RNG production process reduces or eliminates greenhouse gas emissions. Kinetrex’s unique full-service platform provides outstanding value for its customers and host landfills. The transaction requires regulatory approval under Hart-Scott-Rodino and is expected to close in the third quarter of 2021.

“This is a great day in the young history of Kinder Morgan Energy Transition Ventures (ETV),” said ETV President Jesse Arenivas. “We have been focused on RNG due to its potential to grow rapidly in the near term and deliver attractive returns, with landfills providing a low cost, predictable and long-term feedstock. The team at Kinetrex has developed an outstanding business model and platform for future growth in a fragmented market, and we are excited to welcome them to Kinder Morgan.”

“As we looked for the best partner to help grow our presence in renewable natural gas, Kinder Morgan’s Energy Transition Ventures emerged as the clear choice,” said Kinetrex President and Chief Executive Officer Aaron Johnson. “KMI’s project management expertise, extensive pipeline network and broad customer relationships will undoubtedly help us realize the vision we had in founding Kinetrex eight years ago: to provide holistic solutions for customers seeking to meet emission reduction targets.”

Key members of Kinetrex’s management team will be joining KMI as part of the acquisition to pursue new projects that expand their successful RNG platform. After close, Johnson will continue with KMI as president of Renewable Natural Gas and will report to Arenivas. Since its inception in 2013, Kinetrex has been committed to developing solutions that lower the cost of business while maintaining a focus on environmental stewardship. This acquisition will stay true to that focus.

KMI expects the investment to be accretive to its shareholders as the three RNG facilities become operational over the next 18 months, with the purchase price and additional development capital expenditures representing less than six times expected 2023 EBITDA.

J.P. Morgan Securities LLC acted as exclusive financial advisor to Kinetrex Energy in connection with the transaction.

About Kinder Morgan, Inc.

Kinder Morgan, Inc. (NYSE: KMI) is one of the largest energy infrastructure companies in North America. Access to reliable, affordable energy is a critical component for improving lives around the world. We are committed to providing energy transportation and storage services in a safe, efficient and environmentally responsible manner for the benefit of people, communities and businesses we serve. We own an interest in or operate approximately 83,000 miles of pipelines, 144 terminals and 700 billion cubic feet of working natural gas storage capacity. Our pipelines transport natural gas, refined petroleum products, crude oil, condensate, CO₂ and other products, and our terminals store and handle various commodities including gasoline, diesel, jet fuel, chemicals, ethanol, metals and petroleum coke. For more information, please visit www.kindermorgan.com.

About Kinetrex Energy

Kinetrex Energy is a turn-key provider of environmentally friendly renewable natural gas (RNG) and liquid natural gas (LNG) solutions to customers in the transportation, industrial, agricultural, utility and power industries. For more information, please visit http://www.kinetrexenergy.com/.

About Parallel49 Equity

Based in Lake Forest, Illinois, Parallel49 Equity invests in profitable, well-managed lower middle-market companies in North America. Parallel49 Equity investment efforts are focused on the industry sectors of specialty manufacturing and business services. For more information, please visit www.p49equity.com.

Important Information Relating to Forward-Looking Statements

This news release includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities and Exchange Act of 1934. Generally the words “expects,” “believes,” anticipates,” “plans,” “will,” “shall,” “estimates,” and similar expressions identify forward-looking statements, which are not historical in nature. Forward-looking statements in this news release include express or implied statements concerning the proposed transaction, including the parties’ ability to satisfy customary conditions to closing (such as with respect to required regulatory approvals); the prospects for RNG; and the anticipated timing and benefits of the transaction and Kinetrex’s planned development projects to KMI’s business and stockholders. Forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, based on information currently available to them. Although KMI believes that these forward-looking statements are based on reasonable assumptions, it can give no assurance as to when or if any such forward-looking statements will materialize or their ultimate impact on KMI’s operations or financial condition. Important factors that could cause actual results to differ materially from those expressed in or implied by these forward-looking statements include changes in the supply of and demand for renewable natural gas; the timing, cost, and success of expansion projects; commodity prices, particularly the prices for Renewable Identification Numbers under the U.S. Environmental Protection Agency’s Renewable Fuel Standard Program; counterparty financial risk; the timing and success of business development efforts; and the other risks and uncertainties described in KMI’s reports filed with the Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K for the year-ended December 31, 2020 (under the headings “Risk Factors” and “Information Regarding Forward-Looking Statements” and elsewhere) and its subsequent reports, which are available through the SEC’s EDGAR system at www.sec.gov and on KMI’s website at ir.kindermorgan.com. Forward-looking statements speak only as of the date they were made, and except to the extent required by law, KMI undertakes no obligation to update any forward-looking statement because of new information, future events or other factors. Because of these risks and uncertainties, readers should not place undue reliance on these forward-looking statements.

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FAQ

What is Kinder Morgan's recent acquisition?

Kinder Morgan has acquired Kinetrex Energy, a leading supplier of LNG and RNG in the Midwest.

What are the benefits of the Kinetrex acquisition for KMI?

The acquisition is expected to enhance KMI's renewable energy portfolio and be accretive to shareholders.

When is the Kinetrex Energy acquisition expected to close?

The acquisition is projected to close in the third quarter of 2021, pending regulatory approval.

How much RNG is expected from Kinetrex's facilities?

The combined RNG production from Kinetrex's facilities is estimated to exceed four billion cubic feet annually.