Kinder Morgan (KMI) Raises Quarterly Dividend 14% to $0.49; Updates on Outlook

Kinder Morgan (NYSE: KMI) declared a quarterly dividend of $0.49 per share, or $1.96 annualized. This is a 14% increase from the prior dividend of $0.43.

The dividend will be payable on August 14, 2015, to stockholders of record on July 31, 2015, with an ex-dividend date of July 29, 2015.

The annual yield on the dividend is 5.2 percent.

“We are pleased with the large increase in our project backlog which demonstrates our continued ability to leverage our unparalleled asset footprint and provides additional support for future growth,” said Executive Chairman Richard D. Kinder. “For the second quarter, KMI had steady results and increased its dividend to $0.49 per share. We remain on track to meet our full-year dividend target of $2.00 per share. While commodity prices continued to pressure the industry this quarter, we continued to produce strong results due mainly to our large, diversified asset portfolio and fee-based cash flows predominantly supported by take-or-pay contracts. We earned distributable cash flow before certain items of $0.50 per share for the second quarter, which equates to coverage in excess of our dividends of $20 million bringing total coverage to $226 million for the first six months. Our five business segments produced $1.827 billion in segment earnings before DD&A and certain items, up 2 percent from the second quarter 2014, primarily driven by increases in our Products Pipelines and Terminals segments offsetting a decline in our CO2 segment.”

President and CEO Steve Kean said, “Our current project backlog of expansion and joint venture investments is $22.0 billion. Since the first quarter earnings release, we have placed nearly $700 million of completed projects into service, removed approximately $600 million in projects (primarily in the CO2 segment as a result of additional CO2 source and transportation projects being delayed beyond the time horizon of our five-year backlog due to lower commodity prices) and added approximately $5.0 billion driven by new projects, particularly the $3.3 billion market path portion of the Northeast Energy Direct project - and the incremental $630 million investment resulting from KMI's agreement to acquire Shell's 49 percent equity interest in the Elba Liquefaction Company. Projects in the backlog have a high certainty of completion and drive future growth at the company across all of our business segments.”

KMI reported second quarter distributable cash flow before certain items of $1.095 billion versus $332 million for the comparable period in 2014. This increase is primarily attributable to the KMI merger transactions completed in November 2014. Distributable cash flow per share before certain items was $0.50 compared to $0.32 for the second quarter last year. Second quarter net income before certain items was $365 million compared to $515 million for the same period in 2014. Certain items after tax in the second quarter totaled a net loss of $23 million compared to a net loss of $18 million for the same period last year. Net income was $342 million compared to $497 million for the second quarter last year. The decrease in net income before certain items was driven by higher DD&A expense, book taxes and interest expense.

For the first six months of the year, KMI reported distributable cash flow before certain items of $2.337 billion versus $905 million for the comparable period in 2014, due primarily to the KMI merger transactions completed in November 2014. Distributable cash flow per share before certain items for the first six months of the year was $1.07 compared to $0.87 for the same period last year. Net income before certain items was $810 million compared to $1.139 billion for the first two quarters of 2014. Certain items after tax for the first six months of the year totaled a net loss of $49 million compared to a net loss of $41 million for the same period last year. For the first six months of the year, net income was $761 million compared to $1.098 billion for the same period last year. The decrease in net income before certain items was driven by higher DD&A expense, book taxes and interest expense.

Overview of Business Segments

The Natural Gas Pipelines business produced second quarter segment earnings before DD&A and certain items of $965 million, up 1 percent from $958 million for the same period last year. Natural Gas Pipelines is on track to exceed its published annual budget of 1 percent growth.

“Growth in this segment compared to the second quarter last year was led by contributions from the Hiland acquisition and improved performance on the EagleHawk pipeline,” Kean said. “Second quarter growth was partially offset by lower commodity prices affecting certain of our midstream gathering and processing assets. Earnings were also negatively impacted at Kinder Morgan Louisiana Pipeline as a result of a customer contract buyout and at KinderHawk due to the expiration of a minimum volume contract.”

Natural gas transport volumes were up 3 percent compared to the second quarter last year driven by higher volumes on Texas Intrastate pipelines due to greater production from the Eagle Ford Shale, higher power generation load on the Southern Natural Gas (SNG) pipeline due to lower natural gas prices, and higher volume on the El Paso Natural Gas (EPNG) pipeline driven by demand from Mexico. Sales volumes on the Texas Intrastate system were higher by 9 percent compared to the second quarter last year driven by new industrial and power customer contracts. Power generation throughput on our pipelines was up 16 percent compared to the second quarter of 2014.

Natural gas continues to be the fuel of choice for America’s future energy needs, and certain industry experts are projecting gas demand increases of over 40 percent to nearly 110 billion cubic feet per day (Bcf/d) over the next 10 years. Over the last year and a half, KMI has entered into new and pending firm transport capacity commitments totaling 8.7 Bcf/d, including 1.4 Bcf/d added this quarter. KMI pipelines currently move about one-third of the natural gas consumed in the United States. Future opportunities include the need for more capacity in the Northeast, demand for gas-fired power generation, LNG exports and exports to Mexico. KMI currently has a backlog of natural gas projects of approximately $9.4 billion.

The CO2 business produced second quarter segment earnings before DD&A and certain items of $286 million, down from $360 million for the same period in 2014. The CO2 business is expected to be below its annual budget of an 8 percent decline from 2014 due to lower commodity prices.

“As expected, lower commodity prices impacted earnings overall, but our SACROC Unit continued to generate strong production,” Kean said. “SACROC reported quarterly oil production in the second quarter, averaging 35.1 thousand barrels per day (MBbl/d), up 9 percent from the second quarter last year and is on track for record annual production. NGL sales volumes of 21.0 MBbl/d at our Snyder Gas Plant were up 7 percent from the second quarter last year. In addition, we continued to offset some of the impact from lower commodity prices by generating cost savings across our CO2 business. While net CO2 volumes increased versus the second quarter of 2014, they were below plan for the quarter. CO2 demand has remained relatively stable, but is not currently growing due to customer capital constraints related to market conditions.”

Combined gross oil production volumes averaged 59.8 MBbl/d for the second quarter, up 5 percent from 56.8 MBbl/d in the same period last year. Oil production net to Kinder Morgan was up 8 percent compared to the same period last year. SACROC’s second quarter production was significantly above both second quarter 2014 results and plan, and Yates produced solid results but was slightly below both second quarter 2014 results and plan. Second quarter Katz and Goldsmith production was above the same period last year, but well below plan. The average West Texas Intermediate (WTI) crude oil price for the second quarter was $57.94 per barrel versus $102.99 for the second quarter of 2014. Kinder Morgan’s 2015 budget assumed an average WTI crude oil price of approximately $70 per barrel. The commodity price impact on the CO2 segment in the second quarter was higher than the sensitivities announced at the beginning of the year (every $1 per barrel change in the average WTI crude oil price will impact the CO2 segment’s distributable cash flow by approximately $7 million) driven by the lower ratio of NGL prices to crude prices relative to the ratio assumed in our budget.

The Products Pipelines business produced second quarter segment earnings before DD&A and certain items of $275 million, up 32 percent from $209 million for the comparable period in 2014. Products Pipelines expects to exceed its published annual budget of 29 percent growth.

“Growth in this segment compared to the second quarter of 2014 was driven by higher volumes on the Kinder Morgan Crude and Condensate Pipeline (KMCC), the startup of the first phase of the petroleum condensate processing facility along the Houston Ship Channel, which began service in March, improved results on Cochin resulting from the July 2014 completion of the reversal project and contributions from the Double H Pipeline, which was part of our Hiland acquisition,” Kean said. “We also began producing on-specification products in July 2015 from our second 50,000 barrel a day condensate processing facility.”

Total refined products volumes were up 4 percent for the second quarter versus the same period in 2014. Segment gasoline volumes were up 6 percent compared to the second quarter of 2014. NGL volumes more than doubled from the same period last year due to completion of the reversal project on Cochin. Condensate volumes were nearly four times higher than the second quarter last year primarily due to the continued ramp up of volumes on KMCC.

Products Pipelines handled about 11.0 million barrels of biofuels (ethanol and biodiesel) in the second quarter, up slightly from the same period last year. This segment continues to make investments in assets across its operations to accommodate more biofuels.

The Terminals business produced second quarter segment earnings before DD&A and certain items of $271 million, up 19 percent from $227 million for the same period in 2014. The Terminals business is expected to be slightly below its published annual budget of 20 percent growth.

“Approximately 75 percent of the growth in the second quarter was organic versus the same period last year, with the remainder coming from acquisitions,” Kean said. “The increase in second quarter earnings was led by strong performance at our liquids terminals, driven by various expansions across our network including adding additional storage capacity at our BOSTCO and Edmonton South terminals, as well as placing the Edmonton Rail Terminal, a 50-50 joint venture with Imperial Oil Ltd, in service. The Jones Act tanker acquisitions also contributed significantly to growth in this segment, along with contributions from the recently acquired Vopak terminals. Earnings were impacted by a softening of the domestic steel market, and continued weakness in global coal markets also impacted the segment, which saw coal export volumes decline 43 percent versus the same period last year. However, the coal volume impact on earnings was largely offset by long-term minimum tonnage commitments with customers.”

For the second quarter, Terminals and Products Pipelines combined handled 26.8 million barrels of ethanol, down from 27.8 million barrels for the same period last year. The decline reflects the company’s previously announced sale of certain smaller terminal facilities to Watco Companies in exchange for an incremental equity interest in Watco as well as the opportunistic conversion of storage from ethanol to gasoline service in certain markets. KMI currently handles approximately one-third of the ethanol used in the United States.

Kinder Morgan Canada produced second quarter segment earnings before DD&A and certain items of $37 million versus the $40 million it reported for the same period in 2014. Demand for capacity remained high on the Trans Mountain pipeline system in the second quarter, with mainline throughput into Washington state up nearly 15 percent from the same period last year. The earnings decline was primarily due to an unfavorable foreign exchange rate, as the Canadian dollar declined in value by approximately 11 percent since the second quarter of 2014. Kinder Morgan Canada expects to come in below its published annual budget of 1 percent growth because of expected continued weakness in the Canadian dollar.

2015 Outlook

KMI expects to declare dividends of $2.00 per share for 2015, an approximately 15 percent increase over the 2014 declared dividend of $1.74 per share. We expect to have substantial cash coverage in excess of our 2015 declared dividends; however, we expect our excess coverage to be below our budgeted coverage of $654 million as our budgeted coverage assumed an average WTI crude oil price of approximately $70 per barrel and a Henry Hub natural gas price of $3.80 per MMBtu in 2015. The overwhelming majority of cash generated by KMI’s assets is fee based and is not sensitive to commodity prices. KMI does have some commodity price sensitivity, primarily in its CO2 segment, and hedges the majority of its next 12 months of oil production to minimize this sensitivity. For 2015, the company estimated that every $1 per barrel change in average WTI crude oil price will impact KMI’s distributable cash flow by approximately $10 million, and each $0.10 per MMBtu change in the average price of natural gas will impact distributable cash flow by approximately $3 million. Even adjusting for projected commodity prices, the company expects to increase its dividends by 10 percent each year from 2016 through 2020.

Other News

Natural Gas Pipelines

• The KMI board of directors has approved the market path portion of Tennessee Gas Pipeline's (TGP) Northeast Energy Direct project (NED), subject to receipt of applicable regulatory approvals, including state public utility commission approvals for our LDC customers. Currently, the market path portion of the project has commitments of over 550,000 dekatherms/day (Dth/d). The market path, from Wright, New York, to Dracut, Massachusetts, and beyond, is scalable up to 1.3 Bcf/d. TGP has made substantial progress in securing customer commitments with respect to the supply path portion of the project, from the Marcellus production area to Wright, New York, which is scalable up to 1.2 Bcf/d. A FERC certificate application filing is anticipated in the fourth quarter of 2015. The project has an expected in-service date of Nov. 1, 2018, and anticipated capital required for both the market and the supply path components is approximately $5 billion.
• On July 15, 2015, Kinder Morgan, Inc. reached agreement with a unit of Shell to acquire Shell's 49 percent equity interest in the Elba Liquefaction Company (ELC) joint venture formed to develop liquefaction facilities at Elba Island, Georgia. Kinder Morgan currently owns 51 percent of the ELC joint venture. Shell continues to subscribe under a 20-year contract to 100 percent of the terminal's 2.5 million tonnes per year of export capacity, which is equivalent to approximately 350 million cubic feet per day (MMcf/d) of natural gas. Kinder Morgan’s expected incremental investment resulting from this transaction is approximately $630 million, bringing its total investment in all the liquefaction and additional terminal facilities at Elba Island to approximately $2.1 billion. Subject to regulatory approvals, construction is expected to begin in the fourth quarter of 2015, with initial production expected to occur in late 2017.
• A FERC certificate is expected later this year for the Elba Express Company and Southern Natural Gas Company expansion projects to provide 854,000 Dth/d of incremental natural gas transportation service to support the needs of customers in Georgia, South Carolina and northern Florida. Expansion capacity would also serve the proposed Elba Liquefaction project. The project will add north-to-south transportation capacity to the existing Elba Express Pipeline in multiple phases. The combined capital costs of the two projects will be approximately $309 million and the first phases are expected to be in service June 2016, subject to regulatory approvals.
• Progress continues on the Broad Run Expansion and Broad Run Flexibility projects which will move gas north-to-south from a receipt point in West Virginia to delivery points in Mississippi and Louisiana. Estimated capital expenditures for both projects are approximately $818 million. In 2014, Antero Resources was awarded 790,000 Dth/d of 15-year firm capacity. Subject to regulatory approvals, the Broad Run Expansion project will provide an incremental 200,000 Dth/d of firm transportation capacity from TGP's Broad Run Lateral in TGP Zone 3 to mutually agreeable delivery points in TGP Zone 1. The anticipated in-service date of the Broad Run Expansion project is Nov. 1, 2017. The Broad Run Flexibility project will provide an additional 590,000 Dth/d of firm transportation capacity on the same capacity path and is expected to be in service Nov. 1, 2015.
• TGP is continuing work on its approximately $205 million South System Flexibility project, which will provide more than 900 miles of north-to-south transportation capacity on the TGP system from Tennessee to South Texas and expand Kinder Morgan’s transportation service to Mexico. All of the 500,000 Dth/d of capacity is subscribed under a long-term contract to MexGas. An initial 150,000 Dth/d of capacity was placed in service on Jan. 1, 2015, and the remaining capacity will be placed in service in late 2015 and in 2016.
• On April 2, 2015, TGP filed a FERC certificate application for its proposed $156 million Susquehanna West project to transport 145,000 Dth/d of natural gas to the Susquehanna region of Pennsylvania. TGP has requested the issuance of a certificate order by April 15, 2016. The project's anticipated in-service date is Nov. 1, 2017.
• During the second quarter of 2015, TGP began environmental and cultural surveys for its $160 million Cameron LNG capacity project in Louisiana, which would provide 900,000 Dth/d of long-term capacity for customers Mitsubishi and Mitsui via the Cameron Interstate Pipeline, which will serve the future Cameron LNG export complex now under construction. TGP plans a FERC application filing in the fourth quarter of 2015. Cameron LNG received its Notice to Proceed from the FERC in October 2014 and its FERC certificate in June 2014.
• TGP plans a FERC certificate filing in the fourth quarter of 2015 for its proposed Orion (formerly Marcellus to Milford) project, which would provide 135,000 Dth/d of long-term expansion capacity for three customers from the Marcellus supply basin to a TGP interconnection with Columbia Gas Transmission in Pike County, Pennsylvania. The approximately $141 million project is expected to be in service June 2018, subject to regulatory approvals.
• On June 19, 2015, TGP filed a FERC certificate application for its proposed $87 million Triad Expansion project to provide 180,000 Dth/d of long-term capacity for Invenergy's Lackawanna Energy Center to serve a planned new area power plant. The anticipated in-service date is Nov. 1, 2017, subject to regulatory approvals.
• Project planning and engineering-design activities continue on TGP’s proposed $90 million Connecticut Expansion project, which would provide 72,000 Dth/d of additional long-term capacity for three northeast natural gas utility customers. Pending receipt of all necessary regulatory approvals, construction would begin in the fourth quarter 2015 with an anticipated in-service date of Nov. 1, 2016.
• In December 2014, the company’s Texas Intrastate Pipelines group and TGP entered into 15-year firm transportation agreements and a multi-year storage agreement with Cheniere Energy, through its subsidiary Corpus Christi Liquefaction, and in May 2015, Cheniere made its final investment decision to proceed with the project. Kinder Morgan will provide 550,000 Dth/d of firm natural gas transportation service and 3 billion cubic feet of natural gas storage capacity to serve the LNG export facility being developed by Cheniere near Corpus Christi, Texas. Kinder Morgan will expand its existing Texas Intrastate and TGP systems to coordinate with the startup of the LNG export facility, which is expected in 2018-2019. The company expects to invest approximately $219 million in these projects.
• KMI’s Texas Intrastate Pipelines group also entered into a 20-year firm transportation services agreement with SK E&S LNG, LLC, which in April 2015, made its final investment decision to proceed as planned. KMI will invest approximately $169 million to provide more than 320,000 Dth/d of firm natural gas transportation services to support SK LNG’s Train III liquefied natural gas export capacity at Freeport LNG Development's export facility at Quintana Island, Texas. The project is expected to be completed in the third quarter of 2019.
• Kinder Morgan Louisiana Pipeline (KMLP) continues to move forward with its approximately $144 million expansion project that will further upgrade its existing pipeline system to serve Cheniere’s Sabine Pass LNG Terminal in Cameron Parish, Louisiana. The project will increase KMLP's east-to-west reconfigured system capacity by 600,000 Dth/d to serve Train 5 at the facility. Cheniere has reached final investment decision on Train 5. Pending regulatory approvals, this portion of the project is expected to be placed in service in late 2019. Additionally, Cheniere has committed to take an additional 600,000 Dth/d of capacity on KMLP to serve Train 6 at the facility if that train reaches timely final investment decision. A Train 6 commitment would increase the project capital to $215 million. This project is an addition to the previously announced KMLP expansion project to serve Magnolia LNG in Lake Charles, Louisiana.
• Natural Gas Pipeline Company of America (NGPL) made a certificate application with the FERC for its Chicago Market Expansion project on June 1, 2015. NGPL has executed binding agreements with Antero Resources, Nicor Gas, North Shore Gas and Occidental Energy Marketing for incremental firm transportation service on its Gulf Coast mainline system with receipts at the Rockies Express Pipeline interconnection in Moultrie County, Illinois, and deliveries to points north on NGPL’s pipeline system. These commitments will support the expansion project, which will increase NGPL’s capacity by 238,000 Dth/d and provide transportation service to markets in proximity to Chicago, Illinois. The contracts are for an average term of 11 years. The project is expected to be in service in November 2016 pending regulatory approvals. Kinder Morgan owns a 20 percent interest in and operates NGPL.
• In conjunction with the Chicago Market Expansion, NGPL and Nicor Gas, NGPL’s largest customer, agreed to an extension of Nicor Gas’ entire transportation and storage contract portfolio through March 31, 2026. These agreements were previously set to expire between 2016 and 2018, with the largest contracts expiring in 2016. The annual revenue associated with the portfolio will increase by approximately 4 percent by the time the Chicago Market Expansion is placed in service.

CO2

• Construction is more than halfway complete at Kinder Morgan’s approximately $352 million Cow Canyon expansion project in southwestern Colorado, with 100 MMcf/d of CO2 expected to come online by the end of July 2015. The entire expansion project is anticipated to increase CO2 production capacity in the Cow Canyon area of the McElmo Dome source field by 200 MMcf/d by the end of 2015.
• Construction has begun on the approximately $240 million northern portion of the Cortez Pipeline expansion project, which will increase CO2 transportation capacity from 1.35 Bcf/d to 1.5 Bcf/d. The Cortez Pipeline transports CO2 from southwestern Colorado to eastern New Mexico and West Texas for use in enhanced oil recovery projects. The project is on track to be completed by year end.
• Kinder Morgan has completed construction activities at the Tall Cotton Field pilot project in Gaines County, Texas. The approximately $102 million project is the industry’s first greenfield Residual Oil Zone CO2 project and encompasses 180 acres, with potential additional development, assuming success of this project. The company initiated CO2 injection in Tall Cotton in November 2014, and the field is demonstrating early stages of CO2 injection response by producing approximately 100 barrels per day (bpd).

Products Pipelines

• Kinder Morgan continues to work with stakeholders and communities in South Carolina, Georgia and Florida on its proposed Palmetto Pipeline. In June 2015, the company filed a petition for review in the Superior Court of Fulton County, Georgia, regarding the Department of Transportation's decision to deny Palmetto's application for a Certificate of Public Convenience and Necessity. As the company moves forward in the process outlined by the Georgia legislature, surveying and permitting activities continue. Palmetto will move gasoline, diesel and ethanol from Louisiana, Mississippi and South Carolina to points in South Carolina, Georgia and Florida. The approximately $1 billion project (KMI investment net of partner interest is $832 million) has a design capacity of 167,000 bpd and will consist of a segment of expansion capacity on the Plantation pipeline that Palmetto will lease from Plantation Pipe Line Company, and a new 360-mile pipeline to be built from Belton, South Carolina, to Jacksonville, Florida. The company anticipates an in-service date of July 2017, pending regulatory approvals.
• Kinder Morgan continues to make progress on its approximately $517 million Utopia East pipeline project. As previously announced by NOVA Chemicals Corporation, NOVA has executed a long-term transportation agreement with Kinder Morgan to support the project. The Utopia East pipeline will have an initial design capacity of 50,000 bpd, expandable to more than 75,000 bpd. The new pipeline will originate in Harrison County, Ohio, and connect with Kinder Morgan’s existing pipeline and facilities in Fulton County, Ohio, transporting ethane and ethane-propane mixtures eastward to Windsor, Ontario, Canada. Subject to the receipt of permitting and regulatory approvals, the project is expected to be in service by early 2018.
• Kinder Morgan began producing on-specification products in July 2015 from its second 50,000 bpd splitter unit at its approximately $436 million petroleum condensate processing facility along the Houston Ship Channel, after starting up the first 50,000 bpd unit earlier this year. The processing facility is supported by a long-term, fee-based agreement with BP North America and has a total design capacity of 100,000 bpd with both units operating.
• In June 2015, the company announced a binding open season on its proposed Utica Marcellus Texas Pipeline (UMTP), which is designed to transport 430,000 bpd of purity and mixed natural gas liquids produced from the Utica and Marcellus areas. Products will be transported in batches to delivery points along the Texas Gulf Coast which include storage near a Kinder Morgan export facility. The UMTP project involves the abandonment and conversion of approximately 964 miles of natural gas service on TGP, the construction of approximately 200 miles of new pipeline from Louisiana to Texas, and approximately 80 miles of new laterals in Ohio, all with an anticipated in-service date in the fourth quarter of 2018, pending customer commitments and regulatory approvals. In February 2015, the company filed for abandonment of a TGP line with the FERC, and the FERC issued a notice of intent to prepare an environmental assessment in April 2015.
• KMCC continues to benefit from strong Eagle Ford crude and condensate production and plans to expand the system capacity to 360,000 bpd by the end of 2015. It currently has long-term commitments for over 90 percent of the existing 300,000 bpd of capacity. Multiple KMCC-related expansion projects are in various stages of development to connect to additional Eagle Ford supplies and Texas Gulf Coast market outlets. KMCC placed two 120,000-barrel tanks and a truck offloading facility in-service at the DeWitt Station in June 2015 for Republic Midstream Marketing to facilitate transportation of crude and condensate to the KMCC delivery points. Including joint ventures and other projects, KMI’s investments related to Eagle Ford crude and condensate opportunities currently total approximately $1 billion and all are supported by long-term customer contracts.
• Kinder Morgan completed construction on its new connection at Douglas, Wyoming, in July 2015 for its Double H Pipeline, which began service in the first quarter of this year. The 485-mile pipeline, which transports crude oil from North Dakota to Wyoming where it delivers to local markets and interconnects with the Pony Express Pipeline for further transportation to Cushing, Oklahoma, has an initial long haul capacity of approximately 84,000 bpd, with contracts for approximately 80,000 bpd.

Terminals

• In June 2015, Kinder Morgan closed an additional investment in Watco Companies LLC, the Pittsburg, Kansas-based short line railroad terminal and port operator in which it has existing preferred and common equity interests. The $50 million convertible preferred equity investment will earn quarterly distributions and is convertible into common equity at Kinder Morgan’s election. The investment proceeds will be used by Watco to fund identified growth projects and acquisitions.
• Kinder Morgan continues to lead design and planning-permitting activities for the Base Line Terminal development, a new crude oil storage facility in Edmonton, Alberta. Kinder Morgan and Keyera Corp. announced the new 50-50 joint venture terminal in March and have entered into long-term, firm take-or-pay agreements with strong, creditworthy customers to build 4.8 million barrels of crude oil storage. KMI’s investment in the joint venture terminal is approximately CAD$372 million for an initial 12-tank build out, with commissioning expected to begin in the second half of 2017. Separately, KMI will invest up to an additional CAD$75 million outside the joint venture for connecting pipelines and related infrastructure for a total project investment of approximately CAD$447 million. Following completion of the initial tank build out, Kinder Morgan will have nearly 12 million barrels of merchant storage in the Edmonton market.
• The Edmonton Rail Terminal, a 50-50 joint venture with Imperial Oil Limited, was placed into service in the second quarter of 2015. The facility provides its customers, major energy companies that have made firm take-or-pay volume commitments, with over 210,000 bpd of crude take-away capacity and the capability of sourcing crude streams handled by Kinder Morgan at its Edmonton South Terminal for delivery by both CN and CP rail to North American refineries. Including investments made outside of the joint venture for pipeline connectivity and related infrastructure, Kinder Morgan has invested $258 million in connection with the project.
• Work continues at various Kinder Morgan facilities along the Houston Ship Channel in response to customers’ growing demand for refined product storage and dock services. Construction began on two new ship docks on the channel capable of loading ocean going vessels at rates up to 15,000 barrels per hour. The approximately $66 million project is supported by firm vessel commitments from existing customers at Kinder Morgan’s Galena Park and Pasadena terminals. The two docks are expected to be placed in service in the second and fourth quarters of 2016, respectively.
• Work continues on the Kinder Morgan Export Terminal (KMET) along the Houston Ship Channel. The approximately $220 million project includes 12 storage tanks with 1.5 million barrels of storage capacity, one ship dock, one barge dock and cross-channel pipelines to connect with the Kinder Morgan Galena Park terminal. An air permit for the project was received in March 2015, enabling site construction to move forward, and a final U.S. Army Corps of Engineers dock permit for pipeline relocation is expected later this year. The terminal is anticipated to be in service in the first quarter of 2017.
• The final three tanks of a nine-tank, 1.2 million-barrel build were placed into service in the first quarter at Kinder Morgan’s Galena Park terminal, as work continued on a new barge dock at the Pasadena facility. Expected to be in service by year end, the barge dock at Pasadena will provide capacity to handle up to 50 additional barges per month. Capital expenditures for the infrastructure improvements are approximately $137 million.
• In May 2015, construction began on the fourth of five tankers ordered by Kinder Morgan’s American Petroleum Tanker business at General Dynamics’ NASSCO shipyard in San Diego. The five tankers are slated for receipt between 2015 and mid-2017 and are supported by long-term time charters with major shippers. Each of the tankers will be 50,000-deadweight-ton, LNG-conversion-ready product carriers, with a 330,000 barrel cargo capacity. The construction of these tankers is on schedule and on budget. The first of the five tankers is scheduled to be christened in October 2015 and delivered for service in mid-November.

Kinder Morgan Canada

• Kinder Morgan Canada is currently engaged in the process of achieving approval from the National Energy Board (NEB) for the Trans Mountain Expansion Project. The company continues to engage extensively with landowners, Aboriginal groups, communities and stakeholders along the proposed expansion route, and marine communities. To date, 14 community benefits agreements with 19 communities representing 87 percent of the 690 miles of expansion rights-of-way have been completed, and one-third of the most directly affected First Nations along the pipeline have agreed to mutual benefits agreements. The NEB decision is scheduled for January 2016 and accordingly, the company expects the Trans Mountain expansion to be completed in the third quarter of 2018. Thirteen companies in the Canadian producing and oil marketing business signed firm long-term contracts supporting the project for approximately 708,000 bpd. Kinder Morgan Canada received approval of the commercial terms related to the expansion from the NEB in May of 2013. The proposed $5.4 billion expansion will increase capacity on Trans Mountain from approximately 300,000 to 890,000 bpd.

Financings

• In the second quarter, KMI sold shares valued at approximately $863 million under its at-the-market equity distribution program.
• KMI’s board of directors approved a warrant repurchase program authorizing KMI to repurchase in the aggregate up to $100 million of its warrants to purchase shares of Class P common stock, which are currently trading on the New York Stock Exchange. Repurchases may be made by KMI from time to time in open-market or privately negotiated transactions as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. Under the repurchase program, there is no time limit for warrant repurchases, nor is there a minimum number of warrants that KMI intends to repurchase. The repurchase program may be suspended or discontinued at any time without prior notice.
• In the second quarter, KMI repurchased approximately 2.4 million KMI warrants.

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