Kinder Morgan, Inc. (KMI) has announced that its board of directors approved a cash dividend of CAN$0.20 per share for the 3Q (CAN$0.80 annualised) payable on 15 November 2018, to common stockholders of record as of the close of business on 31 October 2018. KMI is reporting 3Q net income available to common stockholders of CAN$693 million, vs CAN$334 million in 3Q17; and distributable cash flow (DCF) of CAN$1.1 billion, a 4% increase over 3Q17. KMI’s DCF number does not include the impact of the one-time gain on the sale of the Trans Mountain pipeline system. KMI continued to fund all growth capital through operating cash flows with no need to access capital markets for that purpose.
“The dividend we are declaring is once again a 60% increase from last year’s 4Q dividend, and is consistent with the plan KMI announced during the summer of 2017,” said Richard D. Kinder, Executive Chairman. “We made tremendous progress on our balance sheet and on developing attractive new projects during the quarter.”
“The third quarter was a momentous one for our company,” Chief Executive Officer Steve Kean noted. “We closed the Trans Mountain transaction on 31 August and then made a final investment decision on the Permian Highway Pipeline Project less than a week later. Our three year campaign to strengthen KMI’s balance sheet reached an important milestone as we ended the quarter with an Adjusted Net Debt-to-Adjusted EBITDA ratio of approximately 4.6 times. Consistent with that achievement, all three ratings agencies have provided formal notification that our credit ratings are on positive outlook for an upgrade, and S&P announced they expect to raise our rating in January.”
Kean continued, “We are maintaining our planned substantial dividend increase and we have also revised our long-term leverage target from at or below 5.0 times to around 4.5 times, which is consistent with where we ended the quarter.”
KMI President Kim Dang said, “This quarter reinforced the importance of our interconnected natural gas transportation network as that segment accounted for a substantial portion of the growth in segment earnings vs 3Q17. We continue to benefit from strategically positioned fee-based assets that generate predictable cash flows and a network that provides our customers with unrivalled flexibility. We also made good progress during the third quarter on the Gulf Coast Express Project and began work on the Permian Highway Pipeline Project. Both of those projects take advantage of the unparalleled market access afforded by our existing network.”
Dang continued, “Once again we had very good commercial and operating performance. Our 3Q earnings per common share of CAN$0.31 includes the one-time gain on the sale of the Trans Mountain system. We achieved distributable cash flow (DCF) of CAN$0.49 per common share in the quarter, representing 4% growth over 3Q17. This resulted in nearly CAN$650 million of excess DCF above our declared dividend.”
As noted above, KMI reported 3Q net income available to common stockholders of CAN$693 million, compared to net income of CAN$334 million for 3Q17, and DCF of CAN$1093 million, up 4% from CAN$1055 million for the comparable period in 2017. The increase in DCF compared to 3Q17 was due to greater contributions across nearly all business segments, partially offset by a reduction in Kinder Morgan Canada earnings resulting from the Trans Mountain sale as well as higher sustaining capital expenditures. Net income available to common stockholders for the third quarter of 2018 also benefited from the gain on the Trans Mountain sale. KMI’s project backlog for the 3Q stood at CAN$6.5 billion, an approximately CAN$250 million increase over 2Q18, with additions of just under CAN$800 million in new projects, primarily in the Natural Gas Pipelines segment, partially offset by approximately CAN$550 million in projects placed in service and other capital adjustments. Excluding the CO2 segment projects, KMI expects the projects in the backlog to generate an average capital-to-EBITDA multiple of approximately 5.4 times.
For the first nine months of 2018, KMI reported net income available to common stockholders of CAN$998 million, compared to CAN$1072 million for the first nine months of 2017, and DCF of CAN$3457 million, up 5% from CAN$3292 million for the comparable period in 2017. The increase in DCF was driven by greater contributions from all KMI business units, partially offset by a reduction in Kinder Morgan Canada earnings resulting from the sale of the Trans Mountain system and higher sustaining capital expenditures. Net income available to common stockholders was reduced by a CAN$488 million unfavourable change in total Certain Items compared to the first nine months of 2017, as the gain on the sale of the Trans Mountain system was more than offset by an impairment taken in the previous quarter.
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