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KMP to Extend Edmonton Terminal

Zacks Equity Research

A unit of leading master limited partnership Kinder Morgan Energy Partners L.P. (KMP) - Kinder Morgan Canada Terminals – is progressing with the construction of another 1.2 million barrels of merchant storage capacity at Trans Mountain Pipeline’s Edmonton terminal in Strathcona County, Alberta. The project is backed by several long-term contracts.

The work on the new tankage, which awaits the receipt of supporting permits, is expected to begin in spring 2013. With completion scheduled for late 2014, the total cost of Phase 2 is estimated at around $112 million.

The construction of Phase 1 of the expansion is ongoing and comprises of 3.6 million barrels of new storage. The entire capacity of Phase 1 is anticipated to be commissioned toward the end of 2013. Total capital cost for the combined 4.8 million barrel capacity is pegged at about $420 million and is backed by long-term contracts with major producers and refiners.

Upon completion of both the phases, the total storage capacity at the Edmonton facility will be 9.4 million barrels, together with the existing Trans Mountain system facility and the North 40 merchant terminal.

The addition of new storage tanks is part of the partnership’s proposed $5.4 billion expansion on its Trans Mountain Pipeline between Alberta and Vancouver.

The project trails along the recently unveiled plans of Kinder Morgan for the expansion of its proposed Trans Mountain pipeline, which has received commitments from 13 customers. These customers have entered into 15–20 year contracts for 700,000 barrels a day of oil to be delivered through the Alberta-to-Burnaby pipeline.

Of these customers, Canadian Natural Resources Ltd., Canadian Oil Sands Ltd., Imperial Oil Ltd., Statoil ASA's (STO) Canadian affiliate – Statoil Canada Ltd – and the marketing units of Suncor Energy inc. (SU) and BP Canada – BP Plc’s (BP) Canadian unit – are worth mentioning.

Kinder Morgan holds a Zacks Rank #3, which is equivalent to a Hold rating for a period of one to three months.

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