Kinder Morgan Sells Half of Utopia Pipeline Project

By Brad Kramer July 5, 2016 View Profile

Kinder Morgan Inc. announced June 28 that private equity firm Riverstone Investment Group LLC will become a 50 percent partner in the Utopia Pipeline Project. To acquire its ownership interest, Riverstone agreed to an upfront cash payment provided at closing, consisting of reimbursement to Kinder Morgan for its 50 percent share of prior capital expenditures related to the project and a payment in excess of capital expenditures to recognize the value created by Kinder Morgan in developing the project to this stage.

In addition to the acquisition of the existing assets, Riverstone has agreed to fund its share of future capital expenditures necessary to complete construction and commissioning of the pipeline project. The total project cost is estimated to be approximately $500 million, excluding capitalized interest.

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“The Utopia pipeline will connect growing ethane supply sources in Ohio to the expanding petrochemical market in Sarnia (Ontario),” said Don Lindley, president of Kinder Morgan’s Natural Gas Liquids (NGL), Products Pipelines. “We are excited to welcome Riverstone as a partner in the Utopia project.”

The project is supported by a long-term contract with Nova Chemicals Corp.

“This is another step towards achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation,” said Steve Kean, Kinder Morgan president and CEO. “This agreement also demonstrates our ability to originate projects with attractive returns that partners are willing to pay to participate and invest in.”

Baran Tekkora, Partner at Riverstone, said, “The principals of Kinder Morgan and Riverstone have a long history of working together and we are happy to be partners again. Kinder Morgan has a proven management team with strong project development, commercial, and operational expertise. We look forward to Utopia being a successful project and believe it will lead to other strategic partnerships on future projects.”

The Utopia Pipeline is a common carrier project that will include approximately 215 miles of new, 12-in. diameter pipeline constructed entirely within Ohio from Harrison to Fulton County. The pipeline will connect with an existing Kinder Morgan pipeline and associated facilities in order to transport ethane and ethane-propane mixtures to petrochemical companies operating in Ontario, Canada, for use as a feedstock in the production of plastics that will ultimately be made into automotive parts, bottles, containers, home furnishings and other common plastic products. These products will be distributed to manufacturers, businesses and homes throughout the Great Lakes region.