Kinder Morgan Inc. decided to sell half of its 51% interest in an LNG facility in Georgia on September 27 with proceeds allocated by the Houston-based company to pay short-term debt and buy back shares.
As it is acknowledged, an undisclosed financial buyer purchases the 25.5% equity interest in Elba Liquefaction Co. LLC (ELC) for approximately $565 million. ELC is a joint venture (JV) established in 2017 to build and own the Elba liquefaction facility situated on Elba Island in Chatham County, Georgia.
Kinder Morgan's interstate natural gas president, Kimberly Watson, welcomed the new partner in the ELC JV and admitted that the company believes that this investment further shows the value of LNG and exhibits the significant role it will play for years to come.
After completion, Kinder Morgan and the undisclosed financial buyer will each hold a 25.5% stake in ELC. Meanwhile, Blackstone Credit will continue to hold a 49% interest.
The value of the equity interest considers an enterprise value of almost $2.3 billion for ELC, which is about 13 times 2022E EBITDA. The transaction has an economic effective date of July 1.
Moreover, Kinder Morgan will continue to manage the Elba Liquefaction facility. The company arranges to use proceeds from the transaction to dwindle short-term debt and guarantee additional capacity for attractive investments, including opportunistic share repurchases.
The Elba liquefaction facility has 10 modular liquefaction units for a total capacity of roughly 2.5 million tonnes per year of LNG. Kinder Morgan considers it equivalent to almost 350 MMcf/d of natural gas.
The final modular liquefaction unit of the Elba facility commenced working in August 2020, marking the closing of the $2 billion project. Previously, Elba Island Liquefaction facility was only an LNG import terminal.
Elba is linked to Southern LNG Co. LLC, owned 100% by Kinder Morgan. Southern LNG also owns and manages the Elba Island LNG Terminal, including the LNG storage tanks and the ship dock for import and export.
The facility is financed by a 20-year contract with Shell LNG NA LLC, which is signed to 100% of the liquefaction capacity.
With approximately 70,000 miles of natural gas pipelines, Kinder Morgan owns an interest in or operates the largest natural gas network in North America. Its pipelines serve major consuming domestic markets and transport about 40 percent of the natural gas consumed in the United States. They are also connected to every important natural gas resource play and supply area in the United States, including the Eagle Ford, Marcellus, Bakken, Utica, Uinta Permian, Haynesville, Fayetteville and Barnett.
