Kinder Morgan Inc (NYSE:KMI) investors are applauding KMI’s move to sell 50% of its stake in the 7,600-mile Southern Natural Gas pipeline to Southern Co (NYSE:SO) for $1.47 billion.
As of this writing, KMI stock is up nearly 4%.
KMI Stock’s Plan
Back in December, Kinder Morgan slashed its dividend by a grueling 75%, dropping its 51-cent quarterly dividend to a measly 12.5 cents.
Since then, oil has gone from the low $30s to consistently near or over $45, and now KMI has a chance to reward patient shareholders by bringing back its dividend.
That’s because the sale of its stake in the Southern Natural Gas pipeline (transporting gas to Southeastern markets in Alabama, Georgia and South Carolina) will help Kinder Morgan reduce its debt load and bring value back to stock holders. Kinder Morgan CEO Steve Kean stated:
“We plan to use all of the proceeds from this transaction to reduce debt at KMI. This is another step towards achieving our stated goals of strengthening our balance sheet and positioning the company for long-term value creation.”
What’s more, Kinder Morgan will still operate the pipeline, allowing both SO and KMI to work together on new projects and take advantage of “growth opportunities” in natural gas infrastructure. Southern Co CEO Thomas Fanning commented:
“Our new ownership stake in SNG will position Southern Company for future growth opportunities and enhanced access to natural gas, which are expected to benefit customers and investors alike.”
The deal, which has been a year in the making, is expected to close in the third quarter or early fourth quarter.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
