Kinder Morgan sees strong Q3 growth in coal export shipments

Kinder Morgan Energy Partners LP (NYSE: KMP) saw strong growth in coal exports in the third quarter in its Terminals business, the company said in an Oct. 17 earnings statement.

The Terminals business, which handles other commodities besides coal, produced third quarter segment earnings before DD&A and certain items of $184m, up 2% from $181m for the comparable period in 2011, and is currently expected to meet its published annual budget of 8% growth. Growth for the quarter was evenly distributed among organic sources and acquisitions.

“Internal growth in this segment was led again by strong export coal volumes across our terminal network, including new shipments at our Houston bulk terminals,” Kinder said. Export coal volumes increased by 32% (up 1.2 million tons) compared to the third quarter of 2011, while overall coal throughput declined by 8%. For the first nine months of this year, export coal volumes increased by 45% (up 4.9 million tons) versus 2011, and overall coal throughput is up 2%.

KMP currently has more than $1.4bn of approved major projects in the Terminals segment. The company is experiencing strong demand in particular for liquids storage capacity and coal exports in its terminals business.

In conjunction with the previously announced Arch Coal (NYSE: ACI) and Peabody Energy (NYSE: BTU) multi-terminal long-term agreements, KMP is proceeding with Phase 3 of its approximately $190m export coal expansion at the International Marine Terminal (IMT) located on the lower Mississippi River in Myrtle Grove, La. The project includes a new continuous barge unloader, a new reclaim system and an additional four million tons of coal storage capacity. The new expansion is expected to be operational late in the first quarter of 2014.

In a move aimed at the growing coal export market, Peabody Energy and Kinder Morgan said July 17 that they have reached long-term agreements to secure and expand the Gulf Coast export platform for Peabody’s Colorado, Powder River Basin and Illinois Basin coal products. Under the multi-terminal agreements, Peabody would gain new access to export coal capacity at Kinder Morgan’s Deepwater Terminal and Houston Bulk Terminal (HBT) near Houston, and IMT on the Mississippi River, through 2021 and 2020, respectively. This would increase Peabody’s Gulf Coast export capacity to about 5 million–7 million tons of coal per year between 2014 and 2020.

Peabody has also secured a rail service agreement with Union Pacific Railroad (UPRR) to transport the company’s Colorado coal (out of the Twentymile/Sage Creek longwall operation) to Kinder Morgan’s Houston terminals.

The agreements allow for throughput flexibility among Kinder Morgan’s Gulf Coast export terminals to serve Peabody’s international customer base. The additional capacity also supports the planned expansion of Kinder Morgan’s Gulf Coast coal handling facilities and Peabody’s development of the Sage Creek extension of the Twentymile mine.

Kinder Morgan announced Jan. 24 that it plans to invest, with some help from Arch Coal, about $140m to further expand its coal handling facilities along the Gulf Coast. Arch Coal signed a long-term throughput agreement with KMP that will help support the expansion of these export facilities. Upon completion of the proposed terminal upgrades and subject to certain rail service agreements, Arch will ship coal at guaranteed minimum volume levels through KMP-owned terminals. The expansion of KMP’s export facilities along the Gulf Coast and East Coast will provide incremental port capacity for Arch’s growing seaborne coal volumes.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.