KMI, PSX, and DINO finalized a $5 billion, 1,300-mile refined products pipeline. Kinder Morgan contributed assets and $250 million cash for a 35.1% stake backed by 10-year take-or-pay contracts.
Kinder Morgan (NYSE: KMI) will own 35.1% of the Western Gateway Pipeline System after a final investment decision alongside Phillips 66 (NYSE: PSX) and HF Sinclair (NYSE: DINO). The $5 billion, 1,300-mile system moves refined products from Gulf Coast and central U.S. refineries to West Coast and Southwest markets.
Kinder Morgan is contributing its existing SFPP East Line from El Paso, Texas, to Phoenix, Arizona, and its SFPP West Line from Colton, California, to Phoenix. The company valued the contributed assets at $1.5 billion and will also put in $250 million in cash. Phillips 66, which holds 49.9% of the joint venture, will build a new 900-mile line from Borger, Texas, to Phoenix and contribute $2.5 billion. HF Sinclair is putting in $750 million.
The pipeline will start with 230,000 barrels per day of capacity, with room to expand without laying new pipe. Completion is scheduled for 2029.
The revenue underpinning is primarily 10-year, take-or-pay contracts. Kinder Morgan gets paid whether customers ship or not. The company already generates 65% of its cash flow from take-or-pay arrangements, with another 26% from fee-based sources and 5% from commodity hedges. CEO Kim Dang said in the announcement that the company expects to "earn attractive returns on our investment based on the incremental project earnings above those of our contributed assets."
The stable cash flows from Western Gateway should support Kinder Morgan's ability to keep raising its dividend. The company has increased its payout for nine consecutive years. It currently yields 3.8%.
Kinder Morgan's growth capital backlog stood at $9.6 billion at the end of the second quarter, with expected in-service dates through mid-2030. Most of that backlog is in gas pipelines ($8.8 billion), so the Western Gateway project adds some diversification to the growth profile.
The AlphaScala Alpha Score for KMI is 58/100 with a Moderate label. The score sits in the Energy sector. The PSX Alpha Score is 65/100, also Moderate, in the same sector.
For related context, see Midstream MLP Scores: KMI, EPD, MPLX at Moderate Risk and Why MPLX's Moderate Score Challenges the Strong Buy Call.
Prepared with AlphaScala editorial tooling from the source reporting linked above. Indexable analysis may include a cited Alpha Score value. Publishing checks screen each story before release. Educational coverage, not personalized advice.