Kinder Morgan Says It Anticipated Arch Coal Deal Rejection

  • Arch shipments account for less than 1 percent of Ebitda: KMI
  • Coal producer paid $40 million-$50 million annually to Kinder

Kinder Morgan Inc. said the cancellation of a storage contract by a bankrupt coal producer accounts for less than 1 percent of earnings and had already been factored into the company’s financial plans.

Arch Coal Inc. disclosed plans to reject a 2013 agreement to use Kinder’s terminals when it filed for creditor protection on Monday in St. Louis. Ending the contract will relieve Arch of “an unnecessary burden and save several hundred million dollars,” the coal producer said in the Chapter 11 filing.

For Kinder, which reaped an estimated $14.7 billion in sales last year, the Arch contract represented about $40 million to $50 million a year, said Richard Wheatley and Dave Conover, spokesmen for the Houston-based pipeline and storage operator. The figure is equivalent to about 0.6 percent of full-year 2015 earnings before income taxes, depreciation and amortization, they said in a telephone interview.

“In the grand scheme of things, this is a drop in the bucket,” Conover said on Tuesday.

Kinder, which slashed its dividend last month to avoid a credit downgrade, has been battered along with other pipeline operators as the energy market collapse prompted oil and natural gas explorers to delay or cancel new projects.

“Terminaling has been a pain point for them with the way commodities in general have been hurting,” said Rob Desai, an analyst at Edward Jones & Co. in St. Louis who has a hold rating on Kinder’s stock. “We don’t expect to see much growth in that business going forward.”

Kinder fell 4 percent to $13.60 at the close in New York, after earlier dropping as much as 8.7 percent. The stock lost about 67 percent of its value in the past year. The Houston-based company’s $39.8 billion debt load exceeds the economic output of entire nations such as Bahrain or Latvia.

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