TEXAS: Kinder Morgan, a U.S. pipeline operator, announced on Monday that it has agreed to acquire NextEra Energy Partners’ natural gas pipelines in South Texas for $1.82 billion in cash. The deal is expected to close in the first quarter of 2024.

The acquisition will add seven pipelines with a total transport capacity of 4.9 billion cubic feet per day to Kinder Morgan’s portfolio. The pipelines supply natural gas to Mexico and power producers and municipalities in South Texas.

The deal comes amid increased consolidation in the oil and gas pipeline industry, as U.S. production grows and regulatory hurdles make new pipelines harder to build. Existing operators have become more valuable as they can offer reliable and efficient transportation of energy.

NextEra Energy Partners, a unit of NextEra Energy that owns and operates contracted energy projects, said the sale price represents an about 10 times multiple on the estimated 2023 adjusted core profit for the Texas gas pipeline portfolio. The company said the proceeds would be enough to pay off the outstanding project-related debt.

NextEra Energy Partners’ shares have fallen by about 44% since late September, when the company lowered its distribution growth forecast through at least 2026. The company has faced higher interest rates that have increased its project costs and hurt its growth prospects.

Kinder Morgan said it plans to fund the transaction with cash on hand and short-term borrowings. The company said the deal will enhance its cash flow and earnings per share.

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