Kinder Morgan (NYSE:KMI) may be positioning to raise its reduced dividend and resume share buybacks after the $1.47B sale of half its stake in the Southern Natural Gas pipeline system.
The ratio of KMI’s debt to EBITDA probably will fall to 5.3x by year-end, below the company’s previous target of 5.5x, shrinking the debt load and freeing up cash that could be used to expand investor payouts, repurchase shares or pay down additional obligations, CFO Kimberly Dang said today during a conference call following the sale news.
At first blush, the deal looks like a steal for Southern Co. (NYSE:SO), working out to a ~11.6x EV/EBITDA multiple vs. the 12x-14x a regulated pipeline would fetch in the current market, but KMI expects to make up for the shortfall with investment opportunities coming off the pipeline, taking pains to frame the deal as the start of a deeper partnership aimed at growing the SNG system.
KMI rose 3.6% in today's trade, while SO fell 0.6%.
Now read: What Does Kinder Morgan's Expanding Terminals Segment Imply About Commodities? »
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