Kinder Morgan Inc. KMI has revealed its intention to invest in ethanol projects in view of record-high demand and a higher use of gasoline in 2016 as mandated in the U.S.
A new ethanol hub will be jointly developed by Kinder Morgan, Bailey Feed Mill and the largest U.S. ethanol producer – Archer-Daniels-Midland Co.(“ADM”) The hub will be constructed in Selma, NC. New facilities and pipeline will be constructed by Kinder Morgan to distribute ethanol in the region. Per Chicago-based ADM, the entire project is anticipated to conclude by the end of 2016.
Anderson Inc. is also interested in investing in the same ethanol projects as Kinder Morgan. Anderson intends to double the capacity at an ethanol plant in Michigan owing to positive balance between supply and demand in the state. Per sources, the project is expected to be completed in Apr 2017.
Cheaper gasoline has boosted the demand for fuel and in turn, has increased the demand for ethanol. Per the Energy Information Administration estimate, the use of gasoline is expected to reach 140 billion gallons by the end of 2015 and drive ethanol demand to a record 14 billion gallons.
Kinder Morgan is one of the largest energy infrastructure companies in North America. The company operates about 80,000 miles of pipelines that transmit natural gas, refined petroleum products, crude oil, carbon dioxide and additional products. It has more than 180 terminals that store petroleum products and chemicals as well as ethanol, coal, petroleum coke, gasoline, jet fuel and steel.
The recent reorganization of Kinder Morgan companies into one has created the largest midstream company in North America. This should facilitate access to additional projects and lead to improved growth. We believe the size advantage provides the company with opportunities to build smaller adjacent pipelines at a lower cost than peers. Further, increased demand for power generation and exports is expected to drive continued infrastructure build-out for the company.
Kinder Morgan carries a Zacks Rank #3 (Hold). Some better-ranked players from the energy sector are Energy Transfer Equity, L.P. ETE, ReneSola Ltd. SOL and Boardwalk Pipeline Partners, LP BWP. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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