If Justin Trudeau is to be believed, the Canadian government is going to take an equity stake in Kinder Morgan's Trans Mountain Pipeline. Andrew Nikiforuk suggests that we should take a good look at Kinder-Morgan's history and balance sheet before making any such investment:
Kinder Morgan, which runs what founder and Texas billionaire Richard Kinder calls an “unsexy, dirty business,” started off as an offshoot of the U.S. corporate giant Enron in 1996. That’s when a pair of senior Enron executives, Richard Kinder and Bill Morgan, joined up to purchase a couple of pipelines from Enron. Kinder and Morgan parlayed that investment into a North American pipeline empire while Enron collapsed in a spectacular fraud scandal in 2001.
To this day Kinder rarely speaks about the Enron scandal even though Kinder Morgan’s senior management team includes many prominent Enron executives, including Jordan Mintz and Steve Kean.
Kinder-Morgan's balance sheet looks about as healthy as Enron's:
The company has been in the financial doldrums for years due to poor earnings (the smallest dividend yields in the industry) and high debt.
Originally structured as a master limited partnership, which doesn’t pay corporate taxes, the company restructured in 2014 and became a corporation. In recent years master limited partnerships have been big money losers “as the energy crash has exposed earlier excesses in terms of leverage and bad investments,” explained a recent article in Bloomberg.
Due to high debt levels ($37 billion, or nearly a third of the value of the company) and low oil prices, the company has lost half of its stock value since 2015. Analysts credit the company’s poor stock performance to “poor business execution and way too much debt.”
On top of that, the company's legal and environmental record is appalling:
Kinder Morgan has a long and detailed record of violating both environmental and financial laws resulting in penalties of $162 million since 2000 in the United States. Key offences include environmental violations ($119 million) such as pipeline spills and explosions, energy market manipulation ($20 million fine), pipeline safety violations and repeated labour violations. In 2011 the U.S. Department of Labor sued Kinder Morgan for underpaying nearly 4,600 workers for overtime for at least two years. The company resolved the lawsuit by paying out $830,000 in back wages.
And we're thinking of investing billions in this white elephant? Some people haven't done their homework.
Image: Last Real Indians