Kinder Morgan and (KMI) and Williams (WMB) are expanding pipeline systems to capture natural gas demand growth in the Southeast. New projects will help distribute Appalachian gas to a region with plenty of upside for growth.
KMI recently announced a plan to expand the Southern Natural Gas (SNG) system in Georgia and Alabama. Meanwhile, WMB is developing the Southeast Supply Enhancement (SSE) project to meet growing demand. Population growth and expanding economic activity create opportunities in the region. In Georgia’s most recent integrated resource plan (IRP), regulators estimate the state’s energy demand will grow by 6,600 MW by 2030.
KMI announced the South System Expansion 4 (SSE4) in its recent 2Q24 earnings call. The expansion of the SNG system will deliver 1.3 Bcf/d into Georgia and Alabama. KMI estimates a $3B project cost with an in-service in late 2028.
KMI management indicated that projects in its backlog have an average build multiple of ~5.5x. The build multiple on the $3B capex spend places the estimated average reservation rate for the project at ~$1.43/Mcf/d. According to the open season, deliveries into Alabama (SNG Zone 2) will range from $0.46 to $0.99/Mcf/d, while deliveries into Georgia (SNG Zone 3) will range from $0.99 to $2.14/Mcf/d. In the KMI Financial Blueprint, East Daley estimates the project will make the company $274MM in annual income through KMI’s 50% ownership in SNG.
SSE4 will work in coordination with the SSE project on WMB’s Transcontinental Gas Pipe Line (Transco); WMB expects to start service on that project in 4Q27. SSE will expand Transco’s capacity by ~1.6 Bcf/d, with 1.3 Bcf/d of the capacity offered from Station 165 in southern Virginia to Station 85 at the Alabama-Mississippi border. SSE will create more southbound egress from the Northeast, and SSE4 will help deliver that gas to end-markets in Alabama and Georgia.
While KMI has not released the names of the “credit-worthy shippers” backing SSE4, East Daley speculates that Southern Company could be one of the anchor shippers. The utility’s Southern Company Services currently contracts for 1.2 Bcf/d across SNG and has contracts for 400 MMcf/d on Transco’s SSE Project to support existing and new natural gas power generation.
The themes of LNG demand pull, coal retirements, data center development, and onshoring of industrial plants will continue to create new demand as projects are announced and new power purchase agreements (PPAs) are signed. Demand growth should create more opportunities for KMI and WMB and companies with long-haul infrastructure in the ground. – Zach Krause Tickers: KMI, WMB.
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