Kinder Morgan Inc. announced July 16 it has agreed to acquire Indianapolis-based Kinetrex Energy from an affiliate of Parallel49 Equity for $310 million. Kinetrex is a leading supplier of liquefied natural gas (LNG) in the Midwest and a rapidly growing player in producing and supplying renewable natural gas (RNG) under long-term contracts to transportation service providers.
Kinetrex has a 50 percent interest in the largest RNG facility in Indiana, as well as signed commercial agreements to begin construction on three additional landfill-based RNG facilities. Once operational next year, total annual RNG production from the four sites is estimated to be more than 4 billion cubic feet (Bcf).
RNG is derived from abundant renewable sources, including organic waste in landfills, wastewater treatment plants and agricultural operations. By capturing methane produced from the decomposition of organic waste, the RNG production process reduces or eliminates greenhouse gas emissions.
“This is a great day in the young history of Kinder Morgan Energy Transition Ventures (ETV),” said ETV president Jesse Arenivas. “We have been focused on RNG due to its potential to grow rapidly in the near term and deliver attractive returns, with landfills providing a low cost, predictable and long-term feedstock. The team at Kinetrex has developed an outstanding business model and platform for future growth in a fragmented market, and we are excited to welcome them to Kinder Morgan.”
Kinetrex’s unique full-service platform provides outstanding value for its customers and host landfills. The transaction requires regulatory approval under Hart-Scott-Rodino and is expected to close in the third quarter of 2021.
“As we looked for the best partner to help grow our presence in renewable natural gas, Kinder Morgan’s Energy Transition Ventures emerged as the clear choice,” said Kinetrex president and CEO Aaron Johnson. “[Kinder Morgan’s] project management expertise, extensive pipeline network and broad customer relationships will undoubtedly help us realize the vision we had in founding Kinetrex eight years ago: to provide holistic solutions for customers seeking to meet emission reduction targets.”
Key members of Kinetrex’s management team will be joining Kinder Morgan as part of the acquisition to pursue new projects that expand their successful RNG platform. After close, Johnson will continue with Kinder Morgan as president of Renewable Natural Gas and will report to Arenivas. Since its inception in 2013, Kinetrex has been committed to developing solutions that lower the cost of business while maintaining a focus on environmental stewardship. This acquisition will stay true to that focus.
Kinder Morgan expects the investment to be accretive to its shareholders as the three RNG facilities become operational over the next 18 months, with the purchase price and additional development capital expenditures representing less than six times expected 2023 EBITDA.
J.P. Morgan Securities LLC acted as exclusive financial advisor to Kinetrex Energy in connection with the transaction.