Cliff Hits Energy Transfer Hard and May be a Warning for Kinder Morgan

What’s the issue?

Pipeline expansion projects are often underwritten by “long-term” contracts with shippers.

Why does it matter?

Many projects at the beginning of the last decade are nearing the end of that “long-term” and if the project was anchored by producers, the changing gas markets may mean those contracts will not be renewed.

What’s our view?

Energy Transfer has been impacted the most by this problem, but Kinder Morgan’s Ruby Pipeline also has a substantial amount of long-term producer contracts coming due this year. Also, the boom in projects built in the middle of the last decade will begin reaching their “long-term” range shortly, and this risk may arise for the developers of those projects as well.

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