Kinder Morgan (NYSE:KMI) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Access the full call at https://events.q4inc.com/attendee/926857942
Summary
Kinder Morgan Inc reported strong financial performance in Q3 2026, with adjusted EPS up 21% and adjusted EBITDA up 9%.
The company’s project backlog increased significantly from $9.6 to $14.4 billion, driven by strategic joint venture projects like SNG’s Southeast Connector and NGPL’s Permian Link.
Management expressed confidence in future growth, citing a strong position in the natural gas market, and emphasized the company’s ability to fund expansion through cash flow.
Operational highlights included a notable increase in natural gas transport and gathering volumes, and high utilization rates in the Terminals business segment.
Management reiterated the long-term bullish outlook for natural gas demand, driven by LNG exports and power generation, and highlighted the company’s strategic advantage due to its extensive pipeline network.
Full Transcript
Michelle (Operator)
Good afternoon and thank you for standing by. Welcome to Kinder Morgan’s third quarter 2026 earnings results conference call. Your lines are in a listen-only mode until the question and answer session of today’s conference. At that time you may press STAR followed by the number one to ask a question. Please unmute your phones and state your name when prompted. Today’s conference is being recorded. If you have any objections, you may disconnect at this time.
It is now my pleasure to turn the call over to Mr. Rich Kinder, Executive Chairman of Kinder Morgan.
Rich Kinder (Executive Chairman)
Thank you, Michelle. Before we begin, as usual, I’d like to remind you that KMI’s earnings release today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934, as well as certain non-GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosures on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release, as well as review our latest filings with the SEC for important material assumptions, expectations, and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements.
Let me begin by sharing some projections from credible third parties that once again support our belief that the demand for natural gas is destined to dramatically increase both in America and the rest of the world in the coming years and even decades. Shell projects that global LNG demand will grow to nearly 750 million tons per year by 2050, and that’s an increase of 65% from 2025. That’s an enormous increase and one that we believe will especially benefit the U.S. given the preference of international customers for sourcing their supply here.
On the domestic front, the North American Electric Reliability Corporation is predicting that peak demand for electricity in this country will grow by between 225 and 245 gigawatts by 2035. And obviously much of that astounding growth will be met by natural gas generation. These two estimates just reinforce and strengthen what we believe is a bullish natural gas story. Now let me turn to our own story at Kinder Morgan. The third quarter was another good quarter for us, with results exceeding both the comparable period in 2025 and our budget for this year. Perhaps more importantly, we made substantial additions to our backlog of new projects. Our additions constitute one of the largest increases in any one quarter in our corporate history, and our backlog of U.S. natural gas projects now stands at an all-time record.
And I would add that we expect these new projects to lead to even more expansion opportunities over the coming months and years. In a broader sense, I believe the existing new projects we announced demonstrate the strength that comes from a large national midstream footprint. That footprint, which we are constantly expanding and extending, allows us to offer more diversified connectivity to our customers as they seek alternative and expanded sources of supply.
To put the size and utilization of our natural gas network in perspective, I remind you that we deliver about 40% of all the natural gas in America, including approximately 40% of all LNG feed gas and over 50% of gas exports to Mexico. Our network connects almost every producing basin with the great majority of demand locations throughout the country. I’m highly confident that our assets will allow us to continue to serve the multifaceted needs of our customers and at the same time deliver real and sustainable value to our shareholders.
As I’ve said before, but it certainly deserves repeating, our strategy is not complicated. We have assets that generate large amounts of recurring cash flow. We are in a business that is in need of substantial additional infrastructure. Because of the size and reach of our system, we’re in a unique position to capture a substantial portion of that need by developing projects supported by long-term take-or-pay agreements with creditworthy entities.
And our strong cash flow allows us to build that infrastructure by using primarily our own cash without undue leverage; we are able to earn good returns from these investments, thus increasing our EBITDA and EPS in the years ahead. For me, it’s hard to think of a better strategy that combines consistent growth with minimal risk. And now let me turn it over to Kim.
Kim Dang (Chief Executive Officer)
Okay, thanks, Rich. This was another outstanding quarter for Kinder Morgan. Adjusted EPS increased by 21%, adjusted EBITDA grew by 9%, and every one of our business segments contributed to that growth. Those results reflect both the strength of our assets and the outstanding execution of our employees. For the full year, we expect adjusted EPS growth to exceed budget by more than 13% and EBITDA to exceed budget by more than 6%. Our financial position continues to strengthen as well. We ended the quarter at approximately 3.5 times debt to EBITDA, the low end of our targeted range. Combined with our roughly $3 billion of annual cash flow available to fund expansion CapEx, we have significant flexibility to fund our organic growth while maintaining a strong balance sheet. That flexibility is important because our project backlog increased from $9.6 to $14.4 billion this quarter.
We added $5.4 billion in new projects and placed $700 million of projects into service. The backlog multiple remains very attractive at 5.7 times. In the $5.4 billion of additions are two highly strategic joint venture projects, SNG’s Southeast Connector and NGPL’s Permian Link. Together, Kinder Morgan’s share of these projects is approximately $4.7 billion. Both projects are supported by at least 20-year take-or-pay contracts with creditworthy shippers, providing the type of long-term stable cash flow we seek to create.
Importantly, Southeast Connector is contracted with strong investment-grade utilities while Permian Link is contracted with an A-rated hyperscaler. These projects also highlight the quality of opportunities we see in front of us. Southeast Connector is a transformational project that connects diverse supply with one of the fastest-growing natural gas demand regions in the country. Large load interconnection requests across the Southeast now exceed 200 gigawatts, which could represent roughly 8 Bcf a day of natural gas demand if it all came to fruition and if it was all served by gas-fired generation.
Southeast Connector is designed to meet that need by delivering approximately 2.6 Bcf a day of natural gas into the region. In addition, we expect this project, like many of our other large projects, to drive future expansion opportunities. Permian Link captures a similar compelling opportunity by moving abundant low-cost Permian natural gas north to meet growing power demand in the Texas Panhandle. Together these projects demonstrate how our network is uniquely positioned to connect growing supply basins with growing demand centers.
More broadly, as Rich mentioned, the long-term outlook for natural gas remains exceptionally strong. Wood Mackenzie projects North American natural gas demand to increase by approximately 46 Bcf a day by 2035, driven primarily by LNG exports and power generation demand. Projects of this size and quality do not happen by accident. The commercial creativity, customer relationships, project management and legal expertise, and the patience and perseverance required to bring these opportunities together are remarkable, and I could not be more proud of what our team has accomplished.
Finally, these projects extend our visible growth runway. Before this quarter, most of our EBITDA from our backlog was expected to be online by the end of 2029. With Permian Link and Southeast Connector entering service between 2030 and 2032, we have meaningfully extended the period of high-quality cash flow growth supported by approved projects with long-term take-or-pay contracts. Simply put, we are delivering strong results today while continuing to build a longer runway for high-quality future growth.
And with that I’ll turn it over to Dax to give you details on our business plan performance.
Dax Sanders
Thanks, Kim. Starting with the Natural Gas business unit, transport volumes were up 3% in the quarter versus the third quarter of 2025. The incremental demand was primarily a result of increased LNG feed gas deliveries on Tennessee Gas Pipeline and incremental demand on our intrastate system. Natural gas gathering volumes were up 14% in the quarter from the third quarter of 2025, with most all the increase coming from our KinderHawk system in the Haynesville, which was up 40%.
As we’ve continued to say, demand for gas on our pipes remains high and our system remains highly utilized. While we announce two very important projects today, looking forward and consistent with Kim’s comments, we continue to see significant incremental project opportunities across our natural gas pipeline network driven primarily by power and LNG, and we will continue to pursue them aggressively. In our Products Pipeline segment, refined product volumes were down 3% in the quarter compared to the third quarter of 2025, and crude condensate volumes were down 11%. More than half the decline in crude volumes is explained by the removal of Double H from service for the NGL conversion early in the third quarter of 2025, with the remaining decrease resulting from fewer well connects at Highland Crude. As previously announced, we, along with our partners, were proud to reach a final investment decision on our Western Gateway project during the third quarter.
The project, which will fundamentally change the way clean products are delivered to the Desert Southwest and Southern California, will ensure the availability of these products to consumers for decades to come. Kinder Morgan’s $300 million total cash investment, which includes our $250 million contribution to the JV and a $50 million investment in our non-contributed assets, has been added to our project backlog and is expected to reach in-service in 2029.
In our Terminals business segment, our liquids lease capacity remains high at almost 93%. Market conditions continue to remain supportive of strong rates, and the utilization of tanks available for use is just under 96% at our key hubs on the Houston Ship Channel and in Carteret, New Jersey. While the temporary Jones Act waiver has added some market uncertainty, our tanker fleet remains exceptionally well contracted. Assuming likely options are exercised, our fleet is 100% leased through the rest of this year, 97% leased through 2027, and 80% leased through 2028.
We have opportunistically chartered a significant percentage of the fleet at higher market rates and have an average length of firm contract commitments of almost three years. The worldwide shortage in refined product supplies and the associated price dislocations have both been significant positives for our export terminals in the Houston Ship Channel hub. In Q3 we saw 427,000 barrels a day move across our 11 docks, which represented an increase of 39% over Q3 2025 and an all-time record.
The CO2 segment saw 8% higher net oil production volumes compared to Q3 2025, which was led by an 11% increase in production at SACROC. NGL volumes were 9% higher, and CO2 volumes were 3% lower. Finally, RNG volumes increased 18% as the significantly improved operations that are driving both greater uptime and hydrocarbon recovery at our facilities continued in the third quarter. With that, I’ll turn it over to David.
David Michels (Vice President and Chief Financial Officer)
Okay, thank you, Dax. We’re declaring a quarterly dividend of 29.75 cents per share, which is $1.19 per share annualized and an increase of 2% over 2025. We delivered a record-setting quarter once again, with net income attributable to KMI and adjusted EBITDA reaching record levels for the third quarter. Our third quarter performance was also ahead of internal expectations, with EPS 15% above budget and adjusted EBITDA 6% above our budget, and this follows the first half of the year during which we achieved similar outperformance.
Turning to the quarterly financial performance, we had another very strong quarter for the third quarter. We generated net income attributable to KMI of $764 million and EPS of $0.34. Those are 22% and 21% higher than the third quarter of 2025, respectively. Adjusted EPS was $0.35, so that’s 21% up from last year. Adjusted EBITDA grew by 9% to $2.18 billion for the quarter. Importantly, as Kim mentioned, the strength was broad-based, with all four business segments delivering higher adjusted earnings year over year.
Natural Gas saw greater contributions from EPNG, KinderHawk, TGP, and our Texas Intrastate system. This performance was driven by greater volume and rates on capacity sales, park-and-loan contributions, expansion project contributions, and greater gathered volumes. Our Products segment benefited from favorable commodity pricing as well as greater butane blending volumes, partially offset by lower crude and refined product volumes. Our Terminals segment benefited from expansion projects placed into service, higher commodity prices, stronger coal and petroleum coke handling activity, and higher Jones Act tank rates.
And our CO2 segment benefited from higher commodity prices, strong volume growth, particularly at SACROC, which was up 11% from last year. Stepping back from the quarter, our year-to-date results have been exceptionally strong. Year to date versus 2025, EBITDA has grown 13% and adjusted EPS is up 32%. As Kim mentioned, we now expect our full-year adjusted EBITDA to be more than 6% above our budget and adjusted EPS to be more than 13% above our budget. That represents well more than $515 million of additional EBITDA.
As we’ve previously noted, during 2026 we’ve benefited from a handful of large items that may not be recurring: winter storm fern and extended cold weather in the Northeast, a terminals contract buyout, a favorable FERC rate true-up, and an unusually favorable Waha to Houston Ship Channel spread. Collectively, these items contribute approximately $225 million to our outperformance in 2026. In addition, favorable commodity prices have contributed an additional $175 million versus our budget.
If you recall, our budgeted WTI price was $60 per barrel. At the same time, tightness continues across our U.S. infrastructure, and that provides opportunities for us to capture additional margin when disruptions occur. We expect those conditions will persist. Moving to the balance sheet, our net debt to adjusted EBITDA ratio ended the quarter at 3.5 times, which is down from 3.8 times at the beginning of the year. Despite spending more this year due to our Monument acquisition and greater-than-budgeted CapEx, we expect to end the year at 3.6 times leverage, and that’s an improvement from the budget of 3.8 times driven by the EBITDA outperformance. And that puts us well below the midpoint of our leverage target range.
Year to date, net debt increased $513 million, and here’s a reconciliation of that. We’ve generated $5.04 billion of cash flow from operations. We’ve spent $1.98 billion in dividends. We’ve spent $3.07 billion in capital — and that’s growth, sustaining, and our contribution to our JVs. And then the Monument acquisition was approximately $500 million, and that gets you pretty close to the $513 million debt increase for the year. Now I’ll turn it back to Kim for Q&A.
Kim Dang (Chief Executive Officer)
Okay, Michelle, if you’ll come on, we’ll take questions.
Michelle (Operator)
Thank you. At this time, if you would like to ask a question, you may press star followed by the number one. To withdraw your question, you may press star two. Please unmute your phones and state your name when prompted. Our first caller is Theresa Chen with Barclays. Your line is open.
Theresa Chen (Analyst)
Good afternoon, and congratulations on these major commercial milestones. I want to ask first on TGP following a successful non-binding open season for the 219 South project. Can you talk about the progress made on solidifying customer shipper commitments at this point, and how are you thinking about the ultimate size and scope for the project? Given the elevated amount of interest beyond the HAFPA B offered as well as the downstream growth opportunities, especially on the heels of the Southeast Connector fiduciary, do you think TGP will play a meaningful role in serving this incremental demand on SMG?
Cecil
Teresa, this is Cecil. How are you doing? Well, one, I’m going to break this question up into a few parts. So the open season that we had, the non-binding open season, very in terms of interest, over 2 Bcf of interest in that open season. Where we are right now with our customers, clearly, you know, we’ve been intimating to the market and you guys that, you know, there’s a demand equation here and ultimately will need to be solved with incremental molecules.
We do feel 219 in some form is going to help contribute to that molecule shortfall. You know, when we think about what the project ultimately looks like, that’s going to depend on who signs at the bottom line. One of the things that we’re seeing right now is timing. You know, there’s some customers that are further along than others. We’re managing through that to try and see how we can stage these projects, maybe come in multiple forms. If I had to kind of gauge where, you know, where I see the CapEx landing there, you know, roughly around a billion and a half dollars depending on ultimate interest, you know, we could adjust from there.
So, you know, strong interest. We do see the need. I think when you think about the downstream Southeast Connector, Tennessee is well positioned to serve that. But not only that, it’s also that middle system power corridor that we have that I talked about on the last call. You know, we see that corridor from Ohio, Kentucky, Virginia, Tennessee — that’s a growing demand center. And so all in all, I think the opportunity set there for incremental supply bodes well.
Theresa Chen (Analyst)
Thank you for that detailed answer. Cecil, on the Southeast Connector, the press release mentioned that the project can be scaled further with additional customer commitments. What is the realistic upside here beyond the 3.1 billion net to KMI? How much bigger can this project be?
Cecil
Well, so a little too early. We’re in the midst of the open season. I will tell you we had significant interest in the open season, and this was a binding open season. We’re still in the process of working through the precedent agreements. The interest on the commercial side as well as — very important — credit, making sure we have the credit behind. And so we’re working through those details. But needless to say, we can scale this, you know, up to three and a half — 3.5 Bcf is plausible,
Kim Dang (Chief Executive Officer)
Teresa, we have enough signed commitments today to support going forward and FIDing the project. And then there are other customers that we came in during the open season that are interested and that we’re working with on PAs, and they may come in later and that would cause us to scale the project.
Cecil
And ultimately it depends on who signs, right? I mean, that’s always the driver.
Theresa Chen (Analyst)
Understood. Thank you.
Michelle (Operator)
Thank you. Our next caller is Julianne Demolin-Smith with Jefferies. Your line is open.
Julianne Demolin-Smith (Analyst)
Hey, good afternoon, team. Nicely done. Gotta hand it to you, impressive here. Let’s keep focusing on the Southeast Connector while it’s topical here. Maybe just to go back to that point you were bringing up on the middle system here on the power corridor. How do you think about the size and scope of that opportunity, the timeliness here? I mean, you allude to having some open seasons pending here, but just what is the scope contemplated there? You talked about scaling it up to three and a half Bcf a day a moment ago in parallel, but elaborate — maybe some other parameters and texture around there.
Cecil
So if you’re focused on, you know, Southeast Connector, you know, we’ve got that open season, you know, it’ll close. We’ll get some clarity around that. As far as the middle system, there are several power projects that have been evaluating capacity, and this is particularly on our 219 South project. And so really the timing there is what we’re talking about. There’s some that are further along than others. And so what we’re going to have to do is really position ourselves to sanction parts of the project to be able to accommodate the immediate demand.
And then the team is still creatively thinking on how we can accommodate the broader interest in terms of incremental scope. So that’s going to take a few quarters to kind of button up in some form or fashion. And then ultimately, as usual, we’ll sanction when we get customers that sign to the bottom line.
Julianne Demolin-Smith (Analyst)
Awesome. Excellent. A little bit bigger picture here. You know, after adding 5 billion this quarter, how has the greater-than-$10 billion commentary or opportunity set changed? Right. Should investors view the Southeast Connector and Permian Link as conversion from the shadow backlog into more formal backlog or, as you just alluded to a second ago, as continued customer activity effectively replenishing that funnel? I don’t want to put words in your mouth, but I’d love to hear how you kind of frame that shadow today.
Kim Dang (Chief Executive Officer)
So, I mean, the shadow backlog today — there is substantial remaining shadow backlog. And I’d say that, you know, as we talked about in our comments, adding these big projects leads to further opportunities. And so we think that — and, you know, we’ve talked about some of them on this call — but, you know, as a result of getting these signed up, this project signed up, it will create bottlenecks in other places that we will have to alleviate that will lead to more projects.
And so I think the industry fundamentals in natural gas, as we talked about also in our opening comments, remain very, very strong. And so, you know, we are confident that there will be meaningful additions — you know, conversions, if you will — into the backlog over time.
Julianne Demolin-Smith (Analyst)
All right, fair enough. I’ll leave it. Actually, just quickly, lastly, on Southeast Connector in particular, how does it fit into the broader permitting reform regime? Just quickly, if you can comment on that.
Kim Dang (Chief Executive Officer)
How does it fit into the permitting reform? Well, I think — yeah, go for it — in Congress. Indeed. He said. Yes. Okay. So the bill that’s in Congress obviously hasn’t passed yet. Now, you know, the current permitting regime I think we are very comfortable with and, you know, had very good success working with the FERC to get MSX and South System for both permits from the FERC within a year, which is, you know, the fastest in recent time on permits of this size. And so I think that the current permitting regime — we will be able to get this project done. No concerns there.
I think the permit bill that is in Congress is a good one and I think, you know, it does some things that could help on where we’ve seen certain projects — not ours — run into problems. But for one, you know, it eliminates the state’s ability to — what I’ll call — game the 401 water permit. It eliminates vacatur as a remedy of the courts, and it strengthens the Nationwide 12 program. So, you know, I think it would be great if it got passed. We think it’d be very helpful and we are very supportive of it. But we are very comfortable completing these projects under the current permitting environment.
Julianne Demolin-Smith (Analyst)
Excellent. No, I appreciate it. Thank you, guys. Nicely done.
Michelle (Operator)
Thank you. Our next caller is Jeremy Tennette with JP Morgan.
Jeremy Tennette (Analyst)
Hi, good afternoon.
Kim Dang (Chief Executive Officer)
Good afternoon, Jeremy.
Jeremy Tennette (Analyst)
Just wanted to follow up on the capital opportunity set. As you’ve been describing here, you announced some pretty sizable projects here and just wondering, I guess as you think about what could be coming forward here. See other projects of this type of size or were these kind of like the two big ones that you had seen? And how do you think about run-rate capex at this point?
Kim Dang (Chief Executive Officer)
Okay, well let me say it’s hard to project exactly what is going to be coming in, but I mean people just talked about another billion and a half project and, you know, we’ve talked about other projects that we think will come about as a result of Southeast Connector. So, you know, I think the reason for the shadow backlog back in the beginning was because people did not believe in the opportunity set that we were seeing on natural gas. And so we were providing this number to try to help you understand the opportunity set.
I think, you know, at this point with a $14.4 billion backlog, I hope we’ve established some credibility about being able to bring these, to bring these things to fruition. So with respect to run rate, I think it’s probably going to be around $4 billion-ish for the next few years in terms of the capex that we would expect to spend.
Jeremy Tennette (Analyst)
Got it. That’s very helpful there. Thanks. And Dave, I wanted to pick up, I think, on some of the comments you laid out when looking forward into ’27, some one-time upside optimization that I would imagine is not baked into the guide for next year. And it seems as far as major projects coming online, it’s more Trident, but that’s very late ’27, more ’28-weighted. I know it’s premature to ask, but just any other thoughts as we think about ’27 when we are modeling it?
The EBITDA.
David Michels (Vice President and Chief Financial Officer)
Yeah, yeah, we’re going to avoid previewing the 2027 guide for right now. But I think it’s important to note that some of those items that we experienced this year, you know, it’s unlikely that we’re going to see those again next year. Winter weather is always hard to predict, but we’re not going to budget a colder or more severe winter than we normally do. And then the commodity price uplift piece, that just depends on—you guys all have your own commodity price deck, so you can put that in there.
We’ll give you the sensitivities that we’ll
Kim Dang (Chief Executive Officer)
have in the budget. And let me just address growth sort of longer term other than 2027. As David said, we’re in the middle of our budget process. We’ll get through that. No concerns here about our ability to grow long term over the next three to five years. As you can see, we’ve got $14.4 billion in projects that’ll bring in quite a bit of cash flow. But it is true that because those projects don’t come on evenly over all the years, the growth is not going to be even every single year.
An example of that is Trident. Only 30% of the contracted EBITDA comes on in 2027. 2026, because it has some of these items, is going to be a difficult year to replicate. But the underlying business here, all of our underlying businesses here, remain very, very strong and the projects are going to deliver enormous benefits as they come online.
Jeremy Tennette (Analyst)
Got it. Thank you. I’ll leave it there.
OPERATOR
Thank you. Our next caller is Praneeth Satish with Wells Fargo. Your line is open, sir.
Praneeth Satish (Analyst at Wells Fargo)
Thanks. Good afternoon and congrats on an incredible quarter here with project FIDs. Maybe just going back to TGP 219 South. I guess we were a little bit surprised with the $1.5 billion capex estimate. Seems lower than we would have thought. Does that $1.5 billion get you all the way to a 2 Bcf per day project, or is that based on the 500 MMcf per day open season that you went out with? Where does this project transition from brownfield to greenfield?
Dax Sanders
Ultimately depends on the shipper receipt deliveries, right? I mean, I can tell you if we scale to a 2 to 3 Bcf number, it would be higher than the $1.5 billion. We’re really focused on, at this point, just the brownfield component, and then ultimately we’ll adjust accordingly with incremental volume adds, and that’s the way I would think about that.
Praneeth Satish (Analyst at Wells Fargo)
Okay, that makes sense. Maybe switching to the Permian here. So Permian Link adding another 2.8 Bcf per day of takeaway, how do you think about the risk of overbuilding in the Permian? I mean, I know that you’re protected on this project because of the take-or-pay contracts, but I’m thinking more about some of the other pipes, some of your older pipes like Gulf Coast Express. And when those come off contract, do you see any risk there on the recontracting side, or do you think we’re all conservative with our Permian supply growth estimates here on the gas side and there’s going to be enough gas to fill all these pipes?
Dax Sanders
So here’s how I think about those types. Our intrastate system, I talked about this on the last call—our Permian Highway and GCX—they’re in the heart of the demand centers that are coming and further developing. Our focus has shifted to really focus on these demand pools. What we see there, especially across our PHP pipeline system, is we see a power demand center corridor forming. And so to the extent that there’s any pullback by any of the producers that are underpinning the project, we see demand pull.
The same thing is out there in our Gulf Coast systems. Both of these pipes were some of the first pipes booked, so from a cost perspective, relatively low on the cost spectrum. And so what we see there is GCX incremental LNG demand that is yet to come. And so we feel pretty good about that. And then overall our focus has been on market pull, and we see those underpinned by long-term contracts. So from a portfolio perspective we feel pretty good. Yeah, I mean, we’ve got like 6,000 miles of intrastate pipe and 145 Bcf of storage, and those pipes are part of that system and tie into a lot of demand. And so we feel good from a demand-pull standpoint that those pipes will continue to have opportunities.
Praneeth Satish (Analyst at Wells Fargo)
Thank you.
OPERATOR
Thank you. Our next caller is Manav Gupta with UBS.
Manav Gupta (Analyst)
Good afternoon. Just for the record, we always claimed the 10 billion shadow backlog very credibly, and you did say that the two projects add further credibility. Even if they would not have been announced, we would have been very confident that your backlog would end well over 10 billion before year-end. So just wanted to put that out there. Quick question. I wanted to go a little to Trident. There’s a lot of gas getting on the Gulf Coast, and you have the ability to eventually move it around. So can you give us an update on what the Phase One and Phase Two of Trident is looking like and how you’ll be able to help other industrial companies and LNG producers by being able to move the gas around the Gulf Coast?
Kim Dang (Chief Executive Officer)
Okay, let me talk. Trident is on time and on budget and should be delivered in February of next year. And Steve, do you want to talk about the market?
Steve
Yeah. So, I mean, look, we’ve talked about this. When we sanctioned the project, we saw a need. There’s an industrial corridor developing around Trident, both from a power perspective and then the industrial side. But beyond that, you get down to the LNG corridor and we saw the need to go from there further west to the Gulf Coast corridor. We see incremental demand. And so, that coupled with our Texas header, our KMLP header, and the KMLP expansions that we’ve got, we’ve got an ability to serve the Texas–Louisiana Gulf Coast, and we see significant demand developing there as well.
So, as Rich alluded to earlier, when you get these stems inside, you get ancillary, secondary, and tertiary expansions off of those stems. So we feel pretty good about that and help from on the demand side as demand develops.
Manav Gupta (Analyst)
Perfect. My quick follow-up was a little bit just focused on the Florida gas market. It’s a steadily growing gas market. If you could comment on it and obviously talk a little bit about your next phase of expansion at FGT, how that is progressing. Thank you.
Dax Sanders
Okay, well, I will talk broadly. As you know, we’re not operator of FGT. We’ll let Energy Transfer talk about the details. But I will tell you this. We’ve been talking about this thematically. In the Southeast we see strong demand. In Florida we do. FGT sanctioned a few projects already. We’re obviously in discussions with other customers on future potential expansions and we see the demand profile as being strong. And so I’ll just leave it at that.
And as you know, we’re not the operator there—we work with the operator—but we feel pretty good about the asset as well. And it’s not just SNG who also helps serve some of that growing market.
Manav Gupta (Analyst)
Thank you so much.
OPERATOR
Thank you. Next caller is Jean Ann Saltbury with Bank of America.
Jean Ann Saltbury (Analyst at Bank of America)
Hi, congrats on the great quarter. Can you speak to whether the anchor hyperscaler of Permian Link is planning online prior to when Permian Link starts and you’ll kind of replace it as the gas source, or if you’re planning to ramp together and so your timing is basically linked to their timing?
Dax Sanders
Well, without getting into the customer details, I’ll tell you we are trying to accommodate multiple customers on this project. I mean, we’ve got an anchor hyperscaler, but we had significant interest. We’re also talking to those other customers. I think the anchor tenant obviously is driving the need for speed. And I think one of the benefits that Permian Link brings to the power market we’ve talked about before is the link to storage and the flexibility and reliability that helps these hyperscalers achieve their seven nines of reliability.
I think that’s a real differentiator here. The next phase, we look at all of our storage facilities to see where we can kind of enhance service and flexibility, and that’s what I think differentiates this.
Jean Ann Saltbury (Analyst at Bank of America)
That makes sense. Thanks. And then building on Teresa’s earlier question, do you anticipate all the gas that’s feeding Southeast Corridor, will it substantially all originate from Appalachia? And if that’s the case, would you potentially require even more expansion than just TGP can provide?
Dax Sanders
Well, so look, one of the beauties of kind of the locations we picked is we’ve got access to multiple pipeline corridors, right? Tennessee—selfishly, we want to grow Tennessee—but we have interconnects with Columbia Gas, we’ve got interconnects with TETCO, we’ve got interconnects planned with several other major interstates there. And ultimately those pipes also have forward-haul/backhaul capabilities. So when you think about where the supply could come from, we’ve always said we need incremental molecules to move, not just gas-on-gas competition.
And so you basically could get a molecule from the Gulf Coast to that point via all of the major trunk pipes, including Tennessee, and then also from the Appalachia, Marcellus, Southwest Utica down to that point. And so it’s multiple basins that can kind of serve that takeoff point. That’s the beauty of it.
Jean Ann Saltbury (Analyst at Bank of America)
That’s helpful. Thank you.
OPERATOR
Thank you. Our next caller is Brandon Bingham, Wiscosia Bank. Your line is open, sir.
Brandon Bingham (Analyst at Wiscosia Bank)
Hey, thanks for taking the questions. Wanted to maybe kind of go back to the U.S. Gulf Coast LNG dynamics, and in particular as it relates to Permian and Haynesville as the supply source. Obviously some puts and takes with both, but just with the rate of change in Permian gas here and maybe not the most favorable price signals for broader Haynesville development, just how do you see those two basins playing out in the fight for U.S. Gulf Coast capacity and who could be the primary driver there?
Kim Dang (Chief Executive Officer)
Well, we said all along that we believe it’s going to be all of the above you’re going to need. We see the demand profile that Rich started off with. It’s significant, that’s significant growth. And it’s going to take more than those basins satisfy that growth. So we think there’s plenty of resource. The key is going to be building that infrastructure in the middle, which we’re really focused on, and then ultimately the price will take care of itself.
And I mean, if you look at WoodMac numbers, and I think they’re pretty similar to our internal numbers, you know, they’ve got Haynesville growing by 13 Bcf, you know, Permian growing by a little over 10 and Marcellus growing by 13. So those are the three big producing basins that are helping to get that 46 Bcf of growth that we referenced between now and 2035. We need a multiple. I mean there’s no science behind this other than we move about 40% of the gas in the U.S. market, and so we move about 50% of the gas to Mexico, 40% going to LNG and 45% of the power demand across the South. So, I mean, I think that’s as good a number as any.
OPERATOR
Thank you. Our next caller is Keith Stanley with Wolf Research. Your line is open, sir.
Keith Stanley (Analyst)
Hi, good afternoon. First wanted to clarify the SEC project you’re sanctioning today. Does that include the SEC extension line up to the Nashville area? And then if you could comment at all on the phasing for both SEC and Permian Link, you know, they start up in the fourth quarter of 2030. When would you get to the targeted build multiple?
Kim Dang (Chief Executive Officer)
So yes, it does include SEC, does include the greenfield line. And on Permian Link it comes online in 2030. And then on SEC it comes on 2030, 2031 and 2032. So it comes on over three years.
Keith Stanley (Analyst)
Got it. Thank you for that. Second one on Western Gateway. So you’re $250 million and contributing SFPP for your interest and TSX, I think, is constructing most of it. How does risk sharing work in that JV for the investment in the event there were cost overruns or delays during construction? Would you have to fund your share of that or is there a separate mechanism given how you’re contributing to the JV?
Kim Dang (Chief Executive Officer)
Let me say a couple of things on that. One is I think we’re being very prudent about how we’re approaching this project in terms of spending capital until we get more comfort around the ability and make sure we’re very confident that we can get built through the states that this has to go through. And then secondly, what I’ll say, and I’m not going to go into a lot of detail about it, but there are—we do have certain cost protections, you know, against cost overruns on that project.
Keith Stanley (Analyst)
That’s helpful.
Kim Dang (Chief Executive Officer)
Thank you.
OPERATOR
Thank you. Our next caller is John Mackay with Goldman Sachs. Your line is open, sir.
John Mackay (Analyst at Goldman Sachs)
Hey team, thanks for the time. I wanted to pick up on kind of the general tone of this and, Kim, you a little bit, and certainly the backlog increase is a bit of an answer, but there has been at least a perceived kind of slowdown in kind of broader contracting activity, you know, some volatility in the markets. I’d love just to hear from you guys, has the tone with customers changed all that much over the last couple months, you know, compared to let’s say earlier this year?
Kim Dang (Chief Executive Officer)
No, I mean, John, we haven’t seen the change. I think our customers continue to engage and we continue to look for opportunities. I think they see this as we become an increasingly globally connected market. I think there’s focus on how to handle some of the volatility through our storage assets. And so we’ve just seen the dialogue continue. It’s been good.
John Mackay (Analyst at Goldman Sachs)
That’s great. And then when we look at the implied returns on these new projects being sub six times or if you look at something like the billions capex per Bcf of capacity numbers kind of going up over time, can you just touch a little bit about kind of customer willingness to kind of take some of these higher implied rates and what that means maybe from looking at a kind of producer side versus the demand side customer. Thank you.
Kim Dang (Chief Executive Officer)
Okay, a couple of things. One, I think what you’re referencing is the, you know, cost per pipeline mile or whatever has gone up. And that’s, you know, that’s largely— that’s going to be a function of a couple of things. One, steel prices/pipe prices have increased, compression costs have increased. So, you know, that’s what you’re seeing in the cost numbers. We have not seen customer pushback in terms of—I mean, we didn’t change our return thresholds.
Right. We’re still targeting the same return thresholds and so, you know, we haven’t increased those or decreased those. And again, they will vary with risk and return. But we have not seen a lot of customer pushback as a result of the increase in the materials costs that we’ve seen.
John Mackay (Analyst at Goldman Sachs)
Just any comments on kind of customer mix in terms of producer willingness to engage versus the demand side? Thanks.
Kim Dang (Chief Executive Officer)
Well, generally the projects that we’re sanctioning today, I mean—well, all the projects we’re sanctioning today are demand pull and that, you know, that is our preference when we do these projects because I think you know that demand can be—you know, basins can come and go to some extent, have been there for a long time, but the demand pull, you know, it is there for decades. And so we feel very good about the customers on these projects.
John Mackay (Analyst at Goldman Sachs)
Appreciate the time. Thank you.
OPERATOR
Thank you. Our next caller is Spiro Dunas with Citi. Your line is open sir.
Spiro Dunas (Analyst)
Thanks, operator. Afternoon team, want to start first with project timing. You talked about adding cash flow out to that 2032 time frame, but it sounds like you’re still filling in some growth for ’29 and 2030. Kim, you also mentioned a $4 billion spending cadence from here. And on my math, TGP 219 South should pretty much get you to that level once it’s FID. So I want to understand how you’re thinking about, I guess, what’s needed to fill up more growth in ’29 and 2030, or if we should expect most of the major project announcements from here—beyond TGP of course—maybe to be more weighted or additive to 2030-plus time frame.
Kim Dang (Chief Executive Officer)
Well ’29 and 2030 is, you know, we’re getting SNG South System IV is coming online Q4 of 2028 and Q4 of 2029. So that’ll drive growth in ’29 and 2030. And then I think MSX, the second phase, is mid-year ’28, so that’ll drive additional growth in ’29. And then these projects, you know, you’ll get fourth quarter probably—roughly—you’ll get the Permian Link. So as I said, it’s not going to be exactly the same growth rate every year. It’ll vary year in and year out.
But, you know, with this backlog and a 5.7 times multiple, you know that’s $2.5 billion of cash flow that will be coming our way as soon as we get these things built, because these are again backed by take-or-pay contracts with either creditworthy entities or that have significant collateral posted.
Spiro Dunas (Analyst)
Got it. Second question—talked about Trident, but want to go to the other side of the Permian and go to Arizona. Hearing more on the utility side about maybe the potential need for another pipeline, just given some utility plans in Arizona West Valley and some data center development there. You of course had Copper State Connector at one point. Just curious about maybe the prospects you see to make another move into Arizona.
Kim Dang (Chief Executive Officer)
Well look, I mean on the western side we do see opportunities. You know we have both of our legs pipeline—both to Arizona and Mexico. And I would characterize it as we do see significant power demand there. We also see traditional conversion—you know, coal plant conversion—as opportunities on the western side. But too early to comment on kind of where and how those get. We do have discussions ongoing out west as well.
Spiro Dunas (Analyst)
Great, I’ll leave it there. Thanks everyone.
OPERATOR
Thank you. Our next caller is Gabe Morin with Mizuho. Your line is open, sir.
Gabe Morin (Analyst)
Hey, good afternoon everyone. I’m not sure if it’s allowed but I’d like to ask some questions on your non-natural-gas businesses.
Kim Dang (Chief Executive Officer)
Right, right. I love to answer your question.
Gabe Morin (Analyst)
Okay, thank you, Kim. One, I was going to ask, just with the forward curve on crude oil having moved up nicely here in ’27 and beyond, whether that puts some CO2 expansions back into play potentially. And then also I think there may be some inorganic opportunities out there on RNG. I’m just curious your thoughts on potentially expanding that business as well.
Anthony
Gabe, thank you for tossing me a bone. Yeah, no, as you know, EOR projects take some time to develop. So, and the forward curve has come up but it’s still pretty backwardated. And so I would say yes, we’re looking at all of the projects we can do and our ability to accelerate, but it’s really no different in terms of how we view investment in that business over time. It’s going to be looking at that curve and we’ll be sensitizing that curve as well for lower oil prices in case those arise as well. Obviously the oil price—there’s a lot of geopolitical risk associated with that—and so there is some concern to extend the war ends where crude prices end up.
But as I said, we’re pretty careful in terms of how we look at our EOR investments and we demand higher returns than we do on CO2’s businesses to take account of that risk. And then on RNG I don’t think we can really kind of talk about ongoing third-party processes. We are aware of those out there and, you know, we’ll continue to kind of look at whether it makes sense to grow that businesses. You know, we’ve had some operational issues in that business.
You know, I think we’ll be careful to the extent that we want to step in into a bigger share there and it will have to come with a higher return as well.
Nadine
Yeah, I mean the other thing I’d say on the RNG business, I mean we did have some struggles but we do have a team that has learned and who knows how to operate these at this point. And so I think we’ve developed some expertise there. But, you know, we also have a lot of lessons learned that we would take into account anything we look at. And then, I mean to Anthony’s point on the CO2 stuff, I mean, you know, when we look at those, you know, those are long-term projects and so we tend to run some kind of, you know, fixed oil price to make sure that we get to our return.
So we don’t just jump because the current year goes to 80 into projects because the current year goes to $85.
Gabe Morin (Analyst)
Thanks Nadine. Thanks, Kim. And if I could just squeeze one more on the Bakken. I’m just curious, sort of on a Double Agent/OuTrigger update. It seems like there’s some shifts going on there in the G&P landscape in the Bakken. Just wondering if that makes you more or less inclined to invest more capital up there.
Kim Dang (Chief Executive Officer)
Look, we’ve invested significant capital up there. I think we’re pretty well positioned for what we see coming, and we can always adjust if we see the macro environment change a little bit. I think where I would take it is we’re sitting in a good spot. We’ve got the infrastructure we need to accommodate any growth that might.
Gabe Morin (Analyst)
Great. Thanks everyone.
OPERATOR
Thank you. Our next caller is Zach Van Everen with TPH Research. Your line is open, sir.
Zach Van Everen (Analyst)
Thanks for taking my question. Maybe back on gas supply, whether it’s Waha, the Gulf Coast or the Southeast, you know, it definitely feels like there’s a fight for gas as a part of any of these projects. Have you helped customers or was it contingent on them also signing supply agreements with producers just to make sure they could fill their FT?
Kim Dang (Chief Executive Officer)
The answer to your latter question is no, we don’t do anything contingent. But I mean, look, we explained the macro, but they have to make their own judgments on this. I think there’s plenty of resource. It’s a price function. There’s a dry gas window, there’s an associated gas window, and then there’s other basins in and around that can help meet the demand. Once again, it’s supply and demand, and there’s other basins that can feed through our networks and ultimately get in to serve the pipelines that we have from different areas.
For example, the Eagle Ford can go the other direction as well. So that’s how I would leave it. I think it’s broad enough. I think folks understand that they need to secure a molecule. I think we make sure that that’s clear, and the rest is up to them. Got it. Yeah, I mean, just to keep my mind simple, I assume inefficient plants. How’s that? Inefficient, right. Inefficient plants. And look, that probably likely won’t all happen, right? That’s all the connection requests, assuming they all go. And that’s all natural gas. And so it’ll be some combination. The point is there is a huge amount of demand growth in the Southeast, and that’s part of what Southeast Connector is addressing.
OPERATOR
Thank you. Our next caller is Jason Gableman with TD Cowen. Your line is open, sir.
Jason Gableman (Analyst)
Yeah, hey, thanks for taking my question. I want to ask about Permian Link and your kind of targeted IRRs. You talk about, I think, mid-teens after-tax IRRs. And I wonder, given, you know, this project with only one anchor shipper has some perception of higher risk, did that require you to kind of construct the project for a higher IRR, or do you feel like the risk profile of this project is similar to your existing business?
Kim Dang (Chief Executive Officer)
Look, we approach this project the same way we approach all of our other projects. And so what I’ll say is this, which is, you know, we can move up and down on the risk/return threshold and our value proposition, meaning that if a customer is willing to share in some of the cost, then we can move down the return threshold a little bit. If the customer is not willing to share in cost overrun risk, then we need a higher return. And so, you know, we have some flexibility in how we approach that.
And then as we negotiate, you know, our customers at times have a preference between, you know, hey, I don’t want to cost share. I want you to take the cost risk. And that’s one rate. We put them one rate. And then if they’re willing to share in the cost risk, there’s another rate. The other thing I’d say is Permian Link has the ability to upsize by adding compression, and so we can add more shippers to this over time, and that will lead to even higher returns.
Dax Sanders
Yeah, it’s important. You know, when we talk about the scale of this, I mean the scope of this project, we have capabilities to serve incremental, and we’re talking to incremental customers to basically fill the rest of the basket, if you will.
Jason Gableman (Analyst)
Got it. Thanks for that. My other question is a bit separate. As you kind of pursue connectivity to move more gas from the Marcellus, I’m wondering if there’s anything to be gained to move further kind of upstream into Marcellus G&P. Would you get anything? Is there any commercial value for controlling more of the gas upstream from your pipes, or not really at this point?
Kim Dang (Chief Executive Officer)
Look, we have some pretty good customers of our own that are very sophisticated in doing that. And, you know, I think we stick to what we do best, which is build large-scale infrastructure. Very similar to the power story. We’re not focused on power, we’re focused on building pipeline infrastructure. And so I think we would collaborate with our customers to do that. And I think that’s probably the best one for us.
Dax Sanders
Yeah, and I think there’s very established players, very established mature players in that. And so, you know, typically they’re going to have an incumbent advantage.
Jason Gableman (Analyst)
Great. Thanks for the time.
OPERATOR
Thank you. Our next caller is Harry Mater with Barclays. Your line is open, sir.
Harry Mater (Analyst)
Hi, thanks. You know, both Southeast Connector and Permian Link are being developed at JVs. I’m curious how you plan to balance contributing capital to those JVs from KMI, at least initially, versus, you know, using what I think appears to be pretty decent balance sheet capacity at both those JVs during the construction phase.
Kim Dang (Chief Executive Officer)
Good afternoon.
David Michels (Vice President and Chief Financial Officer)
Yeah, I think it’s going to be a combination of the JV funding a portion of it and us contributing capital. So I think those JVs have nice cash flows that can go to fund a portion of the CapEx. We can take on incremental debt at those JVs. If we do that, though, our plan is to do it in such a way—well, we will do that—but our plan is to do it in such a way to maintain the existing ratings as JV pipes. And then there will be some capital required above that, in which case we will make equity contributions from owners.
And so now, we also have the flexibility given where our balance sheet is and our cash flow that if we wanted to or needed to, we can fund that 100%. We can fund that CapEx 100% from KMI.
Harry Mater (Analyst)
Got it. All right, thank you.
OPERATOR
Thank you, Mr. Kinder. At this time we are showing no further questions, sir.
Rich Kinder (Executive Chairman)
Okay. Well, let me just conclude with two remarks. Again, I want to say, and Kim mentioned this number, that if you look at the returns expected on this $14.4 billion of backlog, that’s $2.5 billion of additional EBITDA. And if you look at that in terms of where we are presently, that pushes us between $11.5 billion of EBITDA. The other thing I would mention is last call, there was some, let me call it, skepticism about whether we could really bring these projects along.
And I think I made the remark, well, we have to get the horses in the corral. I just want to say we’ve got a hell of a lot of those horses in the corral now with the saddles on, but we got more horses just outside the corral, and I think you’re going to see them and they want to come in. So that will be the message for the future. But thank you all for your good questions. We appreciate it. It’s been a great quarter and we hope to bring you more good news in the future.
Thank you.
OPERATOR
Thank you. This concludes today’s conference call. You may disconnect at this time and have a great rest of your day.
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