Kinder Morgan Energy Partners (KMP) plans to invest approximately $140 million to further expand its coal handling facilities along America’s Gulf Coast. Concurrently, Arch Coal has signed a long-term throughput agreement with KMP that will help support the expansion of these export facilities. Also, Arch and KMP are in final discussions to include, in the throughput agreement, port space for coal shipments at KMP-owned facilities on the US East Coast. Upon completion of the proposed terminal upgrades and subject to certain rail service agreements, Arch will ship coal at guaranteed minimum volume levels through KMP-owned terminals. The expansion of KMP s export facilities along the Gulf Coast and East Coast will provide incremental port capacity for Arch s growing seaborne coal volumes.
“The demand for export coal continues to grow and we are pleased to offer Arch and other customers options in various markets through our multi-location terminal network,” said Jeff Armstrong, President of Kinder Morgan Terminals. “We are also extending existing long-term coal agreements with Arch at our upriver terminals (Cora, Cahokia and Kellogg) in Illinois.”
“This strategic partnership with Kinder Morgan, a company with a proven track record of running successful terminal operations, will allow Arch to significantly increase our participation in the global coal market,” said John W. Eaves, Arch’s President and COO. This dedicated capacity directly underpins our long-term strategy to grow Arch coal exports by fourfold in the next decade, and is consistent with our view that a global coal supply shortfall will persist over that time frame.”
Specific to the expansions on the Gulf Coast, KMP will install a new shiploader and a railcar loop track to handle three 135-car unit trains at its Deepwater terminal in Houston. Following completion of the project, the Deepwater terminal will have throughput capacity of 10 Mt/y of coal. The projects are expected to be immediately accretive to cash available to KMP unitholders upon completion, which is anticipated in the second quarter of 2014.
KMP s Deepwater and East Coast facilities offer dual rail access from Class 1 railroads, while International Marine Terminal (IMT) provides barge access to the inland waterway system. The Deepwater terminal will be capable of handling panamax- and post panamax-size vessels, while one East Coast terminal and IMT will be capable of handling cape-size vessels. These multiple transportation options will allow Arch to unlock incremental value for its domestic coal production and coal reserves over the next 10 years. Anticipated throughput volumes will consist of metallurgical and thermal coal from Arch s major coal producing regions, including Appalachia, the Powder River Basin, the Western Bituminous Region and eventually the Illinois Basin.
“Securing additional port capacity further supports the expansion of Arch’s international coal platform,” said Eaves. “Along with the acquisition of the ICG assets, the opening of new business offices in Singapore and London, and previous equity investments in port terminals on the East Coast and West Coast, this agreement strengthens Arch’s position as one of the top U.S. suppliers in the seaborne coal trade.”
Arch Coal is a top five global coal producer and marketer. Arch is the most diversified American coal company, with mining complexes across every major US coal supply basin. Its core business is supplying cleaner-burning, low-sulphur thermal and metallurgical coal to power generators and steel manufacturers on four continents.
KMP is a leading pipeline transportation and energy storage company in North America.