Kinder Morgan has agreed to take over the existing contracts for the construction of four Jones Act-qualifying product tankers from Philly Tankers as the energy infrastructure company fleet continues to pounce on ripe investment opportunities within its core business.
The four new 50,000 DWT, Tier II tanker will be constructed at the Aker Philadelphia Shipyard in Pennsylvania and are planned to be delivered between November 2016 and November 2017. Each LNG-conversion-ready tanker will have a capacity of 337,000 barrels.
Aker Philadelphia Shipyard says each of the four contracts will be assigned by Philly Tankers LLC to the Kinder Morgan entity immediately prior to delivery of each of the vessels. The transaction is valued at a total of $568 million.
“We are pleased to announce today’s transaction with Kinder Morgan as a successful outcome for Philly Tankers’ shareholders. Philly Tankers has made noteworthy achievements since its inception, including securing long-term employment for two of its vessels, the opportunistic exercise of its options and now the assignment of all four of its new building contracts to Kinder Morgan, which provides an attractive return to Philly Tankers’ shareholders.” said Kristian Rokke, Chairman of Aker Philadelphia Shipyard ASA and Board member of Philly Tankers AS.
The four new vessels will increase Kinder Morgan’s Jones Act tanker fleet to 16 ships by late 2017, of which 14 are under long-term contracts.
“There continues to be strong demand for domestic waterborne transportation to move petroleum products and crude oil, and our fleet of highly efficient tankers will provide stable, fee-based cash flow to KMI shareholders for many years to come through multi-year contracts,” said Kinder Morgan Terminals President John Schlosser. “This latest transaction clearly underscores Kinder Morgan’s commitment to marine transportation of crude oil, condensate and refined products in the U.S. domestic trade.”
“This is just the latest indication that we continue to have good opportunities to deploy capital in our core businesses at attractive returns,” noted Steve Kean, president and chief executive officer of Kinder Morgan, Inc. Prior to this transaction, the company identified a backlog of projects that had grown to $22 billion. “We are seeing numerous opportunities in our core pipelines and terminals businesses as the demand for midstream transportation and storage services continues to grow,” Kean said.
Kinder Morgan currently has seven product tankers on the water and five tankers that are in various stages of design and construction at the NASSCO shipyard in San Diego, California, scheduled for delivery between late 2015 and mid-2017.
Kinder Morgan entered the Jones Act product tanker business with an initial purchase of five ships in January of 2014 via the acquisition of American Petroleum Tankers and State Class Tankers for $960 million in cash.
Philly Tankers was established in June 2014 and is majority-owned by Aker Philadelphia Shipyard ASA.