Inside Kinder Morgan Energy Partners LP (KMP) (KMI) Morgan: Terminals

Based on combined enterprise value, Kinder Morgan Inc (NYSE:KMI) is the third largest energy company in North America. We tend to associate the giant with its 75,000 miles of pipelines, but in reality, its operations are incredibly diverse. Over the course of the next week, I’ll take a closer look at each of the midstream company’s five distinct business units, beginning today with its terminals segment.

Background on the assets

Kinder Morgan Inc (NYSE:KMI) operates the largest independent terminal network in the United States. Everything from liquids to coal to steel has its place among the company’s 180-plus terminals located all over the U.S. and in parts of Canada. Systemwide, the network has about 100 million barrels of liquids capacity and processes 100 million tons of materials every year. Its most important terminal asset locations are in New York Harbor and the Houston Ship Channel.

Kinder Morgan Energy Partners LP (NYSE:KMP)Taking a closer look at the liquids and bulk business within the Terminals segment, we see that bulk tonnage actually decreased in 2012, though it is expected to pick up this year. Liquids throughput increased significantly, and that trend is expected to continue.

Ores and metals, coal, and petroleum coke represent 67% of Kinder Morgan Inc (NYSE:KMI)’s bulk terminal business, while refined petroleum, chemicals, and fuel grade ethanol make up 73% of the liquids business. Even within this segment, diversification is important .

Last quarter, Kinder Morgan Inc (NYSE:KMI)’s terminals segment generated $198 million in earnings. It marked a 7% increase year over year, and though that was the smallest growth increase across all of Kinder Morgan’s business units, the partnership is looking to remedy slow growth in the segment by injecting capital into a few of its existing projects in 2013.

We’ll dive into specific plans in a minute, but for now, know that Kinder Morgan Inc (NYSE:KMI) expects its Terminals segment to yield $1.46 billion in net revenue in 2013. That would be about a $118 million jump over 2012’s number and would more than double the year-over-year increases of the past. The segment’s revenue has increased by approximately $50 million annually over the past three years.

One deal that is no more

Kinder Morgan Inc (NYSE:KMI) officially suspended its effort to enter into a public-private long-term lease operating deal with the Port of Wilmington. Investors were intrigued by the deal; citizens of Delaware and local union officials, less so. Despite the port’s desperate need to be revitalized, increasing opposition to the plan forced Kinder Morgan to punt. Though the company has not completely withdrawn its offer, the ball is in the court of Delaware’s state officials, and the outlook is grim.