Kinder Morgan, Andersons set sights on ethanol projects

Andersons Inc and Houston-based Kinder Morgan Inc have firmed up separate plans to invest in ethanol projects. The forecast of high gasoline consumption in the US is a major reason for planning new ethanol projects. Kinder will set up a new facility and dedicated pipeline for distributing ethanol in the region.

Kinder Morgan will work with Archer-Daniels-Midland Co and Bailey Feed Mill for developing a new ethanol hub in Selma, North Carolina. Archer-Daniels-Midland Co is the largest ethanol producer in the US.

The new project by Kinder is scheduled to be completed by the end of 2016, according to a report by Bloomberg. Cheaper gasoline prices are boosting the demand for the fuel. Ethanol consumption is expected to reach a record level, predicts Energy Information Administration (EIA).

The gasoline consumption is expected to reach 140 billion gallons this year and boost the demand for ethanol to 14 billion gallons, according to Energy Information Administration.

According to a report by The Washington Post, the cheaper gasoline will have impact on changing driving habits and enhanced vehicle efficiency. The cheaper gasoline price is boosting the consumption level and also for ethanol.  

The Barack Obama-led government recently announced that the country needs huge volumes of fuel. Refiners are asked to use ethanol exceeding 10 percent of US motor fuel demand. These two companies have announced their expansion plans after the government's forecast on higher consumption of gasoline.

The NYSE-listed Kinder Morgan's stock was trading 3.70 percent higher at $15.70 on Tuesday (22 December) early. The earnings per share (EPS) were at 0.53 cents and price-earnings (PE) ratio at 29.70. The market capitalization stands at $34.98 billion. 

As per the latest outlook for 2016 by Kinder Morgan, the internally generated cash flow to fund all the required equity contribution for 2016 is sufficient. The company has also reviewed expected investment in 2017 and 2018. 

The board of directors at Kinder Morgan agreed to pay quarterly dividends of $0.125 per share which makes $0.50 annually. It is lower than the previous dividend of $0.51. The dividend enables it to use large cash flow to fund the equity portion of capital requirements for expansion plans.

Andersons Inc is agriculture-based company and conducts business in grain, ethanol, plant nutrient and rail sectors. Ethanol is expected to account for over 10 percent of the US gasoline in 2016. For the first time, ethanol will exceed the threshold, a safer level for blending stipulated for the oil companies.

Andersons Inc will doubt the capacity at its ethanol plant in Michigan. It sees encouraging demand and supply in Michigan state. The project will be completed by April 2017.