Kinder Morgan puts pipeline plan on shelf

Kinder Morgan, the nation’s largest natural gas pipeline operator, on Wednesday shelved a planned $3.1 billion pipeline as the company kicked off a 2016 earnings season expected to be bleak for Houston’s energy companies.

Kinder Morgan said its businesses generated about $1.2 billion in cash in the first quarter of the year, flat from the same period last year. Profits dove 25 percent, to $314 million from $419 million, due in part to a $100 million charge incurred after the company abandoned its planned Northeast Energy Direct pipeline.

The proposed pipeline, which had generated stiff opposition from environmentalists and communities in its path, would have carried natural gas from the Marcellus Shale in Pennsylvania

across Massachusetts.

Kinder Morgan executives said in a call with analysts that they didn’t sign up enough utilities and power plants to make the project profitable. Chief Executive Steve Kean said customers were wary of committing to long-term contracts that pipeline companies need to finance new projects.

The Northeast Energy Direct is the second major pipeline that Kinder Morgan has canceled in 2016. In March, the company said it had suspended work on the $1 billion Palmetto Pipeline after Georgia regulators refused to grant key permits. It booked a $65 million charge related to that project this quarter.

In total, the value of the pipelines Kinder Morgan expects to build in the next five years has shrunk more than 20 percent to $14.1 billion from $18.2 billion at the end of 2015. This year, Kinder Morgan said it expects to spend $2.9 billion on projects and other capital expenditures, down from the $4.2 billion that was budgeted as recently as December.

Reduced spending will leave Kinder Morgan with more cash, as will a 75 percent dividend cut the company announced in December. That allowed the company to keep hundreds of millions it had previously paid out to investors.

In the first quarter, Kinder Morgan shares will pay out 12.5 cents, down from 51 cents. The cut was painful for investors who had long bought the shares because of reliably increasing dividends.

The cut will allow Kinder Morgan to hold onto $954 million in cash. Executives said they plan to use the money to build new pipelines and pay down the $41.6 billion in debt the firm carries.