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Kinder Morgan Closes Deal to Exit Canada

Wednesday, December 18, 2019

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Pipeline operator Kinder Morgan is closing out 2019 by exiting the Canadian market to the financial sound of a $2.5 billion deal, money that accounts for both cash and stock. As part of the move, the company sold subsidiary Kinder Morgan Canada, as well as the cross-border Cochin Pipeline.

According to the Houston Chronicle, both assets were sold to Calgary-based pipeline operator Pembina Corp., which paid $1.5 billion in cash to Kinder Morgan for the pipeline. Stocks to buy Kinder Morgan Canada were valued at $935 million.

Deal History

In September 2018, Kinder Morgan began looking at options for selling its Canadian business, which has largely been attributed to the company facing a number of issues with the environment and politics, along with legal problems. At the time, the sale was valued at around $1.8 billion, with Kinder Morgan appointing TD Securities to find a company interested in acquiring its Canadian assets.

At the time, Kinder Morgan was working on the Trans Mountain oil pipeline, which runs with an existing pipeline between Strathcona County, Alberta and Burnaby, British Columbia. That project faced a number of problems, including issues with the British Columbia government and environmental groups.

In August of this year, Pembina Pipeline signed agreements for the acquisition of the Kinder Morgan subsidiary and the U.S. section of the Cochin Pipeline, a 1,810-mile 12-inch pipeline that carries hydrocarbon liquids from Fort Saskatchewan, Alberta, Canada to Windsor, Ontario. The deal also included 125-acre bulk storage and Vancouver Wharves, an import and export business that deals with more than 4 million tons of cargo annually.

At the time, Pembina President and CEO Mick Dilger said that the acquisition was “highly strategic” for the company, “providing enhanced integration with our existing franchise, entrance into exciting new businesses and clear visibility to creating long-term value for our shareholders.

“It represents an ideal opportunity to continue building on our low-risk, long-term, fee-for-service business model while extending our reach into the US through a highly desirable cross-border pipeline.”

Recent Developments

Earlier this month, Pembina completed the acquisition of the aforementioned assets. In exchange, Kinder Morgan will receive 25 million shares of Pembina Pipeline stock for its stake in Kinder Morgan Canada. From here, Kinder Morgan will move the shares into cash, which is slated to produce $935 million before taxes.

“We are pleased to have closed the highly strategic Kinder Morgan transaction earlier than originally expected, which will allow us to realise a full year of contribution from these assets in 2020,” said Dilger.

“The newly acquired assets provide enhanced integration within our existing franchise, entrance into exciting new businesses and clear visibility to creating long-term value for our shareholders.

   

Tagged categories: Acquisitions; Business operations; NA; North America; Oil and Gas; Pipelines; Program/Project Management; Project Management

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