Ottawa likely to hang onto pipeline
OTTAWA/CALGARY • There are about a dozen parties interested in the Trans Mountain oil pipeline, but the Canadian government won’t reach a deal to flip it before a marketing deadline with Kinder Morgan Inc. closes Sunday, according to people familiar with the situation.
The government’s $4.5 billion purchase of the pipeline and expansion project gave it to July 22 to co-market the pipeline with an eye to selling it to a third party. A quick sale would have effectively allowed the government to substitute in another buyer for the current deal to be finalized.
That deadline Sunday is set to pass. The deal will be finalized with the government as the new owner, and it will seek a new buyer without Kinder Morgan’s help, amid fears of legal and political delays. About a dozen parties have signed non-disclosure agreements as part of the process for a potential resale, and the project is seen likely to end up being bought by a Canadian-led consortium, as opposed to a single buyer, the people said.
The Trans Mountain sale is scheduled to close in either the late third quarter or early fourth quarter, as the project faces continued opposition from the British Columbia premier and awaits a key court ruling. Kinder Morgan’s Canadian unit declined to comment beyond previous statements that it is working with the government to find a buyer, and it referred questions on the status of those efforts to the government. A spokesman for Finance Minister Bill Morneau declined to directly say if there’d be a sale to a third party by July 22, but said the government won’t hold the pipeline forever.
“We have no interest in being a long-term owner of a pipeline, but we will be the temporary caretaker,” spokesman Daniel Lauzon said when asked about a sale. “We won’t rush that.”
Finding a third-party purchaser by the Sunday deadline would be difficult because the obstacles that Kinder Morgan cited in its threat to abandon the project still exist, said Kevin McSweeney, a fund manager at CI Investments in Toronto. British Columbia has given no indication it will drop efforts to impose additional regulations on the pipeline, and a court case over the project is still under way, he said.
Third-party purchasers are likely to be attracted to the pipeline once those issues are resolved, he said.
“A buyer would be reluctant to take it on for the same reasons that Kinder decided not to go forward,” said McSweeney, who helps manage C$13 billion.
“Perhaps someone would be willing to purchase the project at a big discount, but I doubt the government would want to lock in a loss given the political acrimony this file has generated.”