Ultimate Trans Mountain buyer unknown
Numerous investors have expressed interest in project
CALGARY— So now Prime Minister-Justin Trudeau owns a pipeline. Who will take it off his hands remains an open question.
Canada said Tuesday it would buy Kinder Morgan Inc.’s Trans Mountain pipeline, with its expansion project and shipping terminal, for $4.5 billion before eventually selling the project to a new buyer.
Finance Minister Bill Morneau, speaking Tuesday in Ottawa, said it was too soon to say if Canada would sell in the short or medium term, but didn’t want to hold the project in the long term.
Finding a buyer for Trans Mountain could be tricky amid ardent opposition from British Columbia, the Pacific coast province it crosses, along with environmental and some Indigenous groups. That opposition was enough to make Kinder throw up its hands and halt construction last month. Even as Morneau struck an upbeat tone on the potential pool of buyers, he didn’t give a specific time frame for a deal.
“Many investors have already expressed interest in the project, including Indigenous groups, Canadian pension funds, and others,” he said.
One analyst floated another potential home: Kinder Morgan itself.
Canada’s purchase may “be a vehicle to indemnify the project against regulatory risk,” Katie Bays, an analyst with Height Securities LLC in Washington, said. “Once the construction is complete or once regulatory risk evaporates, whichever comes first, the project could be repurchased by Kinder Morgan.”
Kinder Morgan Canada, the unit that raised $1.75 billion for the project in an initial public offering last year, declined to comment on the speculation.
Private equity If Kinder doesn’t want it back, some investors have shown interest in the project in the past.
Before deciding on taking the Canadian unit public, Houstonbased Kinder Morgan ran a dual-track process that also entailed exploring a joint venture of the pipeline project.
That possibility attracted interest from U.S. private equity firm ArcLight Capital Partners and Australia’s IFM Investors Pty Ltd., people familiar with the matter said at the time.
Brookfield Asset Management Inc., which was said to be another bidder on the joint venture and eventually became one of Kinder Morgan Canada’s largest investors, could also be a potential partner in Trans Mountain now.
Among pension funds, the Ontario Municipal Employees Retirement System (OMER) and the Alberta Investment Management Corp (AIMco). could also be interested in the project.
Midstream veteran
OMERS also appointed Michael Ryder as the senior managing director of its infrastructure unit, OMERS Infrastructure. Ryder joined in January from U.S. private equity giant Blackstone Group LP, where he was responsible for leading the firm’s midstream energy and oilfield services investment strategy.
AIMCo is supportive of measures to boost investor confidence and address market uncertainty, Denes Nemeth, a spokesperson for the fund, said in an email, while declining to comment on whether AIMCo would be interested in investing in the project.
Canada Pension Plan Investment Board, the country’s largest pension fund, said in an emailed statement it was not “actively assessing an investment in the extension opportunity.” Largest investor Meanwhile, Caisse de Depot et Placement du Quebec, Canada’s second-largest pension fund, last month disclosed holdings of 10.2 million shares in Kinder Morgan Canada, making it the largest investor outside of its parent company. A spokesperson declined to comment on whether the Caisse would consider an investment in the pipeline.
Other projects
Canada’s other major pipeline operators are not seen as likely to enter the fray, either.
Enbridge Inc. and TransCanada Corp. already operate major pipelines that carry oilsands crude, and both are enmeshed in their own major projects.
TransCanada’s proposed Keystone XL pipeline has battled delays for roughly a decade, and Enbridge’s Line 3 replacement and expansion still hinges on a critical regulatory ruling in Minnesota.
TransCanada spokesperson Grady Semmens said in a statement that the company isn’t involved in discussions about the Trans Mountain pipeline, and that it won’t comment further. Suzanne Wilton, a spokeswoman for Enbridge, said the company would not speculate on the project.