Kinder Morgan exiting Canada
Subsidiary sold to storage firm in deal totaling $2.5B
Houston pipeline operator Kinder Morgan is exiting the Canadian market in a deal worth more than $2.5 billion in cash and stock.
Kinder Morgan will sell its subsidiary Kinder Morgan Canada and cross-border Cochin Pipeline to the Calgary pipeline and storage terminal operator Pembina Corp.
Pembina is paying Kinder Morgan more than $1.5 billion in cash for the Alberta-to-Michigan tar sands crude oil pipeline and another $935 million in stock to buy Kinder Morgan Canada. The deals are expected to close during the fourth quarter of 2019 or the first quarter of 2020.
The proceeds of the sale will allow Kinder Morgan to pay down debt and give it the flexibility to buy back shares, invest in new projects or both, Kinder Morgan CEO Steve Kean said in a statement.
“This is an attractive transaction for Kinder Morgan and Kinder Morgan Canada stockholders,” Kean said.
The sales ended months of speculation about the future of Kinder Morgan Canada, a publicly traded company on the Toronto Stock Exchange. That future became clouded after an economic development arm of the Canadian government bought Kinder Morgan Canada’s Trans Mountain Pipeline system and a related expansion project in a $4.5 billion cash deal that closed in August 2018.
Designed to move crude oil from the tar sands region of Alberta across the Canadian Rockies to the Pacific Coast, the Trans Mountain Pipeline system received approval from the Canadian government in
November 2016 to undergo a major expansion, but faced stiff opposition from various municipalities in British Columbia, Native American groups and environmentalists. Kinder Morgan suspended work on the expansion project and then sold it to the Canadian government, which viewed it as vital to expanding Canadian oil exports.
Kinder Morgan spent the last few months evaluating whether Kinder Morgan Canada would remain as a standalone subsidiary, be sold off or merge with another company.
Kinder Morgan Canada continues to own and operate various pipelines and storage terminals in Alberta, Saskatchewan and British Columbia that will be transferred to Pembina once the deal is closed.
Under the agreement to buy Kinder Morgan Canada, Pembina is paying Kinder Morgan some 25 million shares of Pembina stock, which will give Kinder Morgan control of just under 5 percent of Pembina’s stock. Kinder Morgan plans to sell the shares for cash but has pledged to do so in an “opportunistic and non-disruptive manner.”
In a statement, Pembina CEO Mick Dilger said the deal gives the company an additional 10 million barrels of crude oil storage in the tar sands region of Canada and increases vertical integration.
“This acquisition is highly strategic for Pembina, providing enhanced integration with our existing franchise, entrance into exciting new businesses and clear visibility to creating long-term value for our shareholders,” Dilger said. “It represents an ideal opportunity to continue building on our lowrisk, long-term, fee-for-service business model while extending our reach into the U.S. through a highly desirable cross-border pipeline.”