Deal Ensures Critical Project Benefiting All Canadians Will Proceed

The Kinder Morgan Canada Limited (TSX: KML) board today announced that the Government of Canada has agreed to purchase the Trans Mountain Pipeline system and the expansion project (TMEP) for C$4.5 billion, and to work with the board to seek a third party buyer for the Trans Mountain Pipeline system and TMEP through July 22, 2018.  

As part of the agreement, the Government of Canada has agreed to fund the resumption of TMEP planning and construction work by guaranteeing TMEP’s expenditures under a separate Federal Government recourse credit facility until the transaction closes.  The parties expect to close the transaction late in the third quarter or early in the fourth quarter of 2018, subject to KML shareholder and applicable regulatory approvals.

 “We are pleased to reach agreement on a transaction that benefits the people of Canada, TMEP shippers and KML shareholders,” said KML Chairman and Chief Executive Officer Steve Kean.  “The outcome we have reached represents the best opportunity to complete TMEP and thereby realize the great national economic benefits promised by that project.

 “Our Canadian employees and contractors have worked very hard to advance the project to this critical stage, and they will now resume work in executing this important Canadian project.”   

The purchase price alone equates to approximately $13 per restricted voting share on a pre-capital gains tax basis and approximately $12 per restricted voting share after capital gains tax.  KML expects its approximately 30 percent share of after-tax proceeds to be approximately C$1.25 billion.   

“In addition to the benefit of the sale proceeds, our remaining portfolio of assets represents a strong platform for the company and shareholders now and in the future.  These assets were budgeted to generate approximately half of KML’s Adjusted EBITDA excluding capitalized equity financing costs.  We continue to invest in expansions of our Canadian assets and look forward to future growth in the service of our customers and our shareholders,” Kean concluded.

KML will continue to manage a portfolio of strategic infrastructure across Western Canada, including: 

  • An integrated network of crude tank storage and rail terminals in Alberta that is one of the largest in the region; 
  • The crude terminal facilities constitute the largest merchant terminal storage facility in the Edmonton market and the largest origination crude by rail loading facility in North America;
  • The Vancouver Wharves Terminal, the largest mineral concentrate export/import facility on the west coast of North America; and,
  • The Cochin Pipeline system that transports light condensate originating from the United States to Fort Saskatchewan, Alberta.

TD Securities is serving as financial advisor to KML and is rendering a fairness opinion on the transaction to the KML board.

Read the full news release here