Kinder Morgan Canada (KML) board of directors has agreed to the purchase of the Trans Mountain Pipeline system and the expansion project (TMEP) by the Government of Canada for C$4.5bn, and has agreed to work with the Government of Canada 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 has agreed to fund the resumption of TMEP planning and construction work by guaranteeing TMEP’s advances 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 that KML and the Government were able to reach agreement on a transaction that benefits the people of Canada, TMEP shippers and both Kinder Morgan Inc. (KMI) and KML shareholders,” said KMI Chief Executive Officer, and KML Chairman and Chief Executive Officer, Steve Kean. “The outcome reached represents the best opportunity to complete TMEP and thereby realise the great economic benefits promised by that project.

“The transaction will also have a positive impact on our consolidated balance sheet, as we expect KMI’s approximately 70% share of after tax proceeds to be approximately C$2bn,” said Steve.

“With respect to future growth, we are confident that KMI will continue to find investment opportunities across its unparalleled network of midstream assets. Since mid-2015, we have added on average approximately C$1.3bn per year to our backlog,” continued Steve.

“During the last twelve months, we have added approximately C$2.1bn. Assuming that KMI can invest C$2.0bn per year at an average capital-to-Adjusted EBITDA multiple of approximately 7.0 times (versus the on-average 6.0 times for our backlog as of the first quarter of this year) those investments would yield KMI incremental annual EBITDA of over C$300m, representing greater than 4% annual EBITDA growth,” Steve concluded.

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30th May 2018

30th May 2018