Pembina Pipeline Corporation has entered into agreements to acquire Kinder Morgan Canada Limited (KML) and the U.S. portion of the Cochin Pipeline system from Kinder Morgan for a total purchase price of approximately $4.35 billion.
The transaction values Kinder Morgan Canada at approximately $2.3 billion and Cochin U.S. at approximately $2.05 billion.
Through the transaction, Pembina will acquire strategically located assets including the Cochin Pipeline System, the Edmonton storage and terminal business and Vancouver Wharves, a bulk storage and export/import business.
The Cochin mainline system represents a fully contracted cross-border pipeline system that is highly strategic as it connects Pembina’s Channahon, Bakken and Edmonton area assets and is connected to markets in Mont Belvieu, Conway and Edmonton. Further, there is future potential to connect the eastern leg of the Cochin Pipeline System to Pembina’s assets and markets in Sarnia, Ontario.
As well, the acquisition includes a significant crude oil storage and terminalling business in Western Canada’s key energy complex, which connects Pembina’s conventional and oilsands pipelines to all major export pipelines, providing increased flexibility and greater egress options to customers.
Finally, there is potential for further integration of Vancouver Wharves assets into the Pembina value chain.
The Transaction enhances Pembina’s basin, currency and market diversification with approximately 50 percent of acquired adjusted EBITDA being denominated in U.S. dollars and the Cochin Pipeline System’s connections into premium quality condensate supply in the Chicago area. Further, Pembina believes there is meaningful upside available from currently identified capital projects, as well as further integration with Pembina’s existing businesses.
The assets being acquired in the transaction are expected to generate adjusted EBITDA of approximately $350 million in 2019. Through the integration of these assets with the company’s existing businesses, Pembina estimates that incremental run-rate adjusted EBITDA of $50 million can be realised within five years with nominal capital investment. In addition, Pembina expects the assets could generate an additional $50 million of run-rate adjusted EBITDA through expansion opportunities.
“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,” said Mick Dilger, Pembina’s President and Chief Executive Officer. “It represents an ideal opportunity to continue building on our low-risk, long-term, fee-for-service business model while extending our reach into the U.S. through a highly desirable cross-border pipeline. Further, it will enhance our diversification as well as Pembina’s customer service offering as a leading provider of integrated services to hydrocarbon producers in Western Canada.”