'A great day': Kinder Morgan CEO cheerful after Trans Mountain sale
Company sells existing pipeline and proposed expansion project to the federal government
"We think this is a great day not only for our company but for Canada, and we're happy to be participating in it," CEO Steve Kean said on a conference call with analysts and investors after FInance Minister Bill Morneau's announcement Tuesday.
The Liberal government will purchase the existing Trans Mountain pipeline and the proposed expansion. Construction is set to begin this summer and Ottawa will start picking up the tab for those costs.
Kinder Morgan no longer carries the uncertainty surrounding the court challenges by Indigenous groups and the British Columbia government, which threatened to significantly delay the project.
"That's not a risk that we're carrying as part of this transaction," said Kean. "The entity will continue to prosecute the appeal, if you will, but it's not a residual risk that Kinder Morgan bears."
Kean described the sale as a "fair price." The deal is expected to close in the second half of this year.
In the meantime, Kinder Morgan will help the federal government find a third party for the pipeline and the proposed expansion by July 22. Even if a buyer is not found, Kinder Morgan will still be paid the $4.5-billion sale price.
Kinder Morgan will continue to own properties in Canada such as its storage facilities in Alberta and its Vancouver export terminal. The Houston-based company continues to say it wants to expand its operations in Canada.
"A decision has not yet been made on how to make the best use of the cash proceeds of the transaction. We're now laser focused on closing the transaction," said Kean.
Kinder Morgan had temporarily halted work on the Trans Mountain expansion as opposition by the British Columbia government, in particular, escalated.
All shareholders of Kinder Morgan Canada must vote on the deal.
Increase odds of construction
The federal government's decision to purchase the proposed pipeline "improves the likelihood this project proceeds to completion," said Kevin Birn, an oilsands analyst with IHS Markit.
"This announcement today [Tuesday] really underscores the degree of [the government's] conviction to see this project proceed."
Generally, the oilpatch industry welcomes Tuesday's development, although many would rather see the private sector build new projects without government intervention.
"It's concerning that the federal government felt they needed to acquire the project [and] invest taxpayers' money to assert their jurisdiction," said Chris Bloomer, chief executive of the Canadian Energy Pipeline Association.
At midday, Kinder Morgan Canada's stock was down about one per cent, while the parent company's stock was up about one per cent.