Kinder Morgan Inc. (NYSE: KMI) has made a final investment decision (FID) on its $7.4 billion Trans Mountain pipeline expansion, despite a political climate that the company acknowledges is “not ideal.”
The FID was announced May 25, along with a price set for an initial public offering to create Kinder Morgan Canada Ltd., a new publicly listed company to finance the project.
Kinder Morgan Canada Ltd. will list on the Toronto Stock Exchange under the symbol KML.
Kinder Morgan plans to raise $1.7 billion by issuing 102.9 million $17 shares of common stock. The company will not be co-listed on any American stock exchanges.
The balance of the $7.4 billion project will be financed through the company’s cash flow, which is about US$4.5 billion annually.
“Upon the completion of the IPO, we will have secured satisfactory financing for the Trans Mountain Expansion Project,” Kinder Morgan CEO Steve Kean said in a press release.
“The KML IPO is one of the largest ever in Canada and provides Canadian investors the opportunity to invest in a leading integrated midstream set of western Canadian assets.”
Kinder Morgan has long-term offtake agreements with 13 shippers. The agreements required Kinder Morgan to make a final investment decision by the end of May.
“While the political climate was not ideal, the process proceeded at this time because the Trans Mountain Expansion Project financing contingency period, as specified in shipper agreements, concludes at the end of May,” the company said in its press release.
Kinder Morgan was referring to the recent provincial election, in which the Liberals – who support the expansion project – were reduced to a minority and obliged to play ball with the BC Green Party, which is determined to halt the project.
However, the project already has provincial and federal approval, and pipelines are a federal responsibility.
Even so, the project still faces 19 court challenges, and should the Green Party and NDP form a coalition, it could try to at least put up some roadblocks.
“Our execution planning is complete, our approvals are in hand, and we are now ready to commence construction activities this fall generating thousands of direct jobs for Canadians, including significant benefits to Indigenous communities in Alberta and British Columbia,” said Ian Anderson, president of Kinder Morgan Canada.
The Trans Mountain pipeline was originally built in the 1950s. It runs 1,150 kilometres from Edmonton to Burnaby. Kinder Morgan plans to twin the pipeline, which would triple its current capacity to 890,000 barrels of oil per day from 300,000. Oil tanker traffic would increase to 34 per month from five.
