Kinder Morgan pitches Trans Mountain sale to its shareholders
Kinder Morgan Canada (KML) has scheduled a special shareholder's meeting at the end of August to approve the $4.5 billion sale of its Trans Mountain (TMPL) assets to the federal government.
The deal includes the existing Trans Mountain line, the Puget Sound pipeline to refineries in Washington State, associated tank farms in Edmonton, Kamloops and Sumas, as well as the Westridge Marine Terminal in Burnaby, BC. The government is also required to fund costs for completion of the Trans Mountain Expansion line (TMEP), which has already commenced construction. All workers employed within the TMPL network also get transferred to their new owners.
In order to estimate the value of the Trans Mountain assets, TD Securities did a sensitivity analysis assuming costs for the expansion would over-budget by $1.9 billion, with schedule delays extending to December 2021. Kinder Morgan Canada stresses it has not updated its original cost and schedule estimate for TMEP due to uncertainties around timing. In the spring of 2017, the company had pegged capital costs at $7.4 billion. Earlier this year, Kinder Morgan also pushed back the in-service date by 1-year to December 2020.
In a letter to KML shareholders, the company says it was forced to sell the assets due to "constitutional and jurisdictional trade disputes" that may have taken years to resolve. KML's board of directors has unanimously approved the sale and recommends its shareholders do the same, calling the deal "fair and in the best interests of the Company."
The shareholder vote takes place in Calgary on August 30 and is widely expected to pass.
KINDER MORGAN CANADA NOTICE OF SPECIAL MEETING OF SHAREHOLDERS JUL 27, 2018