Kinder Morgan Inc. will make a final investment decision for the Trans Mountain Expansion Project (TMEP) crude oil pipeline in conjunction with indirect subsidiary Kinder Morgan Canada Ltd. (KML), conditional on successful completion of an initial public offering of KML stock to take place not later than May 31.
TMEP will add 590,000 b/d to Trans Mountain’s capacity, bringing its total to 890,000 b/d. The project is underpinned by 15 and 20-year shipper commitments of 707,500 b/d, or roughly 80% of capacity on the expanded pipeline, with the other 20% reserved for spot volumes as required by Canada’s National Energy Board. KMI expects to begin construction in September for completion in December 2019.
KMI acknowledged the political climate surrounding TMEP “was not ideal” but that its financing contingency period, as specified in shipper agreements, concludes at the end of May, requiring action now.
KML is pricing the IPO of 102.9 million shares of common stock at $17 (Can.)/share for total gross proceeds of $1.75 billion (Can.). Upon closing of the offering, KMI will still own about 70% of its current Canadian business, which will be operated and administered by KML and its affiliates. The business consists of the Trans Mountain pipeline system (including related terminals), the Puget Sound pipeline, the Jet Fuel pipeline system, the Canadian portion of the Cochin pipeline system, the Vancouver Wharves terminal and the North 40 terminal, and three jointly controlled investments: the Edmonton Rail terminal, the Alberta Crude terminal and the Base Line terminal.
TMEP is a $7.4-billion (Can.) project, with a remaining cash spend of $6.2 billion (Can.) as of Mar. 31, KMI said.
