Energy Transfer sells Canadian midstream assets to Pembina-KKR joint venture

March 1, 2022
Energy Transfer is selling its 51% interest in Energy Transfer Canada ULC to a JV which includes Pembina Pipeline and global infrastructure funds managed by KKR.

Energy Transfer LP is selling its 51% interest in Energy Transfer Canada (ETC) ULC to a joint venture which includes Pembina Pipeline Corp. and global infrastructure funds managed by KKR & Co. Inc. ETC’s assets include six natural gas processing plants a combined operating capacity of 1.29 bcfd and an 848-mile natural gas gathering and transportation network in Western Canadian Sedimentary basin.

Pembina and KKR will combine their western Canadian natural gas processing assets into a single, new joint venture entity (Newco), owned 60% by Pembina and 40% by KKR's funds. Pembina will serve as operator and manager of Newco. Included in the assets are Pembina's field-based natural gas processing, the Veresen Midstream business (currently owned 55% by funds managed by KKR and 45% by Pembina), and the business acquired from ETC, already owned 49% by KKR funds.

Pembina’s field-based gas processing assets subject to the transaction include the 360-MMcfd Cutbank complex in west-central Alberta, the 200-MMcfd Saturn complex in northern Alberta, the 300-MMcfd Resthaven plant, the 200-MMcfd Duvernay complex, and the 5,000-b/d Saskatchewan ethane extraction plant, as well as its 45% interest in Veresen Midstream.

Pembina's Empress, Younger, and Burstall assets will be excluded from the transaction and Pembina will retain its current ownership position.

Collectively, the ascribed value of these transactions totals $11.4 billion, excluding the value of assets under construction related to Newco's 50%, non-operated interest in the Key Access Pipeline System (KAPS) project. Following closing of the transactions, Pembina and KKR intend to dispose of Newco's non-operated interest in KAPS, subject to receiving acceptable purchase terms through the sale process. Energy Transfer’s stake in ETC was valued at $1.3 billion, including debt and preferred equity.

The contribution of Pembina's and KKR's assets to Newco, and Newco's acquisition of 51% of ETC from Energy Transfer, are cross-conditional upon each other and will occur concurrently. The companies expect the transactions to close by third-quarter 2022 and to announce Newco's permanent name before closing.