Kinder Morgan, Inc. today announced that the Kinder Morgan Canada Limited Board of Directors has agreed to the purchase of the Trans Mountain Pipeline system and the expansion project (TMEP) by the Government of Canada for CAN$4.5 billion, and has agreed to work with the Government of Canada to seek a third party buyer for the Trans Mountain Pipeline system and TMEP through 22 July 2018.
As part of the agreement, the Government has agreed to fund the resumption of TMEP planning and construction work by guaranteeing TMEP’s advances under a separate Federal Government recourse credit facility until the transaction closes. The parties expect to close the transaction late in 3Q18 or early in 4Q18, subject to KML shareholder and applicable regulatory approvals.
“We are pleased that KML and the Government were able to reach agreement on a transaction that benefits the people of Canada, TMEP shippers and both KMI and KML shareholders,” said KMI Chief Executive Officer, and KML Chairman and CEO, Steve Kean. “The outcome reached represents the best opportunity to complete TMEP and thereby realise the great economic benefits promised by that project.
“For KMI, despite losing the EBITDA associated with the Trans Mountain system, we still expect to meet or exceed our 2018 distributable cash flow (DCF) per share target. The transaction will also have a positive impact on our consolidated balance sheet, as we expect KMI’s approximately 70% share of after tax proceeds to be approximately US$2.0 billion. Additionally, we continue to expect a 2018 annualised dividend of US$0.80 per share, followed by US$1.00 per share in 2019 and US$1.25 per share in 2020, a growth rate of 25% annually,” said Kean. “We will provide additional financial guidance after the transaction closes.
“With respect to future growth, we are confident that KMI will continue to find investment opportunities across its unparalleled network of midstream assets. Since mid 2015, we have added on average approximately US$1.3 billion per year to our backlog,” continued Kean.
“During the last twelve months, we have added approximately US$2.1 billion. Assuming that KMI can invest US$2.0 billion per year at an average capital-to-Adjusted EBITDA multiple of approximately 7 times (vs the on-average 6 times for our backlog as of the first quarter of this year) those investments would yield KMI incremental annual EBITDA of over US$300 million, representing greater than 4% annual EBITDA growth,” Kean concluded.
KMI does not provide forecasted net income (the GAAP financial measure most directly comparable to the non-GAPP financial measures DCF and Adjusted EBITDA) due to the impracticality of quantifying certain amounts required by GAAP, such as realised and unrealised foreign currency gains and losses and potential changes in estimates for certain contingent liabilities.
Read the article online at: https://www.worldpipelines.com/business-news/29052018/trans-mountain-pipeline-and-expansion-project-sold-for-can45-billion/