Is Canada Eyeing Kinder Morgan's Trans Mountain Project?
Zacks Investment Research | May 28, 2018 09:53PM ET
Per sources, Kinder Morgan Inc’s (NYSE:KMI) Trans Mountain oil pipeline along with its expansion project is likely to be bought by Canada. The government intends to ride out the uncertainties over the construction of the pipeline. The project is owned by the company’s subsidiary — Kinder Morgan Canada Ltd.
No details were disclosed by the respective parties due to the confidential nature of the discussions. An email from the company stated that it will not divulge any details unless two of its objectives were met. The first objective includes permission to undertake construction through British Columbia. The second target comprises insurance of the company’s shareholders.
It is likely that Canada will buy the pipeline outright, which is currently the most feasible option. The value of the deal will be announced today during prime minister Justin Trudeau’s expected cabinet meeting.
Initially, Canada offered to cover the expenses for the expansion project but is now contemplating on buying it. Post the takeover, the government intends to sell the project to complete the construction. There is no clarity on whether other Kinder Morgan assets will be included in the sale.
In April, Kinder Morgan stated that it planned to defer bulk of work on its C$7.4-billion ($5.8 billion) Trans Mountain pipeline expansion and is likely to abandon the project if Canada’s provincial and federal governments cannot reach an agreement by May 31.
The pipeline expansion continues to face criticism from various provincial governments of British Columbia as well as municipalities, native groups and environmental activists. This factor indicates the uncertainty over key energy projects in Canada.
The shortage of pipelines and rail transportations has disrupted the production schedule of the companies in Western Canada. The companies had to slow activities due to obstruction in crude transportation. In view of this, Alberta's provincial government supports the project that has also received approval from Canada's federal government.
Details related to the deal are expected to be announced by May 29, 2018.
Price Performance
Kinder Morgan’s shares have lost 1.9% in the past three months, against the Original post
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