THE Government of Canada announced on Tuesday that it has reached an agreement with Kinder Morgan to purchase the company’s Trans Mountain Expansion Project and related pipeline and terminal assets for $4.5 billion. The transaction is expected to close in August 2018.
The government claimed that this investment represents a fair price for Canadians and for shareholders of the company, and will allow the project to proceed under the ownership of a Crown corporation. The core assets required to build the Trans Mountain Expansion Project have significant commercial value, and this transaction represents a sound investment opportunity.
However, the government said it was not its intention to be a long-term owner of this project and that at the appropriate time, it will work with investors to transfer the project and related assets to a new owner or owners, in a way that ensures the project’s construction and operation will proceed in a manner that protects the public interest. Many investors have already expressed interest in the project, including Indigenous groups, Canadian pension funds and others.
Any purchaser of the project would be covered by a federal indemnity protecting them against any financial loss posed by politically motivated unnecessary delays, in line with the indemnity offered to Kinder Morgan by the Government on May 16, 2018.
The Government of Alberta will also contribute to get the project built. Alberta’s contribution would act as an emergency fund and would only come into play if required due to unforeseen circumstances. The amount of Alberta’s contribution could range from zero to a maximum of $2 billion. In return, Alberta will receive value commensurate to their contribution, through equity or profit sharing.
Existing profit sharing or other agreements established between Kinder Morgan and Indigenous groups would be maintained under these transactions.
The government said it has reached an agreement with Kinder Morgan to immediately restart construction on the Trans Mountain Expansion Project. The government will guarantee financing for the 2018 summer construction season, through a loan guarantee from Export Development Canada. This guarantee will ensure that construction work on the project is restarted without delay.