Canada to acquire Trans Mountain expansion project for $3.45bn

The Canadian Government has entered a deal to acquire Kinder Morgan’s Trans Mountain expansion project and associated infrastructure for C$4.5bn ($3.45bn).

The fate of the pipeline expansion project was hanging in balance as Kinder Morgan suspended investment and set a deadline until the end of this month for the government to resolve the legal and jurisdictional issues affecting the expansion.

As part of the deal, the federal government has also agreed to provide financing, through a loan guarantee from Export Development Canada, to the company to immediately restart construction on the project.

Expected to cost C$7.4bn ($5.68bn), the project links Edmonton, Alberta, to Burnaby, British Columbia (BC), and is expected to triple the pipeline capacity from 300,000 barrels a day to 890,000 barrels a day.

Canadian Finance Minister Bill Morneau said: “Our government believes that the commercial agreement we have reached with Kinder Morgan is the best way to protect thousands of good, well-paying jobs while delivering a solid return on investment for Canadians.”

Though the expansion project received the support of the federal and Alberta governments, it faces opposition from BC and environmentalists.

The Alberta government will also contribute an emergency fund of up to C$2bn ($1.53bn) towards the development of the project.

Despite the acquisition of the Trans Mountain expansion project, the federal government plans to offload it to other suitable buyers at a later stage.

To ensure the continuous development of the project, the Canadian Government will offer indemnity to potential new owners to provide immunity against any financial loss posed by political delays.

The acquisition is scheduled to be completed in August.