Pembina completes Kinder Morgan Canada and Cochin Pipeline acquisition

Pembina Pipeline has completed its previously announced acquisition of Kinder Morgan Canada (KML) and the US portion of the Cochin Pipeline from Kinder Morgan (KMI).

Pembina Pipeline acquired the pipeline section for $1.546bn and all of the outstanding common equity of KMI’s subsidiary KML, including the 70% stake held by the company.

Regulated by the Federal Energy Regulatory Commission, the US portion of the pipeline extends from the Kinder Morgan station near Riga, Michigan, to the International Boundary near Maxbass, North Dakota.

Under the arrangement, KMI will receive 0.3068 shares of Pembina Pipeline for each KML share it owns.

KMI will receive around 25 million shares of Pembina Pipeline stock for its 70% stake in KML, which is equivalent to nearly 5% of Pembina’s common equity interest.

KMI stated that it intends to convert these shares into cash in a non-disruptive manner, which is expected to yield pre-tax proceeds of $935m.

Pembina Pipeline president and CEO Mick Dilger said: “We are pleased to have closed the highly strategic Kinder Morgan transaction earlier than originally expected, which will allow us to realise a full year of contribution from these assets in 2020.

“The newly acquired assets provide enhanced integration within our existing franchise, entrance into exciting new businesses and clear visibility to creating long-term value for our shareholders.

“Our teams will now focus on completing the integration activities and pursuing the $100m of additional run-rate adjusted EBITDA we expect to realise over the coming years.”

Pembina Pipeline initially signed the agreements in August.

Earlier this month, KMI announced the company’s 2020 budget guidance and noted that it plans to use the proceeds from the Pembina transactions to reduce debt, thereby creating around $1.2bn of balance sheet or borrowing flexibility next year.