Trans Mountain Expansion Receives Green Light From Kinder Morgan Subject To Successful IPO

Houston-based Kinder Morgan, Inc., said today it has made a final investment decision to proceed with its C$7.4 billion Trans Mountain expansion project in conjunction with its indirect subsidiary, Kinder Morgan Canada Limited

The final investment decision is conditioned on the successful completion of the initial public offering, which is expected to take place by not later than May 31, 2017.

The parent company has priced its IPO of 102.9 million shares of common stock at a price to the public of C$17 per share for total gross proceeds of C$1.75 billion. 

“Upon the completion of the IPO, we will have secured satisfactory financing for the Trans Mountain expansion project. We are excited to be moving forward on this tremendous project which is expected to benefit KMI and KML as well as our Trans Mountain shippers and Canada,” Steve Kean, Kinder Morgan chief executive officer, said in a news release.

“The KML IPO is one of the largest ever in Canada and provides Canadian investors the opportunity to invest in a leading integrated midstream set of western Canadian assets. We are very pleased to price the offering and excited about the future growth opportunities that this platform enables. The offering also strengthens KMI’s balance sheet and strengthens our ability to return value to shareholders,” he added. 

“Our execution planning is complete, our approvals are in hand, and we are now ready to commence construction activities this fall generating thousands of direct jobs for Canadians, including significant benefits to indigenous communities in Alberta and British Columbia,” said Ian Anderson, president of Kinder Morgan Canada. 

The expansion project is a C$7.4 billion project (with a remaining cash spend of C$6.2 billion as of March 31, 2017) which upon completion will provide western Canadian oil producers with an additional approximately 590,000 bbls per day of pipeline capacity to the West Coast and United States and global markets, increasing capacity to 890,000 bbls per day.

The project is underpinned by 15- year and 20-year shipper commitments of 707,500 bbls per day, or roughly 80 per cent of the capacity on the expanded pipeline, with the other 20 per cent reserved for spot volumes as required by the National Energy Board. Construction on the project is expected to begin in September 2017 with completion expected in December 2019.

The final investment decision was contingent on securing financing. While the political climate was not ideal, the process proceeded at this time because the Trans Mountain Expansion Project financing contingency period, as specified in shipper agreements, concludes at the end of May, said Kinder Morgan. 

The IPO constitutes a sale of a portion of KMI’s interest in the Canadian business of KMI. It includes the Trans Mountain pipeline system (including related terminals assets), the Puget Sound pipeline, the Jet Fuel pipeline system, the Canadian portion of the Cochin pipeline system, the Vancouver Wharves Terminal and the North 40 Terminal as well as three jointly controlled investments: the Edmonton Rail Terminal, the Alberta Crude Terminal and the Base Line Terminal.


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