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Kinder Morgan considering sale of remaining Canadian assets

Kinder Morgan Inc. may sell the remaining assets of its Canadian unit to complete its exit from the country after unloading the Trans Mountain pipeline system to the federal government, CEO Steve Kean said.

Kinder Morgan Canada Ltd. is a small midstream company with "attractive assets and with no debt on the balance sheet," Kean said Sept. 5 at the Barclays CEO Energy-Power Conference in New York. The company could also continue to run and manage the assets, which earn about C$200 million per year in EBITDA, he said. Kinder Morgan's largest Canadian asset, the Trans Mountain pipeline system, was sold to the Canadian government for C$4.5 billion in August.

"There are plenty of midstream players, including people with complementary positions to ours, who we think will be interested," Kean said at the Sept. 5 conference. "We're going to explore that over the coming months."

After offloading Trans Mountain, Kean said, Kinder Morgan Canada consists of the Cochin pipeline, which carries NGLs from Ontario to Alberta; oil terminals in the Edmonton, Alberta region; a bulk commodities marine terminal in Vancouver, British Columbia; and a jet fuel pipeline and distribution system near Vancouver. Kean omitted the company's Utopia pipeline, an NGL conduit with a capacity of 75,000 barrels per day that links Ohio with southern Ontario.

The Houston-based midstream giant said it supports a plan by Kinder Morgan Canada to distribute the proceeds of the Trans Mountain sale to shareholders, including itself, and a 3-to-1 reverse split of the Canadian company's shares. Kinder Morgan Inc. holds about 70% of Kinder Morgan Canada's voting shares, and the proposals require two-thirds of voting shares to be approved.

Enbridge Inc. recently sold a suite of natural gas gathering and processing assets in British Columbia to Brookfield Asset Management Inc. for about C$4.3 billion. While Canadian midstream assets are fetching attractive prices, that value has not been reflected in the stock prices of their owners, which trade at a lower price relative to their U.S. peers. Kean said that lower valuation will weigh on Kinder Morgan's deliberations about a Canadian exit.

"The multiple at which KMI trades, and the multiple at which a set of midstream assets like these would trade, there's a dilutive effect there," Kean said. "Whether KMI could make that number — those numbers — work, I think, is very much an open question. But the fact that these are attractive assets in a good market ... those are facts. And so over the coming months, we'll see how this particular process plays out."