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Pembina closes acquisition of Kinder Morgan Canada, part of Cochin line

Pembina Pipeline Corp. closed its previously announced acquisition of Kinder Morgan Canada Ltd. and the U.S. portion of the Cochin pipeline system for C$4.35 billion.

Pembina acquired the U.S. portion of the Cochin Pipeline for US$1.55 billion, according to a Dec. 16 release from Kinder Morgan Inc.

In addition, Pembina also acquired all of the outstanding common equity of subsidiary Kinder Morgan Canada including Kinder Morgan's 70% majority voting stake. Under the deal, Kinder Morgan will receive 0.3068 Pembina shares for each Kinder Morgan Canada share it holds. Under that arrangement, Kinder Morgan will get 25 million shares in Pembina, or less than 5% of its common equity. Kinder Morgan said it plans to convert the shares into cash in an opportunistic and nondisruptive manner.

Kinder Morgan said it plans to use the proceeds from the deal to pay down debt, which would create $1.2 billion of balance sheet or borrowing flexibility in 2020.

Pembina said in a separate Dec. 16 release that its board approved an increase of 1 Canadian cent per share to its monthly common share dividend rate to 21 cents per share, subject to the closing of the Kinder Morgan deal. The first dividend in which the increase will take effect is expected to be declared in early January 2020 and payable on or around Feb. 15, 2020.

The company, based on its outlook and expectations for 2020, said it anticipates annual adjusted EBITDA of C$3.25 billion to C$3.55 billion. Pembina also expects to put into service an additional C$1.1 billion of projects during 2020, according to the release.

For 2020, Pembina is allocating C$2.3 billion to its total capital expenditures. Its pipelines division is slated to have a C$1.3 billion budget, while its facilities and marketing division and new ventures division are expected to spend C$400 million and C$50 million, respectively. A budget of C$525 million was set aside for contributions to equity accounted investments and advances to related parties.