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    Investors Buy Into LNG Canada Supply Pipe

Summary

KKR and Alberta Investment Management are set to acquire a 65% stake in the 670-km Coastal GasLink pipeline from TC Energy.

by: Joseph Murphy

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Investors Buy Into LNG Canada Supply Pipe

US investment firm KKR has teamed up with Canadian fund manager Alberta Investment Management Co (AIMCo) to take a 65% stake in a pipeline project to supply the Shell-led LNG Canada export plant with gas.

The pair have signed a definitive agreement on acquiring the equity in the Coastal GasLink project from North American pipeline operator TC Energy, KKR said in a statement on December 26.

Coastal GasLink, the cost of which was recently revised upwards from C$6.2bn to C$6.6bn ($5bn), will consist of 670 km of pipeline and associated facilities. It will pump up to 2.1bn ft3/day of Western Canadian basin gas from Dawson Creek to Kitimat in British Columbia, where LNG Canada is being developed.

Construction of the pipeline is underway and all required permits are in place.

TC Energy expects a net gain of $600mn from the sale, it said in its own statement. On the deal’s completion, targeted for first half of 2020, Coastal GasLink is slated to secure a credit facility from a syndicate of banks to cover up to 80% of project costs, it said.

“The partial monetisation of Coastal GasLink advances our ongoing efforts to prudently fund our $30bn secured capital program while maximising value for our shareholders,” TC Energy CEO Russ Girling said.

Along the Coastal GasLink route, 20 First Nations have executed agreements that provide them an opportunity to directly invest in CGL. TC Energy said it would provide those First Nations an opportunity to take a 10% stake in the project, on terms similar to the KKR-AIMCo deal.

Shell and its partners – Malaysia’s Petronas, China’s PetroChina, Japan’s Mitsubishi and South Korea’s Kogas – took a final investment decision on building LNG Canada in October last year. The plant is due on stream in 2024-2025, and will produce up to 14mn mt/yr of LNG at full capacity.

KKR noted that the deal marked its third investment in Canadian gas infrastructure to date.