The Pembina Pipeline Corporation has acquired the U.S. portion of the Cochin Pipeline for
$1.546 billion.
In addition, Pembina has acquired all of the outstanding common equity of Kinder Morgan Canada Limited, including the 70 percent majority voting interest held by Kinder Morgan Inc.
Under the Arrangement, KMI will receive .3068 shares of Pembina for each KML share it holds. This exchange ratio results in KMI receiving approximately 25 million shares of Pembina stock for KMI’s 70 percent interest in KML, which equates to slightly less than 5 percent of Pembina’s common equity. KMI expects to ultimately convert these shares into cash in an opportunistic and non-disruptive manner.
As discussed in the December 5, 2019 press release announcing our 2020 budget guidance, KMI intends to use the proceeds from the Pembina transactions to pay down debt – creating approximately $1.2 billion of balance sheet/borrowing flexibility in 2020 (relative to KMI’s long-term leverage target of 4.5x Net Debt to Adjusted EBITDA), which provides attractive optionality. KMI can retain that financial flexibility or use some or all of it to repurchase shares or invest in attractive projects. For illustrative purposes only, using $1.2 billion for share repurchases or to invest in projects could increase the company’s 2020 DCF/share growth from 3 percent to 5 or 6 percent, respectively, assuming a full-year benefit from the repurchases or projects.
