Canada Is Said to Have Started Marketing Trans Mountain Sale

(Bloomberg) -- Canada is already sending out marketing materials for the Trans Mountain pipeline it just acquired from Kinder Morgan Inc. to several potential buyers, according to people familiar with the matter.

Greenhill & Co., a New York-based investment bank, was the exclusive financial adviser to the federal government on its C$4.5 billion ($3.5 billion) purchase of the pipeline and is working on a sale ahead of an expected shareholder vote on the issue in late July, the people said, asking not to be identified because the matter is private. The goal is to have a new buyer in place for the vote, and to potentially turn a profit, they said.

The government has reached out to several pipeline companies, pension funds, and asset managers about the sale, the people said. The deal would include the government’s guarantee to indemnify potential buyers against political delays, which was also offered to Kinder Morgan if it were to push ahead with the project.

“We think that we paid a fair price for the assets, there was due diligence done on the project and the conclusion was that it’s commercially viable -- we believe the private sector will come to the same conclusion,” Canadian Natural Resources Minister Jim Carr said in an interview Thursday. “There have been expressions of interest from a variety of places, but we’ll see.”

Indigenous Buyers?

Canadian Finance Minister Bill Morneau signaled the government’s in no hurry to sell and also indicated indigenous groups may be among the interested parties.

"Most importantly, the question we’ll ask ourselves is: does having the private sector in the short term advance our cause of getting the project done?," he said in an interview with BNN Bloomberg.

"Is it short-term going back to the private sector -- pension funds and indigenous groups -- or is it going to take a longer period of time?," he said. "I don’t have the answer to that yet because we’ll see what comes out of these expressions of interest."

A representative for Greenhill wasn’t immediately available for comment.

Carr said “conversations will happen relatively” soon toward a resale.

“The first priority is to get construction rolling and that will happen very soon,” he said.

The engineering team was hopeful that construction could be done by December 2020, but recent delays may have changed that, Carr said. “Projects that are approved in Canada, that are deemed to be in the national interest by the government in Canada, will proceed,” he said.

Management Included

The federal government announced it would buy the Trans Mountain pipeline system and its planned expansion project Tuesday to ensure it gets built. The move ended weeks of speculation sparked by Kinder Morgan’s threat to abandon a project facing “unquantifiable risk” as the British Columbia government vowed to use every tool to block it.

The sale would include the expansion, related pipeline and terminal assets as well as the management team that was tasked with building the pipeline, the people said. Carr confirmed the management team and all of the work force were included and said it’s “possible” that a buyer wouldn’t need pipeline experience.

Others have expressed doubt the federal government will be able to sell the project without taking a major loss.

“The taxpayer is going to end up losing billions of dollars here,” Jeff Rubin, senior fellow at the Waterloo, Ontario-based Centre for International Governance Innovation, said by phone Tuesday after the purchase was announced. “The commercial viability of this project was very much in doubt in the private sector’s eye, and that’s unfortunately why we are now investors.”

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