KKR, Pembina Combine Canadian Gas Assets in $9 Billion Deal

(Bloomberg) -- KKR & Co. and Pembina Pipeline Corp. agreed to combine their natural gas processing assets in Western Canada to create a joint venture just months after the Calgary-based company lost out in its attempt to take over rival Inter Pipeline Ltd.  

The entity will also acquire certain interests held by U.S. pipeline giant Energy Transfer LP. The total value of the transactions is C$11.4 billion ($9 billion), Pembina said Tuesday in a statement. That sum excludes the value of any assets under construction. 

The deal follows Pembina’s defeat by Brookfield Infrastructure Partners LP in a months-long takeover battle for Inter Pipeline. Had Pembina succeeded, the purchase of Inter Pipeline would have created one of the largest energy companies in Canada, with added pipeline infrastructure across the western part of the country. The deal with KKR is the first by Pemina under new Chief Executive Officer Scott Burrows.

The joint venture announced Tuesday, dubbed “Newco” for now, will have a foothold in northeast British Columbia, a basin with significant gas reserves. Although there’s no operational export terminal for liquefied natural gas in the province, several projects have been proposed and one is under construction to supply a growing global market for chilled natural gas. Pembina’s own Cedar LNG project off British Columbia is one LNG project that’s been proposed. 

The deal is expected to close late in the second quarter or during the third quarter.

“We share Pembina’s views on the positive and essential role that Canadian natural gas plays within the global energy transition and we are pleased to combine these assets to create a stronger platform to meet that opportunity,” said Brandon Freiman, head of North American infrastructure at KKR.

Pembina rose 2.3% to C$44.08 on the Toronto Stock Exchange, the highest closing price in almost two years.

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