Kinder Morgan Canada IPO shares drop on prospect of BC NDP govt

Trans Mountain
Trans Mountain Kinder Morgan photo.

Closing of offering removes final condition for investment approval of Trans Mountain Expansion Project

Despite speculation by pipeline opponents that Kinder Morgan Canada’s initial public offering to fund the Trans Mountain Expansion pipeline construction might fail, the IPO is fully subscribed and the company is trading on the TSX as of Tuesday. The project’s political opposition does seem to have weighed on investors, though, as the stock was initially trading below the IPO price.

Kinder Morgan Canada Limited and Kinder Morgan, Inc. announced completion of the initial public offering of 102,942,000 restricted voting shares of the company at a price to the public of $17/share for total gross proceeds of approximately $1.75 billion, according to a press release.

The proceeds of the offering will be used by the company to indirectly acquire from Kinder Morgan an approximate 30 per cent interest in a limited partnership that holds the Canadian business of Kinder Morgan.

Kinder Morgan will use the proceeds it receives to pay down debt.

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Closing of the offering will remove the final condition for investment approval of the Trans Mountain Expansion Project.

But the project faces potentially stiff opposition with the announcement Monday that the BC Green Party has decided to support a minority government with BC NDP leader John Horgan as premier.

Both leaders are staunchly opposed to Trans Mountain Expansion.

“This issue of Kinder Morgan is one that was critical to us, and I think you’ll see that reflected in tomorrow’s [Tuesday’s minority government] announcement,” Green Party leader Andrew Weaver told reporters Monday.

Premier Christy Clark’s Liberal party supported the project after she said it met her five conditions for the “approval” of a heavy crude oil pipeline project through the province.

Kinder Morgan
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The restricted voting shares will began trading Tuesday on the Toronto Stock Exchange under the symbol ‘KML’.

Investors unease with new BC government was felt early for Kinder Morgan Canada’s IPO, being with a low of $15.75 a share, and $16.22 at 12:25 eastern time.

The company was initially planning to offer shares in the $19-22 range, but lowered expectations with a $17 per share IPO, according to the Globe and Mail.

The underwriters, Toronto Dominion Bank and Royal Bank of Canada have an option to purchase up to an additional 15,441,300 restricted voting shares at the offering price, exercisable until 30 days after closing of the offering.

At the closing of the offering, Kinder Morgan holds approximately 70 per cent of the issued and outstanding shares of its Canadian subsidiary through its indirect ownership of 242,058,000 special voting shares.