KKR and Alberta Investment Management Corporation (AIMCo) have agreed to acquire a 65% stake in the Coastal GasLink Pipeline Project, 670km long natural gas pipeline project in Canada, from TC Energy (formerly TransCanada).

The Coastal GasLink Pipeline and associated facilities are estimated to cost CAD 6.6 billion. The pipeline, which will initially have a capacity of 2.1 billion cubic feet per day will bring natural gas from the Western Canadian Sedimentary Basin in the Dawson Creek, British Columbia region to the LNG Canada liquefaction and export facility, which is being constructed in Kitimat in the same state.

LNG Canada expects to cut down global GHG emissions by up to 60-90 million tonnes annually, which is equivalent to the shutting down of 20-40 coal plants by replacing coal and diesel-fueled generation with cleaner burning natural gas.

All the required regulatory permits have been secured for the Coastal GasLink Pipeline Project for which construction activities have started. The natural gas pipeline project is supported by 25-year transportation service agreements with the five LNG Canada owners.

Brandon Freiman – KKR Member and Head of North American Infrastructure said: “We are excited to partner with TC Energy, a world class infrastructure developer, on this critical project.

“Coastal GasLink represents our third investment in infrastructure supporting Canada’s natural gas industry. We believe the export of Canadian natural gas to global markets will deliver significant benefits for the Canadian economy and local communities in Western Canada, and enable meaningful progress toward reducing global emissions.”

The global investment firm is making the investment mainly via a separately managed infrastructure account in partnership with the National Pension Service of Korea (NPS).

KKR’s financial advisors for the deal are HSBC Securities (Canada) and TD Securities, while Osler, Hoskin & Harcourt is its legal counsel.

Concurrent with the closing of the sale, TC Energy expects the Coastal GasLink Pipeline Project to enter into a secured project financing construction credit facility with a syndicate of banks to cover up to 80% of its funding during construction stage.

As per the terms of the deal, TC Energy will get upfront proceeds that include reimbursement of KKR and AIMCo’s proportionate share of the costs incurred on the pipeline project as of the closing date along with additional payment streams through its construction and operation.

TC Energy expects to register an after-tax gain of nearly CAD 600 million upon closing of the deal which includes the gain on sale, required revaluation of residual ownership interest to fair market value and recognition of unrecorded tax benefits in the past.

The Canadian midstream company will retain a stake of 35% in the Coastal GasLink Pipeline Project.

Russ Girling – TC Energy President and CEO said: “The partial monetization of Coastal GasLink advances our ongoing efforts to prudently fund our $30 billion secured capital program while maximizing value for our shareholders.

“We look forward to establishing a long-term relationship with KKR and AIMCo as we advance this critical energy infrastructure project. We remain fully committed to the Project and will continue to construct, deliver and operate the pipeline on behalf of the partnership.”

  Alberta Investment Management Corporation, Brandon Freiman, British Columbia, Canada, Coastal GasLink Pipeline Project, KKR, Russ Girling, TC Energy