Kinder Morgan treads minefield in post-vote British Columbia

Wed May 17, 2017 6:04pm EDT
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By Ethan Lou and John Tilak

CALGARY, Alberta/TORONTO (Reuters) - British Columbia could become a minefield for Kinder Morgan Inc, with provincial election results expected to complicate the U.S. company's Trans Mountain pipeline expansion and plans for a Canadian initial public offering.

The Canadian province's pro-energy Liberal Party won the May 9 election but lost its majority in the legislature. This has forced it to woo the environmentalist Green Party to govern, raising potential for concessions. In the worst scenario for the Liberals, the Greens could form their own majority government with the second-place New Democrats, who like the Greens oppose Trans Mountain.

While final electoral results can change with the compiling of absentee votes and recounts by May 24, a provincial government unfriendly to development could mean major obstacles to Trans Mountain, even though the federal government has approved it. The expansion of the crude pipeline from oil-producing Alberta to the B.C. coast nearly triples its capacity.

The election is expected to cast a shadow on Kinder Morgan's proposed $1.3 billion IPO for its Canadian unit, set to be the nation's fourth-biggest, filed one day after the election.

"The really close B.C. election vote puts pressure on the Kinder Morgan IPO," said Colin Cieszynski, chief market strategist at CMC Markets. "You run the danger of the whole thing getting stalled for years or going into limbo."

The Trans Mountain project said in a statement on Tuesday that the expansion continues to advance. Kinder Morgan has said in IPO filings that changes in government could disrupt or delay projects such as Trans Mountain, causing "significant" increased costs.

"While the provincial government cannot undo the federal authorization to construct and operate the Trans Mountain pipeline, they could create some potential issues at a local and provincial level," said Alan Ross, managing partner of law firm Borden Ladner Gervais LLP's Calgary office.

"To the extent not done so already, any Kinder Morgan Canada IPO would need to price in political risk related to the B.C. election," he said.   Continued...

Crude oil tanks at Kinder Morgan's terminal are seen in Sherwood Park, near Edmonton, Alberta, Canada November 13, 2016.  REUTERS/Chris Helgren