Kinder Morgan Canada Eyes Domestic Bond Sales for Trans Mountain

(Bloomberg) — Kinder Morgan Canada Ltd. may issue its first Canadian-dollar bonds next year to replace its existing funding for the Trans Mountain pipeline expansion.

The Calgary-based firm received a BBB investment-grade credit rating from S&P Global Ratings on June 2, a first step in a public debt sale. It will look to strategically replace its C$4 billion ($3 billion) construction credit facility after work begins in September, but likely not until at least 2018, David Michels, Kinder Morgan Inc.’s vice president of finance and investor relations, said by phone.

“It’ll be opportunistic, it’ll be how strong the market is, how much of a need do we have to do it, and that’ll be based on the amount that we’ve drawn under the construction facility,” Michels said.

Kinder Morgan Canada, which was spun out of Kinder Morgan Inc. in a recent C$1.75 billion initial public offering, has C$6.2 billion left to spend on its controversial C$7.4 billion project, which would triple the capacity in a pipeline running from near Edmonton, Alberta, to a terminal near the Vancouver port. It has secured C$5.5 billion in credit facilities to fund the project, all rated BBB by S&P, according to the ratings decision.

The federal government supports the project, but two political parties in British Columbia that oppose the pipeline have struck an alliance and are poised to oust the current provincial Liberal government, raising uncertainty around the future of the project. Kinder Morgan Canada shares are trading slightly below their IPO price.

“We’re confident that this will proceed and we’re confident it will proceed on budget and on time,” Michels said, noting that Prime Minister Justin Trudeau had reaffirmed the government’s support for the project after the New Democratic and Green parties aligned in B.C.

A Canadian-dollar bond sale would be the first for Kinder Morgan, according to data compiled by Bloomberg.

©2017 Bloomberg L.P.

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