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Canadian Assets on Sale: Energy Transfer Sells Gas Processing Bussines to Pembina-KKR for $1.3 Billion
04/19/2022
Under the agreement, Energy Transfer will sell its 51% interest in Energy Transfer Canada to the Pembina-KKR joint venture, for more than CA$1.6 billion (US$1.3 billion) including debt and preferred equity. KKR's funds already own the remaining stake.
TC’s assets include six natural gas processing plants with a combined operating capacity of 1.29 Bcf/d and an 848-mile natural gas gathering and transportation network in the Western Canadian Sedimentary Basin.
Through this agreement, Energy Transfer will be able to divest its high-quality Canadian assets at an attractive valuation, deleveraging its balance sheet and allowing it to redeploy capital within the U.S. market.
The Calgary-based company, Energy Transfer Canada, is one of Alberta's largest gas processors. As part of its portfolio of assets, the company owns six gas processing plants with a combined capacity of 1,290 MMcf/d, as well as a network of approximately 848 miles of natural gas gathering and transportation infrastructure.
As a result of the sale, Energy Transfer is slated to receive cash proceeds of approximately 340 million Canadian dollars (US$270 million), and close by the third quarter of 2022.
While this process is underway, Pembina and KKR will combine their western Canadian natural gas processing assets into a single, new joint venture entity — Newco, owned 60% by Pembina and 40% by KKR. Pembina will also be Newco's operator and manager.
This new entity will acquire Pembina's field-based natural gas processing, Veresen Midstream's portfolio (55% owned by KKR funds, 45% by Pembina), and ETC's business. And is expected to have a natural gas processing capacity of about 5 Bcf/d or about 16% of Western Canada’s total processing capacity. The worth of this joint venture will be around CA$11.4 billion (US$8.99 billion).
It is expected that all the deals will close late in the second or third quarter. According to Pembina, it plans to sell its interest in its Key Access Pipeline System as a way to finance the deal, and it is reviewing its portfolio for other noncore, nonoperating assets that might be sold in the process.
After the deal closes, Pembina plans to raise its dividend by 3.6%, as well as raise its share repurchase target to CA$350 million (US$275 million) from CA$200 million.
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