Canada to buy major pipeline to ensure it gets built

Canada to buy major pipeline to ensure it gets built

Canada will buy Kinder Morgan Canada Ltd's (KML.TO) Trans Mountain pipeline for C$4.5 billion ($3.5 billion), the government said on Tuesday, in hopes of saving the project that faces formidable political and environmental opposition.

Kinder Morgan Canada and the Canadian government have agreed to work to seek a third party buyer for the Trans Mountain Pipeline system and the expansion project (TMEP) through July 22, 2018, Kinder Morgan Canada said.

Kinder Morgan last month gave Ottawa an ultimatum: Chairman Steve Kean said the company would suspend all work on the expansion project entirely if the legal issues surrounding it can not be resolved by May 31, adding that it would not continue risking shareholder funds on the project unless the clouds over it clear.

Morneau said more investment would be needed to complete the expansion, and stressed he felt the project should be returned to the private sector. The project has been beset by legal uncertainty and rising protests from environmental groups and the province of British Columbia.

Although the federal government has taken stakes in struggling energy projects, Tuesday's announcement marked the first time Ottawa has bought an entire pipeline. The government is buying the existing pipeline and the scheduled twinned pipeline expansion. It isn't "the intention of the Government of Canada to be a long-term owner of this project", Morneau's department said in a statement.

The province's opposition led Kinder Morgan to suspend nonessential spending on Trans Mountain last month. The company has a market value of $5.8 billion.

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Prime Minister Justin Trudeau has long insisted the project is in Canada's national interest and is a pivotal part of the country's economic future. "It got a very good price for their assets".

Kinder Canada Chief Executive Officer Steven Kean said on a conference call the company hasn't yet decided how it will use the proceeds from the sale and it will consider options including acquisitions and stock buybacks.

More than 200 people, including two members of Parliament, have been arrested already at Kinder Morgan's oil tanker and terminal site in Burnaby, British Columbia.

The Trans Mountain expansion would nearly triple capacity to 890,000 barrels of oil on a line running from Alberta to a terminal near Vancouver.

"How much of a win is this for Canadians?"

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