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Private equity giant KKR and Pembina Pipeline Corp. have sealed a deal to combine their natural gas assets in western Canada in a deal worth almost $9 billion in a bid to gain an edge amid soaring natural gas prices.
According to the terms of the deal, the joint venture the two will set for the purpose will also acquire the assets of Energy Transfer in the region.
The new company will be 60 percent owned by Pembina, the pipeline major said in a news release, and KKR will hold the rest. Pembina will be the manager of the new entity, dubbed Newco.
Assets to be included in Newco include Pembina's field-based natural gas processing assets, the Veresen pipeline business, which is a joint venture between Pembina and KKR, and assets of Energy Transfer Canada, which is 49-percent owned by funds managed by KKR, Pembina said.
"Pembina has enjoyed a strong relationship with KKR as a partner in Veresen Midstream over the past four years," Pembina president and CEO Scott Burrows said.
"We work well together and share a mutual desire to invest capital and generate attractive returns. The formation of this new joint venture is a natural extension of our relationship, unlocks value for Pembina and creates another growth platform. We are extremely pleased to be creating this exciting new company with KKR to drive real synergies and deliver a wider suite of commercial opportunities."
According to the pipeline operator, the deal would create a highly competitive gas processing company in western Canada, "with the ability to serve customers throughout the Montney and Duvernay trends from north central Alberta to northeast British Columbia."
"The industrial logic of combining these three complementary businesses in a fully-aligned partnership is compelling," said KKR director Paul Workman.
"We believe that a well-capitalized, customer-oriented private partnership between KKR and one of Canada's leading infrastructure companies is incredibly well-positioned to create value for our investors, customers and the communities in which we operate."
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com