KML Expected to Distribute $11.40 per Share as a Return of Capital
CALGARY, Sept. 4, 2018 /CNW/ – The Kinder Morgan Canada Limited (TSX: KML) board today announced a series of decisions following the closing of the sale of the Trans Mountain Pipeline system and the Trans Mountain Expansion Project (TMEP) to the Government of Canada. The KML board unanimously voted to distribute the net proceeds from the sale, after capital gains taxes, customary purchase price adjustments and repayment of KML debt, as a return of capital to shareholders. The return of capital to holders of KML’s restricted voting shares is expected to be approximately $1.2 billion or approximately $11.40 per restricted voting share. To facilitate the return of capital and provide flexibility for dividends going forward, KML will seek voting shareholder approval to reduce the stated capital of KML’s restricted voting shares by $1.45 billion.
The board also unanimously approved a proposal to effect a consolidation or “reverse stock split” of the restricted voting shares and special voting shares on a one-for-three basis (three shares consolidating to one share). Subject to the reduction in stated capital and reverse split being approved by shareholders, the anticipated payment date for the proposed return of capital is expected to be January 3, 2019, with the reverse stock split to follow. KML expects to pay an annual dividend of $0.65 per each post-reverse stock split share. The proposals will be voted on at a special meeting of KML shareholders during the fourth quarter of 2018. Details of the proposals will be provided in a proxy statement of KML to be mailed in the fourth quarter of 2018. Kinder Morgan, Inc. (NYSE: KMI) has informed KML that it intends to vote its special voting shares in KML, which represent approximately 70 percent of the voting shares, in favor of the proposals. Approval of the proposals requires 66.67 percent of the voting shares to vote for the proposals. KMI will receive an equivalent return of capital in respect of its approximately 70 percent ownership interest at the same time and subject to the same adjustments applicable to KML’s restricted voting shares.
“The proposals we are putting forward today are designed to maximize the value shareholders will receive both as a result of this transaction and going forward,” said KML Board Chairman and CEO Steve Kean. “Our remaining portfolio of assets represents a strong platform as a stand-alone company with little to no leverage. That said, with respect to KML’s future we will be evaluating the full range of alternatives, and as always we will be focused on the path that provides the greatest value for shareholders.”
KML manages a portfolio of strategic infrastructure across Western Canada, including:
- An integrated network of crude tank storage and rail terminals in Alberta that is one of the largest in the region;
- The Vancouver Wharves Terminal, the largest mineral concentrate export/import facility on the west coast of North America; and,
- The Cochin Pipeline system transporting light condensate from the United States to Fort Saskatchewan, Alberta.
2018 Financial Update
KML expects to maintain a dividend of $0.1625 per restricted voting share in the third quarter of 2018 and expects the dividend to be paid prior to the one-for-three stock split. KML expects the one-for-three stock split to be effective prior to the declaration of the dividend for the fourth quarter of 2018 and expects to pay a dividend of $0.1625 per split-adjusted restricted voting share. KML does not anticipate the proposed return of capital or reverse split to have any impact on the outstanding preferred shares of KML or dividends payable thereon.
“We will be doing a full, bottom-up budget process in preparation for our 2019 budget and will provide detailed guidance upon completion of that process,” said Dax Sanders, KML Chief Financial Officer. “For the fourth quarter, representing the first full quarter without Trans Mountain earnings, we anticipate that the remaining assets in the Pipelines and Terminals segments will generate Adjusted EBITDA of just over $50 million. We also expect to end the year with little or no debt on our balance sheet.”
The KML board has appointed John Schlosser as President of KML and Adam Forman as Vice President and Secretary of KML. Their predecessors in those positions, Ian Anderson and Scott Stoness, have separated from KML to continue in their leadership roles at Trans Mountain under the new ownership structure. Mr. Schlosser previously held the position of President, KML Terminals and continues to serve as President, Terminals for KMI. Mr. Forman also holds the position of KMI Vice President, Deputy General Counsel and Secretary.
About Kinder Morgan Canada Limited
Kinder Morgan Canada Limited (KML) manages and is the holder of an approximately 30 percent minority interest in a portfolio of strategic energy infrastructure assets across Western Canada. Kinder Morgan, Inc. (NYSE: KMI) holds an approximately 70 percent majority voting interest in KML and a corresponding 70 percent economic interest in KML’s business and assets. KML focuses on stable, fee-based energy transportation and storage assets that are central to the energy infrastructure of Western Canada. We strive to promote shareholder value by increasing utilization of our existing assets while controlling costs and operating in a safe and environmentally responsible way. For more information visit kindermorgancanadalimited.com