Kinder Morgan’s NewCo IPO might be off the table
Issuances are never constant. They can be upgraded, downsized, canceled or even postponed. Look at PetroShare for example. Last year the E&P filed to launch into the public market, but it pulled out at the last minute. Veritone took its deal size higher (and much to the company’s management disappointment did not do well in the market). Blue Apron canceled its IPO, and now, Canadian-based Kinder Morgan might be on its way to doing the same.
If you know the oil industry, then you realize that numerous companies operate within that bracket. Most investors are familiar with the E&Ps, the enterprises that do all the dirty work in the business. Other companies deal with treatment services. Another category, which is the category you will be reading about in this article, is the infrastructure. You can’t mine all that that oil and have nowhere to take it, now can you?
Kinder Morgan, based in British Columbia, is an energy infrastructure giant that operates in the region stretching from the Alberta oil sands to British Columbia. The company has been in operation for twenty years. Like you might expect from any other oil company, Kinder Morgan has seen its fair share of ups and downs for that period, the latest of which it is experiencing due to the current global oil glut. So the Kinder Management decided to deal with the revenue losses the way many companies do: by expanding.
Make no mistake, Kinder Morgan is already a big player in the Canadian oil industry. In fact, the planned expansion will put the company at the top ten energy infrastructure providers in the country. The expansion, which Kinder Morgan is calling the Trans Mountain Expansion project, was to take place in two phases. In phase one, Kinder Morgan would form and cede some of its assets to a subsidiary. That part of the plan is done. In the second phase, Kinder Morgan was to launch the subsidiary, NewCo, into the public market. That’s when things got a bit interesting.
Each time you hear of oil mining you know that there is some pollution that is going to be some pollution in the mix. Oil companies have to disclose the risk that pollution control regulations might affect their dividends in future to potential investors. According to a foundation called Greenpeace Canada, NewCo has not done that. The firm has not informed people looking to buy into its IPO, which was to price this month, of the impact of the proposed project on climate change. Greenpeace has filed with the Alberta Securities Commission to stop the IPO until NewCo does that.
The filing could mean a lot of things, none of them positive, for Kinder Morgan. For one, if the verdict comes back negative, the company could make substantial losses. So far the company has been doing well on the market because of favorable government regulations. The second is that Kinder Morgan would lose out on the estimated $1.76 billion it would have gotten from NewCo’s sold-out IPO.