Canada Energy Infrastructure Giants Reach Hostile Takeover Pact
A six-month-long hostile takeover battle between two Canadian infrastructure giants ended in late August, with Toronto-based asset buyer Brookfield Infrastructure Partners winning enough shareholder approval to support its twice-increased C$8.6 billion bid to buy Inter Pipeline Ltd., a Calgary, Alberta, fossil fuel extractor, transporter and project developer.
The offer rose in June after Pembina Pipeline Corp., Canada’s third-largest oil pipeline firm, proposed a white-knight C$8.3 billion offer that was backed by Inter Chair Margaret McKenzie. But after more back and forth negotiations, Pembina cancelled the bid in July.
McKenzie, chair also of the company panel that reviewed its sale options, criticized Brookfield for not fully pricing Inter Pipeline’s profitability claim related to its C$4.3 billion Heartland petrochemical complex under construction in Alberta, a first-time venture into that sector for the firm and its largest evet capital investment.
The project would produce 525,000 tons per year of polypropylene from 22,000 barrels per day of propane. The developer said polypropylene is “an easily transported and fully recyclable plastic” used to manufacture healthcare products, medical supplies, textiles and lightweight automotive components, among other products.
Major project contractors are Fluor, Corp., Kiewit Construction Services, Grace UNIPOL, Honeywell and Linde Engineering. Inter Pipeline said that despite “prolonged impact of COVID-19, [the project] has exceeded 14 million work hours without a lost-time incident on site."
Petrochem Complex Finish Eyed
Inter Pipeline had said in earlier updates that the plant was over budget by as much as C$500 million and several months behind schedule, but announced in early August, that polypropylene facility operations would start "early in the second quarter of 2022," and that the complex's propane dehydrogenation facility was “substantially, mechanically complete” and would operate several months after, "with definitive timing subject to the completion of final commissioning plans later this year."
A nearby plant in Alberta would supply polypropylene production feedstock until the propane facility is operational, it said..
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The project has to date landed eight long-term contracts, averaging nine years, which would use 68% of plant capacity, near its stated goal of 70% to operate, with more user contracts being negotiated, Inter Pipeline said. The latest contract is with an unidentified “investment grade multinational integrated energy producer,” the developer said, adding that it would sell leftover capacity on the open market.
With full-year plant operation not expected until 2023, Inter Pipeline withdrew its 2022 guidance for plant contribution to earnings but reconfirmed it for the following year at between C$400 million and C$450 million.
“We continue to expect [the project] will deliver a step change in cash flow starting next year," McKenzie said.
According to S&P Global analysts, Brookfield could take Inter private and eventually sell some of its assets deemed non-core, which they said could include the Heartland complex.
