Kinder Morgan said it will go ahead with the C$7.4bn ($5.5bn) Trans Mountain pipeline expansion as long as it secures satisfactory financing for the project via its initial public offering (IPO).

The company, in conjunction with its indirect subsidiary Kinder Morgan Canada (KML), made its final investment decision on the project, which is conditional on the successful completion of the IPO.

Kinder Morgan is offering 102.9 million shares at a price of C$17 ($12.6) per share in an effort to raise C$1.75bn ($1.3bn). The public offering is set to close on 31 May.

It will constitute a sale of a part of Kinder Morgan’s interest in KML’s business which also includes the Trans Mountain pipeline system among others.

Kinder Morgan CEO Steve Kean said: “The KML IPO is one of the largest ever in Canada and provides Canadian investors the opportunity to invest in a leading integrated midstream set of western Canadian assets.”

Kean added that the IPO would also consolidate the balance sheet of Kinder Morgan besides helping it to return value to the company shareholders.

The American pipeline company has admitted that although the political climate is not ideal, it will still move ahead with the Trans Mountain Expansion. This, it said was because the project’s financing contingency period, as per the shipper agreements, concludes by the end of this month.

Underpinned by 15- and 20-year shipper commitments, the project is to supply 707,500 barrels per day, or nearly 80% of the capacity on the expanded pipeline, with the remainder 20% reserved for spot volumes as needed by the National Energy Board.

According to a report in the Reuters, the project faces uncertainty as the British Columbia province in Canada through which the pipeline would pass, will go for an election this month. This is so, as the project is threatened to be stalled by environmentalist Green Party should it come to power.

The Trans Mountain expansion project will see the expansion of the 1953-built Trans Mountain Pipeline system that was laid between Edmonton in Alberta and Burnaby in British Columbia.

Kinder Morgan stated that expansion of the present Trans Mountain Pipeline system would increase its capacity by nearly three times from the current production of 300,000 barrels of oil daily.

The expansion project is expected to break ground in September and complete by the end of 2019.

Image: Kinder Morgan’s Trans Mountain pipeline expansion will be subject to Canada IPO result. Photo: courtesy of supakitmod/