Calgary-based energy infrastructure company Enbridge Inc. has secured a $2.7-billion investment from two major U.S. private equity firms to support the expansion of its Westcoast natural gas pipeline network in British Columbia. New York-based KKR & Co. Inc. and Apollo Global Management Inc. are acquiring a 29 percent stake in the pipeline system, which transports natural gas from fields in northern British Columbia and Alberta to markets in southern British Columbia and the northwestern United States.
The investment accompanies government approval granted to Enbridge in April to extend the Westcoast pipeline by 139 kilometres through the Sunrise and Aspen projects. These expansions, estimated to cost $4 billion and expected to be completed by the end of 2028, will increase the pipeline’s daily transportation capacity by 300 million cubic feet, raising its total to 4.1 billion cubic feet. The Westcoast pipeline itself spans more than 2,900 kilometres, reaching from northeast British Columbia and northwest Alberta to the Canada-U.S. border near Chilliwack, British Columbia.
Upon closing the transaction, Enbridge will receive $700 million upfront from KKR and Apollo, with the remainder of the investment disbursed incrementally over the three-year construction period, according to financial analysts. The private equity firms will begin receiving cash distributions from the pipeline once the Sunrise and Aspen expansions become operational.
Pat Murray, Enbridge’s chief financial officer, described the investment as a way to “efficiently recycle capital, strengthen our balance sheet, and maintain financial flexibility,” while Paul Workman, a managing director at KKR, highlighted the appeal of “stable, long-term cash flows and attractive growth opportunities” offered by the infrastructure.
Enbridge retains operational control over the Westcoast pipeline and holds the option to repurchase the equity stakes held by KKR and Apollo between the seventh and fourteenth year following the deal’s close. This approach mirrors similar transactions in the industry, such as Rogers Communications Inc.’s sale of a minority stake in its wireless network to a consortium led by Blackstone Inc.
In a related development, Enbridge announced plans to acquire crude oil infrastructure assets in Texas and New Mexico from Houston-based Salt Creek Midstream LLP for approximately US$600 million. The purchase, expected to finalize by year-end, will add roughly 800 kilometres of pipelines and multiple crude oil terminals, enhancing Enbridge’s connectivity to its Ingleside Energy Center on the Gulf Coast, the largest crude export terminal in North America.
The investment by KKR and Apollo comes ahead of the Canada Investment Summit in Toronto in mid-September, an event hosted by Prime Minister Mark Carney aimed at attracting global capital into Canadian infrastructure. The summit will gather institutional investors managing assets estimated at $120 trillion, supporting the government’s goal of raising approximately $500 billion in private-sector investment over the next five years. The event also occurs amid ongoing trade tensions between Canada and the United States.
Financial advisory roles in the transaction were filled by Morgan Stanley Canada Ltd. and TD Securities for Enbridge, with law firms Sullivan & Cromwell LLP and McCarthy Tétrault LLP providing counsel. KKR’s advisers included CIBC Capital Markets and Kirkland & Ellis LLP, while Apollo was counseled by Scotiabank and Milbank LLP.