Brookfield Set to Acquire Inter Pipeline, Combining $4.3 Billion in Canadian Energy Projects

Researched by Industrial Info Resources (Sugar Land, Texas)--After more than six months of high-pressure jousting among some of Canada's biggest energy players, Brookfield Infrastructure Partners (NYSE:BIP) (Toronto, Ontario) announced last week it had won enough shareholder support to take over Inter Pipeline Limited (Calgary, Alberta), which is Canada's fourth-largest pipeline company. Inter Pipeline's existing midstream fleet is especially appealing to industry developers who are finding it difficult to get big-name projects--such as TC Energy Corporation's (NYSE:TRP) (Calgary) recently nixed Keystone XL--off the drawing board. Industrial Info is tracking more than US$4.3 billion worth of active projects from Brookfield and Inter Pipeline, including more than US$3.6 billion in capital-spending projects under construction.

For months, Brookfield had been locked in a contentious battle with Pembina Pipeline Corporation (NYSE:PBA) (Calgary) for Inter Pipeline. After Brookfield made an unsolicited C$7.1 billion (US$5.6 billion) offer in February, Inter Pipeline initially favored a rival offer from Pembina--which seemed like an all-but-done deal in June. But Brookfield kept up its courtship, gradually upping its offer price to roughly C$8.6 billion (US$6.7 billion), and winning endorsements from major shareholder groups.

Click on the image at right for a map of active projects from Brookfield and Inter Pipeline in Western Canada.

Desperate times in the Canadian Oil & Gas Industry--fueled by the COVID-19 pandemic and the overall diminished status of the industry itself, as stakeholders pursue renewable and other sources of energy--have resulted in a wave of mergers and acquisitions that have seen former rivals such as Cenovus Energy Incorporated (NYSE:CVE) and Husky Energy Incorporated (TSX:HSE) (both Calgary) tie the knot. Companies like Inter Pipeline also have accumulated considerable debts during this time, pressuring them to consider takeover and merger bids.

An industry analyst recently told the Calgary Herald that more consolidation can be expected in the Duvernay and Montney shale formations, which cover most of Alberta and easternmost British Columbia. Inter Pipeline's massive Heartland Petrochemical Complex in Fort Saskatchewan, Alberta, which has been under construction atop the Duvernay Shale since early 2018, was a major factor in Brookfield's decision.

Components of the Heartland project include a US$1.77 billion propane dehydrogenation (PDH) plant, which is designed to produce 1.1 billion pounds per year of propylene; a US$1.3 billion polypropylene unit, which is designed to produce 1 billion pounds per year; and a US$453.4 million gas-fired power plant, which will provide the new units with 102 megawatts (MW). Subscribers to Industrial Info's Global Market Intelligence (GMI) Chemical Processing Project Database can read detailed project reports on the PDH unit, polypropylene unit and gas-fired power plant. In the Montney Shale, Brookfield subsidiary NorthRiver Midstream Incorporated began construction earlier this year on a US$55 million unit addition at its Mackie Creek Compressor Station in Peace River. NorthRiver is partnering with Westcoast Energy, a subsidiary of Enbridge Incorporated (NYSE:ENB) (Calgary), to develop natural gas gathering and processing capacity in and around Montney. Enbridge sold many of its Montney-based assets to Brookfield in 2018.

NorthRiver and Enbridge expect to finish construction within the coming year on two related projects: the US$27 million expansion of a natural gas pipeline and a US$25 million compressor station in Peace River, to expand processing capacity in eastern British Columbia. Subscribers can learn more from Industrial Info's reports on the Mackie Creek addition, pipeline expansion and compressor station addition.

Pembina, which declined to further pursue Inter Pipeline after Brookfield's most recent bid, gets something of a consolation prize: a C$350 million (US$277.3 million) termination fee paid by Inter Pipeline, according to BNN Bloomberg. For more details on the now-dead deal, see June 2, 2021, article - Canada's Pembina Buys Inter Pipeline as Midstream Firms Make Big Bets on Post-COVID Recovery.

Brookfield said in a press release it will file a mandatory extension of the offer to Friday, September 3, to allow remaining shareholders time to tender, after which it will own 68.9% of Inter Pipeline's outstanding common shares. Brookfield said it will take Inter Pipeline private upon closure and finalization of the deal.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.