| CALGARY, Alberta/TORONTO
CALGARY, Alberta/TORONTO May 17 British
Columbia could become a minefield for Kinder Morgan Inc,
with the recent provincial election results expected to weigh on
the U.S. company's Trans Mountain pipeline expansion and plans
for a Canadian initial public offering.
The Canadian province's pro-energy Liberals Party won the
election but lost its majority, forcing it to woo the
environmentalist Green Party to govern, potentially making
concessions. In the worst scenario for the Liberals, the Greens
could form their own majority government with the second-place
New Democrats, who also oppose Trans Mountain.
While final electoral results can change with the compiling
of absentee votes and recounts, to be done by May 24, a
provincial government unfriendly to development could mean major
obstacles to Trans Mountain, even if it has federal approval on
The election is expected to cast a shadow on Kinder Morgan's
proposed $1.3 billion IPO for its Canadian unit, set to be the
nation's fourth-biggest, filed one day after the election.
"The really close B.C. election vote puts pressure on the
Kinder Morgan IPO," said Colin Cieszynski, chief market
strategist at CMC Markets. "You run the danger of the whole
thing getting stalled for years or going into limbo."
The Trans Mountain project said in a statement on Tuesday
that the expansion continues to advance. Kinder Morgan has said
in IPO filings that changes in government could disrupt or delay
projects such as Trans Mountain, causing "significant" increased
"While the provincial government cannot undo the federal
authorization to construct and operate the Trans Mountain
pipeline, they could create some potential issues at a local and
provincial level," said Alan Ross, managing partner of Borden
Ladner Gervais LLP's Calgary office.
"To the extent not done so already, any Kinder Morgan Canada
IPO would need to price in political risk related to the B.C.
election," he said.
Based on IPO documents, Kinder Morgan Canada's dividend
yield would work out to 3.1-3.4 percent. That compares with 3.8
percent at Hydro One, which filed Canada's third biggest
IPO in 2015.
Given political risks, Kinder Morgan may have to offer a
more attractive dividend yield, said Ian Nakamoto, equity
specialist at MacDougall, MacDougall & MacTier, a division of
Even if recounts grant Liberals a majority, it would be
slim, making it hard for them to unilaterally get their way as
before. Liberal leader and incumbent Premier Christy Clark said
she will collaborate with rivals and work across party lines.
The Greens did not respond to requests for comment, although
leader Andrew Weaver said in a commentary in the Globe and Mail
newspaper on Wednesday that reconsidering Trans Mountain would
be a "triumph of democracy." The New Democratic Party (NDP)
reiterated a commitment to use "every tool" to stop the project.
Neither party has specified in detail how to oppose Trans
Mountain. Any pushback would have to overcome the federal
approval already granted, which constitutionally trumps
The province could delay Trans Mountain and wear down the
will of Kinder Morgan's investors, said University of British
Columbia law professor Jocelyn Stacey.
British Columbia can revoke the environmental assessment
certificate it granted, simply not contest a current legal
challenge against it or deny routine construction permits,
resulting in years-long court battles with the federal
government, she said.
A less energy-friendly British Columbia will also embolden
activists, many of whom voted Green or NDP, with Greenpeace
expecting more protesters and possibly holding more civil
disobedience workshops, said Keith Stewart, who heads the
organization's Canadian climate and energy campaign.
"We have people coming to us every day saying, 'How do I lie
down in front of the bulldozers?'"
(Additional reporting by Nicole Mordant in Vancouver; Editing
by Denny Thomas and Leslie Adler)