Power Assets, CKI in $911m Canadian pipeline deal

Hong Kong-based Power Assets and Cheung Kong Infrastructure have teamed up to acquire a 65 percent stake in a portfolio of oil pipeline assets from Husky Energy, one of Canada’s largest integrated energy companies, for C$1.155 billion ($911 million; €808 million). 

Power Assets and CKI will hold a 48.75 percent and 16.25 percent stake in the project respectively, with the remaining stake to be retained by Husky. The Canadian company will continue to manage assets. 

Husky will receive proceeds of C$1.7 billion, including project debt. The sale price represents about 13 times the assets' expected 2016 EBITDA. 

The portfolio includes about 1,900km of oil pipeline in the Lloydminster region, oil storage capacity of 4.1 million barrels at Hardisty and Lloydminster, and other ancillary assets. 

A 20-year offtake contract with Husky will be in place for this pipeline portfolio. 

Completion of this acquisition, still subject to regulatory approvals, is expected to take place by the third quarter of this year. 

CKI said in a statement that the transaction is “consistent with its strategies of investing in infrastructure opportunities around the world and embracing new growth opportunities through diversification”.

Charles Tsai, chief executive of Power Assets, pointed out that the investment provides good potential for growth. 

“Currently, all of the pipelines are nearly fully utilised. New pipeline and gathering systems are to be built in the next few years to meet the increasing demand. The new capacity is expected to be contracted out to users on a medium and long term basis.”

“This transaction represents the largest investment that Power Assets has made since the spinning off of HK Electric Investments two years ago. In line with our acquisition requirements, this deal provides us with an excellent opportunity to invest in a secure and profitable project that offers immediate cash flow,” he added. 

The transaction is also the second joint acquisition between Power Assets and CKI in the past six months following the completion of the €978 million Portugal Renewable Energy transaction in November 2015, according to Tsai. 

He said that the two companies “will continue to look at other midstream assets, as well as other potential acquisition opportunities in Canada and around the world, backed by the companies’ strong balance sheet and financial platform”. 

Last September, a $12.4 billion plan to merge CKI with Power Assets was rejected by the latter’s shareholders. CKI currently holds about 38.87 percent in Power Assets.