Trans Mountain Corp. Arranges Bond Sale To Refinance $18B Debt

By Alex Kimani - Jul 22, 2024,

Trans Mountain Corp., Canada's newly expanded Trans Mountain pipeline, is arranging a bond sale to refinance part of its debt ahead of the Canadian government’s eventual sale of the oil pipeline operator. 

The company had C$25.3 billion ($18.4 billion) debt as of March 31, including credit agreements with a syndicate of lenders containing two facilities totaling C$19 billion. 

The Canadian government bought and nationalized the existing pipeline from a unit of Kinder Morgan Inc. (NYSE:KMI) in 2018 to ensure that the expansion would be built. In effect, the federal government acquired its corporate owner Trans Mountain, which became a federal Crown corporation with Ottawa framing this decision around the desire to secure a key Canadian asset. TMX ended up witnessing massive cost overruns, with the project costing C$34 billion, more than six times the original estimate.

Prime Minister Justin Trudeau’s government is now looking to offload TMX after the expanded pipeline commenced operations in May. 

TMX is expected to  triple the flow of crude from landlocked Alberta to Canada's Pacific coast to 890,000 barrels per day (bpd). The pipeline is viewed as a boon to Asian refiners since it provides them with an opportunity to diversify their imports while also giving Canadian producers more access to U.S. West Coast and Asian markets.

TMX crude exports are expected to clock in at ~350,000-400,000 bpd, and compete with heavy grades from the Middle East and Latin America. Cold Lake crude is about $10 per barrel cheaper than Iraq's Basra Heavy for deliveries to China.

"Canada's TMX crude attracts interest from Asian buyers who are keen to secure cheap supplies of heavy grades but do not have access to U.S.-sanctioned Venezuelan crude," XU told Reuters. 

"It will still take some time for refiners to experiment with and test TMX crude as the first few cargoes have just arrived," Muyu Xu, a senior crude oil analyst at analytics firm Kpler, has revealed.

By Alex Kimani for Oilprice.com