Calgary-based Inter Pipeline has agreed to buy US player Williams Canadian natural gas liquids business for around US$1.03 billion (C$1.35 billion).
Williams Canada's assets include two liquids extraction plants located near Fort McMurray, Alberta, a fractionator near Redwater, Alberta and a pipeline system that connects these facilities. The two extraction plants have the capacity to recover approximately 40,000 bpd of NGL and olefins from the upgrader offgas.
As part of the acquisition, Inter Pipeline also assumes responsibility for the potential construction of a $1.85 billion Propane Dehydrogenation facility located near the Redwater fractionator. This facility would convert low-cost, locally sourced propane into high value polymer grade propylene.
"This accretive acquisition is a highly complementary addition to our existing NGL extraction business. Consistent with our disciplined acquisition strategy, we are purchasing this unique and attractive business at a low period in the commodity cycle, and well below original cost. This positions Inter Pipeline to significantly benefit as energy prices strengthen," Christian Bayle, Inter Pipeline's president and CEO.
To finance the deal, Inter will issue equity for proceeds of $600-million. The company will sell subscription receipts at $26.75 apiece, which will convert into common shares when the deal closes. The offering is led by Toronto-Dominion Bank as bookrunner, and co-led by Canadian Imperial Bank of Commerce and Royal Bank of Canada.
The acquisition is expected to close in the third quarter of this year.
Acquisition provides a platform for material future NGL and olefin related growth opportunities including capacity expansion investments, securing additional offgas supply sources and development of integrated petrochemical manufacturing facilities. Inter said its soon-to-be-acquired business sells its olefins to Nova Chemicals Corp. under a long-term contract, and also ships to other customers in North America.