Enbridge Inc. is bringing on KKR and Apollo as partners in a new joint venture that will pay for two expansions of its Westcoast natural gas pipeline system. The investors will put in roughly C$2.7 billion, including C$0.7 billion paid to Enbridge in cash when the deal closes, for an indirect, cumulative 29% interest in the pipeline system once the second expansion is running. The deal still needs to clear customary closing conditions.
Deal structure
The joint venture is led by capital accounts advised by KKR, working alongside funds and affiliates managed by Apollo. It will fund the Aspen Point and Sunrise Expansion Programs on the Westcoast system, together called the Expansions. Both projects already have regulatory approval and are backed by long-term take-or-pay contracts, agreements under which customers pay for pipeline capacity whether or not they use it.
Aspen Point is due to enter service in 2026, and Sunrise is due to follow in late 2028. KKR and Apollo start collecting distributions as each project comes online, and Enbridge's stake only falls to the 29% level once Sunrise is running.
Enbridge keeps majority ownership and operating control of the Westcoast system, including the job of building the two expansions. It also holds an option to buy back the investors' stake in the joint venture at any point between the seventh and fourteenth year after closing.
Executive reaction
Pat Murray, Enbridge's executive vice president and chief financial officer, said the deal frees up capital and strengthens Enbridge's balance sheet, giving it room for other high-return projects. He said it extends a capital recycling program that has generated C$19 billion since 2014.
KKR managing director Paul Workman described the Westcoast pipeline as an important natural gas transportation system serving customers across western Canada and North America, and said the investment reflects the firm's strategy of investing alongside established operators in infrastructure with stable, long-term cash flow.
Apollo partner Jamshid Ehsani called Enbridge "one of the largest and most reputable energy infrastructure companies in North America" and said the Westcoast system is important for meeting growing natural gas demand in British Columbia, the U.S. Pacific Northwest and international LNG markets.
Advisors and materiality
Enbridge said the transaction is not material to its 2026 financial guidance or its medium-term financial outlook, and it has posted a supplemental presentation on the deal to its website.
Morgan Stanley Canada Limited was lead advisor and TD Securities was co-advisor to Enbridge, with Sullivan & Cromwell and McCarthy Tetrault as legal advisors. CIBC Capital Markets advised KKR, with Kirkland & Ellis and Bennett Jones as legal counsel. Scotiabank advised the Apollo funds, with Milbank as legal counsel.
