Kinder Morgan Canada share target cut as growth hopes fall in wake of Trans Mountain deal

Kinder Morgan Canada Ltd. stock stumbled again on Wednesday after two banks cut their target share prices in the wake of the company’s deal to sell its biggest current and growth asset — the Trans Mountain pipeline system — to the federal government.

READ MORE: Trans Mountain protesters interrupt Finance Minister Bill Morneau during speech in Calgary

The Calgary-based company’s shares closed about one per cent lower at $16.23, continuing the post-deal trend that saw it close nearly three per cent lower at $16.10 on Tuesday. It dipped as low as $15.62 in interday trading Wednesday on the Toronto Stock Exchange.

Kinder Morgan’s future is cloudy and it will be left cash-rich but prospect-poor from the deal to sell its existing 300,000-barrel-per-day pipeline and the delayed 590,000-bpd expansion project for $4.5 billion, analysts at CIBC said in a report.

READ MORE: This B.C. First Nation wants to buy a piece of the Trans Mountain pipeline

“While accretive options may be surfaced, we do not see a potential transaction as sufficient to offset the potential upside from the Trans Mountain expansion project,” the report said.

“Indeed, we question (parent company) Kinder Morgan Inc.’s willingness to retain Kinder Morgan Canada longer term as it only contributes about two per cent of EBITDA (earnings before interest, taxes, depreciation and amortization) and has reduced growth prospects.”

Watch below: Some videos from Global News’ stories about the Trans Mountain pipeline.

Morneau says decision to buy Trans Mountain was to meet goals of project

01:03

Morneau says decision to buy Trans Mountain was to meet goals of project

01:19

‘Multiple groups’ have spoken with Ottawa about Trans Mountain deal, Morneau says

01:06

Morneau says Trans Mountain deal shows economy, environment go ‘hand-in-hand’

00:37

Premier Scott Moe cautiously optimistic about Trans Mountain purchase

03:59

Trans Mountain pipeline expansion good for Saskatchewan: Saskatoon Chamber of Commerce

04:40

Climate Justice Saskatoon opposed to feds buying Trans Mountain pipeline

02:02

Did the Prime Minister have a choice on Trans Mountain?

02:42

Kinder Morgan opponents react to Trans Mountain pipeline purchase

02:43

Federal government announces plan to buy Trans Mountain pipeline project

02:02

Albertans’ reaction to Trans Mountain purchase mixed

01:47

Canadian taxpayers part owners of Trans Mountain pipeline

03:30

Federal government buying Trans Mountain pipeline for $4.5B

06:48

Pipeline fallout: Political pundits weigh in on the now government owned Trans Mountain pipeline

00:43

‘No matter who owns the pipeline, the risks are still the same’: Sierra Club on Trans Mountain

01:09

Trudeau says Trans Mountain deal causes challenges around pipeline to ‘disappear’

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Trudeau says government has no plan to be ‘in the pipeline business’ for long term with Trans Mountain

06:15

B.C. reacts to Ottawa’s deal to purchase Trans Mountain pipeline

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British Columbians react to Trans Mountain pipeline deal made by the federal government

02:34

Morneau: Purchase of Trans Mountain about obtaining ‘valuable assets’

16:35

Horgan’s full press conference following Trans Mountain pipeline deal announcement

CIBC slashed its 12-month price target to $17 from $22 because of its lower expectations of future growth in revenue and dividends for Kinder Morgan shareholders.

The target price at National Bank Financial was also adjusted to $17 from its previous level of $19.

The assets remaining after the sale amount to about $5 per share, analyst Patrick Kenny said in a note. He said he added the $12 per share Kinder Morgan attributes to the Trans Mountain sale to the $5 to arrive at the new valuation.

READ MORE: Timeline: Key dates in the history of the Trans Mountain pipeline

The company will continue to hold an integrated network of crude tank storage and rail terminals in Alberta. It will also own a terminal in Vancouver and the Cochin Pipeline system which transports light condensate from the United States to Fort Saskatchewan, just northeast of Edmonton.

It could look at buying Western Canada natural gas plants currently being marketed by Enbridge Inc. with the cash its getting from the sale, he said, while noting Kinder Morgan has also suggested it may distribute cash to shareholders.

Kinder Morgan Inc. created its Canadian subsidiary in a $1.7-billion initial public offering last year.

The company expects after-tax proceeds for the approximately 30 per cent of Kinder Morgan Canada not owned by its Houston-based parent company to be about $1.25 billion. It didn’t specify how it would spend the proceeds of the sale but did say it plans to continue to invest in Canada.