Energy - JANUARY 10, 2019

SemGroup and KKR form JV to create Canadian midstream infrastructure platform, acquires Meritage Midstream ULC

by Jody Barhanovich

SemGroup Corporation and KKR have formed a joint venture to create a Canadian midstream infrastructure platform, SemCAMS Midstream ULC (SemCAMS Midstream).

Dave Gosse, president of SemCAMS Midstream, said, “Combining the SemCAMS and Meritage portfolios will diversify our customer base and broaden our service offerings to include oil batteries and liquids processing, while considerably expanding our gas processing capacity.”

Under the terms of the joint venture, SemGroup will contribute the shares and assets of its Canadian subsidiary, SemCAMS, valued at C$1.15 billion ($860 million), in exchange for C$615 million ($460 million) cash proceeds and 51 percent common equity ownership in SemCAMS Midstream. KKR will contribute C$515 million ($385 million) of cash in exchange for 49 percent of the common equity ownership. KKR will also contribute C$300 million ($224 million) to acquire perpetual preferred equity. In addition, the joint venture will enter into a C$800 million ($598 million) underwritten bank credit facility.

The companies also announced that SemCAMS Midstream has entered into a definitive agreement to acquire Meritage Midstream ULC and its midstream infrastructure assets for C$600 million ($449 million).

“The acquisition of Meritage enables SemCAMS Midstream to expand and optimize its portfolio of assets, broaden its service offerings and create a more attractive Canadian growth platform,” said Carlin Conner, CEO of SemGroup.

Upon close of the transaction, SemCAMS Midstream will acquire Meritage Midstream ULC, an operating portfolio of approximately 195 MMcf/d of natural gas processing capacity, 101 miles of gas gathering pipelines, 38 miles of oil gathering pipelines and 18 miles of emulsion and gas lift pipelines (Patterson Creek facilities) in the liquids-rich Montney play. Additionally, a 200 MMcf/d gas processing expansion is currently under construction and expected to be in service by third quarter 2019. SemCAMS Midstream will own approximately 900 MMcf/d of natural gas processing capacity between the existing SemCAMS and Meritage facilities.

The Meritage transaction will be financed with a combination of funds from KKR Global Infrastructure Investors III and a fully-underwritten SemCAMS Midstream credit facility. KKR Global Infrastructure Investors III and its affiliated investment vehicles will contribute C$815 million ($609 million) of cash, of which C$300 million ($224 million) will be used to acquire perpetual preferred shares of SemCAMS Midstream.

SemGroup Corporation moves energy across North America through a network of pipelines, processing plants, refinery-connected storage facilities and deep-water marine terminals with import and export capabilities. KKR is a global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners that manage hedge funds.

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