Divestitures (Notes)

12 Months Ended

Dec. 31, 2019



3.	Divestitures

Sale of U.S. Portion of Cochin Pipeline and KML

On December 16, 2019, we closed on two cross-conditional transactions resulting in the sale of the U.S. portion of the Cochin Pipeline and all the outstanding equity of KML, including our 70% interest, to Pembina Pipeline Corporation (Pembina) (together, the “KML and U.S. Cochin Sale”). We recognized a pre-tax net gain of $1,296 million from these transactions within “(Gain) loss on divestitures and impairments, net” on our accompanying consolidated statement of income during the year ended December 31, 2019. We received cash proceeds of $1,553 million net of a working capital adjustment, for the U.S. portion of the Cochin Pipeline which was used to pay down debt. KML common shareholders received 0.3068 shares of Pembina common equity for each share of KML common equity. For our 70% interest in KML, we received approximately 25 million shares of Pembina common equity, with a pre-tax fair value on the transaction date of approximately $892 million. The fair market value as of December 31, 2019 of the Pembina common shares was $925 million and is reported as “Marketable securities at fair value” within our accompanying consolidated balance sheet as of December 31, 2019. Level 1 inputs in the fair value hierarchy were utilized to measure the fair value of the Pembina common shares. The Pembina common shares were subsequently sold on January 9, 2020, and we received proceeds of approximately $907 million ($764 million after tax).

Sale of Trans Mountain Pipeline System and Its Expansion Project

On August 31, 2018, KML completed the sale of the TMPL, the TMEP, the Puget Sound pipeline system for net cash consideration of C$4.43 billion (U.S.$3.4 billion), which is the contractual purchase price of C$4.5 billion net of a preliminary working capital adjustment (the “TMPL Sale”). These assets comprised our Kinder Morgan Canada business segment. We

recognized a pre-tax gain from the TMPL Sale of $595 million within “(Gain) loss on divestitures and impairments, net” in our accompanying consolidated statement of income during the year ended December 31, 2018. During the first quarter of 2019, KML settled the remaining C$37 million (U.S.$28 million) of working capital adjustments which amount was substantially accrued for as of December 31, 2018.

On January 3, 2019, KML distributed the net proceeds from the TMPL Sale to its shareholders as a return of capital. Public owners of KML’s restricted voting shares, reflected as noncontrolling interests by us, received approximately $0.9 billion (C$1.2 billion), and most of our approximate 70% portion of the net proceeds of $1.9 billion (C$2.5 billion) (after Canadian tax) were used to repay our outstanding commercial paper borrowings of $0.4 billion and in February 2019, to pay down approximately $1.3 billion of maturing long-term debt.

May 2017 Sale of Approximate 30% Interest in Canadian Business

On May 30, 2017, KML completed an IPO of 102,942,000 restricted voting shares listed on the Toronto Stock Exchange at a price to the public of C$17.00 per restricted voting share for total gross proceeds of approximately C$1,750 million (U.S.$1,299 million). The net proceeds from the IPO were used by KML to indirectly acquire from us an approximate 30% interest in a limited partnership that held our Canadian business while we retained the remaining 70% interest. We used the proceeds from KML’s IPO to pay down debt. The portion of the Canadian business operations that we sold to the public on May 30, 2017 represented Canadian assets that were subsequently sold in the 2018 TMPL Sale and the 2019 KML and U.S. Cochin Sale.

Subsequent to the IPO, we retained control of KML and the limited partnership, and as a result, they remained consolidated in our consolidated financial statements until its sale in December 2019. For this period, our accompanying financial statements reflect the public ownership of the KML restricted voting shares as “Noncontrolling interests” and the earnings attributable to the public ownership of KML as “Net income attributable to noncontrolling interests.”

As of and for the year ended December 31, 2017, as applicable, the KML IPO resulted in (i) “Contributions from noncontrolling interests - net proceeds from KML IPO” of $1,245 million reported within our consolidated statement of cash flows; (ii) an adjustment to “Additional paid-in capital” of $314 million reported within our consolidated statement of stockholders equity; and (iii) a net $684 million increase to “Noncontrolling interests” reported within our consolidated statement of stockholders equity, including an allocation of currency translation adjustments from “Accumulated other comprehensive loss.” The impact of the IPO also resulted in a deferred income tax adjustment of $166 million.

Sale of Noncontrolling Interest in ELC

Effective February 28, 2017, we sold a 49% partnership interest in ELC to investment funds managed by EIG. We continue to own a 51% controlling interest in and operate ELC. Under the terms of ELC’s limited liability company agreement, we are responsible for placing in service and operating certain supply pipelines and terminal facilities that support the operations of ELC and that are wholly owned by us. In certain limited circumstances that are not expected to occur, EIG has the right to relinquish its interest in ELC and redeem its capital account. The sale proceeds of $386 million, and subsequent EIG contributions and distributions to EIG are presented in “Redeemable Noncontrolling Interest” on our consolidated balance sheets. Once these contingencies expire, EIG’s capital account will be reflected in “Noncontrolling interests” on our consolidated balance sheets.