Trans Mountain Transaction (Notes)

12 Months Ended

Dec. 31, 2018

Discontinued Operations and Disposal Groups [Abstract]

On August 31, 2018, we closed on the sale of the Trans Mountain Asset Group, which were indirectly acquired by the Government of Canada, through Trans Mountain Corporation (a subsidiary of the Canada Development Investment Corporation) for cash consideration of approximately $4.43 billion, which is the contractual purchase price of $4.5 billion net of a preliminary working capital adjustment (the “Trans Mountain Transaction”). As of December 31, 2018, we accrued for an additional $37.0 million for a final working capital adjustment that was subsequently settled in cash. The August 31, 2018 Trans Mountain Asset Group balance sheet included $502.4 million of cash and cash equivalents, along with $559.8 million of debt and $26.2 million of accumulated other comprehensive loss (which was realized as other comprehensive income, net, in our consolidated statement of comprehensive income for the year ended December 31, 2018).

Pursuant to our voting shareholders’ approval on November 29, 2018, a distribution of approximately $1.2 billion were made as a return of capital to holders of our Restricted Voting Shares ($11.40 per Restricted Voting Share) and approximately $2.8 billion to KMI as the indirect holder of our Special Voting Shares on January 3, 2019 (the “Return of Capital”). To facilitate the Return of Capital and provide flexibility for dividends going forward, our voting shareholders also

approved (i) the reduction of the stated capital of our Restricted Voting Shares by $1.45 billion (the “Stated Capital Reduction”) (ii) a “reverse stock split” of our Restricted Voting Shares and Special Voting Shares on a one-for-three basis (three shares consolidating to one share) (the “Share Consolidation”), which was effected on January 4, 2019. In accordance with U.S. GAAP, the Restricted Voting Shares and Special Voting Shares outstanding and earnings per share information in this report reflect the Share Consolidation for all periods presented unless otherwise noted.

We have recorded a Gain on sale of the Trans Mountain Asset Group, net of tax of $1,278.4 million as presented in the accompanying consolidated statement of income for year ended December 31, 2018. The gain included a tax benefit of approximately $81.4 million comprised of the release of deferred income taxes of approximately $389.0 million, which was partially offset by an adjustment to accrued taxes of approximately $307.6 million on the accompanying consolidated balance sheet as of December 31, 2018.

The underlying assets in the Trans Mountain Asset Group were primarily within our Pipelines business segment and the operating results for the Trans Mountain Asset Group are included in Income from operations of the Trans Mountain Asset Group, net of tax in the accompanying consolidated statements of income for the years ended December 31, 2018, 2017 and 2016. Major income and expense line items associated with the Trans Mountain Asset Group that have been presented within the caption Discontinued Operations in the accompanying consolidated statements of income were as follows:


Year Ended December 31,	2018(a)	2017	2016
(In millions of Canadian dollars)
Revenues	214.3	324.9	328.3
Depreciation and amortization	(46.8)	(70.7)	(73.0)
Operating expenses, including general and administrative	(89.8)	(122.0)	(115.5)
Interest and other income (expense)(b)	(22.4)	21.4	24.5
Income from operations of the Trans Mountain Asset Group before income taxes	55.3	153.6	164.3
Gain on sale of the Trans Mountain Asset Group before income taxes	1,197.0	—	—
Income from Discontinued Operations before income taxes	1,252.3	153.6	164.3
Income tax benefit (expense)	65.9	(43.4)	(32.9)
Income from Discontinued Operations, Net of Tax	1,318.2	110.2	131.4

The Trans Mountain Asset Group’s carrying value of assets and liabilities have been presented as held for sale in the accompanying consolidated balance sheet as of December 31, 2017 and include:


December 31,						2017
(In millions of Canadian dollars)
Cash and cash equivalents						128.1
Accounts receivable						46.0
Other current assets						18.6
Property, plant and equipment, net						2,719.6
Goodwill(c)						248.0
Non-current regulatory assets						29.1
Other non-current assets						53.7
Total assets of the Trans Mountain Asset Group						3,243.1

Credit Facility						—
Accounts payable						97.6
Current regulatory liabilities						103.1
Other current liabilities						6.6
Pension and postretirement benefits						75.4

Other non-current liabilities						38.1
Total liabilities of the Trans Mountain Asset Group						320.8

Our net cash flows from operating and investing activities from the Trans Mountain Asset Group included in the accompanying consolidated statements of cash flows were as follows:


Year Ended December 31,	2018(a)	2017	2016
(Net cash provided by (used in) in millions of Canadian dollars)
Operating activities	182.3	58.1	25.5
Investing activities	(507.3)	(462.6)	(190.3)

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a.Amounts are for the period January 1, 2018 to August 31, 2018, the closing of the Trans Mountain Transaction.

b.2018 includes approximately $60.5 million pre-tax write off of deferred financing costs, see Note 10. 2017 and 2016 amounts also include interest expenses from our credit facilities and KMI Loans that were allocated to discontinued operations for borrowings that were directly related to the Trans Mountain Asset Group.

c.Goodwill was evaluated for impairment on May 31 of each year and no impairments were recorded in 2018, 2017 and 2016.

Also, see Note 10 for information on our 4-year, $500.0 million unsecured revolving credit facility.