“This transaction increases our stake in highly strategic core assets located at the heart of our existing value chain,” said Dean Setoguchi, Keyera’s President and Chief Executive Officer. “It will be immediately accretive upon closing and offers quality cash flow growth without having to build new capacity in an inflationary environment.”
Highlights of the Transaction
- Expands core of integrated value chain – Adds more than 25% incremental capacity to fractionation, de-ethanization, underground NGL storage and the Fort Saskatchewan Pipeline (FSPL) system which connects KFS to the Edmonton-area market. The assets add meaningful fee-for-service cash flows.
- Meaningful synergies with Keyera’s integrated platform – These include added operational flexibility, increased volumes available for margin capture in Keyera’s Marketing segment and tax savings.
- Immediately accretive to Distributable Cash Flow (“DCF”) per share1 – Following closing of the Acquisition, DCF per share1 is expected to average approximately 3% accretion per year, including tax synergies.
- Attractive acquisition multiple – The Acquisition price of $365 million represents approximately 11 times expected 2023 annualized Operating Margin contribution to Keyera, attributable to the 21% working interest in KFS to be acquired, and approximately 9.5 times on the same measure thereafter.
- Increasing fractionation capacity in a tight market – Upon closing, the immediate addition of fractionation capacity bolsters Keyera’s ability to secure long-term contracts in a high demand market and accommodates incremental growth volumes from the KAPS pipeline. Acquiring incremental existing capacity eliminates the time lag to construct new capacity, and eliminates project execution risk and exposure to the current inflationary cost environment.
- Provides capital efficient growth options – Future fractionation capacity expansions, including potential de-bottlenecks, are expected to be more capital efficient given the acquisition includes additional storage, pipeline and finished product egress capacity.
- Strong go-forward balance sheet flexibility – The Acquisition will be funded through a combination of cash-on-hand, existing credit facilities and a $200 million bought deal treasury offering described below, with the aim of maintaining corporate debt leverage within the Corporation’s target range of 2.5 to 3.0 times net debt to adjusted EBITDA2.
Summary of Incremental Capacity
KFS Overview |
Current Capacity |
Acquired Capacity |
Upon Closing |
Overall Working Interest |
77 % |
21 % |
98 % |
Fractionation (bbls/d) |
51,000 |
+14,000 |
65,000 |
De-ethanization (bbls/d) |
23,000 |
+6,000 |
29,000 |
Storage (bbls) |
13.4 million |
+3.7 million |
17.1 million |
Pipelines* (bbls/d) |
285,300 |
+79,200 |
364,500 |
*Includes 3 pipelines (8″ bi-directional propane, 12″ C3+ NGL mix & 16″ condensate) that are part of |
RBC Capital Markets acted as exclusive financial advisor to Keyera on the Acquisition.
Bought Deal Equity Offering
In conjunction with the Acquisition, Keyera has entered into an agreement with RBC Dominion Securities Inc., acting on behalf of a syndicate of underwriters (collectively, the “Underwriters”), pursuant to which the Corporation has agreed to issue, and the Underwriters have agreed to purchase on a bought deal basis, an aggregate of 7,070,000 common shares (the “Common Shares”) at an offering price of $28.30 per Common Share (the “Offering Price”) for total gross proceeds to the Corporation of approximately $200 million (the “Offering”).
In addition Keyera has granted the Underwriters an over-allotment option (the “Over-Allotment Option”), exercisable in whole or in part, at any time up to 30 days following the closing of the Offering, to purchase up to an additional 1,060,500 Common Shares at the same Offering Price and upon the same terms and conditions as the Offering.
The Common Shares to be issued pursuant to the Offering and upon exercise of the Over-Allotment Option, if any, will be offered to prospective purchasers in all provinces of Canada by way of a prospectus supplement to the short form base shelf prospectus of the Corporation dated November 18, 2021 (collectively, the “Prospectus”). The prospectus supplement is expected to be filed on SEDAR on or before December 15, 2022 at www.sedar.com. The Common Shares may also be offered in the United States by way of private placement to “qualified institutional buyers” in reliance upon the exemption from registration provided by Rule 144A under the U.S. Securities Act of 1933 (the “U.S. Securities Act”).
Completion of the Offering is subject to certain conditions including receipt of all necessary approvals, including the approval of the Toronto Stock Exchange. The Offering is expected to close on or about December 20, 2022.
No securities regulatory authority has either approved or disapproved the contents of this press release. The Common Shares have not been, and will not be, registered under the U.S. Securities Act, or any state securities laws. Accordingly, the Common Shares may not be offered or sold within the United States unless registered under the U.S. Securities Act and applicable state securities laws or pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Common Shares in any jurisdiction in which such offer, solicitation or sale would be unlawful.
About Keyera Corp.
Keyera Corp. (TSX:KEY) operates an integrated Canadian-based energy infrastructure business with extensive interconnected assets and depth of expertise in delivering energy solutions. Its predominantly fee-for-service based business consists of natural gas gathering and processing; natural gas liquids processing, transportation, storage and marketing; iso-octane production and sales; and an industry-leading condensate system in the Edmonton/Fort Saskatchewan area of Alberta. Keyera strives to provide high quality, value-added services to its customers across North America and is committed to conducting its business ethically, safely and in an environmentally and financially responsible manner.