KKR is exploring a potential sale of its 40% stake in Pembina Gas Infrastructure, with its holding in the Canadian midstream operator expected to be valued at around $7 billion, four people familiar with the matter said on Wednesday.
Pembina Gas Infrastructure was formed in 2022 as a joint venture between the investment firm and Pembina Pipeline Corp, and owns natural gas and natural gas liquids transportation, processing and storage infrastructure in western Canada.
KKR has been working with investment bankers at Scotiabank in recent weeks to solicit potential buyer interest in the stake, said the sources, who cautioned that no sale was guaranteed and spoke on condition of anonymity to discuss confidential information.
KKR and Scotiabank declined comment. Pembina Pipeline did not respond to comment requests.
The KKR stake in Pembina Gas Infrastructure is expected to attract interest from other alternative asset managers and infrastructure funds, the sources said. Such buyers are drawn to minority stakes in such assets because they can pocket steady returns from the revenues earned without needing operational knowledge.
Opportunities to own substantial stakes in large-scale Canadian pipeline assets are rare, which gives the Pembina Gas stake additional scarcity value, the sources added.
Deal activity has remained strong for the Canadian energy sector this year, gaining attention from investors as companies seek to consolidate and build scale on growing demand for infrastructure and energy projects to meet rising energy needs.
When Pembina Gas was formed, the parties said the venture was worth around C$11.4 billion ($8.17 billion) in total, meaning an exit for KKR at the mooted price would be significantly profitable for the investment firm. Since formation, Pembina Gas has grown through bringing built projects online and acquiring further assets.
Pembina Gas has capacity to process around 5 billion cubic feet per day of natural gas, with assets within both the Montney and Duvernay shale formations, according to its website.
(Reporting by David French in New York and Nivedita Balu in Toronto; Additional Reporting by Amanda Stephenson in Calgary; Editing by Nia Williams)