Alberta Regulator Probes Climate Risk Disclosure in Kinder Morgan IPO
The Alberta Securities Commission has agreed to look into Greenpeace Canada’s challenge to the financial projections in Kinder Morgan’s C$1.75-billion public share offering for its Trans Mountain pipeline expansion, promising to give the NGO’s intervention “the consideration we deem appropriate”.
Kinder announced the IPO earlier this month, after giving up on its attempt to secure a single minority investor for the project. “KMI believes that the offering represents the superior path for financing the project for several reasons, including favourable governance, more certainty around timing, and a greater retained interest by KMI,” the company said at the time.
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Greenpeace Senior Energy Strategist Keith Stewart had a different take on the prospectus. “Kinder Morgan’s business plan only works if the world fails to act on climate change,” he said in a release. “They may think that’s a good bet, but they should be honest with potential investors about the risks being taken with their money.”
He cautioned that outdated projections in the Kinder Morgan offering “could potentially mislead investors by portraying an overly optimistic view of the international oil market.”
The Bloomberg report confirms that Kinder Morgan “had been running a dual-track process, exploring both an IPO and a joint venture to finance the Trans Mountain expansion.” But with its regulatory filing, “the company said it was no longer looking into a joint venture.” The story also points to the new political headwinds Kinder will face with the likely election of a minority government in British Columbia—with Andrew Weaver’s Greens holding the balance of power.
“The really close B.C. election vote puts pressure on the Kinder Morgan IPO,” market analyst Colin Cieszynski told Reuters UK. “You run the danger of the whole thing getting stalled for years or going into limbo.”
In its release, Greenpeace warns that “failure to disclose climate-related risks could leave Kinder Morgan more vulnerable to a class action lawsuit by shareholders if the promised oil demand doesn’t materialize.” The organization’s 11-page submission to Alberta, Ontario, and federal security regulators contends that the company’s demand projections are based solely on an International Energy Agency projection in which “oil demand continues to grow because policy-makers don’t adopt more aggressive climate policies in the future.”
In a potentially fatal flaw, Kinder “ignores the IEA scenarios that forecast decreased oil demand if governments do take actions that would bring them closer to achieving the Paris climate agreement goal of keeping warming well below 2°C.”
“Canadian oil lobbyists have been saying we need this pipeline to get oil to India and China, but those countries are now taking aggressive measures to reduce oil consumption,” Stewart noted. “We are confident that once investors see the whole picture, they’ll recognize this pipeline as a white elephant that has no place in the new energy economy.”
Even without the Greenpeace analysis to contend with, at least one fossil industry analyst is predicting a long, tough battle if Kinder tries to push the Trans Mountain project into the construction phase.
“When the shovels hit the ground, my belief is there’s going to be an uprising in Burnaby, etcetera, and it’s going to be ugly,” oil and gas veteran Bruce Robertson, chair of the Explorers and Producers Association of Canada, told an industry conference last week. “And Trudeau et al have got to make a decision (on) whether and how he flexes his muscle to get this thing approved.”