Pembina's Valleyview truck and tank station, south of Valleyview, Alberta.Supplied
New York-based Apollo Global Management is buying a 40-per-cent stake in Calgary-based Pembina Gas Infrastructure Inc. PPL-T, a gas processing company co-owned by Pembina Pipeline Corp., from funds managed by KKR & Co. Inc.
The deal announced Thursday will see funds run by Apollo take over New York-based KKR’s stake for an undisclosed sum, while Pembina Pipeline will stay on as the majority partner, keeping its 60-per-cent ownership share.
The terms of the deal were not disclosed.
The midstream gas sector was not in vogue for years. But it is experiencing a renaissance as demand for liquefied natural gas has surged. Driving that new demand are the need for natural-gas-fired electricity to power data centres that run artificial-intelligence models, efforts to revive manufacturing and concerns about energy security.
Investors see room for further growth in the industry and, when combined with a more supportive policy from the current government in Ottawa toward developing energy resources and infrastructure, that has spurred more interest in Canadian assets.
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“People are making long-term decisions when they think about where they’re sourcing their LNG, their other commodities from, and I think it positions Canada very well,” Scott Browning, a partner in Apollo’s infrastructure group, said in an interview. “It’s a low-cost, low-risk jurisdiction that’s really just starting to grow into an LNG exporter.”
Pembina Gas Infrastructure (PGI) operates 23 gas processing plants and about 3,900 kilometres of gathering pipelines, with the capacity to extract roughly 330,000 barrels of natural-gas liquids a day. It is positioned to serve customers from central Alberta to northeastern B.C.
Mr. Browning said having Pembina Pipeline as a partner was key to the deal. ”We’re very impressed by the platform and what they’ve built," he said. “I think it’s poised for further growth.”
PGI’s roots date back to 2014, when KKR started investing in the Canadian natural-gas sector. The asset manager, which now manages US$744-billion, made one of its biggest early infrastructure investments in Calgary-based Veresen Inc. And it later acquired gas producer SemCAMS ULC, which was headquartered in the same city.
In 2022, KKR reached a deal to merge those businesses with assets that Pembina owned, launching PGI as a $12-billion company. “There’s been value creation since then,” Brandon Freiman, KKR’s head of North American infrastructure, said in an interview.
When it came time to sell, the business attracted interest from infrastructure funds and Apollo – which manages US$938-billion of assets – emerged as a suitor familiar with the Canadian energy sector, he said.
Apollo has invested about US$130-billion in infrastructure deals over the past five years, including at least a dozen transactions involving large-scale energy assets since the fall of 2024.
The deal gives Apollo exposure to the Montney and Duvernay basins in Western Canada, which are rich in natural gas and poised to benefit from the completion of the first phase of the LNG Canada export terminal in Kitimat, B.C. A second phase is also in the planning stages.
The commitment that Prime Minister Mark Carney’s government has shown to Canada’s role in energy markets is encouraging to investors, Mr. Browning and Mr. Freiman said.
And the supply shock to energy markets from the war in Iran, which has closed the Strait of Hormuz, “only amplifies that,” Mr. Freiman said.
“I think a lot of folks who are realizing they’re quite reliant on LNG from the Middle East are looking at the U.S. and Canada and saying, ‘That’s a very reliable source of natural gas,’” he said. “It just puts a premium on diversity of supply.”
Andrew Botterill, the global financial advisory leader for energy, resources and industrials at Deloitte, said earlier this month that the Montney and Duvernay sites “are world-class gas resources” that are highly competitive.
Canadian producers are already “lean and mean,” he said, and will “be leaner and meaner and consolidating. ... So I think we’re going to continue to see more of those deals.”
BMO Nesbitt Burns Inc. and RBC Dominion Securities Inc. advised Apollo on the transaction, and Scotia Capital Inc. advised KKR.
With a report from Emma Graney.