Exclusive: Some Colonial Pipeline owners expect stake sales at company valuation of more than $10 billion, sources say

By David French

(Reuters) – Some owners of Colonial Pipeline are exploring divesting their stakes, hoping to get prices that would value the largest U.S. fuel transportation system at more than $10 billion, according to people familiar with the matter.

Rising energy consumption in the US has increased demand for gas pipeline capacity. Any deal would test the company’s value three years after a major cyberattack disrupted its operations.

Canadian pension fund Caisse de dépôt et place du Québec (CDPQ) has begun work on selling its 16.6% stake in Colonial, while three co-owners who collectively represent 55.3% of Colonial’s capital are discussing whether to follow suit, sources said.

These three parties are oil major Shell and investment firms IFM Investors and KKR, the sources added. Infrastructure funds, public pension funds and sovereign wealth funds are among the potential buyers, according to the sources.

A subsidiary of Koch Industries, the remaining co-owner, has indicated it plans to maintain its 28.1% stake in Colonial, one of the sources said.

The sources warned that no transaction is certain and asked not to be identified because the matter is confidential.

A Colonial spokesperson referred all questions about ownership to its owners. CDPQ and KKR declined to comment. IFM, Koch and Shell did not immediately respond to requests for comment.

Colonial’s pipeline system stretches more than 5,500 miles from Houston, Texas, to New York Harbor. It moves 100 million gallons of fuel daily, including gasoline, jet fuel, diesel and heating oil, according to its website.

The pipeline offers the least expensive route to transport products from low-cost production centers near the Gulf Coast to markets in the Southeast and across the East Coast, credit rating agency Fitch said in a note last month.

A cyber hack caused the Colonial pipeline to shut down for several days in 2021, disrupting fuel supplies to thousands of gas stations and airports.

Colonial failed to plan and prepare for a manual restart and shutdown operation, which exacerbated the consequences, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Administration found at the time.

CDPQ purchased its stake in Colonial for $850 million in 2012 from ConocoPhillips. IFM and KKR acquired respective stakes of 15.8% and 23.4% in 2007 and 2010.

Shell consolidated its 16.13% into a single stake in 2019, while Koch has maintained its current position since 2003.

North American energy pipelines have become valuable holdings over the past two years due to the growth of U.S. energy production and the difficulty of permitting and building new lines. This has led to an increase in negotiations in the sector.

(Reporting by David French in New York; Editing by David Gregorio)