Pembina, KKR ink deals to boost western Canada gas infrastructure

March 1 (Reuters) - Pembina Pipeline Corp (PPL.TO) and KKR & Co (KKR.N) will merge their western Canadian gas processing assets in a joint venture that will also buy Energy Transfer LP's (ET.N) holdings in the region, in deals worth C$11.4 billion ($8.99 billion).

Tuesday's deals provide Pembina a greater exposure to rising natural gas volumes in the area, the company said, allowing it to tap into surging prices for the commodity when the industry is facing a shortage of transport capacity.

The pipeline operator said it expects natural gas processing capacity of the combined venture to be about 5 billion cubic feet per day, or about 16% of Western Canada's total processing capacity.

"Pembina is always interested in creative M&A projects," Chief Operating Officer Jaret Sprott said on a call discussing the deal, even as it focuses on integrating the assets of the venture.

Pembina will operate the new company and own 60% of the venture while KKR's global infrastructure funds will own the rest.

As part of the deals, the combined company will buy Energy Transfer LP's (ET.N) 51% stake in Energy Transfer Canada, with the rest already owned by KKR's funds.

The new company will also include the Veresen Midstream business, in which funds managed by KKR have a 55% stake while Pembina owns the rest.

Calgary, Alberta-based Pembina said it plans to increase its dividend by 3.6% after the deal closes, and that the deal allows it to raise full-year share repurchase target to C$350 million ($275 million) from C$200 million.

The deal is expected to close late in the second quarter or in the third quarter.

Pembina said it intends to sell its interest in its Key Access Pipeline System to finance the deal, and is evaluating its portfolio to look for other non-core, non-operating assets to sell.

($1 = 1.2681 Canadian dollars)

($1 = 1.2739 Canadian dollars)

Reporting by Ruhi Soni in Bengaluru; Editing by Krishna Chandra Eluri and Sriraj Kalluvila

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