Kinder Morgan Canada share target cut as growth hopes fall post pipeline deal

Analysts at CIBC have cut their target share price for Kinder Morgan Canada Ltd. and say its future is cloudy in the wake of its deal to sell its biggest current and growth asset — the Trans Mountain pipeline system — to the federal government.

They say in a research report the company will be left cash-rich but prospect-poor after it agreed to sell its existing 300,000-barrel-per-day pipeline and the delayed 590,000-bpd expansion project for $4.5 billion.

Kinder Morgan Canada stock fell again Wednesday, continuing the post-deal trend that saw it close nearly three per cent lower at $16.10 on Tuesday. It dipped another 15 cents to $15.95 when the Toronto Stock Exchange closed on Wednesday.

CIBC slashed its 12-month price target to $17 from $22 because of its lower expectations of future growth in revenue and dividends for Kinder Morgan shareholders.

It says the company has a great deal of capital available, given Ottawa's cash deal and the plan of its 70 per cent owner, Houston-based Kinder Morgan, Inc., to spend more than $15 billion in overall growth capital over the next five years.

But the note adds that it's unlikely that an acquisition would allow it to offset the benefit from the $7.4-billion expansion of its Trans Mountain pipeline.