Brookfield a potential suitor for Trans Mountain, analyst says

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(Reuters) – Brookfield Infrastructure Partners LP could be a potential buyer of the Canadian government-owned Trans Mountain oil pipeline, a Stifel FirstEnergy (NYSE:) analyst said, as the project expansion struggles with increasing costs arising from regulatory delays.

In 2018, Ottawa bought the 67-year-old pipeline for C$4.5 billion to ensure expansion proceeded, but has faced opposition by environmental and some indigenous groups.

Brookfield could be a potential “dark horse”, as it recently completed a $20 billion capital raise, and continues to have excellent access to capital markets, analyst Ian Gillies said in a research note on Monday.

“We would also expect various indigenous groups to pursue acquiring the pipeline”, Gillies wrote, adding that any further cost overruns would make Trans Mountain an unattractive M&A candidate for existing Canadian infrastructure companies.

Trans Mountain and Brookfield were not immediately available for comment.

The expansion of the Trans Mountain oil pipeline is expected to cost C$12.6 billion ($9.46 billion), a sharp increase from a previous estimate, due to court and regulatory delays, rising costs of land, labor and accommodations for indigenous groups who had raised concerns.

Last week Canada’s Federal Court of Appeal dismissed a challenge to government approval of the pipeline expansion, clearing some uncertainty from the project.

Toronto-Canada based Brookfield Infrastructure Partners, which engages in the acquisition and management of infrastructure assets, last year bought a number of federally-regulated gathering and processing assets from pipeline operator Enbridge.

Bloomberg earlier reported that Canada’s government will start a new round of consultations aimed at hashing out an agreement between indigenous groups that are competing for a stake in the Trans Mountain pipeline.

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