Exclusive-Some Colonial Pipeline owners eye stake sales at $10 billion-plus company valuation, sources say

FILE PHOTO: Holding tanks are pictured at Colonial Pipeline's Linden Junction Tank Farm in Woodbridge, New Jersey, U.S., May 10, 2021. REUTERS/Hussein Waaile/File Photo

By David French

(Reuters) - Some of Colonial Pipeline's owners are exploring divesting their stakes, hoping they can fetch prices that would value the largest U.S. fuel transportation system in excess of $10 billion, according to people familiar with the matter.

Growing U.S. energy consumption has raised demand for 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 placement du Québec (CDPQ) has begun working on the sale of its 16.6% stake in Colonial, while three co-owners that collectively account for 55.3% of the equity in Colonial are discussing whether to follow suit, the 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 potential buyers, according to the sources.

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

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

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

Colonial's pipeline system stretches over 5,500 miles from Houston in Texas to New York's 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 move product from low-cost production centers near the Gulf Coast to markets in the Southeast and across the Eastern Seaboard, credit rating agency Fitch said in a note last month.

A cyberhack caused a days-long shutdown of Colonial's pipeline in 2021, disrupting fuel supplies to thousands of filling stations and airports.

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

CDPQ bought its stake in Colonial for $850 million in 2012 from ConocoPhillips. IFM and KKR acquired their respective 15.8% and 23.4% holdings in 2007 and 2010.

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

North American energy pipelines have become prized holdings in the last two years because of the growth in U.S. energy production and difficulty of permitting and building new lines. This has led to heightened dealmaking in the sector.

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