Kinder Morgan Canada Ltd. is likely to use its cash windfall from the purchase of a controversial pipeline to buy midstream assets in Western Canada, shareholders and analysts say.

Justin Trudeau’s Liberal government is buying the Trans Mountain pipeline and its expansion project for $4.5 billion, taking the contentious asset off Kinder Morgan’s hands in the midst of fierce opposition from environmental groups and British Columbia.

The deal isn’t expected to close until August, which gives Kinder Morgan “a summer to start looking at things,” said Bruce Campbell, president of Campbell Lee & Ross Investment Management Inc., which owns the company’s preferred shares. “I would think as a public company you don’t just sit on two-thirds of your value in cash forever.”

Kinder Canada Chief Executive Officer Steven Kean said on a conference call Tuesday that the company hasn’t decided on what it will do with the proceeds, which will amount to about $12 a share after taxes. Options may include buying back shares, paying down debt or seeking acquisitions of other midstream assets, Kean said.

Kinder Morgan may use the cash to buy assets from TransCanada Corp. or Enbridge Inc., which has been divesting some of its holdings to pay down debt. Other acquisition possibilities include Gibson Energy Inc. and Tidewater Midstream and Infrastructure Ltd., Campbell said in a phone interview.

Enbridge said earlier this month that it wasn’t in talks to buy Trans Mountain.

The interest could also go the other way, as the government said it hopes to eventually find a third-party buyer for the pipeline.

‘Sufficient Security’

If Enbridge or TransCanada "were able to secure sufficient security from the government we believe an acquisition could be a good project for them," Canaccord Genuity Corp. analyst David Galison told clients in a note, adding that both companies would need to secure external funding for the project.

Kinder Morgan could also use the cash to pay off debt and return cash to shareholders, RBC Capital Markets analyst Robert Kwan said in a note to clients.

“There is a modest amount of debt that can be paid down immediately and we believe that the company will look to potential acquisitions of Western Canadian midstream assets," said Kwan, who rates Kinder Morgan Canada outperform.

The government backstop for Trans Mountain will ultimately help the Canadian oil patch, which has faced steep discounts due to an inability to get its crude to market, but it may take a while for the benefits to show, Campbell said.

“In and of itself, this probably isn’t enough of a catalyst to all of sudden make that price differential go away,” he said. “It might take until it’s on-stream in 2020 to change the sentiment.”