TC Energy Corp. agreed to sell a 40 percent stake in two U.S. natural gas pipeline networks for $3.9 billion (about C$5.2 billion) in cash, a deal that will allow the Canadian company to meet a goal of reducing its debt ahead of schedule.
The transaction with private equity firm Global Infrastructure Partners will put the assets — the Columbia Gas Transmission and Columbia Gulf Transmission networks in the U.S. — in a joint venture between TC and GIP, with TC continuing to operate the systems.
TC Energy has met its target of reducing debt by C$5 billion (about $3.8 billion) or more this year ahead of time, Chief Executive Officer Francois Poirier said in a statement. The company has grappled with a major cost overrun at its Coastal GasLink pipeline, which it’s building to supply LNG Canada, a gas export project in British Columbia. The asset-sale program also is intended to help TC Energy keep its dividend growing by 3 percent to 5 percent per year.
“We like the move to take a sizable chunk out of TC Energy’s ‘$5+ billion’ asset monetization program and the reduction in the go-forward capital intensity for the company via a transaction with a well-regarded partner,” Robert Kwan, an analyst with Royal Bank of Canada, said in a note. Still, the sale’s valuation is “very slightly below what we had previously embedded in our existing assumptions for the entire asset monetization program.”
The Columbia Gas and Columbia Gulf pipelines cover more than 15,000 miles (24,000 kilometers) and account for about 20 percent of U.S. liquefied natural gas export supply.
