TC Energy Corp. is selling a 40 per cent stake in its Columbia Gas Transmission and Columbia Gulf Transmission systems to New York City-based Global Infrastructure Partners for $5.2 billion.
The move, announced Monday, is the culmination of an asset divestiture program that Calgary-based TC Energy announced last fall. The company stated at the time it would seek to sell off at least $5 billion in non-core assets by the end of 2023, in order to help finance its larger expansion goals without taking on large amounts of debt.
“Today’s announcement represents a major milestone in achieving our 2023 strategic priorities,” said TC Energy CEO Francois Poirier in a news release.
“To date, we have advanced our deleveraging goals by delivering on our $5+ billion asset divestiture program ahead of our year-end target.”
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The Columbia Gas and Columbia Gulf pipelines span more than 24,000 kilometres across North America, delivering a substantial portion of daily U.S. natural gas demand, including approximately 20 per cent of U.S. liquefied natural gas (LNG) export supply.
TC Energy said it will remain the operator of the pipelines, and will jointly fund their annual maintenance, modernization and growth together with Global Infrastructure Partners.
Global Infrastructure Partners’ share of capital expenditures will average more than $1.3 billion annually over the next three years, TC Energy said.
The divestiture comes as TC Energy has faced rising costs for its Coastal GasLink project, which is currently under construction in B.C. and more than 90 per cent complete. Earlier this year, TC Energy raised the projected cost of the Coastal GasLink project to $14.5 billion, up from an earlier estimate of $11.2 billion.
RBC analyst Robert Kwan wrote in a research note Monday that he likes the Columbia pipelines transaction because it takes a “sizable chunk” out of TC Energy’s $5-plus billion asset monetization program all at once, via a transaction with a “well-regarded partner.”
Kwan said he expects TC Energy to announce additional divestitures in the coming months.
TC Energy is slated to report its second quarter earnings on Friday.