TC Energy Corp. TRP-T says a deal to sell a minority stake in its massive Nova Gas Transmission Ltd. and Foothills natural gas pipeline systems to a consortium of dozens of Indigenous communities has been delayed.
The $1-billion agreement, announced with much fanfare at the company’s Calgary headquarters in July, was part of TC Energy’s plan to reduce its debt and fund investments.
The pipeline company said Tuesday that the deal is delayed “due to an identified transaction structuring issue within the NGTL partnership.” It would not elaborate on what that issue is, or what it means for the future of the agreement.
The news came a surprise to analysts at Scotiabank.
“The size and scope of the issue are unclear, though we understand there was an error in the financial model to do with future capital requirements for the system,” analysts said in a Global Equity Research note on Tuesday.
“Overall, this does not change our view that NGTL is an attractive asset and that the selldown makes strong strategic sense. Given the complexity of the deal and number of parties involved, it could take some time to engage with all stakeholders.”
And while the complexity of the issue may see the deal pushed back to 2025, they wrote, they expect that it will ultimately be completed.
Natural gas infrastructure included in the deal spans 25,000 kilometres of pipeline systems across Western Canada, connecting about 80 per cent of natural gas production from the Western Canadian Sedimentary Basin to domestic and export markets. The communities would pick up a minority interest of 5.34 per cent in the systems under the deal, which TC Energy originally expected to close in the third quarter of 2024.
TC Energy says it is working to ensure the transaction “delivers meaningful distributions to Indigenous communities while upholding the fundamental value” of the assets involved.
The deal represents Canada’s largest equity interest purchase agreement with an Indigenous-owned investment partnership, according to TC. Backed by the Alberta Indigenous Opportunities Corp. (AIOC), a provincial Crown corporation, the consortium includes 72 Indigenous communities in Alberta, British Columbia and Saskatchewan.
The AIOC will provide the consortium with a $1-billion equity loan guarantee to support the investment. Details of the deal are not set in stone, however, as each of the 72 communities involved is yet to determine whether or not they will participate. TC Energy says the sale will go ahead no matter which ones take part.
The AIOC declined to comment on Tuesday, directing all questions to TC Energy.
Lee Thom, a councillor with Kikino Métis Settlement, told media in July that the deal would have a positive generational impact for years to come.
TC Energy is aiming to sell off $3-billion worth of assets this year in a bid to pay down an unsustainable debt load. In June, shareholders voted to spin off the company’s liquids pipeline business into another company, creating a new energy infrastructure firm called South Bow Corp.
François Poirier, TC Energy’s chief executive officer, acknowledged in July that the company is facing debt pressures. But he said it has for years been looking for a way for Indigenous rights holders to become part-owners of the company’s assets, so pursuing the NGTL deal was a perfect opportunity.
“It’s nice when you can kill two birds with one stone,” Mr. Poirier said at the time. “We have $100-billion of assets. We could have picked any number of assets to reduce debt. This is far more meaningful.”