LNG Canada construction general manager Vince Kenny walks towards a receiving platform as the terminus for the Coastal GasLink natural gas pipeline, left, is seen at the export terminal under construction in Kitimat, B.C., on Sept. 28, 2022.DARRYL DYCK/The Canadian Press
TC Energy Corp. TRP-T says it is splitting into two separate companies, spinning off its liquids pipelines business from its natural gas and low-carbon energy operations.
The Calgary-based company announced its plan late Thursday afternoon. Only days earlier, it said it would sell 40 per cent of its two massive Columbia gas transmission systems in the United States to New York-based Global Infrastructure Partners (GIP) for $5.2-billion to help shore up its balance sheet.
The Columbia deal was the first in a program that TC Energy announced last fall to sell off its non-core assets and minority interests, to help fund expansion goals without accruing large amounts of debt. That includes the Coastal GasLink pipeline in British Columbia, which has an expected cost that has surged more than 130 per cent since the original 2018 estimate of $6.2-billion.
TC Energy said Thursday that the decision to split its operations into two entities comes as a result of a two-year strategic review. It expects the plan to be completed in the second half of 2024.
Spinning off TC Energy’s liquids pipelines business will provide both companies “with the flexibility to pursue their own growth objectives,” it said in a news release.
TC Energy’s earnings before interest, taxes, depreciation and amortization (EBITDA) on its liquids pipeline business was $286-million in the second quarter of 2023, or 12 per cent of the company’s total, according to a recent analyst note from CIBC. Its gas pipelines, power and storage business EBITDA was $2.1-billion in the same quarter.
Calling the plan a “transformative announcement,” TC Energy president and chief executive officer François Poirier said in a statement that the spinoff “supports our 2023 priorities by maximizing the value of our assets.”
“We have determined that as two separate companies we can better execute on these distinct opportunity sets to unlock shareholder value,” he said.
The plan is for TC Energy to focus on natural gas infrastructure after the split. It will morph into an increasingly utility-weighted business, and focus on new power and energy opportunities such as nuclear and pumped hydro storage.
The new liquids pipelines company will focus on increasing capacity on underutilized portions of TC Energy’s current transport system, and increasing connectivity to more LNG receipt and delivery points.
Mr. Poirier said the fact TC Energy’s liquids pipelines are already highly contracted means the new entity will start off with stable, robust cash flows. After the spinoff, he said, it can use its financial flexibility to grow.
The announcement comes with only minor changes of TC Energy’s top brass.
Mr. Poirier will remain as president and CEO of TC Energy and Siim A. Vanaselja as chair of the board. Stan G. Chapman will become executive vice-president and chief operating officer of natural gas pipelines, tasked with integrating TC Energy’s current geographically dispersed natural gas business units into a single, unified pipelines business.
The new liquids pipelines company will be led by Bevin Wirzba as president and CEO. It will be publicly traded, with its headquarters in Calgary and an office in Houston. The new entity’s board will be announced in the coming months.