TC Energy Sells 40 Percent of Canada Pipelines Stake - Rigzone News

TC Energy Sells 40 Percent of Canada Pipelines Stake | Rigzone

TC Energy Sells 40 Percent of Canada Pipelines Stake

Global Infrastructure Partners (GIP) will become a 40 percent co-owner in TC Energy Corp.'s Columbia gas transmission system under a $3.9 billion (CAD5.2 billion) farmout deal, the operator said Monday.

TC Energy stays as operator of Columbia Gas Transmission LLC and Columbia Gulf Transmission LLC while GIP will fund 40 percent of gross capital expenditures, expected to average $1 billion (CAD 1.3 billion) yearly in the next three years, TC Energy said in a press release.

The sale is part of the energy infrastructure company's divestiture program for 2023 meant to reduce debts by giving up "discrete assets and/or minority interests", as announced November 9, 2022.

TC Energy had a $1.7 billion (CAD 2.242 billion) current portion of a long-term debt of $35.15 billion (CAD 46.247 billion) as of March 31, according to a quarterly filing April 28. It logged $2.93 billion (CAD 3.851 billion) in cash and cash equivalents as of the end of the first quarter.

"To date, we have advanced our deleveraging goals by delivering on our $5+ billion asset divestiture program ahead of our year-end target, while maximizing the value of our assets and safely executing major projects, such as Coastal GasLink and Southeast Gateway", president and chief executive Francois Poirier said in Monday's announcement.

Expected costs for the Coastal GasLink natural gas pipeline have ballooned to $11 billion (about CAD 14.5 billion). "The Project continues to face material cost pressures that include challenging conditions in the Western Canadian labor market; shortages of skilled labor; impacts of contractor underperformance and disputes; as well as other unexpected events like drought conditions and erosion and sediment control challenges", it said February 1 updating spending figures for the project.

The 416-mile project in British Columbia is planned to deliver gas from Dawson Creek city to a yet-to-be-built export terminal for liquefied natural gas in Kitimat district. TC Energy expects commissioning 2025.

Meanwhile Southeast Gateway is TC Energy's second marine natural gas pipeline in Mexico. TC Energy said August 4, 2022 a final investment decision has been reached with partner CFE, Mexico’s state-owned power utility, to spend $4.5 billion on the 444-mile project. The pipeline "supports the Mexican government’s priorities to supply vital natural gas to the central and southeast regions of Mexico", TC Energy said then.

Stretching over 15,000 miles, the Columbia Gas and Columbia Gulf pipelines "deliver a substantial portion of daily U.S. natural gas demand, including approximately 20 percent of U.S. liquified natural gas export supply", TC Energy noted in Monday's announcement.

"Long-term fundamentals continue to underscore the role of natural gas in a sustainable energy future. Our partnership with GIP will provide additional investment capacity to originate and execute Columbia Gas and Columbia Gulf projects to meet that need”, Poirier said.

The Columbia gas transport assets will come under a joint venture between TC Energy and GIP, which will be called Columbia Pipelines Holding Company LLC. The farmout is expected to close by the end of the year.

" In connection with the transaction, Columbia Pipeline Group, Inc. will contribute all of its equity interests in its wholly-owned subsidiaries, Columbia Gas and Columbia Gulf, to a newly formed wholly-owned entity, Columbia Pipelines Operating Company, LLC, which will be directly held by a newly formed wholly-owned entity, Columbia Pipelines Holding Company, LLC", TC Energy said.

To contact the author, email jov.onsat@rigzone.com

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