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TC Energy has agreed to sell 40% of the Columbia Gas and Columbia Gulf pipelines in the U.S. for US$3.9 billion (C$5.2 billion) in cash, the Canada-based pipeline giant said on Monday.
Columbia Gas and Columbia Gulf will be held in a new joint venture partnership with Global Infrastructure Partners (GIP), said TC Energy, which will speed up its debt reduction program with the sale.
TC Energy will continue to operate the systems, the company added.
TC Energy and GIP will jointly invest in annual maintenance, modernization, and sanctioned growth capital to further enhance system capacity and reliability. GIP will fund its 40% share of gross capital expenditures, which are expected to average more than US$1 billion (C$1.3 billion) annually over the next three years.
Acquired by TC Energy in 2016, the 11,899-mile Columbia Gas Transmission system extends from New York State to the Midwest and Southeast, serving as a link between major natural gas basins and major markets. Columbia Gulf Pipeline, for its part, is 3,367 miles and supplies Louisiana, Mississippi, Tennessee, and Kentucky, and connects to every major pipeline in the U.S. Gulf Coast and to additional Midwestern lines. The two pipeline networks deliver a substantial portion of daily U.S. natural gas demand, including around 20% of the supply for U.S. LNG exports, TC Energy said.
The company has been seeking to monetize assets via divestitures to reduce debt and pay for the cost overruns at other pipeline projects, including in British Columbia in Canada.
“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,” TC Energy’s president and CEO François Poirier said.
“As part of our ongoing capital rotation program, we continue to evaluate opportunities to further our deleveraging objectives and optimally fund our secured capital program,” Poirier added.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com