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TC Energy will split its operations into two separate companies, separating its liquids pipeline business from the rest.
In a news release, the Canadian company said “The spinoff will unlock shareholder value by providing both companies with the flexibility to pursue their own growth objectives through disciplined capital allocation, enhancing efficiencies and driving operational excellence.”
However, only the non-pipeline business will retain the name of the company, suggesting TC Energy is trying to distance itself from its core business activity of transporting hydrocarbons along pipelines.
Following the split, the new TC Energy would be a “diversified, industry-leading natural gas and energy solutions company, uniquely positioned to meet growing industry and consumer demand for reliable, lower-carbon energy, by leveraging complementary business sets.”
The spin-off comes after a two-year strategic review, the company also said, adding that it should be completed next year.
Earlier this week, TC Energy said it would sell 40% of its U.S. natural gas pipeline assets for $3.9 billion. The deal would see the Columbia Gas and Columbia Gulf pipeline systems owned by a partnership between TC Energy and Global Infrastructure Partners but TC Energy would continue to be the operator.
The sale, TC Energy said, was part of its debt reduction efforts.
“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.
Commenting on the planned spin-off, Poirier said “As we have become the partner of choice for a magnitude of accretive, high-quality opportunities, we have determined that as two separate companies we can better execute on these distinct opportunity sets to unlock shareholder value.”
The chief executive also added that the split should bring about annual EBITDA growth rates of 7% and a dividend growth rate of between 3 and 5%.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com