Back to top

Image: Bigstock

TC Energy (TRP), Energir Agree to Sell PNGTS in a $1.14B Deal

Read MoreHide Full Article

TC Energy Corporation (TRP - Free Report) and its partner Northern New England Investment Company, Inc., a subsidiary of Énergir L.P., recently entered into a significant agreement to sell the Portland Natural Gas Transmission System (“PNGTS”). This strategic move involves a sale to BlackRock, facilitated through a fund managed by its Diversified Infrastructure business, and investment funds operated by Morgan Stanley Infrastructure Partners.

The deal stands at a substantial gross purchase price of $1.14 billion, inclusive of the assumption of $250 million in outstanding Senior Notes held at PNGTS. This transaction indicates a valuation of approximately 11 times the reported 2023 comparable EBITDA.

Strategic Priorities and Vision

TC Energy's president and CEO, François Poirier, highlighted the agreement's significance in aligning with the company's strategic objectives, stating that it represents progress toward enhancing balance sheet strength by delivering around $3 billion in asset divestitures.

Balance Sheet Strengthening

The commitment to reaching a debt-to-EBITDA upper limit of 4.75 times by the year end underscores TC Energy's dedication to financial prudence and stability. Poirier further indicated the expectation of additional asset divestiture announcements throughout the year, reinforcing the company's focus on capital rotation and deleveraging initiatives.

Equitable Distribution of Proceeds

Following the transaction, the cash proceeds will be distributed pro-rata under the current PNGTS ownership interests. TC Energy holds 61.7% proprietorship, while Énergir owns the remaining 38.3%. These proceeds, subject to customary adjustments, will be disbursed at the closing of the deal, anticipated to take place in mid-2024.

Regulatory Approvals and Closing Conditions

The two main requisites for this transaction’s successful closure are receiving regulatory approvals and meeting customary closing conditions. TC Energy and its partners are committed to ensuring compliance with all regulatory requirements and facilitating a smooth transition process.

PNGTS Overview and Market Significance

PNGTS serves as a vital FERC-regulated transporter of natural gas, catering to the upper New England and Atlantic Canada markets. With a sprawling infrastructure spanning 475 kilometers (295 miles), PNGTS plays a pivotal role in facilitating the distribution of natural gas. The pipeline receives its supply from the Trans Quebec and Maritimes (“TQM") Pipeline via the Canadian Mainline, further solidifying its importance within the regional energy landscape.

Commitment to Safety and Operational Excellence

TC Energy remains steadfast in its commitment to prioritizing safety and operational excellence across its assets. The company's focus on adhering to stringent safety protocols and implementing best practices underscores its dedication to ensuring the reliability and integrity of its infrastructure.

Financial Guidance and Growth Outlook

Despite the divestiture of PNGTS, TC Energy maintains its financial guidance and growth outlook through 2026. The company is poised to leverage its operational expertise and strategic initiatives to drive sustainable growth and value creation for its stakeholders.

Conclusion

The sale of PNGTS represents a strategic decision aimed at optimizing TC Energy's portfolio and enhancing its financial flexibility. With a steadfast commitment to operational excellence and prudent financial management, TRP continues to solidify its position as a leading player in the energy sector.

Zacks Rank and Key Picks

Currently, TC Energy carries a Zacks Rank #3 (Hold).  

Investors interested in the energy sector might look at some better-ranked stocks like Murphy USA Inc. (MUSA - Free Report) and Energy Transfer LP (ET - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), and Subsea 7 S.A. (SUBCY - Free Report) , carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy USA is valued at around $8.72 billion. In the past year, its shares have risen 61.3%.

MUSA is involved in the marketing of retail motor fuel products and convenience merchandise, operating retail stores under the brands Murphy USA, Murphy Express and QuickChek.

Energy Transfer is valued at $50.45 billion. The company currently pays a dividend of $1.26 per share, or 8.41%, on an annual basis.

ET is an independent energy company, principally engaged in the acquisition, exploration, development and production of crude oil and natural gas.

Subsea 7 is valued at $4.58 billion. The company currently pays a dividend of 38 cents per share, or 2.55%, on an annual basis.

SUBCY offers offshore project services for the energy industry. It specializes in subsea field development, covering project management, design, engineering, procurement, fabrication, survey, installation and commissioning of seabed production facilities.

Published in