TransCanada Corporation (TRP - Free Report) is reportedly contemplating to jettison the Columbia Midstream unit via a deal that could be worth $1 billion. The assets include four gathering systems and a pipeline in eastern Ohio and western Pennsylvania. The pipeline operator also plans to sell a package of mineral rights in the Appalachian region. Notably, the Columbia midstream unit generates annual EBITDA of around $100 million. Per sources, many of the private equity firms have found the assets viable, thanks to the steady returns.
TransCanada is exploring a potential sale of these assets to fund the $8-billion capital spending targeted for 2019. The midstream company aims at using the proceeds to rev up the development of high-profile projects like Coastal GasLink system and the controversial Keystone XL pipeline, which was recently granted a new presidential permit by Trump. TransCanada expects these growth projects to generate higher returns and cash flows.
The company, which carries a leverage ratio of more than 54%, closed the divestment of a 62% stake in Cartier wind power facilitiesin the last reported quarter. Last October, the company had offloaded its only solar power holdings for C$540 million to utilize the proceeds for investing in more profitable pipeline assets.Going against the industry trend of expanding interests in renewable holdings, TransCanada intends to invest in core infrastructure assets.
Currently, the company’s portfolio includes around C$36 billion of accretive growth projects to be placed into service through 2023. The strong inventory of near-to-medium-term growth projects should support continued gains in TransCanada’s earnings and cash flow. The firm’s dividend appears to be highly secure, largely due to stable cash flow provided by the company's long-term contracts.
Zacks Rank & Other Key Picks
TransCanada currently carries a Zacks Rank #2 (Buy).
Other top-ranked players in the energy space include Murphy USA (MUSA - Free Report) , W&T Offshore, Inc. (WTI - Free Report) and Antero Resources Corporation (AR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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