'No sacred cows' as pipeline company TC Energy prepares for C$5 billion asset sale

‘No sacred cows’ as pipeline company TC Energy prepares for C$5 billion asset sale

WINNIPEG, Manitoba, Dec 2 (Reuters) – As TC Energy Corp (TRP.TO) prepares to offload C$5 billion ($3.7 billion) in assets next year, investors and analysts say the North American pipeline operator has many options without touching its core gas business.

Chief executive Francois Poirier cleared up any ambiguity this week when asked how much of TC’s portfolio was in the storefront.

“I remember reading a book called ‘Sacred Cows Make the Best Burgers,'” Poirier said at the company’s Investor Day.

“There are no sacred cows.”

TC, based in Calgary, Alta., is widely known for its Keystone pipeline, a critical artery to get Canadian oil to U.S. refiners that has made headlines for the past decade for an expansion that ultimately failed.

But transporting natural gas to the United States, Canada and Mexico represents the bulk of TC’s business.

TC should consider selling Keystone along with its stake in Ontario’s Bruce Power nuclear facility because they are not part of its core business, said Rob Thummel, senior portfolio manager at TC shareholder Tortoise Capital Advisors.

“As far as a strategy, they’re trying to figure out, do they want to be a utility company or more of an infrastructure game?” said Thummel. “Things that aren’t essential, you might consider selling and implementing a buyback program or looking at energy transition ideas.”

Keystone could bring C$12.8 billion to TC, CIBC analyst Robert Catellier said in a note. He added that reducing TC’s oil exposure would help it meet its emissions reduction targets.

Selling Keystone and the rest of TC pipelines makes sense since other companies are more dominant than TC in liquids, said Brandon Thimer, equity analyst at TC shareholder First Avenue Investment Counsel.

“I think the market is going to applaud some of these provisions.”

TC’s fundraising plans to reduce debt and finance projects, including the troubled Coastal GasLink pipeline in British Columbia, are key to rekindling investor confidence in a company whose shares are lagging those of rival Enbridge Inc (ENB.TO).

The sales could reassure the market that TC won’t need to issue common stock to raise funds in light of Coastal’s cost overruns and an agreement in August to develop a 4.5 pipeline. billion in Mexico, said RBC analyst Robert Kwan.

TC stock has gained less than 1% year-to-date, while Enbridge has gained nearly 12% on Thursday.

TC’s stake in the Millennium natural gas pipeline in New York state is another logical candidate for sale and could fetch $1 billion, said Scotiabank analyst Robert Hope. Alberta’s smaller pipelines, Grand Rapids and White Spruce, could also be up for sale, Hope said.

TC may be in sell mode now, but it has no intention of shrinking. Poirier said the company needs to reduce its debt to less than five times its EBITDA to give TC the ability to buy other assets it expects to become available in the coming years.

“Our top priority in 2023 is to accelerate our deleveraging as we see opportunities over the coming years for us to be potentially opportunistic in mergers and acquisitions,” Poirier said.

“You can’t do that unless you’ve built a cushion.”

(This story has been reclassified to fix the name of the shareholder in paragraph 10)

Reporting by Rod Nickel in Winnipeg; additional reporting by Maiya Keidan in Toronto Editing by Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

Nickel Rod

Thomson Reuters

Covers energy, agriculture and politics in Western Canada, with the energy transition being a key area of ​​interest. Has done short stories in Afghanistan, Pakistan, France and Brazil and covered Hurricane Michael in Florida, Tropical Storm Nate in New Orleans and the 2016 Alberta wildfires and leadership election campaigns politics in two Canadian election campaigns.

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