![TC Energy, Partner Sell Portland NatGas Transmission System for $1.14B](/sites/default/files/styles/hart_news_article_image_640/public/image/2024/03/natural-gas-transmission-pipeline-system.jpg?itok=np6bjvim)
TC Energy and Northern New England Investment Co. are selling to BlackRock the Portland Natural Gas Transmission System, a natural gas transmission pipeline system such as the one depicted above. (Source: Shutterstock)
Canada’s TC Energy (TRP) and partner Northern New England Investment Co., a subsidiary of Énergir LP, agreed to sell the Portland Natural Gas Transmission System (PNGTS) for US$1.14 billion, including the assumption of US$250 million in debt.
BlackRock will purchase the 295-mile (475-km) system through a fund managed by its diversified infrastructure business and investment funds managed by Morgan Stanley Infrastructure Partners.
Cash proceeds will be split pro-rata according to the current PNGTS ownership interests (TC Energy 61.7%, Énergir 38.3%) and will be paid at closing, subject to certain customary adjustments.
The buyers will assume outstanding senior notes held at PNGTS, which are consolidated on TC Energy’s balance sheet. The sale moves TC Energy toward its 2024 divestment target of CA$3 billion (US$ 2.21 billion) and a 4.75x debt-to-EBITDA ratio, the company said in a March 4 news release.
Analysts at Tudor, Pickering, Holt & Co. (TPH) said the pipeline is fully contracted with terms ranging between 10 years and 30 years. The system, which the U.S. Federal Energy Regulatory Commission regulates, transports Canadian natural gas to upper New England, including to Maine, New Hampshire and Massachusetts.
TC Energy will likely look to other potential divestiture targets in Canada and the U.S., TPH said in a March 4 commentary.
“Other assets with a similar profile include their Iroquois Pipeline, Millennium, Tuscarora and GTN [Gas Transmission Northwest]. We will likely see one or two more sales in the U.S. and potentially a small piece of NGTL in Canada to complete the divestiture program,” TPH said.
TC Energy's 2024 financial guidance and growth outlook through 2026 remain unchanged as a result of the divestiture, the company said.
“Overall, TRP's guidance for 2024 EBITDA and growth outlook through 2026 remains unchanged as a result of the transaction,” Jefferies analysts said in a March 4 report. “Strategic priorities for 2024 remain focused on balance sheet strength, with TRP working towards achievement of its 4.75x debt-to-EBITDA upper limit by the end of the year, [the company] expects to announce further asset sales through the year.”
TC Energy said the deal generates pre-tax equity proceeds of approximately CA$740 million (US$545 million) net to the company. The transaction implies a valuation multiple of approximately 11x comparable to 2023 EBITDA, the company said.
"Today’s announcement represents continued progress toward achieving our 2024 strategic priority of enhancing our balance sheet strength by delivering approximately $3 billion in asset divestitures. We are committed to reaching our 4.75 times debt-to-EBITDA upper limit by year-end and expect to have further asset divestiture announcements through the year,” said François Poirier, TC Energy president and CEO. “This sale of a non-core asset at a strong valuation is a unique opportunity to support our capital rotation and deleveraging priorities while continuing to meet the needs of the communities PNGTS serves.”
The pipeline receives natural gas from the Trans Quebec and Maritimes Pipeline via the Canadian Mainline. TC Energy will provide customary transition services and will work jointly with the buyer to ensure the “safe and orderly” transition of this critical natural gas system.
The transaction is expected to close in mid-2024, subject to the receipt of regulatory approvals and customary closing conditions.
Barclays acted as exclusive financial adviser to TC Energy and Énergir on the transaction. Bracewell LLP acted as legal adviser to TC Energy.
RELATED
TC Energy Reportedly Exploring Sale of Pipeline Interests Worth Billions
Recommended Reading
Barnett & Beyond: Marathon, Oxy, Peers Testing Deeper Permian Zones
2024-04-29 - Marathon Oil, Occidental, Continental Resources and others are reaching under the Permian’s popular benches for new drilling locations. Analysts think there are areas of the basin where the Permian’s deeper zones can compete for capital.
VAALCO Reports Increased Reserves After Svenska Deal
2024-07-16 - VAALCO acquired Swedish E&P Svenska’s 27.39% non-operated working interest in the deepwater Baobab Field in Block CI-40, offshore Côte d’Ivoire.
EOG: Utica Oil Can ‘Compete with the Best Plays in America’
2024-05-09 - Oil per lateral foot in the Utica is as good as top Permian wells, EOG Resources told analysts May 3 as the company is taking the play to three-mile laterals and longer.
Third Suriname Find for Petronas, Exxon Could Support 100,000 bbl/d FPSO
2024-05-17 - A recent find offshore Suriname in Block 52 by Petronas and Exxon Mobil could support a 100,000 bbl/d FPSO development, according to Wood Mackenzie.
Permian Recycling Facility Passes 50 MMbbl of Water Recycling
2024-05-20 - Occidental Petroleum and Select Water Solutions have collaborated on water treatment and recycling at the site since 2021.