News Release – TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or
the Company) announced that it has entered into an agreement to
monetize a 40 per cent interest in its Columbia Gas Transmission,
LLC (Columbia Gas) and Columbia Gulf Transmission, LLC (Columbia
Gulf) systems. Columbia Gas and Columbia Gulf will be held in a new
joint venture partnership with Global Infrastructure Partners
(GIP). Total proceeds for the transaction are expected to be $5.2
billion (US$3.9 billion) in cash, to be paid at closing, subject to
certain customary adjustments. The value of the 40 per cent equity
interest implies an enterprise value to a comparable EBITDA1
multiple of approximately 10.5 times TC Energy’s base 2023 outlook
and expected run-rate capital structure for the partnership entity.
TC Energy will continue to operate the systems, focusing on
maximizing value through safe operations, reliability of service
and operational excellence. TC Energy and GIP will jointly invest
in annual maintenance, modernization and sanctioned growth capital
to further enhance system capacity and reliability. GIP will fund
its 40 per cent share of gross capital expenditures, which are
expected to average more than $1.3 billion (US$1 billion) annually
over the next three years.
"Today’s announcement represents a major milestone in achieving
our 2023 strategic priorities. 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,” said François Poirier,
TC Energy’s President and Chief Executive Officer. “As part of our
ongoing capital rotation program, we continue to evaluate
opportunities to further our deleveraging objectives and optimally
fund our secured capital program. Our commitment to strong balance
sheet fundamentals and disciplined sanctioned net capital spending
of $6 to $7 billion annually post 2024 will continue to provide the
foundation for a long-term sustainable annual dividend growth rate
of three to five per cent.”
Supporting the energy transition through critical
natural gas infrastructure
The Columbia Gas and Columbia Gulf pipelines span more than
15,000 miles across a highly integrated North American natural gas
network and are underpinned by strong long-term natural gas
fundamentals and a rate-regulated commercial framework. These
assets deliver a substantial portion of daily U.S. natural gas
demand, including approximately 20 per cent of U.S. liquified
natural gas (LNG) export supply. The resiliency of these systems
combined with their ability to connect the largest and lowest-cost
natural gas basin to key demand centres and global export markets,
uniquely positions them to remain a central player in further
supporting the transition to lower-emitting energy sources.
“Long-term fundamentals continue to underscore the role of
natural gas in a sustainable energy future. Our partnership with
GIP will provide additional investment capacity to originate and
execute Columbia Gas and Columbia Gulf projects to meet that need,”
continued Poirier. “This, and future partnerships, across our
portfolio will strengthen our ability to enable the energy
transition while enhancing balance sheet strength. We look forward
to combining the collective strengths of TC Energy’s strategic
asset base and strong operating expertise, as well as GIP’s proven
investment track record and extensive relationships in the global
LNG market.”
“We are pleased to partner with TC Energy on energy
infrastructure assets that are critical to the North American and
global natural gas markets,” said Bayo Ogunlesi, Global
Infrastructure Partners’ Chairman and Chief Executive Officer. “We
welcome the opportunity for this joint venture to leverage the
combined assets and capabilities of TC Energy and GIP to serve
growing market needs for cleaner fuels, energy security and energy
affordability.”
Transaction details
The transaction is expected to close in the fourth quarter of
2023, subject to customary closing conditions.
In connection with the transaction, Columbia Pipeline Group,
Inc. (CPG) will contribute all of its equity interests in its
wholly-owned subsidiaries, Columbia Gas and Columbia Gulf, to a
newly formed wholly-owned entity, Columbia Pipelines Operating
Company, LLC (CPOC), which will be directly held by a newly formed
wholly-owned entity, Columbia Pipelines Holding Company, LLC
(CPHC). CPHC represents the entity through which TC Energy and GIP
will each hold their equity interest. At closing of the
transaction, TC Energy and GIP will enter into a Limited Liability
Company Agreement and Operation and Maintenance Services Agreement
that provide GIP with certain customary rights commensurate with
its 40 per cent equity ownership interest while preserving TC
Energy's flexibility to efficiently and effectively operate the
assets.
As CPG’s equity interests in Columbia Gas and Columbia Gulf
constitute substantially all of the assets of CPG, in accordance
with the indenture governing CPG’s outstanding 4.50 per cent Senior
Notes due 2025 and 5.80 per cent Senior Notes due in 2045 with a
total outstanding principal amount of US$1.5 billion (collectively,
the “Existing Notes” and such indenture, the “Existing Notes
Indenture”), CPOC and CPG will enter into a supplemental indenture
to the Existing Notes Indenture pursuant to which CPOC will assume
all of CPG’s obligations under the Existing Notes and the Existing
Notes Indenture and CPG will be concurrently released from its
obligations thereunder.
As part of the transaction TC Energy expects to undertake a
recapitalization and debt restructuring of CPHC and CPOC. TD
Securities Inc. and Citi acted as financial advisers to TC Energy
on the transaction and have provided capital commitments with
respect to expected bank financing. Mayer Brown is acting as legal
adviser to TC Energy.
About TC EnergyWe’re a team of 7,000+ energy
problem solvers working to move, generate and store the energy
North America relies on. Today, we’re taking action to make that
energy more sustainable and more secure. We’re innovating and
modernizing to reduce emissions from our business. And, we’re
delivering new energy solutions – from natural gas and renewables
to carbon capture and hydrogen – to help other businesses and
industries decarbonize too. Along the way, we invest in communities
and partner with our neighbours, customers and governments to build
the energy system of the future.
TC Energy’s common shares trade on the Toronto (TSX) and New
York (NYSE) stock exchanges under the symbol TRP. To learn more,
visit us at TCEnergy.com.
About Global Infrastructure Partners Global
Infrastructure Partners (GIP) is a leading infrastructure investor
that specializes in investing in, owning and operating some of the
largest and most complex assets across the energy, transport,
digital infrastructure and water and waste management sectors. With
decarbonization central to our investment thesis, we are well
positioned to support the global energy transition. Headquartered
in New York, GIP has offices in Brisbane, Dallas, Delhi, Hong Kong,
London, Melbourne, Mumbai, Singapore, Stamford and Sydney.
GIP has approximately $100 billion in assets under management.
Our portfolio companies have combined annual revenues of
approximately $80 billion and employ over 100,000 people. We
believe that our focus on real infrastructure assets, combined with
our deep proprietary origination network and comprehensive
operational expertise, enables us to be responsible stewards of our
investors' capital and to create positive economic impact for
communities. For more information, visit www.global-infra.com.
NON-GAAP MEASURESThis release contains
references to comparable EBITDA, which is a non-GAAP measure. This
non-GAAP measure does not have any standardized meaning as
prescribed by GAAP and therefore may not be comparable to similar
measures presented by other entities. Comparable EBITDA is
calculated by adjusting segmented earnings, a GAAP measure, for
specific items we believe are significant but not reflective of our
underlying operations in the period.
Comparable EBITDA for Columbia Gas and Columbia Gulf for the
years ended December 31, 2022 and 2021 was US$1.718 billion and
US$1.749 billion, respectively. Comparable EBITDA for our U.S.
Natural Gas Pipelines segment for the years ended December 31, 2022
and 2021 was US$3.142 billion and US$3.075 billion, respectively.
Segmented earnings for our U.S. Natural Gas Pipelines segment for
the years ended December 31, 2022 and 2021 were $2.617 billion and
$3.071 billion, respectively. For reconciliations of comparable
EBITDA to segmented earnings for our U.S. Natural Gas Pipelines
segment for the years ended December 31, 2022 and 2021, refer to
pages 27, 53 and the Non-GAAP measures section of our management’s
discussion and analysis for the year ended December 31, 2022 (the
MD&A), which sections of the MD&A are incorporated by
reference herein. The MD&A can be found on SEDAR
(www.sedar.com) under TC Energy's profile.
FORWARD-LOOKING INFORMATIONThis release
contains certain information that is forward-looking and is subject
to important risks and uncertainties (such statements are usually
accompanied by words such as "anticipate", "expect", "believe",
"may", "will", "should", "estimate", "intend" or other similar
words). Forward-looking statements in this document may include,
but are not limited to, statements regarding the Company’s
monetization of certain pipelines and the establishment of a
partnership with Global Infrastructure Partners; capital to fund
future growth opportunities; resources and contracts underpinning
the pipeline assets; expected debt structuring and expected timing
of closing. Key assumptions on which our forward-looking
information is based include, but are not limited to, assumptions
about the realization of expected benefits from divestitures,
anticipated construction costs, schedules and completion dates,
access to capital markets, expected industry, market and economic
conditions, inflation rates, foreign exchange and interest rates.
Forward-looking statements in this document are intended to provide
TC Energy security holders and potential investors with information
regarding TC Energy and its subsidiaries, including management's
assessment of TC Energy's and its subsidiaries' future plans and
financial outlook. All forward-looking statements reflect TC
Energy's beliefs and assumptions based on information available at
the time the statements were made and as such are not guarantees of
future performance. As actual results could vary significantly from
the forward-looking information, you should not put undue reliance
on forward-looking information and should not use future-oriented
information or financial outlooks for anything other than their
intended purpose. We do not update our forward-looking information
due to new information or future events, unless we are required to
by law. For additional information on the assumptions made, and the
risks and uncertainties which could cause actual results to differ
from the anticipated results, refer to the most recent Quarterly
Report to Shareholders and Annual Report filed under TC Energy’s
profile on SEDAR at www.sedar.com and with the U.S. Securities and
Exchange Commission at www.sec.gov.
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Media Inquiries:Media
Relationsmedia@tcenergy.com 403-920-7859 or 800-608-7859
Investor & Analyst Inquiries:Gavin Wylie /
Hunter Mauinvestor_relations@tcenergy.com403-920-7911 or
800-361-6522
Global Infrastructure Partners:Mustafa
Riffatmustafa.riffat@global-infra.com
_____________________________
1 Comparable EBITDA is a Non-GAAP measure. The most directly
comparable measure presented in our financial statements is
segmented earnings. See “Non-GAAP measures” and “Forward-looking
information” for more information.
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