TC Energy is divesting a 40% stake in the pipeline systems for $3.9 billion (CA$5.2 billion) in cash, the company announced in a July 24 news release.
The Columbia Gas and Columbia Gulf pipeline systems will be organized in a joint venture partnership between Calgary-based TC Energy and private equity firm GIP. The two companies will jointly invest growth capital to enhance the systems’ capacity and reliability, in addition to annual maintenance and modernization investments.
TC Energy will continue to operate the pipelines after closing, which is expected to occur in the fourth quarter.
GIP is expected to fund gross capital expenditures of around $1 billion annually over the next three years to cover its 40% stake in the gas pipelines.
The Columbia Gas and Columbia Gulf pipelines, which TC Energy acquired in 2016 in a roughly $13 billion deal, collectively span more than 15,000 miles.
The nearly 12,000-mile Columbia Gas Transmission system reaches from New York state into major markets in the Midwest and Southeast. The roughly 3,300-mile Columbia Gulf Pipeline serves natural gas demand in Louisiana, Mississippi, Tennessee and Kentucky.
The Columbia assets also supply nearly 20% of the nation’s LNG export capacity, according to TC Energy.
Last November, TC Energy said it aimed to sell more than CA$5 billion in assets or minority positions in the company’s 2023 divestiture program.
“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,” TC Energy President and CEO François Poirier said.
“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,” he said.
Analysts at Fitch Ratings viewed the agreement as neutral to TC Energy’s credit quality and expect proceeds from the divestiture will facilitate debt reduction this year, according to a July 24 report.
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