WINNIPEG, Manitoba, Dec. 2 (Reuters) – As TC Energy Corp (TRP.TO) is preparing to offload C$5 billion ($3.7 billion) in assets next year, investors and analysts say the North American pipeline operator has plenty of options without touching its nuclear gas business.
Chief Executive Francois Poirier cleared up any ambiguities this week when asked how much of TC’s portfolio is up for sale.
“I remember once reading a book called ‘Sacred cows make the best burgers,'” Poirier said at the company’s investor day.
“There are no sacred cows.”
Calgary, Alberta-based TC is widely known for its Keystone Oil Pipeline, a critical artery for transporting Canadian oil to U.S. refineries that has dominated headlines for the past decade for an expansion that ultimately failed.
But moving natural gas across the United States, Canada and Mexico is the bulk of TC’s business.
TC should consider selling Keystone along with its stake in Ontario’s Bruce Power nuclear power plant, as they are not part of its core business, said Rob Thummel, senior portfolio manager at TC shareholder Tortoise Capital Advisors.
“In terms of strategy, they’re trying to figure out, do they want to be a utility or more of an infrastructure game?” said Tumble. “The things that aren’t core, you could be looking at selling and implementing a buyback program or looking at energy transition ideas.”
Keystone could raise TC $12.8 billion, CIBC analyst Robert Catellier said in a note. He added that reducing TC’s oil exposure would help the company meet its emissions reduction goals.
The sale of Keystone and the rest of TC’s oil pipeline makes sense since other companies are more dominant than TC in liquids, said Brandon Thimer, an equity analyst with TC shareholder First Avenue Investment Counsel.
“I think the market will welcome some of these dispositions.”
TC’s fundraising plans to reduce debt and fund projects, particularly British Columbia’s troubled Coastal GasLink pipeline, are critical to restoring investor confidence in a company whose stock has lagged rival Enbridge Inc. (ENB.TO).
The sales may reassure the market that TC does not need to issue common stock to raise funds in light of Coastal’s cost overruns and an August deal to develop a $4.5 billion pipeline in Mexico, RBC said analyst Robert Kwan.
TC shares are up less than 1% so far, while Enbridge added nearly 12% as of Thursday.
TC’s stake in New York State’s Millennium Natural Gas Pipeline is another logical sell candidate and could raise $1 billion, Scotiabank analyst Robert Hope said. Small oil pipelines in Alberta, Grand Rapids and White Spruce could also be up for sale, Hope said.
TC may be in sell mode right now, but it has no intention of shrinking. Poirier said the company needs to reduce debt below five times its EBITDA to give TC the capacity to purchase other assets it expects to become available in the coming years.
“Our top priority in 2023 is to accelerate our deleveraging as we see some opportunities in the coming years for us to be potentially opportunistic in M&A,” Poirier said.
“You can’t do that unless you’ve built a cushion.”
(This story has been resubmitted to establish shareholder name in paragraph 10)
Reporting by Rod Nickel in Winnipeg; additional reporting by Maiya Keidan in Toronto Edited by Marguerita Choy
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