CALGARY — TC Energy, the Calgary-based pipeline giant formerly known as TransCanada, said late Thursday it will separate itself into two distinct corporate entities as part of a major restructuring plan.
CALGARY — TC Energy, the Calgary-based pipeline giant formerly known as TransCanada, said late Thursday it will separate itself into two distinct corporate entities as part of a major restructuring plan.
CALGARY — TC Energy, the Calgary-based pipeline giant formerly known as TransCanada, said late Thursday it will separate itself into two distinct corporate entities as part of a major restructuring plan.
The proposed transaction would effectively carve out TC’s oil pipeline business from its much larger (and lighter) natural gas and power generation portfolio, which includes carbon capture and storage (CCS) and hydrogen assets. Some analysts view the spinoff as motivated by environmental, social and governance pressures, as the world pivots away from heavier fossil fuels like oil and toward cleaner power-generating sources like gas.
Here’s what you need to know:
The plan: Under the “transformative” deal, expected to close in the second half of 2024, the company will split into two publicly-listed firms. TC will become a pure natural gas and power generation company led by current CEO François Poirier. Bevin Wirzba, current head of TC’s natural gas assets, will lead the new oil-focused company.
The trouble with oil: Ryan Bushell, president of Toronto-based Newhaven Asset Management, said the spinoff will allow TC to fence off its struggling oil business, which hit a “dead end” after the company failed to secure permits in the U.S. for its controversial Keystone XL pipeline.
Its proposed Energy East pipeline, which would have shipped oil from northern Alberta to the Atlantic coast, never got off the ground, and TC’s existing Keystone system has suffered numerous leaks.
“It’s kind of dragging down the growth of the overall business,” Bushell told The Logic.
An ESG play: Meanwhile, its natural gas and power generation portfolio has massive potential for growth, Bushell said. TC operates a tangle of gas pipelines stretching 93,300 kilometres, and oversees various power generation assets. It plans to integrate that with a range of new assets from hydrogen hubs to the Alberta Carbon Grid, a proposed pipeline system TC says will form the “backbone” of the province’s emerging CCS industry.
The spinoff plans will allow it to isolate the potential of its position in natural gas and clean energy portfolio from an ESG perspective. While natural gas remains a controversial fossil fuel among some policymakers and environmental advocates, Bushell says it is increasingly viewed as a crucial bridge fuel in the energy transition.
“It’s been lumped in exactly the same as oil in the past, but now you see attitudes changing on nuclear, potentially they change on natural gas, too.”
In a research note, Morningstar analyst Stephen Ellis said the spinoff means TC has “neatly divested itself of sustainability concerns with regards to the oil assets, while retaining assets that have more positive ESG-related opportunities with gas and carbon capture, as well as power and hydrogen.”
The reaction: CEO Poirier told The Canadian Press that TC’s oil division is still highly valuable, but the spinoff will help the company attract new ESG-minded investors.
“It’s just that there’s been so much growth on the gas and low-carbon side of the business.”
For now, investors appear to doubt the spinoff’s upside. TC shares closed down more than four per cent to about $45 a share Friday on the Toronto Stock Exchange.
Loading...
You have shared 5 articles this month and reached the maximum amount of shares available.
CloseIf you would like to purchase a sharing license please contact The Logic support at [email protected].
CloseYou have gifted 0 article(s) this month and have 5 remaining.
Recipients will be able to read the full text of the article after submitting their email address. They will not have access to other articles or subscriber benefits.
Get up to speed in minutes with insights and analysis on the most important stories of the day, every weekday.
See the bigger picture with reporters and industry experts in subscriber-exclusive events.
Membership provides access to our popular Slack channel, participation in subscriber surveys and invitations to exclusive events with our journalists and special guests.