‘No sacred cows’ as pipeline firm TC Vitality prepares for C$5 billion asset gross sales By Reuters

By Rod Nickel

WINNIPEG, Manitoba (Reuters) – As TC Vitality (NYSE:) Corp prepares to unload C$5 billion ($3.7 billion) in property subsequent 12 months, traders and analysts say the North American pipeline operator has loads of choices with out touching its core gasoline enterprise.

Chief Govt Francois Poirier cleared up any ambiguities this week when requested how a lot of TC’s portfolio is within the store window.

“I bear in mind studying a e book as soon as referred to as, ‘Sacred Cows Make the Finest Burgers,'” Poirier mentioned on the firm’s investor day.

“There aren’t any sacred cows.”

Calgary, Alberta-based TC is broadly recognized for its Keystone oil pipeline, a essential artery for shifting Canadian oil to U.S. refiners that dominated headlines over the previous decade for an growth that in the end failed.

However shifting round the USA, Canada and Mexico is the larger a part of TC’s enterprise.

TC ought to contemplate promoting Keystone together with its stake in Ontario’s Bruce Energy nuclear facility, since they aren’t a part of its core enterprise, mentioned Rob Thummel, senior portfolio supervisor at TC shareholder Tortoise Capital Advisors.

“So far as a technique, they’re making an attempt to determine, do they wish to be a utility firm or extra of an infrastructure play?” Thummel mentioned. “The stuff that is not core, you may have a look at promoting and implementing a buyback program or have a look at power transition concepts.”

Keystone might fetch TC C$12.8 billion, mentioned CIBC analyst Robert Catellier in a word. He added that decreasing TC’s oil publicity would assist it attain its emissions-reduction targets.

Promoting Keystone, and the remainder of TC’s oil pipelines, is smart since different corporations are extra dominant than TC in liquids, mentioned Brandon Thimer, fairness analyst at TC shareholder First Avenue Funding Counsel.

“I feel the market goes to applaud a few of these inclinations.”

TC’s fund-raising plans to scale back debt and fund initiatives, notably the troubled Coastal GasLink pipeline in British Columbia, are essential to reviving investor confidence in an organization whose shares have lagged these of rival Enbridge (NYSE:) Inc.

The gross sales could reassure the market that TC won’t must challenge frequent fairness to lift funds in gentle of Coastal’s value over-runs and a deal in August to develop a $4.5 billion pipeline in Mexico, RBC analyst Robert Kwan mentioned.

TC inventory has gained lower than 1% 12 months thus far, whereas Enbridge has added almost 12% as of Thursday.

TC’s stake within the Millennium pure gasoline pipeline in New York state is one other logical sale candidate and will fetch $1 billion, mentioned Scotiabank analyst Robert Hope. Small Alberta oil pipelines, Grand Rapids and White Spruce, may be on the market, Hope mentioned.

TC could also be in promote mode now, nevertheless it has no intentions of shrinking. Poirier mentioned the corporate wants to scale back debt to beneath 5 occasions its EBITDA to provide TC the capability to purchase different property that it expects to turn out to be out there in coming years.

“Our highest precedence in 2023 is to speed up our deleveraging as a result of we do see over the following years some alternatives for us doubtlessly to be opportunistic in M&A,” Poirier mentioned.

“You possibly can’t try this until you have constructed some cushion.”

(This story has been refiled to repair the title of the shareholder in paragraph 10)