An equity strategist says TC Energy’s sale of a minority stake in its natural gas pipeline network in Western Canada to a consortium of Indigenous communities is a positive step forward for all parties involved.
“I think it’s a really good deal… I think it’s a win-win-win and I think it makes a lot of sense,” said Morningstar Research Services’ Stephen Ellis in an interview with BNN Bloomberg on Wednesday.
“There’s a couple things for TC Energy; one, it raises a billion dollars towards their debt reduction targets, and two… it ensures a really strong partnership between TC Energy and stakeholders alongside the pipeline routes.”
The deal is worth $1 billion, with a total enterprise value inclusive of debt of $1.65 billion, the largest Indigenous equity ownership agreement in Canadian history, according to TC Energy.
Ellis said that with Indigenous partners, TC Energy is likely to see less pushback against future pipeline developments in Western Canada.
“I think the key thing there is they’re going to have economic ownership in that pipeline; those Indigenous groups are going to share in the economics of that pipeline and that’s going to be a really important thing to kind of lessen that pushback,” he said.
“Because I think a lot of the pushback is rooted in the fact that pipeline firms have retained 100 per cent of the economics, and now that you have a fair ownership stake and share in the economics – that pushback is certainly diminished.”
Ellis added that this deal puts TC Energy at close to two-thirds of the $3 billion in asset sales the company had targeted by the end of the year.
He noted that the company’s spinoff of its liquids pipeline business called South Bow, set to be officially completed sometime in the fall, will also help the company to generate cash and further reduce debt.
With files from The Canadian Press
