CALGARY – TransCanada Corp. (TSX:TRP) unveiled a series of multibillion-dollar moves on Tuesday as it revised and nailed down its strategy to absorb a major U.S. pipeline company it bought for $10.3 billion in July.
It announced it would realize US$3.7 billion from the sale of its U.S. Northeast power business, put on the market to help repay a bridge loan used to buy the Columbia Pipeline Group.
Meanwhile, it said it had abandoned a plan to sell stakes in its Mexican natural gas pipelines. And it confirmed a deal to buy out units in a limited partnership that owns part of Columbia’s assets.
“We believe the actions announced today will contribute to both short- and long-term shareholder value,” said president and chief executive Russ Girling on a conference call.
The U.S. power plant assets will go to two buyers. An affiliate of LS Power Equity Advisors is to buy the Ravenswood, Ironwood, Ocean State Power and Kibby Wind operations for US$2.2 billion, while an affiliate of ArcLight Capital Partners is to buy the TC Hydro operation for US$1.07 billion.
The remaining roughly $435 million is expected to be realized in a future sale of the associated marketing business.
TransCanada said it no longer plans to sell a minority interest in six natural gas pipelines in Mexico to help pay for the Columbia deal. Instead, it said it would raise $3.2-billion by selling shares through a bank consortium which will have the option to increase the issue by 10 per cent if demand warrants.
The Calgary-based pipeline company said it had struck a deal to pay US$915 million or $17 per unit to buy Columbia Pipeline Partners LP. In September, it said it had offered $15.75, a deal that was then reviewed by a committee.
“Maintaining our full interest in growing Mexican natural gas pipelines and instead accessing the capital markets is expected to be accretive to earnings per share,” said Girling.
“And the acquisition of Columbia Pipeline Partners LP increases our ownership in Columbia’s principal assets to 100 per cent and further simplifies our corporate structure.”
TransCanada said it expects to take a $1.1-billion net loss on the U.S. power deal — including a $656-million after-tax goodwill impairment in the third quarter and an $863-million after-tax net loss to be recorded in the fourth quarter on the thermal and wind package. The deal is expected to be offset somewhat by a $443-million after-tax gain from the hydro business.
The impairment helped lead TransCanada to a net loss of $135 million or 17 cents per share for the quarter ended Sept. 30, compared with net earnings of $402 million or 57 cents for the same quarter last year.
Excluding that non-cash charge and certain other items, earnings would have been $622 million, compared to $440 million or $0.62 per share for the same period in 2015, it said.
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Note to readers: This is a corrected story. A previous version said TransCanada’s sale of its U.S. Northeast power business to two buyers was expected to realize US$3.7 billion. In fact, the sale to the two buyers is expected to generate $3.27 billion, with the rest of the proceeds coming from a potential sale in the future.