TC Energy open to exceeding $3B asset divestiture target this year, says CEO

TC Energy Corp. is open to selling off more than its previously announced target of $3 billion in assets this year, the company said Friday, and is engaging with multiple interested buyers for what will likely be two to four separate transactions.

CEO Francois Poirier said the Calgary-based pipeline operator has several divestiture processes underway and hopes to be able to make at least one asset sale announcement in the first half of the year.

"We've got many conversations going on, and not only is there competition within processes, but there's competition between processes," Poirier told analysts on a conference call to discuss TC Energy's fourth-quarter earnings.

"So to the extent we could see some compelling valuations, we would be open to considering exceeding the $3 billion target."

The $3 billion, which Poirier said the company is "steadfast" on achieving in 2024, comes on the heels of last fall's announcement by TC Energy that it had completed the sale of a 40 per cent stake in its Columbia Gas and Columbia Gulf systems to New York-based Global Infrastructure Partners for $5.3 billion.

While the deals the company hopes to strike in 2024 will not be as large, Poirier said they have generated significant interest from the market.

"Those smaller transaction sizes tend to widen the buyer universe because more people can write those cheque sizes," Poirier said.

"So we have seen good interest in the different processes that we have underway."

TC Energy has been seeking to sell assets in order to pay off debt. The company has been under significant scrutiny from investors and credit rating agencies for its heavy debt load as well as for the spiralling costs of Coastal GasLink, the 670-km pipeline project it completed last fall.

Coastal GasLink which will transport natural gas from Western Canada to the Shell-led LNG Canada processing and export facility currently being built in Kitimat, B.C. was one of the largest energy infrastructure projects in recent Canadian history and its successful completion is a significant accomplishment for TC Energy.

Pressure on balance sheet

But the project has also put pressure on the company's balance sheet. Throughout the course of construction, the project's budget ballooned from an initial $6.2 billion to $11.2 billion and then increased again to $14.5 billion.

TC Energy continues to try to pursue potential recoveries from contractors to offset a portion of the rising costs.

Poirier also said Friday that TC Energy continues to make progress on its previously announced plan to split into two separate companies by spinning off its crude oil pipelines business.

The new pipeline business, which will be called South Bow Corp., will be headquartered in Calgary with an office in Houston, Texas. It will focus on enhancing the value of the company's existing 4,900 kilometres of crude oil pipelines, including the critical Keystone pipeline system, which transports oil from Alberta to refining markets in the U.S. Midwest and U.S. Gulf Coast.

Poirier said plans remain on track to hold a shareholder vote on the spinoff proposal by mid-year.

On Friday, TC Energy raised its dividend as it reported a fourth-quarter profit of $1.46 billion. The pipeline operator said it will now pay a quarterly dividend of 96 cents per share, up from 93 cents per share.

The increased payment to shareholders came as TC Energy reported its profit amounted to $1.41 per share for the quarter ended Dec. 31.

The result compared with a loss of $1.45 billion or $1.42 per share in the last three months of 2022 when it took a large one-time charge related to rising cost at its Coastal GasLink project.

TC Energy says its comparable earnings per share came to $1.35 in its latest quarter, up from comparable earnings of $1.11 per share a year earlier.

Revenue for the quarter totalled $4.24 billion, up from $4.04 billion in the fourth quarter of 2022.