TC Energy shares rise on spinoff plans
(Reuters) - Shares of TC Energy rose nearly 3% in premarket trading on Thursday after the Keystone pipeline operator disclosed plans to spin off its oil pipelines business to focus solely on transporting natural gas.
The tax-free spinoff separates high-growth areas of gas and power assets, which are expected to grow at a 7% compound annual growth rate through 2026, from liquids assets, which are expected to grow 2-3% over the same period, according to a client note from Morningstar.
It will also help TC offload debt off its balance sheet, while divesting itself of sustainability concerns with regard to the oil assets, Morningstar said.
TC's Keystone pipeline in December last year spilled more than 14,000 barrels of crude oil into a creek in Kansas, making it one of the largest crude spills in the United States in nearly a decade.
The oil pipelines business has over 3,000 miles of infrastructure, which transports Canadian crude to U.S. refineries.
"Ample spin precedents exist, but this situation is interesting for capital allocation with funding flexibility, valuation, upside potential for differentiated entities and changes to the near-term narrative," Credit Suisse's Andrew Kuske said in a note.
TC Energy looks well positioned for growth across the asset base with key competitive advantages across multiple natural gas basins, Kuske added.
Analysts at Scotiabank said the spin-out does not alter their leverage and funding outlook for the company, and that they do not expect the split to impact the growth rates of the two newly formed companies.
U.S.-listed shares of the company were up 2.7% at $36.75.
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