TC Energy (NYSE:TRP) said Tuesday its shareholders voted in favor of spinning off the company’s North American liquids pipeline business, creating a new energy infrastructure firm called South Bow, whose assets include the Keystone oil pipeline.
The spinoff’s assets consist of more than 3K miles of liquids pipelines that connect oil supply in Alberta and parts of the U.S. to refining markets in Illinois, Oklahoma and Texas, and its primary asset is the 622K bbl/day Keystone pipeline, a key export conduit for Canadian crude.
Analysts say the spinoff will help TC Energy (TRP) reduce its high debt load and focus on transporting natural gas; South Bow will be saddled with C$7.9B (~US$5.8B) of debt due to TC.
BMO Capital analyst Ben Pham said recently that South Bow’s narrow asset base and lower growth forecast than TC Energy (TRP) could weigh on its valuation, but the new company will benefit from long-term shipping contracts covering 94% of capacity on Keystone, providing guaranteed revenues.
The two companies will legally separate this fall, and South Bow will be listed on the Toronto and New York stock exchanges.