Oil Pipeline Spinoff Approved by Board, TC Energy Corp Decided on South Bow

CALGARY, Alberta Press Release: At its 2024 annual and special shareholder meeting, TC Energy Corporation is happy to announce that its shareholders approved the spinoff of the company’s Liquids Pipelines business and elected TC Energy’s Board of Directors.

According to Reuters, TC Energy will be able to focus on natural gas transportation and pay down its debt thanks to the spin-off.

Approximately 4,900 kilometers of liquid pipelines connecting oil sources in Alberta and the United States to refining hubs in Illinois, Oklahoma, and Texas are among South Bow Corp’s assets.

The corporation’s crude oil pipelines, which include the vital Keystone pipeline system, will be integrated into South Bow, a brand-new liquids pipeline company.

South Bow will have an office in Houston and its headquarters in Calgary. Bevin Wirzba, the executive vice-president in charge of TC Energy’s natural gas and liquids pipeline division, will serve as its leader.

TC Energy CEO François Poirier stated at the company’s annual meeting on Tuesday that segmenting the firm will enable speedier growth.

“By operating as two distinct entities, each company will be able to concentrate on their unique strategies and opportunity sets, providing vital energy that the world needs,” stated Poirier.

According to the article, South Bow will compete with other pipeline firms for market share in the U.S. Gulf Coast market, and it will bear a substantial debt load of C$7.9 billion ($5.78 billion) from TC Energy.

Additionally, Bevin Wirzba, the executive vice president of liquids pipelines at TC Energy, will take over as CEO of South Bow.

It is anticipated that the two businesses will formally split off in the fall, with South Bow becoming public on the New York and Toronto stock exchanges.

According to a recent research note from BMO Capital Markets analyst Ben Pham, South Bow’s valuation may be impacted by its smaller asset base and slower growth forecasts than those of TC Energy.

On the other hand, the new business will benefit from long-term shipping agreements covering 94% of the Keystone pipeline’s capacity, guaranteeing consistent revenue streams.

The new South Bow is anticipated to work toward boosting the value of its pipeline network by increasing capacity on underutilized portions of the system and increasing pipeline connectivity to additional receipt and delivery points, according to a note to clients sent on Tuesday by Linda Ezergailis, an analyst with TD Cowen.

According to her, the new TC Energy will be in a good position to facilitate the energy transition, lower global emissions, and provide stability for the rising demand for energy.