Stockholders of TC Energy Corp. have voted in favor of a proposal to separate the liquid transport operations of the Canadian oil and gas pipeline company into an independent publicly listed business.
Each TC Energy shareholder will receive one new common unit of TC Energy and 0.2 common share in the spinoff company named South Bow Corp. in exchange for each common share of TC Energy presently held.
The spinoff had already received required tax rulings in Canada and the United States, where South Bow is planned to be listed, TC Energy said in a statement Tuesday. Calgary, Canada-based TC Energy expects to complete the transaction by the middle of the fourth quarter at the latest.
Upon the receipt of regulatory, court and other customary approvals, the split will result in TC Energy being reorganized into a “natural gas infrastructure and energy solutions” provider under the same name, according to the terms of the separation laid out in a circular it published April 10.
“Each company will be structured to reflect differentiated value propositions and the ability to pursue and achieve greater success than a combined entity by executing tailored strategies targeted to distinct customer sets”, TC Energy said Tuesday.
It previously said increased demand for its liquid pipelines presented opportunities that entailed financial flexibility. “As a standalone entity with a distinct capital allocation strategy, South Bow will have greater flexibility to invest in strategic opportunities to expand, extend and unlock the full potential of its competitive corridor connecting WCSB crude oil to the U.S. Midwest and Gulf Coast”, the circular stated. In the Western Canada Sedimentary Basin (WCSB), TC Energy operates the 15,153-mile NGTL System, a gas gathering and transport network serving Canadian and U.S. markets.
“South Bow is expected to obtain an investment-grade rating”, the circular added. “As a result, it will have the agility needed to quickly respond to market shifts, while delivering value back to shareholders in the form of a compelling dividend and enhanced capital allocation optionality”.
Post-spinoff, TC Energy will focus on “reliable, lower-carbon energy and lower emitting energy sources, including natural gas”, as stated in the circular. It will retain current investments in seven Canadian power generation facilities with about 4,600 megawatts in combined capacity.
Also at Tuesday’s annual meeting, TC Energy’s shareholders overwhelmingly approved the renewal of the mandate of all its 13 directors. Chief executive François Poirier won 99.2 percent of the ballot, according to TC Energy’s regulatory filing for the voting results. The electees will serve on the board for a year or until their successors are appointed earlier.
“Today, our shareholders have affirmed their support of our Board and management team’s vision for the futures of TC Energy and South Bow”, Poirier, who is also president, said.
“Through this separation, both companies will continue to deliver shareholder value in the form of compelling dividends, while focusing on meeting the growing demand for all forms of secure, affordable and sustainable energy in North America and around the globe”, Poirier added.
TC Energy closed higher at CAD 52.79 ($38.6) on the Toronto Stock Exchange and $38.61 on the New York Stock Exchange Tuesday.
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