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TC Energy (TRP) to Vend Northern Courier Pipeline for $860M

Zacks Equity Research

In a bid to ramp up its core pipeline growth projects,TC Energy Corporation TRP is set to jettison 85% stake in its Northern Courier Pipeline to Canadian Pension Fund, Alberta Investment Management Corporation for $860 million (or C$1.05 billion). Notably, the 90-kilometer conduit deals with the transportation of bitumen and diluent between the Fort Hills mine site and a terminal owned by Suncor Energy SU.

Subject to customary approvals, the deal is set for closure in the third quarter of 2019. Subsequent to the divestment, TC Energy will continue to be the operator of the pipeline with 15% stake.

The company recently offloaded its Coolidge Generating Station. In fact, so far this year, the firm has announced sale of $1.3 billion (or $1.75 billion) of its assets. TC Energy is currently focusing on divesting its assets to raise cash to repay a huge debt burden as well as to fund its growth projects.  

Markedly, TC Energy’s portfolio includes around C$30 billion of accretive growth projects to be placed into service through 2023. Of this, around C$7 billion worth projects are expected to be completed by year-end.Apart from C$30 billion of near-term growth initiatives, the firm is also advancing C$20 billion of additional medium-to-longer-term projects.The massive capital expenditure spending has raised financing concerns among investors, particularly when it carries an elevated leverage ratio of around 55%. In this regard, the company’s efforts to monetize its non-core pipelines to fund its ambitious capital program bode well.

We believe TC Energy is a kind of set-it-and-forget-it stock that is worth retaining in your portfolio on the back of its stability, long-term growth prospects and shareholder wealth creation. The Zacks Rank #3 (Hold) company’s wide array of natural gas midstream properties positions it for solid long-term growth and a promising future as demand for the commodity soars, spurred by its cost effectiveness, secular shift to cleaner burning fuel for power generation and abundant supply in North America.

Meanwhile, investors can consider better-ranked midstream players Holly Energy Partners, L.P. HEP and Plains Group Holdings, L.P. PAGP, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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