Initial Thoughts on Upcoming TC Energy Spin-off
July 16, 2024
Summary
In late Q3 / early Q4, TC Energy (TRP) will spin-off its liquids business into a public company called South Bow. I’m still finalizing my work, but I think the transaction should unlock value. The RemainCo will be a natural gas focused infrastructure company with contractual revenue agreements with credible counter parties. It will benefit from increased demand for natural gas and expects to grow EBITDA at ~7%. If it reverts to its historical dividend yield of 5%, RemainCo will trade at $66 CAD vs the current share price of ~$55. I think the spin-off is probably worth about $7 or $8 per TRP share.
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