TC Energy Spin-off Notes

June 28, 2024

On June 4, 2024, shareholders voted to approve the spin-off.
The spin-off will have C$7.9BN of debt (debt to EBITDA should be under 5x at the time of the spin-off).
In 2022, TC Energy RemainCo generated $8.5BN of EBITDA.
In 2022, the South Bow generated $1.4BN of EBITDA.
TC Energy is trying to position RemainCo as a utility like, low risk company that should trade at a higher valuation.
The spin-off will be a higher debt, smaller, riskier, company, but it could prove to be a good trade.
By my math, it is going to pay a ~$0.52 cent annual dividend (14% of total dividend). So we could have a “dividend as a catalyst” opportunity.

Good articles:

The spin-off, South Bow, owns the Keystone Pipeline, which ships 622,000 bbls/day from Canada to Nebraska. From Nebraska it branches off to the Midwest and Cushing, Oklahoma. From Cushing, the Marketlink pipeline carries 750,000 bbls/day of crude to Texas refineries.

November 30, 2023

On July 27, 2023, TCE announced that it is going to break up into two public energy companies.
Under the terms of the transaction, TCE will spin off its Liquids Pipeline and Storage Business. The business generated $14BN in EBITDA in 2022. The spin-off is expected to have an investment grade balance sheet. Growth is expected to be 2-3%.
The remaining company will be a natural gas pipelines, storage, and power business. It generated $8.5BN in EBITDA in 2022.
Spin-off slide deck.
The transaction is expected to be completed by the middle of 2024.