TC Energy shareholders approve the creation of South Bow, focusing on crude oil pipelines and growth
TC Energy Corp. shareholders voted to spin off the company's crude oil pipelines business at the annual meeting on Tuesday, as reported by BNN Bloomberg.
This plan, announced last July, will split TC Energy into two separate publicly traded companies.
TC Energy will focus on natural gas infrastructure, nuclear, pumped hydro energy storage, and new low-carbon energy opportunities, while the new liquids pipeline business, South Bow, will handle crude oil pipelines, including the Keystone pipeline system.
South Bow will be headquartered in Calgary with an office in Houston, led by Bevin Wirzba, the current executive vice-president for TC Energy's natural gas and liquids pipelines business.
TC Energy CEO François Poirier stated that separating the company's lines of business would allow for faster growth, enabling each entity to focus on distinct strategies and opportunities.
The spinoff plan resulted from a two-year strategic review by TC Energy, which considered other options, including selling the oil pipelines business. The company has faced scrutiny for its significant debt load and cost overruns on the Coastal GasLink pipeline project, completed in the fall of 2023.
The spinoff aims to allow South Bow to use its robust cash flows to pay down debt and enhance shareholder returns while TC Energy focuses on growth in natural gas.
TC Energy, with natural gas transportation infrastructure in Canada, the US, and Mexico, is optimistic about the future of natural gas, particularly due to the demand for liquefied natural gas (LNG). Poirier emphasized the centrality of natural gas to the world's energy future.
By offering a pure-play natural gas and low-carbon investment opportunity, TC Energy aims to attract a broader set of investors post-spinoff.
TD Cowen analyst Linda Ezergailis noted that South Bow is expected to enhance its pipeline network by increasing capacity on under-utilized portions and improving connectivity to additional receipt and delivery points.
She believes the new TC Energy will be well-positioned to support energy transition and reduce global emissions while ensuring reliability for growing energy demand.
As part of the spinoff arrangement, TC Energy shareholders will receive a new TC Energy common share and 0.2 of a South Bow common share for each share they hold. The spinoff is expected to close in the second half of this year.
