TC Energy sells stake in Coastal GasLink pipeline

TC Energy Corporation has entered into an agreement to sell a 65 percent equity interest in the Coastal GasLink Pipeline Project to KKR and Alberta Investment Management Corporation (AIMCo).

Concurrent with the completion of the sale, TC Energy expects that Coastal GasLink will enter into a secured project financing construction credit facility with a syndicate of banks to fund up to 80 percent of the project during construction.

Both transactions are expected to close in the first half of 2020, subject to customary regulatory approvals and consents, including the consent of LNG Canada, TC Energy noted in its statement.

Russ Girling, TC Energy president and CEO, said, “We remain fully committed to the Project and will continue to construct, deliver and operate the pipeline on behalf of the partnership.”

Under the terms of the sale, TC Energy will receive upfront proceeds that include reimbursement of KKR and AIMCo’s proportionate share of the project costs incurred as of the date of close as well as additional payment streams through the project’s construction and operation.

The company expects to record an after-tax gain of approximately $600 million upon closing of the transaction which includes the gain on sale, required revaluation of residual ownership interest to fair market value and recognition of previously unrecorded tax benefits.

Coastal GasLink involves the construction of 670 kilometers (416 miles) of pipeline and associated facilities. Once completed, the pipeline will have an initial capacity of 2.1 billion cubic feet per day and connect abundant Western Canadian Sedimentary Basin natural gas supply from the Dawson Creek, B.C. area to the LNG Canada liquefaction and export facility being constructed in Kitimat, B.C.

All necessary regulatory permits have been received for the project and construction activities have commenced.

Following the close of the transaction, TC Energy will hold a 35 percent limited partnership equity interest in Coastal GasLink and will be contracted by the limited partnership to construct and operate the pipeline. This transaction was contemplated in the company’s agreements with LNG Canada.

As a result, in conjunction with this sale, the company will provide the First Nations with an option to acquire a 10 percent equity interest in Coastal GasLink on similar terms.