Shareholders of TC Energy Corporation (NYSE:TRP) reportedly gave the green light to create a new energy infrastructure company called South Bow Corp, including assets such as the Keystone oil pipeline.
The spin-off will allow TC Energy to reduce its debt and shift its focus to natural gas transportation, reported Reuters.
South Bow Corp's assets include around 4,900 kilometers of liquid pipelines linking Alberta and the U.S. oil sources to refining hubs in Illinois, Oklahoma, and Texas.
At the annual general meeting, TC Energy CEO Francois Poirier stated, "Spinning off South Bow will allow both companies to maximize the value of their respective assets. Each company will have the ability to focus on their distinct strategies and opportunity sets."
As per the report, South Bow will have a significant debt load of C$7.9 billion ($5.78 billion) from TC Energy and will compete with other pipeline companies for market share in the U.S. Gulf Coast market.
Also, Bevin Wirzba, TC Energy's executive vice president of liquids pipelines, is slated to become CEO at South Bow.
The two companies are expected to officially separate in the fall, and South Bow will be listed on the Toronto and New York stock exchanges.
In a recent research note, BMO Capital Markets analyst Ben Pham mentioned that South Bow's limited asset base and slower growth projections compared to TC Energy could impact its valuation, per the report.
However, the new company will have the advantage of long-term shipping contracts that cover 94% of capacity on the Keystone pipeline, ensuring steady revenue streams.
Investors can gain exposure to the stock via VanEck Energy Income ETF (NYSE:EINC) and Barclays iPath Select MLP ETN (BATS:ATMP).
Also Read: TC Energy's NGTL Pipeline Faces Pressure Reduction Order Despite Repaired Rupture: Report
Price Action: TRP shares are down 0.42% at $38.22 at the last check Tuesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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