Natural gas pipeline systems operator TC PipeLines, LP (TCLP), announced Wednesday that it has completed the previously disclosed acquisition of North Baja Pipeline, LLC from Canadian energy infrastructure provider TransCanada Corp. (TRP, TRP.TO) for about US$395 million in cash and common units. The company also announced an amendment to Incentive Distribution Rights, or IDRs, held by TC PipeLines GP, Inc., an affiliate of TransCanada.
North Baja system is an 80-mile natural gas pipeline that extends from Southwestern Arizona to a point on the California/Mexico border and connects with a natural gas pipeline system in Mexico.
Omaha, Nebraska-based TC PipeLines indicated that North Baja acquisition fits well with its business by providing a low-risk, regulated energy infrastructure asset endorsed by long-term contracts, and strong business fundamentals that provide stable cash flows.
The company noted that the total consideration provided to TransCanada of about US$395 million for the deal consists of about US$200 million in cash and 6.37 million common units of TC PipeLines. The cash component of the deal would be financed by drawing from TC PipeLines, LP's US$250 million senior revolving credit facility. On a per unit basis, the transaction is expected to add to its cash flows.
TC PipeLines said the restructuring of the General Partner IDRs reduces its cost of capital and positions it to potentially play a greater role in the financing of TransCanada's C$22 billion capital program. Furthermore, it better positions it to continue future acquisitions and expansion projects by lowering its cost of capital and bolstering its competitive position.
TCLP is currently trading at US$34.89, up US$0.10 or 0.30% on the Nasdaq, while TRP is trading at US$27.39, up US$0.48 or 1.78% on the NYSE. TRP.TO is trading at C$31.32, up C$0.18 or 0.58%, on a volume of 2.76 million shares on the TSX.
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