Earlier this month, TransCanada Corp. closed the sale of its remaining 30 percent interest in Gas Transmission Northwest (GTN) to its master limited partnership, TC PipeLines LP.
Gas Transmission Northwest is a 2,178 km (1,353 mile) pipeline that transports natural gas under long-term contracts from the Western Canada Sedimentary Basin and the Rocky Mountains to Washington, Oregon and California. In 2014, the remaining 30 percent interest in the pipeline generated comparable EBITDA of US$43 million.
The US$446 million transaction is comprised of US$253 million in cash, the assumption of US$98 million in proportional GTN debt and the issuance of US$95 million of new Class B units to TransCanada. The Class B units will entitle TransCanada to a distribution based on 30 percent of Gas Transmission Northwest’s annual cash distributions as follows:
1) for the first five years, 100 percent of distributions above US$20 million
2) for subsequent years, 25 percent of distributions above US$20 million.
This structure is designed to be mutually beneficial for both TransCanada and the TC PipeLines as it provides shared exposure to the potential financial upside from Gas Transmission Northwest.
TransCanada, through its subsidiaries, currently holds a 28 percent interest in TC PipeLines LP, a United States master limited partnership, which was formed to acquire, own and actively participate in the management of U.S. natural gas pipelines and related assets.
With more than 60 years’ experience, TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure including natural gas and liquids pipelines, power generation and gas storage facilities. TransCanada operates a network of natural gas pipelines that extends more than 68,000 km (42,100 miles), tapping into virtually all major gas supply basins in North America.