(Reuters) -Pipeline operator TC Energy said on Tuesday it would sell a minority stake in some of its Canadian assets for C$1 billion ($722.1 million) to certain indigenous communities as part of its plan to reduce debt and fund investments.
The company, best known for its Keystone oil pipeline, is undergoing an overhaul and had said last year it would spin off its liquids business to focus on transporting natural gas.
The agreement, backed by the Alberta Indigenous Opportunities Corporation, would enable 72 indigenous communities to acquire an aggregate 5.34% minority equity interest in the NGTL System and Foothills pipeline assets.
Several Canadian energy companies, including Suncor and Enbridge, have also entered economic partnership deals with indigenous communities in recent years.
The Canadian government had said earlier this year it would provide up to C$5 billion in loan guarantees to help indigenous groups invest in natural resource projects. The loan guarantee program is sector-agnostic, indicating that it will be available for all forms of resource projects.
Analysts said TC Energy’s deal, which was widely anticipated, was a key step to achieving the company’s asset sale target for 2024 and would have a positive impact on investor sentiment.
“With significant asset sales announced, we see its funding plan being further de-risked,” Scotiabank analyst Robert Hope wrote in a note.
Analysts also viewed the partnership favourably as it provides an ownership stake in a local project with a steady income stream to indigenous communities.
NGTL, spanning 24,386 kilometers in length, is TC Energy’s natural gas gathering and transportation system for the Western Canadian Sedimentary Basin and connects most of the natural gas production in western Canada to domestic and export markets.
The transaction is expected to close in the third quarter.
($1 = 1.3848 Canadian dollars)
(Reporting by Tanay Dhumal, Seher Dareen and Arunima Kumar in Bengaluru; Editing by Sonia Cheema and Shilpi Majumdar)
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