TransCanada has signed an agreement to sell a 49.9% interest in Portland Natural Gas (PNGTS) to its partnership TC PipeLines (TCP) for $223m.
The earnings before interest, taxes, depreciation and amortisation (EBITDA) from the stake in PNGTS is expected to be about $23m in 2016.
TransCanada president and CEO Russ Girling said: “The PNGTS transaction is a continuation of our strategy to drop down the remainder of TransCanada’s US natural gas pipeline assets to the TC PipeLines partnership.
“Asset sales to the partnership provide TransCanada with cash proceeds to help fund our capital programme and further diversify the partnership’s asset base, positioning it for continued growth.”
According to the company, the transaction consists of $188m in cash along with the assumption of a proportionate share of PNGTS debt amounting to $35m.
In case PNGTS is expanded in the future, the agreement is set to provide for additional payments from TC PipeLines, TransCanada stated.
In March 1999, the 474km, high-pressure interstate natural gas pipeline PNGTS started serving the energy needs of New England.
Connecting the TransQuÃ©bec and Maritimes Pipeline at the Canadian border near East Hereford, QuÃ©bec, the pipeline will deliver natural gas to customers in the US northeast.
It will also share facilities with the Maritimes and Northeast Pipeline from Westbrook, Maine to a connection with the Tennessee Gas Pipeline System, which is located near Boston, Massachusetts.
Upon completion of the transaction, TransCanada will continue to hold a direct 11.8% interest in the pipeline.
TC PipeLines president Steve Becker said: “We are very pleased to announce that the partnership has agreed to acquire a 49.9% interest in Portland Natural Gas Transmission System from TransCanada.
“This transaction is another in a series of expected drop downs from TransCanada and again demonstrates our strategy of investing in assets that provide stability and long-term value to our unit-holders.”
The sale is subject to various conditions and is expected to close at the end of 2015.