TC Energy To Spin-Off South Bow On October 1, 2024

Core Viewpoint - TC Energy Corp is executing a tax-free spin-off of its Liquids Pipelines business into South Bow Corporation, allowing shareholders to retain their stake in TC Energy while gaining a proportional interest in South Bow [1][8][12] Spin-Off Details - The spin-off has received necessary tax rulings and approvals, set to take effect on October 1, 2024, with a record date of September 25, 2024 [2][9] - The spin-off ratio is 0.2:1, meaning shareholders will receive 0.2 shares of South Bow for each share of TC Energy [3][9] - Trading for TC Energy and South Bow shares will commence in 'due bill' markets and 'when-issued' trading on TSX from September 25, 2024, until October 1, 2024 [4][10] Company Focus Post Spin-Off - Post-separation, TC Energy will concentrate on Natural Gas Pipeline infrastructure and Power and Energy business, while South Bow will focus on Liquid Pipeline operations [1][13] - TC Energy's operations will include a 93,600 km natural gas pipeline network, addressing over 25% of North America's energy demands [19] Financial Overview - TC Energy's debt-to-EBITDA ratio is currently 5.1x, with a target to reduce it to 4.75x by 2024 through asset divestments and proceeds from the spin-off [19][27] - The anticipated proceeds from the spin-off are approximately C$8.0 billion, which will be used to repay debt [19] Growth Prospects - TC Energy's Natural Gas and Power business is expected to grow at a CAGR of 7.0$11.2 billion by 2026 [20] - South Bow's liquid pipeline business is expected to grow at a slower rate of 2.0-3.0% CAGR, with EBITDA reaching $1.5 billion by 2026 [20][32] Valuation - TC Energy's fair value estimate is C$66.30 per share, with a target price of $48.75 per share, suggesting a 6.3$10.90 per share, reflecting its high leverage and slower growth prospects [35]