Press Release

DBRS Morningstar Comments on TC Energy’s Announced Spinoff of Its Liquids Business; Maintains TC Energy’s Preferred Share Rating at Pfd-3 (high) and TransCanada PipeLines Rating at BBB (high)

July 28, 2023

DBRS Limited (DBRS Morningstar) notes that TC Energy Corporation (TC Energy or the Company) has announced the spinoff of its liquids pipelines business into a separate listed company with an expected closing date in H2 2024. TC Energy expects the liquids pipeline company to be capitalized with approximately $8.0 billion of senior and junior subordinated debt, the proceeds of which will be used to repay debt at the Company. The transaction is subject to favourable tax rulings from Canadian and U.S. tax authorities, the receipt of necessary regulatory approvals, and shareholder approval.

DBRS Morningstar does not expect the spinoff to have an impact on the Company’s ratings. The spinoff has a modestly negative impact on TC Energy’s business risk profile because of the loss of diversification. Nevertheless, DBRS Morningstar foresees the Company’s business risk profile post spinoff remaining strong, underpinned by regulated/contracted cash flows, strong supply and demand fundamentals at its natural gas pipelines and power businesses, and an asset base that is still very diversified despite the spinoff. DBRS Morningstar also believes that the negative impact on the financial risk profile from the loss of cash flow from the spinoff will be more than offset by the reduction in debt. The spinoff also lowers TC Energy’s dividend payouts by approximately 14%. DBRS Morningstar’s upgrade and downgrade thresholds (as noted in its press release dated July 25, 2023) remain unchanged.

All figures are in Canadian dollars unless otherwise noted.

Information regarding DBRS Morningstar credit ratings, including definitions, policies, and methodologies, is available on or contact us at [email protected].

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