TransCanada said Tuesday it will sell its Northeast U.S. power business and acquire all outstanding units in Columbia Pipeline Partners.
The Calgary-based company expects to realize about $3.7 billion from the monetization of its U.S. Northeast Power business.
The amount is expected to be realized through two sale transactions.
The first transaction covers the sale of Ravenswood, Ironwood, Ocean State Power and Kibby Wind to Helix Generation, an affiliate of LS Power Equity Advisors, for $2.2 billion.
The second transaction includes the sale of TC Hydro to Great River Hydro, an affiliate of ArcLight Capital Partners, for $1.065 billion.
TransCanada said the remaining amount will be “attributed to TransCanada’s power marketing business which is expected to be realized going forward.”
The two sale transactions are expected to close in the first half of 2017 subject to certain regulatory and other approvals and will include closing adjustments.
The sales are expected to result in a $1.1 billion after-tax net loss that is comprised of a $656 million after-tax goodwill impairment charge recorded on September 30 and an $863 million after-tax net loss on the sale of the thermal and wind package to be recorded in the fourth quarter of 2016.
The sales are also expected to result in a $443 million after-tax gain on the sale of the hydro assets once that transaction closes in 2017.
Proceeds from the sales and future realization of value of the marketing business will be used to repay a portion of the $6.9 billion senior unsecured asset bridge term loan credit facilities.
The loan credit facilities were used to partially finance the Columbia Pipeline Group acquisition earlier this year.
“The sale of our merchant U.S. Northeast Power business to fund a portion of our acquisition of Columbia will further enhance the stability and predictability of our earnings and cash flow streams and support a strong and growing dividend,” TransCanada’s president and CEO Russ Girling said.
TransCanada has also entered into an agreement and plan of merger that calls for its wholly-owned subsidiary, Columbia, to acquire all outstanding publicly held common units of Columbia Pipeline Partners LP (CPPL) in a cash transaction.
Each common unit will be purchased for $17.00 a piece for an aggregate transaction value of $915 million.
The price represents an increase of $1.25 per common unit when compared to Columbia’s initial offer of $15.75 per common unit on September 25.
Common unitholders will continue to receive regular quarterly distributions of $0.1975 per common unit including a pro-rated distribution for any partial period to the closing date, TransCanada said.
The transaction is expected to close in first quarter 2017 subject to receipt of CPPL unitholder approval.
Upon closing, CPPL will be an indirect, wholly-owned entity of TransCanada and will cease to be a publicly held partnership.
“The decision to acquire Columbia Pipeline Partners completes our review of strategic alternatives for our master limited partnership holdings following the Columbia transaction,” Girling said.