Canadian pipeline giant TransCanada is engaged in sales of its stock and some North American assets in order to fund its proposed acquisition of the Columbia Pipeline Group, a TransCanada spokesman said Wednesday.
TransCanada had announced earlier this month it would buy in a $13 billion all-cash deal.
The company plans to sell all of its electric power generating assets in the US Northeast, TransCanada spokesman Mark Cooper said in an email.
This includes "hydroelectric plants on the Connecticut and Deerfield Rivers," Cooper said. "The decision to sell came down to some tough financing decisions we needed to make in order to realize the rare opportunity to gain a foothold in the Marcellus and Utica basins through the Columbia acquisition."
TransCanada's hydroelectric assets, located in New Hampshire, Vermont and Massachusetts, include 13 hydroelectric stations, which 43 generating units capable of producing 560 megawatts of power.
Other TransCanada-owned electric generation assets in the US Northeast include: the 2,480-MW Ravenswood Generating Facility, a multi-fuel plant, capable of burning natural gas, fuel oil and kerosene, in New York City; the 560-MW Ocean State Power plant in Rhode Island, which can be fueled by gas or fuel oil; and the 132-MW Kibby Wind Power Project, New England's largest wind power project, comprising an array of 44 wind turbines in Maine.
In addition to the proposed power asset sales, TransCanada has raised C$4.42 billion ($3.37 billion) in the largest stock sale in Canadian history, according to press reports.
Cooper said he was unable to confirm the value of the stock sale, saying that he would be able to provide more details following the close of the offering on April 1.
Gerald Hannochko, an analyst with Standard & Poor's, said that in addition to the generating assets in the US Northeast, TransCanada is also looking to sell pipeline assets in Mexico to raise cash to fund the Colombia acquisition. S&P and Platts are both parts of McGraw-Hill Financial.
TransCanada's pipeline assets in Mexico include two wholly-owned gas pipelines, the 315-km (196-mile) Guadalajara Pipeline and the 365-km (227-mile) Tamazunchale Pipeline.
The Guadalajara pipeline moves gas from Manzanillo, Colima state, to Guadalajara, Jalisco state, while the Tamazunchale line carries gas from Naranjos, Veracruz state, to Tamazunchale, San Luis Potosi state, and on to El Sauz, Queretaro state.
TransCanada also holds a 28% interest in the 86-mile (138-km) North Baja system, which transports gas between Arizona and California and connects with a third-party pipeline on the California/Mexico border.
Hannochko said S&P gives TransCanada a credit rating of A-, with a negative outlook, which he said is "reflective of the financing risk of the transaction, surrounding the sale of the Northeast power assets, as well as a portion of the Mexican pipes."
The timing is poor for the sale of the power assets "and if you have to have an additional amount of leverage because you didn't receive enough cash, that presents a risk," he said.
TransCanada expects the acquisition to close in the second half of 2016 "subject to receipt of Columbia shareholder approval, regulatory clearance pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, review by the Committee on Foreign Investment in the United States, and the satisfaction of customary closing conditions," Cooper said.
