DBRS Comments on TransCanada’s Announcement to Buy Remaining Equity of Columbia Pipeline Partnership

DBRS Limited (DBRS) notes that TransCanada Corporation (TCC or the Company) has today announced that its wholly owned subsidiary, Columbia Pipeline Group, Inc. (Columbia), has offered to acquire, for cash, all of the 53,843,466 outstanding common units of the master limited partnership, Columbia Pipeline Partners, LP (CPPL), at a price of USD 15.75 per common unit. The offer price represents an 11.3% premium to the 30-day average closing price on September 23, 2016. If an agreement is reached and such terms are ultimately approved by each of the TCC, Columbia and CPPL boards of directors, the transaction will also require approval by a majority of CPPL common unitholders. The closing of a potential transaction will also be conditional upon regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act, as amended.

DBRS views that the announcement is in line with the Company’s review of strategic alternatives for its master limited partnership holdings as announced upon closing of the Columbia acquisition on July 1, 2016. The acquisition of the remaining outstanding units of CPPL results in simplifying the Company’s ownership structure and, at the same time, Columbia will have the full benefit of free cash flow generated by CPPL to service its approximately USD 2.8 billion of debt. TCC is exploring multiple funding options, including equity to finance the USD 848 million (approximately CAD 1.12 billion) acquisition. The Company expects the transaction to close by Q1 2017.

DBRS continues to maintain its Under Review with Developing Implications status on all TCC ratings as well as those of TransCanada PipeLines Limited, NOVA Gas Transmission Ltd. and Trans Québec & Maritimes Pipeline Inc. (please refer to the DBRS press release, “DBRS Comments on TransCanada’s Columbia Pipeline Group Acquisition Closing” (June 30, 2016)). DBRS will further review the information related to today’s announcement as well as TCC’s proposed sale of its U.S. Northeast merchant power assets and a minority interest in the Mexican natural gas pipeline business, as it becomes available, and aims to resolve the Under Review with Developing Implications status once the complete financing details are known and the asset sale transactions have closed.

Notes:
The applicable methodologies are Rating Companies in the Pipeline and Diversified Energy Industry (December 2015), DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Financial Issuers (April 2016) and DBRS Criteria: Preferred Share and Hybrid Criteria for Corporate Issuers (January 2016), which can be found on our website under Methodologies.

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