TC Energy sells partial stake in pipeline to Indigenous groups

TC Energy Corp. is selling a minority stake in its Western Canadian natural gas transmission network to a consortium of Indigenous communities for $1 billion.

The Calgary-based pipeline company said the deal, announced Tuesday, will enable 72 Indigenous communities to take a 5.34 per cent stake in its Nova Gas transmission system and Foothills pipeline assets, which together comprise a 25,000-kilometre network of natural gas infrastructure assets spanning Western Canada.

The deal is backed by the Alberta Indigenous Opportunities Corp. (AIOC) and negotiated by a consortium committee representing Indigenous communities across Alberta, British Columbia and Saskatchewan.

Inclusive of debt, the deal has a total enterprise value of $1.65 billion, making it Canada's largest-ever Indigenous equity ownership agreement, TC Energy said. As owners, the Indigenous communities will receive predictable and long-term cash flows from the pipelines, whose revenues are underpinned by federally regulated rates.

“Indigenous ownership is the path to a more prosperous nation. As owners, Indigenous communities will have resources to invest for the future and greater economic sovereignty," said TC Energy president and CEO François Poirier in a news release.

"We anticipate that the Indigenous investors will benefit from this partnership for some years to come," said Chief Isaac Twinn, chair of the consortium committee and chief of the Sawridge First Nation near Slave Lake, Alta.

Indigenous communities across Canada are showing growing interest in acquiring equity positions in major projects and infrastructure as a way to generate revenue and economic opportunity for their people.

In 2022, for example, Enbridge Inc. struck a $1.1-billion deal to sell an 11.57 per cent interest in seven northern Alberta pipelines to 23 First Nation and Métis communities.

Several Indigenous-led groups have also indicated interest in purchasing an equity stake in the Trans Mountain oil pipeline, which is currently owned by the federal government.

The interest in equity ownership comes at a time when Canada has committed to reconciliation with Indigenous people, a commitment that includes the recognition of Indigenous people’s right to economic self-determination.

The bulk of the activity so far has been with the energy sector in Western Canada, where infrastructure such as oil and gas pipelines and wind and solar farms are often located on the traditional territories of Indigenous people.

Energy companies benefit from such deals, as securing the support and consent of Indigenous communities is increasingly essential for the construction and operation of major projects.

But while Indigenous communities have historically faced difficulties accessing the capital required for major equity transactions, that is starting to change.

The AIOC is an Alberta Crown corporation that was established in 2019 and provides loan guarantees ranging from $20 million up to $250 million for eligible projects. In the case of the TC Energy deal announced Tuesday, the AIOC will provide communities with a $1-billion equity loan guarantee to support the newly formed Indigenous-owned investment partnership.

“In only four years, the Alberta Indigenous Opportunities Corporation has truly made an impact for Indigenous communities," said Alberta Premier Danielle Smith in a news release.

"This newest agreement builds on earlier successes and shows Canada and the world that energy partnerships with First Nations and Métis peoples are both desired and possible."

Once finalized, the communities will enter into definitive agreements as co-investors in the pipeline network. Each community will independently decide whether to participate in the opportunity.

TC Energy said the transaction is expected to close in the third quarter of this year but is subject to receipt of band council and settlement resolutions along with financing.

This year's federal budget announced the creation of a national Indigenous loan guarantee program to help communities unlock access to capital and remove barriers to equity investment.

This report by The Canadian Press was first published July 30, 2024.