TC Energy signs deal to sell minority 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.

"United, we have come to a place where we created a partnership that not only prioritizes our needs in our Indigenous communities, but builds long-lasting investments into our communities that extends to generations far beyond mine and yours," said Lee Thom, a councillor with the Kikino Metis Settlement of Alberta and a member of the consortium committee, at a news conference at TC Energy's Calgary headquarters Tuesday afternoon.

TC Energy CEO Francois Poirier called the deal an important step that is "long overdue."

"I'll put it simply, Indigenous ownership is the path to a more prosperous nation," he told reporters.

"Indigenous ownership in Canada's resource economy should be commonplace. It is the best way for industries across the nation to continue to operate and grow," Poirier said.

"Imagine if we — Canada, our industry, our company TC Energy — had taken this approach decades ago. Imagine how much we could have gotten done, how much we could have built together, and how many benefits would have been created for Indigenous communities."

Energy companies have been partnering with Indigenous communities for decades but early agreements typically involved guarantees of construction jobs or other financial benefits for the community and fell short of offering Indigenous people a full equity stake.

That's starting to change, as Indigenous communities across Canada demonstrate 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 Metis 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.

"An unprecedented number of Indigenous communities from Alberta, Saskatchewan and British Columbia have already expressed their interest in being part of this partnership," said Alberta Premier Danielle Smith on Tuesday.

"This is a clear demonstration that many Indigenous people support our energy industry — they want to be part of it."

Indigenous communities have historically faced difficulties accessing the capital required for major equity transactions, but that's slowly changing.

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.

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.

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.

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.

While TC Energy has been vocal about its plan to sell off assets to help pay down its debt, Poirier said Tuesday he views this deal foremost as a way to advance the company's Indigenous reconciliation efforts.

"I'll be honest with you, we have $100 billion worth of assets. We could have picked any number of assets to reduce debt," he said.

"This is far more meaningful."