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Russ Girling, President & CEO of TransCanada, meets with the Globe and Mail editorial board on May 13 2014.

Fred Lum/The Globe and Mail

TransCanada Corp. is making good on its pledge to keep selling assets to a U.S. affiliate to help fund $46-billion in expansion plans, even after an activist investor abandoned a campaign for a much bigger shakeup.

TransCanada is selling its remaining 30-per-cent stake in Gas Transmission Northwest LLC, a U.S. gas pipeline network, to master limited partnership TC Pipelines LP in a so-called "drop down" transaction.

Under the deal, TransCanada will receive $253-million (U.S.) in cash, hive off $98-million in debt associated with the pipeline and get $95-million in class B shares, which pay distributions. TransCanada currently has a 28-per-cent stake in TC Pipelines.

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The company plans to drop all of its U.S. gas pipeline assets down to the MLP as a way to help fund its slate of projects, reducing its need to seek financing in the debt and equity markets.

It is doing so, however, at a more measured pace than was urged by Sandell Asset Management. Late last year, the New York-based hedge fund wrote to TransCanada's board and published a white paper that outlined actions management should take to boost the stock price.

The activist firm pushed for TransCanada to drop down all of its U.S. pipeline assets in one fell swoop and spin off its energy and power businesses, leaving a pure-play pipeline operator.

TransCanada chief executive Russ Girling has said his company has the capacity to sell up to $1-billion of assets to its affiliate per year. It has various interests in four other systems it will eventually part with. He rejected the idea of splitting up the company, calling the various divisions "very synergistic."

After gaining little traction by the end of last year, Sandell unloaded its entire position in TransCanada, a stake worth $37-million, according to regulatory filings.

TransCanada's shares are down 5.5 per cent since the start of 2015.

The company announced the latest drop-down deal a day after U.S. President Barack Obama vetoed legislation approving its proposed Keystone XL oil pipeline.

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The move was widely expected. Even if TransCanada fails to get the contentious pipeline approved, TransCanada can still achieve dividend increases of 8 per cent to 9 per cent annually through 2021, said FirstEnergy Capital Corp. analyst Steven Paget.

"Although a final denial by President Obama would be negative, the next U.S. presidential election is just over 18 months away, and a new president might be more inclined to approve the pipeline," Mr. Paget wrote in a research note.

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