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Pipes sit stacked at the TransCanada Corp. Houston Lateral Project pipe yard in Mont Belvieu, Texas, U.S., on Wednesday, March 5, 2014.Scott Dalton/Bloomberg

TransCanada Corp. is gearing up for a stream of power-generation asset sales that could yield more than $7-billion (U.S.) and help pay for its latest blockbuster deal.

The Calgary-based energy company has hired financial advisers to help it sell power-generation assets in the U.S. Northeast, chief financial officer Don Marchand said Thursday on a conference call. One of those assets was folded into TransCanada's portfolio just a few weeks ago. The company is also looking to sell a minority stake in its Mexican natural-gas-transmission business, which has already attracted some potential bidders.

The sale of an estimated $7.1-billion worth of assets, together with the issuance of $3.2-billion in equity, will help fund TransCanada's $10.2-billion deal for Houston-based Columbia Pipeline Group Inc. , Moody's Investors Service Inc. said on Friday.

The U.S. portfolio on the block is made up of merchant power plants and facilities, which compete to sell their electricity into the wholesale power market. That differs from regulated utilities and generators, which have contracts to sell power at set rates to an end user. Merchant power plants and facilities tend to attract lower prices from buyers than their counterparts that have the stability of steady cash flows.

TransCanada built this portfolio considerably over the past decade as a way to broaden its business away from pipelines, but investors have long shown discomfort with these assets.

In 2008, after the company bought one of New York's major power plants for $2.8-billion, TransCanada's stock fell nearly 10 per cent. Hal Kvisle, who was then chief executive officer of the business, said TransCanada was committed to power and to the U.S. Northeast. That asset, called Ravenswood, is now up for sale.

TransCanada is also looking to sell a plant it only officially acquired in February of this year. Last October, Talen Energy Corp. said it would sell a merchant natural-gas-fired plant to TransCanada, which is now looking to sell the plant again.

At the same time, Talen sold two hydroelectric plants to Brookfield Renewable Energy Partners LP. Sachin Shah, Brookfield Renewable's CEO, told investors on a recent conference call that its merchant assets were doing better than expected, even with energy prices as low as they are.

In 2013, Edmonton-based Capital Power Corp. made waves by selling three natural-gas-fired power plants in New England to Emera Inc. for $541-million, taking a loss on the deal but reducing its risk profile.

Mr. Marchand said during the conference call that reducing risk for TransCanada was one of the reasons for selling the properties.

Gavin MacFarlane, an analyst in Moody's infrastructure finance group, agreed that the plan to sell assets and equity was favourable.

"The transaction is a modest credit positive for TransCanada over the long-term horizon, because the business risk profile will improve, thanks to the purchase of the low-risk Columbia Pipeline Group and the sale of the higher-risk generation assets," he wrote in a note to clients.

A couple of the assets being divested include green energy sources, such as wind power and hydroelectric facilities. The company has invested more than $5-billion in emission-less energy sources over time.

Here are the assets TransCanada has said are on the table (all figures in U.S. dollars):

Minority interest in Mexican natural gas pipeline business

Potential buyers are already reaching out to express interest in the Mexican business, and TransCanada hasn't even finalized its advisers.

The company had been building up its business as Mexico broadens its natural gas transportation grid to serve industrial users. These customers have been looking for a cleaner-burning fuel.

By 2018, TransCanada projected it would have invested about $3-billion in Mexico with five major Mexican pipeline systems either operational or under development. The most recent Mexican deal was struck in November of 2015, when TransCanada won a $500-million contract to build, own and operate the Tuxpan-Tula Pipeline for 25 years in a deal with Mexico's state-owned electric utility.

Ravenswood Generating Station

TransCanada bought this Queens, N.Y., power plant in 2008 for about $2.8-billion. Former TransCanada chief executive officer Hal Kvisle said the deal would expand its "energy business into one of the most important power markets in North America." TransCanada says that Ravenswood could serve about 21 per cent of New York City's peak load at full capacity. The 2,480 megawatt facility is fuelled by natural gas, fuel oil and kerosene.


TransCanada only just completed the acquisition of the Ironwood natural-gas-fired power plant in February. The $654-million deal was struck late last year with Talen Energy Corp., which had been forced to sell some assets to comply with a U.S. Federal Energy Regulatory Commission order. The Lebanon, Penn., facility has a capacity to generate 778 megawatts. Russ Girling, CEO of TransCanada, highlighted the region as "important" on a conference call with analysts in November of 2015, saying the power plant provided a "solid platform to backstop and grow our already substantial wholesale, commercial and industrial customer base in Pennsylvania, New Jersey and Maryland."

New England hydro assets

When Chapter 11 status forced USGen New England Inc. to sell its hydroelectric generating assets, and TransCanada was the only company to place a bid, the company acquired dams and generating stations for $503-million , closing the deal in 2005.

TransCanada has 13 dams and 43 hydroelectric generating units on two rivers in New Hampshire, Vermont and Massachusetts. The Deerfield River and Connecticut River facilities can together generate about 560 megawatts of electric power. TransCaanda also owns 30,000 acres of land affiliated with the properties .

Kibby Wind Power

In late 2010, TransCanada began generating 132 megawatts of wind power on Kibby Mountain in Franklin County, Me. . The project involved constructing 44 wind turbines to serve New England and cost about $320-million, according to the company's estimates when the project began in 2008.

Ocean State Power

TransCanada's big step into energy production has its roots in Ocean State Power, a 560 megawatt gas-fired, combined-cycle power plant in Burrillville, R.I. After acquiring a minority stake in the business in 1991, former CEO Hal Kvisle used the asset as a jumping off point to diversify beyond Canadian pipelines, and grow " a big business" in the U.S. Northeast. In June of 2000, TransCanada bought the last 29.9 per cent of the company that it didn't own for $61-million.

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