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TC Energy (New York Stock Exchange: TRP) +0.9% in trading on Wednesday, when Barclays upgraded its stock from equal weight to overweight with a price target of C$61, up from C$55, and said the company is “uniquely positioned for an evolving energy landscape with its existing infrastructure assets spanning “multiple commodity value chains.”
Barclays analyst Theresa Chen believes TRP RemainCo will likely trade at a premium to the midstream sector average following the South Bow spin-off, expected to occur in late Q3 or mid-Q4, justifying a lofty valuation given its asset composition (natural gas transmission, natural gas storage and power) and highly stable cash flows supported by tariff-based off-take or feed-in contracts.
South Bow will also see isolated cash flows due to long-term fee-based contracts backed by volume commitments, but will likely justify a lower valuation as a standalone liquid infrastructure entity compared to RemainCo, Chen says.
In terms of near-term catalysts, Chen believes clarity on remaining asset sales and related economics, as well as successful execution of the South Bow financing in the near term, helped by Keystone's year-to-date gains amid wide WCS spreads earlier this year, could be positive for the stock.