In the effort to better focus on pipeline and power generation projects, TransCanada Corp. has reached an agreement to sell Cancarb Ltd. and its related power generation facility to Tokai Carbon Co. Ltd. for aggregate gross proceeds of $190 million, plus customary adjustments. The transaction is expected to close late in the first quarter of 2014, subject to various approvals.
The divestiture of Cancarb and its waste heat recovery power plant, located in Medicine Hat, Alberta, allows TransCanada to capitalize on current market conditions and better align its asset base with the company’s strategic direction, which is focused on large-scale pipeline and power generation projects in Canada, the United States and Mexico. J.P. Morgan Securities LLC acted as the exclusive financial advisor on the transaction.
“Like any company, we regularly evaluate our diverse portfolio of assets to ensure it is maximizing value for our shareholders as we realize our vision of becoming North America’s leading energy infrastructure company,” said Russ Girling, TransCanada’s president and CEO. “The proceeds from this sale will help fund TransCanada’s unprecedented capital growth plan that includes $38 billion in new projects to be completed by the end of the decade.”
TransCanada acquired Cancarb in 1981. Cancarb is the world’s largest producer of “thermal carbon black,” a specialized form of carbon derived from super-heated natural gas, which is used in a wide range of industrial and automotive products including high-grade rubber, insulation and ceramics. The adjoining 41-MW power plant that was added in 2001 captures large volumes of waste heat from the manufacturing process to produce electricity that is sold into Medicine Hat’s electrical grid, helping to reduce greenhouse gas emissions.
“Low natural gas prices, combined with Cancarb’s strong performance and global market share for thermal carbon black, made it an attractive investment for prospective buyers,” Girling said. “Decisions like this are intended to build a stronger company for everyone, and we are committed to ensuring Cancarb’s employees are treated fairly during the transition to new ownership.”
Tokai Carbon Co., headquartered in Tokyo, Japan, is an established international supplier of furnace carbon black and other carbon ceramic-related products. The company is listed on the Tokyo Stock Exchange and has affiliates in China, Korea, Thailand, the United States, Germany, Italy, Sweden and the United Kingdom. The company operates five plants in three countries (Japan, China and Thailand) that produce furnace carbon black, with combined annual capacity over 500,000 metric tonnes.