TC Energy Corp. shareholders voted overwhelmingly on Tuesday, June 4, to approve the spinoff of the company's liquids pipeline business, creating a new energy infrastructure company called South Bow Corp.

According to a Reuters report, the move will allow Calgary-based TC Energy to reduce its debt burden and focus on its natural gas operations. 

South Bow will inherit nearly 4,900 kilometers of liquid pipelines that transport oil from Alberta and parts of the United States to refineries in Illinois, Oklahoma, and Texas. Its most significant asset is the Keystone pipeline, a vital export route for Canadian crude with a daily capacity of 622,000 barrels.

"This spinoff will enable both companies to optimize the value of their distinct assets," TC Energy CEO Francois Poirier said at the company's annual general meeting, adding that each company will have the “flexibility to pursue its own strategies and growth opportunities."

South Bow will begin operations with a substantial debt load of C$7.9 billion (about $5.78 billion) and face competition from rivals aiming to expand shipments to the U.S. Gulf Coast. 

However, Analysts caution that South Bow's limited asset base and lower projected growth compared to TC Energy could impact its valuation. The new company will benefit from long-term shipping contracts that guarantee revenue for 94% of Keystone's capacity. 

South Bow will also be led by seasoned industry veteran Bevan Wirzba, formerly TC's executive vice president of liquids pipelines. Wirzba confirmed a legal separation planned for this fall, with South Bow listing on the Toronto and New York stock exchanges.

According to a TC management information circular released in April, the company explored the possibility of establishing a joint venture with another energy infrastructure firm before opting for the spinoff. This raises speculation that South Bow could become an attractive acquisition target once it begins trading publicly.