Former Enbridge CEO Daniel sees possible re-application for Keystone XL
Former Enbridge CEO Patrick Daniel told BNN today that he is believes Donald Trump’s victory will be positive for cross-border energy pipeline projects, starting with the Keystone XL pipeline, the final application for which was turned down by the Obama administration a year ago after seven years of permitting activity.
Daniel told BNN that Trump’s presence in the Oval Office should “slice through the red tape ensnaring projects like TransCanada’s (ticker: TRP) Keystone XL.”
“Obviously, this is good news for something like the Keystone XL pipeline, the opportunity to reapply, and it does provide an additional outlet for Canadian crude oil,” Daniel said. “This is positive for that specific project, there’s no doubt.”
Daniel said the Republican sweep of the White House, Senate and House of Representatives should help take much of the political wrangling over pipelines out of the process. “I do think this will de-politicize pipelines to certain extent,” he said. “Even with regulatory approval, it’s been difficult to get pipelines built.”
Daniel said he had prepared to discuss effects of a Clinton election with BNN but said he was caught off guard by the Trump victory.
Daniel discussed other energy and trade related cross-border ideas, noting that Canada should be looking to create avenues to ship its oil and natural gas to other global markets, and he concluded that the change from the current leadership to a Trump/Republican administration opens up a lot of hope for new projects to be approved going forward. Daniel said that renewables should be included in cross-border energy discussion and that as the countries proceed down the path toward reducing carbon emissions, natural gas projects are going to be particularly important.
View the full BNN interview here.
TransCanada’s strategic initiatives update
On the same day that it posted Q3 earnings, TransCanada (ticker: TRP) updated investors on its recent strategic initiatives in a press release saying that the company:
- Expects to realize approximately US$3.7 billion from the monetization of its U.S. Northeast Power business;
- Decided to maintain full ownership interest in its growing Mexican Natural Gas Pipeline business;
- Reached agreement to purchase all of the common units of Columbia Pipeline Partners LP for US$17.00 per unit for a total amount of approximately US$915 million;
- Announced a bought deal offering of common shares of approximately $3.2 billion plus a 10 per cent over-allotment option;
- Continued to advance $25 billion of near-term projects that are expected to be completed by 2020;
- Expects annual dividend growth rate at the upper end of previous guidance of eight to 10 per cent through 2020.
Mexico for growth
TransCanada said it would maintain its full ownership interest in natural gas pipeline assets in Mexico rather than sell a minority interest in six of these pipelines to fund a portion of the Columbia acquisition. TransCanada currently owns and operates the Guadalajara and Tamazunchale natural gas pipelines and is investing US$3.8 billion to develop and complete construction of four additional pipelines plus fund its interest in the Sur de Texas project, all of which will serve growing demand in Mexico. All projects are expected to be in-service by the end of 2018 and are underpinned by 25-year take-or-pay contracts with the Comisión Federal de Electricidad (CFE). Once completed, TransCanada said it expects its Mexican natural gas pipeline business to generate approximately US$575 million of annual EBITDA, up from US$181 million in 2015.
“While the sale of a minority interest in our growing natural gas pipeline footprint in Mexico was an option, we determined that we would maximize short- and long-term shareholder value by retaining our full ownership interest in these assets and instead access capital markets,” said TRP CEO Russ Girling. “This will allow us to fully capture future growth associated with the portfolio, is expected to be accretive to earnings per share and is consistent with maintaining a simple corporate structure.”
Columbia Pipeline Partners acquisition
During the conference call that accompanied the strategic update announcement, TransCanada EVP, Corporate Development, and CFO Don Marchand, commented on the Columbia acquisition: “Columbia’s $7.7 billion growth program brings our portfolio of near-term commercially-secured projects to over $25 billion and includes $21 billion of natural gas pipeline projects, primarily related to Columbia, NGTL, and Mexico; $2 billion of liquids pipeline projects in Grand Rapids and Northern Courier; and $2 billion of power projects at Napanee and Bruce Power. They are all underpinned by regulated business models for long-term contracts. Approximately $7.5 billion has been invested in these projects to-date, with the remainder to be spent over the balance of the decade. As these projects are placed into operation over the next four years, they are expected to generate significant growth in earnings and cash flow.”
What’s next for Keystone XL?
Following the rejection of its application to build the Keystone XL by the Obama administration last fall, TransCanada took to international court with claims that it was damaged by the U.S. actions after seven years of cooperation with U.S. officials in which it met all of their demands regarding the pipeline. TRP is seeking $15 billion in damages from the U.S. for breaches of NAFTA with respect to the U.S. rejection of the Keystone XL application, which analysts agree was done for political reasons.
In view of the U.S. presidential election, former Enbridge CEO Patrick Daniel told BNN today that reapplying to build the Keystone XL could be a viable option after the new administration takes over.
