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TransCanada reports lower earnings; details 2011 spending plans

Christopher E. Smith
OGJ Pipeline Editor

HOUSTON, Feb. 16 -- TransCanada Corp. announced net income applicable to common shares for the year ended Dec. 31, 2010, of $1.2 billion or $1.78/share, compared with $1.4 billion ($2.11/share) in the same period last year.

Net income in 2010 included a $127 million aftertax (18¢/share) valuation provision against advances to the Aboriginal Pipeline Group (APG) for the Mackenzie Gas Project (MGP) and net unrealized gains resulting from adjustments for changes in the fair value of proprietary natural gas inventory in storage and certain risk management activities. Net income in 2009 included a dilution gain resulting from TransCanada’s reduced ownership in PipeLines LP and favorable income tax adjustments.

The company cited the Cushing extension of its Keystone crude oil pipeline and the Groundbirch and Bison natural gas pipelines, all brought into service during 2010, as projects that will further contribute to TransCanada’s earnings and cash flow moving forward. TransCanada said its capital program will continue in 2011, describing its Guadalajara Pipeline in Mexico as 70% finished and expected to begin operations in this year’s second quarter.

TransCanada continues to pursue its 500,000 b/d Keystone US Gulf Coast Expansion (Keystone XL), while hiking the total expected capital cost of the Keystone Pipeline System to $13 billion from $12.2 billion. The company ascribed the increased estimate to both higher costs incurred in completing Keystone’s first two phases and an increase in the estimated costs for completing Keystone XL due to scope changes, evolving regulatory requirements, and permitting delays.

TransCanada has binding, long-term commitments for 380,000 b/d on Keystone XL, which still requires approval from the US Department of State. The company anticipates a final regulatory decision in mid to late 2011. Canadian regulatory approvals are already in place.

TransCanada had invested $7.4 billion in the Keystone system, including $1.4 billion related to Keystone XL, as of Dec. 31, 2010. The company anticipates spending the remaining $5.6 billion, $1.2 billion of which has already been committed, between now and Keystone XL’s 2013 in-service date. Total Keystone capacity including XL would be 1.1 million b/d.

Canada’s National Energy Board (NEB) approved TransCanada’s Horn River pipeline project in late January 2011 (OGJ Online, Feb. 7, 2011). TransCanada expects the $310 million project to be operational second-quarter 2012 with commitments for contracted natural gas volumes rising to 634 MMcfd by 2014. TransCanada said it continues to receive new requests for further natural gas transmission service to bring gas from northwest Alberta and northeast British Columbia to market and expects additional extensions and expansions of its Alberta System.

TransCanada said its Alaska Pipeline Project team is working with shippers to resolve conditions under its control contained in bids received as part of the project’s open season.

Mackenzie Gas Project proponents, meanwhile, continue to pursue required regulatory approvals and the Canadian government’s support of an acceptable fiscal framework, according to TransCanada. The NEB released a decision granting approval of the project’s application for a certificate of public convenience and necessity in December 2010. The approval contained 264 conditions including the requirement to file an updated cost estimate and report on the decision to construct by yearend 2013 and to being construction by Dec. 31, 2015.

TransCanada acknowledged uncertainty regarding the Mackenzie Gas project’s commercial structure, fiscal framework, and timelines, but said it remains committed to advancing the project.

Contact Christopher E. Smith at chriss@ogjonline.com.


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