TransCanada Has Bumper Year, as New Pipes Start

TransCanada reported February 15 a record net income of C$861mn (US$689mn) for 2017, compared with a loss of $358mn the year before, as new capacity came on stream.

CEO Russ Girling said: "The increases reflect the strong performance of our existing assets and approximately C$5bn of growth projects that were completed and placed into service during 2017. They included expansions of our NGTL and Canadian Mainline systems in our Canadian natural gas pipelines business, the Gibraltar and Rayne XPress projects in US natural gas pipelines and the Grand Rapids and Northern Courier liquids pipelines in Alberta."

The company will advance a C$23bn near-term capital program, including an additional C$2.4bn on NGTL to add another 1bn ft³/d capacity, also announced February 15, following an oversubscribed open season that saw contracts average 19 years. "The successful open season shows strong industry support to significantly expand transmission capacity out of the basin and improve market connectivity for Canadian natural gas production,” Girling said. Construction is due to start next year, with operations beginning in November 2020.

But Bill Gwozd, founding board member of the Calgary-based Centre for Gas and Liquids Monetization, says Marcellus and Utica gas will continue to provide stiff competition for western Canadian producers, even if they are successful in getting their gas to the Empress export gate from Alberta.

"Once the dream of getting that stranded gas to Empress materialises, these gas producers will be significantly challenged to get appropriate net backs for the gas via the eastern markets," Gwozd told NGW in an email. "Old gas supply competition on new gas supply arriving is real, and the possibility of setting new records for continuously low gas prices is unfortunately just around the corner."

TransCanada's near-term program is expected to generate significant additional growth in earnings and cash flow and support continued annual dividend growth at the upper end of an 8-10% range through 2020 and an additional 8-10% in 2021, added Girling. "We have invested approximately C$8bn into these projects to date and are well positioned to fund the remainder of this capital program through our strong and growing internally generated cash flow and access to capital markets on compelling terms."