TransCanada Corp. has laid the groundwork for a multibillion-dollar capital plan over the next decade, but the bulk of the spending is earmarked for projects with an uncertain future.
The Calgary-based pipeline and power giant said Wednesday that it would spend as much as $46-billion through to 2020 to connect surging supplies of shale gas and oil sands crude in Western Canada to growth markets. But roughly 70 per cent of the total, or $33-billion, is dedicated to projects bogged down by political wrangling or economic inertia.
TransCanada is backing jumbo pipelines to ship natural gas for export to Canada's west coast, although neither Royal Dutch Shell PLC nor state-run Petronas of Malaysia have agreed to build the associated infrastructure. Keystone XL remains mired in U.S. politics, and Energy East is embroiled in an escalating scrap with gas distributors in Ontario and Quebec.
Those distributors are worried that the $12-billion plan will leave them vulnerable to supply shortages and higher transportation costs.
"Over the long term, we don't see [Energy East] as a healthy deal," said Jim Redford, vice-president at Union Gas, one of three distributors opposing the plan. "We don't see the value to gas customers."
TransCanada rejects that view. At issue is a portion of the pipeline from North Bay to Cornwall, Ont., that it plans to take out of gas service to use for oil shipments. The gas distribution companies say that segment is fully utilized in winter, and want TransCanada to build a new oil pipeline starting at North Bay.
TransCanada instead proposes building a smaller capacity pipeline that would carry U.S.-sourced gas from Southern Ontario to Quebec, and says it is merely replacing gas export capacity to the eastern U.S. that it no longer has contracts to support. TransCanada canvassed gas customers about their desire for firm service on the new gas line from Southern Ontario to Quebec, but its critics insist it did so before customers had a chance to fully understand the impact of the Energy East project.
"I've heard the rhetoric before; that's ludicrous," said Steve Clark, TransCanada's senior vice-president for eastern gas pipelines. "We've had dialogue with industry for two years that's been extensive and comprehensive," including plans to take gas pipeline capacity out of service from Alberta to the Quebec border.
At a conference in Toronto, Mr. Clark sought to reassure Ontario power providers – many of whom use gas to create electricity – that the Energy East project will not deprive them of adequate transmission service.
The uncertainty over major projects comes with U.S. hedge fund Sandell Asset Management pressing to break up the company. TransCanada pledged Wednesday to double its dividend growth rate through 2017 from annual increases of 4 per cent today, as it completes $13-billion in small and medium-sized projects.
A question mark still hangs over Keystone XL after a failed bid this week by U.S. Republicans to force President Barack Obama to make a decision on the $8-billion pipeline.
TransCanada chief executive officer Russ Girling said the Senate vote was a "very positive sign" that points toward future approval of the contentious pipeline, which is designed shuttle 830,000 barrels a day (b/d) of oil sands bitumen and North Dakota crude to refineries on the U.S. Gulf Coast.
The company insists the project remains vital to oil company shippers, but markets are increasingly moving on.
"It's good that they had a dividend growth forecast that doesn't depend on the big projects," said Steven Paget, director of institutional research at FirstEnergy Capital Corp.
"It's kind of their way of saying, you'll get your money. Don't worry about Obama or regulators too much. That's extra."