TransCanada says its finances will be “negatively impacted” if it decides not to move forward with Energy East
TransCanada Corporation announced Thursday that it filed a letter with the National Energy Board (NEB) seeking a 30-day suspension of the Energy East Pipeline and Eastern Mainline Project applications, according to a press release.
The suspension will allow time to conduct a careful review of recent changes announced by the NEB regarding the list of issues and environmental assessment factors of the projects while understanding how these changes impact the projects’ costs, schedules and viability.
TransCanada said that “significant changes” to the regulatory process introduced by the NEB led to the request for a 30-day suspension of the applications.
The company will cease recording Allowance for Funds Used During Construction (AFUDC) on the projects effective Aug. 23, 2017, being the date of the NEB’s announcement altering the terms of their assessment.
Last month the NEB said it will consider upstream and downstream greenhouse gas emissions during its review of Energy East, which would be a major change from past practice in which only the emissions from the project construction were included.
The Alberta government was quick to condemn the NEB’s decision.
“The scope of the assessment released today is wide reaching and we continue to review it, however, based on our initial analysis, we believe this would be a historic overreach and have concerns about what this means for energy development across Canada,” said Marg McCuaig-Boyd at the time.
“Deciding the merits of a pipeline on downstream emissions is like judging transmission lines based on how its electricity will be used.”
The NEB also said will provide “more visibility” to the evaluation of oil spill risks.
“What they want to do is halt the clock on it, and I can’t say I am surprised,” Dirk Lever, an energy infrastructure analyst at AltaCorp Capital in Calgary, told Reuters.
Assessing indirect emissions “is a really tough ask,” he added.
“Apart from Energy East, we will continue to advance our $24 billion near-term capital program in addition to our longer-term opportunities,” said Russ Girling, TransCanada’s president and chief executive officer.
Should TransCanada decide not to proceed with the projects after a thorough review of the impact of the NEB’s amendments, the carrying value of its investment in the projects as well as its ability to recover development costs incurred to date would be negatively impacted.
“Our portfolio of high quality projects is expected to generate growth in earnings and cash flow to support an expected annual dividend growth rate at the upper end of an eight to 10 per cent range through 2020,” said Girling.