TransCanada growth cut as Ontario plant nixed

The cancellation of TransCanada Corp.’s planned power plant west of Toronto means less growth after 2013 but the pipeline and utility giant is in a good position to chase other big projects, an analyst said Friday. Chad Friess, with UBS Investment Research, said in a note that the natural-gas-fired plant in Oakville, Ont., would have added 10 cents per share, or three per cent of yearly earnings, to TransCanada’s bottom line once in service. However, since the cancellation means the company can avoid spending $1.2 billion between now and 2014, it is “on firm financial ground and has the spare capacity to pursue other large projects alongside the Keystone Expansion,” he wrote, referring to a massive crude oil pipeline TransCanada proposes to build from Alberta to the U.S. Gulf Coast. “Given the long lead time, we are confident (TransCanada) will fill the void left by Oakville over the next few years.” The collapse of the Oakville plant may not deter TransCanada too much since it has numerous other expansion plans across its broad North American operations. The Calgary-based energy giant is known mainly as the biggest shipper of Western Canadian natural gas to Canadian and U.S. markets. It also operates a variety of power plants in North America, with many new proposed projects in the hopper. The company also is a backer of the Alaska and Mackenzie natural gas pipelines that would bring gas from the Far North to southern markets. Among current projects, TransCanada is working on: – The US$320-million Guadalajara pipeline project in Mexico, set to begin carrying gas in 2011. – The US$600-million Bison pipeline to deliver natural gas from the U.S. Rockies to markets in the U.S. Midwest. – Horn River and Groundbirch pipeline projects to bring B.C. gas to market. – The Zephyr green power transmission development in Wyoming, the Collidge generation station in Arizona and the Kibby wind power project in Maine. The Ontario government said Thursday that the 975-megawatt Oakville plant will no longer be needed given power demand forecasts and increasing green energy supplies. Premier Dalton McGuinty said Friday he doesn’t know how much it will end up costing taxpayers to kill plans to build the plant, which would have fed power into the provincial power grid. McGuinty said he’s not aware of the specifics of the contract with TransCanada and couldn’t say how much the government will have to shell out to break the agreement. He added that he is not reconsidering plans to build a plant in Holland Marsh, which lies in a Conservative riding. Oakville residents had been adamantly opposed to having the plant built in their community, and even enlisted the help of famed American environmentalist Erin Brockovich to garner publicity. TransCanada (TSX:TRP) and the Ontario Power Authority will discuss payments to which the company is entitled. That compensation would likely include what TransCanada spent on developing the business, securing the site and the time its employees put in, said Steven Paget, an analyst with investment dealer FirstEnergy Capital. “I think it would be at least several million,” he said. In a statement Thursday, TransCanada expressed nohard feelings as a result of the provincial government’s decision. “We appreciate the fact that the Ontario government and TransCanada have had a positive working relationship and we look forward to discussing potential opportunities of working together in the future as the government’s long-term energy plan is developed,” the company said. Ontario has done itself a disservice by spooking private power companies that may want to invest there in the future, Paget said. “However nice this kiss and make up session is, it doesn’t reduce the perceived political risk of investing in Ontario. In fact, it’s increased it,” he said. “But settling this contract amicably means that it’s not going to be an absolute disaster for them.” TransCanada shares closed flat at C$38.32 in Friday trading on the Toronto Stock Exchange. ((08 OCT 2010))–transcanada-growth-cut-as-ontario-plant-nixed–page0




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