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TransCanada Advancing Natural Gas Pipelines from Canada to Mexico

TransCanada Corp. executives said they want to "carefully advance" more than C$20 billion of projects currently under development, and reported progress with several projects in North America, including natural gas and oil pipelines in the United States and Mexico.

During the fourth quarter, the Calgary-based oil and gas transportation conglomerate said it would proceed with construction of the C$6.2 billion Coastal GasLink pipeline project after LNG Canada's joint venture (JV) partners said they had reached a final investment decision (FID) to build a liquefaction facility in Kitimat, British Columbia (BC). The 670-kilometer (416-mile) pipeline would have an initial capacity of about 2.1 Bcf/d and could be expanded up to 5 Bcf/d. As part of its agreement with LNG Canada's five JV partners, TransCanada was reimbursed C$470 million in pre-FID costs.

TransCanada also plans to file applications to build and operate an expanded Nova Gas Transmission Ltd. (NGTL) pipeline system with Canada's National Energy Board (NEB) before the end of March. Pending the necessary approvals for the C$1.5 billion expansion, the company said it could begin construction on NGTL in Alberta and BC, as early as 3Q2020.

The company is also expecting NEB to respond in 1Q2019 to a compliance filing TransCanada submitted in January over a toll cut on its Canadian Mainline gas system.

In the United States, TransCanada expects to place the remainder of the Mountaineer XPress project into service by the end of March, along with all of the Gulf XPress project. Just under half of Mountaineer entered service in January. Both natural gas pipelines are projects of affiliate Columbia Gas Transmission LLC.

The conglomerate also reported that it was continuing to work toward entering the 800-kilometer, 42-inch diameter Sur de Texas-Tuxpan undersea natural gas pipeline, to move gas from Texas into Mexico, in early 2Q2019. CEO Russ Girling said TransCanada has spent about US$3 billion on Sur de Texas and two other U.S.-to-Mexico pipelines -- Tuxpan-Tula and Tula-Villa de Reyes. Sur de Texas is being developed with Sempra Energy’s Mexico subsidiary Infraestructura Energética Nova.

There have been some regulatory delays involving Mexico’s power utility Comisión Federal de Electricidad (CFE). "While our Mexican projects have faced some delays the CFE has approved the payment of fixed capacity charges on our pipelines in accordance with their respective 25-year transportation service agreements," Girling said during a quarterly earnings call Thursday.

TransCanada reported net income of C$1.1 billion (C$1.19/ share) in 4Q2018, compared with C$861 million (C98 cents) in the year-ago quarter. Full-year net earnings were C$3.5 billion (C$3.92) in 2018, versus C$3.0 billion (C$3.43) in 2017.

Revenues increased 7.9% in the fourth quarter to C$3.9 billion, and rose 1.7% for the year to C$13.7 billion. The company's U.S. natural gas pipelines segment brought in C$1.33 billion in 4Q2018, a 47.3% increase from the year-ago quarter. The Canadian natural gas pipelines segment saw a 30.8% increase in quarterly earnings, to C$1.27 billion.

Willing Fighting For Keystone XL

TransCanada executives also discussed the ongoing court fight for the embattled Keystone XL crude oil pipeline, which moves Alberta crude to Lower 48 markets, even at the risk of losing the 2019 construction season.

During the call, Executive Vice President Paul Miller, who handles liquids pipelines, said TransCanada was pursuing a reversal of a ruling last November in U.S. District Court for the District of Montana that halted construction of Keystone. The company was also still waiting for a decision by the Nebraska Supreme Court over whether a decision by the state Public Service Commission to approve the pipeline route in November 2017 was valid.

Miller said TransCanada has a two-year construction window and wants to start construction this year. He said the company also has "an optimal construction program" that takes advantage of seasonality. The Montana court agreed to allow TransCanada to continue performing preliminary work for the project.

"There will come a point where, because of the desire to pursue this optimal [construction] structure, we will lose 2019," Miller warned. "We're not at that point yet. And we continue to work these various hurdles again with the goal to achieving starting in 2019. But it's uncertain at this time when we will have these various legal and regulatory hurdles behind us."

In the interim, Miller said TransCanada anticipates the U.S. State Department will complete work on a supplemental environmental impact statement (SEIS) for Keystone in 2Q2019. Once the SEIS is issued, Miller said the Bureau of Land Management and the Army Corps of Engineers would be in a position to issue additional permits for the pipeline.

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