As demand for natural gas and power grows, TransCanada Corp. intends to connect new sources of supply to meet growing demand, and will hold to its commitment to play a leading role in developing the proposed Alaska Highway Pipeline and Mackenzie Gas Pipeline Project, the CEO said last week.
Speaking on Friday as TransCanada unveiled its strong second quarter report, CEO Hal Kvisle said the company’s commitment to long-term growth is “demonstrated by initiatives such as TransCanada’s agreement to acquire Gas Transmission Northwest (GTN), our recent receipt of final approvals needed to begin construction of a 550 MW natural gas-fired cogeneration power plant in Becancour, QB,” and ongoing efforts to bring gas south via the proposed Alaska and Mackenzie Delta projects.
For the Mackenzie Delta proposal, which appears to be moving ahead, TransCanada agreed to finance the Aboriginal Pipeline Group’s share in engineering and regulatory work in exchange for one-third ownership in the pipeline (see Daily GPI, June 7). The deal is a loan that covers bills of C$80-100 million (US$62-75 million). In Alaska, TransCanada negotiating a contract to build a gas pipeline from the North Slope under the state’s Stranded Gas Development Act (see Daily GPI, June 22).
“North American energy demand has increased significantly during the last few decades, and we expect this trend to continue,” said Kvisle. “As demand for natural gas and power grows, it is our intention to connect new sources of supply to meet growing demand and deliver long-term growth and value creation.” Kvisle noted that the company is focused on making “strategic and disciplined investments while maintaining a strong balance sheet,” and did not rule out future acquisitions.
TransCanada’s interest in liquefied natural gas (LNG) projects also is not waning, said Kvisle. Calling it a “long-term game” in North America, the CEO said his company would not “force the issue” with stakeholders in areas where facilities were not wanted, as was the case in Harpswell, ME in March (see Daily GPI, March 11). TransCanada, he said, “has no plans at all to be pursuing the project.”
However, the company may pursue other LNG projects in the region with interested partners. If another developer manages to obtain permits to establish an LNG terminal in New England, Kvisle said, “we’ll be keen to invest in them.”
In the second quarter, TransCanada nearly doubled its earnings, helped by one-time gains as it focused on its core natural gas pipeline and power services business. Net income for second quarter 2004 was C$388 million (C$80 cents/share), compared with C$202 million (C42 cents) in 2Q2003.
Quarterly increases resulted from an after-tax gain of C$15 million (C3 cents/share) from sale of the ManChief and Curtis Palmer power plants to subsidiary TransCanada Power LP. In addition, other gains of C$172 million (C36 cents/share) resulted from the removal of TransCanada’s obligation to fund the redemption of TransCanada Power LP units in 2017, as well as a reduction in ownership interest in TransCanada Power LP in the quarter. Of these gains, C$132 million were previously deferred and were being amortized into income to 2017.
For the year, Kvisle said TransCanada’s capital expenditures are expected to total approximately C$2.9 billion. Approximately C$2.3 billion of that amount, including C$0.7 billion of assumed debt, will be used to acquire GTN from National Energy & Gas Transmission Inc. (see Daily GPI, April 30). GTN owns a 1,350-mile pipeline in the Pacific Northwest and the 80-mile North Baja system in the Southwest.
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