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TransCanada Holds Growth Outlook Despite Keystone XL Limbo

Updated on
  • Pipeline operator extends dividend forecast through 2021
  • Company seeks to file amended application for alternate route

TransCanada Corp. reaffirmed forecasts for profit and dividend growth a week after a Nebraska regulatory decision left the fate of the company’s $8 billion Keystone XL pipeline megaproject clouded.

Earnings before interest, taxes, depreciation and amortization will grow at an average annual rate of about 10 percent between 2015 and 2020, the Calgary-based company said in a presentation to investors on Tuesday. TransCanada also held firm to plans to lift its dividend by an annual average of 8 percent to 10 percent, and extended that outlook by an additional year through 2021.

Those projections, though, are overshadowed by questions over the long-delayed Keystone XL. The Nebraska Public Service commission approved the project last week, but stipulated a different route than the company envisioned for the 1,179-mile (1,897-kilometer) conduit. While the decision seemed to remove a key hurdle to construction, foes have said they believe it opens challenges to the new route because it wasn’t vetted to the same degree as the original.

“We continue to review that decision and its potential impacts on the cost and schedule of the project,” Chief Executive Officer Russ Girling said at the presentation in Toronto.

Seeking Permission

In a request dated Friday, the company asked the state to reconsider its ruling and allow it to file an amended application to address questions raised in the ruling.

In its motion, TransCanada isn’t seeking to have the commission alter its approval of the alternate path for the conduit, Terry Cunha, a spokesman for TransCanada, said in an emailed statement.

TransCanada has generally found itself in analysts’ and investors’ favor as an option to invest in energy without much exposure to volatile oil and natural gas prices. The shares gained 4.9 percent this year through Monday, compared with a 13 percent decline for the S&P/TSX energy index, and 15 of the 19 analysts covering the stock recommend buying it. TransCanada shares rose 0.5 percent to C$63.79 at 1:45 p.m. in Toronto.

While the company has delivered earnings that beat analysts’ estimates for the past 13 quarters, it faced recent turbulence. The company last month pulled the plug on the proposed Energy East pipeline, which would have carried western Canadian crude to refineries in the country’s east. And it faced some criticism for maintenance-related outages on its gas system in Alberta that weighed on the price of Canadian gas over the summer.

Landowner Opposition

Keystone XL, which has been on the drawing board since 2008, has drawn stiff landowner opposition. Last week’s decision prompted objections that the public service commission had no mechanism for approving the alternate route, according to a filing by landowners.

Even with Nebraska’s decision in hand, TransCanada still must formally decide whether to build the line, which would send crude from Hardisty, Alberta, through Montana and South Dakota to Nebraska, where it will connect to pipelines leading to U.S. Gulf Coast refineries.

TransCanada resumed service on its existing Keystone crude pipeline on Tuesday after it was shut Nov. 16 because of a leak in South Dakota. The company didn’t specify the time of the restart or provide estimates for when it will return to full rates.

— With assistance by Sheela Tobben

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