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TransCanada (TRP) to Abort Energy East Pipeline Project


TransCanada Corporation TRP recently announced plans to terminate its mega project Energy East Pipeline as well as Eastern Mainline Project owing to regulatory hurdles and prolonged delays.

Energy East Pipeline was touted as a major transformative project for the development of Canada’s future energy by Alberta’s energy minister and industry players. However, it hit a roadblock due to the stringent policies issued by the National Energy Board (NEB) on Aug 23. The board initiated a tougher review process for the Energy East Pipeline and Eastern Mainline Projects.

The board announced that the approval process for the projects will now involve the examination of greenhouse gas emissions at both upstream and downstream stages. NEB felt that the expanded scope of the review will provide more visibility in the assessment of risks related to causalities like oil spill, among others.

Concurrently, last month TransCanada filed an application with the NEB to stall the federal review of the projects for 30 days. After re-evaluating the commercial viability of the project, the company decided to call off the same owing to persistent uncertainties and challenges including the anticipated cost overruns that would be incurred with the latest NEB policies.

Eastern Mainline — a 279 kilometer pipeline — was to connect Markham and Edwardsburgh. Energy East Pipeline was expected to carry crude from Alberta and Saskatchewan to eastern Canadian refineries .The pipeline was expected to provide Western Canada’s producers an alternative route to transport 1.1 million barrels of oil per day. However, with the project getting terminated, producers will now have to bank on Enbridge Inc.’s ENB Line 3, TransCanada’s Keystone XL and Kinder Morgan Inc.’s KMI Trans Mountain pipeline for transporting fuel. With energy demand and supply in Western Canada looking promising at present, the termination of this project signals the country’s failure to tap significant growth opportunities.

With the project getting scrapped, TransCanada will incur a non-cash charge of $1 billion in the fourth quarter. Apart from affecting the company adversely, the termination of the project will also lead to potential loss of jobs and investment opportunities in Atlantic Canada.

Zacks Rank and Other Stock to Consider

Headquartered in Alberta, TransCanada mainly focuses on natural gas transmission and power services. Its pipeline transports the majority of Western Canada's natural gas to growing markets in Canada and the United States. The company currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company has an impressive pricing strength and has outperformed the broader industry over the last six months. During the aforesaid period, units of TransCanada were up by 3.29% against the broader industry’s 3.73% decline.

Crescent Point Energy Corporation CPG, flaunting a Zacks Rank #1,delivered positive earnings surprise in the trailing four quarters with an average of 392.06%.

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