(Ottawa) The Trans Mountain pipeline would be sold at a loss if the government tried to sell it today. The Parliamentary Budget Officer (PBO) came to this conclusion after recalculating the current value of the pipeline network which came into operation on 1is May.
Posted at 10:12 a.m.
Updated at 10:54 a.m.
This value is estimated at 33.4 billion or 29.6 billion, depending on the two scenarios analyzed by the PBO. In both cases, PBO included anticipated cash flows through 2063.
The first scenario assumes that contracts concluded with shippers for the first 15 to 20 years of operation of the pipeline would be renewed. If this were the case, the value of the pipeline would amount to 33.4 billion.
In the event of “considerable unused pipeline capacity” from 2040 due to the energy transition, oil producers may not be required to sign long-term contracts.
The second scenario takes into account. It is based on the assumption that the contracts would not be renewed and that shippers would instead have to pay a rate to use the pipeline to transport their crude oil from Alberta to the Burnaby terminal in British Columbia. In such a case, the value of Trans Mountain would decrease to $29.6 billion.
In both scenarios, the current value of the pipeline is below the value of its assets, notes the PBO. Trans Mountain would therefore be sold at a loss if the government decided to sell it in 2024, since “after repayment of outstanding liabilities, the remaining amount would be less than the shareholder’s equity. »
Trans Mountain Corporation has assets of $35.2 billion, liabilities of $26.9 billion and shareholders’ equity of $8.3 billion.
The PBO’s conclusion contrasts with comments made Monday by Finance Minister Chyrstia Freeland. She suggested that the federal government could pocket more than the $34 billion the pipeline cost it when it disposes of it.
“We’re going to get our money back because we don’t intend to own the pipeline in the long term,” she said. If you look at the analyzes of its value right now, the consensus is that this project is worth a lot of money. »
However, the PBO brings some nuances to its analysis. He points out that the value of the sale of Trans Mountain may depend on several factors such as “the number of potential buyers, their cost to raise the required capital, when and how it will be sold, market conditions at the time of the sale. »
“Whether the government will make a profit or a loss on the eventual sale of the Trans Mountain pipeline system will depend on what someone is willing to pay for it,” he summarizes.
The Trudeau government made the controversial decision in 2018 to purchase the Trans Mountain pipeline for $4.5 billion. The former owner, Kinder Morgan Canada, then threatened to abandon the pipeline expansion project due to environmental opposition.
The 1,180 kilometer pipeline system is the only one in the country transporting crude oil to the West Coast. It transports approximately 890,000 barrels of petroleum products each day from Alberta to British Columbia.
With Joël-Denis Bellavance, The Press and The Canadian Press
