TC Energy Corporation announced that it will proceed with construction of the Keystone XL Pipeline Project resulting in an investment of approximately $8.0 billion into the North American economy.
At 1,210-miles (1,947-kilometres) in length, the Project will be capable of safely delivering 830,000 barrels per day (Bbl/day) of crude oil from Hardisty, Alberta to Steele City, Nebraska where it will connect with TC Energy’s existing facilities to reach U.S. Gulf Coast refiners to meet critical needs for transportation fuel and useful manufactured products.
With pre-construction activities underway, the pipeline is expected to enter service in 2023.
The Project is underpinned by new 20-year transportation service agreements for 575,000 Bbl/day with a group of strong, credit-worthy counterparties which are expected to generate approximately US$1.3 billion of earnings before interest, taxes, depreciation and amortization (EBITDA) on an annual basis.
In addition, once the Project is in service, current contracts for 115,000 Bbl/day from Hardisty to the U.S. Gulf Coast on the existing Keystone line will shift to the new facilities under renewed 20-year contracts.
Subject to terms and conditions outlined in the agreements, 50 per cent of any difference between the estimated capital cost and final cost of the Project are subject to a sharing mechanism and will be reflected in the pipeline tolls.
As part of the funding plan, the Government of Alberta has agreed to invest approximately US$1.1 billion as equity in the Project, which substantially covers planned construction costs through the end of 2020.
The remaining capital investment of approximately US$6.9 billion is expected to be largely made in 2021 and 2022 and funded through the combination of a US$4.2 billion project level credit facility to be fully guaranteed by the Government of Alberta and a US$2.7 billion investment by TC Energy.
The Company’s capital investment will be funded through a combination of internally generated cash flow, hybrid securities and common equity through the activation of its dividend reinvestment program in 2021 and 2022.
To provide additional financial flexibility in support of its credit metrics and capital program, including the Project, the Company intends to also file a $1.0 billion equity shelf to enable an at-the-market equity issuance program which will be utilized if and as deemed appropriate.
Once the Project is completed and placed into service, TC Energy expects to acquire the Government of Alberta’s equity investment under agreed terms and conditions and to refinance the US$4.2 billion credit facility in the debt capital markets. ■