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TransCanada pulling out the stops Assets sales, mostly generation, help finance US$13 billion takeover of Columbia Pipeline; plan to ship natural gas to LNG terminals GARY PARK For Petroleum News
TransCanada Chief Executive Officer Russ Girling described his company’s US$13 billion deal to buy Texas-based Columbia Pipeline Group as “truly transformational” and wasted no time demonstrating what he meant.
A 704-megawatt natural gas-fired power complex bought for US$657 million from Talen Energy only six weeks ago was immediately put back on the block.
That is among a basket of U.S. Northeast power assets TransCanada is putting up for sale to pay for its Columbia acquisition.
Chief Financial Officer Don Marchand said the plans also include selling a gas- and oil-fired generation plant in New York bought for US$2.9 billion in 2009, hydroelectric power holdings in New England, a wind power operation in Maine, gas generation facilities in Rhode Island and its natural gas pipelines in Mexico.
The assets will land on the market just as interest in power plants is heating up, said Jeff Bodington, with an investment banking firm Bodington & Co.
In the interim, TransCanada said it has credit facilities in place to cover up to C$10.3 billion worth of debt to finance the Columbia transaction, which is separate to the C$4.2 billion share issue.
Focus shift But beyond looking for ways to help finance its blockbuster deal, along with its C$4.2 billion share issue which many sources said was heavily oversubscribed, TransCanada is also gearing up to dramatically shift its focus from Western Canada to the eastern United States.
For decades, TransCanada established its business around moving gas from Alberta to Ontario and Quebec through a massive pipeline network that has been in rapid decline.
Natural gas production in Western Canada has dropped about 20 percent in the last 15 years to 13.5 billion cubic feet per day, while Canadian exports to the United States have been slashed in half.
The company was also forced to back out of plans to deliver huge volumes of Arctic gas to southern markets from Canada’s Mackenzie Delta and Alaska’s North Slope.
Edward Kallio, an independent energy consultant in Calgary, said TransCanada held out too long for Alaska and Mackenzie gas to fill its pipelines.
Now, he told the Globe and Mail, it has recognized that the “fundamentals really drive where the pipes are going to go and where they are going to thrive.”
Marcellus shale That is where Columbia entered the picture, with its extensive delivery systems from the Marcellus shale, where production has quadrupled to 20 bcf per day since 2010 and is expected to add another 10 bcf per day in the next 15 years. The nearby Utica shale also plays a key role.
Dirk Lever, an analyst with AltaCorp Capital, said a lot of the Marcellus and Utica gas is competing with Alberta and Texas gas.
Now, Girling said, his company will gain a pipeline link in Pennsylvania and adjoining states, providing a “rare and attractive” opportunity that will position TransCanada to be the main shipper of natural gas to LNG operations across North America.
It is not yet clear whether that strategy is intended to offset the apparent defeat of its Keystone XL crude pipeline from Alberta to the Texas Gulf Coast and possibly its Energy East project across Canada should that falter.
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