CALGARY – TransCanada Corp.’s second-quarter profits rose 30 per cent as more of its projects came into service and the pipeline giant said Thursday that it expects to break ground on its next major feat – the controversial Keystone XL crude pipeline extension – in the new year.
“I would say that we are truly shovel ready,” chief executive officer Russ Girling told analysts on a conference call.
“Our construction plans are in place for early 2012 and we are very anxious to get moving forward with this project.”
The Calgary-based company (TSX:TRP) is awaiting a U.S. State Department decision on the US$7-billion proposal, which would extend an existing pipeline system to the U.S. Gulf Coast. The first stages of Keystone already deliver crude from Alberta to the U.S. Midwest and Oklahoma.
Earlier this week, legislators in the Republican-controlled House of Representatives passed a bill to force a decision on the Keystone XL pipeline by Nov. 1. A preliminary environmental assessment is expected by mid-August.
But the bill faces an uncertain future in the U.S. Senate, which is still controlled by Democrats, some of them vehemently opposed to the pipeline.
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Critics of Keystone XL say the project would increase U.S. dependence on “dirty” oilsands crude. There are also concerns a spill could harm key drinking water sources.
Supporters say, however, that the project will offer a big boost to the U.S. economy and reduce the amount of crude the United States has to import from unfriendly or potentially unstable countries.
“We very much believe this project is in the national interest of the United States and we expect to receive a Presidential Permit by the end of 2011,” Girling said.
TransCanada had bought all the pipe and equipment it needs to start digging as soon as it has its approval and has agreements in place with major labour unions south of the border, Girling said.
Because most of the costs have already been nailed down, Girling said there likely isn’t much that can be accomplished by throwing more money at the project in order to speed it along.
“I mean, these things take the time that they take to get done correctly,” he said.
“In any event, I wouldn’t see the costs migrating up even if we were to press a little bit harder on time frame. My gut feel right now says we’re going to be on the same time frame schedule that we’ve always been on, and I think the middle of 2013 (for pipeline startup) is still a reasonable estimate.”
Edward Jones analyst Lanny Pendill said he’s always had his money on Keystone XL getting the State Department nod.
“It makes too much sense for it not to get approved,” he said.
The United States is hungry for oil and is looking for ways to replace imports from places like Saudi Arabia and Venezuela.
“You’ve got all this crude potential just north of the border, and from a political ally, a stable country. I don’t see how the oil doesn’t flow down to the U.S.,” said Pendill, who is based in St. Louis.
On the call, Girling attributed his company’s strong second-quarter showing to new projects coming on stream.
In mid-June, the Guadalajara pipeline in Mexico began shipping natural gas. A month earlier, its Coolidge power plant in Arizona started up under a 20-year power purchase arrangement with a local utility.
Last year, TransCanada brought its base Keystone oil pipeline – which delivers Canadian crude to the U.S. Midwest and Oklahoma – into service.
TransCanada has also recently started up the Bison, Groundbirch and North Central Corridor natural gas pipelines, the Kibby wind project in Maine and the Halton Hills power generating station in Ontario.
Comparable earnings – a measure TransCanada believes best reflects the underlying performance of its operations by stripping out the effects of one-time items – were $357 million, or 51 cents per share.
That marked an improvement from earnings of $275 million, or 40 cents a share in the same 2010 period, and came in slightly below the 52 cents per share analysts polled by Thomson Reuters had been expecting.
Another measure of profitability, net income attributable to common shares, rose to $353 million, or 50 cents per share, from $285 million, or 41 cents per share.
Revenues increased to $2.1 billion from $1.9 billion.
The company said it would keep its quarterly dividend steady at 42 cents per share.
Last week, TransCanada’s six-month-old Bison natural gas pipeline ruptured in rural Wyoming. On Thursday it said it is awaiting the go-ahead from regulators to start it up again.
TransCanada is best known as North America’s largest natural gas shipper with a vast network of pipelines criss-crossing the continent. It also has power generation assets across North America.
TransCanada shares rose 19 cents to $40.04 on the Toronto Stock Exchange.