TransCanada (TSX: TRP) announced, on October 5, the cancellation of its $CAN 15.7B Energy East project. This announcement reflects an uncertain future for the Utilities sector’s companies, for example for those wishing to build pipelines for the transport of natural gas in the near future. They may turn to our southern neighbors, who are offering more attractive business opportunities.
Indeed, the Canadian government is tightening the returns that utilities companies are allowed to earn, while US states are happy to sign new projects with large profit margins. This will likely cause several companies in the sector to make acquisitions south of the border and avoid Canadian inter-provincial projects. For example, Emera Inc. (TSX: EMA), among others, has submitted a bid for the Massachusetts Clean Energy RFP, which would allow it to export 5.69 TWh of electricity to Massachusetts for 20 years if selected, representing additional annual revenues of nearly one billion dollars ($CAN).
This approach could, in my opinion, be beneficial to Canadian consumers. By expanding their operating network in the United States, companies would be able to increase their revenues and profits without having a direct impact on Canadian customers, while at the same time achieving economies of scale. With additional income, they would be able to invest more in their Canadian networks and provide higher quality services. They would also be better equipped to respond to a major crisis, since they would have access to more funds. Finally, these additional funds could be invested in research and development of renewable energy, which would allow them to remain competitive since the majority of the requests for bids require ta certain percentage of green energy.
Emera Incorporated. (2017). Emera Bids Atlantic Link Subsea Cable Info. Retrieved from http://investors.emera.com/Mobile/file.aspx?IID=4072693&FID=389635469
Calgary Herald. (2017). TransCanada cancels $15.7B Energy East pipeline project. Retrieved from http://calgaryherald.com/business/energy/transcanada-cancels-energy-east-pipeline-project
The globe and mail. (2017). TransCanada’s cancelled energy east project has Canadian utilities looking south. Retrieved from https://beta.theglobeandmail.com/report-on-business/streetwise/transcanadas-cancelled-energy-east-project-has-canadian-utilities-looking-south/article36519489/?ref=http://www.theglobeandmail.com