TC Energy Corp. remains on track to complete the Coastal GasLink pipeline by the end of this year without another escalation in construction costs, the Calgary-based company said Friday.
The update is welcome one for TC Energy, which has been under significant scrutiny from investors and credit rating agencies for its heavy debt load as well as for the spiralling costs of the Coastal Gas Link project, a 670-km pipeline spanning northern B.C. that will carry natural gas to the LNG Canada facility in Kitimat.
The company was recently downgraded by both DBRS Morningstar and Moody’s Corp., in part due to the ballooning costs of the project, which has been dogged by unexpected construction issues and rising labour costs.
Over the course of the project, the pipeline’s construction has also attracted opposition and protests from environmentalists and Indigenous leaders. While many Indigenous groups along the project’s pathway support the pipeline, the hereditary Wet’suwet’en chiefs, whose territory the pipeline crosses, do not.
In February, TC Energy raised the estimated project price tag to $14.5 billion, up significantly from a previous estimate of $11.2 billion and more than double the initial cost estimate of $6.2 billion.
At the time, the company said it was still hoping to complete the pipeline by the end of 2023, but warned that if it takes longer and construction extends well into 2024, it could add an additional $1.2 billion to the project’s costs.
In the spring, the B.C. government issued a handful of stop-work orders on portions of the project due to sediment control and erosion problems.
But on Friday, TC Energy executive vice-president Bevin Wirzba said Coastal GasLink is managing the challenges and the project is more than 90 per cent finished. He said the company is maintaining its previously announced completion target and most recent cost estimate.
“We’ve had our share of really complex and risky parts of the project to accomplish, and I’m really proud that the team has delivered upon all of them,” Wirzba said, on a conference call with analysts to discuss the company’s second-quarter earnings.
“The remaining scope is not without execution risk, but we’ve been able to navigate these challenges week by week … We have all the plans in place to deliver and finish strong in the year-end.”
Completing Coastal GasLink on time is a crucial piece in what is TC Energy’s overall strategic plan to reduce its debtload and free up opportunities for growth.
On Thursday, the company announced its plans to split into two separate companies by spinning off its crude oil pipelines business.
Having two separate companies — one focused on crude oil transport, and one focused on natural gas and low-carbon forms of energy — will help TC Energy attract new investors and pursue a wider range of growth opportunities, CEO François Poirier said.
On Monday, TC Energy also announced it would sell off a 40 per cent stake in its Columbia Gas Transmission and Columbia Gulf Transmission systems to New York City-based Global Infrastructure Partners for $5.2 billion.
Poirier said he hopes to achieve an additional $3 billion in divestitures between now and the end of 2024, adding the funds will be used to pay down debt and clear the way for the growth of the two newly separated companies.
TC Energy’s reported a $250 million profit in the second quarter, down from $889 million a year earlier.
The company’s share price was down more than 5 per cent, at $44.84, as of midday trading Friday.
Amanda Stephenson, The Canadian Press