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TransCanada (TRP) to Proceed With $6 Billion PRGT Project

Zacks Equity Research

After a careful and comprehensive review of its Prince Rupert Gas Transmission Project (PRGT), TransCanada Corporation TRP has decided to advance with the $6-billion natural gas pipeline expansion plan.  After a few setbacks, TransCanada finally received approval from the B.C. Environmental Assessment Office for the pipeline’s expansion on Dec 20, 2017.

TransCanada has been permitted to construct two additional camps along with a standby compressor unit at each of its eight proposed compressor stations.The newly approved camps will add another 53 hectares to the project’s land area. Further, it will lead to the creation of additional 200 jobs.

The 559-mile pipeline was expected to deliver natural gas from Hudson’s Hope to the Pacific NorthWest LNG Facility — a natural gas liquefaction and export facility — near Prince Rupert. Post the cancellation of the $36-billion Pacific Northwest LNG (PNW LNG) project, despite being green-lit by the Trudeau government, TransCanada had been conducting detailed evaluation of the PRGT project to ascertain its viability. Though TransCanada has decided to continue with the PRGT project, it has not clearly stated what alternatives it has thought of regarding the natural gas pipeline.

Malaysia’s integrated-energy player Petronas scrapped the PNW LNG project in July 2015 as the low commodity prices had made the economics of the project (announced in 2013) less profitable. Unfavorable market conditions have led to the cancellation of few other LNG projects in the Prince Rupert area.China's CNOOC Limited CEO had pulled the plug on the $28-billion Aurora LNG project in September 2017 after four years of feasibility study. Further, Royal Dutch Shell plc RDS.A also terminated its Prince Rupert LNG project, which it inherited from the BG Group acquisition. However, ExxonMobil Corporation hasn’t scrapped its $25-billion project in the area on the hopes of improving economic conditions. The project, which is currently in the preliminary stage, has been progressing at a slow pace and will continue that way throughout 2018.

Apart from the approval for the PRGT project, TransCanada has also been granted necessary approvals for all the major Appalachian growth projects — including Leach XPress, Mountaineer Xpress and Gulf Xpress — associated with the acquisition of Columbia Pipeline Group.

Headquartered in Alberta, TransCanada mainly focuses on natural gas transmission and power services. Its pipeline transports the majority of Western Canada's natural gas to growing markets in Canada and the United States. TransCanada reaffirmed the forecasts of its profits and earnings growth on the Investor Day observed on Nov 28.

The company expects EBITDA to grow at an average annual rate of about 10% between 2015 and 2020. Further, the Calgary-based company has raised the upper end of its dividend forecast from 8% to 10%, and extended that outlook through 2021.

TransCanada currently carries a Zacks Rank #3 (Hold).

TransCanada Corporation Price


TransCanada Corporation Price | TransCanada Corporation Quote


A better-ranked player in the same industry is Ultrapar Participacoes S.A.UGP, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ultrapar is expected to deliver year-over-year growth of 17.93% in its earnings in 2018.

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