The Parliamentary Budget Officer (PBO) today released an updated analysis of the Trans Mountain Pipeline system.
Since the PBO’s June 2022 report, the total project cost estimate for the Trans Mountain Expansion Project (TMEP) has increased by $12.8 billion and it began commercial operations on May 1, 2024.
The PBO’s latest report provides a current financial valuation of Trans Mountain Corporation using a discounted cash flow (DCF) method on a go forward basis starting in 2024.
The report presents two scenarios to illustrate how the value of the pipeline could be impacted by the future servicing and tolling framework. While most of the Trans Mountain Pipeline system’s capacity is earmarked toward committed contracts for the first 15 to 20 years of operation, once they expire, it is uncertain what kind of service and tolling framework will prevail.
Based on Trans Mountain Corporation’s most recent annual report, if the Trans Mountain Pipeline system were sold in 2024 at either of the present values calculated by the PBO, the government would record a loss on the sale.
“We estimate the Trans Mountain assets could be worth either $29.6 or $33.4 billion, depending on the examined scenarios, which are based on the type of service and tolling framework in place after the first 20 years of operation,” says Yves Giroux, PBO.
There is also uncertainty in some of the underlying assumptions on pipeline utilization, tolls and discount rate, all of which can impact the valuation. The report also includes an assessment of the valuation’s sensitivity to these key factors.
“Whether the government records a profit or loss on the sale of the Trans Mountain Pipeline network will ultimately be determined by the price a buyer is willing to pay,” adds Mr. Giroux. “The sale price will depend on factors such as the number of interested buyers, their costs to secure the necessary funds, the timing and method of sale, market conditions and if some groups are given priority in the sale.”