Kinder Morgan’s Trans Mountain pipeline project is facing fierce opposition from the BC government, environmentalists and some First Nations. Canadian Finance Minister Bill Morneau said the Canadian Pension Plan could be possible investors in the project. Trans Mountain photo.
Infrastructure Bank might be best way for Canada to invest in Trans Mountain: Energy industry source
On Thursday, Canadian Finance Minister Bill Morneau said funds from the Canadian Pension Plan could be used to invest in Kinder Morgan’s expansion of the Trans Mountain pipeline project.
“We have very sophisticated Canadian pension funds and institutional investors that have a high level of understanding of how you embark on infrastructure projects and a great deal of experience around the world in bringing those projects to completion,” Morneau told Reuters in an interview.
Mark Machin, chief executive of Canada Pension Plan Investment Board, told Reuters that the country’s biggest pension fund manager could consider investing in the project.
“If it’s an opportunity that has decent returns then we’ll look at it,” Machin said. He added the government’s recent pledge to protect investors against political risk was helpful.
But one skeptical energy source told Reuters “it doesn’t matter who the owner is; even if it’s the federal government, you’re not getting the grandma off the picket line in Burnaby”.
One Calgary based oil trader told Reuters he did not find Morneau’s comments reassuring.
“I don’t want the government involved in owning or funding a pipeline. Two governments from now, who knows what they would do with it? Just the wrong message to the industry, really.”
Morneau is addressing what the federal government may be prepared to do if Kinder Morgan walks away from the project. On Wednesday, he raised the possibility of foreign funding, saying “plenty of investors would be interested”.
However, industry sources who spoke with Reuters were unsure new investors would be interested in the controversial project and if Kinder Morgan would even allow a rival to take over the project.
US pipeline companies are probably more interested in working on projects in the United States and less likely to be willing to take on the fiercely opposed TMX. And allowing an overseas company to take over a Canadian energy sector project could be problematic.
Andrew Botterill, national oil and gas leader at Deloitte says investors see Canadian pipelines and other resource projects as subject to high political risk.
“That’s the type of risk that makes it very difficult for companies to come in and invest in Canada, when they’re looking globally for stability,” he told Reuters.
Morneau did not say if the Canadian government was actively seeking out investors for the project.
Another Reuters Canadian natural resources sector source says the Infrastructure Bank may be the best vehicle to invest in the pipeline. The newly created Infrastructure Bank is open for business, but has not yet facilitated financing for any project.
Both Morneau and the Infrastructure Bank did not comment on the possibility that the Infrastructure Bank could be involved.
In March, Kinder Morgan Canada said it was suspending all non-essential work on the Trans Mountain pipeline due to rising political, environmental and First Nations’ opposition. The company set a deadline of May 31 for Ottawa to provide assurances it will be able to proceed smoothly with the expansion.
According to Prime Minister Justin Trudeau, every year oil producers in Canada are losing $15 billion due to bottlenecks in the oil transportation system. Should Kinder Morgan walk away from the project, it could throw the Trudeau government into crisis.
Morneau told Reuters the federal government is intervening because of the “exceptional” circumstances of the project.
Kinder Morgan set May 31 as a deadline for Ottawa to provide assurances the company can move ahead with the TMX project that will more than double the capacity of the current pipeline that runs from Alberta to tidewater in BC.