The Fly

TC Energy sees $14.5B in costs to complete Coastal GasLink Project

TC Energy Corporation announced updated cost estimates for the Coastal GasLink Project. The Project continues to face material cost pressures that include challenging conditions in the Western Canadian labour market; shortages of skilled labour; impacts of contractor underperformance and disputes; as well as other unexpected events like drought conditions and erosion and sediment control challenges. A comprehensive cost and schedule risk analysis was conducted to assess current market conditions and potential risks and uncertainties facing the remaining project scope. As a result of the CSRA, TC Energy’s estimate of the costs to complete the Project has increased to approximately $14.5 billion. This estimate excludes potential cost recoveries and incorporates contingencies for certain factors that may be outside of the Company’s control such as labour conditions; contractor performance; and weather-related events. TC Energy expects to fund the incremental revised project costs and is actively pursuing cost mitigants and recoveries that may partially offset a portion of these costs, some of which may not be conclusively determined until after the Project is in service. Coastal GasLink is working closely with its prime contractors on implementing productivity improvement strategies targeting mechanical completion by year-end 2023, with commissioning and clean-up work continuing into 2024 and 2025. The CSRA review also considered the potential impact of an extension of construction well into 2024. In that event, costs would increase further by up to $1.2 billion. Due to the increase in the expected cost of the Project and the additional funding required, TC Energy will recognize an impairment to its equity investment in Coastal GasLink LP in its fourth quarter 2022 financial results. The Coastal GasLink Project continues to make significant progress having reached approximately 83 per cent overall completion. The entire route has been cleared, grading is more than 94 per cent complete and over 485 km of the approximately 670 km pipeline has been backfilled with restoration activities underway in many areas. The Wilde Lake Compressor Facility has commenced commissioning work with the introduction of natural gas expected in March, representing another significant milestone in reaching our targeted mechanical completion later this year. Once complete, Coastal GasLink will be Canada’s first direct link for LNG deliveries that will further support displacing 60 to 90 million tonnes of CO2 emissions annually, an important step along the energy transition. TC Energy’s overall 2023 capital expenditure outlook has been revised to approximately $11.5 to $12.0 billion, reflecting the deferral of certain project spending, expected cost-saving initiatives and incremental funding requirements associated with Coastal GasLink.

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