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TransCanada Business Model International Pipeline Conference November 12, 2009.

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Presentation on theme: "TransCanada Business Model International Pipeline Conference November 12, 2009."— Presentation transcript:

1 TransCanada Business Model International Pipeline Conference November 12, 2009

2 2 Agenda About TransCanada TransCanadas North America Business Model Guadalajara Pipeline Project

3 3 Natural Gas Pipelines 59,000 km (36,500 mi) of wholly owned natural gas pipeline Interests in an additional 7,800 km (4,800 mi) of natural gas pipeline 250 Bcf of regulated natural gas storage capacity Unparalleled connections from traditional and emerging basins to growing markets Average daily volume of approximately 15 Bcf

4 4 Power Generation 19 plants, 10,900 megawatts Diversified portfolio consists primarily of: Long-term power purchase arrangements with stable, predictable earnings Low-cost, base-load generation Key power infrastructure assets in attractive markets

5 5 TransCanadas History in Mexico CD Juarez Nogales Mexico City M é rida Toluca Tuxpan Naco L á zaro C á rdenas Guadalajara Altamira Mayakan Pipeline El Bajío Pipeline Manzanillo Guaymas Chihuahua Valladolid Reynosa Monterrey Tijuana Acapulco Topolobampo Mazatl á n Mexicali Cancun Pemex Pipeline Private Open Access Pipeline Tamazunchale Pipeline Proposed LNG Terminal Legend 1998, built the first privately owned pipeline in Mexico, the Energia Mayakan pipeline 1999, built the El Bajio pipeline in Bajio region 2006, built the Tamazunchale pipeline in eastern Mexico

6 TransCanadas North American Business Model

7 7 The Natural Gas Transportation System Source: AGA

8 8 Natural Gas Value Chain – Considerations of Participants ProducersMarketersPipelinesLocal Utility Consumers Independent, Major Shell, BP, Exxon, ConocoPhilips Gas well gas Oil well gas No Product reserves, Generate cash Affiliated, Independent JP Morgan, Encana Supply aggregation, Logistics management No Margin on gas, Margin on services Interstate, Intrastate TransCanada Transportation, Storage Yes Fee for service, Return on capital Investor owned, Municipal Pacific Gas & Electric, Oneok Supply aggregation, Transportation Yes Fee for service, Return on capital Type Example Price Regulated Contribution Objectives Residential, Industrial, Commercial Homes, stores, plants Market for gas, Market for services No Secure supply, Minimum cost

9 9 Natural Gas Value Chain – Activities of Participants Source: AGA ProducersMarketersPipelinesLocal Utility Consumers Generate cash flow Ensure access to market Obtain best price Match supplies to market Avoid imbalance penalties Cost vs benefit of selling further down the channel Seasonal arbitrage Commodity price risk (hedging) Achieve margin (spread) Avoid imbalance penalties Manage price risks Seasonal arbitrage Geographic arbitrage Profit opportunities in managing risks for others Generate transport/storage revenue Extract value for service provided (swing) Impose discipline on shippers (receipt vs delivery imbalances) Account for ownership of gas in pipeline custody Optimize system operations Commodity sales Service obligation Supply security/cost Transport revenue Pipeline/storage capacity access Pipeline imbalances Imbalances on local distribution company Commodity price risk Type of service (sale or transport, firm or interruptible) Supply security Commodity price Access to alternatives Hedging Imbalances

10 10 Broad Trends – Gas Demand Demand led by Electric Generation sector Bcf/d HistoryForecast Residential & Commercial Other Industrial Electric Generation

11 11 Broad Trends – Gas Supply Domestic North America gas supply to remain strong Gulf of Mexico + U.S. Other WCSB U.S. Rockies Eastern Canada Bcf/d North LNG Mexico Demand HistoryForecast U.S. Shale BC Unconv.

12 12 Building for Tomorrow: Developing a Portfolio of Future Growth Opportunities Our Approach: Maintain complete analysis of market conditions Capitalize on the need for new and more efficient energy infrastructure in North America Focus on regions and businesses where we can build genuine competitive advantage Carefully select opportunities with long-term upside Maintain long list of project opportunities Pursue projects when conditions are right Negotiate contract structure acceptable to our risk tolerance

13 13 Building for Tomorrow: Risk / Return Trade off Required Return Capital Structure External Financing Financial Market situation Corporate Strength Project Risks Construction cost Contract Term Counterparty Exposure Regulatory/Political

14 14 Track Record of Investing in Attractive Low-Risk Assets $19 Billion* (1999 – 2008) * Includes acquisitions and completed greenfield projects Power – Long-term PPAs / Capacity Payments $4.7 (45%) (14%) (25%) (11%) (5%) Power – Low-cost Base-load $2.1 U.S. Regulated Pipelines $8.7 Canadian Regulated Pipelines $2.6 Other $0.9

15 15 Current Projects * TransCanada share in CAD dollars. Assumes a US$ to CAD$ exchange rate of 1.1. Approximately $3.5 billion was spent by the end of 2008 on multi-year projects. Project Pipelines Keystone Canadian Regulated U.S. Regulated Bison Guadalajara Energy Bruce Power Units 1 & 2 (50%) Halton Hills Kibby Wind Cartier Wind Phases 4 – 6 (62%) Coolidge Capital Cost Estimate* ($Billions) 13.2 2.5 0.7 0.6 0.3 17.3 1.7 0.7 0.4 0.6 3.8 21.1 In-Service Date 2010 – 2012 2009 – 2011 2010 – 2011 2011 2010 2009 – 2010 2010 – 2012 2011 Revenue Stream Contracted and Spot Cost of service Contracted and Spot Contracted Fully contracted Contracted and Spot Fully contracted

16 16 Keystone Oil Pipeline Approx. US$12 billion Keystone 3,456 km Gulf Coast Expansion 3,200 km Capacity 1,090,000 Bbl/d 910,000 Bbl/d committed for an average term of 18 years (83% of total capacity) Strong counterparties operating in upstream and downstream segments of the oil business

17 17 Alberta System North Central Corridor 300 km of 42-inch pipe 26 MW of compression Approximately $925 million In-service 2010 Groundbirch Pipeline Project Commitments for 1.1 Bcf/d by 2014 77 km 36-inch pipe Approximately $250 million Expected in-service Q4 2010 Horn River Pipeline Project Commitments for 378 MMcf/d in 2013 155 km combination of NPS 30 and existing pipe Approximately $340 million Expected in-service 2012

18 18 297-mile natural gas pipeline 407 MMcf/d contracted Initial capacity 400 MMcf/d to 500 MMcf/d Future expansion up to 1.0 Bcf/d and extension potential Approximately $US610 million Connects growing Rockies supply to Northern Border Pipeline with access to Chicago and area markets Expected in-service date late 2010 Bison Pipeline

19 19 Guadalajara Pipeline 310 km, 30-inch diameter Expected in-service Q2 2011 Initial capacity 500 MMcf/d Future expansion up to 900 MMcf/d Approximately US$320 million 25-year ship or pay contract with CFE Tamazunchale Pipeline 130 km, 36-inch diameter Initial capacity 170 MMcf/day Future expansion up to 430 MMcf/day In-service late 2006 26-year ship or pay contract with CFE Mexico Assets

20 TransCanadas Guadalajara Pipeline

21 21 Guadalajara Pipeline Awarded in May, 2009 Approximately 300 km in length 30 diameter pipeline Will deliver up to: 500 MMcf/d of natural gas to CFEs Manzanillo power plant; 320 MMcf/d of natural gas to the Pemex system near Guadalajara In-service: March 2011

22 22 Project Summary The pipeline project is part of a larger energy infrastructure program undertaken by CFE LNG Supply acquisition (2007) (supplies from Peru) LNG Regasification (2008) (owned by Korea Gas and Mitsui) Refurbishment of Manzanillo Power plant to natural gas (CFE) Gas for new power plants in Guadalajara and for power generation in central Mexico (through the Pemex pipeline) Pipeline linking LNG terminal to power plant and Pemex pipeline system The overall program will Serve Mexicos growing electric demand Diversify Mexicos natural gas supply Improve efficiency of CFEs power generation Ensure natural gas supply in Central and Western Mexico

23 23 CFE Multi-Phase Program LNG Terminal To guarantee the future supply of natural gas to thermoelectric power plants through means of purchasing liquefied natural gas (LNG). This LNG will be stored and regasified in a newly constructed Storage and Regasification Terminal in the state of Colima.

24 24 CFE Multi-Phase Program Manzanillo Power Plant Upgrade Upgrade and improve the thermoelectric power plant in Manzanillo

25 25 CFE Multi-Phase Program Guadalajara Pipeline Transport natural gas from the Storage and Regasification Terminal through the construction of the Guadalajara Pipeline This gas pipeline links natural gas between the states of Colima and Jalisco, and also increases the security of natural gas supply to Central and Western Mexico

26 26 Project Timeline – Key Dates LNG Gas Supply ContractSeptember 28, 2007 LNG Regasification Contract AwardedMarch 7, 2008 Guadalajara Pipeline CFE ITB IssuedOctober 14, 2008 Bid SubmissionApril 14, 2009 Contract AwardMay 4, 2009 Contract ExecutionMay 20, 2009 Construction CommencementQ1, 2010 Target CompletedQ1, 2011 Commercial In-serviceMarch 30, 2011 22 months from date of contract to commercial operations

27 27 Guadalajara Pipeline Construction Challenges Congested Rights of Way Fibre optics Overhead power lines Highways Urban structures

28 28 Guadalajara Pipeline Construction Challenges Difficult construction areas with limited alternatives to reroute

29 29 Guadalajara Pipeline Construction Challenges Difficult crossings of canyons and gorges

30 30 Guadalajara Pipeline Construction Challenges Anticipating future highway expansion plans

31 31 Guadalajara Pipeline Construction Challenges Working in and around environmental protected areas

32 32 Guadalajara Pipeline Construction Challenges Active nearby volcanic and seismic activity

33 33 TransCanadas Formula for Success Long History of Construction Experienced Project Teams Extensive database of past projects including costs, risk variables Well developed project management tools and expertise Strong supplier and contractor base Disciplined Approach to Business Market Intelligence Risk Analysis Comprehensive Due Diligence Financial Structuring

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