New report shows Canada taking massive financial risk in Trans Mountain Pipeline buyout
June 26, 2018
A new financial report details how the Canadian federal government’s buyout of the Trans Mountain Pipeline risks an increase in the federal budget deficit.
Unceded Coast Salish Territories (VANCOUVER, BC) — A new financial report issued today by global energy finance analysts at the Institute for Energy Economics & Financial Analysis details how the Canadian federal government’s buyout of the Trans Mountain Pipeline risks an increase in the federal budget deficit and how its pledge to cover cost overruns for any future buyer will almost certainly lead to increased costs for Canadian taxpayers. It further details how the federal government will likely be forced to resell the project for less than it paid, causing a serious loss for taxpayers.
In response, environmental organization Stand.earth issued the following statement:
“The findings of this report demonstrate that the Canadian federal government acted hastily and irresponsibly to buy this ill-fated pipeline. The purchase price was unjustifiably high and now the government will likely be pushed to sell at a significant loss — making this a terrible financial deal for Canadians.
Canadians should be outraged at the deal our government struck — a deal that gives Kinder Morgan a 637% profit and leaves taxpayers on the hook for unlimited increases in cost overruns. We are calling on the Trudeau government to release all of the financial documents it used to justify this purchase that it has not disclosed.” —Karen Mahon, Strategy Director, Stand.earth
Among the report’s findings:
The Canadian government should release the results of its independent background investigation of Kinder Morgan and the project that informed the purchase price and deal terms.
The government should release background information, term sheets and draft agreements with the Royal Bank of Canada on its covered credit agreement.
The government should disclose how it plans to finance the $1B resource reserve required under the share purchase agreement.
About the Institute for Energy Economics and Financial Analysis (IEEFA)
The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. Based in Cleveland, Ohio, the institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.
About the authors
Tom Sanzillo, Director of Finance at IEEFA, has 30 years of experience in public and private finance, including as a first deputy comptroller of New York State, where he held oversight over a $156 billion pension fund and $200 billion in municipal bond programs.
Kathy Hipple, Financial Analyst at IEEFA, is a founding partner of Noosphere Marketing and the finance professor at Bard’s MBA for Sustainability. She worked for 10 years with international institutional clients at Merrill Lynch and then served as CEO of Ambassador Media.