Good day, ladies and gentlemen. Welcome to the TransCanada Corporation 2011 fourth quarter results conference call. I would now like to turn the meeting over to Mr. David Moneta, Vice President of Investor Relations. Please go ahead, Mr. Moneta.
Great. Thanks very much, and good afternoon, everyone. I'd like to welcome you to TransCanada's 2011 fourth quarter conference call. With me today are Russ Girling, President and Chief Executive Officer, Don Marchand, Executive Vice President and Chief Financial Officer, Alex Pourbaix, President of our Energy and Oil Pipelines, Greg Lohnes, President, Natural Gas Pipelines, and Glenn Menuz, Vice President and Controller. Russ and Don will begin today with some opening comments on our financial results and certain other company developments. Please note that a slide presentation will accompany their remarks. A copy of the presentation is available on our website at transcanada.com, and it can be found in the investor section under the heading Events and Presentations. Following their prepared remarks, we will turn the call over to the conference coordinator for your questions.
During the question and answer period, we'll take questions from the investment community first, followed by the media. In order to provide everyone with an equal opportunity to participate, we ask that you limit yourself to two questions. If you have additional questions, please re-enter the queue. Also, we ask that you focus your questions on our industry, our corporate strategy, recent developments, and key elements of our financial performance. If you have detailed questions relating to some of our smaller operations or your detailed financial models, Terry Hook and I would be pleased to discuss them with you following the call. Before Russ begins, I'd like to remind you that our remarks today will include forward-looking statements that are subject to important risks and uncertainties.
For more information on these risks and uncertainties, please see the reports filed by TransCanada with Canadian securities regulators and with the U.S. Securities and Exchange Commission. Finally, I'd also like to point out that during this presentation, we'll refer to measures such as comparable earnings, comparable earnings per share, earnings before interest, taxes, depreciation, and amortization, or EBITDA, comparable EBITDA, and funds generated from operations. These and certain other comparable measures do not have any standardized meaning under GAAP and are therefore considered to be non-GAAP measures. As a result, they may not be comparable to similar measures presented by other entities. These measures are used to provide you with additional information on TransCanada's operating performance, liquidity, and its ability to generate funds to finance its operations. With that, I'll now turn the call over to Russ.
Thank you, David, and good afternoon, everyone, and thank you very much for joining us. I'd like to start today with a couple of financial highlights before I get into a strategic update. Don will, of course, provide you a more detailed financial overview after my comments. To start, 2011 was a very strong year for TransCanada. Comparable earnings were at CAD 1.6 billion, or CAD 2.23 a share, a 13% increase from 2010. 2011 was a year where we commissioned a large number of critical infrastructure projects. CAD 10 billion of assets have gone into service in our company since the spring of 2010, largely on time and on budget. These assets are now delivering solid earnings and cash flow for our shareholders.
In 2011, the assets that became operational included the Cushing extension of the Keystone Pipeline, the Bison and Guadalajara natural gas pipelines, extensions and expansions of the Alberta System, the Coolidge Generating Station in Arizona, and two additional phases of our Cartier Wind project. TransCanada is now positioned to complete another $12 billion of projects that are expected to come into service between now and 2015, including the Bruce Power restart program in Ontario, additional extensions and expansions of the Alberta System, the final phase of the Cartier Wind power project in Quebec, the nine solar projects, and the Keystone XL expansion, along with the Cushing and Bakken Marketlink projects and the Houston Lateral.
Again, all of these projects are either regulated or underpinned by long-term contracts, which gives us the confidence that they will also generate stable and sustained earnings and cash flow growth for our shareholders for decades to come. Turning to our fourth quarter results, comparable earnings were CAD 366 million, or CAD 0.52 per share. Comparable EBITDA was CAD 1.2 billion, and funds generated from operations were CAD 881 million, an increase of 8% over 2010. Today, our board of directors declared a quarterly dividend of CAD 0.44 per common share for the quarter ending March 31st, 2012. On an annual basis, this translates into an eight-cent increase from CAD 1.68 to CAD 2.76 per share and represents a 5% increase over the previous amount. This is the 12th consecutive year that TransCanada's board has raised its dividend. Now moving to some of my strategic comments.
I'll update you on the projects we've progressed since I spoke to you last quarter. I'll start with Keystone XL. The U.S. State Department, as you know, suspended the finalization of the review of Keystone XL in November 2011, stating that alternate routes needed to be defined that avoided the Nebraska Sandhills. The Department of State has said this work could be completed by the first quarter of 2013. TransCanada will continue to work collaboratively with the state of Nebraska, and we are looking at options right now to define a new route through that state. As you're also aware, the State Department denied the Presidential Permit for Keystone XL on January 18th.
Facing a 60-day legislative-imposed decision deadline, the department said it did not have sufficient time to obtain the information necessary to assess whether the project in its current state was in the national interest of the United States. The decision was not made on the merits of our application, and the State Department has indicated it is open for us to reapply. Well, we're obviously disappointed with that decision. TransCanada's commitment to the project remains very strong, and the company will reapply for the Presidential Permit. We expect the Final Environmental Impact Statement, which was issued on August 26th, 2011, which was based on 10,000 pages of data and analysis compiled since 2008, would be used in any future regulatory review.
The review of Keystone XL was by far the most exhaustive and detailed analysis ever conducted of a cross-border crude oil pipeline in the United States, a process that the Inspector General confirmed recently was conducted in accordance with the laws and longstanding regulatory practices in the United States. We remain focused on the necessary work for this pipeline to begin shipping oil in late 2014 or early 2015. Keystone XL is in the national interest of the United States, as it will allow Americans to move closer to achieving North American energy security, and it will create thousands of much-needed jobs. Early in January, we released a detailed breakdown of the 20,000 jobs Keystone XL would create during construction. Every welder, every electrician, every pipefitter, et cetera. However, the primary benefit of this project is the role that Keystone will play in increasing energy security in the United States.
The U.S. consumes some 50 million barrels a day of oil, and it imports 10-11 million barrels a day of that oil. By all forecasts, that importation of oil will continue for decades to come. Let me be clear, Keystone XL is not a pipeline built to export crude oil from the United States. It's meant to fill that need. It will directly displace heavy crude oil that is currently being imported from Venezuela, Mexico, and the Middle East, which is currently being refined in the Gulf Coast. It will replace that supply with a secure, stable supply of U.S. and Canadian crude oil. Contracts U.S. refiners have in place with the Venezuelans and the Mexicans for crude oils are set to expire in the coming years.
There will be a gap in the supply that must be filled, and Keystone XL will help fill that gap with Canadian and U.S. oil. Another point that's often overlooked is the fact that Keystone XL will help meet the objective Americans have of wanting their own oil developed, produced, and consumed in the United States. We have provided 25% of Keystone XL's capacity for the delivery of U.S. oil to U.S. refineries. We've been successful in signing long-term contracts to bring oil from the Williston Basin in Montana and the Dakotas, and crude oil from Cushing, Oklahoma, onto our system for delivery to U.S. refineries. In December 2011, we signed contracts that would add additional supply to the Cushing MarketLink project, which would transport crude oil from Cushing, Oklahoma, to Port Arthur and Houston, Texas.
The $50 million Cushing MarketLink project would use a portion of the Keystone XL facilities, including the Houston Lateral. Also in December, we completed a successful open season, where we received contractual support to transport crude oil from Hardisty, Alberta, to Houston, Texas, through our 80 km Houston Lateral project. This $600 million pipeline extension and expansion would increase the capacity of Keystone XL to 830,000 barrels a day. The Houston Lateral would more than double the U.S. Gulf Coast refining capacity directly accessible from the Keystone Pipeline system to over 4 million barrels a day. At this point, the capacity of the entire Keystone system has largely been reserved under long-term contracts, I think a clear sign that the marketplace needs and wants this pipeline in place as soon as possible. Moving now to our natural gas pipelines.
As I told you last quarter, TransCanada filed an application on September 1st with the National Energy Board that addresses tolls for the Canadian Mainline for 2012 and 2013. TransCanada is presently charging approved interim tolls at the level of the 2011 final tolls. Components of this application relate to the restructuring of services and tolling on the Mainline in response to the significant changes that have occurred over the last few years in natural gas supply, natural gas demand, and transportation in North America. We believe approval and implementation of the proposals in the application will enhance the long-term economic viability of the Mainline and the Western Canadian Sedimentary Basin as a whole. What our application proposes is significantly reduced long-haul tolls for 2012 and 2013 compared to the existing levels. The National Energy Board will hold a hearing on the application beginning in June of this year.
It's the beginning of June, and it's scheduled to run through August and September, and we'd expect a decision by late 2012 or early 2013. TransCanada also refiled an application in November 2011 that included supplemental information for the approval to build the CAD 130 million new pipeline on the Canadian Mainline that would transport about 350 million cubic feet a day of Marcellus Shale gas from the U.S. to eastern markets in both Canada and the United States. The Mainline remains a very important piece of North American gas infrastructure. We saw a very cold winter in 2010-11, where volumes on the Mainline peaked at around 5.5 billion cubic feet a day, and the eastern end of our pipeline was pretty much full every day during that period of time.
This winter so far has been one of the warmest North America's seen in about the last 100 years. Gas storage is full, and gas transportation is down on all pipelines in North America, including the Mainline. Volumes are at the low end of the scale, as I said, right now. At 3 BCF a day, it's still the single largest transportation system on the continent. The Alberta Natural Gas Delivery System continues to grow through new connections of supply, primarily in Horn River and the Montney Shale plays in British Columbia, as well as the Deep Basin in Alberta.
TransCanada has filed applications with the National Energy Board to expand its system to accommodate requests from companies to get their gas to market throughout the northwest and northeast portions of the Western Canadian Sedimentary Basin. We've signed contracts to transport 3.4 billion cubic feet a day of natural gas from Western Alberta, Northeast BC by 2014, and we're working on dealing with further requests to transport additional volumes on the Alberta system from those northwest portions of the WCSB. In 2011, the National Energy Board approved CAD 910 million worth of natural gas pipeline projects in this region. Further projects with a value of about CAD 800 million are awaiting an NEB decision. In addition, we continue to pursue pipeline infrastructure to connect the Western Canadian Sedimentary Basin to markets that support further development of Alberta oil sands.
We continue to look at opportunities that would deliver LNG for export on the West Coast, and we continue to look at the potential of a $500 million-$600 million investment in an extension of our Tamazunchale pipeline in Mexico. The Alaska Pipeline Project team continues to work with our shippers to resolve the conditional bids received as part of the project's open season. The team is also working towards a FERC application with a deadline of October 2012 for the Alberta option that would transport gas from Alaska to Alberta and onto other continental markets. TransCanada has also started discussions with Alaska North Slope producers on one of two options that were first presented in 2007. That is the LNG option that would see a pipeline built from Prudhoe Bay to LNG facilities in Valdez, Alaska.
On the energy side of our business, the refurbishment of units one and two at Bruce Power are continuing as we had hoped. The two units are now being prepared to supply power to Ontario's electrical grid. Unit two is expected to come operational by the end of the first quarter, and unit one is on target to be producing power in the third quarter of 2012. Our share of total capital costs is still expected to be CAD 2.4 billion. Once refurbished and complete, Bruce Power will be the world's largest nuclear facility, providing more than 6,200 MW or about 25% of Ontario's power. This emissions-free power is backed by long-term power purchase agreements with the Ontario Power Authority. In late December of 2011, our company agreed to purchase nine Ontario solar projects with a combined capacity of 86 MW for approximately CAD 470 million.
All nine projects have 20-year power purchase agreements with the Ontario Power Authority. Each of the nine projects will be developed and constructed by Canadian Solar Solutions utilizing photovoltaic panels. TransCanada will purchase each project after it begins commercial operations, subject to certain milestones being met. We expect these solar projects to begin producing power between late 2012 and mid-2013. These solar projects would allow TransCanada to expand and add to our diverse generating portfolio, where a third of the power we own or have interest in comes from alternative or renewable energy sources. To conclude, fourth quarter results were solid and overall, 2011 was a very good year for our company. TransCanada continued to advance many of its strategic initiatives and brought several critical energy infrastructure projects into operation.
We expanded our Keystone Pipeline system, constructed new infrastructure to deliver natural gas right across the continent, continued to build low-emission natural gas-fired power plants, and brought Canada's largest wind farm closer to completion. It is clear that our strategy is working, and we are seeing very tangible results of our discipline and focus. Our company delivered a record CAD 4.8 billion of EBITDA in 2011 versus the CAD 3.9 billion in 2010. This represents year-over-year increases of about CAD 865 million. As we move into 2012, low gas prices will impact the commodity-exposed parts of our business and throughputs on our pipeline systems. As we've said many times, the majority of our revenues are derived from regulated assets and facilities backed by long-term contracts.
We look forward to completing the Bruce Nuclear restart, the final phase of the Cartier Wind project, construction of the nine solar projects in Ontario, continued expansions and expansion of the Alberta System, and moving forward on our Keystone XL project. Today, we have over $50 billion of energy infrastructure projects being evaluated by our very capable business development team. They are focused on meeting the needs to move shale and conventional gas within the continent and from frontier regions, attaching crude oil production to key refining centers, and developing new power generation as the North American market revitalizes its aging infrastructure and evolves to a less carbon-intensive mix. These opportunities mesh extremely well with TransCanada's strategy, our growth aspirations, our existing presence, and deep organizational capabilities.
While we don't expect to capture all of those opportunities, I am very confident these projects, combined with appropriate acquisitions, will provide us with the opportunity to reinvest our substantial discretionary free cash flow. As we bring on new projects and gas and power prices recover, we expect to continue to grow earnings, cash flow, and dividends, and build long-term enduring value for our shareholders. With that, I'll turn the call back over to Don Marchand to provide you some additional details on our fourth quarter financial results. Don?
Thanks, Russ, and good afternoon, everyone. As you know, earlier today, we released our fourth quarter results and announced a 5% increase in the common share dividend. This is the 12th consecutive year the board of directors has raised the dividend. I'd like to start my remarks today by highlighting the following. TransCanada had another solid quarter driven by good performance from both our new and existing set of high-quality assets. The CAD 10 billion of new assets now in service are contributing highly predictable earnings and cash flow underpinned by long-term contracts or regulated cost of service business models. For the full year 2011, comparable earnings per share increased 13% and funds generated from operations increased 10%. The company continues to advance its large capital program and seek out new investment opportunities in all segments of its core businesses and geographies.
These projects will further contribute to sustainable earnings, cash flow, and dividend growth in the future. Last, we are well-positioned to fund the remainder of our current capital program, as well as pursue new initiatives. I'd now like to take the next few minutes to expand on the details for the fourth quarter. Comparable earnings in the fourth quarter are CAD 366 million, or CAD 0.52 per share, decreased by CAD 18 million, or CAD 0.03 per share compared to the same period in 2010. Incremental earnings from recently commissioned assets, combined with higher power prices in Alberta, were more than offset by lower contributions from Bruce Power related to planned plant outages, higher interest expense as a result of lower capitalized interest, reduced earnings from U.S. Power, and net realized losses in 2011 compared to gains in 2010 from foreign exchange derivatives.
As mentioned in our last conference call, and at our Investor Days in November, Bruce A commenced a six-month outage on November 6, known as the Extended West Shift Plus program, that will extend the life of Unit 3. Bruce B Unit 5 completed a planned seven-week outage in the fourth quarter. Both outages combined to reduce comparable earnings by about CAD 0.05 per share in the quarter. New assets contributing significant incremental earnings included Keystone Phases 1 and 2, Bison, Guadalajara, and Alberta System extensions and expansions, and the Coolidge Generating Station. I'll now briefly review the business segment results at the EBITDA level. Natural Gas Pipelines reported another solid quarter. The business segment generated comparable EBITDA of CAD 739 million in fourth quarter 2011 compared to CAD 737 million last year. Results benefited from incremental EBITDA from Bison and Guadalajara, which were placed in service earlier this year.
This was partially offset by lower incentive earnings from the Canadian Mainline and the Alberta System and lower revenues from certain U.S. pipelines. With respect to the Canadian Mainline tolls application, until an NEB decision is received, earnings from the Canadian Mainline in 2012 will be lower than 2011, as results will reflect the last approved ROE of 8.08% on deemed common equity of 40% on a somewhat lower rate base, and will exclude incentive earnings that have enhanced results in recent years. Using the last approved ROE in deemed common equity is consistent with past accounting practices for our Canadian natural gas pipelines awaiting regulatory decisions. Turning to Oil Pipelines, Keystone generated CAD 179 million of EBITDA in the fourth quarter. This represents its best quarter since the company commenced recording earnings in February of 2011.
Throughput volume on the system continued to rise in the period, averaging approximately 490,000 barrels per day, including about 20,000 barrels per day of spot volumes. During its 11 months of operations, Keystone has generated significant new EBITDA for the company totaling $587 million. In 2012, which will be its first full year of operations, Keystone is expected to generate approximately $700 million of EBITDA. In Energy, comparable EBITDA was $295 million in the fourth quarter, compared to $301 million for the same period last year. Slight year-over-year decrease was a result of a combination of factors. Higher realized power prices in Alberta and incremental earnings from the startup of Coolidge in Arizona were positive factors, although these were offset by a reduction in Bruce A and B generation volumes and higher operating costs resulting from planned plant outages mentioned at the outset of my comments.
Lower realized prices at Bruce B as legacy contracts continue to roll off and lower contributions from US Power and Natural Gas Storage. As outlined previously, TransCanada continues to fully record revenues and costs under the Sundance A power purchase arrangement and in the fourth quarter recognized CAD 57 million in comparable EBITDA, bringing the total to CAD 156 million for 2011. TransCanada has disputed TransAlta's force majeure and economic destruction claims under the binding dispute resolution process provided in the Sundance A PPA, and both matters will be heard through a single binding arbitration process. The arbitration panel has scheduled a hearing for April 2012, and assuming the hearing concludes within the time allotted, TransCanada expects to receive a decision in mid-2012. The outcome of any arbitration process is not certain, however, TransCanada believes the matter will be resolved in its favor.
Turning to unregulated Natural Gas Storage, revenues were lower in the fourth quarter as storage spreads narrowed. While returns on capital remain very good, in 2012, we expect EBITDA from this business to be lower than the past couple of years in light of the current gas price environment. Finally, in Energy, the Bruce A Unit 3 six-month West Shift Plus planned outage will continue throughout the first quarter of 2012. This will continue to impact our earnings in the near term. It is critical to the life extension strategy for the units at Bruce Power and an excellent example of maximizing the full life value of our existing assets. Now turning to the other income statement items on slide 21. Comparable interest expense in the fourth quarter was CAD 251 million compared to CAD 173 million last year. The CAD 78 million increase reflects lower capitalized interest related primarily to Keystone.
In the fourth quarter, CAD 71 million of interest was capitalized to assets under construction, compared to CAD 150 million for the same period in 2010. As mentioned in previous quarters, capitalized interest has declined as the projects have been placed into service, somewhat offsetting the impact of rising EBITDA associated with these new assets. Comparable interest income and other for fourth quarter 2011 decreased by CAD 53 million to CAD 8 million. The decrease reflects realized losses in 2011 versus gains in 2010 on derivatives used to manage the company's net exposure to foreign exchange fluctuations on U.S. dollar income. In combination with U.S. dollar-denominated interest expense, this hedging program largely counterbalances the currency impact of translating U.S. dollar pipeline and energy income recorded in the business segments.
Comparable income taxes of CAD 123 million in fourth quarter 2011 were CAD 20 million higher than fourth quarter 2010, primarily due to positive tax adjustments, which reduced taxes in the prior year, and higher flow-through income taxes on the Canadian Mainline in 2011. Moving on to cash flow and capital expenditures on slide 22. Cash flow was again robust in the fourth quarter and continues to grow primarily from incremental earnings from our new assets. Funds generated from operations increased by CAD 69 million to CAD 881 million in the period. For the full year 2011, the company generated CAD 3.7 billion of funds from operations, an increase of CAD 330 million or 10% over 2010. Capital expenditures were CAD 1.1 billion in the fourth quarter 2011, principally related to the expansion of the Alberta System, advancing the Keystone XL project, and the Bruce Power restart program.
Looking to 2012, including capitalized interest, our expectation is we will spend approximately CAD 2.7 billion on capital projects, primarily related to Alberta System extensions and expansions, Keystone, Bruce Power, Canadian Solar, and maintenance capital. We expect the Canadian Solar deal to close in stages between late 2012 and mid-2013 as each of the nine solar farms are completed and placed in service. Now, looking at slide 23. Our liquidity position and access to capital markets remain strong. At the end of the year, our consolidated balance sheet consisted of 43% common equity, 4% preferred shares, 2% junior subordinated notes, and 51% debt net of cash. At December 31, we had CAD 765 million of cash on hand, along with CAD 4.3 billion of committed and undrawn revolving bank lines. In December, we established a new U.S. domicile commercial paper program, fully backstopped by committed credit lines.
This will further diversify the company's sources of funding, and along with our two other well-supported commercial paper programs in Canada, provides a flexible and very attractive source of short-term capital. In November, we closed a medium-term note issue in Canada totaling CAD 750 million, CAD 500 million for a term of 10 years at 3.65% and CAD 250 million of 30-year money at 4.55%. The proceeds were used to fund the Alberta System and Canadian Mainline rate bases. Next, just a quick reminder of TransCanada's adoption of U.S. GAAP, effective January 1, 2012. The principal difference between Canadian GAAP and U.S. GAAP is the accounting for joint venture investments, which in TransCanada's case is predominantly Bruce Power, as well as Northern Border, TQM and Iroquois.
Rather than accounting for these investments using proportionate consolidation, whereby we pick up our share of assets, liabilities, revenues, expenses, and cash flows, these investments will be recorded using the equity method of accounting, which essentially means various line items will be collapsed to one line on each of the balance sheet and income statement. There will be no impact to net income in moving to U.S. GAAP. On the balance sheet, both assets and liabilities will drop by about $1 billion, as joint venture debt and other liabilities are moved on to the asset side in a new line item called equity investments. On the income statement, a new line will be created for these equity investments above the EBITDA line.
As a result, reported EBITDA is expected to drop by approximately CAD 300 million, as this will effectively move about CAD 200 million of depreciation and CAD 100 million of interest costs above the line into EBITDA, which is essentially just geography. Funds from operations will reflect actual cash distributions that we receive from our equity investments going forward versus our proportionate share of their collected funds from operations. That amount is likely less than CAD 100 million different on an annual basis. The investing and financing sections of the cash flow statement will no longer reflect our proportionate share of the joint venture's activities. Rather, the investing section will reflect cash equity injections made by TransCanada into the joint ventures. Finally, we expect to file our 2011 annual report to shareholders tomorrow, which contains the consolidated financial statements and accompanying notes, as well as the related management's discussion and analysis.
In closing, 2011 was a very successful year on a number of fronts. Comparable earnings per share rose to CAD 2.23, an increase of 13% over 2010, evidence that our plan is working. Having now completed and placed into service approximately CAD 10 billion of assets since the spring of 2010, we've added about CAD 1 billion in incremental sustainable EBITDA from assets that are largely underpinned by long-term contracts. In addition, we have invested approximately CAD 5 billion into projects that are part of our CAD 12 billion committed capital program. We are well-positioned to fund the remainder of that program. Finally, we expect to continue to generate significant cash flow that can be used to invest in additional accretive growth opportunities, continue to grow the dividend, and further enhance our financial strength and flexibility in the years ahead. That's the end of my prepared remarks.
I'll now turn the call back over to David for the Q&A.
Thanks, Don. Just a reminder, before I do turn the call back over to the conference coordinator, we will take questions from the investment community first, and following that, we'll turn it over to the media. With that, I'll turn it back to the conference coordinator for your questions.
Thank you, Mr. Monetta. Questions will now be taken from the telephone lines. If you have a question, please press star one on your telephone keypad. You may cancel your question at any time by pressing the pound sign.
The first question is from Linda Ezergailis with TD Securities. Please go ahead.
Thank you. I was wondering if you could maybe give us an update as much as possible on your Keystone XL discussions with your shipper group and what the feasibility might be of developing it in phases?
We've had a great deal of discussion with our shippers. Our shippers all remain completely committed to the Keystone XL project. From our perspective, our number one priority is going ahead with the entire project. That being said, there is an obvious and real need to take care of that bottleneck in Cushing. Over the last month, we've received a lot of inbound interest from potential shippers as to whether we could go forward with the Cushing to Gulf Coast phase. We're having a lot of discussions about that. We think there's potentially a lot of merit to it, and we're just working through that right now.
Thank you. Just as a follow-up question, I appreciate the guidance on base Keystone EBITDA expectations for 2012. Can you advise what your expectations of throughput are to match that EBITDA? Do you expect the system to be running fairly full?
I don't have that right in front of me, Linda, but my recollection, right now we're running, give or take, slightly over 500,000 barrels a day, 510 in that range. I would expect that to continue 510-520.
Okay, how much of that would be spot volume?
Pretty fairly nominal amounts. It would overwhelmingly be contract volumes.
Great. Thanks.
Okay.
Thanks, Linda. Thank you. The next question is from Juan Plessis from Canaccord Genuity. Please go ahead.
Thank you. You've mentioned that you're pursuing natural gas pipeline opportunities to support proposed LNG facilities on the West Coast. Just wondering if you can tell us if you had any active discussions with shippers in this regard, and perhaps the timeline or timeframe you'd be looking at to construct this infrastructure.
Sure. It's Greg Lohnes. As you've seen, there's a couple of export permits that have been obtained now, one for 1.3 and another smaller one more in the 200-250 range. There's about 1.5 BCF of export permits. And then there are two or three other proponents who have all indicated an interest. We certainly have had discussions with most, if not all of those. If the market wants to go to the West Coast, we think we're a strong candidate to build that pipeline. We're one of the few that have the experience to build in very difficult mountainous conditions. We've done that in Canada, we've done that in South America, we've done that in Mexico, and continue to do that in Mexico. We think we're well positioned should a pipeline need to be built to the West Coast.
We continue to talk to our shippers and to interested parties about the merits of the Alberta System and the fact that the Alberta System has the ability to gather gas from different parts of British Columbia and of Alberta and provides the liquidity of the NIT Hub, which would allow volumes to be built up and transported in an interim period before the LNG facilities are completed. Because as you know, with an LNG facility, once the trains are in place, it's best just to fill it up and run it full basically immediately. There's some pre-build, and we would hope that then we'd see gas flowing on our other infrastructure, including the mainline, as those volumes build up. We do continue to have discussions down those lines. The time frames are, in our view, in the 2018-2020 time frame.
Okay, thank you for that. Just with regard to Keystone XL, you're now targeting an in-service date of early 2015. I know last month you were looking at a late 2014 startup date. Just wondering what's changed in the past month to make you move that startup date.
Hey, Juan, it's Alex.
Alex.
Not really anything very material. We've always said that the time period for construction of Keystone XL would be two full years, and we're just taking a look at the time frame. We believe that a reasonable date to get a new Presidential Permit is in Q1 of 2013, and it was really just simple math.
Okay, thank you very much.
Okay.
Thank you. The next question is from Paul Lechem from CIBC. Please go ahead.
Thank you. Good afternoon. I was just wondering if you could provide a little bit more color on your gas storage business and around how much of your storage is contracted, how much is currently utilized, your outlook, a little bit more color around the metrics there.
Yeah, I could maybe start. We have two gas storage businesses, one that's regulated and one that's non-regulated. They basically are both exposed to the same factors. One's more contracted than the other one, but one's run by Alex and one's run by Greg. Why don't I get them to individually respond to your question?
Sure. It's Alex. I'll start out first with the unregulated storage business. We're obviously, right now, at the bottom of the cycle for gas storage spreads. I would expect to see the gas storage business produce modestly lower EBITDA in 2012 than it did in 2011. We would see that improving as we come out of the bottom for this industry. We're pretty well hedged in 2012. I think we're probably about two-thirds of our total capacity is hedged in 2012, and then that drops off very significantly as we have anticipation of some improvement in spreads going forward.
On the regulated side of the business, which is about 250 BCF of storage, we've got about 5% available this year, more uncontracted for 2013. We are seeing some interest in that capacity, but only on an annual basis. I think the marketplace is taking a wait and see attitude with regard to what's going to happen next winter with storage. As storage is quite tight, I think, as we go through this next year, as you know, with high storage levels throughout North America, a demand for that limited space is likely to be fairly high.
Thank you. A question on the U.S. power market. Your forward sales going into 2012 seem to be a lot lower than they were going into 2011. Can you give some color around what your thoughts are on that, your thought process is on that? Do you have expectations of stronger pricing as we go into 2012, or
Yeah, I think basically, from our perspective, we're at a pretty low level for pricing. We have incredibly low gas prices right now, and as a result, we're much more inclined to be more open than we have been in the past, going forward.
Okay. Thank you for that.
Yeah.
Thanks, Paul.
Thank you. The next question is from Chad Fries from UBS. Please go ahead.
Thank you. I was wondering if you could provide some loose guidance on when you expect a refiling for the Presidential Permit on XL, and how that squares with the ongoing process in Nebraska to reroute. Is one dependent on the other?
Chad, we've said we're going to reapply for a Presidential Permit. I would imagine we're going to do that pretty quickly. At the same time, we want to be really careful and make sure that we're putting in the best application possible. We have a little bit of work to do in Nebraska. We're collaborating very well with the state, with the Department of Environmental Quality. There's a few things we got to get done in the state, but I would expect to see us refile in the relatively near future.
Okay, thanks for that. I was wondering if you could also provide an idea of the sort of leverage that the Keystone has as volumes move beyond the contracted 530,000 barrels a day level. I know they're not there yet, but with the potential that they could move higher than that, could you just give me some context for where EBITDA could go if you reach that contracted or that fully utilized level?
Yeah. I don't have that in front of me. Let me think about that, and we'll get back to you on that one. But I think I would generally say, as I said earlier, we're not expecting very significant spot volumes, certainly in 2012. Let me think about if we can give some sort of help with where we could see that going forward.
Okay. Thanks for that, Alex.
Okay.
Thank you. The next question is from Ted Durbin with Goldman Sachs. Please go ahead.
Yeah. I wondered if you could talk about any implications of coal to gas substitution, whether it's in Alberta or in the East, that you might be seeing. I'm thinking specifically with gas prices being so low, you might see some of your coal plants in the West not running there. But I'm not sure what your fuel costs are, so maybe that's not really an issue for you.
Yeah. The marginal cost of operating our coal entitlements are very low. We don't actually see a lot of coal to gas switching going on in Alberta.
Okay. That's helpful. On the CapEx, the CAD 2.7 billion, I think that's up a little bit from your Analyst Day. I guess I would have thought maybe down some because you've pushed back some of the Keystone spending. Maybe you can just walk through the drivers of that.
Yeah. It's up a touch. Keystone's probably CAD 600 million-CAD 700 million, including capitalized interest, CAD 1 billion for the big Canadian regulated pipes, probably about CAD 300 million for Canadian Solar this year, and then the rest would bring us to about CAD 2.7 billion, including the completion of Bruce.
Okay. You think you'll still have some decent spending momentum on Keystone, even though we're still sort of waiting here on the permit and whatnot?
Yeah. It's consistent with what we noted at Investor Day is that we do have some momentum spend we have to carry through on some of the commitments for some of the steel that we've already made. That's pretty much the extent of it right now.
Okay, great. Those are my questions. Thank you.
Thank you. The next question is from Steven Patchett with Veresen. Please go ahead.
Good afternoon. My first question is, could it be possible for you to spin out some of your low growth potential, but high free cash flow Canadian assets into what is a more yield vehicle as we've seen others do?
I'm not sure exactly, Steven, what vehicle you're referring to or what examples. Certainly in the U.S., we have continued to use our MLP. When we needed cash, we dropped down assets into the limited partnership last year. That worked successfully for us as it has in the past. Looking forward, we don't have a large need for the capital. As well, on the Canadian side, obviously there's the regulatory construct that needs to be kept in mind as you move assets into these tax advantage vehicles. Some of the players that would normally buy those kinds of assets are ineligible on a tax advantage side where they can't buy those assets.
At this point in time, I'd say, Steve, there's really nothing that we're thinking about doing outside of the normal need for capital, which we don't have right now to use our U.S. MLP in that regard.
Okay. Thank you. My second question, there was a ramp-up time between first volumes and full EBITDA generation on the first Keystone. Would you be able to give us guidance on when you expect KXL to have full EBITDA generation?
As I said, we're targeting sort of Q1 2015, and I'd have to talk to our operating guys to see how quickly they think we can get to full pressure.
I suspect it's on phase two. You'd expect to see a period of time that was measured in months, not as long as the issues that we had on phase Keystone. Certainly, the issues that we had with the valves and the couplings, we have taken that into account when we designed Keystone XL and wouldn't expect to have those same sort of vibration issues. You learn as you go. I would expect that the timeframe from sort of first flow to full operations would be substantially compressed from where we were on phase one.
The other comment I was just thinking about is on the Canadian portion. We did have that pressure limitation when we started out, and we obviously wouldn't be expecting anything like that either.
Right. That doesn't exist in the Canadian section in any form.
Yeah.
That's right. Well, thank you. Those are my questions.
Yep. Thanks, Steve.
Thank you. The next question is from Carl Kirst with BMO. Please go ahead.
Hey, guys. Just Nitin Babu filling in for Carl Kirst. Quick question. What is the average hedge price for 2012 and 2013 for Western Power? How does that compare to the current curve?
Sorry, you were-
Price in Western Power. Okay. Let me think about that. Forward prices, we're looking at low 70s for 2012. Probably about the same for 2013. David, do we have a
The average hedge price in Alberta for 2012 is in the CAD 65-CAD 66 range. 2013 would be similar. That's up a little bit from what we gave you at Investor Day back in November.
Okay, thanks. With regards to U.S., have you guys heard any sort of updates on the FERC stance? Or do you have any timing on what the whole capacity price issue will be sort of resolved?
No, obviously both sides and all the intervenors have put their case in. The case has been in since the fall, and we do not at this point have any guidance from FERC as to when they intend to rule on the dispute.
Those are my questions. Thank you.
Okay.
Thank you. The next question is from Matthew Akman with Scotiabank. Please go ahead.
Thanks very much. Alex, I wonder if you can just characterize the discussions with shippers on XL about trying to extend their commitments. Obviously, they're committed to the project in general terms, but in more specific terms, what are the discussions like? Are you committing them in contract to extending commitments, or how is that going, and what can you say about that?
Obviously, there's some confidentiality associated with this, but what I can tell you is with that Q1 2015 in-service date, we're talking about Keystone XL. We expect to have no problems whatsoever maintaining the vast majority of our shipping commitments through to that in-service date.
Okay, good. Thanks for that. My other question is on the whole West Coast LNG strategy, and certainly I understand, Greg, your commentary about going into the Alberta System and the benefits to shippers in terms of optionality from there, especially given timing uncertainty about when LNG will be developed and in what quantity, and the optionality of going in the Mainline. I'm just wanting to be clear, is your pitch to shippers that they have to go into the Alberta System in order for you guys to ultimately take them to the West Coast? Or would you consider developing other pipelines to the West Coast that don't come directly off Alberta System, maybe come off from other points, whether it's Spectra or some other point like that?
Well, I think we're a pipeline developer, and if someone has a proposal that they want us to look at to build from any particular point, we would always look at those opportunities. My point being that it seems logical with gas coming where you have different partners. If you look at some of the proposals that are out there that have permits or don't, with gas in different regions of the basin, that it seems to make economic sense for those kinds of consortiums to use the Alberta System. We have the expertise to build pipe, and we'll build it for people from where they want us to build it to what market they want to go to.
There's no other specific proposal for a particular route, though, right now, is there, from TransCanada?
TransCanada is always analyzing the marketplace and understanding that people want to get to Kitimat, and we certainly have done some preliminary work on what we would view as the optimal route to get from various locations to Kitimat.
Okay. Thanks very much, guys. Those are my questions.
Thanks, Matthew.
Thanks, Matthew.
Thank you. The next question is from Andrew Kuske with Credit Suisse. Please go ahead.
Thank you. Good afternoon. My first question is for Greg, and it's a broader perspective on just pipeline returns in the natural gas world. How do you think about returns, and what's the appropriate level of return on equity for a pipe in an environment right now where you have the 10-year roughly around 2% and gas prices relatively lackluster around $2.50?
Yeah. Well, I think, Andrew, you have to think about always in the North American context, whether it's a Canadian pipe or a U.S. pipe, keep in mind that you need to be competitive in this environment. When we're looking at settlements, for example, we've had two successes this year with GTN and with Tuscarora. We've got parties there with longer-term contracts. They recognize that there's volatility in the marketplace. There's certainly, this year, volatility in weather, and we see that. You can't just look at it on a 12-month basis. You have to look at these assets and these contracts over the longer term. I think what we're seeing in the U.S. is this 11%-12% or 13% range on quite a bit thicker equity than we've traditionally seen in Canada, equities in excess of 50% on pipes.
You got a lot of older pipes that are getting more depreciated, and the contracts are getting shorter. That's driving some change in contracting strategies as we go forward. As shale gas is causing flow patterns to change, it's driving changes in how tolls are structured, whether it's seasonal, whether it's higher tolls on shorter hauls where the supply has moved to a different spot on the pipe. Generally, large diameter, already in the ground infrastructure that partially depreciates, tends to be able to compete.
Okay. That's very helpful. My second question is targeted to Alex, and it's really on your storage business. This is somewhat similar and related to the question to Greg, but how do you think about expanding that storage business in the current market environment where there are some storage operators that are really struggling in the current market? Do you see some opportunities for M&A or just development at this point with your gas being so cheap in any kind of historic context, at least near-term history, that development costs for new storage would actually be rather inexpensive versus trying to put in pad gas at $7, $10?
Yeah, no, I think that's a really good question. I would say, certainly from an acquisition perspective, it's always our preference to be buying at the bottom of the cycle. I think we clearly are. If we're not there in storage, we're pretty darn close, and we are seeing some pretty attractive opportunity. A lot of previously high-flying companies are now struggling that have storage assets. I think we're going to take a hard look at that. On the development side, we're always open to development opportunities, and we always have a couple that we're working on. I would say right now, when I look at the economics, it looks like at the present time, it probably is cheaper to buy than to build in the short term, but we're always kind of doing the math.
Okay. That's very helpful. Thank you.
Okay.
Thanks, Andrew.
Thank you. The next question is from Robert Kwan with RBC Capital Markets. Please go ahead.
Thank you. You had some comments earlier on where the mainline volumes were, Russ, and I'm just wondering if you can just talk about how the cash came in for 2011 versus the revenue requirement. I know it's very early, we're 45 days into the year, but can you give a sense of how far behind you are on budget for the 2012 revenue requirement?
It's Greg. I'll tackle it, and then Russ can add any color he'd like. We had filed for, in our restructuring, a deferral that we would have a shortfall of about CAD 175 million. That included the shortfall from 2010, so we would've dealt with that deferral. We were working towards a number that would've got us right there, maybe a little bit better. We did come in right around that number, so I think 175 versus 174. Right on top of that number. In the restructuring proposal, we've suggested we would defer CAD 100 million longer term, and then the other 75 would be part of the revenue requirement. When we filed for 2012 tolls, we were expecting something closer to a normal, as opposed to a really cold winter like we had last year, but more a normal winter with volumes averaging about 3.4.
We now see and expect that because we're a couple months in or a month and a half, and we didn't get the winter volumes that we had last year, that we'd expect to average more in the 3.2 range for 2012. I don't have an actual revenue number for you, but I would say that as to a toll impact of what we're trying to do, which is achieve a much lower toll on the main line, that 200 million a day would not have any kind of a significant impact. It'd be single cents.
Okay. Just to confirm, so for 2011 you were square versus plan?
Yeah.
Okay. Just a last question here. You talked about certainly trying to be self-funding with the capital plan or at least the equity components of your projects, yet you still have $5 billion or so of CapEx that's in limbo for Keystone XL. I'm wondering, how do you think about committing capital at this point with respect to projects that have, say, multi-year lead times, or are you really focusing on some of the shorter, quick build like the solar or acquisitions?
Sort of all of the above. I think as we said at Investor Day, one of the benefits, if there are benefits of delay from Keystone, is that it spreads out our capital expenditure over a longer period of time, and we do find ourselves with some financial capacity. There are some things that we hadn't done that we'd like to do. Obviously, if there are short-term accretive acquisition opportunities that we can go after in the short run here that can add earnings to our shareholders, we will do that. There's not a whole bunch of that out in the marketplace right now, but there are a few things that we're looking at, but I wouldn't say that they're substantial. I'd say that the bulk of the capital will be allocated to term projects as they arise.
We have been working on a lot of those in our portfolio as well. It'll be a combination of things. Obviously, as we said, we want to make sure that we only spend within our own capital-generated means, and we will continue to do that. Some of this, Robert, will be opportunistic over the coming months. There's no sort of guiding force either direction right now. We want to add value to our shareholders, and we'll allocate the capital as best we can to do that.
Okay. That's great. Thanks, Russ. Thanks, Greg.
Thank you. The next question is from Pierre Lacroix with Desjardins. Please go ahead.
Thank you very much. Just wanted to have a little bit more color on the Alberta System. We've seen the applications going up and the approvals also going up, and just wondered, going into 2012 and 2013, the rate of applications and new projects there, how do you see that evolving? Do you see the current trend continuing in terms of booking new projects and getting into construction?
It's Gregory Lohnes. We have about CAD 900 million worth of projects that the NEB has now approved and CAD 800 million of applications that are currently before them. We expect to have contracted volumes come on about 3.4 BCF by 2014. We stay in constant contact with our shippers. We're always dealing with them, and all of those projects are moving forward, and our shippers want to move them forward, recognizing that our infrastructure's only one piece of a much bigger expenditure that our producers in the area have. Those projects are moving along. We are seeing with these low gas prices, a shift in interest from more dry gas, as you can expect, to more of the wet gas areas, the Montney, the Duvernay areas. We are seeing a shift there and a move from interest in expanding in the dry gas area.
See some of that maybe being pushed off a couple of years.
Okay. Thanks, Greg, and maybe you can tell me what is the project completion timeline there for the CAD 900 million? Is it expected to be in service mid 2012, end 2012? What is the timeline over the next couple of years for the deployment of that CAD 900 million and the other CAD 800 million that is likely to come?
I don't actually have in front of me the in-service dates, but they obviously vary. These are projects of a number of different sizes. Some would be a small loop, some would be a compression project, et cetera. They'll kind of drift in over that period of time to be ready for 2014. We do have 72 km of 36-inch pipe we're building into the Horn right now, and that project's going forward. We're hoping to have that in service in the spring. It's kind of spread out over that timeline. Some of those northern areas, it's winter construction only, so they wouldn't be starting till next fall.
Okay. Thank you very much.
You're welcome.
Thank you. Once again, as a reminder, if you are an analyst and you wish to ask a question, please press *1 on your telephone keypad. The next question is from Harry Mateer with Barclays Capital. Please go ahead.
Hi, guys. A few questions from me. I guess, first of all, just to put a finer point on your potential financing needs. You've already retired about CAD 500 million of debt due this year. You have a little bit left. Given your lower CapEx budget year-over-year, should we expect to see TransCanada in the bond market or not this year?
Yeah, we still have a need of about CAD 1 billion, would be a rough number, in the bond market this year.
Okay. In terms of some of your U.S. natural gas pipelines, can you give me a sense for what you're seeing directionally, maybe even quantify it in terms of tolls, specifically any color on Northern Border, Great Lakes or ANR?
No, we wouldn't expect to see any change in the toll structure for any of those in 2012. I think it's a question of volumes and some of our short-term sales. Northern Border running pretty much full, strong tolls there. Volumes would be expected to be pretty much on top of last year, around sort of 1.7 BCF a day. Great Lakes volumes are down right now a little bit, but we'd expect to be flat, maybe down a little bit to last year, and we are selling some of that capacity at a bit of a discount to our toll. Toll's about $0.31, and we've been selling some of that slightly below there. GTN, we just settled on GTN, and we recognize we're losing some volumes from the Ruby project coming into service, and we're seeing that come around, but we weren't counting on those volumes.
We do still have some long-term contracts there, so we have very steady revenues coming in from GTN, and we'd be running similar to last year, about 1.6-1.7 Bcf a day.
Okay, great. On Bison, can you give me a sense for utilization right now?
Yeah. Bison is contracted, so utilization doesn't impact our revenues there. There are some pricing dynamics down in the Rockies area that have caused some of our shippers to take a different path and actually not use their contract commitments there every day. We have seen some volumes dropping down to some quite low levels on some days. What happens then is that Bison comes in at about station six on the Northern Border, so those volumes end up being replaced with volumes from Alberta because the Bison shippers hold matching contract capacity all the way down Northern Border. They resell that capacity, and we're actually moving higher volumes from Alberta than we had forecast.
Okay. Is it fair to say that you haven't really seen any signs of interest in additional compression capacity on Bison at this point?
I think that'd be fair. We do have one project, and we are in talks with some shippers. With the changing dynamics there, I think that's a ways off yet.
Okay. Last question. There are likely to be some pipeline assets on the market this year. Can you just give us a sense for your current thoughts on M&A? I know you mentioned it's in general cheaper to buy versus build, but are gas pipeline assets something that TransCanada will take a look at?
Definitely. That's our business. It's one of our core businesses, and we're always looking for assets that are complementary to the assets that we have. We certainly keep track of what pipes are out in the market and what may or may not become available. Of course, we have some areas where, if you look at the map, you see that we don't have as much penetration as we might like to have. We certainly keep an eye on those pipes and try and stay in contact with the marketplace to understand what assets might come up. Certainly, our view is that existing infrastructure is very valuable, and we've seen that with a few transactions that have taken place, that we view our assets as being valuable, and we would look to expand that to the extent we can.
Yeah. Very helpful. Thank you.
Thank you. Questions will now be taken from the media. If you're a member of the media and you wish to ask a question, please press *1 on your telephone keypad. The first question is from Shawn McCarthy with The Globe and Mail. Please go ahead.
Hi there. I had two follow-up questions to some of the information that's been out in your presentation and with the analysts. One was, in terms of the Southern leg and whether you might proceed separately with the Southern leg, what kind of timeline are you looking at in terms of making a decision on that? And then secondly, in terms of, you mentioned, I believe, and correct me if I'm wrong, that you're looking at is perhaps $600-$700 million in additional capital spending on Keystone XL in the next, I'm not sure of the timeframe. Is that right? And how much would that bring the total to in terms of capital spending on the XL line? Thanks.
With respect to the Southern Leg, as I said in my earlier comments, those discussions are ongoing right now. So far we've certainly had a high level of interest from potential shippers. Obviously, the differentials between Cushing and the Gulf Coast are at a pretty significant level right now. We think there's a pretty compelling need for the project. We got to do our homework with shippers. I would expect this is the kind of thing we'll be considering over the next couple of months here, month or so. Sorry, what was the second question again?
Capital spending. Just to be sure, who's speaking? Is it Russ or Alex?
Oh, sorry. It's Alex Pourbaix.
That's also okay.
With respect to capital spending, I think we've said that at the end of 2011, we're about CAD 2.4 billion all-in on the Keystone XL project, and the expectation is that over the next year, we will probably invest another CAD 600 million to keep the timeline and to maintain our equipment and material contracts that we've entered into.
All right. Thanks very much, Alex.
Your other question, I think, with respect to the CAD 600 million.
Yep
... or $800 million of additional capital, that's tied to three projects, the Cushing MarketLink project, the Bakken Marketlink project, and the Houston Lateral. All of which we have obtained contractual support for. It does expand the capacity of the Keystone XL pipeline from some 700,000 barrels a day up to 830,000 barrels a day, of which we're sort of fully contractually committed now for all of those volumes. It's moved the capital from, I think our estimate was around $7.5 billion. Now we're sitting at around $7.8 billion in that kind of range. Our original estimate was about $7 billion, and now we're sitting at about $7.8 billion.
Thank you.
Thank you. The next question is from Scott Haggett with Reuters. Please go ahead.
Hi, I think both my questions just got answered, but maybe I can ask, given your interest in existing gas lines, whether or not you've looked at all at the potential of acquiring the Pacific Trails line that will serve the Kitimat LNG plant?
I think the original line that was there was just sold, and AltaGas has an interest in that. The other line, the right of way is held by one of the consortiums, and currently they're looking at moving that project forward on their own.
Thank you.
Thank you. The next question is from Claudia Cattaneo with the National Post.
Hi. I have a couple of questions. One, I'd like to find out how you regrouped as a result of the delay that was announced last month. Have you had to lay off any staff? Have you had to cancel any contracts associated with Keystone XL? My second question is, this is obviously a major political issue in the United States. I'd like to find out whether you're going to participate in this debate in any way or whether you're just going to stand on the sidelines and wait for the election to be over.
I guess I'll try to answer them as best I can.
Sure.
With respect to the delay in our process, of course, that impacts the number of people that we have working on our project. We were gearing up for construction at the end of the year.
Mm-hmm.
We've had to go back to our contractors and let them know that we aren't gearing up for construction at this point in time for the overall project, and that has impacted their workforces. It has impacted the orders for equipment. Obviously, we don't need things delivered this year. We'll need them delivered next year, and we have delayed those things as well. That said, our primary focus is on getting this pipeline built. With respect to political issues in Washington, that's not our focus. Our focus is around the reapplication, as Alex said, around the reroute in Nebraska and doing what is necessary on the ground to move our project forward.
Okay. Thank you.
Thank you. The next question is from Bradley Olson with Bloomberg LP. Please go ahead.
Hi. I just wanted to ask a broad follow-up. How would you characterize the challenge to a company that's involved in building big infrastructure projects after the BP Macondo spill?
Obviously, the BP Macondo spill had an impact on the public awareness with respect to oil and gas infrastructure. It was followed by a couple of other very serious events in North America. I think that obviously shook the confidence of the general public in the safety of pipelines. I think the pipeline industry has responded extremely well to those, changed our practices and procedures. I think it's very important to distinguish the difference between a pipeline incident in Macondo. In the Macondo incident, there's natural pressure that couldn't be capped, and we had a situation where that spill went on for an extended period of time because they didn't have the capacity to shut it down immediately.
I distinguish that very distinctly from a pipeline break, where the instant that we determine that there is a minute change in pressure on our pipeline system, we have the ability to shut down our pipeline system immediately and remotely. We have about 35,000 sensors, for example, on our new pipeline system that are remotely monitored, so by satellite. The data's refreshed every five seconds, and we have the opportunity to know exactly what's going into the pipeline or what's going on in the pipeline at any important time. If there is a break, we shut it down right away. Once you take the pressure off the pipeline, the oil doesn't go anywhere. It stays contained in the pipeline. I think it's very important to distinguish between Macondo.
There's no question that Macondo changed how people view what we're doing and the bar at which they expect us to operate at. We're up for that as an industry, and we're up for that as a company. We understand that people expect us to deliver oil safely every day and want to know that that's being done in a way that they can be confident in. That's probably a good thing for all of us. It's never a good thing that these events occur, but I think on the positive side, we're all more aware and all more willing to up our game to make sure that the public remains safe.
Now, just a quick follow-up. Given that more than half your capital for the $12 billion in projects through 2015 that you want to bring online, given that half of that is tied up in Keystone XL, and that's the biggest infrastructure project in North America, what do you say to investors who are sort of questioning the notion of having all your eggs in one basket in terms of projects?
This is what I'd say is that TransCanada is a $50 billion corporation. While Keystone is a large project, it by no means is a risk too large for our shareholders to move forward. At the end of the day, this is a pipeline. We're into it about $2.4 billion. We have secured about 95% of the right of way. The pipe is all sitting on the ground, and the pumps are ready to be hooked up. For all intents and purposes, we're ready to go. We have a Final Environmental Impact Statement that said that the route that we've chosen doesn't have environmental impacts. We have the issues that we need to deal with in Nebraska. They're not insurmountable. The state of Nebraska, political and regulatory authorities are supportive of what we need to do. We'll work collaboratively to get it done.
I don't have any reservations that this pipeline is going to get completed. The U.S. needs to import some 10 million barrels a day of oil every day, and they currently get it from places like Venezuela, Saudi Arabia, Nigeria. We're just going to replace that oil with Canadian oil. The consumption in the U.S. doesn't change by us building this pipeline. It just makes sense all the way around. It's not too large for TransCanada to manage. We have a number of other projects underway, which fill up, as you said, the other half of the projects, including expansions of our Alberta System. We've got Cartier Wind underway. We've got solar projects underway. We've got a lot of things going underway.
I think, as I mentioned in my opening comments, we have about CAD 50 billion worth of projects that we're looking at between now and over the next decade. Now, we're certainly not going to be able to land them all, but those are the size of projects that a company like TransCanada has the capacity to execute, and we'll continue to look for projects of that order of magnitude.
Well, thank you.
Thank you. The next question is from Lauren Krugel with The Canadian Press. Please go ahead.
Oh, hi. Good afternoon. I just had a quick question about jobs and specifically ones that would be created after the pipeline starts up, not construction jobs, but permanent ones. We've seen a variety of estimates from as low as 20 to as high as 100. I'm wondering if you can kind of flesh out your own estimates and explain how you came up with those figures.
I think at the current time, that we haven't discussed what our operating numbers are going to be. The debate publicly has been around, does this project create jobs? I guess my first point is it's a $7 billion piece of infrastructure that needs to be constructed and built, and that does create far more than a few jobs. We've been pretty specific in the 13,000 construction jobs right down to the clerk that checks everybody in and out of the job site on a daily basis. As well from a manufacturing perspective, when you have to buy what looks like some $3 billion or $4 billion worth of goods and services for the pipeline, obviously that creates a lot of jobs as well. Operating a $7 billion piece of infrastructure is a complicated function that does require bodies. We have operating staff in place along our pipeline system.
There are synergies with our existing operations, but it will create new jobs. There's no question about that. It will also create ongoing secure employment in the refineries where we're going to deliver that oil to, processing, trucking, and all the other ancillary benefits of operating the pipeline. Guys, it's a $7 billion piece of infrastructure with tankage and terminals and all those other kinds of things are going to create lots and lots of term employment. I don't have a number for you today as to what that exact number would be.
I just have another quick question. Just wondering if you can comment on the latest Republican efforts to speed up a decision. It looks like they're adding some more legislative provisions today in Capitol Hill. Are you banking on that? Is there any hope of that speeding things up? Is it even helpful?
Our focus, as I said, is on building the pipeline. That's what we do, and that's what we have expertise in. We're focused right now on our reapplication, as Alex said. We're focused on our reroute in Nebraska and working with Nebraskans to find a suitable route that meets their needs, and advancing our project in any way we can. Obviously, any initiative that advances approval is positive for the project and positive for putting people back to work as quickly as possible. That said, I'm not focused on what's going on there at all. Our focus is 100% on the things that we know how to do, which is permit and construct pipelines.
Okay, thank you. That's it for me.
Thank you. This concludes the question and answer portion of the program. I'd now like to turn the meeting back over to Mr. Monetta.
Great. Thanks very much. Thanks to all of you for your interest in TransCanada this afternoon. We appreciate you taking the time, and we look forward to talking to you again soon. Bye for now.
Thank you. The conference has now ended. Please disconnect