CALGARY, Alberta – June 16, 2009 – TransCanada Corporation (TSX, NYSE: TRP) (TransCanada) today announced that it has reached an agreement to become the sole owner of the Keystone Pipeline System (Keystone) through the acquisition of ConocoPhillips’ remaining interest in the project for approximately US$550 million plus the assumption of approximately US$200 million of short-term debt. The purchase price reflects ConocoPhillips’ capital contributions to date and includes an allowance for funds used during construction. TransCanada will also assume responsibility for ConocoPhillips’ share of the capital investment required to complete the project resulting in an incremental commitment of approximately US$1.7 billion through the end of 2012. The transaction is expected to close in third quarter 2009, subject to the receipt of certain regulatory approvals.
“This acquisition represents a unique opportunity for TransCanada to become the exclusive owner of an important oil transmission system that will play a vital role in transporting a growing supply of Canadian crude oil to the largest refining markets in the United States for decades to come,” said Hal Kvisle, TransCanada president and chief executive officer. “We believe the significant commercial support Keystone has received to date highlights the value it will create for our customers and our shareholders.”
When completed, Keystone will be one of the largest oil delivery systems in North America with the capacity to deliver 1.1 million barrels per day. Keystone has secured long-term commitments for 910,000 barrels per day for an average term of approximately 18 years which represents approximately 83 per cent of the commercial design of the system. As a result of Keystone’s access to premium markets, competitive and stable tolls, faster transit times, and improved batch quality, it is anticipated that Keystone will also move incremental volumes for customers on a short-term basis or under additional long-term contracts. In the future, Keystone could be economically expanded from 1.1 million barrels per day to 1.5 million barrels per day in response to additional market demand.
The first phase of Keystone is currently under construction. It will extend 3,456 kilometres (2,148 miles) from Hardisty, Alberta to U.S. Midwest markets. It will have an initial nominal capacity of 435,000 barrels per day and serve markets in Wood River and Patoka, Illinois. Commissioning of this segment is expected to commence in late 2009 with commercial operations to follow in early 2010. The line will subsequently be expanded to a nominal capacity of 590,000 barrels per day and extended to Cushing, Oklahoma. Commissioning of the Cushing segment is expected to commence in late 2010.
Keystone is also currently seeking the necessary regulatory approvals in Canada and the U.S. to construct and operate an expansion and extension of the pipeline system that will provide additional capacity of 500,000 barrels per day from Western Canada to the U.S. Gulf Coast in 2012. The Keystone expansion will extend 2,720 kilometres (1,690 miles) from Hardisty, Alberta to a delivery point near existing terminals in Port Arthur, Texas. Construction of the expansion facilities is anticipated to commence in 2010 following the receipt of the necessary regulatory approvals.
The total capital cost of Keystone is expected to be approximately US$12 billion. Approximately US$2.7 billion has been spent to date with the remaining US$9.3 billion to be invested between now and the end of 2012. Capital costs related to the construction of Keystone are subject to a capital cost risk-and-reward sharing mechanism with its customers.
With more than 50 years’ experience, TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure including natural gas pipelines, power generation, gas storage facilities, and projects related to oil pipelines and LNG facilities. TransCanada’s network of wholly owned pipelines extends more than 59,000 kilometres (36,500 miles), tapping into virtually all major gas supply basins in North America. TransCanada is one of the continent’s largest providers of gas storage and related services with approximately 370 billion cubic feet of storage capacity. A growing independent power producer, TransCanada owns, or has interests in, over 10,900 megawatts of power generation in Canada and the United States. TransCanada’s common shares trade on the Toronto and New York stock exchanges under the symbol TRP.
Note: All financial figures are in Canadian dollars unless noted otherwise.
More information available at TransCanada.com