Analyst Note| Joe Gemino, CPA |
In a highly anticipated move, newly inducted President Joe Biden revoked the Keystone XL’s presidential permit on his first day in office. The president cited climate change issues as the underlying reason for revoking the project’s permit. The move comes as no surprise to us, as we expected Biden to oppose the project. Fortunately for TC Energy, we do not expect the company to incur much stranded capital. In March of last year, the Alberta government invested $1.1 billion (CAD 1.5 billion) as equity to fund the remainder of the project’s 2020 capital costs. The province could sell the pipe and material for scrap to recoup a portion of the financial losses associated with the project. TC Energy could challenge Biden’s executive order in court on the grounds that it violates the new North American trade deal. However, the company announced that it will suspend the project, and we don’t expect any attempts to build the project to be successful under the Biden administration.