Ontario Energy Network Meeting Energy Demand and Improving Environmental Performance: A Balanced Approach

Transcription

1 Ontario Energy Network Meeting Energy Demand and Improving Environmental Performance: A Balanced Approach December 6, 2011 Hal Kvisle President and CEO (Retired) TransCanada Corporation

2 Forward-Looking Information This presentation may contain certain information that is forward-looking and is subject to important risks and uncertainties. The words "anticipate", "expect", "believe", "may", "should", "estimate", "project", "outlook", "forecast" or other similar words are used to identify such forward-looking information. Forward-looking statements in this presentation are intended to provide TransCanada security holders and potential investors with information regarding TransCanada and its subsidiaries, including management s assessment of TransCanada s and its subsidiaries future financial and operational plans and outlook. Forward-looking statements in this presentation may include, among others, statements regarding the anticipated business prospects, and financial performance of TransCanada and its subsidiaries, expectations or projections about the future, strategies and goals for growth and expansion, expected and future cash flows, costs, schedules (including anticipated construction and completion dates), operating and financial results, and expected impact of future commitments and contingent liabilities. All forward-looking statements reflect TransCanada's beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those predicted in these forward-looking statements. Factors that could cause actual results or events to differ materially from current expectations include, among others, the ability of TransCanada to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the operating performance of the TransCanada s pipeline and energy assets, the availability and price of energy commodities, capacity payments, regulatory processes and decisions, outcomes of litigation and arbitration proceedings, changes in environmental and other laws and regulations, competitive factors in the pipeline and energy sectors, construction and completion of capital projects, labour, equipment and material costs, access to capital markets, interest and currency exchange rates, technological developments and economic conditions in North America. By its nature, forward-looking information is subject to various risks and uncertainties, which could cause TransCanada's actual results and experience to differ materially from the anticipated results or expectations expressed. Additional information on these and other factors is available in the reports filed by TransCanada with Canadian securities regulators and with the U.S. Securities and Exchange Commission (SEC). Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this presentation or otherwise, and not to use future-oriented information or financial outlooks for anything other than their intended purpose. TransCanada undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law. 2

3 TransCanada One of North America s Largest Natural Gas Pipeline Networks 57,000 km (35,500 mi) wholly-owned 11,500 km (7,000 mi) partially-owned Average volume of 14 Bcf/d North America s 3rd Largest Natural Gas Storage Operator 380 Bcf of capacity Canada s Largest Private Sector Power Generator 19 power plants, 10,800 MW Premier North American Oil Pipeline System 1.4 million Bbl/d ultimate capacity Enterprise Value ~ $53 billion 3

4 TransCanada s Power Portfolio 10,800 MW s of critical infrastructure Natural Gas 52% Nuclear 23% Wind 5% Coal PPAs 15% Hydro 5% Positioned to prosper in a carbon-constrained world 4

5 Building a Stable Power Asset Base $4.5 billion investment in projects entering service between 2010 and 2012 Halton Hills (683 MW) Kibby (132 MW) Coolidge (575 MW) Bruce A Units 1 & 2 Restart (1,500 MW) (50% interest) Cartier Phases IV & V (270 MW) (62% interest) Long-term contracts with stable, predictable earnings and cash flow Strong counterparties No commodity price risk 5

6 Cartier Wind Phases IV and V In-service December 2011 Gros-Morne Phase I (101 MW) Montagne Sèche (58 MW) In-service December 2012 Gros-Morne Phase II (111 MW) $400 million investment $300 million spent to date 20-year PPA with Hydro Québec 6

7 North America Requires Substantial Energy Infrastructure Development Cumulative Investment in Energy Supply Infrastructure by Region and Fuel OECD Pacific Other E. Europe/Eurasia Russia Middle East Other Asia India Power Oil Gas Coal Biofuels Africa Latin America OECD Europe China North America $ trillion SOURCE: International Energy Agency (IEA) World Energy Outlook

8 Increasing International Competition for Crude Oil Reserves Source: EIA, Annual Energy Outlook

9 North American Refined Products Consumption 30 MMb/d Mexico* Canada US Other US LPG US Jet Fuel US Distillate Fuel Oil 5 US Motor Gasoline Sources: EIA Annual Energy Outlook 2011 (Dec 2010) EIA International Energy Outlook 2011 (Sept 2011) Canada Demand EIA International Energy Outlook 2010 (July 2010) Mexico Demand 9

10 Canadian Oil Production 5,000 Mb/d 4,500 4,000 Atlantic 3,500 3,000 Oil Sands In-Situ 2,500 2,000 1,500 Oil Sands Mining 1, Conventional Heavy Conv. Light and Medium 0 Pentanes/Condensate Source: CAPP Crude Oil Forecast, Markets & Pipelines (June 2011) Growth (Expected) Case 10

11 North American Gas Supply/Demand Balance Bcf/d WCSB Gulf of Mexico + U.S. Other History Forecast Eastern Canada U.S. Rockies U.S. Shale Mexico BC Unconv. LNG Source: TransCanada TSO 11

12 North American Natural Gas Demand Bcf/d History Forecast Total Demand Electric Generation Industrial Commercial Residential Pipe/Plant Fuel Source: TransCanada TSO 12

13 North American Power Generation by Fuel Type TWh 7,000 6,000 5,000 History Forecast Gas Power demand is expected to grow at an average of 1.3% per year between 2010 and ,000 3,000 Renewables Oil Hydro Increase is primarily due to growing population and GDP 2,000 1,000 Nuclear Coal Growing demand is met through natural gas-fired generation and renewables

14 Ontario Power Generation by Fuel Type 250 TWh 200 Solar, Geothermal, Other Wind 150 Coal Hydro 100 Gas 50 Nuclear SOURCE: Adapted from IHS CERA North American Gas and Power Scenarios: Spring 2011, Statistics Canada 14

15 Bruce Power L.P. Bruce A Units 1 and 2 set to restart in 2012 Bruce Power will have 8 operating units Bruce A - 3,000 MW (48.8% interest) Bruce B - 3,200 MW (31.6% interest) Power sold to the Ontario Power Authority under a long-term contract 15

16 Bruce Power Restart Remaining Milestones 2011 Q3 Q Q1 Q2 Q3 Unit 2 Fuel Load Complete Sync to Grid Commercial Operations Unit 1 Fuel Load Sync to Grid Commercial Operations TransCanada s share of capital investment expected to approximate $2.4 billion $2.2 billion spent to date Virtually every restart program has been faster on second unit Units 1 & 2 will generate 1,500 MW of clean energy 16

17 Bruce Power Asset Management Program Program is Expected to Extend the Operating Life of Units Units 3-8 Original Life Assumptions Number of Units Unit 1 & 2 Restart Units 3-8 Current Life Expectation Original Assumptions Unit 1 & 2 Restart Current Expectation* Potential Future Refurbishment 100% of the Power Generation Sold Under Long-Term Contract * Pending ongoing work and regulatory approvals 17

18 Bruce Restart Project - Now in Final Phase 18

19 Improving Environmental Performance Environmental impact is driven by North American consumption: More than 80% of motor fuel emissions are generated by the vehicle About 15% are generated in the production and refining phases In the end, all emissions are driven by end-use consumption Reduced emissions will require: A reduction in energy-intensive activities: Drive fewer miles per year Are consumers prepared to change their habits? Reduced energy intensity: Drive more fuel efficient vehicles Equipment replacement takes time Advances in electricity supply: Electricity can replace hydrocarbons Clean electricity sources can replace dirty coal But equipment replacement takes time 19

20 Canada s GHG Emissions In Context Source: CAPP, Achieving Balance, The Canadian Oil Sands Story, Insight Energy Conference, (February 2, 2010) 20

21 Greenhouse Gas Emissions From Canadian and U.S. Coalfired Power Plants and Oil Sands Operations, 2007 Source: CAPP, Canada s Oil Sands in a North American Policy Context, North American Energy Summit, May 6,

22 Current Cost of Competing Generating Options in North America FOSSIL CLEAN OR RENEWABLE Levelized Cost (2009 Dollars per MWh) Existing Coal Existing CCGT CCGT Geothermal Onshore Wind Nuclear Biomass Coal CCS CSP PV Farm Source: IHS CERA, Spring Notes: Busbar costs. Does not include storage, PTC, or ITC; CSP = concentrating solar power. All options represent the levelized cost of building 1 MW and represent nonfirm cost of electricity. 22

23 Regulatory Challenges Permitting processes are not aligned to the national interest Approval processes have become more political with the increasing engagement of organized and well-funded special interest groups and NGOs Eminent domain rights are critical and under threat Energy related catastrophic events have increased public fear Social media has been a game-changer, allowing opposition to connect to and mobilize others in the community 23

24 Nearly All Infrastructure Development Experiences Opposition 80% 70% Oppose Support 60% 50% 40% 30% 20% 10% 0% Nuclear Power Plant Oil Drilling Power Transmission Line Natural Gas Drilling Natural Gas Pipeline Wind Farm SOURCE: The Saint Consulting Group The Saint Index: United States,

25 Eminent Domain is Critical and Under Threat Crucial for the advancement of infrastructure projects A legitimate tool that balances individual interests and the national interest, and particularly critical for linear projects such as pipelines and transmission lines Eminent Domain rights are regularly challenged or politicized TransCanada has an excellent track record of limiting its use of the eminent domain process compared to industry It must be a fair yet predictable and efficient process 25

26 Activism is on the Rise Politicians are being increasingly influenced by campaigns whose opposition is not based on science or facts Activists are abusing the regulatory process They know that delay = denial Opposition to the Keystone XL pipeline has been driven by professional activists who oppose oil sands development, not the pipeline A serious threat to infrastructure projects that are in the national interest 26

27 The Economic Value of Energy Self- Sufficiency When North America imports a barrel of oil from overseas, we pay $100 for that barrel while only $10 flows back to North American service and equipment providers When North America produces its own barrel of oil, at least $80 flows back to North American service and equipment providers: Field development costs of $20/bbl Field operating costs of $20/bbl Corporate costs of $10/bbl Continental pipeline tariffs of $10/bbl Taxes and royalties of $20/bbl Developing and producing our own oil generates incremental spending within North America of at least $70/bbl On 1 MMb/d, direct spending exceeds $25 billion annually With GDP multipliers, the GDP impact is about $100 billion annually Alaska, the oil sands, the Bakken, and the Deepwater Gulf could generate more than 5 MMb/d of incremental long-term production 27

28 Are Increased Regulatory Requirements Adding Value? The Keystone XL pipeline permitting research and analysis is among the most exhaustive in U.S. history. The Base Keystone Presidential Permit took 23 months. The Keystone XL process is at 38 months and counting At what point does the cost of incremental regulatory requirements exceed the benefits obtained? 28

29 Summary and Conclusions Technological advances in shale gas and unconventional oil will enable North America to meet more energy demand with domestic resources Canadian oil sands are a large, reliable source of crude oil with vital economic and energy security benefits for North America Vehicle replacement takes 10+ years Power plant replacement takes 20+ years Environmental reviews must be free of inappropriate political influence to effectively serve the public interest Communities often favor green solutions, but cost and feasibility are frequently underestimated Energy development benefits and concerns must be addressed in a transparent manner with the public, media, and environmental groups Strong political and energy industry leadership is needed to address the issues, engage stakeholders, and restore credibility 29

30 Ontario Energy Network Meeting Energy Demand and Improving Environmental Performance: A Balanced Approach December 6, 2011 Hal Kvisle President and CEO (Retired) TransCanada Corporation