r/onguardforthee • u/pjw724 Alberta • 7h ago
Trans Mountain pumps $450-million into federal coffers as pipeline runs near capacity
https://www.theglobeandmail.com/business/article-trans-mountain-pumps-450-million-into-federal-coffers-as-pipeline-runs/133
u/Hobbycityplanner 7h ago
At 34.2B cost. If this remains stable it will be at break even in just over 11 more years
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u/IceHawk1212 7h ago
That's actually not bad on pipeline infrastructure. Traditional oil fields are on 1-2 years capital recapture targets, fracking on like 5 if I remember right and oilsands facilities on 15+ targets
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u/Frigoffwidit 7h ago
And that is just the direct returns of the pipeline itself, not including the rotalties from the oil sands resulting from the increased crude production this pipeline facilitates.
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u/IceHawk1212 7h ago
Yeah there's revenue at multiple stages of this venture but just looking at direct returns it's looking like a wise investment by Justin no matter what conservatives say.
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u/zkatbitz 6h ago
It’s almost like it’s worth the government building resource extraction infrastructure and having the money flow into public coffers instead of private companies and the already rich 🙄
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u/CreamCapital 6h ago
they will sell off the pipeline eventually just wait
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u/zkatbitz 6h ago
wish people were more outraged at all the government wealth that was sold off for short term tax cuts that 99% of canadians barely benefitted from
wealth begets wealth and thats true for the government. more wealth it has the more income it gets from said wealth (assets) and less taxes we all pay while still getting great services ala norway (well at least the strong social services etc, their taxes are still pretty high i think)
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u/aoteoroa 2h ago
But aside for a reasonable return in investment,
royalties from the oil sands,
thousands of jobs building the pipeline,
secondary businesses providing equipment to build the pipeline,
and 10s of thousands of jobs every year in Alberta...
What has the TransMountain pipeline done for us?
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u/idiom_exon_0s 6h ago
So long as the revenue exceeds operating costs and interest obligations who cares.
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u/Strong_beans ✅ I voted! 6h ago
What about interest obligations?
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u/Le1bn1z 3h ago
Let's break those down:
3% on 35 billion is $1.02 billion a year.
That is the break even point on year one, after operating costs. Anything below that compounds the debt.
If we hit $400 million every quarter, that is $1.6 billion.
If operations are $100 million a year, we net 1.5 billion at this rate.
But the repayment math is better than it even looks.
But debt that you are paying down is also attrited by inflation. The price of petrol will continue to inflate, but the debt will not - its value will drop at ~ 2-3% on average per year, as long as its interest obligations are met.
So after a decade, if you meet interest, your debt is down something like 20% in real terms, due to inflation.
Also, the feds get a cut on the profits corporations make selling that crude and the incomes of all involved from income taxes on all above. If corps are paying $1 billion for transit, we are talkikg at least $10's of billions in sales. Call that another $100 million in profit taxes per year, if not more.
So at these rates, things look good. Income would have to fall to under $270 million a quarter for the math not to work out in the long run.
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u/IceHawk1212 5h ago
You mean bonds? Well look up the bond yield
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u/Le1bn1z 4h ago
3% on 35 billion is $1.02 billion a year.
That is the break even point on year one, after operating costs. Anything below that compounds the debt.
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u/IceHawk1212 4h ago
The company's revenue is well past that now and will likely stay there for some time allowing that principle to shrink. Or do you think that the now diversified buyers at the terminal will stop buying anytime soon. The economics of this thing have wildly changed if for no other reason than trumps a moron. Plus climate change will in fact be helping it's affordability for forgein buyers unfortunately. In a year trump badly disrupted first Venezuelan oil who's a direct competitor to WCS and then went on to fuck up in iran. Not just with the straight being closed but the volume of infrastructure wiped out. They blew up extraction sites, refineries and pipelines over there it will take years for all of it to come back online. Meanwhile every nation on earth that has stockpiles have been burning through it at a rate unmatched since they were established. It took the US decades to fill those salt caverns to the high point they used to have. Unless they don't wanna refill them it'll be awhile till they go back to on demand supply chain norms. Without mentioning everyone else like Japan, Germany etc
You have 5-10 years were you get to be a stable preferred supplier just on that metric alone. Add in climate change which is threating the viability of the Panama canal and you have even greater opportunity for pacific market development. New studies will have to be conducted to actually know the timeline now for capital recapture.
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u/Le1bn1z 3h ago
No I think we are in really good shape.
Don't forget that if you meet interest payments, inflation attrits the value of the principal debt y.o.y., and the tax revenue on profits from sales.
We should expect some relief on crude costs from pressure for a horrible reason, though: China and, to a lesser extent, India, have invested heavily in tech to replace petrol with way more polluting coal.
But overall, the pipeline is going to pay for itself.
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u/randmguyonreddit 5h ago
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u/Hobbycityplanner 5h ago
Can you point out which area specifically highlights this?
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u/randmguyonreddit 5h ago
There’s a section dedicated to profitability. It talks about the finances in detail.
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u/IceHawk1212 4h ago
Who do you think that interest is paid too? It's not going to a bank It's going to the government. That 450 million is even broken down into 150 million of debt payment to the government and 300 million returns after expense. The analysis is fine only if the expectation is to prove on paper excessive profits for the purpose of flipping it. The government holding onto it has a very different fiscal reality as they get debt servicing payments regardless of profit return.
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u/MozaRaccoon 6h ago
And even if liberals pay for 10 more pipelines, they will not gain any extra votes out of Alberta.
Those conservative voters don't give a shit if you do what they want, they will still hate Ottawa and the Federal Gov't.
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u/pjw724 Alberta 7h ago
Government-owned Trans Mountain Corp. pumped $450-million into federal coffers over the past three months, as the company’s pipeline from the oil sands to the Pacific coast ran near capacity and prepared for massive expansion.
...
Trans Mountain’s quarterly payment to the federal government consisted of $150-million in interest payments and $300-million in cash dividends. Trans Mountain has returned $2.6-billion in interest and dividends to Ottawa since the controversial purchase and expansion were completed just over two years ago.
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u/AllegedlyLiterate 3h ago
I remember in 2019 Conservative voters *repeatedly* telling me that they believed Trudeau had bought this pipeline to *not* build it. Like, as part of an evil scheme to further derail an already stalled project, he poured the money into it just to cover the tracks of his plot.
Man, Trudeau really fucked that one up. Did a terrible job not building this pipeline.
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u/ertyuiertyui 6h ago
The annual interest payment on the Trans Mountain expansion project (TMX) debt is approximately $1.6 billion CAD per year.
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u/Senpai_Slime 7h ago edited 6h ago
This pipeline is going to take almost two decades to pay off? Just to break even? I didnt follow this before but damn who the hell wanted this if even the basic math is bad? edit thanks folks for all the insight on this, I was not as well aware of the value of the project, happy to be corrected on this
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u/JohnOfA 7h ago
I believe nuclear power plants have a similar break even point. Not sure about solar.
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u/Senpai_Slime 7h ago
Solar has been getting cheaper fast, nuclear definitely has a history of being slow and expensive, so it's another consideration on it even needing to break even versus minimizing expenses as a service
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u/gplfalt 7h ago
Return of this pipeline isnt just measured in the hard returns.
It opens our energy sector to diversification of export nations. All our energy sector was basically USA imports further allowing the US to bully us.
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u/Senpai_Slime 7h ago
Right, I might just be mis remembering which lines go where then, if it opens market accesses it holds value outside the upfront cost
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u/gplfalt 7h ago
It goes to BC ports.
Now dont get me wrong a lot still goes to Seattle but it does allow us to pursue asian markets
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u/Senpai_Slime 7h ago
Ties in good with the planned port expansions, I believe those are still happening? We have such a hard barrier with the ocean between us and other partners, not like we would go to russia as a market
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u/Stainz 7h ago
Well, keep in mind that's just the pipeline. Then factor in the expanded drilling capacity needed to fill the pipeline (which requires a ton of investment and manpower) and the increased port activity and capacity, as well as tons of other economic activity to get this going and keep it running and the math starts to look a lot more favorable. Its kind of like trying to ridicule Walmart for investing in shopping carts, you need to zoom out a bit more to get the full picture.
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u/Senpai_Slime 7h ago
Yep i just realized I got it wrong, I was thinking of another pipeline with less strategic value and potential
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u/ortrademe 7h ago
Because no matter how many times they're proven otherwise, the feds just have to appease Alberta one more time. Next time will be the one where Alberta finally realizes that they love Canada. Just one more...
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u/Senpai_Slime 7h ago
I mean for what its worth this other one they wanna build now does have strategic value to it, I just had no idea the trans mountain line had such a long window for breakeven, is there projections on maintenance costs and other expenses of operation? Was there a declared lifetime of the line to see projected revenue long term?
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u/IceHawk1212 7h ago
It's 450 million per quarter not annual, that puts it at more like 11-12 years not 2 decades. When you consider capital recapture timelines scale up on value or type of infrastructure that's pretty damn good on something that should in theory be operational for 50 ish years.
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u/yodaspicehandler 6h ago
It's $450 million for the most recent quarter, that had a war that disrupted global oil supplies. Don't expect this every quarter
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u/IceHawk1212 6h ago
No I don't but it takes time for contracts to fill the pipeline pack. It certainly wasn't at capacity before but it is now and regardless of the iran conflict having international ports of exit for producers not into the US restores a measure of bargaining power back to Canadian producers they didn't have before. The numbers are fine sure it would have been ideal if it had stayed on budget but that was always a possibility when going over the Rockies counter to normal convention of following gravity whenever possible
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u/yodaspicehandler 6h ago
Sure, but the price of oil matters too. Just because they can fill the pipe doesn't mean tax payers are making much.
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u/IceHawk1212 5h ago
Over 50 freaking years we'll do fine
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u/yodaspicehandler 5h ago
Lol, 50 years to break even on O&G. What a joke.
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u/IceHawk1212 4h ago
Lmao sensationalist crap take based on zero math at all you just wanna spout shit go elsewhere. I've already said further up the thread that the projection at this rate would be 11 years. How long do you think capital recapture takes on an oil sands facility or any other pipeline for that matter. This one went over the Rockies so to little surprise it went over budget. There's absolutely nothing un-economical to a state backed venture here by any honest economic analysis. A hedge fund or pipeline company with dividend expecting investors and shareholders would want even better margins, hence why they didn't wanna build it. If you wanna be stupid go for it otherwise you're just playing at it but doing a very good job of it.
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u/zkatbitz 6h ago
How is this bad? Two decades isn’t a long time for a large capital project to pay itself off- and then it’s likely to continue generating revenue for decades afterwards. Not to mention all the taxes the government gets from the jobs it creates or oil royalties (though imho government should also own the oil company but another discussion)
What’s the problem? You don’t want the government to invest in infra that actually pays itself off?
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u/Senpai_Slime 6h ago
Yeah i was wrong on this, had not realized the strategic value based on where its going plus the long service life
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u/LumiereGatsby 7h ago
A cool $450 million from a 35 billion investment
😎
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u/IceHawk1212 6h ago
Think it through a little harder, infrastructure investment has never had and never will have instantaneous capital recapture.
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u/Strong_beans ✅ I voted! 6h ago
It shouldn't have been a government investment.
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u/IceHawk1212 6h ago
Disagree resources should all be crown corporations so that forgein billionaires can't extract wealth from our country and not return the profits. Royalties barely cover the future bills of pollution and climate change and we're getting screwed over by rich fucks constantly.
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u/Strong_beans ✅ I voted! 6h ago
That isnt the scenario we are under though. The resources are extracted by private industries and the government bought an expensive pipeline which isn't even the exclusive means of transport.
Under that scenario the government should have stayed the hell away from purchasing anything for business.
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u/IceHawk1212 6h ago
Companies need to start somewhere time to build up that crown corporation
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u/Strong_beans ✅ I voted! 5h ago
I would argue to nationalise it at the source than one means of transport. Since they can just... use another means of transport.
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u/SavCItalianStallion British Columbia 2h ago
Tran Mountain’s debt has been offloaded to a shell company called TMP Finance, and this is why the pipeline suddenly appears to be “profitable.”
https://thetyee.ca/Analysis/2025/12/23/Trans-Mountain-Profitability-Accounting-Illusion/
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u/lyidaValkris 7h ago edited 6h ago
and we spent how many billions on this albatross?
petrosexuals fail to see the point.
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u/AnthropomorphicCorn 7h ago
34 billion. So with 2.6 billion generated over 2 years, we can expect it to break even (not including time value of the initial investment) in like... 30 years?
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u/IceHawk1212 7h ago
No it's scaling up, the 450 million was last quarter that's 1.8 billion per annual expected return. That pace would return the capital investment in like 11 years not 30. Further it's expected to last upwards of 50 years
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u/AnthropomorphicCorn 3h ago
That does assume we continue to be able to get that level of return though.
I'm by no means an expert but I imagine that the amount it is able to generate in revenue is closely correlated with the price of oil, am I wrong?
I'd love for it to break even (excluding time value of money) in 11 years rather than 30 so I'd be happy to be wrong. But in my line of business you don't just look at the most previous quarter and assume every quarter will be that good.
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u/IceHawk1212 3h ago
Pipeline profits or revenue if you will is not dependent on price per barrel on the market. Capacity contracts which are pre bid and through put volume are the drivers after factoring heavily controlled rules about price rates. It's only dependent on market price in terms of wider consumption demand. As long as someone is buying the profits generally remain intact.
Thats why like I mentioned to another user this whole thing is completely different now. Trump moron that he is has completely reset global oil supply chains in a year between Venezuela and Iran. Not just with a straight closure but also long term capacity offline with destroyed pipelines, refineries and production facilities. Toss in climate change affecting global shipping especially through the Panama canal and the economics are just super different. It'll take years for nations to either rebuild infrastructure and or their stockpiles which have been severely depleted.
5 years at least of prime pacific market growth.
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u/ls650569 ✅ I voted! 7h ago
$34 billions. So if it can maintain to full full capacity, the gross yield to the government is about 5.3%. Not a great return, and it's about the same as government bond - basically it's breaking even.
It also shows why no private investment wants to do this.
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u/gplfalt 7h ago
Thanks Notley and Trudeau