Natural Resources Committee on Nov. 4th, 2024

[Mario Simard, Bloc, Jonquière, QC]

I don't think the government can assume $34 billion in risk without doing a profitability analysis. You probably have one; not having one would be irresponsible. I have heard about a profitability analysis done by TD Securities and BMO, but with an outlook of 100 years. It says that the pipeline will be profitable over 100 years.

Can you provide that kind of document to the committee, the profitability analyses you have done?

[Anne David]

I will repeat what my colleague Greg Reade said in answer to one of your colleagues earlier: The finance department will look into this matter and provide an answer to the committee thereafter.

[Mario Simard, Bloc, Jonquière, QC]

Okay. Are you aware of the analysis done by TD Securities and BMO? Is the outlook 100 years?

[Greg Reade]

I don't think so, but we will follow up on that.

[Anne David]

The outlook is not 100 years, but the department will follow up on that.

[Mario Simard, Bloc, Jonquière, QC]

Okay.

How do you explain the striking difference between the profitability analyses and the financial structure you had before you in your decision-making process and the Parliamentary Budget Officer's conclusions?

It will be updated in due course, but in 2022, the PBO said that, at $21 billion, the project was not profitable. The PBO also said that the government's claim that the profits would be reinvested in clean energy was misleading.

The minister said earlier that, in her opinion, the project would be profitable. How can you explain this glaring difference between your analyses and those of the PBO?

[Greg Reade]

Maybe I can start with the question that the analysis undertaken by the PBO is a discounted cashflow analysis. I think we agree that is a way to start to understand the value of this type of project. It's very sensitive to assumptions, including discount rates and uptake or utilization of the pipeline. We'll be keen to look also at the revised report. We did see the previous report. I recall that the tolls also increased partly in response to cost overruns. There was a sharing, a cross-sharing of information.

I'd also just add that the ultimate value of the pipeline will be determined in the market, and acquirers will take into account factors well beyond this type of analysis. There could be value for different types of buyers, institutional buyers, pension funds, etc., or strategic. There may be value for their companies. There are other ways to think about valuation beyond those analyses.

[Mario Simard, Bloc, Jonquière, QC]

Thank you. You would agree with me, however, that it would be surprising for an update to show that a project was profitable at $34 billion if a previous analysis showed that it was not at $21 billion. We will see what the PBO has to say about that.

We have heard many times that all profits from the Trans Mountain project would be reinvested in clean energies. That is something Mr. Guilbeault said. I don't want to put words into your mouth or put you on the spot, but isn't that just a talking point rather than something that can really be done?

[The Chair, Liberal, George Chahal]

Mr. Simard, we are at the end of time.

Can you provide a very brief answer to that.

[Greg Reade]

I can just say that the pipeline is on the cusp of returning funds, as it is just starting operations and filling. The moment is in the future.

[The Chair, Liberal, George Chahal]

Thank you.

We'll now go to Mr. Angus for six minutes.

Mr. Angus, the floor is yours.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you, Chair.

Mr. Reade, what is the connection between the TMX Corporation and TMP Finance?

[Greg Reade]

TMP Finance is a subsidiary of CDEV, the Canada Development Investment Corporation. It was created at the point of acquisition as an entity that could receive financing from the government. In the early start, there was an acquisition for financing and then the first part of the pipeline was built with direct financing from government. That was an entity that could receive the financing and then send it into the operating part of Trans Mountain. That was important so that we could preserve the commercial structure of Trans Mountain for an eventual divestiture. It also allows for full transparency for CDEV's reporting to show the financing that comes in and goes out.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Fair play. The financing came through TMP Finance, which makes sense. Where does the debt sit?

[Greg Reade]

You can think of it in terms of sources and uses. We have debt that was drawn from the Canada Account, at least for the first tranches. There's also debt sitting with the banks. That's then recorded on Trans Mountain's books.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Trans Mountain Corporation?

[Greg Reade]

Trans Mountain Corporation, which is consolidated up through CDEV.

[Charlie Angus, NDP, Timmins—James Bay, ON]

How much debt do they have on their books?

[Greg Reade]

We can follow up with the financial statements.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Can you? What we've been told is that TMP Finance was basically a shell company that's holding the debt, which makes TMX Corporation look viable because the debt is being held by TMP Finance. Is that true?

[Greg Reade]

No. TMC records the debt that it holds. It has a combination of debt and equity. What was sent down from TMP Finance was sent down as both debt and equity. Again, this was to emulate a commercial structure and to try and create a commercial structure that could be divested.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Can you show us so that we know where the debt is?

[Greg Reade]

We can show you so you can see how it's debt that came over and how it sits as debt and equity on Trans Mountain's balance sheet.

[Charlie Angus, NDP, Timmins—James Bay, ON]

When TMC only charges the shippers 48% of what it costs, where does that extra 52% of the cost go?

[Greg Reade]

I need to—