Good day, Mr. Chair and members of the committee.
Thank you for the invitation to appear before you today. We are pleased to be here to discuss our most recent analysis of the Trans Mountain Pipeline, which was released on November 8, 2024. With me today, I have Jason Stanton, advisor-analyst with my office.
Since our last report was published in June 2022, the total project cost estimate for the Trans Mountain expansion project has increased by $12.8 billion to a total of $34.2 billion and it began commercial operations on May 1, 2024. Our latest report provides a current financial valuation using a discounted cash flow method on a go-forward basis. The analysis incorporates new data in conjunction with relevant publicly available information. The analysis does not include previously incurred costs, such as the purchase price or capital expenditures prior to 2024. It is also important to note that the report does not present an audit or evaluation of the Trans Mountain expansion project construction or operating costs of the type performed by the Auditor General.
The report presents two scenarios to illustrate how the value of the pipeline could be impacted by the future servicing and tolling framework.
While most of the Trans Mountain pipeline system's capacity is earmarked toward committed contracts for the first 15 to 20 years of operation, once they expire, it is uncertain what kind of service and tolling framework will prevail. We estimate that a scenario in which contracts are renewed has a current value of $33.4 billion, while a reversion to a cost-of-service scenario has a current value of $29.6 billion.
However, there is also uncertainty in some of the underlying assumptions on pipeline utilization, tolls and discount rate, all of which can impact the valuation. This is why the report also includes an assessment of the valuation's sensitivity to these key factors. Based on Trans Mountain corporation's most recent annual report, if the Trans Mountain pipeline system were sold in 2024 at either of the present values calculated in our report, the government would record a loss on the sale. However, whether the government records a profit or loss on the sale of the Trans Mountain pipeline network will ultimately be determined by the price a buyer is willing to pay. This would depend on such factors as the number of interested buyers, their costs to secure the necessary funds, the timing and method of sale, market conditions, and whether some groups are given priority in the sale.
Jason and I would be pleased to respond to any questions you may have, regarding either our analysis of the Trans Mountain pipeline system or other PBO work.
Thank you.