TransCanada's (TRP) CEO Russ Girling Q2 2014 Results - Earnings Call Transcript

Aug. 5.14 | About: TransCanada Corporation (TRP)

TransCanada Corporation (NYSE:TRP)

Q2 2014 Earnings Conference Call

July 31, 2014 04:00 PM ET

Executives

David Moneta - VP of IR

Russ Girling - President and CEO

Don Marchand - EVP and CFO

Alex Pourbaix - President of Development

Karl Johannson - President of Natural Gas Pipelines business

Paul Miller - President of Liquids Pipelines

Bill Taylor - President of Energy

Glenn Menuz - VP & Controller

Analysts

Carl Kirst - BMO Capital Markets

Matthew Akman - Scotiabank

Robert Kwan - RBC Capital Markets

Paul Lechem - CIBC

Linda Ezergailis - TD Securities

Steven Paget - FirstEnergy

Andrew Kuske - Credit Suisse

Faisal Khan - Citigroup

Shneur Gershuni - UBS

David McGough - Morningstar

Carl Kirst - BMO Capital Markets

Lauren Krugel - The Canadian Press

John Spears - The Toronto Star

Geoff Lee - Pipeline News

Elsie Ross - Daily Oil Bulletin

Iris Kuo - Argus Media

Rebecca Penty - Bloomberg News

Operator

Good day, ladies and gentlemen. Welcome to the TransCanada Corporation 2014 Second Quarter Results Conference Call. I would now like to turn the meeting over to Mr. David Moneta, Vice President of Investor Relations. Please go ahead, Mr. Moneta.

David Moneta

Thanks very much, and good afternoon, everyone. I’d like to welcome you to TransCanada’s 2014 Second Quarter Conference Call. With me today are Russ Girling, President and Chief Executive Officer; Don Marchand, Executive Vice President and Chief Financial Officer; Alex Pourbaix, President of Development; Karl Johannson, President of Natural Gas Pipelines business; Paul Miller, President of Liquids Pipelines; Bill Taylor, President of Energy and Glenn Menuz, our Vice President & Controller.

Russ and Don will begin today with some opening comments on our financial results and certain other Company developments. Please note that a slide presentation will accompany their remarks and a copy of the presentation is available on our Web site at transcanada.com. It can be found in the Investors section under the heading Events & Presentations.

Following their prepared remarks, we will turn the call over to the conference coordinator for your questions. During the question-and-answer period, we’ll take questions from the investment community first, followed by the media. In order to provide everyone with an equal opportunity to participate, we ask that you limit yourself to two questions. If you have additional questions please re-enter the queue.

Also, we ask that you focus your questions on our industry, our corporate strategy, recent developments and key elements of our financial performance. If you have detailed questions regarding to some of our smaller operations or your detailed financial models, Lee and I would be pleased to discuss them with you following the call.

Before Russ begins, I’d like to remind you that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by TransCanada with Canadian Securities Regulators and with the U.S. Securities Exchange Commission.

And finally, I’d also like to point out that during the presentation, we’ll refer to measures such as comparable earnings; comparable earnings per share; earnings before interest, taxes, depreciation and amortization or EBITDA; comparable EBITDA; and funds generated from operations. These and certain other comparable measures do not have any standardized meaning under U.S. GAAP and are therefore considered to be non-GAAP measures. As a result, they may not be comparable to similar measures presented by other entities. These measures are used to provide you with additional information on our operating performance, liquidity and our ability to generate funds to finance our operations.

With that, I’ll now turn the call over to Russ.

Russ Girling

Thanks, David and good afternoon, everyone and thank you very much for joining us today. We are very pleased to announce another solid quarter with the majority of our business segments performing very well. The Q2 results reinforce our strategy of building a diversified and growing portfolio of critical energy infrastructure projects. We are very pleased with the performance of our gas pipelines and the increased volumes that they are flowing today. This includes the Canadian mainline which has steadily moved over 3.3 bcf a day so far this year at the current time even in the shoulder seasons right now we are moving more than 3 bcf a day which is two times of volumes we are moving last year.

In addition, the Keystone pipeline continues to perform very well including the southern leg of the system that is now operating. To date we have now safely transported over 630 million barrels of oil to our neighbors south of the border.

Turning over to Energy, fundamentals in this business continue to improve and our U.S. power assets produced strong reduced in Q2. However that was somewhat offset by weak Alberta power prices and Bruce Power maintenance outages, we are very confident both the Alberta Power business and Bruce Power positioned for improved results as the Alberta power market fundamentals improved and Bruce operations continue to move towards a steady state.

In addition, our contracted capital program continued to grow in the quarter with an addition of a CAD1.9 billion Merrick Pipeline project, bringing our total of commercially secured projects to CAD38 billion.

TransCanada shareholders will benefit from the predictable and sustainable cash flow earnings and dividends that these projects will deliver for years yet to come. The couple of highlights from the Q2 financials; as I said, our three business performed well during the quarter. TransCanada reported net income of CAD416 million or CAD$0.59 per share. Comparable earnings for the quarter were $332 million or $0.47 per share. That amount excludes a net gain of CAD99 million from the previously announced sale of Cancarp and the after-tax CAD31 million termination expense related to the restructuring of an Alberta natural gas storage contract.

Comparable EBITDA of CAD1.2 billion and funds generated from operations were CAD917 million. Earlier today, the Board of Directors also declared a quarterly dividend of CAD0.48 per common share for the quarter ending September 30, 2014. In a few minutes, Don will offer more detail on our Q2 financial performance, but first I’d like to highlight some of the key developments since I spoke to you last time.

We continue with our preparations for filing our Energy East full facilities application to the National Energy Board, which we are still on track to submit in the third quarter of this year. Consultations and discussions with thousands of stakeholders along the 4,600 kilometer route of the pipeline are ongoing. To date, we’ve held over 2,200 meetings and have answered hundreds of questions at over 81 open houses and communities in six provinces.

These consultations will continue before and after we have filed our NAB application. These face-to-face discussions are vital to ensuring we hear people’s concerns and that we address those concerns in our planning and design. Today, well over 6,000 Canadians have taken part in those open houses. The 1.1 million barrel a day energies pipeline will transport oil from Western Canada, Eastern Canadian refineries and export terminals in Quebec and New Brunswick creating jobs, tax revenue and energy security across Canada. Market demand for this project continues to grow, I’ve to remind you that the $12 billion project is underpinned by more than 900,000 barrels per day, affirm long-term contracts with a diverse set and very credit worthy shippers.

Moving over to Keystone, as you are aware the US Department of State has delayed the decision on a presidential permit for Keystone XL, the State Department has said it requires more time to gather input from eight federal agencies, more time to process the $2.5 million comments from the public comment period and it needs a better understanding of the legal issues in Nebraska.

As we’ve said before in our view this delay remains unnecessary. Five exhaustive environmental reviews since 2000 and over 17000 pages of scientific data concluded the project has minimal environmental impact and significant safety, energy security, employment and economic benefits will accrue from the project. The need for the project remains strong as oil production in both Canada and United States continue to grow shippers remain firmly committed to seeing this pipeline completed. In Nebraska the State Supreme Court said that it will begin to hear oral arguments on September 5th related to the appeal of a lower court ruling by the Attorney General of Nebraska, a decision is expected in late 2014, early 2015. As we had before a majority of Americans continue to support this pipeline, the project has strong bipartisan political support in Washington and in all the states along its path.

We remain confident that Keystone XL is in the national interest of the United States and it will ultimately be approved. We anticipate the pipeline will be operational approximately two years after we receive a presidential permit. Back here in Alberta, we continue to advance our $3.5 billion investment plans for oil infrastructure from Fort McMurray to Hardisty. Last week the Alberta energy regulator approved our application for the Northern Courier pipeline project. The $800 million 90 kilometer pipeline will transport bitumen and diluent between Fort Hills, the mine location and the bitumen extraction facility in Suncor’s East tank farm located north of Fort McMurray. The pipeline is 100% subscribed under long-term contracts with the Fort Hills partners. We expect construction to begin shortly and Northern Courier should be in service in 2017. Moving to gas, we have filed regulatory applications for both our $5 billion Prince Rupert gas transmission project and the $4 billion Coastal gasoline project, fieldwork and community consultations continue to progress, final investment decisions for both of those projects are expected in the 2014-2015 timeframe.

Now a couple of comments on our NGTL system: we continue to experience unprecedented interest in connecting new supply to the NGTL system as Alberta and Northeast British Columbia gas production continues to grow. $250 million of NGTL projects have become operational so far this year and we have another $3.8 billion that are either under construction or in the process of seeking NEB approval. That total includes the $1.7 billion North Montney project that will extend the NGTL system further into British Columbia. We anticipate an NEB decision on the North Montney extension in the first quarter of 2015. Continuing with the NGTL expansion in early June, we announced the Merrick Pipeline project. This $1.9 billion 260 kilometer pipeline would transport natural gas through the NGTL system for delivery into the proposed Pacific Trails pipeline and onwards through an LNG facility in Kitimat, British Columbia. Subject to approvals and positive investment decision, we expect Merrick to be in operation in the first quarter of 2020. Looking forward we continue to work through significant requests for additional pipeline receipt and delivery capacity on the NGTL system which I expect in the next couple of months will lead to additional firm contracts for extended capacity and significant capital investment requirements.

Moving over to the mainline, in May we filed a project description with the National Energy Board for our proposed Eastern mainline project based on our recent open season the project would see us add 600 million cubic feet a day at capacity to ensure we meet the needs of existing shippers as well as new firm service commitments contracted for the Eastern triangle segment of the Canadian mainline. Finally in the gas pipeline segment, we continue to pursue opportunities in both United States and Mexico including further extensions of the ANR system which would connect growing natural gas supply in the Marcellus and Utica formations to North American markets and in the longer term an Alaska LNG export pipeline. In oil pipelines we continue to develop potential opportunities that will both build on our existing pipeline footprint and look for new ways to get growing crude oil production in North America to market.

In the power segment we continue to assess opportunities in our core market areas. This includes regions where we are currently seeing strong demand growth like Alberta and we’re also seeking growth through things like Bruce Power where we continue to negotiate arrangements with the Ontario government to replace or refurbish Bruce Power units 3 through 8, is recognized by all parties that these units are critical to providing emission less base load electricity for the people of Ontario for decades to come. And finally a few comments on the significant shareholder value we expect to create as we advance our $38 billion capital program. The scope and scale of these projects is truly unprecedented. Once they are completed, we expect our position as a leader in each of our core North American businesses to grow even further. The portfolio includes $21 billion of crude oil pipeline projects, $15 billion of natural gas pipeline projects and $2 billion of power generation facilities.

Each of these projects is back by either a long term takeaway contract that averages 20 years or more or traditional cost to service model. As a result, the earnings and cash flow we would generate from these assets is expected to highly predictable and sustainable for decades to come.

Though this includes the four large scale infrastructure projects that I touched on earlier specifically Keystone XL, Energy East, Prince Rupert and Coastal GasLink together those projects represent $26 billion of a $38 billion growth portfolio, all of these projects were expected to come into service in the second half of this decade once completed these projects will transform a company and provide growth for our shareholder well into a next decade.

In addition, we are currently in various stages advancing $12 billion about $38 million program a smaller scale, shorter term projects that include $4 billion on an NGTL system, $3.5 of Alberta oil expansion, $2 billion of Mexican gas infrastructure projects and $1.5 of New Energy Infrastructure projects. The majority of those projects are expected to become operational between now and 2017.

As I mentioned a moment ago, we are in the process of reviewing other opportunities in all three of our core businesses that will enhance our current asset portfolio and position us better in the long term. The activity combined with the $38 billion of already commercial secured projects will almost certainly exceed our internally generated cash flow in debt capacity, as we’ve previously communicated is our intention to finance this projects in a way that maximizes value for our shareholders.

Specifically, we’ve indicated that we have numerous attractive alternatives for example we have indicated that it is our intension to divest 100% of our U.S. pipeline portfolio in the PC pipelines LP and we’ve been busy over the last months laying the ground work for that to occur. Don will highlight this and some other options in his talk. And we continually assess market conditions and involve them as our funding needs become more visible.

In summary, our fundamental strategy is to focus on our core businesses and it will always be on maximizing shareholder value through going cash flow earnings and dividends. We had some delays in our project approvals, but the necessity of this infrastructure requirement is clear and we remained confident in all of their approvals.

Today we have an enviable well diversified footprint of critical energy infrastructure assets that delivers stable and growing cash flows. We have $38 billion of high quality commercially secured projects and we are now positioned to capture more. These are high quality nature of that base footprint as well as the contracted development portfolio, we have access to many attractive value adding financing alternatives.

We remained disciplined and focused on executing our plans, growing cash flow and dividends and delivering on our commitment to grow shareholder value. That completes my prepared remarks and I’ll turn the call over to Don for further details on our quarterly results.

Don Marchand

Thanks Russ and good afternoon everyone. Before I run through our Q2 results in detail I’d just like to highlight a few key messages. The majority of our business segment performed well during the second quarter which highlights the benefits of our diversity and critical energy infrastructure assets.

$3.3 billion of new assets are now contributing to earnings and cash flow which partially offset weak Alberta power prices and maintenance outages at Bruce power in the quarter.

And finally, we remained well positioned to fund our $38 million portfolio of commercially secured projects with predictable and growing cash flow, a strong balance sheet and access to multiple attractive external funding sources.

Now moving to our consolidated results shown on the next slide, net income in the second quarter was $416 million or $0.59 per share compared to $365 million or $0.52 per share for the same period in 2013, excluding this specific items highlighted on the slide, comparable earnings in the second quarter of $332 million or $0.47 per share were $25 million of $0.04 per share lower than the same period in 2013.

The decrease in comparable EPS was primarily due to reduced earnings from Western Power as a result of soft Alberta power prices and lower equity income from Bruce Power due to higher planned and unplanned outage day at Bruce A. This was partially offset by new contributions from the Keystone Gulf Coast extension and the Tamazunchale extension in Mexico, as well as higher realized capacity prices at U.S. power.

Turning to our business segment results at the EBITDA level. Our natural gas pipelines business generated comparable EBITDA of $759 million in the second quarter 2014 compare to $644 million for the same period last year. Canadian gas pipelines comparable EBITDA of $549 million increased 58 million compare to 2013 driven by flow through items from both the Canadian mainline and NGTL which do not have an impact on net income.

Net income from the Canadian mainline was $9 million lower compare to the same period last year, as a result of a lower average investment base as well as carrying charges owed to shippers stemming from a positive toll stabilization account balance. NGTL’s net income was $58 million was unchanged year-over-year. Positive impact for the larger average investment base and higher allowed return on equity at 10.1% were offset by increased OM&A costs at risk under the terms of the current settlement which expires at the end of 2014. U.S and international gas pipeline’s comparable EBTIDA of $212 million increased $54 million compared to second quarter 2013 primarily as a result of the commencement of contract revenues being recognized from the Tamazunchale extension and the positive impact of the stronger U.S. dollar.

Construction activity on the Tamazunchale extension has been delayed as a result of archaeological findings on the route. However, the pipeline is expected to be completed by the end of September. These delays are recognized as a force majeure and provisions under the contract CFE allow for the collection of revenue which has been recognized in the second quarter.

Turning to liquids pipelines, the Keystone pipeline system generated CAD256 million of comparable EBITDA in the second quarter. The CAD69 million year-over-year increases is a result of the Keystone Gulf Coast extension which was placed into service in January along with the favorable impact of a stronger U.S. dollar. Liquids pipeline development expenses were CAD6 million primarily due to lower capitalization of development costs.

In Energy, comparable EBITDA was 231 million in the second quarter compared to 330 million for the same period last year. The 99 million decreased was the result of several factors. Western Power comparable EBITDA declined CAD71 million as a result of lower realized prices. Despite robust Alberta power demand growth, the return coal-fired capacity and incremental wind generation led to weaker power prices.

The second quarter average pool price was CAD42 per megawatt hour compared to a CAD123 in the same period last year. In July, power prices in Alberta have been encouraging as they’ve rebounded and averaged over a CAD110 per megawatt. Bruce Power’s equity income decreased $35 million due to higher planned and unplanned outage days at Bruce A partially offset by fewer outage days at Bruce B.

Overall, availability percentages in the second half of 2014 are expected to be in the low 90s for Bruce A and high 80s range for Bruce B if there are now further planned maintenance events scheduled at Bruce A and just one remaining at Bruce B scheduled for one of its units in the fourth quarter. As a result, we expect Bruce Power to deliver improved results in the balance of the year.

U.S. power comparable EBITDA increased CAD14 million in the second quarter, compared to last year, primarily due to higher realized capacity prices in New York, higher hydro generation volumes and the favorable impact of the stronger U.S. dollar. Natural gas storage comparable EBITDA of CAD2 million was down CAD7 million compared to the same period in 2013 due to decreased proprietary and third party storage revenues as a result of lower realized storage spreads. This trend is expected to continue as summer winter spreads remain challenged.

Now turning to the other income statement items on slide 17. Comparable interest expense rose CAD45 million in the second quarter to CAD297 million from CAD252 million in 2013. This increase was primarily due to interest charges on recent U.S. debt issues and higher foreign exchange on translating interest denominated in U.S. dollars, partially offset by Canadian and U.S dollar debt maturities.

As I’ve highlighted in the past, exposure to U.S. dollar income is largely offset with U.S. dollar denominated interest expense and financial derivatives, the net effect of which is that currency movements do not have a material impact on earnings over a rolling 12 month for a period.

In the second quarter, $63 million of interest was capitalized to assets under construction compared to 60 million for the same period in 2013. This reflects higher capitalized interest for the Keystone XL, Mexican LNG and other liquids pipeline projects offset by the completion of the Gulf Coast extension of the Keystone system.

Comparable interest income and other for second quarter increased CAD31 million compared to 2013 due to lower realized losses on derivatives used to manage our net exposure to foreign exchange fluctuations on U.S. dollar income, the impact of currency translation fluctuations on working capital balances and AFUDC related to our rate-regulated projects.

This includes Energy East which meets the requirement per rate regulated accounting under U.S. GAAP. Comparable income tax expense for second quarter 2014 increased CAD29 million versus the same period last year due to higher pre-tax earnings changes in the proportion of income earned in higher tax jurisdictions as well as higher flow-through taxes on Canadian-regulated pipelines. Excluding Canadian regulatory flow-through pipelines, the effective tax rate in 2014 is expected to be in 27% to 28% range.

Net income attributable to non-controlling interests raised $8 million compared to the same period last year due to the partial sale of GTN and Bison last July to our MLP TC Pipelines. Preferred share dividends of CAD25 million were CAD5 million higher in second quarter 2014 as a result of the CAD450 million series 9 issue completed in January 2014.

Now moving onto cash flow and investing activities on slide 18. Cash flow remains solid with funds generated from operations of CAD917 million in the quarter and in excess of CAD2 billion year-to-date. Capital expenditures were CAD 967 million in the second quarter driven principally by Mexican pipelines and GTL system expansions and construction activities on the Houston lateral and tank terminal. Equity investments of Sean CAD40 million in the quarter reflect activity related to the Grand Rapids pipeline and Bruce Power. Finally, the sale of Cancarb closed on April 15th and resulted in net proceeds of CAD187 million.

Now turning to slide 19, our liquidity in excess to capital markets remain strong. At June 30th, our consolidated capital structure consisted of 40% common equity, 5% preferred shares, 2% junior subordinated notes and 53% debt net of cash. We have $565 million of cash on hand along with $5 billion of committed and undrawn revolving bank lines available with our high quality bank group. Our two commercial paper programs, one in Canada and one in the U.S. remain well supported and continue to provide flexible and very attractive sources of short-term funds.

As I mentioned earlier, during the second quarter, we closed the sale of Cancarb and its related power generation facility for net proceeds of a CAD187 million and realized and after-tax gain of CAD99 million.

Looking forward, we remain well positioned to finance our CAD38 billion portfolio of commercially secured projects, underpinned by predictable and growing internal generated cash flow from our CAD55 billion diversified asset base and new senior debt consistent with our A grade credit rating.

Beyond these two funding sources, additional capital in the form of preferred shares, hybrid securities and portfolio management, including the drop down of assets into TC Pipelines LP are expected to help fund our growth plans.

Over the next several years, we are committed to vending in all of our remaining U.S. natural gas pipeline assets into TC Pipelines. These assets that remain on balance sheet are expected to generate approximately US$500 million of annual EBITDA once all of ANR’s new contracts kick in by the end of 2015. TC Pipeline’s strong balance sheet, investment grade credit rating and the intent to launch their new at the market equity program positions it well for future drop downs.

Finally, as we progress through key upcoming stage gates on many of our large transformative projects, we will actively consider additional portfolio management activities, partners, project financing and reinstatement of our dividend reinvestment program from treasury as an alternative to discrete common equity issuance.

In closing, the company produced solid second quarter results despite weak power prices in Western Power and maintenance outages at Bruce Power. Year-to-date comparable earnings per share and funds generated from operations are up 4% and 8% respectively compared to 2013. CAD3.3 billion of new assets are now contributing to earnings in 2014 including the Keystone Gulf Coast extension, the Tamazunchale extension and various expansions on the NGTL system.

In addition, we continue to advance our CAD38 billion of commercially secured projects and are well positioned to finance this capital program. Our impressive slate of critical energy infrastructure projects is expected to generate significant growth in earnings, cash flow and dividends for our shareholders over the remainder of the decade.

That’s the end of my prepared remarks. I will now turn the call back over to David for the Q&A.

David Moneta

Thanks, Don. Just a reminder, before I turn it over to the conference coordinator, we will take questions from the investment community first. And once we’ve completed that, we’ll turn it over to the media.

So with that, I’ll turn it back to the conference coordinator for your questions.

Question-and-Answer Session

Operator

Thank you. We will now take questions from the telephone lines. First from the analysts. (Operator Instructions). The first question is from Carl Kirst from BMO Capital Markets. Please go ahead.

Carl Kirst - BMO Capital Markets

I certainly appreciate the comments on the MLP. Maybe I could start there. Obviously Don, there is a bit of contingent pipeline funding, XL, Petronas, what not, that could quickly build to very large 2015, 2016 CapEx years. I'm a little, I guess concerned is the wrong word, but to the extent that we look at the MLP, what do you think is the pace of the gating factor as far as how many drops you could do, how much equity you actually could pool from the MLP? And I'm thinking about this from a timing standpoint, but is it prudent to wait until after some of these contingent pipelines get approved to know you need the funding or do you start doing it today, because of quite frankly, a more limited pace, there's only so much you can put into the retail market, so we kind of need to start building that today. How do you plan, how do you think of that?

Don Marchand

There is an element of use of proceeds to it clearly. We also have CAD12 billion or projects aside from the big four transformative ones. So just waiting for us to cross one of the stage gates on those projects is not necessarily a pre-requisite for these drop downs. So we are not waiting for one of these large binary outcomes to possibly in our favor here. So with that, I think a couple of dropdowns a year are certainly possible. And as we do drop assets into there, the size of the vehicle grows and its ability to take assets grows along with that. We are certainly subject to market conditions in the MLP space as well. We have taken steps with this at the market program here to be able to continuously feed equity into the market place which allow us to some flexibility in the timing and funding of these things.

Russ Girling

I think another factor Carl, has been us wanting to ensure that we have this assets in a position that we can maximize the value for TransCanada offset by as you said the considerations around timing and market conditions but certainly the work we’ve done around day and our for example to extend the contract life was very important and we’ve been working on that for some time, as well on the cost and restructuring side of that business, in order to firstly maximize EBITDA and give it to long term stability which in our view leads to maximum proceeds down the road for a trap that we can use to define our capital program. So a lot of those thing are been put in place and are, part of the process on timing as well.

Carl Kirst - BMO Capital Markets

Appreciate the color. And maybe if I could follow-up just with a question specifically on Bruce. I guess we have sort of now back-to-back quarters of fairly large unplanned outage days at Bruce A. Can you give us a little bit more color on were those perhaps associated items, is it just sort of coincidence how we had two sort of more challenged quarters back-to-back and what gives you the confidence that whatever challenges were there are now put behind us?

Bill Taylor

Yes, it’s Bill, Carl I can take that question. Well, first of, some of the, at least one of the outages at Bruce A that occurred in Q2 was really spill over some of the issues that will occur in Q1 that issue is largely behind Bruce at this point is the view so we’re not expecting any further issues from that particular issue. There is been a couple of added unplanned outages that were caused by some issues on the transmission system that really are nothing to do with Bruce’s operations per say, but rather the power system being in the position where it was unable to get accept Bruce’s continue run due to a contingent event on the power system. So a couple of those sorts of things occur. And then one added issue in the Q was the planned outage at the Unit 3 which was extended to do work which were really shorter any future outage that’s needed at Unit 3 we’re just sort of an extension of the scope of that outage once they get into it. So again we don’t we expect that to be really positive things for the future. So, overall as Don mentioned, we expect Bruce to come into one with their outage situation in the second half of the year.

Operator

Thank you. The next question is from Matthew Akman from Scotiabank. Please go ahead.

Matthew Akman - Scotiabank

On the MLP you guys talked about gas pipe dropdowns; I'm just wondering if you've thought about oil pipe dropdowns as well and whether there would have to be some significant change in the mandate of TCP or whether those fit strategically in your mind.

Don Marchand

Yes. Hi, Matthew its Don again here. Putting Keystone would be a qualifying asset into the LP, we would not describe as a mature asset at this point certainly we would, we expect Keystone XL to come in, into services some point here and then synergistically put all of this together and we benefit from that. And we do have $4 billion plus of assets ahead of it in the Q. What I would say though is, if we can get all these large or many of these large transformative projects over the finish line, it is certainly a lever we would pull that we would way against things like common equity issuance or partners at that point in time. So we not saying yes, absolutely saying, yes it qualifies and something we would, we had actively consider down the line in the circumstances at that point.

Matthew Akman - Scotiabank

Okay. Thanks. A follow-up question; Russ was mentioning some potential expansion on NGTL. I'm just wondering, I don't know if this is Russ or Carl, but if those relate to more LNG type pipeline expansions or if those are related more to intra Alberta drilling and pick up in NGL related gas drilling?

Karl Johannson

Hi Matthew, it’s Karl I can take that. I think we’re taking more just to new supply and load on our system demand on our system. So we have had some, I’d substantive subscriptions for new service on our pipeline now what we’re going as we’re going through and we’re qualifying them to getting contracts and what not signed and then we will determine what the expansion that we need that will come out of that, so that will take us few months to get sort of out. But yes, we’ve seen just some growth both in the demand for gas and receipt service for new supplies coming up on NGTL.

Don Marchand

Matthew may I just added to it. Is we did experience and extremely cold winter across North America and Alberta was no exception and what we found on the NGTL system that our customer found on the NGTL System was, to the extent that that used interruptible capacity historically, though that interruptible capacity wasn’t available on cold winter days, now that demand is growing quite substantially. And things like Fort McMurray for example and our customers have back to us with pretty significant requests for additional delivery capacity for that current need but as well for future growth and in expansion needs. So as Karl said it’s more related to inter Alberta, your growth and supply end and quite frankly your demand that hasn’t been addressed in some time.

Operator

Thank you, the next question is from Robert Kwan with RBC Capital Markets, please go ahead.

Robert Kwan - RBC Capital Markets

Just on the Mainline, I was wondering how the second quarter cash collection was versus budget and if you can just update where you are with the variance account and any thoughts on how you might like to dispose of it and when you might book it?

Don Marchand

Ah yes, I can deal with that, we’re forecasting not only a positive cash balance in the TSA count of close to $400 million, and most of that was actually accumulated in the first quarter, but a little bit was cumulated in the second quarter and there’s a little bit of a forecast for the rest of the year as well. The long term investment account that we had which really is essentially the deferrals from previous years and the collections from previous years sat at $350 million at the end of the year, so we have asked through our filing, our latest filing on the LDC settlement, we asked the board to take the surplus out of the TSA account and apply it to long term adjustment account so that we can essentially collect our uncollected revenues from previous years and that is yet to be ruled on by the board, we would expect that that’s a reasonable thing to do, we have to wait for the board to opine on that.

Robert Kwan - RBC Capital Markets

Okay, that’s great. And then just if I can turn to Bruce; obviously with the decline in Ontario power prices, the floor makes a lot of sense. I'm wondering though what your expectation for price is with respect to the variable lease payment and where you expect that to settle and how the lease payments might be versus previous periods?

Bill Taylor

I guess the approach on that is that we do as you point out expect a floor to be in play again this year although as you recall prices in Q1 were quite strong, you know that has really come back more into line and in regards to the lease payments I guess we don’t expect there to be any positive impact on lease payments in the coming year in the current year.

Robert Kwan - RBC Capital Markets

So just to be clear, the high prices in Q1 put you in a bit of an awkward zone where it's a bit of a headwind, I guess?

Russ Girling

Well, I think maybe Glenn would like to comment on how we treated Q1 which I think we covered last call but….

Glenn Menuz

Robert I think it’s fair to say that as Bill saying that we expected the weakness in the prices coming off the strong first quarter, so you’re right, it’s somewhere in that zone, somewhere between the threshold price on the threshold spot price on the lease reduction and the floor price. So but with respect to what Bill was alluding to on the first quarter we did defer the spot excess, the excess of the spot price over the floor price in the first quarter because we did not think we’d be able to realize on that through the rest of the year because the annual spot price would end up being below the floor price and lo and behold that’s exactly what happened in the second quarter, second quarter average spot was below the floor and in fact the year to date at June 30 was already below the floor so that entire amount that was deferred in the first quarter was reversed and as a result what we expect to see is, as long as annual spot prices continue to be expected to be below the floor if we would book the floor price each and every quarter of the year.

Robert Kwan - RBC Capital Markets

Okay and the same thing with the lease payment?

Glenn Menuz

The lease payment, this part we haven’t made any accrual for any reduction in lease price because at this point we don’t have clarity that that would kick in.

Don Marchand

Robert, you know at the end of the day we’d fully expect that we’ll realize the floor price for Bruce Power and with regards to headwinds there’s no real headwind that’s a carryover from Q1. If there’s any headwind I guess by the end of the year we wouldn’t expect to realize a lease reduction as we have in the last year or two.

Robert Kwan - RBC Capital Markets

Got it, thank you.

Operator

Thank you, the next question is from Paul Lechem from CIBC, please go ahead.

Paul Lechem - CIBC

Since we're on Bruce, I was wondering if you have any further comments on the negotiations, the refurbishment of the remaining years. I think Russ mentioned that those are underway in his opening remarks. Is there any further color you can give in terms of timeframes or any other thoughts on that process?

Bill Taylor

Sure, it’s Bill again. Well first off I just would clarify that those discussions are underway between Bruce Power and the government of Ontario, and their agent the Ontario Power Authority. And by all accounts the discussions are going well and the owners are engaged in that process ourselves and Borealis. And the discussions are ongoing with active effort on it as to timing. We can’t say for sure there is a lot of moving parts to it but as Russia indicated we’re quite hopeful given the interest in that we and Borealis have in continuing at the site to refurbish the units and also the government’s interest in the Transaction, we are hopeful that something we will be able to come together that’s workable for both side.

Paul Lechem - CIBC

Is there any timeframe? Given the units have a midlife, end of life by the end of the decade; is there any timeframe where you need to get this negotiation complete so you can sort of get these things refurbished in time?

Bill Taylor

Well, the schedule as to exactly which units would be refurbished and in what order is certainly a point of discussion with the Government and the timing and sequencing of those is something that Bruce Power is concerned about as well as the Ontario Power Authority is relative to securing supplies for Ontario. So I mean there isn’t a hard Dave by which I can say to you that we have to have things buttoned up relatively to that schedule, but clearly the schedule is part of it from the Government’s perspective and Bruce’s perspective, it is a matter of discussion in the negotiation and but it’s not dispositive to an exact date as to when things have to be done.

Don Marchand

I’ll add to Bill’s comments. Obviously we want to get this done as quickly as we possibly can. I believe that Ontario Government is motivated to do the same but it is a complicated conversation and I would say in the next 6 to 12 months hopefully we will have far more visibility on the question of timing and those kinds of things. But I can tell you that all the parties at the table are motivated to get this done.

Operator

Thank you. The next question is from Linda Ezergailis from TD Securities. Please go ahead.

Linda Ezergailis - TD Securities

I have a follow up question with respect to U.S. MLP. I am wondering how TransCanada Corp is thinking of what might be an appropriate range of ownership levels overtime for their U.S. MLP affiliates and would you take paper in a transaction just to kind of help with the lumpiness and timing?

Don Marchand

It’s Don here Linda. We don’t have a specific level of ownership that we are targeting at this stage, In terms of taking paper for doing more of a big bang dropdown. We have weighed that against a more conveyer belt sequential vending of the assets per cash and at the current time we feel that’s the better root as it matches proceeds, use of proceeds at the big TransCanada level. I guess our concerns on taking back paper would be creating an overhang in the marketplace. Given that would be our intention to monetize, to fund our capital program at big TransCanada, s at this stage we are in the camp of the conveyer belt approach to it.

Linda Ezergailis - TD Securities

And as a follow-up question, I don't know if this is for Bill or who, but can you give us an update on your view of the outlook of the Alberta, New York and New England power markets, both in terms of pricing and how that informs your thoughts about new assets, whether to build or buy in those markets?

Bill Taylor

Sure. Well, that’s a pretty broad question but I would say that clearly in as indicated in the results, we have been having on a U.S. power that we are seeing some improvement and strength in both the New England region and the New York region. The New England situation is partly driven by as you May know, improve energy spreads that are driven by some gas infrastructure challenges that are affecting peak natural gas prices in the region and that’s spilling over into the energy markets and that driving some of our results.

In New York, the capacity prices have been stronger and I would say that in both locations however, it’s still quite challenging to make the economics work for new investment, even with the improvement that we’ve seen. So we’re hopeful that, that will continue and that opportunities will be there or well situated with our holdings in both regions to look at, refurbishment type expansions at both Ravenswood and our locations in New England. So it’s something that’s on our radar but we’re just waiting for the economic signals to be strong enough to justify that.

In Alberta, as you know the last quarter was dominated by quite a lower prices than say a year ago this time. However, I think as evidenced more recently in the last few weeks here in July we’ve seen a lot stronger demand in Alberta. I think they yesterday alone they hit a new all-time peak, is my understanding. I mean the fundamentals are strong in Alberta. We definitely see that on the horizon and there should be some continued strengthening in prices as that demand continues to grow.

Linda Ezergailis - TD Securities

Does that suggest that you're starting to sharpen your pencil for investments in that market?

Russ Girling

We are always looking at the Alberta market again we haven’t, we have a couple of project including the Saddlebrook project which you may be aware of which we have got in development and when we see the conditions right, to go have something like that then we certainly would but we don’t add anything to be specific on at this momentum in time.

Linda Ezergailis - TD Securities

So no corporate transactions or acquisitions in that market?

Russ Girling

There is, like I said we’re always looking at opportunities and to the extent that we see something looks understanding and then we would perceive at that point, but no.

Operator

Thank you. The next question is from Steven Paget from FirstEnergy. Please go ahead.

Steven Paget - FirstEnergy

My first question is on the Marcellus. The growth rate in the Marcellus in 2014 year-to-date is 3.8 Bcf per day versus 2013. This is a record growth rate, so it's growing faster than ever. How is this increasing growth rate affecting your plans? Do you in particular see making any changes to your network deals on those probably [indiscernible] such as Eastern Mainline and [indiscernible].

Russ Girling

I guess, I can make comment here and if somebody else wants to jump in they can add to it. But certainly this growth in the Marcellus is going to lost on us, you’re right it is record growth and it is a very substantial volume. Now we have the inner beneficiary of that growth that a lot of the -- some of the volume that came into ANR are from the Marcellus area and certainly put Marcellus and Utica, some of that volume is getting to the ANR. Our restructuring, our LDC settlement application that is in the front of NEB right now they absence of that application is to build out the sudden constraint of the Eastern triangle of our mainline system Parkway to Maple area so that our customers can get more supply from Marcellus bringing it up into Dawn (ph) and then move to our systems. So that’s really the essences of the LDC settlement that we have there. So yes, TransCanada I think is looking at Marcellus and then looking at the big opportunity there for some of its assets. And also add to that we’re starting to see more and more activity around our investment in Iroquois Pipeline system where Marcellus is starting to move into Iroquois system, so it’s been a pretty good. The increased volume has been in pretty good new story for TransCanada.

Steven Paget - FirstEnergy

On CapEx, you've got a total CapEx of CAD5 billion for 2014, which I think in effect means you're spending about CAD3.3 billion in the second half of the year, which is more than you spent in the first half. Is this guidance still in effect and which of the projects is soaking up big portions of the capital?

Don Marchand

Yes. It’s Don here. Yes. We’re still at the $5 billion figure as CapEx and equity investments. So we add in the Grand Rapids and Bruce in the first quarter there. So even the first half. The major projects underway right now there’s a significant build going on in Mexico right now we’re top of the Topolobampo and Mazatlan and GTL expansions and we’re finishing the Eastern Lateral as well we’re working on the LNG projects to the west coast and some preliminary expand on energy east. So it’s spread around fairly well. But we are still, yes, we do expect a busy second half here towards that 5 billion number.

Operator

Thank you. The next question is from Andrew Kuske from Credit Suisse. Please go ahead.

Andrew Kuske - Credit Suisse

I guess my first question is for Don and it's just in relation to your capital structure. How much of a slug of preps do you think you can have with great comfort in your capital structure overall?

Don Marchand

We look at the preps and hybrid securities as it’s kind of a mezzanine basket here, around the 12% area capital structure as we, where we believe the equity credit starts to diminish from the agencies, so we’re at 7 right now so there’s a fair bit of headroom there in those products.

Andrew Kuske - Credit Suisse

Okay. That’s helpful. And then I guess sort of somewhat related; as you go through your capital program and obviously you've got the drops that you can do to free up a lot of capacity on things, but do you see a need, if a lot of the projects start to hit all at one time, to really expand the size of your credit lines?

Don Marchand

Potentially, I mean we will cautious on that front, we’re always cognate and the risk of market disruption. So as that’s the safety valet for that we generally assume we’ll have capital market access at all time, we have a battle test I the way we didn’t actually draw our lines and follow the way but that’s something if the magnitude of the CapEx does ramp up we’d look to do that, we’re about 5 billion right now. And I would expect there be significant capacity available for us from the banking community.

Andrew Kuske - Credit Suisse

Then just in relation to Apache's announcement this morning of effectively exiting the LNG project that they have; to what degree do you think this is really just their specific circumstances relative to the two situations you're aligned with? And then I guess a follow-up to that is, do you have any interest in the Pacific Trail Pipeline, really a preexisting line going across BC?

Russ Girling

Well, first of all I think we always understood and we are aware of that. Apache was looking to sell down some of their interest in this project. Now they’re announcing it today, I haven’t had chance to talk to them about it, I haven’t been able to get a hold of them, but I noticed they used the word exit and I don’t know what that exit means, are they selling on all their interest in project, are they selling down both the upstream and downstream, I just don’t know. But we did know that they were looking to exit at least the piece of this project.

So that suggests to me that this is nothing fundamental with the project. I know Chevron is still, from what I understand, is still committed to the project and we’ll see how that transition goes and who picks up that piece. So as far the Pacific Trails pipeline, it’s certainly as of right now this partnership is still is planning on owning that pipeline but certainly if they were to look for somebody to take that from them and develop it, we would certainly be interested in it, we would look at it at that time.

And I’d also just add on the project itself, nobody has asked us to slow down our spend or anything on it. So from our perspective, they’re still -- we’re still trying to meet our deadlines for the Kitimat Project on the Merrick Pipeline. So we haven’t had any of the conversation of any of the partners to curtail or slowdown any of our work on that, on the Merrick pipeline.

Operator

Thank you. The next question is from Faisal Khan from Citigroup. Please go ahead.

Faisal Khan - Citigroup

I have a couple of questions on corporate strategy here, especially as you guys embark on a large capital spending program in the pipeline space and I appreciate the details on all the capital spending. I was wondering if you guys could discuss the benefits of sort of keeping the power and pipeline assets together as a consolidated company, and more specifically, if you could kind of go into what you guys the sort of operational and commercial synergies are of sort of keeping these assets together, especially as you embark on this large potential spending program in the pipeline space?

Russ Girling

Sure Faisal it is on an ongoing basis, we look at our portfolio since I determine what’s a value, what’s not a value. Our power portfolio has been, is growing consciously and very specifically along the asset footprint of our pipeline. So if you take a look at a map, you can see very clearly that where we’ve located our power facilities are in jurisdictions that we know and understand that where we have competitive advantage.

And as a result we have been able to build a power business in those regions which I think is quite enviable, both in terms of this contracted kind of nature but as well in terms of the merchant capacity that we have is the low cost merchant capacity in the market. So in Alberta for example, the coal-fired PPAs are the low-cost contributors. And as I sort of look at, sort of the synergies between those two groups and why we have been able to grow that group in that profitable way relative to our peers in the what I call the IPP space and that have had to take on I think investments at up lesser quality and because of not being as diversified as we’ve been.

All of our customers on the pipeline side are the same customers that we have on the power side. All of the regulators in each of those jurisdictions are identical for the regulators we deal with on those sides. The people that we have operating those assets in those regions obviously if you look at the footprint, we have a centralized operating group that operates both of those. So whether we are operating a turbine that will turn a compressor or turbine that will turn a generator, it’s the same equipment and we guys are pretty significant in operating economies of scale both from a purchasing perspective but as well from an operating perspective and being able to operate that similar equipment across the asset base. And then from a funding standpoint, we have funded that business quite substantially through a period where we didn’t have a lot of pipeline investment, a good deal of our capital, free capital was spent in that business and we’re now in a position to harvest that if you will our investments in power. Albeit we are still getting those assets up and running the way we want to but we have put in a couple of billion dollars into that base over the last a little while and invested in several others they are now flowing cash and those cash close will be used to fund capital in our other businesses.

But there is still some maturing left to go on in that business as we talked about here earlier. The true value of Bruce will be realized if we can get a long-term extension in the units 3 through 8 and that conversation is going on with the Government of Ontario as well the in the Alberta we’ve got the expiry of our PPAs in the 2017 to 2020 horizon. Again we want to work on ensuring the longevity of that business and maximizing the value of our position for TransCanada shareholders today. So that’s not to say that we don’t look at these things in terms of separating companies at some point in time in the future, but as we look at it today, there is still a lot of value to be gained for TransCanada shareholders through the integrated management approach that we've applied, and as well from a funding perspective. So as I said there’s -- that doesn’t mean that in our portfolio there’s not a group of those assets, as Don said that it could be bundled in the event that we need to access alternative financing forms for funding our capital program. I look at our contracted base of gas, gas assets, our contracted base of solar assets that we now have under construction, our wind assets, run-of-river hydro, all of those can attract low cost to capital in the market place and in the event that we require additional funds, that’s another lever we can pull from financing perspective down the road so we look at it as a portfolio of assets that has considerable upside potential for our shareholders and an optionality in terms of their financing potential going forward, so, that’s currently the way we look at our power portfolio.

Faisal Khan - Citigroup

Okay, I appreciate those comments I'm just wondering, one last question on this topic. Do you think the volatility in the earnings, and we discussed it today on the call, is sort of a volatility in western Canadian power prices and for that matter, the outage days in Bruce? Do you think that earnings volatility around EPS and some of the recontracting issues in the future sort of clouds the value of the pipeline business and potential growth on the pipeline business? You spent an awful lot of time talking about power when the real growth is coming from the pipes. I'm just wondering if you think there's maybe a discount in the stock or a sum of the parts discount, because of the volatility in power and because it takes up a lot of time in terms of trying to get investors to understand it?

Russ Girling

That is a question that we ask ourselves again, what assets are best fit for our portfolio and as I said that our approach to the power business is try to ensure that the power assets we bring into the either portfolio or investment grade and I guess when I think about merchant assets, merchant gas-fired assets, historically I wouldn’t call it investment grade assets and without a contract associated with them, so as you look through our portfolio at the percentage of what I’d call truly merchant power exposed to prices and volume interruptions are fairly minimal, all of our gas-fired power with the exception of Ravenswood is contracted. Ravenswood’s got a capacity market which to your point is somewhat difficult and sometimes but again provides us with steady cash flow. When I look at the other assets that we’ve -- merchant assets that we’ve put in place, they have minimal volatility relative to what most people think about in the power business. I think the run-of-river hydro unit for example in the New England region, it’s the lowest cost producer, it runs every day, we’re sure that we have revenue on a standalone basis it’s investment grade, on a 60-40 like balance sheet. So it sort of -- from balance sheet perspective is, fits with ours, I think at Bruce Power again you’re contracted to an A-grade credit counterparty at a fixed to an escalating price in the future of field costs, pass through, we do have operational risk and given that we’ve just refurbished those facilities we have had some volatility in the operation but I would expect that to dissipate over time and I think if you look at the operations at Bruce P, I think you can see that that -- a steady state run Bruce running full time can generate pretty steady cash flow from a very high, highly credit worthy counterparty and they’re sort of going back to Alberta. Alberta primarily contracted on the gas side and the lowest cost production in the province is coal that runs every day and it does have some price volatility associated with it, it doesn’t go to a level that we can call it sort of investment grade if you will. So as I think about our portfolio we tried to consciously make that portfolio as closely aligned from a balance sheet perspective as we can to the pipeline business, we haven’t entered into what I call the truly merchant space that causes the rating agencies to have a great anxiety, now the edges we have a little bit of that but if you look at where we’re going with our power business over time, with things like our investment in Bruce, the Napanee facility, the solar facilities that we’ve got under construction right now, are percentage and then you add that to our portfolio on the pipeline side of contracted facilities the percentage of volatile earnings or cash flow from this company declines from what I think is a very small number today to even a small number three or four years out, so I think that there’s added value to our shareholders of that optionality and we take advantage of that optionality whenever we can, and detrimental impacts I think aren’t overwhelming.

Operator

Thank you, the next question is from Jennifer Hills from UBS, please go ahead.

Shneur Gershuni - UBS

Hi, good afternoon. It's actually Shneur Gershuni with UBS. Just wanted to ask a couple of follow-up questions on the MLP comments. Specifically, there's been talk about dropdowns to TCP, you sort of mentioned it several times over the last couple of months. I think it was at your analyst day as well too. Is it fair to read today's comments as a more firm commitment to dropping down the assets or said differently, you're a lot closer to the point where we'll see an acceleration of dropdowns as compared to your previous pace? I was wondering if you can sort of comment with respect to that?

Don Marchand

It’s Don here. Our commitment was firm at Investor Day and it has been firm throughout here. As I mentioned earlier, there is an element of use of proceeds to this whole strategy which does inform us on timing as to move forward with this stuff but you can expect us to move forward here on a systemic basis over the coming several years here. If big TransCanada has an increased need for the money some of the projects moving forward, they can see it accelerate faster but no, there has been no change to our strategy in this regard.

Shneur Gershuni - UBS

So we're not closer to seeing an acceleration? I should read this no differently than I read it in November, basically.

Russ Girling

Correct, the strategy is overtime here to do that. We’re certainly cognizant of the fact that there it’s been over a year since we did one of these, but at the same time, I’d point you to the quality of the assets that is going in, and they are well known and EBITDA that’s there as well. We continue to firm up some of the target assets like ANR as we in the interim period here since Investor Day, we’ve gone in contract at up ANR for an average term of 23 years for the whole system at max rate. So there are some other elements in the background here that we are just making sure these assets are tied up with a bow before we put them in.

Shneur Gershuni - UBS

So there is no timeline to be thinking about this, just as TransCanada needs funding, we would expect that you would basically sort of tap the market through the dropdowns basically. Is that sort of the thought process we should employ going forward?

Russ Girling

That’s correct.

Operator

Thank you. The next question is from David McGough from Morningstar. Please go ahead.

David McGough - Morningstar

Regarding the Keystone system and the second quarter earnings for the Gulf Coast connector, I'm just trying to put in my head how much has ramped up in terms of throughput on that pipeline and where could we maybe see that going over the near-term? Because it's not at capacity yet, is it?

Paul Miller

No, it’s Paul here. It’s not a capacity, we anticipated running between 300,000 and 400,000 barrels per day during the second quarter, we are at the high end of that range now, we’re probably averaging closer to 400. We would continue to see those volumes ramp towards year end. We’ve have some operational issues in regard to some of our injection facilities at Cushing, those are largely behind us. So I’d anticipate seeing a few more bales come on to this system here in Q3, Q4.

David McGough - Morningstar

Okay, so thinking kind of a few more barrels, is it maybe where we're at now a reasonable run rate with a little bit of an uptick at this point?

Paul Miller

It is. And when you look at the run rate we have now both on a cash basis and a volume basis, it’s about 85% contracted. So I would anticipate a stability in that run rate again with some potential for some upside depending on market conditions.

Operator

Thank you. The next question is from Carl Kirst from BMO Capital Markets. Please go ahead.

Carl Kirst - BMO Capital Markets

Just one quick follow-up, only because Russ, you mentioned it in the prepared comments, but casting our net much longer-term and looking at Alaska, we have had the state pass the law taking energy and seemingly moving forward. And I guess my question is, as you sit here and you look forward today and understand we've got a two-year pre-feed process ahead of us and alike, how are you thinking about the investment size opportunity. We keep hearing these rather large 45 billion to 60 billion, but that's of course the entire program and I guess with Alaska now, there are five different parties to consider.

But as you sort of cast your eyes forward, how large an opportunity do you think this could be, if indeed it does proceed?

Russ Girling

I think the numbers that you are quoting are the still the numbers that the project thinks about, that 40 billion to 60 billion kind of level forward I would call that the pipeline in gas treatment facilities at the inlet of which we’d have an opportunity to participate and so it’s not our intention at the current time participate in the LNG facility itself but that is just the upstream facility in the pipeline itself.

Our percentage the way that it’s been constructed is aligned with what the states in kind royalty take is going to be. And we don’t know what that number is but we would surmise it is probably between 15% and 25%. And the way that it’s structured right now is we would take that share of the investment in both the pipeline and in the upstream facilities now that the state may take some of that, we’re not sure at this time. So I think you can think of it at a TransCanada like investment in that range of 15% to 25% of the CAD45 billion to CAD60 billion and that gets you that is the simple math of where that would land. So it’s a like CAD10 billion -- CAD5 billion to CAD10 billion investment out there in the future is just kind of the way we are thinking about it.

Operator

Thank you. We will now take questions from the media. (Operator Instructions) The first question is from Lauren Krugel from The Canadian Press. Please go ahead.

Lauren Krugel - The Canadian Press

I was just wondering whether you had an update on your rail bridge plans, any update you can provide there.

Don Marchand

Ma’am it’s formula here. We continue to explore the opportunity to create both receipt facilities in Alberta and delivery facilities in the marketplace. On the project development side on the engineering, the siting, we're progressing well in that regard. And then on the market development side we’re dealing with a number of parties here to anchor those facilities and it just takes time to crawl number of parties around the common projects. So we continue that effort but don’t have further updates at this point.

Operator

Thank you. The next question is from John Spears from The Toronto Star. Please go ahead.

John Spears - The Toronto Star

Hello. I just have two quick questions about Bruce Tower. Mr. Girling you mentioned about the units three to eight, you said replace or refurbish. And I am just wondering if there was a, you’re contemplating new build reactors at Bruce at all?

Bill Taylor

Well, maybe I can differ Russ on that but I guess before I do that, this is Bill. But I would just say that there are, the nature of the discussions between Bruce and the government although, I think at one point in time there was some discussion about further expansions at Bruce there’s nothing on the table in that regard this is purely regarding the refurbishment of units sounds 3 to 8 at the present time.

Russ Girling

Yes. I am just looking at my notes, John it did have those work to replace, but I think what we’re referring to there in a speaking note was there was replacement of certain parts and pieces and which are part of the refurbishment, no plans at this time for a new build facility of any kind.

John Spears - The Toronto Star

Right. Okay. And I just wondering ever so often we hear that TransCanada where Bruce is interested in operating the Darlington or Pickering stations what interest do you have and what conversations are you having what the government have wrote that, if any?

Russ Girling

I can may be try to take that is obviously that something that’s stand us around on a continuous basis. That’s not the current focus is my understanding of the current negotiation it’s a bipartite negotiation between Bruce Power and the OPG and the government on Bruce units but obviously it has to be coordinated with there are similar by party conversation with OPG because we have to schedule the sequence of taking this reactors down with how Darlington refurbishment program is planned at the same time. And I am not aware at the current time that there’s any sort of discussion around having a single operator, my understanding is sort of their coordinated discussions but they are bipartite discussions not a tripartite discussion at the current time. So I acute those comments as well but we wouldn’t be the source of them and not something that we’re pursuing at the current time that is I am aware of.

Operator

Thank you. The next question is from Geoff Lee from Pipeline News. Please go ahead.

Geoff Lee - Pipeline News

Yes. Thank you. I had a question about Energy East, you’re going to build a lateral to take over from oil from Cromer, Manitoba to Lucan (ph) to Saskatchewan, and will you be taking oil from SandRidge (Ph) tanks in Cromer or from Tundra SandRidge tanks in Cromer?

Paul Miller

It’s Paul here. We are looking at number of different both already in auctions and receipt plan auctions in that both Saskatchewan, Manitoba market place, we have selected interest from perspective shippers to understand what their market needs are and what their receipt point requirements are. So at this point we have survey various locations and we have had conversations with numerous party who have existing facilities, part of TransCanada’s approach to pipeline development is to slight our own turmoil facility and although we see every point. So all of those who are in play, it’s really is going to be a function of what is the market requirement and then we’ll scope to fill facilities accordingly.

Operator

Thank you. The next question is from Elsie Ross from Daily Oil Bulletin. Please go ahead.

Elsie Ross - Daily Oil Bulletin

How close are you actually to getting ready to file that energy, the application could it be in August or are you looking at later than that?

Alex Pourbaix

Hi. It’s Alex Pourbaix just talking. Our plan is we’ve been out, so we’re going to file that in the third quarter. So you can expect this that filing come in really in just a few weeks from cycling.

Elsie Ross - Daily Oil Bulletin

What, in Ontario, what sense are your getting from those public consultations and further some places the keeper are saying well there is no percentage in for that profits for the pipeline to go through again, what’s signs are you getting those out there.

Don Marchand

You know as you probably heard Russ talk about in his prepared remarks, we have held on this project something in the range of 80 different public meetings, we’ve met with over 6000 stakeholders, I would tell you that our experience has been that very much so that most of the people who attend these events and the people who get engaged in learning about this project are very interested in it and recognize that there are very-very significant benefits for all of the provinces that the project goes through. If you look at Ontario, Ontario alone, if you look at the benefits of the construction activities because so much of the project is located in terms of its total length is located in Ontario, those construction benefits and the GDP benefits to the province are massive. And that’s just the direct benefit, so now I think when we go along the road and we talk about this project the message I’m getting very strongly is most people recognize that there are very significant benefits to this project and very significant benefits to Canada to be able to market its production inside the country as opposed to importing oil to our domestic refineries.

Russ Girling

I think Elsie that it’s clearly that along those routes in Ontario for example, we’ve been partners in those communities for literally decades and we’re refurbishing a pipe that’s been there. Our employees know those communities, those communities know our employees, we’ve been a very strong corporate citizen, a strong contributor to the fabric of those communities over long period of time and they recognize a. the property tax and things like that that we pay today, but probably more importantly this is our investment in other ways in those communities, so, as we have the conversation about really just changing the products that’s in the pipeline, they won’t understand what are the potential risks and what are mitigation strategies and that’s been the nature of the conversation and as Alex as I would say that those have gone extraordinarily well, they know us and they know that when we talk about pipeline safety mitigation and response that they know that we’ve been serious about it and they’ve seen firsthand how we handle those kind of situations in their communities, as I said over the last number of decades.

Operator

Thank you, the next question is from Iris Kuo from Argus Media, please go ahead.

Iris Kuo - Argus Media

Hi, thanks for taking the call. First of all could you give a little bit more detail on what the injection issues were with the Gulf Coast pipeline, I think you said, in the second quarter and how that’s been addressed in addition to any color on heavy throughputs on the pipeline.

Paul Miller

Sorry, it’s Paul here. I missed the second half of your question, any color on what?

Iris Kuo - Argus Media

Heavy throughputs on the line.

Paul Miller

Oh, I see. So the operability issues were really more just having all the facilities finished, being constructed and commissioned. So we think we’ve had the terminal in place probably at the beginning of the year here, and we have just been finalizing all the various interconnect which allow for the efficient operation of the terminal. So those interconnects which provide the liquidity to the hub, have now largely been constructed and we’ll move them into operations once we conclude commissioning. In regard to the heavy light split we don’t provide that information, I can tell you that we do have the ability to take both heavy and light bales from the Cushing market place down to the US Gulf Coast, and that’s just a function of market demand.

Iris Kuo - Argus Media

Sure, and then just a quick question on Cushing market if you don’t mind giving a, perhaps little bit more, I mean explain, I was confused on whether this project is sort of the interconnects that you just mentioned or if it’s storage or pipelines or you know once the project is completed what kind of impacts you would expect to see on throughputs or operation.

Russ Girling

The Cushing market link is a, is the terminal and injection facilities and the later interconnects in the Cushing marketplace and it uses facilities that form a part of the Keystone pipeline system. That portion of the Keystone pipeline system from Cushing to the US Gulf Coast as built today has the capacity of 700,000 barrels per day, but we have been ramping up capacity since we put this in service in early January and today we’re probably flowing about 400,000 barrels per day, we’re targeting to increase those volumes throughout the year and again how quickly we ramp up is really going to be a function of market demand. As far as terminal facilities today we have just probably under a million barrels capacity, mostly for operational purposes but there is a storage component of this Cushing market link so to the extent that folks want to contract storage with us we’ll provide that services as well.

Operator

Thank you, the next question’s from Rebecca Penty from Bloomberg News, please go ahead.

Rebecca Penty - Bloomberg News

Thanks for taking my question, I just had a point of clarification, Russ earlier in the call you were talking about Keystone XL and the court process in Nebraska, and you mentioned that you expect a decision in Late 2014 or early 2015. And I just wanted to clarify were you referring to a state department decision or a ruling from the Supreme Court or whatever court it is in Nebraska.

Russ Girling

It was with respect to the Supreme Court ruling in Nebraska. I am hopeful that we will see a decision before them, but based on historic precedent in terms of Supreme Court decisions, that’s kind of the time frame we would expect to get from in September or a hearing to a decision sometime later in the year or early next year.

Operator

Thank you. There are no further questions registered at this time. I would like to turn the meeting back over to Mr. Moneta.

David Moneta

Great. Thanks very much and thanks to all of you for participating this afternoon. We very much appreciate your interest in TransCanada and we look forward and we look forward to speaking to you again soon. Bye for now.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.

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