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PBO warns of losing billions of dollars if the expansion of Trans Mountain does not continue

Rachel Gilmore, Employees

Posted Thursday 31 January 2019 10:35 EST

Last Updated on Thursday 31 January 2019 11:36 EST

OTTAWA, the Canadian parliamentary budget, monitors that the liberal government has paid one of the highest possible tariffs for the Trans Mountain gas pipeline – and this value is falling with each delay, increasing construction costs and changing the risk profile.

That means the government could lose billions of dollars if construction does not continue.

"It is very likely that the construction will be delayed and construction costs will increase and that these two factors are likely to reduce the value of the gas pipeline and its expansion by billions of dollars," the new reporter Yves Giroux said on Thursday.

The government bought Trans Mountain Pipeline, the Trans Mountain Expansion Project and related assets for $ 4.4 billion. PBO's analysis found that the actual value of all these companies was between $ 3.6 billion and $ 4.6 billion, meaning that the government paid almost the highest price it could pay for pipelines, projects, and all ornaments.

The report revealed that, with every year's delay, the government's purchase value dropped by $ 700 million. It also found that a 10% increase in construction costs would reduce the value by $ 450 million. In addition, if the perceived project risk increased and the discount rate increased by 2%, the state purchase would reduce the value by $ 1.3 billion.

If the project is never built, the value of the pipeline without revenue generating capacity is between $ 1.8 billion and $ 2.8 billion, which means a huge financial blow to the government.

"The worst case scenario is that the Trans Mountain development project is not seeing daylight, and then the value of the government's property has fallen sharply and the government could lose anywhere between two and two billion dollars in the worst case scenario," Giroux said.

It is unlikely that the construction will be completed by 2021, according to PBO, which means that the reduction is very likely.

Giroux said that a private company is unlikely to continue with the project.

"The fact that Kinder Morgan wanted to sell to the government suggests that a private company would not do it," he said.

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