Saturday, September 20, 2008

TransCanada Exposure to Lehman

TransCanada (TRP) moves to keep Lehman deals from Barclays,

TransCanada PipeLines Ltd. has more than $250-million (U.S.) in exposure to Lehman Brothers Holdings Inc. and it's concerned about what might happen to that debt if Lehman is taken over by Barclays PLC, court filings show.

TransCanada revealed the holding in a filing in the New York court that is overseeing Lehman's bankruptcy protection. Lehman filed for protection on Monday, listing $613-billion in debt. Two days later, London-based Barclays announced plans to buy the firm's U.S. operations for $1.7-billion.

In its court filing, TransCanada said it has "significant contractual agreements" with Lehman Brothers Commodity Service Inc. and its subsidiary, Eagle Energy Partners, a Houston-based energy marketing and services specialist. The contracts total "in excess of $250-million," the company added.
TransCanada was selected by the Alaska Gasline Inducement Act (AGIA) to compete with the North Slope producers gas pipeline, the Denali Pipeline.

The Total Debt to Equity ratio of TransCanada is 1.345, compared to Exxon's debt to equity ratio of  0.077. 

Denali Pipeline partners ConocoPhillips (COP) and BP have debt to equity ratios of 0.237 and 0.287 respectively.

Bottom line - This is something to keep an eye on as the banking crisis unfolds.  TransCanada is the most exposed (weakest) firm of the potential Alaska Gas Pipeline players.  ConocoPhillips and BP are in good shape and Exxon is more or less bullet proof.  TransCanada's weakness could tip the game in Denali's and Exxon's favor.


Anonymous said...

Transcanada is a regulated pipeline company, the others are integrated oil and gas companies. Different industries, different risks, different captial structures. Finance 101.

AK Engineer said...

Sure that's the 101 observation but bank meltdowns add a new level of difficulty to TransCanada's plans.

It may take more than $500 Million in corporate welfare to make their plan work.

Their own CEO admits that no ones happy until Exxon's happy.

Price swings in the energy markets, banks going under, it's no time to bet on the weakest firm in the room.