TC Energy ( NYSE: TRP ) closed -5.6% in Wednesday's trading after the company projected its Coastal GasLink project will now cost C$14.5B to complete , and warned the budget could rise an additional C$1.2B if construction drags on well into 2024.
The anticipated cost already had been hiked 70% to C$11.2B after the project terms were revised on a contract with LNG Canada, the company behind the liquefied natural gas terminal in British Columbia where the pipeline will end.
TC Energy ( TRP ) had cautioned Coastal GasLink faced rising costs thanks to shortages in skilled labor and contractor disputes, as well as drought conditions and erosion and sediment control challenges, but analysts were expecting a cost increase of C$1B-C$3B.
The 416-mile pipeline is ~83% complete, the company said.
Analysts said funding for the project's rising cost will rely on asset sales ; Scotia Capital's Robert Hope is now modeling for C$8B in asset sales, up from C$6.5B he previously expected.
Investor sentiment on TC Energy ( TRP ) "could improve as asset sales are announced and there is further clarity on Coastal GasLink's timing and cost, which we expect towards the tail end of the second quarter," Hope wrote.
RBC Capital's Robert Kwan and Maurice Choy noted investors seem to prefer TC Energy ( TRP ) offload the Keystone pipeline, but the analyst pair said the December crude spill could stall any potential sale until at least 2024.
Kwan and Choy said it is more likely TC Energy ( TRP ) would try to sell multiple assets in its liquids pipelines segment or non-controlling stakes in other assets where the company could remain the operator.
TC Energy's ( TRP ) overspending is a cause for concern given its implications for the company’s leverage, HFIR Energy Income writes in an analysis posted recently on Seeking Alpha .
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Why did TC Energy stock tumble today? Coastal GasLink project costs blow up