TransCanada (TSE:TRP) the country’s second-biggest pipeline operator advanced to a fresh record high as it defended its corporate structure following a report suggesting some activist funds may push to break up the company to boost its share price.
Shares were up 1.2 percent to C$61.53 at 1:21 p.m. in Toronto after touching an all-time high of C$63.86.
“TransCanada understands the value placed on sustainable growth in cash flow earnings and dividends and is wholly-committed to the ongoing enhancement of shareholder value including continuous evaluation of the company’s approach to capital allocation” the Calgary-based company said in a statement today.
The company said that it "firmly believes its current corporate form asset base and financial strength provide critical underpinning to execute the company's industry-leading $38 billion capital program which is expected to generate significant sustainable growth in future cash flow earnings and dividends."
TransCanada said it is committed to vending the remainder of its U.S. natural gas pipeline assets into its master limited partnership TC PipeLines LP (TCP) over the coming years. These assets are expected to generate approximately $500 million in earnings before interest tax depreciation and amortization in 2016 and beyond.
Discussions about a potential campaign are still in the early stages but some of TransCanada's largest shareholders have been contacted by hedge funds interested in shaking up one of North America's biggest pipeline companies Reuters reported citing people familiar with the matter.
These actions have also provoked discussion by the TransCanada board surrounding its strategic direction Reuters said citing the people.
The stock rose the most in three years yesterday after Reuters reported that Daniel Loeb’s Third Point LLC had a stake in the company. Citigroup issued a report in June suggesting a breakup would boost the share price.
Meanwhile costs for the long-delayed Keystone XL pipeline could be more than double the original $5.4 billion price tag.
TransCanada's chief executive officer Russ Girling told the Wall Street Journal the longer the project remains in limbo the closer to $10-billion the costs rise. The Calgary-based company said the higher costs will be passed on to refiners and consumers in the end.
TransCanada is marking what it called an “unfortunate milestone” for the project. It has now been six years since it applied for a U.S. permit to build the pipeline.
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