She's the bane of the Oil Patch and every greasy, dishonest petro-politician in Canada, Justin Trudeau and Rachel Notley very much included.
Robyn Allan is a force to be reckoned with. She's had a distinguished career as an economist. She has been President and CEO of the Insurance Corp of British Columbia, VP-Finance of Parklane Ventures and Senior Economist of the B.C. Central Credit Union.
Allan has also been a burr under the saddle of the fossil fuelers and their political minions determined to ride roughshod over the province of British Columbia. She was a regular intervenor before the industry-rigged National Energy Board and, in keeping with the pattern of captured regulators, she was routinely ignored.
A vigorous critic of the Trans Mountain pipeline, Allan has been warning both the federal government and its regulator that Kinder Morgan's numbers have been cooked.
I advised the NEB that project financing was compromised. The NEB ignored the warning. It even reviewed a stale-dated project. The board stuck with a $5.4-billion cost, citing this in its May 2016 report, even though Kinder Morgan announced in October 2015 costs had increased to $6.8 billion.
In March 2017, costs rose again to $7.4 billion — 40 per cent above the initial estimate. By this time, U.S. private capital markets had summarily rejected the expansion. Kinder Morgan was unable to raise debt or equity, and no joint-venture partner could be found. U.S. investors saw the writing on the wall.
Kinder Morgan turned its attention to the Canadian government and capital markets. The company acknowledged its search for financial support from the Canada Pension Plan and the Infrastructure Fund.
KMI then announced the Canadian entity would be responsible for raising all required project financing, although the U.S. parent still held 70 per cent ownership. No update on negotiations with Ottawa was forthcoming.
The foreign parent had effectively washed its hands of all financing responsibility while retaining the majority of any benefits for KMI’s U.S. shareholders.
In June, Canadian banks entered into a $4-billion construction debt facility with $1 billion more available if the cost exceeds $7.4 billion. Canadian banks are aware the capital estimate is too low.
Kinder Morgan then raised $550 million in preferred shares through the same Canadian banks. Current project costs and carrying charges mean at least $2 billion in unfunded equity remains.
But that’s not all — before construction, even more equity will be required. Kinder Morgan is not up-front with escalating project cost. Instead, the recent ultimatum states: “KML is not updating its cost and schedule estimate at this time.”
Why not? If there were any time the Canadian public has a right to know the cost of tearing the country apart, it is now. Especially since taxpayers are being set up to pay for it.
Given Kinder Morgan’s clever cost-obfuscation strategy and the contracts that are yet to be finalized, direct project costs could exceed $9 billion.
Negotiations behind closed doors with desperate politicians whose behaviour suggests they lack the business acumen to know project costs before they commit to them puts all Canadians at serious financial risk. Either that, or Trudeau’s government is complicit in hiding project overruns to rationalize a taxpayer-funded bailout for a project that sank long ago.h/t Trail Blazer