November 3, 2010 / 1:13 PM / 8 years ago

UPDATE 2-TransCanada downplays impact of US vote on pipeline

* CEO says market will ultimately decide Keystone XL fate

* Q3 comparable earnings C$0.54/shr vs year-earlier C$0.49

* Sees tough business environment in short term

* Shares off C$0.19 at C$37.43 (Recasts with Keystone XL comments, Bruce cost increase)

By Jeffrey Jones

CALGARY, Alberta, Nov 3 (Reuters) - Market need, not the U.S. political power shift, will be the biggest factor in a final go-ahead decision for TransCanada Corp’s (TRP.TO) $7-billion oil pipeline to Texas from Alberta, the company’s chief executive said on Wednesday.

TransCanada CEO Russ Girling downplayed the Republican gains in U.S. midterm elections and their impact on Keystone XL, which would ship more than half a million barrels of oil sands-derived crude a day to U.S. Gulf Coast refineries.

Some analysts have said the shift to the right could be positive for the project, whose approval process has been delayed as the State Department reviews its environmental and market impact.

“It’s a fundamental need even in a depressed economy — they’re still needing 10 million barrels a day of imported oil and Canada is a great source of supply,” Girling told analysts after TransCanada reported a 9 percent increase in third-quarter profit.

“That along with the economic stimulus that comes with the $7 billion project, and some 15,000 direct jobs, are very much needed in this economy. So I think, again, the marketplace will drive those decisions at the end of the day.”

The proposal is opposed by some federal and state lawmakers as well as environmentalists, who worry about the impact of increased Canadian oil sands development on air, land, water and local communities. Some oppose the route across Nebraska and its massive Ogallala aquifer.

Secretary of State Hillary Clinton caused a stir last month when she said her department was inclined to approve the project, aimed at filling the supply gap left by declining imports from Mexico and Venezuela.

However, a senior State Department official said last week that a final decision is still months away and approval is not a foregone conclusion.

TransCanada executives said on Wednesday they expect a decision in the first half of 2011 and project start-up is still targeted for the first three months of 2013.

For the third quarter, TransCanada reported net income of C$377 million ($334 million), or 54 Canadian cents a share, up from year-earlier C$345 million, or 50 Canadian cents a share.

Comparable earnings, which exclude most one-time items, rose 12 percent to C$374 million, or 54 Canadian cents a share, from C$335 million, or 49 Canadian cents a share.

That exceeded the average analyst forecast of 52 Canadian cents a share, as compiled by Thomson Reuters I/B/E/S.

TransCanada is best known for its natural gas pipelines in Canada and the United States and for power-generation operations, including a stake in the Bruce nuclear plant in Ontario and New York City’s Ravenswood generating station.

Weak natural gas and electricity prices will hamper results in the short term, the company said.

TransCanada’s share of the refurbishment of the Bruce A Units 1 and 2, has climbed by C$400 million from last year to C$2.4 billion amid delays in the complex project, Girling said. The project’s overall cost is now pegged at C$4.8 billion.

Returns to the company are now expected to be at the low end of its 9 percent to 13 percent target range, executives said. Both units are expected to be operating in 2012.

TransCanada’s third-quarter revenue rose 4 percent to C$2.13 billion.

The company’s shares were 19 Canadian cents lower at C$37.43 on the Toronto Stock Exchange on Wednesday afternoon. They are up 13 percent over the past 12 months.

$1=$1.01 Canadian Additional reporting by Bhaswati Mukhopadhyay; editing by Peter Galloway

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