By Robb M. Stewart


TC Energy Corp.'s shares were under pressure Wednesday as the market looks for details on what assets could be sold and when after the company detailed the scope of the cost blowout its big natural gas pipeline project in western Canada faces.

Analysts say funding plans for the incremental increase in the cost of the Coastal GasLink project will rely on asset sales.

In afternoon trading, the shares were 6.5% lower at C$53.64, extending the decline over the last 12 months.

The company on Wednesday projected its Coastal GasLink project will now cost 14.5 billion Canadian dollars ($10.9 billion) to complete, and cautioned the budget could rise a further C$1.2 billion if construction drags on well into 2024.

The price tag had already been boosted 70% to C$11.2 billion after the terms were revised on a contract with LNG Canada, the company behind the liquefied natural gas terminal where the pipeline in British Columbia will terminate.

TC Energy's management affirmed plans for a C$5 billion-plus asset sale program but said strong market interest and "compelling valuation" would support upsizing the program.

TC Energy in November warned 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 rise to the overall cost of between C$1 billion and C$3 billion.

The company said Wednesday it was chasing cost-cutting measures to partially offset the increased cost of the project.

CIBC in a research report said investor uncertainty will linger since the project isn't completed and it continues to face cost pressures, but that once the market digests the updated cost information then asset sales announcements could serve as a catalyst for TC Energy's shares.

Robert Hope, an analyst at Scotia Capital, is now modeling for C$8 billion in asset sales, up from C$6.5 billion previously expected.

"We believe sentiment on (TC Energy) 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," Mr. Hope said.

With the increase in the expected cost of Coastal GasLink, TC Energy said its overall capital spending target for 2023 has been revised upward to about C$12 billion from the C$11.5 billion projected previously, which also includes the deferral of certain spending and expected cost-saving moves. Coastal GasLink, a 416-mile pipeline in British Columbia that will bring natural gas from Dawson Creek to Kitimat, is now about 83% complete, it said.

RBC Capital Markets analysts Robert Kwan and Maurice Choy have previously highlighted the merits of TC Energy considering much bigger asset-sale plans, though they said they expect the program is more likely to be refined higher than boosted to exceed the C$10 billion mark they consider possible.

Investors they spoke to expressed a preference for TC Energy to offload the Keystone pipeline, but the analysts said the spill last year could stall any potential sale until at least 2024. Mssrs. Kwan and Choy said it was more likely that the company will move to sell multiple assets in its liquids pipelines segment or non-controlling stakes in other assets where TC Energy could remain the operator.

Scotia's Mr. Hope said that while TC Energy continues to target mechanical completion on Coastal GasLink by end-2023, the project isn't out of the woods yet.

If construction extends well into 2024, Mr. Hope estimated the potential for another 2% downside to expected per-share earnings, assuming higher costs are funding through asset sales. It is a scenario he said investors appear to have discounted, given the reaction in the share price, he said.


Write to Robb M. Stewart at robb.stewart@wsj.com


(END) Dow Jones Newswires

02-01-23 1417ET