The Next Steps For TransCanada After Trump's Keystone XL Order

Credit Suisse sees continued upside in the shares of TransCanada Corporation (USA) TRP after President Donald Trump signed an executive order inviting TransCanada's Keystone XL Pipeline to re-submit its project application.

Analyst Andrew Kuske, who maintains an Outperform rating on the stock, said an obvious window is open to develop this type of infrastructure, which possesses a long asset life well beyond most political terms.

“With renewed confidence on KXL, we include the project in our numbers and believe a favourable bias looks to exist for a lot of energy infrastructure in the near-term which looks to favor TRP's large footprint and capital allocation activities,” Kuske wrote in a note.

Despite lots of issues remaining unresolved, the analyst believes a clear path to approval exists for this pipeline, along with the ability to actually build the project.

Obstacles

Kuske listed out the key issues in need of resolution, including:

• A number of issues in Nebraska.
• The ability to build KXL without significant protest or threats.
• The nature of the renegotiation.
• Any requirements that may exist on the project in terms of product sourcing.
• Implications of a potential border tax or other related mechanisms.

The analyst noted that TransCanada’s pipeline asset base spans two of North America's most prolific natural gas basins (Marcellus and the Montney), which looks to underpin a visible amount of future growth.

“Further clarity for KXL looks to be another catalyst as the project moves towards eventual construction,” Kuske added.

Positives

Meanwhile, the latest development is considered positive for the broader Canadian energy industry in transportation viewpoint as other projects like the Line 3 Replacement Program and Alberta Clipper are likely to benefit from the change of tone in the US government.

At last check, shares of TransCanada rose 1.56 percent to $49.60, after setting a new 52-week high of $49.76.