What’s the issue?
Pipeline expansion projects may be on hold as FERC appears poised to review its certificate policy statement.
Why does it matter?
Growth in a pipeline company’s earnings is generally tied to its ability to deploy capital and earn a return on that capital. Over the past decade, most pipelines have grown their asset base through incrementally priced expansions, but such projects have become more and more challenging.
What’s our view?
With expansion projects becoming more challenging, the pipelines may turn to major maintenance projects. Most of the pipelines with at least one thousand miles of pipe seem to have a substantial amount of older pipe that could be due for replacement, and many have rate moratoriums ending soon. This combination of factors could lead to a substantial increase in these major maintenance projects, which could increase their rate base and generate additional revenue.
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