TSX Commentary

TransCanada held a well-attended Investor Day in Toronto. RBC CM believes management is keenly aware of the market’s aversion to the further issuance of common shares. Common shares were not even listed as an option for potential funding sources for the 2010/2011 capex plan. Further, commentary during the sessions and RBC CM’ additional discussions with management indicate that acquisition-driven common share issuance is highly unlikely. Management provided an EBITDA outlook through 2013 that shows EBITDA growth from roughly $4 billion for 2009 to about $6.5 billion in 2013. From a regulatory perspective, the company would be allowed to raise the Mainline’s toll into Eastern Ontario from roughly $1.25/GJ to $1.75/GJ for 2010. However, management appears willing to work with shippers to reduce the magnitude of the toll increase in the near-term until additional volumes from the Montney and the Horn help improve throughput on the system. RBC CM continues to believe that the stock’s valuation remains compelling, particularly for long-term investors and/or investors looking for a low-risk way to play an outlook for higher natural gas prices, which would lead to higher power prices. Even if the gas price doesn’t improve, patient investors could still expect growth in EPS beginning in 2011 due to the continued ramp-up from Keystone along with the commissioning of other new projects.