Canadian Energy Infrastructure

Research evidence excerpt

Canadian Energy Infrastructure

ld expansions

(namely Enbridge and Trans Mountain's Mainline optimizations) will be delivered, aided by favourable

economics and/or diversification benefits. Many agree that greenfield alternatives face uncertainties,

with concerns surrounding last mile risks (e.g., South Bow's Prairie Connector) and economics (e.g., new

west coast oil pipeline, plus Pathways). Clarity should progressively emerge over the coming 12 months,

giving investors time to assess positions. Meanwhile, Gibson Energy looks well-positioned to benefit

regardless of which solution emerges, even if any associated tank additions come later this decade.

Capital allocation: It's not a one-size-fits-all approach. In recent years, the sector has seen several

equity raises aimed at funding strategic acquisitions. While similarly-themed raises may continue

moving forward, we believe TC Energy's recent capital allocation refinement has motivated a broad

sector discussion on using new common equity to fund organic growth. For the midstreamers, we

believe many investors continue to highly value equity self-funded models, which can be perceived as

being sustainable and disciplined frameworks that motivate strong competition among various uses of

capital. However, with the sector facing a seemingly ever-growing opportunity set in the near-term,

certain investors appear selectively supportive of organic growth-driven equity raises, particularly if

the economics of the project(s) are relatively attractive, and alternate sources of funding have been

explored (notably sales of mature, low growth assets).

Five other notable themes. (1) Rising WCSB energy production: With our global energy research