BMO Energy Infrastructure Research: Funds are currently being reassessed in Canada, with a valuation gap between traditional pipelines and green transformation.

BMO Capital Markets' Energy Infrastructure Watch report released on November 3 shows that institutional investors' focus on the Canadian energy infrastructure sector has shown a clear pattern of differentiation over the past month. This report reflects both the valuation struggles of traditional pipeline assets in a macro headwind environment, and the market's urgent need to reprice the growth prospects under the backdrop of energy transition. Among the top five most watched topics, Pembina Pipeline (PBA.US) occupies two spots, highlighting the stock's key juncture in strategic transformation. The market is closely watching the rumored potential sale of Pembina Gas Infrastructure's 40% stake by KKR & Co (KKR.US), a transaction that will directly test the valuation resilience of midstream assets in a high interest rate environment; at the same time, Pembina Pipeline's data center project in partnership with Greenlight is expected to reach a final investment decision in the first half of 2026, with a power capacity of 900 megawatts leading investors to continuously inquire about its impact on stock price and implied EBITDA return rate. Meanwhile, Brookfield Renewable Partners LP (BEP.US) has become the hottest name in the Clean Energy Fuels Corp. infrastructure sector with a $8 billion investment in the U.S. nuclear power sector and strategic partnerships with the U.S. government and Westinghouse Electric. BMO has raised its target price to $36, representing an implied upside of nearly 18% from the current market price of $30.54. Additionally, with the start of Q3 earnings season, performance previews have naturally become a focal point for institutions. Taking a broader view, three core industry themes are reshaping institutions' judgment framework on the entire sector. Firstly, long-term electricity prices in Alberta have continued to soar over the past month, with forward contracts for 2028-2030 reaching $80-90 per megawatt-hour, more than doubling the average price of around $43 since 2025, sparking a reevaluation of the value of local power generation assets. Secondly, pipeline indices have underperformed the utility sector by as much as 11 percentage points (-7% vs +4%), reflecting investors' doubts about the long-term growth prospects of traditional fossil energy infrastructure, despite the sector's resilient cash flow. Thirdly, natural gas storage facilities are quietly entering an expansion cycle, whether it's Enbridge (ENB.US) in Aitken Creek, Canadian Utilities in Alberta Hub Group, Inc. Class A's expansion, or Altagas' latest disclosed Dimsdale Phase One project, market revaluation of the strategic value and historical valuation anchors of these seasonal assets. At the individual stock level, pipeline and utility companies present distinct focus logic. For pipeline stocks, Pembina is the most sought-after name in models due to the aforementioned equity changes and data center opportunities; Keyera (KEY.US) underperformed the sector by an additional 4 percentage points in October, with institutions anxious to understand if this weakness stems from deteriorating fundamentals; TC Energy is set to update its growth guidance post-2027 in the third-quarter report, with the biggest question hanging over the heads of bulls being whether there is a risk of a downgrade from the current annual compound growth rate of 5-7%. In the field of electric utilities, Capital Power is of interest to the market as it has "monetized" its 375 megawatt AESO Phase One project quota, with market curiosity on how it will participate in a larger market; TransAlta has become a direct indicator of rising electricity prices in Alberta, with institutions demanding an update on its net asset value per share under the "blue sky scenario" to reflect the triple benefits of forward electricity prices, demand from large-scale data centers, and the rebound of utilization hours from historical lows; while Boralex, as one of the few coverage targets that has not seen an increase by 2025, has recently seen a surge in investor inquiries as the market tries to clarify the roots of its relative weakness. It is noteworthy that the three stocks that institutions most frequently requested financial models for in the past month are TransAlta, TC Energy, and Pembina Pipeline, highlighting the core concerns of the current markethow traditional assets are priced under the dual narratives of energy transition and energy security, and how emerging growth is realized.