TC PipeLines, LP (NASDAQ:TCLP) (the Partnership) today reported
third quarter 2011 Partnership cash flows of $43.1 million compared
to $45.4 million for the same period in 2010. Net income for third
quarter 2011 was $40.7 million or $0.75 per common unit, an
increase of $2.1 million, compared to $38.6 million or $0.82 per
common unit for the same period in 2010.
"Our results reflect the stability of our financial position
underpinned by the Partnership's strong liquidity, conservative
balance sheet and diversified portfolio of assets which is a
significant advantage for us during these volatile market
conditions," said Steve Becker, President, TC PipeLines GP, Inc.
"We believe the Partnership remains well positioned with minimal
near term capital requirements and strong cash flow in the future
from our investments."
Third Quarter Highlights (All financial figures are
unaudited)
-- Partnership cash flows of $43.1 million
-- Paid cash distributions of $42.0 million
-- Declared cash distributions of $0.77 per common unit
-- Net income of $40.7 million or $0.75 per common unit
-- GTN filed an uncontested rate case settlement with its shippers for
2012-2015 with the Federal Energy Regulatory Commission (FERC)
Three months ended Nine months ended
(unaudited) September 30, September 30,
(millions of dollars except per
common unit amounts) 2011 2010 2011 2010
----------------------------------------------------------------------------
Partnership cash flows(a) 43.1 45.4 139.1 128.4
Cash distributions paid (42.0) (34.4) (112.8) (103.3)
Cash distributions declared per
common unit(b) $ 0.77 $ 0.75 $ 2.29 $ 2.21
Net income(c) 40.7 38.6 119.1 100.0
Net income per common unit(d) $ 0.75 $ 0.82 $ 2.33 $ 2.12
Weighted average common units
outstanding (millions) 53.5 46.2 50.2 46.2
Common units outstanding at end of
period (millions) 53.5 46.2 53.5 46.2
(a) Partnership cash flows is a non-GAAP financial measure.
Refer to the section entitled "Partnership Cash Flows" for further
detail.
(b) The Partnership's 2011 third quarter cash distribution will
be paid on November 14, 2011 to unitholders of record as of the
close of business on October 31, 2011.
(c) Includes equity earnings from GTN and Bison from May 3,
2011, date of acquisition, to September 30, 2011.
(d) Net income per common unit is computed by dividing net
income, after deduction of the General Partner's allocation, by the
weighted average number of common units outstanding. The General
Partner's allocation is computed based upon the General Partner's
effective two percent interest plus an amount equal to incentive
distributions.
Recent Developments
Third Quarter Cash Distribution
On October 19, 2011, the Partnership announced that the board of
directors of TC PipeLines GP, Inc., the Partnership's General
Partner, declared the Partnership's third quarter 2011 cash
distribution of $0.77 per common unit. This cash distribution is
equivalent to the second quarter 2011 distribution and represents a
2.7 percent increase from the $0.75 per common unit paid in third
quarter 2010. The distribution is payable on November 14, 2011 to
unitholders of record as of the close of business on October 31,
2011.
GTN Rate Settlement
On August 12, 2011, GTN filed a petition with the FERC for
approval of a Stipulation and Agreement of Settlement (GTN
Settlement) with shippers and regulators regarding GTN's rates,
terms and conditions of service effective January 1, 2012. A
decision is expected from FERC by the end of the year. If approved,
the settlement rates are expected to partially mitigate the loss of
firm contracts in fourth quarter 2011, and also reflect the impact
of a declining rate base since the last settlement. Rates will be
in effect through the end of 2015.
Bison Pipeline Line Break Incident
On July 20, 2011, a line break occurred on the Bison pipeline.
On August 22, 2011, the US Department of Transportation's Pipeline
and Hazardous Materials Safety Administration (PHMSA) granted Bison
permission to return the pipeline to service at a reduced pressure
which allowed Bison to deliver approximately 60 percent of its
contracted quantities. The line was repaired and brought back to
full service on October 8, 2011. The incident has not had a
material impact to the Partnership's net income or cash flows.
Partnership Cash Flows
The Partnership uses the non-GAAP financial measures
"Partnership cash flows" and "Partnership cash flows before General
Partner distributions" as they provide measures of cash generated
during the period to evaluate our cash distribution capability. As
well, management uses these measures as a basis for recommendations
to our General Partner's board of directors regarding the
distribution to be declared each quarter. Partnership cash flow
information is presented to enhance investors' understanding of the
way that management analyzes the Partnership's financial
performance.
Partnership cash flows include cash distributions from the
Partnership's equity investments, Great Lakes and Northern Border,
plus operating cash flows from the Partnership's wholly-owned
subsidiaries, North Baja and Tuscarora, net of Partnership costs
and distributions declared to the General Partner. The
Partnership's interests in GTN and Bison were acquired in May 2011
and no distributions were received from these investments in the
third quarter 2011. The Partnership expects to begin receiving
distributions in the fourth quarter 2011 from GTN and Bison.
Partnership cash flows and Partnership cash flows before General
Partner distributions are provided as a supplement to GAAP
financial results and are not meant to be considered in isolation
or as substitutes for financial results prepared in accordance with
GAAP.
Third Quarter 2011
Partnership cash flows decreased $2.3 million to $43.1 million
in the third quarter of 2011 compared to $45.4 million in the same
period of 2010. This decrease was primarily due to higher costs at
the Partnership level of $3.3 million relating to higher financial
charges, partially offset by increased cash distributions from
Great Lakes of $0.8 million and Northern Border of $0.9
million.
The Partnership paid distributions of $42.0 million in the third
quarter of 2011, an increase of $7.6 million compared to the same
period in 2010 due to an increase in the number of common units
outstanding, an increase in the quarterly distribution of $0.02 per
common unit paid beginning in the fourth quarter of 2010 and a
further increase of $0.02 per common unit paid beginning in the
third quarter of 2011.
Net Income
To supplement our financial statements, we have presented a
comparison of the earnings contribution from each of our
investments. We have presented net income in this format to enhance
investors' understanding of the way management analyzes our
financial performance. We believe this summary provides a more
meaningful comparison of our net income to prior year periods, as
we account for our partially- owned pipeline systems using the
equity method. The presentation of this additional information is
not meant to be considered in isolation or as a substitute for
results prepared in accordance with GAAP.
Three months ended Nine months ended
(unaudited) September 30, September 30,
(millions of dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Equity earnings:
Great Lakes 14.3 14.6 49.3 44.0
Northern Border 19.6 21.0 56.4 47.8
GTN(a) 4.7 - 7.1 -
Bison(a) 1.8 - 3.7 -
Net income from Other Pipes(b) 10.2 9.3 30.7 27.6
Partnership expenses (9.9) (6.3) (28.1) (19.4)
----------------------------------------
Net income 40.7 38.6 119.1 100.0
----------------------------------------
----------------------------------------
(a) Represents equity earnings from May 3, 2011, date of
acquisition, to September 30, 2011.
(b) "Other Pipes" includes the results of North Baja and
Tuscarora.
Third Quarter 2011
Net income increased $2.1 million to $40.7 million in the third
quarter of 2011 compared to $38.6 million in the same period in
2010. This increase was primarily due to earnings from the 25
percent interests in GTN and Bison, which were acquired in May
2011, partially offset by lower equity income from Northern Border
and higher Partnership costs.
Equity income from Great Lakes was $14.3 million in the third
quarter of 2011, which was consistent with the $14.6 million earned
in the third quarter of 2010.
Equity income from Northern Border was $19.6 million in the
third quarter of 2011, a decrease of $1.4 million compared to $21.0
million for the same period in 2010. This decrease was primarily
due to lower rates for transportation services in the third quarter
of 2011.
Net income from Other Pipes, which includes results from North
Baja and Tuscarora, was $10.2 million in the third quarter 2011, an
increase of $0.9 million compared to the same period in 2010. This
increase was primarily due to lower financial charges from
Tuscarora as a result of lower average interest rates and lower
average debt outstanding attributable to the refinancing of a
portion of senior notes in December 2010.
Additionally, higher revenues were earned at North Baja due to
additional supply brought on from the Yuma Lateral, which was
completed in March 2011.
Costs at the Partnership level were $9.9 million in the third
quarter of 2011, an increase of $3.6 million compared to $6.3
million for the third quarter of 2010. This increase was primarily
due to higher financial charges in 2011 resulting from higher
average debt outstanding at higher average interest rates.
Liquidity and Capital Resources
At September 30, 2011, there was $67.0 million outstanding on
the $500.0 million revolver portion of the Partnership's senior
credit facility and $300.0 million outstanding under the term loan
portion of the senior credit facility. The average interest rate on
the senior credit facility was 3.4 percent for the three months
ended September 30, 2011, including the impact of interest rate
hedging activity.
The Partnership was in compliance with the covenants of the
credit agreement at September 30, 2011.
Conference Call
Analysts, members of the media and other interested parties are
invited to participate in a teleconference by calling 866.225.0198
on Thursday, October 27, 2011 at 11:00 a.m. central daylight time
(CDT)/12 p.m. eastern daylight time (EDT). Steve Becker, president
of the General Partner, will discuss the third quarter 2011
financial results and provide an update on the Partnership's
business developments, followed by a question and answer session
for the investment community and media. Please dial in 10 minutes
prior to the start of the call. No pass code is required. A live
webcast of the conference call will also be available through the
Partnership's website at www.tcpipelineslp.com. Slides for the
presentation will be posted on the Partnership's website under
"Event and Presentations" prior to the webcast.
A replay of the teleconference will also be available two hours
after the conclusion of the call and until 11 p.m. (CDT) and
midnight (EDT) on November 3, 2011, by calling 800.408.3053, then
entering pass code 8686876.
TC PipeLines, LP has interests in 5,560 miles of federally
regulated U.S. interstate natural gas pipelines which serve markets
across the United States and Eastern Canada. This includes
significant interests in Great Lakes Gas Transmission Limited
Partnership and Northern Border Pipeline Company as well as 25
percent ownership interest in each of Gas Transmission Northwest
LLC, and Bison Pipeline LLC. TC PipeLines, LP also has 100 percent
ownership of North Baja Pipeline, LLC and Tuscarora Gas
Transmission Company. TC PipeLines, LP is managed by its General
Partner, TC PipeLines GP, Inc., an indirect wholly owned subsidiary
of TransCanada Corporation. TC PipeLines GP, Inc. also holds common
units of TC PipeLines, LP. Common units of TC PipeLines, LP are
quoted on the NASDAQ Global Select Market and trade under the
symbol "TCLP." For more information about TC PipeLines, LP, visit
the Partnership's website at www.tcpipelineslp.com.
Cautionary Statement Regarding Forward-Looking Information
This news release may include "forward-looking statements"
regarding future events and the future financial performance of TC
PipeLines, LP. All statements other than statements of historical
fact included herein may constitute forward-looking statements.
Words such as "anticipate," "believe," "continue," "estimate,"
"expect," "intend," "forecast," "project," "may," "plan,"
"strategy," and similar expressions identify forward-looking
statements. All forward-looking statements are based on the
Partnership's current beliefs as well as assumptions made by and
information currently available to the Partnership. These
statements reflect the Partnership's current views with respect to
future events and are not guarantees of performance. Actual results
may differ materially from those expressed or implied in these
forward-looking statements and are subject to a number of risks and
uncertainties. Important factors that could cause actual results to
materially differ from the Partnership's current expectations
include the demand for Great Lakes, Northern Border and GTN
transportation in the future; the risk of a prolonged slowdown in
growth or further decline in the U.S. economy or the risk of delay
in growth recovery in the U.S. economy; regulatory decisions,
particularly those of the FERC; the ability of Great Lakes,
Northern Border and GTN to recontract their available capacity on
competitive terms or at all; the Partnership's ability to identify
and/or consummate accretive growth opportunities from TransCanada
Corporation or others; the ability to access capital and credit
markets with competitive rates and terms; operational decisions of
the operator of our pipeline systems; the failure of a shipper on
any one of the Partnership's pipelines to perform its contractual
obligations; available supply of natural gas in the Western Canada
Sedimentary Basin and in competing basins, such as the Rocky
Mountains, as well as increasing development of shale natural gas
production; future demand for natural gas; overcapacity in the
industry; success of other pipelines competing with Northern
Border, Great Lakes and GTN by bringing competing U.S.-sourced gas
to Northern Border's, Great Lakes' and GTN's markets; and other
risks inherent in the transportation of natural gas as discussed in
the Partnership's filings with the Securities and Exchange
Commission (SEC), including its Annual Report on Form 10-K for the
most recently completed fiscal year and its subsequently filed
Quarterly Reports on Form 10-Q. These filings are available to the
public over the Internet at the SEC's website (www.sec.gov) and via
the Partnership's website (www.tcpipelineslp.com). The Partnership
disclaims any intention or obligation to update publicly or revise
any such forward-looking statements, whether as a result of new
information, future events or otherwise, occurring after the date
hereof.
TC PipeLines, LP
Financial Summary
Consolidated Statement of Income
Three months ended Nine months ended
(unaudited) September 30, September 30,
(millions of dollars except per
common unit amounts) 2011 2010 2011 2010
----------------------------------------------------------------------------
Equity earnings from unconsolidated
affiliates(a) 40.4 35.6 116.5 91.8
Transmission revenues 17.6 17.4 52.5 51.8
Operating expenses (3.4) (3.1) (9.9) (9.8)
General and administrative (1.2) (0.9) (7.8) (3.3)
Depreciation (3.7) (3.8) (11.4) (11.2)
Financial charges and other (9.0) (6.6) (20.8) (19.3)
---------------------------------------
Net income 40.7 38.6 119.1 100.0
---------------------------------------
---------------------------------------
Net income allocation
Common units 39.9 37.8 116.7 98.0
General partner 0.8 0.8 2.4 2.0
---------------------------------------
40.7 38.6 119.1 100.0
---------------------------------------
---------------------------------------
Net income per common unit $ 0.75 $ 0.82 $ 2.33 $ 2.12
---------------------------------------
---------------------------------------
Weighted average common units
outstanding (millions) 53.5 46.2 50.2 46.2
---------------------------------------
---------------------------------------
Common units outstanding, end of the
period (millions) 53.5 46.2 53.5 46.2
---------------------------------------
(a) Includes equity earnings from GTN and Bison from May 3,
2011, date of acquisition, to September 30, 2011.
Consolidated Condensed Balance Sheet
(unaudited)
September December
(millions of dollars) 30, 2011 31, 2010
----------------------------------------------------------------------------
ASSETS
Current assets 16.2 12.3
Investments in unconsolidated affiliates 1,643.0 1,194.8
Other assets 437.8 443.4
----------------------
2,097.0 1,650.5
----------------------
----------------------
----------------------------------------------------------------------------
LIABILITIES AND PARTNERS' EQUITY
Current liabilities 12.3 9.0
Fair value of derivative contracts, including current
portion and other 4.2 15.1
Long-term debt, including current portion 746.9 513.9
Partners' equity 1,333.6 1,112.5
----------------------
2,097.0 1,650.5
----------------------
----------------------
Non-GAAP Measures
Reconciliations of Net Income to Partnership Cash Flows
Three months ended Nine months ended
(unaudited) September 30, September 30,
(millions of dollars except per
common unit amounts) 2011 2010 2011 2010
----------------------------------------------------------------------------
Net income(a) 40.7 38.6 119.1 100.0
Add:
Cash distributions from Great
Lakes(b) 18.2 17.4 56.5 51.1
Cash distributions from Northern
Border(b) 20.8 19.9 73.1 57.7
Cash distributions from GTN(b) - - - -
Cash distributions from Bison(b) - - - -
Cash flows provided by Other Pipes'
operating activities 14.8 15.1 39.9 41.1
---------------------------------------
53.8 52.4 169.5 149.9
---------------------------------------
Less:
Equity earnings from unconsolidated
affiliates (40.4) (35.6) (116.5) (91.8)
Other Pipes' net income (10.2) (9.3) (30.7) (27.6)
---------------------------------------
(50.6) (44.9) (147.2) (119.4)
---------------------------------------
Partnership cash flows before General
Partner distributions 43.9 46.1 141.4 130.5
General Partner distributions(c) (0.8) (0.7) (2.3) (2.1)
---------------------------------------
Partnership cash flows 43.1 45.4 139.1 128.4
---------------------------------------
---------------------------------------
Cash distributions declared (42.0) (35.4) (119.4) (104.2)
Cash distributions declared per
common unit(d) $ 0.77 $ 0.75 $ 2.29 $ 2.21
Cash distributions paid (42.0) (34.4) (112.8) (103.3)
Cash distributions paid per common
unit(d) $ 0.77 $ 0.73 $ 2.27 $ 2.19
(a) Includes equity earnings from GTN and Bison from May 3,
2011, date of acquisition, to September 30, 2011.
(b) In accordance with the cash distribution policies of the
respective pipeline systems, cash distributions from Great Lakes
and Northern Border are based on their respective prior quarter
financial results. The Partnership interests in GTN and Bison were
acquired in May 2011and no distributions were received from these
investments in the third quarter of 2011. The Partnership expects
to begin to receive distributions in the fourth quarter of
2011.
(c) General Partner distributions represent the cash
distributions declared to the General Partner with respect to its
effective two percent interest plus an amount equal to incentive
distributions.
(d) Cash distributions declared per common unit and cash
distributions paid per common unit are computed by dividing cash
distributions, after the deduction of the General Partner's
allocation, by the number of common units outstanding. The General
Partner's allocation is computed based upon the General Partner's
effective two percent interest plus an amount equal to incentive
distributions.
Operating Statistics
Three months ended Nine months ended
September 30, September 30,
(unaudited) 2011 2010 2011 2010
----------------------------------------------------------------------------
Great Lakes
-------------------------------------
Volumes:
Average daily scheduled volumes(a)
(million cubic feet per day) 2,241 2,173 2,442 2,146
Capital Expenditures (millions of
dollars) :
Maintenance 3.1 0.9 4.0 3.9
Growth 0.5 2.7 0.7 3.6
---------------------------------------
Northern Border
-------------------------------------
Volumes:
Average daily scheduled volumes(a)
(million cubic feet per day) 2,515 2,557 2,599 2,410
Capital Expenditures (millions of
dollars) :
Maintenance 3.1 1.2 11.7 2.1
Growth 4.8 1.1 6.7 2.2
---------------------------------------
GTN (b)
-------------------------------------
Volumes:
Average daily scheduled volumes(a)
(million cubic feet per day) 1,760 2,273 1,828 2,191
Capital Expenditures(c) (millions of
dollars) :
Maintenance 0.7 - 1.0 -
Growth 1.7 - 2.3 -
---------------------------------------
Bison (a)
-------------------------------------
Capital Expenditures(c) (millions of
dollars) :
Maintenance 0.2 - 0.2 -
Growth 5.7 - 18.9 -
---------------------------------------
North Baja (a)
-------------------------------------
Capital Expenditures (millions of
dollars) :
Maintenance 0.1 0.4 0.3 0.5
Growth 0.2 0.1 0.4 8.5
---------------------------------------
Tuscarora (a)
-------------------------------------
Capital Expenditures (millions of
dollars) :
Maintenance - - - 0.2
Growth 0.3 0.4 0.3 0.5
---------------------------------------
(a) Average daily scheduled volumes represent volumes of natural
gas, irrespective of path or distance transported, from which
variable usage fee revenue is earned. Average daily scheduled
volumes are not presented for Bison, North Baja and Tuscarora as
cash flows and net income from these investments are primarily
underpinned by long-term firm contracts and do not vary
significantly with changes in utilization.
(b) The interest in GTN was acquired on May 3, 2011. Average
daily scheduled volumes for periods prior to May 3, 2011 are
presented for comparative information purposes only.
(c) Represents capital expenditures from GTN and Bison from May
3, 2011, date of acquisition, to September 30, 2011.
Contacts: TC PipeLines, LP Media Inquiries: Terry Cunha/Shawn
Howard 403.920.7859 TC PipeLines, LP Unitholder and Analyst
Inquiries: Lee Evans
877.290.2772investor_relations@tcpipelineslp.comwww.tcpipelineslp.com
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