TransCanada Reports Second Quarter 2007 Earnings
TransCanada reported net income for second quarter 2007 was $257 million ($0.48 per share) compared to $244 million ($0.50 per share) for second quarter 2006.
Comparable earnings were $241 million ($0.45 per share) for second quarter 2007 compared to $198 million ($0.41 per share) in second quarter 2006. The $43 million ($0.04 per share) increase in comparable earnings in second quarter 2007 compared to second quarter 2006 is primarily due to income from the acquisition of American Natural Resources Company and ANR Storage Company (collectively, ANR) and the start-up of Becancour and higher income recorded due to a settlement on the Canadian Mainline approved by the National Energy Board (NEB). Comparable earnings excluded positive income tax adjustments of $16 million in second quarter 2007. In second quarter 2006, comparable earnings excluded $33 million favourable impact on future income taxes arising from a reduction in Canadian federal and provincial corporate income tax rates and a $13 million ($23 million pre-tax) gain on the sale of TransCanada's interest in Northern Border Partners, L.P.
Net income for the six months ended June 30, 2007 was $522 million ($1.00 per share) compared to $517 million ($1.06 per share) for the same period in 2006. Net income from continuing operations for the six months ended June 30, 2007 was $522 million ($1.00 per share) compared to $489 million ($1.00 per share) for the same period in 2006.
Comparable earnings for the six months ended June 30, 2007 were $491 million ($0.94 per share) compared to $425 million ($0.87 per share) for the same period in 2006. The $66 million ($0.07 per share) increase in comparable earnings for the six months ended June 30, 2007 compared to the same period in 2006 is primarily due to income from ANR and Becancour and higher income recorded due to the settlement on the Canadian Mainline approved by the NEB. Comparable earnings for the six months ended June 30, 2007 excluded positive income tax adjustments of $31 million. In the first six months of 2006, comparable earnings excluded a $33 million favourable impact on future income taxes, an $18 million ($29 million pre-tax) bankruptcy settlement with Mirant and the $13 million gain on the sale of TransCanada's interest in Northern Border Partners, L.P.
Net cash provided by operations in second quarter 2007 was $689 million compared to $448 million for the same period in 2006. Net cash provided by operations for the six months ended June 30, 2007 was $1,307 million compared to $963 million for the same period in 2006. The increase in net cash provided by operations was primarily due to an increase in funds generated from operations and a decrease in operating working capital.
Funds generated from operations in second quarter 2007 were $596 million compared to $539 million for the same period in 2006. Funds generated from operations for the six months ended June 30, 2007 were $1,178 million compared to $1,056 million for the same period in 2006.
"We continue to advance our large portfolio of Pipelines and Energy projects," said Hal Kvisle, TransCanada's president and chief executive officer. "Significant milestones in the second quarter include commercial support for the Keystone Oil Pipeline expansion and extension and favourable decisions from the Quebec and Federal governments on the Cacouna Energy LNG project. We also made progress with the Portlands Energy Centre, Halton Hills Generating Station, Cartier Wind project and the Bruce Power restart and refurbishment project."
Notable recent developments in Pipelines, Energy and Corporate include: Pipelines:
- TransCanada announced a successful Open Season on the Keystone Oil Pipeline (Keystone) that supports an expansion to 590,000 barrels per day and extension of the pipeline to Cushing, Oklahoma. TransCanada has now secured long-term contracts for a total of 495,000 barrels per day with an average duration of 18 years. In addition, the NEB held a public hearing related to the construction and operation of Keystone's Canadian facilities. The public hearing ended on June 21, 2007 and a decision is expected in fourth quarter 2007.
- TransCanada's five-year settlement with interested stakeholders for years 2007 to 2011 on its Canadian Mainline was approved by the NEB in May 2007. The settlement reflects a cost of capital based on a rate of return on common equity determined by the NEB return-on-equity formula, on a deemed common equity ratio of 40 per cent, an increase from 36 per cent. The NEB also approved TransCanada's request that interim tolls be made final for 2007.
- ANR received regulatory approval to proceed with a 14 Bcf natural gas storage expansion project in Michigan. This capacity is fully contracted with an expected in service date of April 1, 2008 for injections and November 1, 2008 for withdrawals. This project is in addition to a natural gas storage enhancement and expansion program that will increase Michigan capacity available for sale by 13 Bcf. This program was also fully subscribed with injections commencing in April 2007. The expected capital cost of these projects is US$125 million.
- In June 2007, TransCanada made an application to the Alberta Energy and Utilities Board for approval to construct approximately $300 million of new facilities on the Alberta System to initially serve the growing demand for natural gas in the Fort McMurray region of Alberta.
- In July 2007, the NEB approved TransCanada's application to add Gros Cacouna as a receipt point on its integrated Canadian Mainline system and reaffirmed the existing rolled-in toll methodology. The effective date for these approvals is when the facilities required to connect the Gros Cacouna receipt point are approved and placed in service. Trans Quebec and Maritimes Pipeline (TQM) and TransCanada are preparing applications to the NEB for approval to construct those facilities required to connect the Cacouna Energy Liquefied Natural Gas (LNG) terminal at Gros Cacouna to the existing integrated TQM/Canadian Mainline infrastructure.
- TransCanada assumed operatorship at ANR, Great Lakes, and Northern Border natural gas transmission systems and commenced physical natural gas deliveries at the Tamazunchale pipeline in east-central Mexico. Energy:
- The Cacouna Energy LNG project received federal cabinet approval pursuant to the Canadian Environmental Assessment Act. This approval is required for the issuance of permits under the Fisheries Act (Canada) and Navigable Waters Protection Act (Canada). Also, the Quebec government granted a decree pursuant to the Environment Quality Act approving the Cacouna regassification terminal.
- Construction is progressing on Bruce A, Portlands Energy Centre, and on the Cartier Wind Energy project. Pre-construction activities continue at the Halton Hills Generating Station.
- Becancour, one of TransCanada's largest co-generation facilities, is successfully operating and running as expected. Becancour supplies electricity to Hydro-Quebec Distribution and provides a source of competitively priced steam. Corporate:
- In April 2007, US$1.0 billion of Junior Subordinated Notes were issued maturing in 2067 and bearing interest of 6.35 per cent until May 2017, at which time the interest on the Notes will convert to a floating rate reset quarterly to the three-month London Interbank Offered Rate plus 221 basis points.
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