Proposed Keystone Project
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TransCanada announced comparable earnings for the year ended December 31, 2008 of $1.3 billion or $2.25 per share, an increase of approximately 8% on a per share basis compared to 2007.
"TransCanada's financial performance in 2008 demonstrates our ability to generate significant earnings and cash flow even in these uncertain economic times," said Hal Kvisle, TransCanada president and chief executive officer. "This has enabled our Board of Directors to increase the dividend on common shares for the ninth consecutive year. The new quarterly dividend of $0.38 per common share equates to $1.52 per common share on an annualized basis, an increase of six per cent.
"TransCanada made significant progress on a number of major projects in 2008, including the Keystone oil pipeline system, the North Central Corridor expansion, the Bruce Power refurbishment, and three large-scale, gas-fired power plants. These major projects are all under construction today. In 2009, we expect to invest approximately $6 billion in these and other capital projects. The strong cash flow generated by our operating assets, along with recently completed debt and common equity issues, mean we are well-positioned to fund our sizable capital program. Looking forward, we expect to generate strong, long-term financial returns for our shareholders as a result of our growing portfolio of high-quality energy infrastructure assets, our proven project development and execution capabilities, and our strong financial position."
Fourth Quarter and Year-End 2008 Highlights
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
- Comparable earnings for the year ended December 31, 2008 of $1.3 billion ($2.25 per share)
- Net income for the year ended December 31, 2008 of $1.4 billion ($2.53 per share)
- Funds generated from operations for the year ended December 31, 2008 of $3.0 billion
- Comparable earnings for fourth quarter 2008 of $271 million ($0.46 per share)
- Net income for fourth quarter 2008 of $277 million ($0.47 per share)
- Funds generated from operations for fourth quarter 2008 of $712 million
- Invested $6.4 billion in 2008 in a number of growth opportunities including the Keystone Pipeline system, Ravenswood generating station, Bruce Power, Portlands Energy Centre and Halton Hills generating station.
TransCanada reported net income for fourth quarter 2008 of $277 million ($0.47 per share) compared to $377 million ($0.70 per share) for fourth quarter 2007. Net income in fourth quarter 2007 included $56 million of favourable income tax adjustments and a $14 million gain on the sale of land. Fourth quarter 2008 and 2007 included $6 million and $10 million, respectively, of fair value gains in the natural gas storage business.
Comparable earnings were $271 million ($0.46 per share) for fourth quarter 2008 compared to $297 million ($0.55 per share) in fourth quarter 2007. The $26 million ($0.09 per share) decrease was primarily due to higher Corporate costs, which included unrealized losses of $39 million after-tax ($0.07 per share) from the change in the fair value of derivatives used to manage TransCanada's exposure to rising interest rates that do not qualify as hedges for accounting purposes together with the impact of financing incremental debt to fund the Company's growth. Partially offsetting these higher corporate costs were higher earnings in the Energy and Pipelines businesses.
Net income was $1.4 billion ($2.53 per share) for the year ended December 31, 2008 compared to net income of $1.2 billion ($2.31 per share) for 2007. Net income in 2008 included $152 million of gains from bankruptcy settlements with Calpine, $10 million of GTN lawsuit settlement proceeds, a $27 million write-down of the Broadwater liquefied natural gas (LNG) project costs and $26 million of favourable income tax adjustments. Net income in 2007 included favourable income tax adjustments of $102 million, $14 million gain on the sale of land and $7 million of net unrealized gains from natural gas storage fair value changes.
Comparable earnings for the year ended December 31, 2008 were $1.3 billion ($2.25 per share), compared to $1.1 billion ($2.08 per share) for 2007. The $179 million ($0.17 per share) increase was primarily due to higher earnings from the Energy and Pipelines businesses partially offset by higher Corporate expenses.
Notable recent developments in Pipelines, Energy and Corporate include:
- The Keystone Pipeline system has completed approximately 40 per cent of the engineering, procurement and construction activities for the initial phase of the project to Wood River, Patoka and Cushing. In November, an application was filed with the U.S. Department of State for a Presidential Permit for the Keystone expansion to the U.S. Gulf Coast.
TransCanada agreed to increase its equity ownership in the Keystone partnership to 79.99 per cent, which will reduce ConocoPhillips' equity ownership to 20.01 per cent. Certain parties who have agreed to make volume commitments to the Keystone expansion have an option to acquire up to a combined 15 per cent equity ownership in the Keystone partnerships. If these options are exercised, TransCanada's equity ownership could be reduced to 64.99 per cent.
- In November, ANR's Cold Springs 1 storage facility was placed in service. The project added 14 billion cubic feet (Bcf) of natural gas storage and 200 million cubic feet per day (mmcf/d) of withdrawal capacity, and increased ANR's total storage capacity to 250 Bcf.
- The Bison Pipeline project is a proposed 480 kilometre (km) pipeline from the Powder River Basin in Wyoming to the Northern Border system in North Dakota. The project has shipping commitments for approximately 405 mmcf/d and is expected to be in service in fourth quarter 2010. The capital cost of the project is estimated at US$500 - US$600 million. TransCanada continues to work with shippers to finalize the size and design of this project.
- In December 2008, the Alaska Commissioner of Revenue and Natural Resources issued the Alaska Gasline Inducement Act (AGIA) license to TransCanada. TransCanada has committed under AGIA to advance the Alaska Pipeline project through an open season and subsequent Federal Energy Regulatory Commission (FERC) certification. TransCanada has commenced the engineering, environmental, field and commercial work, and expects to conclude an open season by mid-2010.
- TransCanada recently concluded a binding open season for gas transmission service from the Montney Groundbirch area located in northeastern B.C. Shippers have committed to firm gas transportation contracts and volumes associated with these commitments are expected to reach 1.1 Bcf per day (Bcf/d) by 2014. The proposed pipeline will be approximately 77 km in length and is expected to commence service in fourth quarter 2010, subject to receipt of necessary regulatory approvals. The proposed project is expected to cost approximately $250 million.
- - TransCanada is finalizing details associated with a binding open season and pipeline extension project to service the Horn River shale gas area in northeastern B.C. with the Alberta System. The Horn River project is expected to commence operation in early 2011.
- The Board of Directors of TransCanada declared a quarterly dividend of $0.38 per common share, an increase of six per cent, for the quarter ending March 31, 2009, on TransCanada's outstanding common shares.
- In late fourth quarter 2008, the TransCanada Board of Directors approved an increase in the discount on the issuance of common shares from treasury under TransCanada's Dividend Reinvestment and Share Repurchase Plan from two to three per cent for the common share dividend payable on January 30, 2009.
- On November 25, 2008, TransCanada completed a public offering of 30,500,000 common shares. On December 5, 2008, an additional 4,575,000 common shares were issued upon exercise of the underwriter's over-allotment option. Gross proceeds from the common share offering and the over-allotment option totalled approximately $1.157 billion. The proceeds of this offering will be used to partially fund capital projects, including the Keystone Pipeline system, for general corporate purposes and to repay short-term indebtedness.
- In addition, during the fourth quarter of 2008, a subsidiary of TransCanada closed a new US$1.0 billion committed bank facility with certain of its existing relationship banks. The revolving, extendable, expandable facility has an initial term of 364 days with a one-year term out at the option of the borrower and will support a new commercial paper program dedicated to funding expenditures for the Keystone Pipeline system.
- In January 2009, the Company issued US$750 million of 7.125 per cent and US$1.25 billion of 7.625 per cent Senior Unsecured Notes maturing on January 15, 2019, and January 15, 2039, respectively. Net proceeds from the issue are expected to be used to partially fund TransCanada's capital projects, retire maturing debt obligations and for general corporate purposes. These notes were issued under the US$3.0 billion debt shelf prospectus filed in the United States in January 2009.
- Global financial markets remain volatile, however, TransCanada's liquidity position remains sound, underpinned by highly predictable cash flow from operations, significant cash balances on hand from recent securities issues, as well as committed revolving bank lines of US$1.0 billion, $2.0 billion and US$300 million, maturing in November 2010, December 2012 and February 2013, respectively. To date, no draws have been made on these facilities.