TransCanada announced net income for second quarter 2009 of $314 million or $0.50 per share. TransCanada's Board of Directors also declared a quarterly dividend of $0.38 per common share.
"Our solid second quarter performance in the face of historically low power prices in Alberta and Ontario demonstrates the inherent strength of our business model and the quality of our existing assets," said Hal Kvisle, TransCanada's president and chief executive officer. "Looking forward, our strong internally generated cash flow and prudent decisions to maintain TransCanada's financial strength means we are well positioned to fund our large capital program. While the carrying costs and dilution associated with recent financings will continue to have an impact on our financial results through the remainder of 2009, we expect significant growth in earnings and cash flow over the next four years as $21 billion of secured, low-risk projects are placed into service."
Second Quarter 2009 Highlights
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
TransCanada reported net income for second quarter 2009 of $314 million ($0.50 per share) compared to $324 million ($0.58 per share) for second quarter 2008.
Comparable earnings were $319 million in second quarter 2009 compared to $316 million for the same period in 2008. The increase in comparable earnings was primarily due to higher earnings from Bruce Power, Eastern Power, Natural Gas Storage, and U.S. Pipelines, partially offset by a decrease in Western Power and higher financing costs. Comparable earnings per share of $0.51 in second quarter 2009 decreased from $0.57 per share for the same period in 2008 due to an increase in the average number of shares outstanding following the Company's common share issuances in the second and fourth quarters of 2008 and the second quarter of 2009. Comparable earnings in second quarter 2009 and 2008 excluded $5 million of after tax unrealized losses, and $8 million of after tax unrealized gains, respectively, resulting from changes in the fair value of proprietary natural gas inventory and natural gas forward purchase and sale contracts. Comparable EBITDA in second quarter 2009 of $1,017 million increased $69 million compared to $948 million in second quarter 2008.
Funds generated from operations in second quarter 2009 were $692 million compared to $676 million in second quarter 2008.
Notable recent developments in Pipelines, Energy and Corporate include:
TransCanada reached an agreement to acquire ConocoPhillips' remaining interest in the Keystone Oil Pipeline System (Keystone) for approximately US$550 million plus the assumption of approximately US$200 million of short-term indebtedness. The transaction is expected to close in third quarter 2009, subject to the receipt of certain regulatory approvals.
TransCanada will assume responsibility for ConocoPhillips' share of the capital investment required to complete the project resulting in an incremental commitment of approximately US$1.7 billion through the end of 2012.
When completed, the US$12 billion pipeline will be one of the largest oil delivery systems in North America with the capacity to deliver 1.1 million barrels per day (bbl/d) from Western Canada to the largest refining markets in the United States. To date, Keystone has secured long-term commitments for 910,000 bbl/d for an average term of approximately 18 years which represents 83 per cent of the commercial design of the system. At July 30, 2009, the first phase was approximately 80 per cent complete.
Keystone is expected to begin to generate EBITDA in first quarter 2010, when commercial operations to Wood River and Patoka, Illinois commence, and increase through 2011 and 2012 as subsequent phases of Keystone are placed in service. Based on current long-term commitments of 910,000 bbl/d, Keystone is expected to generate EBITDA of approximately US$1.2 billion in 2013, its first full year of commercial operation serving both the U.S. Midwest and Gulf Coast markets. If volumes increase to 1.1 million bbl/d, Keystone would generate approximately US$1.5 billion of annual EBITDA. In the future, Keystone could be economically expanded from 1.1 million bbl/d to 1.5 million bbl/d in response to additional market demand.
TransCanada entered into a contract to build, own and operate the US$320 million Guadalajara Pipeline in Mexico, supported by a 25-year contract for its entire capacity with Comision Federal de Electricidad, Mexico's state-owned electric company. The proposed pipeline will extend 310 kilometres (kms) (193 miles) from an LNG terminal under construction near Manzanillo, Mexico, to Guadalajara, and is expected to be capable of transporting 500 million cubic feet per day of natural gas. The Company expects to complete most of the construction in 2010 with a targeted in-service date of March 2011.
TransCanada sold the North Baja Pipeline (North Baja), to TC PipeLines, LP (PipeLines LP) on July 1, 2009. As part of the transaction, TransCanada agreed to amend its incentive distribution rights with PipeLines LP. TransCanada received aggregate consideration totalling approximately US$395 million from PipeLines LP, including approximately US$200 million in cash and 6,371,680 common units of PipeLines LP. TransCanada's ownership in PipeLines LP increased to 42.6 per cent as a result of this transaction. TransCanada will continue to operate the North Baja Pipeline.
TransCanada submitted an application in April 2009 to the National Energy Board (NEB) for approval to construct and operate the Groundbirch Pipeline, which comprises a 77 km (48 mile) natural gas pipeline and related facilities. The Groundbirch Pipeline is an extension of the Alberta System which is expected to connect natural gas supply primarily from the Montney shale gas region in northeast B.C. to existing infrastructure in northwest Alberta. In June 2009, the NEB announced that it will hold a public hearing process on the application. Subject to regulatory approvals, construction of the Groundbirch Pipeline is expected to commence in July 2010 with final completion anticipated in November 2010.
TransCanada filed a project description in May 2009 with the NEB to construct the Horn River natural gas pipeline. The Horn River Pipeline is a proposed extension of the Alberta System to service the Horn River shale gas region in northeast B.C. Horn River producers have recently notified TransCanada that they are extending their construction schedule for upstream production facilities which will enhance their ability to manage project costs, therefore, TransCanada will delay the in-service date of the Horn River Pipeline from 2011 to 2012.
TransCanada and ExxonMobil Corporation reached an agreement to work together to progress TransCanada's Alaska Pipeline Project. With a forecasted capital cost of US$26 billion (2007 estimate in 2007 dollars), the project would provide a variety of benefits to Alaska and Canada, as well as the rest of the United States including substantial revenues, jobs, business opportunities and new, long-term stable supplies of natural gas.
The Alaska Pipeline Project continues to move forward with project development, including engineering, environmental reviews, Alaska Native and Canadian Aboriginal engagement, and commercial work to conclude an initial binding open season by July 2010. Subject to the completion of a successful open season, construction of the approximately 2,700 km (1,700 mile), 4.5 billion cubic feet per day pipeline is expected to begin in 2016, once environmental and regulatory approvals are received, and begin transporting natural gas in 2018.
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