TransCanada Earns Q1 Net Income of $334MM
TransCanada has announced net income for first quarter 2009 of $334 million or $0.54 per share. TransCanada's Board of Directors also declared a quarterly dividend of $0.38 per common share.
"TransCanada's solid first quarter financial performance demonstrates our ability to generate significant earnings and cash flow from our large portfolio of energy infrastructure assets," said Hal Kvisle, TransCanada's president and chief executive officer. "Looking forward, we are well positioned to fund our large 2009 capital program as a result of our strong internally generated cash flow and our prudent decisions to maintain TransCanada's strong financial position and liquidity during these uncertain economic times. To that end, TransCanada successfully issued $3.1 billion of long-term debt in the first quarter and $1.1 billion of common shares at the end of 2008. Although the carrying costs and dilution associated with these financings will have an impact on our 2009 results, we remain well positioned to generate strong, long-term returns for our shareholders. Today we are in the midst of constructing $19 billion of commercially secured, low-risk projects such as the Keystone oil pipeline, the North Central Corridor expansion, the Bruce Power refurbishment, and three large-scale, gas-fired power plants that will be completed and placed into service over the next four years. Each is expected to generate significant long-term earnings and cash flow for our shareholders."
First Quarter Highlights
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
- Net income for first quarter 2009 of $334 million or $0.54 per share
- Comparable earnings for first quarter 2009 of $343 million or $0.55 per share
- Comparable earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.1 billion for first quarter 2009
- Funds generated from operations for first quarter 2009 of $766 million
- Dividend of $0.38 per common share declared by the Board of Directors
- Issued $3.1 billion of long-term debt to fund 2009 capital program
- Commissioned the 550 megawatt (MW) Portlands Energy Centre under budget
TransCanada reported net income for first quarter 2009 of $334 million ($0.54 per share) compared to $449 million ($0.83 per share) for first quarter 2008.
Comparable earnings were $343 million in first quarter 2009 compared to $326 million for the same period in 2008. The increase in comparable earnings was primarily due to higher earnings from U.S. Pipelines, Eastern Power and Bruce Power, partially offset by decreases in the U.S. Power and Natural Gas Storage businesses and higher financing costs. Comparable earnings of $0.55 per share in first quarter 2009 decreased from $0.60 per share for the same period in 2008 due to an increased number of shares outstanding following the Company's common share issuances in the second and fourth quarters of 2008. Comparable earnings in first quarter 2009 and 2008 excluded $9 million after tax, and $12 million after tax, respectively, of net unrealized losses resulting from changes in the fair value of proprietary natural gas storage inventory and natural gas forward purchase and sale contracts. In addition, comparable earnings in first quarter 2008 excluded the $152 million after tax Calpine bankruptcy settlements, the $10 million after tax GTN lawsuit settlement and the $27 million after tax write-down of Broadwater LNG project costs.
Comparable EBITDA was $1,131 million in first quarter 2009 compared to $1,067 million in first quarter 2008.
Funds generated from operations in first quarter 2009 of $766 million decreased $156 million primarily due to the $152 million of after tax proceeds received in first quarter 2008 from the Calpine bankruptcy settlements.
Notable recent developments in Pipelines, Energy and Corporate include:
- In October 2008, TransCanada agreed to increase its equity ownership in the Keystone partnerships to 79.99 per cent with ConocoPhillips' equity ownership being reduced concurrently to 20.01 per cent. In accordance with this agreement, TransCanada is funding 100 per cent of the construction expenditures until the participants’ project capital contributions are aligned with the revised ownership interests. At March 31, 2009 and December 31, 2008, TransCanada's equity ownership in the Keystone partnerships was approximately 71 percent and 62 percent, respectively.
Certain parties that have volume commitments for the Keystone expansion had options to acquire up to a combined 15 percent ownership interest in the Keystone partnerships. None of these options were exercised and the target ownership between TransCanada and ConocoPhillips remains at 79.99 percent and 20.01 percent, respectively.
On February 27, 2009 TransCanada filed an application with the National Energy Board (NEB) to construct and operate the Canadian portion of the Keystone expansion to the U.S. Gulf Coast. A public hearing is anticipated to occur in September 2009 and a decision from the NEB is expected in early 2010.
A Presidential permit, an Environmental Impact Statement and several state permits are required to construct and operate the U.S. portion of the Keystone expansion to the U.S. Gulf Coast. Permit applications have been filed with the respective jurisdictions and approvals are expected in the second quarter 2010.
- In May 2009, the first section of the North Central Corridor expansion is expected to be completed at a total capital cost of approximately $400 million. Construction of the remaining sections and associated facilities will continue throughout 2009 with final completion of the North Central Corridor expansion anticipated in April 2010.
- On February 26, 2009, the NEB determined that the Alberta System is within federal jurisdiction and is subject to regulation by the NEB under the National Energy Board Act (Canada), effective April 29, 2009. Under federal regulation, TransCanada will be able to apply to the NEB for approval to extend the Alberta System across provincial borders, allowing the Company to provide attractive service options and rates to producers in British Columbia and the North.
- On February 26, 2009, TransCanada announced the successful completion of a binding open season, securing support for firm transportation contracts for a pipeline to connect new shale gas supply in the Horn River basin north of Fort Nelson, B.C. to the Alberta System. The contracts are expected to commence in 2011 and increase to 378 million cubic feet per day (mmcf/d) by second quarter 2013. Combined with the Montney volumes of 1.1 billion cubic feet per day (Bcf/d) by 2014, this represents a total of 1.5 Bcf/d of new transportation capacity out of this region.
- On March 19, 2009, Trans Québec & Maritimes Pipeline Inc. (TQM) received the NEB's decision on its cost of capital application for the years 2007 and 2008, which requested the approval of an 11 per cent return on 40 per cent deemed common equity. In its decision, the NEB granted TQM's request to vary from the Multi-pipeline Cost of Capital Decision (RH-2-94), based on changes in financial markets and economic conditions, and set a 6.4 percent after-tax weighted average cost of capital (ATWACC) for each of the two years.
The decision granted TQM an aggregate return on capital, leaving it to TQM to choose its optimal capital structure. This decision equates to a 9.85 percent return on 40 percent deemed common equity in 2007 and a 9.75 percent return on 40 percent deemed common equity in 2008. Prior to the decision, TQM was subject to the NEB return on equity formula of 8.46 and 8.71 for 2007 and 2008, respectively, on deemed common equity of 30 percent established in the RH-2-94 decision.
- TransCanada's Bison pipeline project filed an application April 20, 2009 with the Federal Energy Regulatory Commission (FERC) for the right to construct, own and operate the pipeline.
The Project is expected to have a capital cost of US$610 million and will consist of approximately 486 kilometers (302 miles) of 30-inch diameter natural gas pipeline designed to transport gas from the Powder River Basin in Wyoming to the Midwest U.S. market with a contracted capacity of approximately 407 mmcf/d with potential expandability of up to approximately 1 Bcf/d.
- The 550 MW Portlands Energy Centre was fully commissioned on April 22, 2009 under budget. The power plant, which is 50 per cent owned by TransCanada, will provide electricity to central Toronto under a 20-year Accelerated Clean Air Supply contract with the Ontario Power Authority.
- In other Energy developments, refurbishment work continues on Bruce Power Units 1 and 2 and the units are expected to return to commercial service in 2010. TransCanada also advanced construction work on the 132 MW Kibby Wind Power Project, with commissioning of the first phase expected to begin in fourth quarter 2009. Construction of the 683 MW Halton Hills generating station also continued and it is anticipated to be in service in the third quarter of 2010.
- The Company and its subsidiaries held cash and cash equivalents of $2.2 billion at March 31, 2009.
- In first quarter 2009, TransCanada issued $3.1 billion and retired $482 million of long-term debt and reduced notes payable by $917 million.
- On January 9, 2009, a subsidiary of the Company issued Senior Unsecured Notes of US$750 million and US$1.25 billion maturing in January 2019 and January 2039, respectively, and bearing interest at 7.125 percent and 7.625 percent, respectively. These notes were issued under a US$3.0 billion debt shelf prospectus filed in January 2009 which now has capacity of US$1.0 billion remaining.
- On February 17, 2009, a subsidiary of the Company issued Medium-Term Notes of $300 million and $400 million maturing in February 2014 and February 2039, respectively, and bearing interest at 5.05 per cent and 8.05 percent, respectively. These notes were issued under the $1.5 billion Canadian Medium-Term Notes shelf prospectus in March 2007.
- On April 23, 2009, TransCanada Pipelines Limited filed a new $2.0 billion Canadian Medium-Term Notes shelf prospectus to replace the $1.5 billion Canadian Medium-Term Notes shelf prospectus, which expired in April 2009.
- TransCanada’s liquidity position remains solid, underpinned by highly predictable cash flow from operations, significant cash balances on hand from recent debt 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 as TransCanada has maintained continuous access to the Canadian commercial paper market on competitive terms.
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