TC PipeLines, LP Announces 2005 First Quarter Results
04 May 2005 - 12:08PM
Business Wire
TC PipeLines, LP (NASDAQ:TCLP) (the Partnership) today reported
first quarter 2005 net income of $13.4 million or $0.72 per unit
(all amounts in U.S. dollars) compared to $13.7 million or $0.75
per unit in the first quarter of 2004. The decrease in net income
is primarily due to lower equity income from Northern Border
Pipeline Company. Cash generated in the first quarter of 2005
increased $1.9 million to $17.3 million compared to $15.4 million
for the same period in 2004. This increase includes $4.1 million of
cash distributed from the Partnership's investments in Northern
Border Pipeline Company and Tuscarora Gas Transmission Company
classified as return of capital. This increase in cash generated
was primarily due to higher cash distributions from Northern Border
Pipeline compared to the prior year. "Our first quarter 2005 net
income remains relatively stable compared to the same period last
year," said Ron Turner, president and chief executive officer of
the general partner, TC PipeLines GP, Inc. "Our pipeline
investments delivered strong cash flows in the first quarter which
underpinned our cash distributions. "Northern Border Pipeline
continues to face re-contracting risk in 2005. In the month of
April, our share of Northern Border Pipeline's earnings was reduced
by an estimated $1.8 million (Northern Border Pipeline's revenue
reduction was estimated to be approximately $6 million) when
compared to plan as a result of approximately 600 MMcf/d of firm
capacity not contracted. Northern Border Pipeline has advised us
that they believe further revenue reduction in 2005 is likely with
the greatest potential for continued revenue shortfall occurring in
the second quarter. Currently, Northern Border Pipeline estimates
the potential revenue reduction in 2005 to be in the range of $15
million to $28 million, of which $5 million to $8 million would be
the Partnership's share. "As a result of this, the Partnership's
earnings and cash flows from Northern Border Pipeline will be lower
in 2005 than expected. We believe, however, that our healthy
distribution coverage ratio (A) which was expected to be
approximately 1.36 times for 2005, coupled with our strong balance
sheet, means we expect to be able to absorb this reduction and
continue cash distributions to our unitholders. Even with potential
revenue reduction in the range of $5 million to $8 million in 2005,
our coverage ratio remains strong at approximately 1.26 times to
1.19 times," Turner said. (A) Reconciliation of non-GAAP financial
measure: distribution coverage ratio is a non-GAAP financial
measure defined as net cash available per unit divided by
distribution per unit. Management believes that this is an
important measure to assist the Partnership's investors in
evaluating the Partnership's business performance and stability of
distributions. -0- *T
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Assuming Assuming Forecast revenue revenue for the reduction
reduction (millions of U.S. dollars year ended of $5 of $8 except
per unit amounts) 2005 million million
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Cash generated from operations $51.9 $47.0 $44.0
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Plus: Returns of capital 10.5 10.5 10.5
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Less: Available cash to the General Partner (7.6) (6.9) (6.5)
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Net available cash to unitholders 54.8 50.6 48.0
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Net available cash per unit (17.5 million units) $3.13 $2.89 $2.74
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Distribution coverage ratio (assuming $2.30 per unit) 1.36 times
1.26 times 1.19 times
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On April 19, 2005, the Partnership announced its first quarter cash
distribution in the amount of $0.575 per unit, payable to
unitholders of record on April 29, 2005. Financial Highlights
(unaudited) Three months ended March 31 (millions of dollars except
------------------------------ per unit amounts) 2005 2004
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Net income 13.4 13.7 Per unit (1) $0.72 $0.75 Cash generated from
operations 13.2 13.4 Return of capital (2) 4.1 2.0 Cash
distributions paid 10.7 10.1 Cash distributions declared per unit
(3) $0.575 $0.55 Units outstanding (millions) 17.5 17.5 (1) Net
income per unit is computed by dividing net income, after deduction
of the general partner's allocation, by the number of common and
subordinated units outstanding. The general partner's allocation is
computed based upon the general partner's two per cent interest
plus an amount equal to incentive distributions. (2) Current
accounting practice requires the classification of cumulative cash
distributions in excess of cumulative equity earnings to be
reported as a return of capital. (3) The Partnership's 2005 first
quarter cash distribution will be paid on May 13, 2005 to
unitholders of record as of April 29, 2005. *T Net Income The
Partnership reported first quarter 2005 net income of $13.4 million
or $0.72 per unit, a decrease of $0.3 million compared to $13.7
million or $0.75 per unit in the first quarter of 2004. Equity
income from Northern Border Pipeline was $12.2 million in the first
quarter of 2005 compared to $12.5 million in the same quarter of
2004. Northern Border Pipeline's revenues were lower and costs and
expenses were higher in the first quarter of 2005 compared to the
same period in 2004. The decrease in revenue is primarily due to
the leap year which provided an additional day of transportation in
2004 compared to 2005. The increase in operations and maintenance
expense is primarily due to increases in salary and benefit
expenses. Equity income from Tuscarora was $2.0 million in the
first quarter of 2005 compared to $1.8 million for the same period
in 2004. This increase is primarily attributable to lower operating
expenses resulting from the renegotiation of lower rates for
maintenance contracts in 2005. The Partnership's first quarter 2005
general and administrative expenses of $0.5 million were
approximately the same as in the first quarter of 2004. Financial
charges of $0.3 million in the first quarter of 2005 increased
compared to $0.1 million in the same period last year primarily due
to higher average debt balances. Cash Flow The Partnership reported
first quarter 2005 cash generated from operations of $13.2 million
compared to $13.4 million in the first quarter of 2004. Cash
generated from investments increased $1.9 million to $17.3 million
in 2005 compared to $15.4 million for the same period in 2004 when
including the portion of the cash distributions from Northern
Border Pipeline and Tuscarora classified as return of capital. In
the first quarter of 2005, the Partnership received a cash
distribution from Northern Border Pipeline of $16.2 million, $4.0
million of which has been classified as return of capital, compared
to $14.5 million in the first quarter of 2004, an increase of $1.7
million. The increase is primarily due to Northern Border
Pipeline's higher fourth quarter cash flow in 2004 relative to the
same period in 2003. The increased cash flow is primarily
attributable to increased net income and decreased capital
expenditures in the fourth quarter of 2004 compared to the fourth
quarter of 2003. Distributions paid in the first quarter are based
on the results of the fourth quarter of the previous year. Cash
distributions from Tuscarora in the first quarter of 2005 were $2.1
million, including $0.1 million classified as return of capital,
compared to $1.5 million in the first quarter of 2004, an increase
of $0.6 million. In the first quarter of 2005, the Partnership paid
an aggregate $10.7 million of cash distributions to unitholders and
its general partner, compared to $10.1 million in the first quarter
of 2004. This cash distribution, on a per unit basis, represents
$0.575 per unit in the first quarter of 2005, compared to $0.55 per
unit in the first quarter of 2004, as well as the general partner
interest, including incentive distributions. In the first quarter
of 2005, the Partnership repaid $6.5 million under its revolving
credit facility, reducing the Partnership's outstanding debt
balance to $30.0 million as at March 31, 2005. Conference Call The
Partnership will hold a conference call Wednesday, May 4, 2005 at
12 p.m. (Eastern). Ron Turner, president and chief executive
officer of the general partner, will discuss the first quarter 2005
financial results and general developments and issues concerning
the Partnership. Those interested in listening to the call may dial
(866) 546-6145. A replay of the conference call will also be
available two hours after the call and until midnight (Eastern),
May 11, 2005 by dialing (800) 408-3053, then entering pass code
3150023. A live webcast of the conference call will also be
available through the Partnership's website at
www.tcpipelineslp.com. An audio replay of the call will be
maintained on the website. TC PipeLines, LP is a publicly traded
limited partnership. It owns a 30 per cent interest in Northern
Border Pipeline Company, a Texas general partnership, and a 49 per
cent interest in Tuscarora Gas Transmission Company, a Nevada
general partnership. Northern Border Pipeline, which is owned 70
per cent by Northern Border Partners, L.P., a publicly traded
master limited partnership controlled by affiliates of ONEOK, Inc.,
owns a 1,249-mile United States interstate pipeline system that
transports natural gas from the Montana-Saskatchewan border to
markets in the midwestern United States. Tuscarora owns a 240-mile
United States interstate pipeline system that transports natural
gas from Oregon, where it interconnects to TransCanada's GTN
System. 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 the Partnership. Common units of TC PipeLines, LP are
quoted on the Nasdaq Stock Market and trade under the symbol
"TCLP." For more information about TC PipeLines, LP, visit the
Partnership's Internet site 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. Words such as
"believes," "expects," "intends," "forecasts," "projects," 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. The
Partnership assumes no obligation to update any such
forward-looking statements to reflect events or circumstances
occurring after the date hereof. Important factors that could cause
actual results to materially differ from the Partnership's current
expectations include regulatory decisions, particularly those of
the Federal Energy Regulatory Commission, the Securities and
Exchange Commission, the ability of Northern Border Pipeline to
recontract its available capacity at maximum rates, operational
decisions of Northern Border Pipeline's operator, the failure of a
shipper on either one of the Partnership's pipelines to perform its
contractual obligations, cost of acquisitions, future demand for
natural gas, overcapacity in the industry, and other risks inherent
in the transportation of natural gas as discussed in the
Partnership's filings with the Securities and Exchange Commission,
including the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2004. -0- *T TC PipeLines, LP Financial
Highlights Statement of Income Three months ended (unaudited) March
31 (millions of U.S. dollars except per unit amounts) 2005 2004
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Equity income from investment in Northern Border Pipeline (1) 12.2
12.5 Equity income from investment in Tuscarora (2) 2.0 1.8 General
and administrative expenses (0.5) (0.5) Financial charges and other
(0.3) (0.1) ------------------- Net income 13.4 13.7
------------------- ------------------- Net income per unit (3)
$0.72 $0.75 ------------------- ------------------- Units
outstanding (millions) 17.5 17.5 -------------------
------------------- March 31, December 31, Balance Sheet 2005 2004
(millions of U.S. dollars) (unaudited) (audited)
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ASSETS Cash 2.6 2.5 Investment in Northern Border Pipeline (1)
286.0 290.1 Investment in Tuscarora (2) 39.4 39.5
-------------------------- 328.0 332.1 --------------------------
-------------------------- LIABILITIES AND PARTNERS' EQUITY Accrued
liabilities 0.5 0.7 Current portion of long-term debt 30.0 6.5
Long-term debt - 30.0 Partners' equity 297.5 294.9
-------------------------- 328.0 332.1 --------------------------
-------------------------- Cash Flow Information Three months ended
(unaudited) March 31 (millions of U.S. dollars) 2005 2004
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Cash Generated From Operations Distributions received from equity
investments Northern Border Pipeline Company 12.2 12.5 Tuscarora
Gas Transmission Company 2.0 1.5 Changes in working capital and
other (1.0) (0.6) ------------------- ------------------- 13.2 13.4
Return of capital from Northern Border Pipeline Company 4.0 2.0
Return of capital from Tuscarora Gas Transmission Company 0.1 -
------------------- Cash Generated From Investments (a) 17.3 15.4
Investment in Northern Border Pipeline Company - (19.5)
Distributions paid (10.7) (10.1) Long-term debt issued/(repaid)
(6.5) 9.0 ------------------- Increase/(decrease) in cash 0.1 (5.2)
------------------- ------------------- (a) Reconciliation of
non-GAAP financial measure: Cash generated from investments is a
non-GAAP financial measure which includes cash generated from
operations and return of capital. It is provided as a supplement to
results reported in accordance with GAAP. Management believes that
this is an important measure to assist the Partnership's investors
in evaluating the Partnership's business performance. (1) Northern
Border Pipeline Company TC PipeLines holds a 30 per cent general
partner interest in Northern Border Pipeline Company. Summarized
operating and financial information of Northern Border Pipeline for
the three months ended March 31, 2005 and 2004 and as at March 31,
2005 and December 31, 2004 is as follows: Three months ended March
31 (unaudited) 2005 2004
-------------------------------------------------------
------------- Operating Results Gas delivered (million cubic feet)
215,991 218,324 Average throughput (million cubic feet per day)
2,480 2,471 Financial Results (millions of U.S. dollars) Operating
revenue 82.8 83.3 Operating expenses Operations and maintenance 9.6
9.1 Depreciation and amortization 14.4 14.5 Taxes other than income
7.8 7.9 ------------- ------------- Total operating expenses 31.8
31.5 ------------- ------------- Operating income 51.0 51.8
Interest expense, net (10.6) (10.2) Other income 0.2 0.1
------------- ------------- Net income 40.6 41.7 -------------
------------- ------------- ------------- Capital Expenditures
(millions of U.S. dollars) Maintenance 4.4 0.1 Growth 0.3 0.2 March
31, December 31, Summary Balance Sheet Data 2005 2004 (millions of
U.S. dollars) (unaudited) (audited)
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Total Assets 1,619.4 1,623.3 ------------- -------------
------------- ------------- Other current liabilities and reserves
and deferred credits 57.8 52.3 Long-term debt (including current
maturities) 608.3 603.9 Partners' capital 949.9 963.3 Accumulated
other comprehensive income 3.4 3.8 ------------- -------------
Total liabilities and partners' equity 1,619.4 1,623.3
------------- ------------- ------------- ------------- (2)
Tuscarora Gas Transmission Company TC PipeLines holds a 49 per cent
general partner interest in Tuscarora Gas Transmission Company.
Summarized operating and financial information of Tuscarora for the
three months ended March 31, 2005 and 2004 and as at March 31, 2005
and December 31, 2004 is as follows: Three months ended March 31
(unaudited) 2005 2004
-------------------------------------------------------
------------- Operating Results Gas delivered (million cubic feet)
9,230 7,925 Average throughput (million cubic feet per day) 101 87
Financial Results (millions of U.S. dollars) Operating revenue 8.3
8.3 Operating expenses Operations and maintenance 0.8 0.9
Depreciation and amortization 1.5 1.6 Taxes other than income 0.3
0.3 ------------- ------------- Total operating expenses 2.6 2.8
------------- ------------- Operating income 5.7 5.5 Interest
expense, net (1.5) (1.5) ------------- ------------- Net income 4.2
4.0 ------------- ------------- ------------- ------------- Capital
Expenditures (millions of U.S. dollars) Maintenance 0.1 0.1 Growth
0.1 0.1 March 31, December 31, Summary Balance Sheet Data 2005 2004
(millions of U.S. dollars) (unaudited) (audited)
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Total assets 146.6 144.9 ------------- ------------- -------------
------------- Other current liabilities and reserves and deferred
credits 3.7 2.0 Long-term debt (including current maturities) 80.8
80.8 Partners' capital 62.0 62.0 Accumulated other comprehensive
income 0.1 0.1 ------------- ------------- Total liabilities and
partners' equity 146.6 144.9 ------------- -------------
------------- ------------- *T (3) Net income per unit is computed
by dividing net income, after deduction of the general partner's
allocation, by the number of common and subordinated units
outstanding. The general partner's allocation is computed based
upon the general partner's two per cent interest plus an amount
equal to incentive distributions. TC Pipelines, LP (NASDAQ:TCLP)
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