TC PipeLines, LP Announces 2005 Second Quarter Results
04 August 2005 - 9:12AM
Business Wire
TC PipeLines, LP (NASDAQ:TCLP) (the Partnership) today reported
second quarter 2005 net income of $9.7 million or $0.52 per unit
(all amounts in U.S. dollars) compared to $13.6 million or $0.74
per unit in the second quarter of 2004. The decrease in net income
is primarily due to lower equity income from Northern Border
Pipeline. Cash generated from investments in the second quarter of
2005 decreased $0.6 million to $17.9 million compared to $18.5
million for the same period in 2004 primarily due to higher
maintenance capital expenditures incurred by Northern Border
Pipeline during 2005. Cash generated from investments includes $7.5
million of cash distributed from the Partnership's investments in
Northern Border Pipeline Company and Tuscarora Gas Transmission
Company classified as return of capital. "The Partnership's net
income decrease is mainly due to the negative impact on revenues
resulting from changes in market fundamentals experienced by
Northern Border Pipeline during the second quarter," said Ron
Turner, president and chief executive officer of the general
partner, TC PipeLines GP, Inc. "During the second quarter, Northern
Border Pipeline's firm demand revenues dropped by approximately
$13.0 million (approximately $3.9 million impact on the
Partnership's net income) when compared to the prior year as a
result of uncontracted capacity and expired contracts which were
partially offset by $1.3 million of short-term and other
transportation service revenue. "Northern Border Pipeline believes
that the greatest impact of unsold capacity occurred during the
second quarter 2005. Northern Border Pipeline has advised us that
its capacity for July through September has been sold out at more
favorable rates compared to the second quarter, and expects that
throughout the duration of the 2005/2006 heating season, it will be
fully contracted at or near maximum rates. Consequently, Northern
Border Pipeline now expects that the most likely range of impact on
its revenue from unsold and discounted capacity in 2005 is $15.0
million to $18.0 million (approximately $11.7 million of which was
experienced in the second quarter 2005). The impact on the
Partnership's 2005 earnings is approximately $5.0 million. "As a
result of this, the Partnership's earnings and cash flows from
Northern Border Pipeline will be lower in 2005 than expected.
However, we continue to believe that our strong distribution
coverage ratio(A), which is currently expected to be in excess of
1.3 times for 2005, coupled with our strong financial position,
will allow us to continue to deliver stable cash flows to our
unitholders and to continue a disciplined approach to repaying the
Partnership's outstanding debt," Turner said. On July 14, 2005, the
Partnership announced its second quarter cash distribution in the
amount of $0.575 per unit, payable to unitholders of record on July
29, 2005. -0- *T ------------------------------------- (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.
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(millions of U.S. dollars except per unit amounts) 2005 Forecast
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Cash generated from operations $48.3
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Plus: Returns of capital 12.6
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Less: Available cash to the General Partner (7.2)
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Net available cash to unitholders 53.7
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Net available cash per unit (17.5 million units) $3.07
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Distribution coverage ratio (assuming $2.30 per unit) 1.33 times
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Financial Highlights (unaudited) Three months ended Six months
ended (millions of dollars June 30 June 30 except per unit amounts)
2005 2004 2005 2004
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Net income 9.7 13.6 23.1 27.3 Per unit (1) $ 0.52 $ 0.74 $ 1.24 $
1.49 Cash generated from operations 10.4 14.1 25.6 27.5 Return of
capital (2) 7.5 4.4 11.6 6.4 Cash distributions paid 10.8 10.2 21.5
20.3 Cash distributions declared per unit (3) $0.575 $0.575 $ 1.15
$1.125 Units outstanding (millions) 17.5 17.5 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 second
quarter cash distribution will be paid on August 12, 2005 to
unitholders of record as of July 29, 2005. *T Net Income The
Partnership reported second quarter 2005 net income of $9.7 million
or $0.52 per unit, a decrease of $3.9 million compared to $13.6
million or $0.74 per unit in the second quarter of 2004. Equity
income from Northern Border Pipeline was $8.6 million in the second
quarter of 2005, a decrease of $3.8 million when compared to $12.4
million in the second quarter of 2004. This decrease in equity
income from Northern Border Pipeline is primarily due to
approximately $13.0 million in revenue reduction associated with
unsold and discounted capacity; partially offsetting this revenue
reduction were increases in short-term and other transportation
service revenues of approximately $1.3 million. The net revenue
reduction of $11.7 million contributed to a negative net income
impact to TC PipeLines, LP of approximately $3.5 million. Increases
in Northern Border Pipelines' taxes other than income and financial
charges, partially offset by decreases in operations and
maintenance expenses relative to the same period in 2004
contributed to approximately $0.3 million decrease in equity income
from Northern Border Pipeline for the second quarter 2005. Equity
income from Tuscarora remained at $1.8 million in the second
quarter of 2005 compared to the same period in 2004. The
Partnership's second quarter 2005 general and administrative
expenses of $0.5 million were approximately the same as the second
quarter of 2004. Financial charges of $0.2 million in the second
quarter of 2005 increased compared to $0.1 million in the same
period last year primarily due to higher average interest rates.
Cash Flow The Partnership reported second quarter 2005 cash
generated from operations of $10.4 million compared to $14.1
million in the second quarter of 2004. Cash generated from
investments decreased $0.6 million to $17.9 million in the second
quarter 2005 compared to $18.5 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 second quarter of 2005, the Partnership received a cash
distribution from Northern Border Pipeline of $15.7 million, $7.1
million of which has been classified as return of capital, compared
to $16.8 million in the second quarter of 2004, a decrease of $1.1
million. The decrease is primarily due to Northern Border
Pipeline's higher maintenance capital expenditures in first quarter
of 2005 relative to the same period in 2004. Cash distributions
received in the quarter are based on the respective results of our
equity investments for the previous quarter. Cash distributions
from Tuscarora in the second quarter of 2005 were $2.2 million,
including $0.4 million classified as return of capital, compared to
$2.1 million in the second quarter of 2004, an increase of $0.1
million. In the second quarter of 2005, the Partnership paid an
aggregate $10.8 million of cash distributions to unitholders and
its general partner, compared to $10.2 million in the second
quarter of 2004. This cash distribution, on a per unit basis,
represents $0.575 per unit in the second quarter of 2005, as well
as the general partner interest, including incentive distributions.
In the second quarter of 2005, the Partnership repaid $6.0 million
under its revolving credit facility, reducing the Partnership's
outstanding debt balance to $24.0 million as at June 30, 2005.
Conference Call The Partnership will hold a conference call
Thursday, August 4, 2005 at 12 p.m. (Eastern). Ron Turner,
president and chief executive officer of the general partner, will
discuss the second quarter 2005 financial results and general
developments and issues concerning the Partnership. Those
interested in listening to the call may dial (866) 540-8136. A
replay of the conference call will also be available two hours
after the call and until midnight (Eastern), August 11, 2005 by
dialing (800) 408-3053, then entering pass code 3158912. 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 statement 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, availability of supplies
of Canadian natural gas, natural gas development in the Western
Canada Sedimentary Basin, availability of additional storage
capacity, 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 (unaudited)
Three months ended Six months ended (millions of U.S. dollars June
30 June 30 except per unit amounts) 2005 2004 2005 2004
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Equity income from investment in Northern Border Pipeline (1) 8.6
12.4 20.8 24.9 Equity income from investment in Tuscarora (2) 1.8
1.8 3.8 3.6 General and administrative expenses (0.5) (0.5) (1.0)
(1.0) Financial charges and other (0.2) (0.1) (0.5) (0.2)
------------------------------------- Net income 9.7 13.6 23.1 27.3
-------------------------------------
------------------------------------- Net income per unit (3) $0.52
$0.74 $1.24 $1.49 -------------------------------------
------------------------------------- Units outstanding (millions)
17.5 17.5 17.5 17.5 -------------------------------------
------------------------------------- June 30, Balance Sheet 2005
December 31, (millions of U.S. dollars) (unaudited) 2004
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ASSETS Cash 3.2 2.5 Investment in Northern Border Pipeline (1)
278.8 290.1 Investment in Tuscarora (2) 39.0 39.5
-------------------------------- 321.0 332.1
-------------------------------- --------------------------------
LIABILITIES AND PARTNERS' EQUITY Accrued liabilities 0.7 0.7
Current portion of long-term debt 24.0 6.5 Long-term debt - 30.0
Partners' equity 296.3 294.9 -------------------------------- 321.0
332.1 --------------------------------
-------------------------------- Cash Flow Information Three months
ended Six months ended (unaudited) June 30 June 30 (millions of
U.S. dollars) 2005 2004 2005 2004
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Distributions received from equity investments Northern Border
Pipeline Company 8.6 12.4 20.8 24.9 Tuscarora Gas Transmission
Company 1.8 2.1 3.8 3.6 Changes in working capital and other -
(0.4) 1.0 (1.0) ------------------------------------- Cash
Generated From Operations 10.4 14.1 25.6 27.5 Return of capital
from Northern Border Pipeline Company 7.1 4.4 11.1 6.4 Return of
capital from Tuscarora Gas Transmission Company 0.4 - 0.5 -
------------------------------------- Cash Generated From
Investments (a) 17.9 18.5 37.2 33.9 Investment in Northern Border
Pipeline Company - (19.5) - (39.0) Distributions paid (10.8) (10.2)
(21.5) (20.3) Long-term debt issued/(repaid) (6.0) 11.0 (12.5) 20.0
------------------------------------- Increase/(decrease) in cash
1.1 (0.2) 3.2 (5.4) -------------------------------------
------------------------------------- (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. *T (1)
Northern Border Pipeline Company TC PipeLines, LP 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 and six months ended June 30, 2005 and 2004
and as at June 30, 2005 and December 31, 2004 is as follows: -0- *T
Three months ended Six months ended June 30 June 30 (unaudited)
2005 2004 2005 2004
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Operating Results Gas delivered (million cubic feet) 183,973
208,953 399,964 427,277 Average throughput (million cubic feet per
day) 2,076 2,359 2,277 2,415 Financial Results (millions of U.S.
dollars) Operating revenue 69.8 81.5 152.6 164.8 Operating expenses
Operations and maintenance 9.2 9.7 18.8 18.8 Depreciation and
amortization 14.4 14.6 28.7 29.1 Taxes other than income 7.4 6.4
15.3 14.3 ------------------------------------- Total operating
expenses 31.0 30.7 62.8 62.2 -------------------------------------
Operating income 38.8 50.8 89.8 102.6 Interest expense, net (10.6)
(9.9) (21.2) (20.1) Other income 0.6 0.4 0.8 0.5
------------------------------------- Net income 28.8 41.3 69.4
83.0 -------------------------------------
------------------------------------- Capital Expenditures
(millions of U.S. dollars) Maintenance 3.7 4.3 8.1 4.4 Growth 1.7
(0.1) 2.0 0.1 June 30, Summary Balance Sheet Data 2005 December 31,
(millions of U.S. dollars) (unaudited) 2004
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Total assets 1,581.7 1,623.3 --------------------------------
-------------------------------- Other current liabilities and
reserves and deferred credits 49.6 52.3 Long-term debt (including
current maturities) 602.8 603.9 Partners' capital 926.3 963.3
Accumulated other comprehensive income 3.0 3.8
-------------------------------- Total liabilities and partners'
equity 1,581.7 1,623.3 --------------------------------
-------------------------------- *T (2) Tuscarora Gas Transmission
Company TC PipeLines, LP holds a 49 per cent general partner
interest in Tuscarora Gas Transmission Company. Summarized
operating and financial information of Tuscarora for the three and
six months ended June 30, 2005 and 2004 and as at June 30, 2005 and
December 31, 2004 is as follows: -0- *T Three months ended Six
months ended June 30 June 30 (unaudited) 2005 2004 2005 2004
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Operating Results Gas delivered (million cubic feet) 4,382 4,306
13,612 12,231 Average throughput (million cubic feet per day) 48 47
75 51 Financial Results (millions of U.S. dollars) Operating
revenue 8.0 8.0 16.3 16.3 Operating expenses Operations and
maintenance 0.8 0.9 1.6 1.8 Depreciation and amortization 1.6 1.5
3.1 3.1 Taxes other than income 0.3 0.3 0.6 0.6
------------------------------------- Total operating expenses 2.7
2.7 5.3 5.5 ------------------------------------- Operating income
5.3 5.3 11.0 10.8 Interest expense, net (1.4) (1.6) (2.9) (3.1)
Other Income 0.1 - 0.1 - ------------------------------------- Net
income 4.0 3.7 8.2 7.7 -------------------------------------
------------------------------------- Capital Expenditures
(millions of U.S. dollars) Maintenance - - 0.1 0.1 Growth 0.5 0.1
0.6 0.2 June 30, Summary Balance Sheet Data 2005 December 31,
(millions of U.S. dollars) (unaudited) 2004
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Total assets 142.3 144.9 --------------------------------
-------------------------------- Other current liabilities and
reserves and deferred credits 2.4 2.0 Long-term debt (including
current maturities) 78.3 80.8 Partners' capital 61.5 62.0
Accumulated other comprehensive income 0.1 0.1
-------------------------------- Total liabilities and partners'
equity 142.3 144.9 --------------------------------
-------------------------------- *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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