Related Link: 2010 Fourth Quarter Results
TransCanada Corporation (TSX, NYSE: TRP) (TransCanada or the Company) today announced comparable earnings for fourth quarter 2010 of $384 million or $0.55 per share. For the year ended December 31, 2010, comparable earnings were $1.4 billion or $1.97 per share.
Net income applicable to common shares for fourth quarter 2010 of $269 million or $0.39 per share includes the impact of a $127 million after-tax, one-time valuation provision recorded against the Mackenzie Gas Project. Including this provision, net income applicable to common shares for the year ended December 31, 2010 was $1.2 billion or $1.78 per share.
TransCanada’s Board of Directors also declared a quarterly dividend of $0.42 per common share which equates to $1.68 per common share on an annualized basis, a five per cent increase. This is the eleventh consecutive year the Board of Directors has raised the dividend.
“TransCanada’s strong comparable earnings for the fourth quarter of 2010 demonstrates the stability of our core businesses,” says Russ Girling, TransCanada’s president and chief executive officer.
“The Company continues to advance its unprecedented $20 billion capital program as more projects begin operations – the Cushing extension of Keystone and the Groundbirch and Bison natural gas pipelines are the latest large scale projects to be brought into service – projects that will further contribute to TransCanada’s earnings and cash flow for years to come.”
Girling added with the completion of the initial phase of Keystone in June 2010 and, more recently, the Cushing extension, Groundbirch and Bison, TransCanada has seen six major developments begin operating in recent months. In the fall of 2010, the Company announced completion and the start of operations of the second phase of the Kibby Wind project in Maine and the Halton Hills Generating Station in Ontario.
The capital program will continue to progress in the coming months. TransCanada’s Coolidge Generating Station in Arizona is 95 per cent complete and construction of the Guadalajara Pipeline in Mexico is 70 per cent finished. Both projects are expected to begin operations in second quarter 2011.
Fourth Quarter and Year-End Highlights
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
- For fourth quarter 2010
– Comparable earnings of $384 million or $0.55 per share
– Comparable EBITDA of $1.0 billion
– Funds generated from operations of $812 million
- For the year ended December 31, 2010
– Comparable earnings of $1.4 billion or $1.97 per share
– Comparable EBITDA of $3.9 billion
– Funds generated from operations of $3.3 billion
- Placed into-service or completed construction on capital projects totalling approximately $8.5 billion
– The $6.0 billion phases one and two of the Keystone oil pipeline including the Cushing extension
– The $155 million Groundbirch pipeline became operational connecting Montney shale gas in northeast B.C., along with the US$630 million Bison pipeline which connects U.S. Rockies gas to market
– The $800 million North Central Corridor natural gas pipeline
– The $700 million Halton Hills Generating Station
– The second phase of the US$350 million Kibby Wind project
Comparable earnings for fourth quarter 2010 were $384 million ($0.55 per share) compared to $328 million ($0.48 per share) in the same period in 2009. The increase was primarily due to the start-up of the Halton Hills power plant in September, increased plant availability at Bruce A, higher contribution from U.S. Power, higher return on equity on a larger rate base for the Alberta System, lower Alaska Pipeline Project development costs and lower net interest expense from the capitalization of interest related to the Company’s large capital growth program. Partially offsetting these increases were lower realized power prices for Bruce B and Western Power and a reduction in natural gas storage revenues.
Net income applicable to common shares for fourth quarter 2010 was $269 million ($0.39 per share) compared to $381 million ($0.56 per share) in fourth quarter 2009. Net income in 2010 included a $127 million after-tax ($0.18 per share) valuation provision against advances to the Aboriginal Pipeline Group (APG) for the Mackenzie Gas Project (MGP) and net unrealized gains resulting from adjustments for changes in the fair value of proprietary natural gas inventory in storage and certain risk management activities. Net income in 2009 included a dilution gain resulting from TransCanada’s reduced ownership in PipeLines LP and favourable income tax adjustments.
Comparable earnings for the year ended December 31, 2010 were $1.4 billion ($1.97 per share) compared to $1.3 billion ($2.03 per share) for the same period in 2009.
Net income applicable to common shares for the year ended December 31, 2010 was $1.2 billion ($1.78 per share) compared to $1.4 billion ($2.11 per share) in the same period last year.
Notable recent developments in Oil Pipelines, Natural Gas Pipelines, Energy and Corporate include:
– The second phase of the Keystone Pipeline System to expand nominal capacity to 591,000 Bbl/d and extend the pipeline system to Cushing, Oklahoma is now operational. The first two phases of Keystone (Wood River/Patoka, Illinois and Cushing, Oklahoma) have contracted volumes of 530,000 Bbl/d.
TransCanada’s 500,000 Bbl/d U.S. Gulf Coast Expansion continues to move forward. The pipeline has binding, long-term commitments for 380,000 Bbl/d. The regulatory process conducted by the Department of State is continuing within a heightened political environment and opposition to the project has been expressed. However, the Company anticipates a decision regarding final regulatory approval for the U.S. portion of the project in mid to late 2011. Canadian regulatory approvals are already in place.
The total capital cost of the Keystone Pipeline System is expected to be approximately US$13 billion. The revised capital cost estimate reflects currency translation, higher than anticipated costs to complete the first two phases of the project and an increase in the estimated cost of completing the U.S. Gulf Coast Expansion as a result of scope changes, evolving regulatory requirements and permitting delays.
At December 31, 2010, US$7.4 billion had been invested, including US$1.4 billion related to the U.S. Gulf Coast Expansion. The remaining US$5.6 billion, US$1.2 billion of which has already been committed, is expected to be invested between now and the in-service date of the expansion, which is expected in 2013.
The U.S. Gulf Coast Expansion project will play an important role in linking a secure and growing supply of western Canadian and U.S. Williston Basin crude oil with the largest refining markets in the United States.
Successful open seasons for both the Bakken and Cushing Marketlink Projects concluded in January 2011. Bakken Marketlink will deliver U.S. crude oil from Baker, Montana to Cushing, Oklahoma using pipeline facilities that form part of the Keystone Gulf Coast Expansion. This project has secured a total of 65,000 Bbl/d of firm, term contracts.
TransCanada has received sufficient contractual support to proceed with the Cushing Marketlink Project, which will have the ability to provide transportation of 150,000 Bbl/d of U.S. crude oil from Cushing, Oklahoma to the U.S. Gulf Coast. Combined with Bakken Marketlink, the two projects will have the pipeline capacity to transport up to 250,000 Bbl/d of U.S. crude oil to market.
Natural Gas Pipelines:
– The $155 million Groundbirch pipeline began shipping natural gas in late December 2010. Groundbirch is a 77-kilometre (km) (48-mile), 36-inch diameter natural gas pipeline that extends the Alberta System into northeast B.C. by connecting to natural gas supplies in the Montney shale gas formation. The project has firm transportation contracts rising to 1.24 billion cubic feet per day (Bcf/d) by 2014.
The National Energy Board (NEB) approved the Horn River pipeline project in late January 2011. The $310 million project is scheduled to be operational in second quarter 2012 with commitments for contracted natural gas volumes rising to 634 million cubic feet per day (mmcf/d) by 2014.
New requests for further natural gas transmission service continue to be received to connect gas from northwest Alberta and northeast B.C. The result is expected to be a need for additional extensions and expansions of the Alberta System.
– The US$630 million Bison natural gas pipeline commenced operations in January 2011. The 487-km (303-mile) pipeline has long-term contracts for 407 mmcf/d to deliver gas from the Powder River Basin in Wyoming to the Northern Border pipeline system in North Dakota and on to North American markets.
– Construction of the Guadalajara pipeline is 70 per cent complete as of December 31, 2010. The US$360 million project is expected to be operational in mid 2011. At 305 km (190 miles) in length, the 24 and 30-inch diameter natural gas pipeline will have the capacity to move 500 mmcf/d from Manzanillo to Guadalajara, Mexico’s second largest city.
– TransCanada filed an application with the National Energy Board in late January 2011 for approval of revised interim tolls for its Canadian Mainline effective March 1, 2011. The Company’s initial interim toll application was rejected by the NEB in December 2010. The revised interim tolls are consistent with the existing 2007-2011 settlement with customers.
The Company continues discussions with shippers and other stakeholders, working toward developing a longer term arrangement that will enhance the competitiveness of the Canadian Mainline and the Western Canadian Sedimentary Basin.
– TransCanada held two successful open seasons to transport Marcellus shale gas on the Canadian Mainline. Contracts were signed with shippers for 230,000 gigajoules per day to ship gas to Eastern Canadian markets.
– The Alaska Pipeline Project team continues to work with shippers to resolve conditions under its control that are contained in bids received as part of the project’s open season. Multiple conditional bids from major industry players and others for significant volumes were submitted.
– The Mackenzie Gas Project proponents continue to pursue the required regulatory approvals for the project and the Canadian government’s support of an acceptable fiscal framework. In December 2010, the NEB released a decision granting approval of the project’s application for a Certificate of Public Convenience and Necessity. The approval contained 264 conditions including the requirement to file an updated cost estimate and report on the decision to construct by the end of 2013 and, further, that construction must commence by December 31, 2015.
Nevertheless, uncertainty persists with respect to the project’s ultimate commercial structure and fiscal framework as well as the timeframes under which the project will proceed and if and when the Company’s advances to the APG will be repaid. Accordingly, at December 31, 2010, TransCanada recorded a valuation provision for its $146 million loan to the APG. Future amounts advanced to the APG in furtherance of the MGP will be expensed.
TransCanada remains committed to advancing the project.
– Construction of the 575 MW Coolidge generating station is approximately 95 per cent complete as of December 31, 2010, with commissioning approximately 80 per cent finished. The US$500 million generating station is anticipated to be in service in second quarter 2011. All of the power produced by the facility will be sold under a 20-year power purchase arrangement to the Salt River Project.
– The second phase of the Kibby Wind power project went into service on October 26, 2010. This phase included 22 additional turbines. The two phases of the US$350 million project will produce a total of 132 MW of clean, renewable energy for the state of Maine – enough for approximately 50,000 homes. The first 22-turbine phase of the project began producing power in the fall of 2009.
– Construction continues on the five-stage, 590 MW Cartier Wind Energy project in Québec. The Montagne-Sèche project and phase one of the Gros-Morne wind farm are expected to be operational in December 2011. Gros-Morne phase two is expected to be operational in December 2012. These are the fourth and fifth Québec-based wind farms of Cartier Wind Energy, which is 62 per cent owned by TransCanada. All of the power produced by Cartier Wind Energy is sold under a 20-year power purchase arrangement to Hydro-Québec.
– Refurbishment work on Bruce Power Units 1 and 2 reached a significant milestone in December 2010 as Atomic Energy of Canada wrapped up a substantial portion of its work on Unit 2 and is on schedule to complete work on Unit 1 by second quarter 2011.
Subject to regulatory approval, Bruce expects to load fuel into Unit 2 in second quarter 2011, synchronize to the electrical grid by the end of 2011 and begin operations in first quarter 2012. Unit 1 should see fuel load starting in third quarter 2011, first synchronization of the generator in first quarter 2012 and commercial operations are expected to begin in third quarter 2012. TransCanada’s share of the total capital costs is expected to be $2.4 billion.
– On February 8, 2011 TransCanada received from TransAlta Corporation (TransAlta) notice under the Sundance A Power Purchase Arrangement (PPA) that TransAlta has determined that the Sundance 1 and 2 generating units cannot be economically repaired, replaced, rebuilt or restored and that TransAlta therefore seeks to terminate the PPA in respect of those units. TransCanada has not received any information that would validate TransAlta’s determination that the units cannot be economically restored to service.
TransCanada has 10 business days from the date of TransAlta’s notice to either agree with or dispute TransAlta’s determination that the Sundance 1 and 2 generating units cannot be economically repaired, replaced, rebuilt or restored. TransCanada will assess any information provided by TransAlta during this 10 day period. If TransCanada disputes TransAlta’s determination, the issue will be resolved using the dispute resolution procedure under the terms of the PPA.
In December 2010, the Sundance 1 and 2 generating units were withdrawn from service for testing. In January 2011, these same units were subject to a force majeure claim by TransAlta under the PPA. To date, TransCanada has received insufficient information to make an assessment of TransAlta’s force majeure claim and therefore has recorded revenues under the PPA as though this event was a normal plant outage.
– The Board of Directors of TransCanada declared a quarterly dividend of $0.42 per share for the quarter ending March 31, 2011 on TransCanada’s outstanding common shares. The quarterly amount is equivalent to $1.68 per common share on an annual basis and represents a five per cent increase over the previous amount.
– TransCanada is well positioned to fund its existing capital program through its growing internally-generated cash flow, its dividend reinvestment and share purchase plan and its continued access to capital markets. TransCanada will also continue to examine opportunities for portfolio management, including a role for TC PipeLines, LP in financing its capital program.
Teleconference – Audio and Slide Presentation:
TransCanada will hold a teleconference and webcast to discuss its 2010 fourth quarter financial results. Russ Girling, TransCanada president and chief executive officer and Don Marchand, executive vice-president and chief financial officer, along with other members of the TransCanada executive leadership team, will discuss the financial results and company developments, including its $20 billion capital program, before opening the call to questions from analysts and members of the media.
Event: TransCanada 2010 fourth quarter financial results teleconference and webcast
Date: Tuesday, February 15, 2011
Time: 1 p.m. mountain standard time (MST) / 3 p.m. eastern standard time (EST)
How: Analysts, members of the media and other interested parties are invited to participate by calling 866.223.7781 or 416.340.8018 (Toronto area). Please dial in 10 minutes prior to the start of the call. No pass code is required. A live webcast of the teleconference will be available at http://www.transcanada.com/.
A replay of the teleconference will be available two hours after the conclusion of the call until midnight (EST) February 22, 2011. Please call 800.408.3053 or 905.694.9451 (Toronto area) and enter pass code 2263263#.
With more than 50 years’ experience, TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure including natural gas and oil pipelines, power generation and gas storage facilities. TransCanada’s network of wholly owned natural gas pipelines extends more than 60,000 kilometres (37,000 miles), tapping into virtually all major gas supply basins in North America. TransCanada is one of the continent’s largest providers of gas storage and related services with approximately 380 billion cubic feet of storage capacity. A growing independent power producer, TransCanada owns, or has interests in over 10,800 megawatts of power generation in Canada and the United States. TransCanada is developing one of North America’s largest oil delivery systems. TransCanada’s common shares trade on the Toronto and New York stock exchanges under the symbol TRP. For more information visit: http://www.transcanada.com/
Terry Cunha/Shawn Howard
David Moneta/Terry Hook/Lee Evans