TC PipeLines, LP Announces 2005 Third Quarter Results
November 02 2005 - 5:39PM
Business Wire
TC PipeLines, LP (NASDAQ:TCLP) (the Partnership) today reported
third quarter 2005 net income of $14.8 million or $0.81 per unit
(all amounts in U.S. dollars) compared to $12.6 million or $0.68
per unit for the same period last year. The increase in net income
is primarily due to higher equity income from Northern Border
Pipeline. Cash generated from investments in the third quarter of
2005 was $13.2 million, a decrease of $3.7 million, compared to
$16.9 million for the same period last year. The decrease in cash
generated was primarily due to Northern Border Pipeline's lower
distributions in the third quarter of 2005 compared to the same
period last year. The reduction in Northern Border Pipeline's
distributions is attributable to the negative revenue impact
experienced by Northern Border Pipeline during the second quarter
of 2005 due to changes in market fundamentals which affected its
ability to sell its capacity at maximum rate. "Our third quarter
2005 net income increased approximately $2.2 million relative to
the same period last year," said Ron Turner, president and chief
executive officer of the general partner, TC PipeLines GP, Inc.
"This net income increase was mainly due to the recognition of $9.4
million ($2.8 million positive impact on TC PipeLines' net income)
related to the sale of Northern Border Pipeline's bankruptcy claims
held against Enron and Enron North America. During the third
quarter, Northern Border Pipeline's firm demand revenues dropped by
approximately $2.0 million ($0.6 million negative impact on TC
PipeLines' net income) when compared to the prior year as a result
of expired contracts which were replaced with short-term contracts
at a discounted rate. "Northern Border Pipeline continues to
believe that the greatest impact of unsold capacity occurred during
the second quarter this year. During the third quarter, all of
Northern Border Pipeline's available capacity was sold at more
favourable rates relative to the second quarter. In light of the
changing market fundamentals on Northern Border Pipeline, we are
satisfied with the third quarter financial performance. The
Partnership continues to maintain a solid financial position which
supports stable cash flows to our unitholders," Turner said. On
October 18, 2005, the Partnership announced its third quarter cash
distribution in the amount of $0.575 per unit, payable to
unitholders of record on October 31, 2005. -0- *T Financial
Highlights (unaudited) Three months ended Nine months ended
September 30 September 30 --------------------------------------
(millions of dollars except per unit amounts) 2005 2004 2005 2004
---------------------------------------------------------------------
Net income 14.8 12.6 37.9 39.9 Per unit (1) $0.81 $0.68 $2.05 $2.17
Cash generated from operations 12.9 12.5 36.0 40.0 Return of
capital (2) 0.3 4.4 11.9 10.8 Cash distributions paid 10.7 10.7
32.2 31.0 Cash distributions declared per unit (3) $0.575 $0.575
$1.725 $1.700 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 third quarter cash distribution will be paid on
November 14, 2005 to unitholders of record as of October 31, 2005.
*T Net Income The Partnership reported third quarter 2005 net
income of $14.8 million or $0.81 per unit, an increase of $2.2
million compared to $12.6 million or $0.68 per unit for the same
period last year. Equity income from Northern Border Pipeline was
$13.9 million in the third quarter of 2005, an increase of $2.6
million, compared to $11.3 million for the same period last year.
This increase was primarily due to proceeds of $11.1 million
received from the sale of Northern Border Pipeline's bankruptcy
claims held against Enron and Enron North America. As a result of
the sale, Northern Border Pipeline recognized additional income of
$9.4 million in the third quarter of 2005. Northern Border Pipeline
had previously adjusted its allowance for doubtful accounts to
reflect estimated recovery of $1.7 million. Partially offsetting
this is a decrease in firm demand revenues of approximately $2.0
million due to discounting of some capacity. The Partnership's
share of the net impact of these factors on Northern Border
Pipeline's revenues contributed to a positive net income to TC
PipeLines of $2.2 million. The balance of the $0.4 million increase
in equity income from Northern Border Pipeline is attributable to
lower operations and maintenance and interest expenses and higher
other income. Equity income from Tuscarora was $1.7 million in the
third quarter of 2005, a decrease of $0.1 million, compared to $1.8
million for the same period last year. The decrease was primarily
due to slightly lower transportation revenues earned in the third
quarter of 2005. The Partnership's third quarter 2005 general and
administrative expenses of $0.5 million increased $0.2 million
compared to $0.3 million for the same period in 2004, primarily due
to higher salaries and benefits as well as timing of expenses.
Financial charges of $0.3 million in the third quarter of 2005
increased $0.1 million, compared to $0.2 million for the same
period last year due to higher average interest rates. Cash Flow
The Partnership reported third quarter 2005 cash generated from
investments of $13.2 million in the third quarter of 2005, a $3.7
million decrease, compared to $16.9 million for the same period
last year. In the third quarter of 2005, the Partnership received a
cash distribution from Northern Border Pipeline of $11.8 million
compared to $15.5 million in the third quarter of 2004, a decrease
of $3.7 million. The decrease was primarily due to Northern Border
Pipeline's lower second quarter earnings due to the negative
revenue impact resulting from uncontracted capacity and expired
contracts which were replaced with short-term contracts at
discounted rates. Cash distributions received in the quarter are
based on the respective results of the Partnership's equity
investments for the previous quarter. Cash distributions from
Tuscarora in the third quarter of 2005 were $2.0 million, including
$0.3 million classified as return of capital, consistent with the
third quarter of 2004. The Partnership paid an aggregate $10.7
million of cash distributions to unitholders and its general
partner in each of the third quarters of 2005 and 2004. This cash
distribution, on a per unit basis, represents $0.575 per unit, as
well as the general partner interest, including incentive
distributions. In the third quarter of 2005, the Partnership repaid
$4.0 million under its revolving credit facility, reducing the
Partnership's outstanding debt balance to $20.0 million as at
September 30, 2005. Conference Call The Partnership will hold a
conference call Thursday, November 3, 2005 at 12 p.m. (Eastern).
Ron Turner, president and chief executive officer of the general
partner, will discuss the third quarter 2005 financial results and
general developments and issues concerning the Partnership. Those
interested in listening to the call may dial (800) 387-6216. A
replay of the conference call will also be available two hours
after the call and until midnight (Eastern), November 10, 2005 by
dialing (800) 408-3053, then entering pass code 3164580. 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
Gas Transmission Northwest 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 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 and 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 (unaudited) Three months ended Nine
months ended (millions of U.S. dollars September 30 September 30
except per unit amounts) 2005 2004 2005 2004
---------------------------------------------------------------------
Equity income from investment in Northern Border Pipeline (1) 13.9
11.3 34.7 36.2 Equity income from investment in Tuscarora (2) 1.7
1.8 5.5 5.4 General and administrative expenses (0.5) (0.3) (1.5)
(1.3) Financial charges and other (0.3) (0.2) (0.8) (0.4)
------------------------------------ Net income 14.8 12.6 37.9 39.9
------------------------------------ Net income per unit (3) $0.81
$0.68 $2.05 $2.17 ------------------------------------ Units
outstanding (millions) 17.5 17.5 17.5 17.5
------------------------------------
------------------------------------ Balance Sheet September 30,
2005 December 31, 2004 (millions of U.S. dollars) (unaudited)
(audited)
---------------------------------------------------------------------
ASSETS Cash 1.4 2.5 Investment in Northern Border Pipeline (1)
280.7 290.1 Investment in Tuscarora (2) 39.0 39.5
------------------------------------ 321.1 332.1
------------------------------------ LIABILITIES AND PARTNERS'
EQUITY Accrued liabilities 0.8 0.7 Current portion of long-term
debt 20.0 6.5 Long-term debt - 30.0 Partners' equity 300.3 294.9
------------------------------------ 321.1 332.1
------------------------------------
------------------------------------ Cash Flow Information Three
months ended Nine months ended (unaudited) September 30 September
30 (millions of U.S. dollars) 2005 2004 2005 2004
---------------------------------------------------------------------
Distributions received from equity investments Northern Border
Pipeline Company 11.8 11.3 32.6 36.2 Tuscarora Gas Transmission
Company 1.7 1.8 5.5 5.4 Changes in working capital and other (0.6)
(0.6) (2.1) (1.6) ------------------------------------ Cash
Generated From Operations 12.9 12.5 36.0 40.0 Return of capital
from Northern Border Pipeline Company - 4.2 11.1 10.6 Return of
capital from Tuscarora Gas Transmission Company 0.3 0.2 0.8 0.2
------------------------------------ Cash Generated From
Investments(x) 13.2 16.9 47.9 50.8 Investment in Northern Border
Pipeline Company - - - (39.0) Investment in Tuscarora Gas
Transmission Company (0.3) (0.4) (0.3) (0.4) Distributions paid
(10.7) (10.7) (32.2) (31.0) Long-term debt issued/(repaid) (4.0)
(6.0) (16.5) 14.0 ------------------------------------ (Decrease)
in cash (1.8) (0.2) (1.1) (5.6)
------------------------------------
------------------------------------ (x) 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 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 nine months ended September 30, 2005 and 2004 and as
at September 30, 2005 and December 31, 2004 is as follows: -0- *T
Three months ended Nine months ended September 30 September 30
(unaudited) 2005 2004 2005 2004
---------------------------------------------------------------------
Operating Results Gas delivered (million cubic feet) 212,481
210,245 612,445 637,522 Average throughput (million cubic feet per
day) 2,380 2,353 2,311 2,394 Financial Results (millions of U.S.
dollars) Operating revenue 89.0 81.6 241.6 246.4 Operating expenses
Operations and maintenance 10.6 11.1 29.4 29.9 Depreciation and
amortization 14.5 14.5 43.2 43.6 Taxes other than income 8.1 8.1
23.4 22.4 ------------------------------------ Total operating
expenses 33.2 33.7 96.0 95.9 ------------------------------------
Operating income 55.8 47.9 145.6 150.5 Interest expense, net (10.7)
(10.1) (31.9) (30.2) Other income 1.1 (0.2) 1.9 0.3
------------------------------------ Net income 46.2 37.6 115.6
120.6 ------------------------------------ Capital Expenditures
(millions of U.S. dollars) Maintenance 3.9 2.6 12.0 7.0 Growth 3.0
(0.5) 5.0 (0.4) Summary Balance Sheet Data September 30, 2005
December 31, 2004 (millions of U.S. dollars) (unaudited)
---------------------------------------------------------------------
Total assets 1,599.0 1,625.0 ------------------------------------
Other current liabilities and reserves and deferred credits 60.9
54.0 Long-term debt (including current maturities) 602.4 603.9
Partners' capital 933.0 963.3 Accumulated other comprehensive
income 2.7 3.8 ------------------------------------ Total
liabilities and partners' equity 1,599.0 1,625.0
------------------------------------
------------------------------------ Certain reclassifications were
made to the 2004 financial statements to conform with the current
year presentation. *T (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 and nine months ended
September 30, 2005 and 2004 and as at September 30, 2005 and
December 31, 2004 is as follows: -0- *T Three months ended Nine
months ended September 30 September 30 (unaudited) 2005 2004 2005
2004
---------------------------------------------------------------------
Operating Results Gas delivered (million cubic feet) 4,190 4,494
17,802 16,725 Average throughput (million cubic feet per day) 46 49
65 61 Financial Results (millions of U.S. dollars) Operating
revenue 7.8 8.1 24.1 24.4 Operating expenses Operations and
maintenance 0.7 0.8 2.3 2.6 Depreciation and amortization 1.5 1.5
4.6 4.6 Taxes other than income 0.3 0.4 0.9 1.0
------------------------------------ Total operating expenses 2.5
2.7 7.8 8.2 ------------------------------------ Operating income
5.3 5.4 16.3 16.2 Interest expense, net (1.5) (1.5) (4.4) (4.6)
Other income - - 0.1 - ------------------------------------ Net
income 3.8 3.9 12.0 11.6 ------------------------------------
Capital Expenditures (millions of U.S. dollars) Maintenance 0.1 0.1
0.2 0.2 Growth 0.1 0.9 0.7 1.1 Summary Balance Sheet Data September
30, 2005 December 31, 2004 (millions of U.S. dollars) (unaudited)
---------------------------------------------------------------------
Total assets 143.8 144.9 ------------------------------------ Other
current liabilities and reserves and deferred credits 3.6 2.0
Long-term debt (including current maturities) 78.3 80.8 Partners'
capital 61.8 62.0 Accumulated other comprehensive income 0.1 0.1
------------------------------------ Total liabilities and
partners' equity 143.8 144.9 ------------------------------------
------------------------------------ *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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