CALGARY, ALBERTA–(July 31, 2015) – TransCanada Corporation (TSX:TRP) (NYSE:TRP) (TransCanada) today announced net income attributable to common shares for second quarter 2015 of $429 million or $0.60 per share compared to $416 million or $0.59 per share for the same period in 2014. Comparable earnings for second quarter 2015 were $397 million or $0.56 per share compared to $332 million or $0.47 per share for the same period last year. TransCanada’s Board of Directors also declared a quarterly dividend of $0.52 per common share for the quarter ending September 30, 2015, equivalent to $2.08 per common share on an annualized basis.
“Our three core businesses produced another solid quarter of financial results demonstrating the resiliency of our high-quality asset base in challenging market conditions,” said Russ Girling, TransCanada’s president and chief executive officer. “Comparable earnings and funds generated from operations increased 20 and 16 per cent, respectively, compared to the same period last year highlighting the strong foundation that will allow us to continue to grow the dividend at an annual rate of eight to ten per cent through 2017 and fund our industry-leading $46 billion capital program.”
Over the past several months, we advanced key components of our growth plans which included more than $13 billion in proposed natural gas pipeline projects to support the emerging liquefied natural gas (LNG) industry on the British Columbia (B.C.) Coast. Our Prince Rupert Gas Transmission (PRGT) project reached an important milestone with a positive Final Investment Decision (FID), subject to two conditions, from Pacific NorthWest LNG (PNW LNG). We also received the majority of the facilities permits for both our PRGT and Coastal GasLink projects which positions us to be ready to commence construction, pending a FID from the respective project sponsors. PRGT and Coastal GasLink also continued their engagement with Aboriginal groups along the pipeline routes and signed several project agreements with First Nation communities.
We also continue to advance the balance of our $46 billion portfolio of commercially secured projects as well as numerous other growth initiatives. These projects are expected to result in significant growth in earnings, cash flow and dividends through the end of the decade. With our high-quality asset base and financial strength, we remain well positioned to create long-term shareholder value throughout various market conditions.
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
- Second quarter financial results
- Net income attributable to common shares of $429 million or $0.60 per share
- Comparable earnings of $397 million or $0.56 per share
- Comparable earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.4 billion
- Funds generated from operations of $1.1 billion
- Declared a quarterly dividend of $0.52 per common share for the quarter ending September 30, 2015
- PRGT reached a significant milestone when PNW LNG announced a positive FID, subject to two conditions, for their proposed liquefaction and export facility on the West Coast of B.C.
- Received a majority of the pipeline and facilities permits for PRGT and Coastal GasLink
- Received regulatory approval for the $1.7 billion North Montney Mainline project
- Continued to advance our master limited partnership strategy with the drop down of the remaining 30 per cent interest in Gas Transmission Northwest LLC (GTN) for US$457 million
- Completed over $1.5 billion of financing with the issuance of junior subordinated and medium-term notes
Net income attributable to common shares increased by $13 million to $429 million or $0.60 per share for the three months ended June 30, 2015 compared to the same period last year. Second quarter 2015 included a $34 million income tax expense adjustment due to an increase in the Alberta corporate income tax rate and an $8 million after-tax restructuring charge related to changes to our major projects group. Second quarter 2014 included a $99 million after-tax gain from the sale of Cancarb and a $31 million after-tax loss from the termination of a natural gas storage contract. Both periods included unrealized gains and losses from changes in risk management activities. All of these specific items are excluded from comparable earnings.
Comparable earnings for second quarter 2015 were $397 million or $0.56 per share compared to $332 million or $0.47 per share for the same period in 2014. Higher earnings from the Canadian Mainline, NGTL System, Keystone, Bruce Power and Eastern Power were partially offset by lower contributions from U.S. Power and Western Power.
Notable recent developments in Natural Gas Pipelines, Liquids Pipelines, Energy and Corporate include:
- NGTL System Expansions: The NGTL System has approximately $6.8 billion of new supply and demand facilities currently under development. In second quarter 2015, we continued to advance several of these capital expansion projects and plan to file additional facilities applications for this program through the remainder of 2015. We have received additional requests for firm receipt service that we anticipate will increase the overall capital spend on the NGTL System beyond the previously announced program and continue to work with our customers to best match their requirements for 2016, 2017 and 2018 in-service dates.
On April 15, 2015, the National Energy Board (NEB) issued its report recommending the federal government approve the NGTL System’s $1.7 billion North Montney Mainline project which will provide substantial new capacity on the NGTL System to meet the transportation requirements associated with rapidly increasing development of natural gas resources in the Montney supply basin in northeastern B.C. The project will connect Montney and other Western Canada Sedimentary Basin supply to both existing and new natural gas markets, notably emerging markets for LNG.
The North Montney Mainline project will consist of two large diameter, 42-inch pipeline sections, Aitken Creek and Kahta, totaling approximately 301 kilometres (km) (187 miles) in length, and associated metering facilities, valve sites and compression facilities. The project will also include an interconnection with our proposed PRGT project to provide natural gas supply to the proposed PNW LNG liquefaction and export facility near Prince Rupert, B.C. NGTL currently expects to have the Aitken Creek Section in service in late 2016, and the Kahta Section in service in 2017.
The Federal Government approved the recommendations of the report from the NEB, and on June 11, 2015, the NEB issued a Certificate of Public Convenience and Necessity to proceed with the project, subject to certain terms and conditions. Under one of these conditions, construction on the North Montney Mainline Project can only begin after a confirmation of FID has been made on the proposed PNW LNG project and we are proceeding with construction on PRGT.
- Canadian Mainline: On March 31, 2015, we submitted a compliance toll filing in response to direction from the NEB’s RH-001-2014 Decision issued in November 2014. On June 12, 2015, the NEB approved the applied-for compliance tolls, as filed. These final tolls became effective on July 1, 2015 which allowed, among other things, the recording of incentive earnings as approved by the NEB.
On June 2, 2015, the NEB approved construction of the King’s North Connection project to expand gas transmission capacity in the greater Toronto area and provide shippers with the flexibility to source growing supplies of Marcellus gas from the U.S. Northeast. The project is expected to cost approximately $220 million and is anticipated to be in-service by third quarter 2016.
- PRGT: In second quarter 2015, we received six of the eleven pipeline and facilities permits from the B.C. Oil and Gas Commission (BC OGC) needed to build and operate PRGT. We anticipate decisions on the remaining BC OGC permits in third quarter 2015. PRGT is a 900 km (559 mile) natural gas pipeline that will deliver gas from the North Montney producing region near Fort St. John, B.C. at an interconnect on the NGTL System to the proposed PNW LNG facility near Prince Rupert, B.C.
We continued our engagement with Aboriginal groups along the pipeline route and during the quarter announced the signing of project agreements with Gitanyow First Nation, Kitselas First Nation, Lake Babine Nation, Doig River First Nation, Halfway River First Nation and Yekooche First Nation.
On June 11, 2015, PNW LNG announced a positive FID for the proposed liquefaction and export facility, subject to two conditions. The first condition is approval by the Legislative Assembly of B.C. of a Project Development Agreement between PNW LNG and the Province of B.C. This condition was satisfied in mid-July 2015. The second condition is a positive regulatory decision on PNW LNG’s environmental assessment by the Government of Canada.
Subject to successful completion of the regulatory process for PRGT, we remain on target to begin construction following confirmation of a FID by PNW LNG. The in-service date for PRGT is estimated to be 2020 but will be aligned with PNW LNG’s liquefaction facility timeline.
- Coastal GasLink: We have received eight of ten pipeline and facilities permits from the BC OGC and anticipate receiving the remaining two permits in third quarter 2015. We are continuing our engagement with Aboriginal groups along the pipeline route and on June 29, 2015 we announced the signing of project agreements with Wet’suwet’en First Nation, Skin Tyee Nation, Nee-Tahi-Buhn Band, Yekooche First Nation, Doig River First Nation and Halfway River First Nation, all of northern B.C.
Coastal GasLink is a 670 km (416 mile) natural gas pipeline that will deliver gas from the Montney producing region at an expected interconnect on the NGTL System near Dawson Creek, B.C. to LNG Canada’s proposed LNG facility near Kitimat, B.C. The project is subject to regulatory approvals and a positive FID.
- GTN Drop Down: On April 1, 2015, we closed the sale of our remaining 30 per cent interest in GTN to our master limited partnership, TC PipeLines, LP (the Partnership). The US$457 million sale, which included a US$11 million purchase price adjustment, was comprised of US$264 million in cash, the assumption of US$98 million in proportional GTN debt and the issuance of US$95 million of new Class B units to TransCanada. The Class B units entitle us to a cash distribution based on 30 per cent of GTN’s annual cash distribution after certain thresholds are achieved, namely 100 per cent of distributions above US$20 million in the first five years and 25 per cent of distributions above US$20 million in subsequent years.
The drop down of the remaining interest in GTN is part of a systematic series of transactions to sell the remainder of TransCanada’s U.S. natural gas pipeline assets to the Partnership to help us fund our capital program.
At June 30, 2015, we held a 28.2 per cent interest in the Partnership.
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