UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): 26 April 2004.
TC PIPELINES, LP
(Exact name of registrant as specified in its charter)
DELAWARE 000-26091 52-2135448
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
110 TURNPIKE ROAD, SUITE 203 01581
WESTBOROUGH, MASSACHUSETTS (Zip Code)
(Address of principal executive offices)
(508) 871-7046
(Registrant's telephone number, including area code)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following materials are filed as exhibits to this Current
Report on Form 8-K:
Exhibit
Number Description of Exhibit
- ------- ----------------------
99.1 News Release of TC PipeLines, LP entitled "TC PipeLines,
LP Announces 2004 First Quarter Results" issued April 26, 2004.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On April 26, 2004, TC PipeLines, LP issued a news release announcing first
quarter results for the period ended March 31, 2004. A copy of the news release
is furnished with this report as Exhibit 99.1 and is incorporated herein by
reference.
The information in this report is being furnished, not filed, pursuant to Item
12 of Form 8-K. Accordingly, the information in Item 12 of this report will not
be incorporated by reference into any registration statement filed by TC
PipeLines, LP under the Securities Act of 1933, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TC PipeLines, LP
By: TC PipeLines GP, Inc.,
its general partner
Dated: April 26, 2004 By: /s/ Russell K. Girling
---------------------------------
Russell K. Girling
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- ----------------------
99.1 News Release of TC PipeLines, LP entitled "TC PipeLines,
LP Announces 2004 First Quarter Results" issued April 26, 2004.
Exhibit 99.1
[TC PIPELINES, LP LOGO OMITTED]
Media Inquiries: Kurt Kadatz/Hejdi Feick (403) 920-7859
Unitholder and Analyst Inquiries: David Moneta/Debbie Stein (877) 290-2772
News Release
TC PipeLines, LP Announces 2004 First Quarter Results
CALGARY, Alberta - April 26, 2004 - (Nasdaq: TCLP) - TC PipeLines, LP (the
Partnership) today reported first quarter 2004 net income of $13.7 million or
$0.75 per unit (all amounts in U.S. dollars) compared to $11.9 million or $0.66
per unit in first quarter 2003. The increase in net income is due to higher
equity income from both Northern Border Pipeline Company ("Northern Border
Pipeline") and Tuscarora Gas Transmission Company ("Tuscarora").
Cash generated in first quarter 2004, including $2.0 million of cash distributed
from Northern Border Pipeline classified as a return of capital, increased to
$15.4 million compared to $13.5 million in 2003. The increase reflects higher
cash distributions from Northern Border Pipeline due primarily to the change in
its cash distribution policy effective January 1, 2004.
"The Partnership's first quarter 2004 results reflect increased income and cash
flow relative to the same period last year," said Ron Turner, President and
Chief Executive Officer of the general partner, TC PipeLines GP, Inc. "This is
the result of successful marketing of transportation services on Northern Border
Pipeline and the recent expansion of the Tuscarora system." On April 20, 2004,
the Partnership announced its first quarter cash distribution in the amount of
$0.55 per unit.
FINANCIAL HIGHLIGHTS
(unaudited)
(millions of dollars, except per unit amounts) THREE MONTHS ENDED MARCH 31
- --------------------------------------------------------------------------- --------------------
2004 2003
-------------------- --------------------
Net Income 13.7 11.9
Per unit (1) $0.75 $0.66
Cash Generated from Operations 13.4 13.5
Return of Capital from Northern Border Pipeline 2.0 -
Cash Distributions Paid 10.1 9.6
Cash Distributions Declared per unit (2) $0.55 $0.525
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 2% interest plus an amount equal to incentive
distributions.
(2) The Partnership's 2004 first quarter cash distribution will be paid on May
14, 2004 to unitholders of record as of April 30, 2004.
NET INCOME
The Partnership reported first quarter 2004 net income of $13.7 million or $0.75
per unit, an increase of $1.8 million compared to $11.9 million or $0.66 per
unit in first quarter 2003.
Equity income from Northern Border Pipeline was $12.5 million in first quarter
2004 compared to $11.0 million in the same quarter of 2003. The increase is
attributable to higher revenues and lower interest costs. The increase in
revenues reflects Northern Border Pipeline's ability to generate and retain
more revenues from the sale of short-term capacity and additional
transportation services. The reduction in interest costs is the result of
both a decrease in the average long-term debt balance and a decrease in
average interest rates. Equity income from Tuscarora amounted to $1.8 million
in first quarter 2004 compared to $1.3 million for first quarter 2003. The
increase was primarily due to revenues from long-term firm transportation
contracts, which commenced in November 2003, related to Tuscarora's recent
expansion.
The Partnership's first quarter 2004 general and administrative expenses and
financial charges of $0.5 million and $0.1 million, respectively, approximate
those of the same period last year.
CASH FLOW
The Partnership reported first quarter 2004 cash generated from operations of
$13.4 million compared to $13.5 million for first quarter 2003. When including
the portion of the cash distribution from Northern Border Pipeline reported as a
return of capital, cash generated increased to $15.4 million in 2004. The
increase is due primarily to Northern Border Pipeline's change in cash
distribution policy.
-2-
In first quarter 2004, the Partnership received a cash distribution from
Northern Border Pipeline amounting to $14.5 million compared to $12.5 million in
first quarter 2003. The increase in distribution from Northern Border Pipeline
is primarily due to a change in Northern Border Pipeline's cash distribution
policy effective January 1, 2004. Under this new policy, cash distributions are
based upon 100% of distributable cash flow as determined from Northern Border
Pipeline's financial statements based on earnings before interest, taxes,
depreciation and amortization less interest and maintenance capital
expenditures.
Current accounting practice requires the classification of cumulative cash
distributions in excess of cumulative equity earnings to be reported as a return
of capital. As of the fourth quarter 2003, cumulative cash distributions from
Northern Border Pipeline to the Partnership exceeded cumulative equity earnings.
In first quarter 2004, distributions from Northern Border Pipeline exceeded
equity earnings to the Partnership by $2.0 million.
Cash distributions from Tuscarora for the first quarter 2004 were $1.5 million,
unchanged from first quarter 2003.
In the first quarter 2004, the Partnership contributed $19.5 million to
Northern Border Pipeline representing its 30% share of a $65.0 million cash
call issued by Northern Border Pipeline to its partners on January 27, 2004.
The funds were used by Northern Border Pipeline to repay a portion of its
existing indebtedness. The Partnership's contribution was funded with cash
from operations and its credit facilities.
During first quarter 2004, the Partnership paid an aggregate $10.1 million of
cash distributions to unitholders and its general partner, compared to $9.6
million in first quarter 2003. This cash distribution, on a per unit basis,
represents $0.55 per unit in first quarter 2004, as compared to $0.525 per unit
in first quarter 2003, as well as the general partner interest including
incentive distributions.
CONFERENCE CALL
The Partnership will hold a conference call Tuesday, April 27, 2004 at 12 p.m.
(Eastern). Ron Turner, President and Chief Executive Officer of the general
partner, will discuss the first quarter 2004 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 after the call until midnight, May 4, 2004 by dialing
(800) 408-3053, then entering pass code 3037898.
A live Web cast of the conference call will also be available through the
Partnership's Internet site at www.tcpipelineslp.com. An audio replay of the
call will be maintained on the Internet site.
-3-
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 Enron Corp., 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 with facilities of Gas Transmission Northwest Corporation, to
northern Nevada. TC PipeLines, LP is managed by its general partner, TC
PipeLines GP, Inc., an indirect wholly owned subsidiary of TransCanada
Corporation. Subsidiaries of TransCanada Corporation also hold common and
subordinated 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.
- 30 -
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This news release includes 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. 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,
majority control of the Northern Border Pipeline management committee by
affiliates of Enron Corp., which has filed for bankruptcy protection, 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, 2003.
-4-
TC PipeLines, LP
Financial Highlights
STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31 (unaudited)
(millions of U.S. dollars, except per unit amounts) 2004 2003
- --------------------------------------------------------------------------------------- -------------------
Equity Income from Investment in
Northern Border Pipeline Company (1) 12.5 11.0
Equity Income from Investment in
Tuscarora Gas Transmission Company (2) 1.8 1.3
General and Administrative Expenses (0.5) (0.4)
Financial Charges (0.1) -
---------------------- -------------------
NET INCOME 13.7 11.9
---------------------- -------------------
---------------------- -------------------
NET INCOME PER UNIT (3) $0.75 $0.66
---------------------- -------------------
---------------------- -------------------
UNITS OUTSTANDING (MILLIONS) 17.5 17.5
---------------------- -------------------
---------------------- -------------------
BALANCE SHEET
MARCH 31, 2004 December 31, 2003
(millions of U.S. dollars) (unaudited) (audited)
- -------------------------------------------------------------------------------------- --------------------
ASSETS
Cash 2.3 7.5
Investment in Northern Border Pipeline Company (1) 258.2 240.7
Investment in Tuscarora Gas Transmission Company (2) 40.2 39.9
--------------------- --------------------
300.7 288.1
--------------------- --------------------
--------------------- --------------------
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities 0.7 0.6
Current Portion of Long-Term Debt - 5.5
Long-Term Debt 14.5 -
Partners' Equity 285.5 282.0
--------------------- --------------------
300.7 288.1
--------------------- --------------------
--------------------- --------------------
CASH FLOW INFORMATION
THREE MONTHS ENDED MARCH 31 (unaudited)
(millions of U.S. dollars) 2004 2003
- -------------------------------------------------------------------------------------- ------------------
Cash Generated from Operations
Distributions Received from Equity Investments
Northern Border Pipeline Company 12.5 12.5
Tuscarora Gas Transmission Company 1.5 1.5
Changes in Working Capital and Other (0.6) (0.5)
---------------------- ------------------
13.4 13.5
Return of capital from Northern Border Pipeline 2.0 -
Company
Investment in Northern Border Pipeline Company (19.5) -
Investment in Tuscarora Gas Transmission Company - (3.3)
Distributions Paid (10.1) (9.6)
Long-term debt issued/(repaid) 9.0 (3.0)
---------------------- ------------------
Decrease In Cash (5.2) (2.4)
---------------------- ------------------
---------------------- ------------------
-5-
(1) NORTHERN BORDER PIPELINE COMPANY
TC PipeLines holds a 30% general partner interest in Northern Border
Pipeline Company. Summarized operating and financial information of Northern
Border Pipeline for the three months ended March 31, 2004 and 2003 and as at
March 31, 2004 and December 31, 2003 is as follows:
THREE MONTHS ENDED MARCH 31 (unaudited) 2004 2003
-------------------------------------------------------------------------------- --------------------
OPERATING RESULTS
-----------------
Gas Delivered (million cubic feet) 218,324 210,023
Average Throughput (million cubic feet per day) 2,471 2,406
FINANCIAL RESULTS (millions of U.S. dollars)
-----------------
Operating Revenue 83.3 79.9
Operating Expenses
Operations and Maintenance 9.1 8.9
Depreciation and Amortization 14.5 14.5
Taxes other than Income 7.9 7.9
--------------------- --------------------
Total Operating Expenses 31.5 31.3
--------------------- --------------------
Operating Income 51.8 48.6
Interest Expense, Net (10.2) (11.8)
Other Income 0.1 (0.1)
--------------------- --------------------
Net Income 41.7 36.7
--------------------- --------------------
--------------------- --------------------
CAPITAL EXPENDITURES (millions of U.S. dollars)
--------------------
Maintenance 0.1 1.9
Growth 0.2 -
SUMMARY BALANCE SHEET DATA (millions of U.S. dollars) MARCH 31, 2004 December 31, 2003
-------------------------- (unaudited) (audited)
--------------------- --------------------
Total Assets 1,697.9 1,691.3
--------------------- --------------------
--------------------- --------------------
Other Current Liabilities and
Reserves and Deferred Credits 69.7 67.4
Long-Term Debt (including current maturities) 767.6 821.5
Partners' Capital 855.8 797.2
Accumulated Other Comprehensive Income 4.8 5.2
--------------------- --------------------
Total Liabilities and Partners' Equity 1,697.9 1,691.3
--------------------- --------------------
--------------------- --------------------
-6-
(2) TUSCARORA GAS TRANSMISSION COMPANY
TC PipeLines holds a 49% general partner interest in Tuscarora Gas
Transmission Company. Summarized operating and financial information of
Tuscarora for the three months ended March 31, 2004 and 2003 and as at March
31, 2004 and December 31, 2003 is as follows:
THREE MONTHS ENDED MARCH 31 (unaudited) 2004 2003
--------------------------------------------------------------------------------- ------------------
OPERATING RESULTS
-----------------
Gas Delivered (million cubic feet) 7,925 5,753
Average Throughput (million cubic feet per day) 87 64
FINANCIAL RESULTS (millions of U.S. dollars)
-----------------
Operating Revenue 8.3 7.4
Operating Expenses
Operations, Maintenance & Administrative 0.9 0.9
Depreciation and Amortization 1.6 1.6
Taxes other than Income 0.3 0.3
---------------------- ------------------
Total Operating Expenses 2.8 2.8
---------------------- ------------------
Operating Income 5.5 4.6
Interest Expense, Net (1.5) (1.6)
Other Income - -
---------------------- ------------------
Net Income 4.0 3.0
---------------------- ------------------
CAPITAL EXPENDITURES (millions of U.S. dollars)
--------------------
Maintenance 0.1 -
Growth 0.1 0.2
SUMMARY BALANCE SHEET DATA (millions of U.S. dollars) MARCH 31, 2004 December 31, 2003
-------------------------- (unaudited) (audited)
--------------------- --------------------
Total Assets 152.1 149.6
---------------------- --------------------
---------------------- --------------------
Other Current Liabilities and
Reserves and Deferred Credits 3.7 2.1
Long-Term Debt (including current maturities) 85.4 85.4
Partners' Capital 62.9 62.0
Accumulated Other Comprehensive Income 0.1 0.1
---------------------- --------------------
Total Liabilities and Partners' Equity 152.1 149.6
---------------------- --------------------
---------------------- --------------------
(3) Net income per unit is computed by dividing net income, after deduction of
the general partners' allocation, by the number of common and subordinated
units outstanding. The general partner's allocation is computed based upon
the general partner's 2% interest plus an amount equal to incentive
distributions.
-7-
