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) April 5, 2006 |
TC PipeLines, LP
(Exact name of registrant as specified in its charter)
Delaware |
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000-26091 |
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52-2135448 |
(State or other jurisdiction |
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(Commission File |
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(IRS Employer |
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110 Turnpike Road, Suite 203 |
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01581 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code (508) 871-7046 |
Not Applicable
(Former name or former address if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement.
Operating Agreement
In connection with the acquisition by TC PipeLines, LP (the Partnership) of an additional 20% general partnership interest in Northern Border Pipeline Company (the Acquisition), TransCan Northwest Border Ltd. (TCNB), an affiliate of the Partnership, entered into an operating agreement (the Operating Agreement) dated as of April 6, 2006 with Northern Border Pipeline Company (NBPL). TCNB is a wholly-owned subsidiary of TransCanada Corporation, which is the parent company of TC PipeLines GP, Inc., the sole general partner of the Partnership.
Under the Operating Agreement, TCNB will become the operator of the interstate gas pipeline and related facilities owned by NBPL (the Pipeline) on April 1, 2007, and will have general responsibility for the day-to-day management of the Pipeline. The term of the Operating Agreement will continue until April 1, 2018 and will renew on a year-to-year basis thereafter unless terminated by either party by giving six months prior written notice. TCNB will be fully reimbursed by NBPL for all costs and expenses authorized by the management committee of NBPL and all reasonable and proper costs and expenses paid by TCNB in connection with the operation of the Pipeline without any profit or loss.
TCNB will indemnify NBPL for all actions, claims, demands, costs and liabilities arising out of actions (or failures to act) by TCNB that are not in accordance with the terms of the Operating Agreement or an express direction by NBPL other than actions (or failures to act) by TCNB in good faith within the scope of its authority in the course of the operation of the Pipeline.
NBPL will indemnify TCNB against all actions, claims, demands, costs and liabilities arising out of acts (or failure to act) of TCNB in good faith within the scope of its authority in the course of the operation of the Pipeline, including claims, demands, costs and liabilities arising from the negligence of TCNB, its officers, agents, employees or affiliates. TCNB will not be indemnified for its gross negligence or willful misconduct.
Consent and Amendment to Operating Agreement
In connection with the Acquisition, NBPL entered into a consent and amendment to operating agreement (the Operating Agreement Amendment) dated as of April 6, 2006 with Northern Plains Natural Gas Company, LLC (Northern Plains), the current operator of the Pipeline. The Operating Agreement Amendment provides the consent of Northern Plains for NBPL to enter into the Operating Agreement with TCNB and amends the term of NBPLs current operating agreement with Northern Plains to continue through March 31, 2007, subject to provisions of the NBPL general partnership agreement. Northern Plains, a wholly owned subsidiary of ONEOK, Inc., is a general partner of Northern Border Intermediate Limited Partnership (NBILP), which is one of NBPLs general partners.
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Transaction Fee Agreement
In connection with the Acquisition, the Partnership entered into a transaction fee agreement (the Transaction Fee Agreement) dated as of April 6, 2006 with TCNB. Under the Transaction Fee Agreement, in recognition of the benefits to the Partnership of TCNB, an affiliate of the Partnership, assuming the duties and responsibilities of becoming the operator of NBPL, the Partnership agreed to pay TCNB a fee of $10 million.
Amended and Restated General Partnership Agreement of Northern Border Pipeline Company
In connection with the Acquisition, TC PipeLines Intermediate Limited Partnership (TCILP), a wholly-owned subsidiary of the Partnership, and NBILP entered into the First Amended and Restated General Partnership Agreement of Northern Border Pipeline Company dated as of April 6, 2006 (the Amended Partnership Agreement) to (i) reflect that, as a result of the Acquisition, each of TCILP and NBILP own 50% of the general partnership interests in NBPL, (ii) designate TCNB as the operator of the Pipeline effective April 1, 2007, (iii) eliminate outdated provisions, (iv) revise the governance provisions and (v) incorporate all prior amendments and changes in one document.
Under the Amended Partnership Agreement, the management committee of NBPL will consist of four members, two of whom will be designated by NBILP and two of whom will be designated by TCILP. TCILP will select one of its representatives to serve as the chairman of the management committee so long as TCILP holds, directly or indirectly, an undivided 50% interest in NBPL or, if an additional partner is admitted to NBPL, at least as great a partnership interest as the partner with the largest partnership interest.
Except as otherwise provided in the Amended Partnership Agreement, the management committee shall act upon the affirmative vote of a majority of the partners ownership interests. For this purpose, each partner may, by notice to the other partner, allocate to each of its representatives all or any portion of its ownership interest, and the representatives designated by each of NBILP and TCILP shall have, in the aggregate, votes equal to their respective partnership interests.
The audit committee shall consist of three members, two of whom shall be selected by each partners representatives on the management committee, provided that the representatives of any partner as to whom (or as to whose general partner) the operator is then an affiliate, shall only have the right to appoint one member of the audit committee. No member of the audit committee may be an employee, officer or director of the operator. Decisions of the audit committee shall be by majority vote of the members.
Item 2.01. Completion of Acquisition or Disposition of Assets.
On April 6, 2006, TC PipeLines Intermediate Limited Partnership, a wholly-owned subsidiary of TC PipeLines, LP (the Partnership), completed the acquisition of an additional 20% general partnership interest in Northern Border Pipeline Company (NBPL) from Northern Border Intermediate Limited Partnership, a wholly-owned subsidiary of Northern Border Partners, L.P. (NBP) for approximately $297 million in cash plus up to $10 million in
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transaction costs payable to a subsidiary of TransCanada Corporation (TransCanada). The Partnership also indirectly assumed approximately $120 million of debt of NBPL. The acquisition was made pursuant to a partnership interest purchase and sale agreement (the Purchase Agreement), dated as of December 31, 2005, by and between Northern Border Intermediate Limited Partnership and TC PipeLines Intermediate Limited Partnership, and is effective as of December 31, 2005. As a result of the transaction, the Partnerships interest in NBPL increased from 30% to 50% and NBPs interest in NBPL decreased from 70% to 50%.
Concurrent with the closing of this transaction, TransCanada completed the sale of all of the stock of Northwest Border Pipeline Company, which company holds an indirect 17.5% general partner interest in NBP, to a subsidiary of ONEOK, Inc. for a net payment of approximately $29.5 million. TransCanada is the parent company of TC PipeLines GP, Inc. (TCGP), the sole general partner of the Partnership.
The Partnership used funds provided under the Credit Facility described under Item 2.03 to pay the purchase price for the acquisition and $10 million in transaction costs payable in connection with the acquisition.
The conflicts committee of the Partnership, which is comprised of the independent members of the board of directors of TCGP, determined that the acquisition of the 20% general partnership interest in NBPL in accordance with the Purchase Agreement and the payment of up to $10 million in transaction costs to a subsidiary of TransCanada are fair and reasonable to the Partnership and in the interests of the Partnerships unitholders. The conflicts committee engaged independent legal counsel and an independent financial adviser to assist in its determination.
The Partnerships press release regarding the completion of the acquisition of the 20% general partnership interest in NBPL is attached as an exhibit to this Form 8-K.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On April 5, 2006, TC PipeLines, LP (the Partnership) borrowed $307 million under its $310 million unsecured credit agreement (the Credit Facility), dated as of March 31, 2006, with Citigroup Global Markets Inc. and UBS Loan Finance LLC (UBS), as joint lead arrangers and joint book managers, Citicorp North America, Inc., as administrative agent and a lender, UBS, as syndication agent and a lender, Mizuho Corporate Bank, Ltd. and Bank of Tokyo-Mitsubishi UFJ, as co-documentation agents and lenders, and SunTrust Bank, as a lender. The funds borrowed under the Credit Facility were used to pay the cash portion of the purchase price for the acquisition described under Item 2.01 and $10 million in transaction costs payable in connection with the acquisition. The remaining $3 million commitment under the Credit Facility was terminated. All amounts borrowed under the Credit Facility will be due and payable on March 31, 2008.
Borrowings under the Credit Facility will bear interest based, at the Partnerships election, on the London interbank offered rate (LIBOR) or the base rate plus, in either case, an applicable margin. The base rate will equal the higher of Citibanks base rate or 0.5% above the federal funds rate. The applicable margin is based on the Partnerships leverage ratio. The
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applicable margin ranges between 0.875% and 1.250% for LIBOR loans and between 0% and 0.250% for base rate loans. The applicable margin increases by 0.125% per annum on March 31, 2007 and further increases by 0.25% per annum on September 30, 2007.
The credit agreement includes usual and customary covenants for credit facilities of this type, including covenants limiting liens, mergers, asset sales and material changes in the business of the Partnership or its subsidiaries. The credit agreement also requires the Partnership to maintain a leverage ratio of not more than 4.50 to 1.00 at all times and an interest coverage ratio of not less than 3.50 to 1.00 at the end of any fiscal quarter.
In the event of a default by the Partnership under the credit agreement, including cross-defaults relating to specified other debt of the Partnership or its significant subsidiaries in excess of $15 million, the lenders may declare the amounts outstanding, including all accrued interest and unpaid fees, payable immediately. In addition, the lenders may enforce any and all rights and remedies created under the credit agreement or applicable law. For events of default relating to insolvency, bankruptcy or receivership, the amounts outstanding become payable immediately.
The agents and certain lenders under the Credit Facility described above and their affiliates have in the past provided, and may in the future provide, investment banking, underwriting, lending, commercial banking and other advisory services to the Partnership. These parties have received, and may in the future receive, customary compensation from the Partnership for such services.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not filed herewith. Pursuant to Item 9.01(a)(4) of Form 8-K, the Partnership undertakes to file such information by amendment to this report not later than 71 calendar days after April 12, 2006.
(b) Pro Forma Financial Information.
Not filed herewith. Pursuant to Item 9.01(a)(4) of Form 8-K, the Partnership undertakes to file such information by amendment to this report not later than 71 calendar days after April 12, 2006.
(d) Exhibits.
2.1 Partnership Interest Purchase and Sale Agreement dated as of December 31, 2005 by and between Northern Border Intermediate Limited Partnership and TC PipeLines Intermediate Limited Partnership (incorporated by reference to Exhibit 2.1 to the Partnerships Current Report on Form 8-K filed February 15, 2006).
99.1 Press Release dated April 6, 2006.
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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.
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TC PipeLines, LP |
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by: TC PipeLines GP, Inc., |
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its general partner |
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By: |
/s/ Amy W. Leong |
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Amy W. Leong |
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Controller |
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Dated: April 10, 2006 |
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Exhibit No. |
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Description |
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2.1 |
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Partnership Interest Purchase and Sale Agreement dated as of December 31, 2005 by and between Northern Border Intermediate Limited Partnership and TC PipeLines Intermediate Limited Partnership (incorporated by reference to Exhibit 2.1 to the Partnerships Current Report on Form 8-K filed February 15, 2006). |
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99.1 |
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Press Release dated April 6, 2006. |
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Exhibit 99.1
News Release
CALGARY, Alberta April 6, 2006 (NASDAQ: TCLP) TC PipeLines, LP (the Partnership) today announced it has closed its acquisition of an additional 20 per cent general partnership interest in Northern Border Pipeline Company (NBPL), a Texas general partnership, for approximately $297 million plus $10 million in transaction costs payable to a subsidiary of TransCanada Corporation (TransCanada). The Partnership will also indirectly assume approximately $120 million of debt of NBPL. The transaction is effective as of December 31, 2005. The Partnership now holds a 50 per cent interest in NBPL.
Concurrent with this transaction, TransCanada closed the sale of its 17.5 per cent general partner interest in Northern Border Partners, L.P. to a subsidiary of ONEOK, Inc. (ONEOK) for a net payment of approximately $29.5 million. TransCanada is the parent company of TC PipeLines GP, Inc., the sole general partner of TC PipeLines, LP.
As part of the transaction, and effective by early second quarter 2007, a subsidiary of TransCanada will become the operator of NBPL which is currently operated by Northern Plains Natural Gas Company, LLC, a subsidiary of ONEOK.
The Partnership funded the transaction at closing through a floating rate bridge loan facility. The Partnership intends to refinance the bridge loan with a combination of equity and debt.
With capacity of 2.4 billion cubic feet per day, the 1,249-mile Northern Border Pipeline is the largest natural gas pipeline connecting the Alberta hub with growing U.S. markets, transporting natural gas from the Montana-Saskatchewan border, where it connects to TransCanadas Foothills System, to interconnecting pipelines in the upper Midwestern United States. Northern Border Pipeline Company provides its shippers access to markets in the Midwest through interconnecting pipeline facilities, as well as direct access to Chicago markets. Northern Border Pipeline shippers can arrange transportation with third
parties to provide access beyond Chicago to markets throughout the United States.
TC PipeLines, LP is a publicly traded limited partnership. It owns a 50 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 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 TransCanadas 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.
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 Partnerships current beliefs as well as assumptions made by and information currently available to the Partnership. These statements reflect the Partnerships 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 Partnerships 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 Pipelines operator, the failure of a shipper on either one of the Partnerships 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 Partnerships filings with the Securities and Exchange Commission, including the Partnerships Annual Report on Form 10-K for the year ended December 31, 2005.
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Jennifer Varey |
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(403) 920-7859 |
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(800) 608-7859 |
Unitholder and Analyst Inquiries: |
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Myles Dougan |
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(877) 290-2772 |