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)
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February
18, 2010
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|
TC
PipeLines, LP
|
|
(Exact
name of registrant as specified in its
charter)
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Delaware
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000-26091
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52-2135448
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
|
|
717
Texas Street, Suite #2400
Houston,
Texas
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77002
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(Address
of principal executive offices)
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(Zip
Code)
|
|
Registrant’s
telephone number, including area code
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(877)
290-2772
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| 13710 FNB Parkway, Omaha, Nebraska 68154-5200 |
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(Former
name or former address if changed since last
report)
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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:
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange
Act
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(17
CFR 240.14d-2(b))
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|
¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange
Act
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(17
CFR 240.13e-4(c))
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On
February 18, 2010, TC PipeLines, LP (the "Partnership") issued a news
release announcing financial results for the Partnership's 2009 fourth
quarter and fiscal year 2009 earnings. A copy of the news
release is furnished with this report as Exhibit 99.1.
In accordance with General
Instruction B.2. of Form 8-K, the information in this Item 2.02 and Exhibit
99.1 hereto are being furnished and are not deemed to be “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, and are not
otherwise subject to the liabilities of that section. Accordingly, the
information in this Item 2.02 and Exhibit 99.1 hereto will not be
incorporated by reference into any filing made by the Partnership under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, unless specifically identified therein as being incorporated therein by
reference.
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(d)
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Exhibits.
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99.1
|
News Release dated February 18, 2010. |
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
By: /s/
Robert C.
Jacobucci
Robert
C. Jacobucci
Principal
Financial Officer and Controller
Dated: February
18, 2010
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|
EXHIBIT
INDEX
|
|
Exhibit
No.
|
Description
|
|
99.1
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News Release
dated February 18, 2010.
|
Exhibit
99.1
NewsRelease
TC
PipeLines, LP Reports Fourth Quarter 2009 Results
HOUSTON,
Texas – February
18, 2010 – (Nasdaq: TCLP) – TC PipeLines, LP (the Partnership) today
reported an $8.7 million increase in fourth quarter 2009 Partnership cash flows
to $40.1 million compared to $31.4 million for the same period in 2008. Net
income for fourth
quarter 2009 was $24.9 million, a decrease of $1.7 million, compared to
$26.6 million, prior to recast, for the same period in 2008.
“Despite
the weak economy, TC PipeLines had a solid 2009 while dealing with the impact of
a low gas price environment and the challenges presented by competing gas
flows,” said Russ Girling, chairman and chief executive officer of TC
PipeLines GP, Inc. “Our annual Partnership cash flows of $150 million provided
significant coverage relative to the distributions paid to our
unitholders.”
“During
the year we raised the distribution following the acquisition of the North Baja
pipeline from TransCanada. In conjunction with that transaction we reset the
Incentive Distribution Rights. This reduces our cost of capital and
competitively positions us for further growth. Additional acquisitions from
TransCanada may help achieve our growth, as it is in the midst of building
and financing a C$22 billion capital program,” added Girling.
Fourth
Quarter and Full Year 2009 Highlights (All
financial figures are unaudited)
|
·
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For
the full year 2009
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o
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Partnership
cash flows of $150.2 million
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o
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Paid
cash distributions of $117.0 million
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o
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Declared
cash distributions of $2.895 per common
unit
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o
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Net
income of $106.1 million or $2.34 per common
unit
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|
o
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Net
income prior to recast of $97.8
million
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|
·
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Fourth
quarter 2009
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|
o
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Partnership
cash flows of $40.1 million
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|
o
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Paid
cash distributions of $30.7 million
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|
o
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Declared
cash distributions of $0.73 per common
unit
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o
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Net
income of $24.9 million or $0.56 per common
unit
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|
·
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Acquired
North Baja Pipeline, LLC (North
Baja)
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|
·
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Restructured
Incentive Distribution Rights
(IDRs)
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|
·
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Issued
11.4 million common units in two private placements and a public
offering
|
1
|
(unaudited)
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Three
months ended
December
31,
|
Twelve
months ended
December
31,
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||||||||||||||
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(millions
of dollars except per common unit amounts)
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2009
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2008
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2009
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2008
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||||||||||||
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Partnership
cash flows(1)
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40.1 | 31.4 | 150.2 | 143.5 | ||||||||||||
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Cash
distributions paid
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30.7 | 27.8 | 117.0 | 108.6 | ||||||||||||
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Cash
distributions declared per common unit(2)
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$0.730 | $0.705 | $2.895 | $2.815 | ||||||||||||
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Net
income(3)
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24.9 | 29.1 | 106.1 | 123.0 | ||||||||||||
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Net income prior to
recast(3)
(4)
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24.9 | 26.6 | 97.8 | 107.7 | ||||||||||||
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Net income per
common unit(5)
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$0.56 | $0.67 | $2.34 | $2.73 | ||||||||||||
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Weighted average
common units outstanding (millions)
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43.6 | 34.9 | 38.7 | 34.9 | ||||||||||||
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Common units
outstanding at end of period (millions)
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46.2 | 34.9 | 46.2 | 34.9 | ||||||||||||
(1) Partnership cash flows is a non-GAAP financial measure. Refer to the section entitled “Partnership Cash Flows” for further detail.
(2) The
Partnership’s 2009 fourth quarter cash distribution was paid on February 12,
2010 to unitholders of record as of January 31, 2010.
(3) The acquisition of North Baja from TransCanada
Corporation (TransCanada) was accounted for as a transaction between entities
under common control, similar to a pooling of interests, whereby the assets and
liabilities of North Baja were recorded at TransCanada’s carrying value and the
Partnership’s historical financial information was recast to include North Baja
for all periods presented on a consolidated basis. The effect of recasting the
Partnership’s consolidated financial statements to account for the common
control transaction increased the Partnership’s net income by $2.5 million and
$15.3 million for the three and twelve months ended December 31, 2008,
respectively, from amounts previously reported. In addition, the Partnership’s
net income increased by $8.3 million for the six months ended June 30, 2009 from
amounts previously reported.
(4) Net income prior to recast is a non-GAAP financial
measure. Refer to the section entitled “Net Income” for further
detail.
(5) Net
income per common unit is computed by dividing net income prior to recast, after
deduction of the general partner’s allocation, by the weighted average number of
common 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.
Effective
January 1, 2009, the Partnership adopted the provisions of Accounting Standards Codification
(ASC) 260-10-55 Earnings Per Share – Overall – Implementation Guidance and
Illustrations – Master Limited Partnerships. The retrospective
application of ASC 260-10-55 has impacted the amount of net income allocated to
the IDRs held by the general partner. Previously, the net income allocated to
the IDRs was based on the cash distribution paid in the period, and now it is
based on the cash distribution declared for the period. This resulted in a
reduction in the net income per common unit of nil and $0.02 for the three and
twelve months ended December 31, 2008, respectively.
Recent
Developments
On
January 19, 2010, the Board of Directors of TC PipeLines GP, Inc. declared the
Partnership’s fourth quarter 2009 cash distribution in the amount of $0.73 per
common unit, which was paid on February 12, 2010 to unitholders of record on
January 31, 2010. This cash distribution represents a 3.5 per cent increase from
the fourth quarter 2008 distribution of $0.705 per common unit.
On
November 18, 2009, the Partnership completed a public offering of 5,000,000
common units at $38.00 per common unit for gross proceeds of $190.0 million and
net proceeds of $181.7 million after unit issuance costs. In connection with the
public offering, TC PipeLines GP, Inc. contributed $3.8 million to the
Partnership to maintain its two per cent general partner interest. Net proceeds
were used to repay long-term debt outstanding on the Partnership’s revolving
credit facility.
2
On
November 19, 2009, the Federal Energy Regulatory Commission (FERC) instituted
proceedings under Section 5 of the Natural Gas Act to review the tariff rates of
Great Lakes Gas Transmission Limited Partnership (Great Lakes or GLGT) as well
as two other unaffiliated pipelines. As directed under the FERC order, Great
Lakes filed a cost and revenue study on February 4, 2010. A hearing is scheduled
for early August and the presiding Administrative Law Judge is expected to issue
an initial decision in November 2010.
Partnership
Cash Flows
The Partnership uses
non-GAAP financial measures ‘Partnership cash flows’ and ‘Partnership cash flows
before general partner distributions’ as they provide a measure of cash
generated during the period to evaluate our cash distribution capability. As
well, management uses these measures as a basis for recommendations to our
general partner’s board of directors regarding the distribution amount to be
declared each quarter. Partnership cash flow information is presented to enhance
investors’ understanding of the way that management analyzes the Partnership’s
financial performance.
The
Partnership calculates Partnership cash flows as net income, less North Baja’s
net income contribution prior to acquisition, plus operating cash flows from the
Partnership’s wholly-owned subsidiaries, North Baja and Tuscarora Gas
Transmission Company (Tuscarora), and cash distributions received in excess of
equity income from the Partnership’s equity investments, Great Lakes and
Northern Border Pipeline Company (Northern Border or NBPC), net of distributions
declared to the general partner. Partnership cash flows before general partner
distributions represent Partnership cash flows prior to distributions declared
to the general partner.
Partnership
cash flows and Partnership cash flows before general partner distributions are
provided as a supplement to GAAP financial results and are not meant to be
considered in isolation or as substitutes for financial results prepared in
accordance with GAAP.
Fourth
Quarter 2009
Partnership
cash flows increased $8.7 million to $40.1 million in fourth quarter 2009
compared to the same period in 2008. This increase was primarily due to the cash
flows provided by North Baja’s operating activities of $7.2 million in fourth
quarter 2009, in addition to a decrease of $2.6 million in general partner
distributions resulting from the restructuring of IDRs on July 1,
2009.
The
Partnership paid distributions of $30.7 million in fourth quarter 2009, an
increase of $2.9 million compared to the same period in the prior year due to an
increase in the number of common units outstanding and an increase in quarterly
per common unit distribution amounts. In fourth quarter 2009, net proceeds from
equity issuances of $185.5 million, including the general partner’s contribution
to maintain its two per cent interest, were used to repay long-term debt
outstanding on the Partnership’s revolving credit facility.
Year
Ended December 31, 2009
Partnership
cash flows increased $6.7 million to $150.2 million in 2009 compared to 2008.
This increase was primarily due to $15.7 million of cash flows provided by North
Baja’s operating activities since the Partnership’s July 1, 2009 acquisition, a
decrease of $4.9 million in general partner distributions resulting from the
restructuring of IDRs on July 1, 2009 and an increase of cash flows provided by
Tuscarora’s operating activities of $2.2 million. These positive factors were
partially offset by decreased cash distributions of $15.0 million from Northern
Border, due to a special one-time $8.2 million distribution for the proceeds
received in connection with the sale of Bison Pipeline LLC (Bison) in 2008, as
well as lower net income in 2009 as compared to 2008, partially offset by a
reduction in maintenance capital expenditures.
3
The
Partnership paid distributions of $117.0 million in 2009, an increase of $8.4
million compared to 2008 due to an increase in the number of common units
outstanding and increases in quarterly per common unit distribution amounts. In
third quarter 2009, the Partnership acquired North Baja with proceeds from
equity issuances of $80.0 million, including the general partner’s contribution
to maintain its two per cent interest, a $170.0 million draw on its revolving
credit facility and cash on hand. In 2009, the Partnership made equity
contributions to Northern Border totalling $42.3 million to partially fund the
repayment of Northern Border’s $200.0 million of debt which matured on September
1, 2009 and to complete the Des Plaines Project. In fourth quarter 2009, net
proceeds from equity issuances of $185.5 million, including the general
partner’s contribution to maintain its two per cent interest, were used to repay
long-term debt outstanding on the Partnership’s revolving credit
facility.
Net
Income
The
Partnership uses the non-GAAP financial measure ‘Net income prior to recast’ as
a financial performance measure. Net income prior to recast excludes North
Baja’s net income for periods prior to the date on which the Partnership
acquired North Baja. The
acquisition of North Baja from TransCanada was accounted for as a transaction
under common control, similar to a pooling of interests, whereby the
Partnership’s historical financial information was recast to include the net
income of North Baja for all periods presented, which included income which did
not accrue to the Partnership’s general partner interest or to the Partnership’s
common units, but rather, accrued to North Baja’s former parent.
Net
income prior to recast is presented to enhance investors’ understanding of the
way management analyzes the Partnership’s financial performance. Net
income prior to recast is provided as a supplement to GAAP financial results and
is not meant to be considered in isolation or as a substitute for financial
results prepared in accordance with GAAP.
4
| The shaded areas in the tables below disclose the results from Great Lakes and Northern Border, representing 100 per cent of each entity's operations for the given period. | |||||||||||||||||||||||||||||||||||||||||
| For the three months ended December 31, 2009 |
For
the three months ended December 31, 2008
|
||||||||||||||||||||||||||||||||||||||||
|
(unaudited)
(millions
of dollars)
|
Total
|
Other
Pipes
|
Corp(1)
|
GLGT
|
NBPC(2)
|
Total
|
Other
Pipes
|
Corp(1)
|
GLGT
|
NBPC(2)
|
|||||||||||||||||||||||||||||||
|
Transmission
revenues
|
16.8 | 16.8 | - | 69.3 | 55.3 | 8.3 | 8.3 | - | 73.2 | 80.3 | |||||||||||||||||||||||||||||||
|
Operating
expenses
|
(2.8 | ) | (2.8 | ) | - | (16.9 | ) | (15.0 | ) | (1.7 | ) | (1.7 | ) | - | (21.2 | ) | (20.5 | ) | |||||||||||||||||||||||
|
General
and administrative
|
(1.1 | ) | - | (1.1 | ) | - | - | (1.0 | ) | - | (1.0 | ) | - | - | |||||||||||||||||||||||||||
| 12.9 | 14.0 | (1.1 | ) | 52.4 | 40.3 | 5.6 | 6.6 | (1.0 | ) | 52.0 | 59.8 | ||||||||||||||||||||||||||||||
|
Depreciation
|
(3.7 | ) | (3.7 | ) | - | (14.6 | ) | (15.5 | ) | (1.8 | ) | (1.8 | ) | - | (14.6 | ) | (15.3 | ) | |||||||||||||||||||||||
|
Financial
charges, net and other
|
(6.6 | ) | (0.8 | ) | (5.8 | ) | (7.5 | ) | (7.0 | ) | (7.3 | ) | (1.2 | ) | (6.1 | ) | (8.2 | ) | (9.7 | ) | |||||||||||||||||||||
|
Michigan
business tax
|
- | - | - | (1.0 | ) | - | - | - | - | (1.3 | ) | - | |||||||||||||||||||||||||||||
| 29.3 | 17.8 | 27.9 | 34.8 | ||||||||||||||||||||||||||||||||||||||
|
Equity
income
|
22.3 | - | - | 13.5 | 8.8 | 30.1 | - | - | 12.9 | 17.2 | |||||||||||||||||||||||||||||||
|
Net
income prior to recast
|
24.9 | 9.5 | (6.9 | ) | 13.5 | 8.8 | 26.6 | 3.6 | (7.1 | ) | 12.9 | 17.2 | |||||||||||||||||||||||||||||
| North Baja's contribution prior | |||||||||||||||||||||||||||||||||||||||||
| to acquisition(3) | - | - | - | - | - | 2.5 | 2.5 | - | - | - | |||||||||||||||||||||||||||||||
|
Net
income(3)
|
24.9 | 9.5 | (6.9 | ) | 13.5 | 8.8 | 29.1 | 6.1 | (7.1 | ) | 12.9 | 17.2 | |||||||||||||||||||||||||||||
|
For
the twelve months ended December 31, 2009
|
For
the twelve months ended December 31, 2008
|
||||||||||||||||||||||||||||||||||||||||
|
(unaudited)
(millions
of dollars)
|
Total
|
Other
Pipes
|
Corp(1)
|
GLGT
|
NBPC(2)
|
Total
|
Other
Pipes
|
Corp(1)
|
GLGT
|
NBPC(2)
|
|||||||||||||||||||||||||||||||
|
Transmission
revenues
|
50.9 | 50.9 | - | 289.7 | 249.2 | 31.6 | 31.6 | - | 287.1 | 293.1 | |||||||||||||||||||||||||||||||
|
Operating
expenses
|
(7.9 | ) | (7.9 | ) | - | (66.5 | ) | (70.8 | ) | (5.4 | ) | (5.4 | ) | - | (67.1 | ) | (78.0 | ) | |||||||||||||||||||||||
|
General
and administrative
|
(6.2 | ) | - | (6.2 | ) | - | - | (4.1 | ) | - | (4.1 | ) | - | - | |||||||||||||||||||||||||||
| 36.8 | 43.0 | (6.2 | ) | 223.2 | 178.4 | 22.1 | 26.2 | (4.1 | ) | 220.0 | 215.1 | ||||||||||||||||||||||||||||||
|
Depreciation
|
(10.9 | ) | (10.9 | ) | - | (58.5 | ) | (61.9 | ) | (6.9 | ) | (6.9 | ) | - | (58.5 | ) | (61.1 | ) | |||||||||||||||||||||||
|
Financial
charges, net and other(4)
|
(27.5 | ) | (4.1 | ) | (23.4 | ) | (31.9 | ) | (34.4 | ) | (30.1 | ) | (4.3 | ) | (25.8 | ) | (32.6 | ) | (21.8 | ) | |||||||||||||||||||||
|
Michigan
business tax
|
- | - | - | (5.4 | ) | - | - | - | - | (5.5 | ) | - | |||||||||||||||||||||||||||||
| 127.4 | 82.1 | 123.4 | 132.2 | ||||||||||||||||||||||||||||||||||||||
|
Equity
income
|
99.4 | - | - | 59.1 | 40.3 | 122.6 | - | - | 57.3 | 65.3 | |||||||||||||||||||||||||||||||
|
Net
income prior to recast
|
97.8 | 28.0 | (29.6 | ) | 59.1 | 40.3 | 107.7 | 15.0 | (29.9 | ) | 57.3 | 65.3 | |||||||||||||||||||||||||||||
|
North
Baja's contribution prior
|
|
||||||||||||||||||||||||||||||||||||||||
|
to
acquisition(3)
|
8.3 | 8.3 | - | - | - | 15.3 | 15.3 | - | - | - | |||||||||||||||||||||||||||||||
|
Net
income(3)
|
106.1 | 36.3 | (29.6 | ) | 59.1 | 40.3 | 123.0 | 30.3 | (29.9 | ) | 57.3 | 65.3 | |||||||||||||||||||||||||||||
(1) “Corp” includes the costs of the Partnership, but excludes the costs of its subsidiaries.
(2) The
Partnership owns a 50 per cent general partner interest in Northern
Border.
(3) The acquisition of North Baja from
TransCanada was accounted for as a transaction between entities under common
control, similar to a pooling of interests, whereby the assets and liabilities
of North Baja were recorded at TransCanada’s carrying value and the
Partnership’s historical financial information was recast to include the
acquired entity for all periods presented on a consolidated
basis.
(4) In 2008,
Northern Border’s financial charges, net and other, included a $16.2 million
gain on the sale of Bison.
5
Fourth
Quarter 2009
The
Partnership’s net income prior to recast decreased by $1.7 million to $24.9
million in fourth quarter 2009 compared to the same period in 2008. The $5.4
million contribution to net income from North Baja in fourth quarter 2009
partially offset the lower
equity income from Northern Border.
Equity
income from Northern Border decreased $8.4 million to $8.8 million in fourth
quarter 2009 compared to the same period in 2008. Northern Border’s net income
decreased $17.0 million compared to the same period in 2008 primarily due to
decreased transmission revenues resulting from reductions in contracted
capacity, which was partially offset by lower operating expenses due to lower
property taxes and lower general and administrative costs, and lower financial
charges due to lower interest rates and average debt outstanding.
Net
income prior to recast from Other Pipes, which includes results from North Baja
and Tuscarora, increased $5.9 million to $9.5 million in fourth quarter 2009
compared to the same period in 2008. This increase was primarily due to the
acquisition of North Baja which contributed $5.4 million to net income in fourth
quarter 2009.
Equity
income from Great Lakes increased $0.6 million to $13.5 million in fourth
quarter 2009 compared to the same period in 2008. The increase in equity income
was primarily due to decreased operating expenses relating to lower pipeline
integrity expenditures, partially offset by decreased short-term firm
transportation revenues.
Year
Ended December 31, 2009
The
Partnership’s net income prior to recast decreased by $9.9 million to $97.8
million in 2009 compared to 2008. The $11.6 million contribution to net income
from North Baja in 2009 partially offset the lower
equity income from Northern Border.
Equity
income from Northern Border decreased $25.0 million to $40.3 million in 2009
compared to 2008. In 2008, equity income from Northern Border included the
Partnership’s $8.1 million share of Northern Border’s gain recorded on the sale
of Bison. Excluding this gain, Northern Border’s 2009 net income decreased $33.9
million compared to 2008 primarily due to decreased transmission revenues
resulting from reductions in contracted capacity, which was partially offset by
lower operating expenses and financial charges. Operating expenses decreased
$7.2 million in 2009 compared to 2008 primarily due to decreased property taxes
and lower general and administrative costs. Excluding the $16.2 million gain on
the sale of Bison in 2008, financial charges, net and other, decreased $3.6
million in 2009 compared to 2008 primarily due to lower interest rates and
average debt outstanding.
Net
income prior to recast from Other Pipes, which includes results from North Baja
and Tuscarora, increased $13.0 million to $28.0 million in 2009 compared to
2008. This increase was primarily due to the acquisition of North Baja which
contributed $11.6 million to net income in 2009, as well as increased
transmission revenues from a full year of operations of Tuscarora’s Likely
compressor station expansion that went into service in April 2008.
Equity
income from Great Lakes increased $1.8 million to $59.1 million in 2009 compared
to 2008. The increase in equity income was primarily due to increased
transmission revenues and decreased operating expenses. Transmission revenues
increased primarily due to increased sales of short-term services, partially
offset by decreased reservation revenues resulting from re-negotiation of
contracts at lower rates and non-renewal of services. Operating expenses
decreased primarily due to lower compressor fuel use tax, lower property taxes,
and lower integration transition costs. These decreases in operating expenses
were offset by increased repairs and overhauls.
6
Costs at
the Partnership level decreased $0.3 million to $29.6 million in 2009 compared
to 2008 due to lower financial charges, partially offset by increased operating
expenses. The decrease in financial charges, net and other, was a result of
lower effective interest rates, partially offset by higher average debt
outstanding. Operating expenses increased primarily due to transaction costs
relating to the North Baja acquisition and the concurrent IDR
restructuring.
Liquidity
and Capital Resources
At
December 31, 2009, the outstanding balance on the Partnership’s revolving credit
facility was $9.0 million, with $241.0 million available for future borrowings,
and the Partnership was in compliance with the covenants of the agreement. The
average interest rate on the credit facility was 4.10 per cent for the year
ended December 31, 2009, inclusive of the impact of interest rate hedging
activity.
Conference
Call
Analysts,
members of the public, the media and other interested parties are invited to
participate in a teleconference and audio webcast on Thursday, February 18, 2010
at 11:00 a.m. (Central) and noon (Eastern). Mark Zimmerman, president of the
general partner, will discuss fourth quarter 2009 financial results and general
developments of the Partnership followed by a question and answer session for
the investment community and media.
To
participate, please call (866) 225-0198. No pass code is required.
A replay
of the teleconference call will also be available two hours after the conclusion
of the call and until 11:00 p.m.(Central) and midnight (Eastern) on Thursday,
February 25, 2010, by dialing (800) 408-3053, then entering pass code
4820037#.
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 has interests in approximately 3,700 miles of federally regulated
U.S. interstate natural gas pipelines, including Great Lakes Gas Transmission
Limited Partnership (46.45 per cent ownership), Northern Border Pipeline Company
(50 per cent ownership), North Baja Pipeline, LLC (100 per cent ownership) and
Tuscarora Gas Transmission Company (100 per cent ownership). Great Lakes is a
2,115-mile pipeline serving markets in Minnesota, Wisconsin, Michigan and
eastern Canada. The 1,249-mile Northern Border Pipeline transports natural gas
from the Montana-Saskatchewan border to markets in the midwestern United States.
North Baja is an 80-mile natural gas pipeline that extends from southwestern
Arizona to a point on the California/Mexico border and connects with a natural
gas pipeline system in Mexico. Tuscarora owns a 240-mile pipeline system that
transports natural gas from Oregon, where it interconnects TransCanada’s Gas
Transmission Northwest System, to markets in Oregon, Northern California, and
Northwestern Nevada. 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 TC PipeLines, LP.
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 website at www.tcpipelineslp.com.
7
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. The Partnership
assumes no obligation to update any such forward-looking statements 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 the positions taken by the FERC, interveners, the
Administrative Law Judge in the Great Lakes rate proceeding, the demand for
Great Lakes and Northern Border transportation in the future, the risk of a
prolonged slowdown in growth or decline in the U.S. economy or the risk of delay
in growth recovery in the U.S. economy, regulatory decisions, particularly those
of the FERC, the ability of Great Lakes and Northern Border to recontract their
available capacity on competitive terms, the Partnership’s ability to identify
and/or consummate accretive growth opportunities from TransCanada or others, the
ability to access capital and credit markets with competitve rates and terms,
operational decisions of the operator of our pipeline systems, the failure of a
shipper on any one of the Partnership’s pipelines to perform its contractual
obligations, supply of natural gas in the Western Canada Sedimentary Basin and
in competing basins, such as the Rocky Mountains, future demand for natural gas,
overcapacity in the industry, success of other pipelines competing with Northern
Border and Great Lakes by bringing competing U.S. sourced gas to Northern
Border’s and Great Lakes’ markets, 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, 2008 and the Partnership’s Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30,
2009.
- 30
- -
|
Media
Inquiries:
|
Cecily
Dobson/Terry Cunha
|
(403)
920-7859
(800)
608-7859
|
|
Unitholder
and Analyst Inquiries:
|
Terry
Hook
|
(877)
290-2772
investor_relations@tcpipelineslp.com
|
8
TC
PipeLines, LP
Financial
Summary
Consolidated
Statement of Income
|
(unaudited)
|
Three
months ended
December
31,
|
Twelve
months ended
December
31,
|
||||||||||||||
|
(millions
of dollars except per common unit amounts)
|
2009
|
2008(1)
|
2009(1)
|
2008(1)
|
||||||||||||
|
Equity
income from investment in Great Lakes
|
13.5 | 12.9 | 59.1 | 57.3 | ||||||||||||
|
Equity
income from investment in Northern Border
|
8.8 | 17.2 | 40.3 | 65.3 | ||||||||||||
|
Transmission
revenues
|
16.8 | 16.9 | 67.9 | 64.5 | ||||||||||||
|
Operating
expenses
|
(2.8 | ) | (4.4 | ) | (11.0 | ) | (11.5 | ) | ||||||||
|
General
and administrative
|
(1.1 | ) | (1.0 | ) | (6.2 | ) | (4.1 | ) | ||||||||
|
Depreciation
|
(3.7 | ) | (3.7 | ) | (14.7 | ) | (13.9 | ) | ||||||||
|
Financial
charges, net and other
|
(6.6 | ) | (8.8 | ) | (29.3 | ) | (34.6 | ) | ||||||||
|
Net
income
|
24.9 | 29.1 | 106.1 | 123.0 | ||||||||||||
|
Pre-acquisition
net income contribution from North Baja
|
- | (2.5 | ) | (8.3 | ) | (15.3 | ) | |||||||||
|
Net
income prior to recast
|
24.9 | 26.6 | 97.8 | 107.7 | ||||||||||||
|
Net
income allocation
|
||||||||||||||||
|
Common
units
|
24.5 | 23.4 | 90.6 | 95.1 | ||||||||||||
|
General
partner
|
0.4 | 3.2 | 7.2 | 12.6 | ||||||||||||
| 24.9 | 26.6 | 97.8 | 107.7 | |||||||||||||
|
Net
income per common unit
|
$0.56 | $0.67 | $2.34 | $2.73 | ||||||||||||
|
Weighted
average common units outstanding (millions)
|
43.6 | 34.9 | 38.7 | 34.9 | ||||||||||||
|
Common
units outstanding, end of the period (millions)
|
46.2 | 34.9 | 46.2 | 34.9 | ||||||||||||
Consolidated
Condensed Balance Sheet
|
(unaudited)
|
December
31,
|
December
31,
|
||||||
|
(millions
of dollars)
|
2009
|
2008(1)
|
||||||
|
ASSETS
|
||||||||
|
Current
assets
|
9.7 | 19.8 | ||||||
|
Investment
in Great Lakes
|
691.2 | 704.5 | ||||||
|
Investment
in Northern Border
|
523.0 | 514.8 | ||||||
|
Other
assets
|
451.2 | 462.0 | ||||||
| 1,675.1 | 1,701.1 | |||||||
|
LIABILITIES
AND PARTNERS' EQUITY
|
||||||||
|
Current
liabilities
|
5.8 | 9.0 | ||||||
|
Fair
value of derivative contracts, including current portion and
other
|
24.5 | 32.2 | ||||||
|
Long-term
debt, including current portion
|
541.3 | 536.8 | ||||||
|
Due
to North Baja's former parent
|
- | 247.5 | ||||||
|
Partners'
equity
|
1,103.5 | 875.6 | ||||||
| 1,675.1 | 1,701.1 | |||||||
9
(1) The acquisition of North Baja from TransCanada was accounted for as a transaction between entities under common control, similar to a pooling of interests, whereby the assets and liabilities of North Baja were recorded at TransCanada’s carrying value and the Partnership’s historical financial information was recast to include North Baja for all periods presented on a consolidated basis. The effect of recasting the Partnership’s consolidated financial statements to account for the common control transaction increased the Partnership’s net income by $2.5 million and $15.3 million for the three and twelve months ended December 31, 2008, respectively, from amounts previously reported. In addition, the Partnership’s net income increased by $8.3 million for the six months ended June 30, 2009 from amounts previously reported.
Non-GAAP
Measures
Reconciliations
of Net Income to Net Income Prior to Recast and Partnership Cash
Flows
|
(unaudited)
|
Three
months ended
December
31,
|
Twelve
months ended
December
31,
|
||||||||||||||
|
(millions
of dollars except per common unit amounts)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
|
Net income(1)
|
24.9 | 29.1 | 106.1 | 123.0 | ||||||||||||
|
North Baja's
contribution prior to acquisition(1)
|
- | (2.5 | ) | (8.3 | ) | (15.3 | ) | |||||||||
|
Net
income prior to recast
|
24.9 | 26.6 | 97.8 | 107.7 | ||||||||||||
|
Add:
|
||||||||||||||||
|
Cash distributions
from Great Lakes(2)
|
18.5 | 18.9 | 72.5 | 73.9 | ||||||||||||
|
Cash distributions
from Northern Border(2)
|
17.2 | 18.7 | 75.7 | 90.7 | ||||||||||||
|
Cash
flows provided by North Baja's operating activities
|
7.2 | - | 15.7 | - | ||||||||||||
|
Cash
flows provided by Tuscarora's operating activities
|
4.8 | 4.2 | 23.7 | 21.5 | ||||||||||||
| 47.7 | 41.8 | 187.6 | 186.1 | |||||||||||||
|
Less:
|
||||||||||||||||
|
Equity
income from investment in Great Lakes
|
(13.5 | ) | (12.9 | ) | (59.1 | ) | (57.3 | ) | ||||||||
|
Equity
income from investment in Northern Border
|
(8.8 | ) | (17.2 | ) | (40.3 | ) | (65.3 | ) | ||||||||
|
North
Baja's net income
|
(5.4 | ) | - | (11.6 | ) | - | ||||||||||
|
Tuscarora's
net income
|
(4.1 | ) | (3.6 | ) | (16.4 | ) | (15.0 | ) | ||||||||
| (31.8 | ) | (33.7 | ) | (127.4 | ) | (137.6 | ) | |||||||||
|
Partnership
cash flows before general partner distributions
|
40.8 | 34.7 | 158.0 | 156.2 | ||||||||||||
|
General partner
distributions(3)
|
(0.7 | ) | (3.3 | ) | (7.8 | ) | (12.7 | ) | ||||||||
|
Partnership
cash flows
|
40.1 | 31.4 | 150.2 | 143.5 | ||||||||||||
|
Cash
distributions declared
|
(34.4 | ) | (27.8 | ) | (123.6 | ) | (110.8 | ) | ||||||||
|
Cash distributions
declared per common unit(4)
|
0.730 | 0.705 | 2.895 | 2.815 | ||||||||||||
|
Cash
distributions paid
|
(30.7 | ) | (27.8 | ) | (117.0 | ) | (108.6 | ) | ||||||||
|
Cash distributions
paid per common unit(4)
|
0.730 | 0.705 | 2.870 | 2.775 | ||||||||||||
(1) The acquisition of North Baja from TransCanada was accounted for as a transaction between entities under common control, similar to a pooling of interests, whereby the assets and liabilities of North Baja were recorded at TransCanada’s carrying value and the Partnership’s historical financial information was recast to include North Baja for all periods presented on a consolidated basis.
(2) In
accordance with the cash distribution policies of the respective pipeline
systems, cash distributions from Great Lakes and Northern Border are based on
their respective prior quarter financial results, except that the distribution
paid by Northern Border in third quarter 2008 included a special distribution of
$16.4 million (Partnership share - $8.2 million) related to the sale of
Bison.
10
(3)
General partner distributions represent the cash distributions declared to the
general partner with respect to its two per cent interest plus an amount equal
to incentive distributions. Prior to 2009, General partner distributions were
based on the cash distributions paid during the quarter to the general partner.
General partner distributions in fourth quarter 2008 were not affected by the
retrospective application of ASC 260-10-55. General partner distributions for
the year ended December 31, 2008 increased from $11.8 million to $12.7
million.
(4)
Cash distributions declared per common unit and cash distributions paid per
common unit are computed by dividing cash distributions, after the deduction of
the general partner's allocation, by the number of common 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.
Operating
Results
| Three
months ended
December
31,
|
Twelve months
ended
December
31,
|
|||||||||||||||
|
(unaudited)
|
2009 |
2008
|
2009
|
2008
|
||||||||||||
|
Great
Lakes
|
||||||||||||||||
|
Volumes:
|
||||||||||||||||
|
Gas
delivered (million
cubic feet)
|
161,603 | 178,178 | 727,031 | 784,284 | ||||||||||||
|
Average
throughput (million
cubic feet per day)
|
1,757 | 1,937 | 1,992 | 2,143 | ||||||||||||
|
Capital
Expenditures (millions
of dollars):
|
||||||||||||||||
|
Maintenance
|
0.5 | 6.1 | 5.5 | 12.3 | ||||||||||||
|
Growth
|
2.8 | - | 2.8 | - | ||||||||||||
|
Northern
Border
|
||||||||||||||||
|
Volumes:
|
||||||||||||||||
|
Gas
delivered (million
cubic feet)
|
142,960 | 204,332 | 614,356 | 731,138 | ||||||||||||
|
Average
throughput (million
cubic feet per day)
|
1,571 | 2,277 | 1,708 | 2,041 | ||||||||||||
|
Capital
Expenditures (millions
of dollars):
|
||||||||||||||||
|
Maintenance
|
1.3 | 1.7 | 6.7 | 8.4 | ||||||||||||
|
Growth
|
0.1 | 5.2 | 4.4 | 12.1 | ||||||||||||
|
North
Baja
|
||||||||||||||||
|
Volumes:
|
||||||||||||||||
|
Gas
delivered (million
cubic feet)
|
23,216 | 25,015 | 95,821 | 103,883 | ||||||||||||
|
Average
throughput (million
cubic feet per day)
|
252 | 272 | 263 | 285 | ||||||||||||
|
Capital
Expenditures (millions
of dollars):
|
||||||||||||||||
|
Maintenance
|
0.1 | 0.4 | 0.3 | 12.8 | ||||||||||||
|
Growth
|
1.8 | 2.0 | 2.8 | 15.0 | ||||||||||||
|
Tuscarora
|
||||||||||||||||
|
Volumes:
|
||||||||||||||||
|
Gas
delivered (million
cubic feet)
|
10,242 | 8,373 | 34,282 | 30,061 | ||||||||||||
|
Average
throughput (million
cubic feet per day)
|
111 | 91 | 94 | 82 | ||||||||||||
|
Capital
Expenditures (millions
of dollars):
|
||||||||||||||||
|
Maintenance
|
- | 0.1 | 0.2 | 0.1 | ||||||||||||
|
Growth
|
0.1 | 0.3 | 0.6 | 6.7 | ||||||||||||
11