CALGARY, ALBERTA — (Marketwire) — 02/12/13 — TransCanada Corporation (TSX: TRP) (NYSE: TRP) (TransCanada or the Company) today announced comparable earnings for fourth quarter 2012 of $318 million or $0.45 per share. For the year ended December 31, 2012, comparable earnings were $1.3 billion or $1.89 per share. TransCanada–s Board of Directors also declared a quarterly dividend of $0.46 per common share for the quarter ending March 31, 2013, equivalent to $1.84 per common share on an annualized basis, an increase of five per cent. This is the thirteenth consecutive year the Board of Directors has raised the dividend.
“TransCanada–s diverse set of high-quality critical energy infrastructure assets performed relatively well over the course of 2012,” said Russ Girling, TransCanada–s president and chief executive officer. “While the majority of our assets continued to generate stable and predictable earnings and cash flow, plant outages at Bruce Power and Sundance A along with a lower contribution from certain natural gas pipelines did adversely affect our financial results.
“In 2012, we made significant progress on a number of initiatives to improve earnings and position our Company for continued growth,” added Girling. “We commenced construction on the Gulf Coast Project, advanced Keystone XL, received positive decisions related to Sundance A and Ravenswood, and placed $3.4 billion of new assets into service. The restart of Bruce Power Units 1 and 2, the return to service of Sundance A in fall 2013, and the start up of other natural gas pipeline and energy projects are expected to have a positive impact on earnings and cash flow in 2013. Looking forward, TransCanada is well positioned to grow sustainable earnings, cash flow and dividends as we complete our current capital program, benefit from an anticipated recovery in natural gas and power prices and execute on our significant portfolio of secured new growth opportunities.”
Over the next three years, subject to required approvals, TransCanada expects to complete $12 billion of projects that are currently in advanced stages of development. They include the Gulf Coast Project, Keystone XL, the Keystone Hardisty Terminal, the initial phase of the Grand Rapids Pipeline, the Tamazunchale extension, the acquisition of nine Ontario Solar projects, and the ongoing expansion of the Alberta System.
During the course of 2012 and early 2013, the Company also commercially secured an additional $13 billion of long-life, contracted energy infrastructure projects that are expected to be placed into service in 2016 and beyond. They include the Coastal GasLink and Prince Rupert Gas Transmission projects that would move natural gas to Canada–s West Coast for liquefaction and shipment to Asian markets, the Topolobampo and Mazatlan Gas Pipeline projects in Mexico, completion of the Grand Rapids and Northern Courier oil pipeline projects in Northern Alberta, and the Napanee Generating Station in Eastern Ontario. TransCanada expects these projects to generate predictable, sustained earnings and cash flow.
Fourth Quarter and Year-End Highlights
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
Comparable earnings for fourth quarter 2012 were $318 million or $0.45 per share compared to $365 million or $0.52 per share for the same period in 2011. The decrease was primarily due to lower earnings contributions from Western Power, Bruce Power and certain natural gas pipelines including the Canadian Mainline, ANR and Great Lakes.
Comparable earnings for the year ended December 31, 2012 were $1.3 billion or $1.89 per share compared to $1.6 billion or $2.22 per share in 2011. Incremental earnings from Keystone and recently commissioned assets were more than offset by lower contributions from Western Power, Bruce Power, U.S. Power and certain natural gas pipelines including the Canadian Mainline, ANR and Great Lakes.
Net income attributable to common shares for fourth quarter 2012 was $306 million or $0.43 per share compared to $376 million or $0.53 per share in fourth quarter 2011. For the year ended December 31, 2012, net income attributable to common shares was $1.3 billion or $1.84 per share compared to $1.5 billion or $2.17 per share in 2011.
Notable recent developments in Oil Pipelines, Natural Gas Pipelines, Energy and Corporate include:
Oil Pipelines:
Natural Gas Pipelines:
Energy:
Corporate:
Teleconference – Audio and Slide Presentation:
TransCanada will hold a teleconference and webcast on Tuesday, February 12, 2013 to discuss its fourth quarter 2012 financial results. Russ Girling, TransCanada–s president and chief executive officer and Don Marchand, executive vice-president and chief financial officer, along with other members of the TransCanada executive leadership team, will discuss the financial results and Company developments at 1:00 p.m. (MST) / 3:00 p.m. (EST).
Analysts, members of the media and other interested parties are invited to participate by calling 866.226.1793 or 416.340.2218 (Toronto area). Please dial in 10 minutes prior to the start of the call. No pass code is required. A live webcast of the teleconference will be available at .
A replay of the teleconference will be available two hours after the conclusion of the call until 11:59 PM (EST) February 19, 2013. Please call 905.694.9451 or 800.408.3053 (North America only) and enter pass code 6260206.
With more than 60 years– experience, TransCanada is a in the and reliable operation of North American energy infrastructure, including natural gas and oil pipelines, power generation and gas storage facilities. TransCanada operates a network of natural gas pipelines that extends more than 68,500 kilometres (42,500 miles), tapping into virtually all major gas supply basins in North America. TransCanada is one of the continent–s largest providers of gas storage and related services with over 400 billion cubic feet of storage capacity. A growing independent power producer, TransCanada owns or has interests in over 11,800 megawatts of power generation in Canada and the United States. TransCanada is developing one of North America–s largest oil delivery systems. TransCanada–s common shares trade on the Toronto and New York stock exchanges under the symbol TRP. For more information visit: or check us out on Twitter .
Fourth Quarter 2012 Financial Highlights
Forward-Looking Information
TransCanada Corporation (TransCanada or the Company) discloses forward-looking information to help current and potential investors understand management–s assessment of the Company–s future plans and financial outlook, and future prospects overall.
Statements that are forward-looking are based on what the Company knows and expects today and generally include words like anticipate, expect, believe, may, will, should, estimate or other similar words.
Forward-looking statements in this news release may include information about the following, among other things:
Forward-looking statements do not guarantee future performance. Actual events and results could be significantly different because of various assumptions, risks or uncertainties related to TransCanada–s business or events that happen after the date of this news release.
TransCanada–s forward-looking information is based on the following key assumptions, risks and uncertainties, among other things:
Assumptions
Risks and uncertainties
More information about these and other factors is available in reports TransCanada has filed with Canadian securities regulators and the U.S. Securities and Exchange Commission.
Readers should not put undue reliance on forward-looking information. TransCanada does not update forward-looking statements based on new information or future events, unless required to by law.
Non-GAAP Measures
TransCanada uses the measures Comparable Earnings, Comparable Earnings per Share, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Comparable EBITDA, Earnings Before Interest and Taxes (EBIT), Comparable EBIT, Comparable Interest Expense, Comparable Interest Income and Other, Comparable Income Taxes and Funds Generated from Operations in this news release. These measures do not have any standardized meaning as prescribed by U.S. generally accepted accounting principles (GAAP). They are, therefore, considered to be non-GAAP measures and are unlikely to be comparable to similar measures presented by other entities. Management of TransCanada uses these non-GAAP measures to improve its ability to compare financial results among reporting periods and to enhance its understanding of operating performance, liquidity and ability to generate funds to finance operations. These non-GAAP measures are also provided to readers as additional information on TransCanada–s operating performance, liquidity and ability to generate funds to finance operations.
EBITDA is an approximate measure of the Company–s pre-tax operating cash flow and is generally used to better measure performance and evaluate trends of individual assets. EBITDA comprises earnings before deducting interest and other financial charges, income taxes, depreciation and amortization, net income attributable to non-controlling interests and preferred share dividends. EBITDA includes income from equity investments. EBIT is a measure of the Company–s earnings from ongoing operations and is generally used to better measure performance and evaluate trends within each segment. EBIT comprises earnings before deducting interest and other financial charges, income taxes, net income attributable to non-controlling interests and preferred share dividends. EBIT includes income from equity investments.
Comparable Earnings, Comparable EBITDA, Comparable EBIT, Comparable Interest Expense, Comparable Interest Income and Other, and Comparable Income Taxes comprise Net Income Applicable to Common Shares, EBITDA, EBIT, Interest Expense, Interest Income and Other, and Income Taxes, respectively, and are adjusted for specific items that are significant but are not reflective of the Company–s underlying operations in the period. Specific items are subjective, however, management uses its judgement and informed decision-making when identifying items to be excluded in calculating these non-GAAP measures, some of which may recur. Specific items may include but are not limited to certain fair value adjustments relating to risk management activities, income tax refunds and adjustments, gains or losses on sales of assets, legal and bankruptcy settlements, and write-downs of assets and investments. These non-GAAP measures are calculated on a consistent basis from period to period. The specific items for which such measures are adjusted in each applicable period may only be relevant in certain periods and are disclosed in the Reconciliation of Non-GAAP Measures table in this news release.
The Company engages in risk management activities to reduce its exposure to certain financial and commodity price risks by utilizing derivatives. The risk management activities which TransCanada excludes from Comparable Earnings provide effective economic hedges but do not meet the specific criteria for hedge accounting treatment and, therefore, changes in their fair values are recorded in Net Income each year. The unrealized gains or losses from changes in the fair value of these derivative contracts are not considered to be representative of the underlying operations in the current period or the positive margin that will be realized upon settlement. As a result, these amounts have been excluded in the determination of Comparable Earnings.
The Reconciliation of Non-GAAP Measures table in this news release presents a reconciliation of these non-GAAP measures to Net Income Attributable to Common Shares. Comparable Earnings per Common Share is calculated by dividing Comparable Earnings by the weighted average number of common shares outstanding for the period.
Funds Generated from Operations comprise Net Cash Provided by Operations before changes in operating working capital and allows management to better measure consolidated operating cash flow, excluding fluctuations from working capital balances which may not necessarily be reflective of underlying operations in the same period.
Consolidated Results of Operations
Fourth Quarter Results
Comparable Earnings in fourth quarter 2012 were $318 million or $0.45 per share compared to $365 million or $0.52 per share for the same period in 2011. Comparable Earnings excluded net unrealized after-tax losses of $12 million ($17 million pre-tax) (2011 – gains of $11 million after tax; ($13 million pre-tax)) resulting from changes in the fair value of certain risk management activities.
Comparable Earnings decreased $47 million or $0.07 per share in fourth quarter 2012 compared to the same period in 2011 and reflected the following:
Annual Results
Comparable Earnings in 2012 were $1,330 million or $1.89 per share compared to $1,559 million or $2.22 per share for 2011. Comparable Earnings in 2012 excluded net unrealized after-tax losses of $16 million ($22 million pre-tax) (2011 – losses of $33 million after tax ($52 million pre-tax)) resulting from changes in the fair value of certain risk management activities. Comparable Earnings in 2012 also excluded a negative after-tax charge of $15 million ($20 million pre-tax) following the July 2012 Sundance A PPA arbitration decision that was recorded in second quarter 2012 but related to amounts originally recorded in fourth quarter 2011.
Comparable Earnings decreased $229 million or $0.33 per share in 2012 compared to 2011 and reflected the following:
U.S. Dollar-Denominated Balances
On a consolidated basis, the impact of changes in the value of the U.S. dollar on U.S. operations is partially offset by other U.S. dollar-denominated items as set out in the following table. The resultant pre-tax net exposure is managed using derivatives, further reducing the Company–s exposure to changes in the Canadian-U.S. foreign exchange rate. The average exchange rate to convert a U.S. dollar to a Canadian dollar for fourth quarter 2012 and year ended December 31, 2012 was 0.99 and 1.00, respectively (2011 – 1.02 and 0.99, respectively).
Natural Gas Pipelines
Natural Gas Pipelines– Comparable EBIT was $454 million in fourth quarter 2012 compared to $481 million for the same period in 2011.
Canadian Natural Gas Pipelines
Canadian Mainline–s net income of $47 million in fourth quarter 2012 decreased $13 million compared to the same period in 2011. Canadian Mainline–s net income for fourth quarter 2011 included incentive earnings earned under an incentive arrangement in the five-year tolls settlement that expired December 31, 2011. In the absence of a National Energy Board decision with respect to its 2012-2013 tolls application, Canadian Mainline–s 2012 results reflect the last approved rate of return on common equity of 8.08 per cent on deemed common equity of 40 per cent and exclude incentive earnings. In addition, Canadian Mainline–s fourth quarter 2012 net income decreased as a result of a lower average investment base compared to the prior year.
The Alberta System–s net income of $55 million in fourth quarter 2012 increased by $4 million compared to the same period in 2011 as a result of a higher average investment base, partially offset by lower incentive earnings.
Canadian Mainline–s Comparable EBITDA for fourth quarter 2012 of $250 million decreased $12 million compared to $262 million in the same period in 2011. The Alberta System–s Comparable EBITDA was $195 million for fourth quarter 2012 compared to $185 million in the same period in 2011. EBITDA from the Canadian Mainline and the Alberta System reflect the net income variances discussed above as well as variances in depreciation, financial charges and income taxes which are recovered in revenue on a flow-through basis and, therefore, do not impact net income.
U.S. and International Natural Gas Pipelines
ANR–s Comparable EBITDA in fourth quarter 2012 of US$63 million decreased US$10 million compared to the same period in 2011 primarily due to lower transportation revenues and higher costs.
Great Lakes– Comparable EBITDA for fourth quarter 2012 of US$11 million decreased US$9 million compared to the same period in 2011 and was primarily the result of lower transportation revenue due to uncontracted capacity and lower rates compared to the same period in 2011.
Business Development
Natural Gas Pipelines– Business Development Comparable EBITDA loss from business development activities decreased $11 million for fourth quarter 2012 compared to the same period in 2011. The decrease in business development costs were primarily related to reduced activity in 2012 for the Alaska Pipeline Project.
Oil Pipelines
Oil Pipelines– Comparable EBIT in fourth quarter 2012 was $136 million compared to $144 million in the same period in 2011.
The Keystone Pipeline System–s Comparable EBITDA of $180 million in fourth quarter 2012 is consistent with the same period in 2011.
EBITDA from the Keystone Pipeline System is primarily generated from payments received under long-term commercial arrangements for capacity that are not dependant on actual throughput. Uncontracted capacity is offered to the market on a spot basis and, when capacity is available, provides opportunities to generate incremental EBITDA.
Business Development spending increased $8 million in fourth quarter 2012 compared to the same period in 2011 and reflected increased business development activity and related costs.
Energy
Energy–s Comparable EBIT was $154 million in fourth quarter 2012 compared to $187 million for the same period in 2011.
Western Power–s Comparable EBITDA of $84 million in fourth quarter 2012 decreased $58 million compared to the same period in 2011 primarily due to the Sundance A PPA force majeure and decreased equity earnings from the ASTC Power Partnership as a result of the Sundance B PPA arbitration decision.
Throughout 2011 and first quarter 2012, revenues and costs related to the Sundance A PPA had been recorded as though the outages of Units 1 and 2 were interruptions of supply in accordance with the terms of the PPA. As a result of the Sundance A PPA arbitration decision received in July 2012, no further revenues and costs related to the PPA will be recorded until Units 1 and 2 are returned to service because the plant is in force majeure. Comparable EBITDA for the three months ended December 31, 2011 included $57 million of accrued earnings related to the Sundance A PPA.
Western Power–s Power Revenues of $158 million in fourth quarter 2012 decreased $61 million compared to the same period in 2011 primarily due to the Sundance A PPA force majeure.
Western Power–s Commodity Purchases Resold of $74 million decreased $15 million compared to the same period in 2011 primarily due to the Sundance A PPA force majeure, partially offset by higher purchased volumes as a result of lower PPA plant outage days.
Eastern Power–s Comparable EBITDA of $94 million in fourth quarter 2012 increased $12 million compared to the same period in 2011. The increase was primarily due to incremental Cartier Wind earnings from phases one and two of Gros-Morne which were placed in service in November 2011 and November 2012, respectively and Montagne-Seche which was placed in service in November 2011, partially offset by lower Becancour contractual earnings.
Income from Equity Investments of $23 million decreased $9 million compared to the same period in 2011 primarily due to the Sundance B PPA arbitration decision. In second quarter 2010, Sundance B Unit 3 experienced an unplanned outage related to mechanical failure of certain generator components and was subject to a force majeure claim by the facility operator, TransAlta Corporation. The ASTC Power Partnership, which holds the Sundance B PPA, disputed the claim under the binding dispute resolution process provided in the PPA as it did not believe TransAlta–s claim met the test of force majeure. TransCanada therefore recorded equity earnings from its 50 per cent ownership interest in ASTC Power Partnership as though this event was a normal plant outage. In November 2012, an arbitration decision was reached with the arbitration panel granting partial force majeure relief to TransAlta and TransCanada reduced fourth quarter equity earnings by $11 million to reflect the amount which will not be recovered as a result of the decision.
Approximately 80 per cent of Western Power sales volumes were sold under contract in fourth quarter 2012, compared to 82 per cent in fourth quarter 2011. To reduce its exposure to spot market prices in Alberta, as at December 31, 2012, Western Power had entered into fixed-price power sales contracts to sell approximately 6,700 gigawatt hours (GWh) for 2013 and 4,300 GWh for 2014.
Eastern Power–s sales volumes were 100 per cent sold under contract and are expected to be fully contracted going forward.
TransCanada–s Loss from Bruce A increased $39 million to a loss of $54 million in fourth quarter 2012 compared to the same period in 2011. This increase was primarily due to lower volumes and higher operating costs resulting from higher outage days. These increases were partially offset by incremental volumes and earnings from Units 1 and 2 which were returned to service on October 22 and October 31, respectively.
Both Units 1 and 2 operated at reduced output levels following their return to service and, in late November 2012, Bruce Power took Unit 1 offline for an approximate 30 day planned maintenance outage. Bruce Power expects the availability percentages for Units 1 and 2 to increase over time; however, these units have not operated for an extended period of time and may experience slightly higher forced loss rates and reduced availability percentages in 2013.
TransCanada–s Equity Income from Bruce B increased $32 million to $46 million in fourth quarter 2012 compared to the same period in 2011. The increase was primarily due to higher volumes and lower operating costs resulting from fewer planned outage days and lower lease expense.
Under a contract with the Ontario Power Authority (OPA), all output from Bruce A in fourth quarter 2012 was sold at a fixed price of $68.23 per MWh (before recovery of fuel costs from the OPA) compared to $66.33 per MWh in fourth quarter 2011. Also under a contract with the OPA, all output from the Bruce B units was subject to a floor price of $51.62 per MWh in fourth quarter 2012 compared to $50.18 per MWh in fourth quarter 2011. Both the Bruce A and Bruce B contract prices are adjusted annually for inflation on April 1.
Amounts received under the Bruce B floor price mechanism within a calendar year are subject to repayment if the monthly average spot price exceeds the floor price. No amounts recorded in revenues were subject to repayment in 2012 or 2011.
The Bruce A Unit 4 outage, which commenced on August 2, 2012, is expected to be completed in first quarter 2013. Planned maintenance on Bruce B units is scheduled to occur in the first half of 2013.
The overall plant availability percentage in 2013 is expected to be approximately 90 per cent for Bruce A and high 80–s for Bruce B. The Unit 4 outage, which began on August 2, 2012, is expected to be completed in late first quarter 2013. Planned maintenance on Bruce B units is scheduled to occur during the first half of 2013.
U.S. Power–s Comparable EBITDA of US$48 million for the three months ended December 31, 2012 increased US$16 million compared to the same period in 2011. The increase was primarily due to higher generation volumes and higher realized power and capacity prices in New York, partially offset by lower earnings from the U.S. hydro facilities due to reduced water flows, as well as lower capacity prices and higher load serving costs in New England.
Physical sales volumes for the three months ended December 31, 2012 have increased compared to the same period in 2011 largely due to higher purchased volumes to serve increased sales to wholesale, commercial and industrial customers in the PJM and New England markets. Generation volumes at Ravenswood were higher as the plant ran at higher than normal levels both during and following Superstorm Sandy when damage at several other third party power and transmission facilities reduced power supply in the area. This increase was partially offset by lower hydro volumes.
U.S. Power–s Power Revenue of US$353 million for the three months ended December 31, 2012 increased US$145 million compared to the same period in 2011. The increase was primarily due to higher sales volumes in addition to higher realized power prices.
Capacity Revenue of US$53 million for the three months ended December 31, 2012 increased US$9 million compared to the same period in 2011 due to higher realized capacity prices in New York, partially offset by lower capacity prices in New England.
Commodity Purchases Resold of US$217 million for the three months ended December 31, 2012 increased US$98 million compared to the same period in 2011 due to higher volumes of physical power purchased for resale under power sales commitments to wholesale, commercial and industrial customers, higher load serving costs, and higher prices paid for power purchased.
Plant Operating Costs and Other, which includes fuel gas consumed in generation, of US$149 million for the three months ended December 31, 2012 increased US$34 million compared to the same period in 2011, primarily due to higher generation volumes at the Ravenswood facility.
As at December 31, 2012, approximately 2,600 GWh or 34 per cent and 1,000 GWh or 13 per cent of U.S. Power–s planned generation is contracted for 2013 and 2014, respectively. Planned generation fluctuates depending on hydrology, wind conditions, commodity prices and the resulting dispatch of the assets. Power sales fluctuate based on customer usage.
Natural Gas Storage
Natural Gas Storage–s Comparable EBITDA of $20 million for the three months ended December 31, 2012 was comparable to the same period in 2011.
Comparable Interest Expense of $246 million for the three months ended December 31, 2012 decreased $5 million compared to the same period in 2011. The decrease primarily reflected higher capitalized interest for the Gulf Coast Project partially offset by reduced capitalized interest for the Company–s investment in Bruce Power as a result of placing refurbished units in service.
Comparable Interest Income and Other of $20 million for the three months ended December 31, 2012 increased $12 million compared to the same period in 2011. The increase in fourth quarter reflected realized gains in 2012 compared to losses in 2011 on derivatives used to manage the Company–s net exposure to foreign exchange rate fluctuations on U.S. dollar-denominated income.
Segmented Information
Contacts:
TransCanada
Media Enquiries:
Shawn Howard/Grady Semmens
403.920.7859 or 800.608.7859
TransCanada
Investor & Analyst Enquiries:
David Moneta/Lee Evans
403.920.7911 or 800.361.6522