TransCanada Reports 10 Per Cent Increase in Comparable Earnings for 2007
Common Share Dividend Increased by Six Per Cent
CALGARY, ALBERTA--(Marketwire - Jan. 29, 2008) - TransCanada Corporation (TSX:TRP) (NYSE:TRP)
Fourth Quarter and Year-End 2007 Highlights
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
- Net income for fourth quarter 2007 of $377 million ($0.70 per share), an increase of approximately 27 per cent on a per share basis compared to 2006
- Comparable earnings for fourth quarter 2007 of $307 million ($0.57 per share), an increase of approximately eight per cent on a per share basis compared to 2006
- Net income for the year ended December 31, 2007 of $1.223 billion ($2.31 per share), an increase of approximately five per cent on a per share basis compared to 2006
- Comparable earnings for the year ended December 31, 2007 of $1.107 billion ($2.09 per share), an increase of approximately 10 per cent on a per share basis compared to 2006
- Funds generated from operations for fourth quarter and year ended December 31, 2007 of $741 million and $2.621 billion, an increase of approximately 12 and 10 per cent respectively
- Dividend of $0.36 per common share declared by the Board of Directors, an increase of six per cent
"TransCanada's strong financial performance in the fourth quarter and throughout 2007 is a result of solid contributions from our existing assets and the growing cash flow and earnings from newly acquired and developed assets such as the ANR pipeline system and the Edson gas storage facility in Alberta," said Hal Kvisle, TransCanada president and chief executive officer. "Our strong financial performance in 2007 has enabled our Board of Directors to increase the quarterly dividend on the company's common shares by six per cent to $0.36 per share."
"We are pleased with TransCanada's advancements of our pipeline and energy projects in 2007. Significant milestones in the fourth quarter included certain regulatory approvals for our Keystone pipeline project, the announcement of an expansion of the Alberta System and the installation of the sixteenth and final new steam generator at the Bruce A power plant. It is through advancement of large-scale infrastructure initiatives such as these that we expect to generate strong long-term financial returns for our shareholders," added Mr. Kvisle.
TransCanada Corporation (TransCanada or the Company) reported net income for fourth quarter 2007 of $377 million ($0.70 per share) compared to $269 million ($0.55 per share) for fourth quarter 2006.
Comparable earnings were $307 million ($0.57 per share) for fourth quarter 2007 compared to $257 million ($0.53 per share) in fourth quarter 2006. The $50 million ($0.04 per share) increase was due to higher contributions from the Pipelines business reflecting additional income earned from the acquisition of American Natural Resources Company and the ANR Storage Company (collectively, ANR), higher earnings as a result of rate settlements for both the Canadian Mainline and the Gas Transmission Northwest System and lower operating costs on the Alberta System. Comparable earnings were lower in the Energy business primarily due to the impact of lower realized power prices in Alberta and lower contributions from Bruce Power. Comparable earnings in fourth quarter 2007 excluded $56 million of favourable income tax adjustments resulting from changes in Canadian federal income tax legislation and a $14 million gain on sale of land, and in fourth quarter 2006, excluded $12 million of income tax refunds.
Net income and net income from continuing operations (net earnings) was $1.223 billion ($2.31 per share) for the year ended December 31, 2007 compared to net income of $1.079 billion ($2.21 per share), and net earnings of $1.051 billion ($2.15 per share) for 2006.
Comparable earnings for the year ended December 31, 2007 were $1.107 billion ($2.09 per share), compared to $925 million ($1.90 per share) for 2006. The $182 million ($0.19 per share) increase was primarily due to additional income earned from the acquisition of ANR, higher earnings from the Canadian Mainline and the start-up in late 2006 of the Becancour and Edson facilities. Partially offsetting these increases was a lower contribution from Bruce Power. Comparable earnings for the year ended December 31, 2007 excluded positive income tax adjustments of $102 million and the $14 million gain on sale of land. Comparable earnings for the year ended December 31, 2006, excluded $95 million in favourable income tax adjustments, an $18 million bankruptcy settlement with Mirant Corporation and certain of its subsidiaries, and a $13 million gain on the sale of TransCanada's interest in Northern Border Partners, L.P.
Net cash provided by operations in fourth quarter 2007 was $695 million compared to $493 million for the same period in 2006. Net cash provided by operations for the year ended December 31, 2007 was $2.836 billion compared to $2.075 billion for the same period in 2006. The increase in net cash provided by operations was primarily due to an increase in funds generated from operations and a decrease in operating working capital.
Funds generated from operations were $741 million and $2.621 billion for the quarter and year ended December 31, 2007, an increase of $81 million and $243 million, respectively, when compared to the same periods in 2006.
Notable recent developments in Pipelines, Energy and Corporate include:
Pipelines
- On January 11, 2008, TransCanada received the Final Environmental Impact Statement (FEIS) from the U.S. Department of State regarding the Keystone oil pipeline project (Keystone) stating the pipeline would result in limited adverse impacts. A decision is anticipated mid-February 2008 regarding Keystone's application for a Presidential Permit authorizing the construction and operation of the facilities at the U.S./Canada border crossing. Construction and material supply contracts totaling approximately $3.0 billion have been awarded for pipe, tanks, pumps and related materials, and engineering and construction management services. Receipt and stockpiling of line pipe has begun and construction activities are scheduled to commence February 2008.
- On January 22, ConocoPhillips and TransCanada announced that ConocoPhillips acquired a 50 per cent ownership interest in the Keystone oil pipeline project. A previously signed Memorandum of Understanding committed ConocoPhillips to ship crude oil on the pipeline and gave the right to acquire up to 50 per cent ownership interest. Affiliates of TransCanada will be responsible for constructing and operating the 3,456-kilometre (2,148-mile) Keystone Pipeline.
- On November 1, 2007, the Gas Transmission Northwest System filed a Stipulation and Agreement with the Federal Energy Regulatory Commission (FERC) comprised of an uncontested settlement of all aspects of its 2006 General Rate Case. On January 7, 2008, the FERC issued an order approving the settlement. The settlement rates are effective retroactive to January 1, 2007.
- In November 2007, a non-routine application was filed with the Alberta Energy and Utilities Board (EUB) for a North Central Corridor pipeline expansion of the Alberta System. The project will provide capacity needed to address increasing gas supply in northwest Alberta, declining gas supply in northeast Alberta, growing intra-Alberta markets resulting largely from increased oil sands development and reduced delivery capability to interconnecting pipelines at the Alberta-Saskatchewan border. The estimated cost of this project is $983 million with construction expected to begin late 2008, subject to regulatory approval. The project is expected to be completed in two stages with the first stage completed in April 2009 and the second in April 2010.
- On November 30, 2007, TransCanada submitted an application for license to construct the Alaska Pipeline project under the Alaska Gasline Inducement Act (AGIA). On January 4, 2008, the State of Alaska announced that TransCanada had submitted a complete AGIA application and would be advancing to the Public Comment stage. No other applicant met all the AGIA requirements. If approved by the Administration and the Legislature, TransCanada could be granted the AGIA License later this year.
- In November 2007, Trans Quebec & Maritimes (TQM) filed an application with the National Energy Board (NEB) for approval of a three-year partial negotiated settlement, concerning all matters except cost of capital, with interested parties for the years 2007 to 2009. In December 2007, TQM filed a cost of capital application for the years 2007 and 2008. The application requests approval of an 11 per cent return on 40 per cent deemed common equity. TQM's rates currently reflect the NEB return on equity (ROE) formula on 30 per cent deemed common equity. The cost of capital hearing is expected to commence on September 23, 2008.
- Portland Natural Gas Transmission System (PNGTS) and the Gas Transmission Northwest System reached agreement with Calpine Corporation for allowed unsecured claims in the Calpine bankruptcy of US$125 million and US$192.5 million, respectively. These claims are expected to be settled in first quarter 2008 when creditors are expected to receive shares in the re-organized Calpine. These shares will be subject to market price moves as the new Calpine shares begin to trade in the market. Claims for Nova Gas Transmission Ltd. and Foothills Pipe Lines (South B.C.) Ltd. for $31.6 million and $44.4 million, respectively, were both received in January 2008 and are for the benefit of the shippers.
Energy
- In January 2008, a milestone in the Bruce A Units 1 and 2 restart and refurbishment project was completed when the sixteenth and final new steam generator was installed. With the completion of this stage of the project, the authorized funding for Units 1 and 2 has been increased from $2.75 billion to approximately $3.0 billion. Bruce Power is currently preparing a comprehensive estimate of the cost to complete the Unit 1 and 2 restart. This process is expected to result in a further increase in the total project cost. Project cost increases are subject to the capital cost risk and reward sharing mechanism under the agreement with the Ontario Power Authority. Bruce A Units 1 and 2 are expected to produce an additional 1,500 megawatts (MW) when completed in 2010.
- Broadwater Energy, LLC achieved another major milestone on January 11, 2008 as the FERC issued its FEIS for the Broadwater project, the proposed offshore liquefied natural gas (LNG) facility in Long Island Sound, New York. FERC has reaffirmed its conclusions that Broadwater is an environmentally responsible way to meet the region's natural gas needs in the coming years, given the alternatives. This includes consideration of the project's purpose and need and the environmental impacts associated with the location, design, and construction methods of the alternatives. The New York State Department of State is expected to release a decision on the Coastal Zone Management Act in first quarter 2008.
- The second phase of the Cartier Wind project, the 100.5 MW Anse-a-Valleau wind farm, was placed into service in November 2007. In addition, Cartier Wind began construction of its third phase of the project, the 109.5 MW Carleton wind farm.
- On January 15, 2008, Maine's Land Use Regulatory Commission Hearing approved a Land Use Permit for the Kibby Wind power project, a proposed wind farm along Kibby Mountain and Kibby Range in the Boundary Mountains of Maine. The Kibby Wind power project includes 44 wind turbines and is expected to produce approximately 132 MW of electricity. Subject to receipt of U.S. federal and state approvals, construction of the new facilities could begin in early 2008.
- In November 2007, TransCanada entered into an agreement with Hydro-Quebec to temporarily suspend all electricity generation from the Becancour power plant during 2008. The agreement, which was requested by Hydro-Quebec as a result of their excess electricity supply, was approved by Quebec's Regie de l'energie in December 2007. The agreement also provides Hydro-Quebec the option to extend the temporary suspension to 2009. TransCanada will receive payments under the agreement similar to those that would have been received under normal course operation.
Fourth Quarter and Year End 2007 Financial Highlights
Operating Results Three months ended Year ended
(unaudited) December 31 December 31
(millions of dollars) 2007 2006 2007 2006
----------------------------------------------------------------------------
Revenues 2,189 2,091 8,828 7,520
Net Income
Continuing operations 377 269 1,223 1,051
Discontinued operations - - - 28
---------------------------------------------
377 269 1,223 1,079
---------------------------------------------
---------------------------------------------
Comparable Earnings (1) 307 257 1,107 925
---------------------------------------------
---------------------------------------------
Cash Flows
Funds generated from operations (1) 741 660 2,621 2,378
(Increase)/decrease in operating
working capital (46) (167) 215 (303)
---------------------------------------------
Net cash provided by operations 695 493 2,836 2,075
---------------------------------------------
---------------------------------------------
Capital Expenditures 595 570 1,651 1,572
Acquisitions, Net of Cash Acquired 1 112 4,223 470
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Three months ended Year ended
December 31 December 31
Common Share Statistics 2007 2006 2007 2006
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Net Income Per Share - Basic
Continuing operations $0.70 $0.55 $2.31 $2.15
Discontinued operations - - - 0.06
---------------------------------------------
$0.70 $0.55 $2.31 $2.21
---------------------------------------------
---------------------------------------------
Comparable Earnings Per Share -
Basic (1) $0.57 $0.53 $2.09 $1.90
Dividends Declared Per Share $0.34 $0.32 $1.36 $1.28
Basic Common Shares Outstanding
(millions)
Average for the period 539 489 530 488
End of period 540 489 540 489
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(1) For a further discussion of comparable earnings, funds generated from
operations and comparable earnings per share, refer to the Non-GAAP
Measures section in this News Release.
Forward-Looking Information
This news release may contain certain information that is forward-looking and is subject to important risks and uncertainties. The words "anticipate", "expect", "may", "should", "estimate", "project", "outlook", "forecast" or other similar words are used to identify such forward looking information. All forward-looking statements are based on TransCanada's beliefs and assumptions based on information available at the time such statements were made. The results or events predicted in this information may differ from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of TransCanada to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, regulatory decisions, changes in environmental and other laws and regulations, competitive factors in the pipeline and energy industry sectors, construction and completion of capital projects, access to capital markets, interest and currency exchange rates, technological developments and the current economic conditions in North America. By its nature, such forward-looking information is subject to various risks and uncertainties which could cause TransCanada's actual results and experience to differ materially from the anticipated results or other expectations expressed. For additional information on these and other factors, see the reports filed by TransCanada with Canadian securities regulators and with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this news release or otherwise, and TransCanada undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
Non-GAAP Measures
TransCanada uses the measures "comparable earnings", "comparable earnings per share" "funds generated from operations" and "operating income" in this news release. These measures do not have any standardized meaning prescribed by generally accepted accounting principles (GAAP) and are therefore considered to be non-GAAP measures. These measures are unlikely to be comparable to similar measures presented by other entities. These measures have been used to provide readers with additional information on TransCanada's operating performance, liquidity and its ability to generate funds to finance its operations. These measures are used by Management to increase comparability of financial results between reporting periods and to enhance its understanding of operating performance, liquidity and ability to generate funds to finance operations.
Comparable earnings is comprised of net income from continuing operations adjusted for specific items that are significant and not typical of the Company's operations. The identification of specific items is subjective and management uses judgement in determining the items to be excluded in calculating comparable earnings. Specific items may include, but are not limited to, certain income tax refunds and adjustments, gains or losses on sales of assets, legal settlements and bankruptcy settlements received from former customers. A reconciliation of comparable earnings to net income is presented in the Consolidated Results of Operation section in this news release. Comparable earnings per share is calculated by dividing comparable earnings by the weighted average number of shares outstanding for the period.
Funds generated from operations is comprised of net cash provided by operations before changes in operating working capital. A reconciliation of funds generated from operations to net cash provided by operations is presented in the Fourth Quarter and year-end 2007 Financial Highlights chart in this news release.
Operating income is used in the Energy segment and is comprised of revenues less operating expenses as shown on the consolidated income statement. A reconciliation of operating income to net earnings is presented in the Energy section in this News Release.
Consolidated Results of Operations
Reconciliation of Comparable Earnings
to Net Income
(unaudited) Three months ended Year ended
(millions of dollars except December 31 December 31
per share amounts) 2007 2006 2007 2006
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Pipelines
Comparable earnings 202 126 686 529
Specific items:
Bankruptcy settlement with Mirant - - - 18
Gain on sale of Northern Border
Partners, L.P. interest - - - 13
---------------------------------------------
Net earnings 202 126 686 560
---------------------------------------------
Energy
Comparable earnings 114 132 466 429
Specific items:
Income tax reassessments and
adjustments 30 - 34 23
Gain on sale of land 14 - 14 -
---------------------------------------------
Net earnings 158 132 514 452
---------------------------------------------
Corporate
Comparable expenses (9) (1) (45) (33)
Specific item:
Income tax reassessments and
adjustments 26 12 68 72
---------------------------------------------
Net earnings 17 11 23 39
---------------------------------------------
Net Income
Continuing operations (1) 377 269 1,223 1,051
Discontinued operations - - - 28
---------------------------------------------
Net Income 377 269 1,223 1,079
---------------------------------------------
---------------------------------------------
Net Income Per Share
Continuing operations(2) $0.70 $0.55 $2.31 $2.15
Discontinued operations - - - 0.06
---------------------------------------------
Basic $0.70 $0.55 $2.31 $2.21
---------------------------------------------
---------------------------------------------
Diluted $0.70 $0.54 $2.30 $2.20
---------------------------------------------
---------------------------------------------
(1) Comparable Earnings 307 257 1,107 925
Specific items (net of tax, where
applicable):
Income tax reassessments and
adjustments 56 12 102 95
Gain on sale of land 14 - 14 -
Bankruptcy settlement with Mirant - - - 18
Gain on sale of Northern Border
Partners, L.P. interest - - - 13
---------------------------------------------
Net Income from Continuing
Operations 377 269 1,223 1,051
---------------------------------------------
---------------------------------------------
(2) Comparable Earnings Per Share $0.57 $0.53 $2.09 $1.90
Specific items - per share
Income tax reassessments and
adjustments 0.10 0.02 0.19 0.18
Gain on sale of land 0.03 - 0.03 -
Bankruptcy settlement with Mirant - - - 0.04
Gain on sale of Northern Border
Partners, L.P. interest - - - 0.03
---------------------------------------------
Net Income Per Share from
Continuing Operations $0.70 $0.55 $2.31 $2.15
---------------------------------------------
---------------------------------------------
TransCanada's net income and net earnings in fourth quarter 2007 were $377 million or $0.70 per share compared to $269 million or $0.55 per share in fourth quarter 2006, an increase of $108 million or $0.15 per share. This increase reflects the impact of favourable income tax adjustments of $56 million in fourth quarter 2007 as a result of changes in Canadian federal income tax legislation, compared to income tax refunds and related interest of $12 million in fourth quarter 2006. The increase is also due to additional earnings from the acquisition of ANR in February 2007 and the start up of the Edson facility in December 2006, the positive impact of the settlements for both the Gas Transmission Northwest System and the Canadian Mainline, a $14-million after-tax ($16 million pre-tax) gain on the sale of land and lower operating costs on the Alberta System. Lower realized power prices in Alberta and a lower contribution from Bruce Power partially offset these increases to net earnings in fourth quarter 2007 compared to fourth quarter 2006. On a per share basis, net income in fourth quarter 2007 increased $0.15 per share compared to fourth quarter 2006, even though the Company had an increased number of shares outstanding following the Company's share issuances in 2007.
Comparable earnings for fourth quarter 2007 were $307 million or $0.57 per share, compared to $257 million or $0.53 per share for the same period in 2006. Comparable earnings excluded the above-mentioned $56-million and $12-million positive income tax adjustments in fourth quarter 2007 and 2006, respectively, as well as the $14-million gain on sale of land in fourth quarter 2007.
Net income was $1,223 million or $2.31 per share for the year ended December 31, 2007, compared to net income of $1,079 million or $2.21 per share for the same period in 2006. Net income for the year ended December 31, 2006 included net income from discontinued operations of $28 million or $0.06 per share, reflecting bankruptcy settlements with Mirant related to TransCanada's Gas Marketing business divested in 2001.
Net earnings were $1,223 million or $2.31 per share for the year ended December 31, 2007 compared to $1,051 million or $2.15 per share for the same period in 2006. The increase in net earnings for the year ended December 31, 2007 compared to the same period in 2006 is primarily due to additional earnings from the acquisition of ANR and the first full year of earnings in 2007 from both the Becancour and Edson facilities, the positive impact of the settlements for both the Gas Transmission Northwest System and the Canadian Mainline and the $14-million gain on the sale of land. A lower contribution from Bruce Power partially offset these increases in net earnings for the year ended December 31, 2007 compared to the same period in 2006. The increase in net earnings also reflects the impact of favourable income tax adjustments of $102 million in 2007 compared to favourable income tax adjustments of $95 million in 2006. In addition, net earnings in 2006 included an $18-million after-tax ($29 million pre-tax) bankruptcy settlement with Mirant and a $13-million after-tax ($23 million pre-tax) gain on the sale of TransCanada's general partner interest in Northern Border Partners, L.P. On a per share basis, net earnings for 2007 increased $0.16 per share compared to 2006, even though the Company had an increased number of shares outstanding following the Company's share issuances in 2007.
Comparable earnings for the year ended December 31, 2007 were $1,107 million or $2.09 per share, compared to $925 million or $1.90 per share for the same period in 2006. Comparable earnings for the year ended December 31, 2007 excluded the positive income tax adjustments of $102 million and the $14-million after-tax gain on sale of land. Comparable earnings for the year ended December 31, 2006, excluded the $95-million favourable income tax adjustments, the $18-million bankruptcy settlement with Mirant and the $13-million gain on the sale of TransCanada's interest in Northern Border Partners, L.P.
Results from each business segment for the three months and year ended December 31, 2007 are discussed further in the Pipelines, Energy and Corporate sections of this news release.
Funds generated from operations of $741 million and $2,621 million for the three months and year ended December 31, 2007, respectively, increased $81 million and $243 million, respectively, compared to the same periods in 2006.
Pipelines
The Pipelines business generated net earnings and comparable earnings of $202 million in fourth quarter 2007, an increase of $76 million compared to $126 million in fourth quarter 2006.
Net earnings for the year ended December 31, 2007 were $686 million compared to $560 million in 2006. Excluding the $18-million Mirant settlement in first quarter 2006 and the $13-million gain on the sale of TransCanada's interest in Northern Border Partner's L.P. in second quarter 2006, comparable earnings increased $157 million compared to 2006.
Pipelines Results-at-a-Glance Three months ended Year ended
(unaudited) December 31 December 31
(millions of dollars) 2007 2006 2007 2006
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Wholly Owned Pipelines
Canadian Mainline 72 60 273 239
Alberta System 41 34 138 136
ANR (1) 35 104
GTN 32 7 58 46
Foothills (2) 6 6 26 27
---------------------------------------------
186 107 599 448
---------------------------------------------
Other Pipelines
Great Lakes (3) 11 11 47 44
Iroquois 4 4 15 15
Portland 4 3 11 13
TC PipeLines LP (4) 4 1 18 4
Ventures LP 2 3 11 12
TQM 1 2 6 7
TransGas 5 3 15 11
Gas Pacifico/INNERGY 1 3 3 8
Tamazunchale (5) 3 2 10 2
Northern Development (4) (2) (7) (5)
General, administrative, support costs
and other (15) (11) (42) (30)
---------------------------------------------
16 19 87 81
---------------------------------------------
Comparable Earnings 202 126 686 529
Bankruptcy settlement with Mirant - - - 18
Gain on sale of Northern Border
Partners, L.P. interest - - - 13
---------------------------------------------
Net Earnings 202 126 686 560
---------------------------------------------
---------------------------------------------
(1) ANR's results include operations since February 22, 2007.
(2) Foothills' results reflect the combined operations of Foothills and the
BC System. Effective April 1, 2007, Foothills and BC System were
integrated.
(3) Great Lakes' results reflect TransCanada's 53.55 per cent ownership in
Great Lakes since February 22, 2007 and 50 per cent ownership prior to
that date.
(4) TC PipeLines, LP's results include TransCanada's effective ownership of
an additional 15 per cent in Great Lakes as a result of TransCanada's
32.1 per cent interest in TC PipeLines, LP since February 22, 2007, as
well as an additional 20 per cent ownership of Northern Border and
an additional 49 per cent ownership of Tuscarora since April 6, 2006
and December 19, 2006, respectively.
(5) Tamazunchale's results include operations since December 1, 2006.
Wholly Owned Pipelines
Canadian Mainline's net earnings increased $12 million and $34 million for the three months and year ended December 31, 2007, respectively, compared to the corresponding periods in 2006. These increases reflect the impact of a five-year tolls settlement (the Settlement) on the Canadian Mainline, effective January 1, 2007 to December 31, 2011. The Settlement with interested stakeholders was approved by the NEB in May 2007 and included an increase in the deemed common equity ratio from 36 per cent to 40 per cent. In addition to the positive impact of the increase in deemed common equity ratio in the Settlement, Canadian Mainline's net earnings increased due to certain performance-based incentive arrangements and operations, maintenance and administrative (OM&A) cost savings. Partially offsetting these increases were the negative impacts of a lower allowed ROE of 8.46 per cent in 2007 (8.88 per cent in 2006) and a lower average investment base.
Alberta System's net earnings of $41 million in fourth quarter 2007 increased $7 million compared to $34 million in the same quarter of 2006. Net earnings for the year ended December 31, 2007 of $138 million increased $2 million compared to 2006. These increases were mainly due to OM&A cost savings, partially offset by a lower investment base as well as a lower allowed ROE in 2007. Earnings in 2007 reflect an ROE of 8.51 per cent compared to 8.93 per cent in 2006, both on deemed common equity of 35 per cent.
For the three months ended December 31, 2007 and the period from acquisition to December 31, 2007, ANR's net earnings were $35 million and $104 million, respectively, in line with the Company's expectations. TransCanada completed the acquisition of ANR on February 22, 2007 and included its net earnings from this date. ANR's revenues are primarily derived from its interstate natural gas transmission, storage, gathering and related services. Due to the seasonal nature of the business, ANR's volumes, revenues and net earnings are generally expected to be higher in the winter months.
GTN's comparable earnings for the three months and year ended December 31, 2007, increased $25 million and $12 million, respectively, compared to the same periods in 2006 primarily due to the positive impact of a rate case settlement included in fourth quarter 2007. In fourth quarter 2007, GTN recorded the full year impact for the rate case settlement upon approval by the FERC in January 2008. GTN's 2007 financial results had reflected revenues based on 2006 rates for transportation service. The positive impact of the rate case settlement on net earnings was partially offset by the impact of lower long-term firm contracted volumes and a weaker U.S. dollar in 2007. In addition, comparable earnings in 2007 was negatively impacted by a higher provision taken in 2007 for non-payment of contract revenues from a subsidiary of Calpine Corporation that filed for bankruptcy protection.
Operating Statistics
Gas
Transmission
Year ended Canadian Alberta Northwest
December 31 Mainline(1) System(2) ANR(3)(4) System(3) Foothills(5)
(unaudited) 2007 2006 2007 2006 2007 2007 2006 2007 2006
----------------------------------------------------------------------------
Average
investment
base
($ millions) 7,292 7,459 4,224 4,287 n/a n/a n/a 818 850
Delivery
volumes (Bcf)
Total 3,183 2,955 4,020 4,051 1,210 827 790 1,441 1,403
Average
per day 8.7 8.1 11.0 11.1 3.8 2.3 2.2 3.9 3.8
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(1) Canadian Mainline deliveries originating at the Alberta border and in
Saskatchewan for the year ended December 31, 2007 were 2,199 Bcf (2006 -
2,224 Bcf); average per day was 6.0 Bcf (2006 - 6.1 Bcf).
(2) Field receipt volumes for the Alberta System for the year ended December
31, 2007 were 4,047 Bcf (2006 - 4,160 Bcf); average per day was 11.1 Bcf
(2006 - 11.4 Bcf).
(3) ANR and the Gas Transmission Northwest System results are not impacted
by current average investment base as these systems operate under a
fixed rate model approved by the FERC.
(4) ANR includes results of pipeline operations since February 22, 2007.
(5) Foothills reflects the combined operations of Foothills and the BC
System. Effective April 1, 2007, Foothills and BC System were
integrated.
Other Pipelines
TransCanada's proportionate share of net earnings from Other Pipelines was $16 million for the three months ended December 31, 2007 compared to $19 million for the same period in 2006. Increased earnings from TC PipeLines, LP, primarily due to TransCanada's increased partnership interest and TC PipeLines, LP's acquisition of an additional 46.45 per cent interest in Great Lakes, were more than offset by the impact of higher project development and support costs associated with growing the Pipelines business.
Other Pipelines' comparable earnings for the year ended December 31, 2007 were $87 million compared to $81 million in the corresponding period in 2006. Earnings increased due to higher earnings for TC PipeLines, LP, primarily due to TransCanada's increased partnership interest and TC PipeLines, LP's Great Lakes and Northern Border acquisitions in February 2007 and April 2006, respectively. Earnings also increased due to earnings from the Tamazunchale pipeline, which commenced commercial operations in December 2006. These increases were partially offset by higher project development and support costs associated with growing the Pipelines business and a weaker U.S. dollar.
As at December 31, 2007, TransCanada had advanced $137 million to the Aboriginal Pipeline Group with respect to the Mackenzie Gas Pipeline Project (MGP). TransCanada and its co-venturers on the MGP continue to pursue the development of the project, focusing on the regulatory process and discussions with the Canadian federal government on fiscal framework. Project timing is uncertain and is conditional upon regulatory and fiscal matters. TransCanada's ability to recover its investment remains dependent on the successful outcome of the project.
Energy
Energy's net earnings of $158 million in fourth quarter 2007 increased $26 million compared to $132 million in fourth quarter 2006. Excluding $30 million of positive income tax adjustments as a result of changes in Canadian federal income tax legislation and the $14 million after-tax ($16 million pre-tax) gain on sale of land previously held for power development in Ontario, comparable earnings of $114 million decreased $18 million in fourth quarter 2007.
Energy's net earnings for the year ended December 31, 2007 of $514 million increased $62 million compared to $452 million for the same period in 2006. Excluding the $34 million and $23 million of income tax adjustments in 2007 and 2006, respectively, and the $14 million gain on sale of land in 2007, Energy's comparable earnings for the year ended December 31, 2007 increased $37 million to $466 million.
Energy Results-at-a-Glance Three months ended Year ended
(unaudited) December 31 December 31
(millions of dollars) 2007 2006 2007 2006
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Bruce Power 43 59 167 235
Western Power Operations 58 109 308 297
Eastern Power Operations 66 55 255 187
Natural Gas Storage 57 30 146 93
General, administrative, support costs
and other (45) (44) (158) (144)
---------------------------------------------
Operating income 179 209 718 668
Financial charges (6) (6) (22) (23)
Interest income and other 2 - 10 5
Income taxes (61) (71) (240) (221)
---------------------------------------------
Comparable Earnings 114 132 466 429
Gain on sale of land 14 - 14 -
Income tax adjustments 30 - 34 23
---------------------------------------------
Net Earnings 158 132 514 452
---------------------------------------------
---------------------------------------------
Bruce Power
Three months ended Year ended
Bruce Power Results-at-a-Glance December 31 December 31
(unaudited) 2007 2006 2007 2006
----------------------------------------------------------------------------
Bruce Power (100 per cent basis)
(millions of dollars)
Revenues
Power 493 465 1,920 1,861
Other (1) 28 28 113 71
---------------------------------------------
521 493 2,033 1,932
---------------------------------------------
Operating expenses
Operations and maintenance(2) (258) (256) (1,051) (912)
Fuel (28) (28) (104) (96)
Supplemental rent(2) (42) (43) (170) (170)
Depreciation and amortization (36) (35) (151) (134)
---------------------------------------------
(364) (362) (1,476) (1,312)
---------------------------------------------
Operating Income 157 131 557 620
---------------------------------------------
TransCanada's proportionate
share - Bruce A (5) 42 24 91
TransCanada's proportionate
share - Bruce B 53 16 161 137
---------------------------------------------
TransCanada's proportionate
share 48 58 185 228
Adjustments (5) 1 (18) 7
---------------------------------------------
TransCanada's operating income
from Bruce Power 43 59 167 235
---------------------------------------------
---------------------------------------------
Bruce Power - Other Information
Plant availability
Bruce A 68% 97% 78% 81%
Bruce B 93% 85% 89% 91%
Combined Bruce Power 86% 89% 86% 88%
Planned outage days
Bruce A 46 - 121 81
Bruce B 13 43 93 65
Unplanned outage days
Bruce A 6 2 17 37
Bruce B 3 10 32 31
Sales volumes (GWh) (3)
Bruce A - 100 per cent 2,250 3,210 10,180 10,650
TransCanada's proportionate
share 1,096 1,564 4,959 5,158
Bruce B - 100 per cent 6,670 6,030 25,290 25,820
TransCanada's proportionate
share 2,108 1,905 7,992 8,159
Combined Bruce Power - 100 per
cent 8,920 9,240 35,470 36,470
TransCanada's proportionate
share 3,204 3,469 12,951 13,317
Results per MWh (4)
Bruce A power revenues $60 $59 $59 $58
Bruce B power revenues $54 $46 $52 $48
Combined Bruce Power revenues $56 $50 $55 $51
Combined Bruce Power fuel $ 3 $ 3 $ 3 $ 3
Combined Bruce Power operating
expenses(5) $40 $38 $41 $35
Percentage of output sold to
spot market 44% 30% 45% 35%
---------------------------------------------
---------------------------------------------
(1) Includes fuel cost recoveries for Bruce A of $10 million and $35 million
for the three months and year ended December 31, 2007, respectively ($11
million and $30 million for the three months and year ended December 31,
2006, respectively). Includes changes in fair value of held-for-trading
derivatives of $11 million and $47 million for the three months and year
ended December 31, 2007, respectively
(nil for each of the three months and year ended December 31, 2006).
(2) Includes adjustments to eliminate the effects of inter-partnership
transactions between Bruce A and Bruce B.
(3) Gigawatt hours.
(4) Megawatt hours.
(5) Net of fuel cost recoveries.
TransCanada's operating income of $43 million from its combined investment in Bruce Power decreased $16 million in fourth quarter 2007 compared to fourth quarter 2006. TransCanada's proportionate share of operating income in Bruce B increased $37 million to $53 million in fourth quarter 2007 due to the positive impact of higher realized prices, higher generation volumes and lower operating costs as a result of fewer planned outage days in fourth quarter 2007 compared to the same period in 2006. TransCanada's proportionate share of operating income in Bruce A decreased by $47 million from $42 million in fourth quarter 2006 primarily due to lower generation volumes and higher operating costs related to the significant increase in planned outage days in fourth quarter 2007 compared to fourth quarter 2006. Higher post-employment benefit costs and lower positive purchase price amortizations related to the expiry of power sales agreements also contributed to the decrease in TransCanada's operating income from its combined investment in Bruce Power in fourth quarter 2007 compared to the same period in 2006.
TransCanada's share of Bruce Power's generation for fourth quarter 2007 decreased 265 GWh to 3,204 GWh, compared to 3,469 GWh in fourth quarter 2006, as a result of an increase in planned maintenance outage days at Bruce A in fourth quarter 2007. Bruce B power prices achieved during fourth quarter 2007 were $54 per MWh compared to $46 per MWh in fourth quarter 2006, primarily due to higher spot market prices in Ontario. Bruce A power prices were consistent with 2007 due to the contracted fixed price. Bruce Power's combined operating expenses (net of fuel cost recoveries) in fourth quarter 2007 increased to $40 per MWh from $38 per MWh in fourth quarter 2006 primarily due to lower combined output.
TransCanada's operating income from its investment in Bruce Power for the year ended December 31, 2007 was $167 million compared to $235 million for the same period in 2006. TransCanada's proportionate share of operating income in Bruce B increased $24 million to $161 million for the year ended December 31, 2007 primarily due to higher realized power prices, partially offset by higher operating costs associated with an increase in planned outage days in 2007, compared to 2006. TransCanada's proportionate share of operating income in Bruce A decreased $67 million to $24 million for the year ended December 31, 2007 primarily due to lower output and higher operating costs associated with an increase in planned outage days in 2007 compared to 2006. Higher post-employment benefit costs and lower positive purchase price amortizations related to the expiry of power sales agreements also contributed to the decrease in TransCanada's operating income from its combined investment in Bruce Power for the year ended December 31, 2007 compared to 2006.
The overall plant availability percentage in 2008 is expected to be in the low 90s for the four Bruce B units and in the low 80s for the two operating Bruce A units. A planned outage for Bruce B Unit 7 started at the end of January 2008 and is expected to be completed in March 2008. A planned maintenance outage for Bruce B Unit 5 is scheduled for early May 2008 and is expected to be completed in late second quarter 2008. Bruce A Unit 4 has a one-month outage scheduled to start late March 2008. A two-month outage scheduled for Bruce A Unit 3 is expected to commence mid-September 2008.
Income from Bruce B is directly impacted by the fluctuations in wholesale spot market prices for electricity. Net earnings from both Bruce A and Bruce B units are impacted by overall plant availability, which in turn is impacted by scheduled and unscheduled maintenance. As a result of a contract with the Ontario Power Authority (OPA), all of the output from Bruce A in fourth quarter 2007 was sold at a fixed price of $59.69 per MWh (before recovery of fuel costs from the OPA) compared to $58.63 per MWh for fourth quarter 2006. Sales from the Bruce B Units 5 to 8 were subject to a floor price of $46.82 per MWh in fourth quarter 2007 and $45.99 per MWh in fourth quarter 2006. Both the Bruce A and Bruce B reference prices are adjusted annually for inflation on April 1. Payments received pursuant to the Bruce B floor price mechanism are subject to a recapture payment dependent on annual spot prices over the term of the contract. Bruce B net earnings do not include any amounts received under this floor price mechanism to date. To further reduce its exposure to spot market prices, Bruce B has entered into fixed price sales contracts to sell forward approximately 10,200 GWh for 2008.
As at December 31, 2007, Bruce A had incurred capital costs of $1.9 billion with respect to the revised restart and refurbishment of Units 1 and 2, and additional costs of $0.2 billion with respect to Units 3 and 4.
Western Power Operations
Western Power Operations Results-at-a-Glance
Three months ended Year ended
(unaudited) December 31 December 31
(millions of dollars) 2007 2006 2007 2006
----------------------------------------------------------------------------
Revenues
Power 245 378 1,045 1,185
Other (1) 18 35 89 169
---------------------------------------------
263 413 1,134 1,354
---------------------------------------------
Commodity purchases resold
Power (154) (233) (608) (767)
Other (2) (12) (32) (65) (135)
---------------------------------------------
(166) (265) (673) (902)
---------------------------------------------
Plant operating costs and other (35) (35) (135) (135)
Depreciation (4) (4) (18) (20)
---------------------------------------------
Operating income 58 109 308 297
---------------------------------------------
---------------------------------------------
(1) Other revenue includes natural gas sold and Cancarb Thermax.
(2) Other commodity purchases resold includes the cost of natural gas sold.
Western Power Operations Sales Volumes
Three months ended Year ended
(unaudited) December 31 December 31
(GWh) 2007 2006 2007 2006
----------------------------------------------------------------------------
Supply
Generation 471 637 2,154 2,259
Purchased
Sundance A & B and Sheerness
PPAs 3,209 3,192 12,199 12,712
Other purchases 206 445 1,433 1,905
---------------------------------------------
3,886 4,274 15,786 16,876
---------------------------------------------
---------------------------------------------
Sales
Contracted 2,644 3,514 11,998 12,750
Spot 1,242 760 3,788 4,126
---------------------------------------------
3,886 4,274 15,786 16,876
---------------------------------------------
---------------------------------------------
Western Power Operations' operating income of $58 million in fourth quarter 2007 decreased $51 million compared to $109 million in fourth quarter 2006. This decrease was primarily due to lower overall realized power prices and lower market heat rates on higher uncontracted volumes of power sold, partially offset by lower power purchase arrangement (PPA) costs. Average spot market power prices in Alberta decreased 47 per cent, or $55 per MWh, in fourth quarter 2007 compared to fourth quarter 2006. The power price decrease was also the main contributor to an approximate 43 per cent decrease in market heat rates, partially offset by an 11 per cent, or $0.73 per gigajoule (GJ), decrease in average spot market natural gas prices in Alberta in fourth quarter 2007 compared to the same quarter in 2006. The market heat rate is determined by dividing the average price of power per MWh by the average price of natural gas per GJ for a given period.
Western Power Operations' revenues decreased in fourth quarter 2007, compared to fourth quarter 2006 primarily due to the lower overall realized power prices. Also contributing to this decrease were lower generation volumes as a result of reduced dispatch of Alberta cogeneration assets during periods of uneconomic market conditions and maintenance outages at the MacKay River and Cancarb facilities. Commodity purchases resold decreased in fourth quarter 2007, compared to fourth quarter 2006, primarily due to lower PPA costs and the expiry of certain retail contracts.
Western Power Operations manages the sale of its power on a portfolio basis. A portion of its power is sold on the spot market for operational reasons and the amount of supply volumes eventually sold into the spot market is dependent upon the ability to transact in forward sales markets at acceptable contract terms. This approach to portfolio management assists in minimizing costs in situations where Western Power Operations would otherwise have to purchase electricity in the open market to fulfill its contractual sales obligations. Approximately 32 per cent of power sales volumes were sold into the spot market in fourth quarter 2007 compared to approximately 18 per cent in fourth quarter 2006. To reduce its exposure to spot market prices on uncontracted volumes, as at December 31, 2007, Western Power Operations had fixed-price power sales contracts to sell approximately 9,200 GWh for 2008.
Western Power Operations' operating income for the year ended December 31, 2007 increased $11 million to $308 million compared to the same period in 2006. This increase was primarily due to lower PPA costs, partially offset by slightly lower overall realized power prices. Western Power Operations' strategy is to reduce its exposure to lower spot market prices by contracting the majority of its volumes.
Eastern Power Operations
Eastern Power Operations Results-at-a-Glance (1)
Three months ended Year ended
(unaudited) December 31 December 31
(millions of dollars) 2007 2006 2007 2006
----------------------------------------------------------------------------
Revenue
Power 346 262 1,481 789
Other (2) 53 68 239 292
---------------------------------------------
399 330 1,720 1,081
---------------------------------------------
Commodity purchases resold
Power (169) (95) (755) (379)
Other (2) (45) (61) (208) (257)
---------------------------------------------
(214) (156) (963) (636)
---------------------------------------------
Plant operating costs and other (107) (108) (454) (226)
Depreciation (12) (11) (48) (32)
---------------------------------------------
Operating income 66 55 255 187
---------------------------------------------
---------------------------------------------
(1) Includes Becancour, Baie-des-Sables, and Anse-a-Valleau effective
September 17, 2006, November 21, 2006 and November 10, 2007,
respectively.
(2) Other includes the cost of natural gas sold.
Eastern Power Operations Sales Volumes (1)
Three months ended Year ended
(unaudited) December 31 December 31
(GWh) 2007 2006 2007 2006
----------------------------------------------------------------------------
Supply
Generation 2,129 2,007 8,095 4,700
Purchased 1,811 760 6,986 3,091
---------------------------------------------
3,940 2,767 15,081 7,791
---------------------------------------------
---------------------------------------------
Sales
Contracted 3,798 2,659 14,505 7,374
Spot 142 108 576 417
---------------------------------------------
3,940 2,767 15,081 7,791
---------------------------------------------
---------------------------------------------
(1) Includes Becancour, Baie-des-Sables, and Anse-a-Valleau effective
September 17, 2006, November 21, 2006 and November 10, 2007,
respectively.
Eastern Power Operations' operating income increased $11 million to $66 million for the three months ended December 31, 2007, compared to the same period in 2006. The increase was primarily due to payments received under the newly-designed forward capacity market in New England and increased earnings from higher sales volumes to commercial and industrial customers. These positive impacts to earnings were partially offset by decreased generation from the TC Hydro facilities, which had above-normal water flows in fourth quarter 2006.
Generation volumes in fourth quarter 2007 of 2,129 GWh increased 122 GWh compared to 2,007 GWh in fourth quarter 2006, primarily due to the increased output from the Ocean State Power generation assets, partially offset by decreased output from the TC Hydro generation assets, which had above-normal water flows in 2006.
Eastern Power Operations' power revenues of $346 million increased $84 million in fourth quarter 2007, compared to fourth quarter 2006, primarily due to increased sales volumes to commercial and industrial customers, and incremental revenue received under the forward capacity market which began operating in New England in December 2006. Power commodity purchases resold of $169 million and purchased power volumes of 1,811 GWh were significantly higher in fourth quarter 2007, compared to fourth quarter 2006, primarily due to the impact of increased purchases to supply increased sales volumes to wholesale, commercial and industrial customers. Plant operating costs and other of $107 million, which includes fuel gas consumed in generation, were consistent in fourth quarter 2007 compared to the same period in 2006.
Power sales volumes sold into the spot market of approximately four per cent in fourth quarter 2007 are comparable with the same period in 2006. Eastern Power Operations is focused on selling the majority of its power under contract to wholesale, commercial and industrial customers, while managing a portfolio of power supplies sourced from its own generation and wholesale power purchases. To reduce its exposure to spot market prices, as at December 31, 2007, Eastern Power Operations had entered into fixed price power sales contracts to sell approximately 8,200 GWh for 2008, although certain contracted volumes are dependent on customer usage levels.
Eastern Power Operations' operating income for the year ended December 31, 2007 increased $68 million to $255 million compared to the same period in 2006. The increase was primarily due to incremental income earned in 2007 from the first full year of operations of the 550 MW Becancour cogeneration plant, payments received under the forward capacity market in New England and the startup of the Anse-a-Valleau and Baie-des-Sables wind farms at the Cartier Wind project in November 2007 and 2006, respectively. Partially offsetting these positive impacts was decreased generation from the TC Hydro facilities resulting from reduced water flows.
Power Plant Availability
Weighted Average Power Plant Availability (1)
Three months ended Year ended
December 31 December 31
(unaudited) 2007 2006 2007 2006
----------------------------------------------------------------------------
Bruce Power 86% 89% 86% 88%
Western Power Operations (2) 79% 92% 90% 88%
Eastern Power Operations (3) 93% 89% 96% 95%
All plants, excluding Bruce Power 89% 90% 93% 93%
All plants 89% 90% 91% 91%
-------------------------------------------
(1) Plant availability represents the percentage of time in the period that
the plant is available to generate power, whether actually running or
not and is reduced by planned and unplanned outages.
(2) Western Power Operations' availability was reduced in fourth quarter
2007, compared to fourth quarter 2006, due to unplanned outages at the
MacKay River and Cancarb power plants.
(3) Eastern Power Operations includes B??cancour, Baie-des-Sables, and
Anse-??-Valleau effective September 17, 2006, November 21, 2006 and
November 10, 2007, respectively.
Natural Gas Storage
Natural Gas Storage operating income of $57 million in fourth quarter 2007 increased $27 million compared to $30 million in fourth quarter 2006. Natural Gas Storage operating income of $146 million for the year ended December 31, 2007 increased $53 million compared to $93 million for the same period in 2006. These increases were primarily due to income earned from a full year of operations from the Edson facility. In fourth quarter 2007, operating income included a $15 million net unrealized gain resulting from the changes in fair value of proprietary natural gas inventory, forward purchase contracts and forward sale contracts. For the year ended December 31, 2007, operating income included a $10 million net unrealized gain on the changes in fair value of the proprietary natural gas inventory, forward purchase contracts and forward sale contracts.
TransCanada manages its natural gas storage assets' exposure to seasonal natural gas price spreads by hedging storage capacity with a portfolio of third party storage capacity leases and proprietary natural gas purchases and sales. Earnings from third party storage capacity leases are recognized evenly over the term of the lease. Earnings for proprietary natural gas sales, exclusive of unrealized gains or losses from changes in fair value, are recognized when the natural gas is sold which typically occurs during the winter withdrawal season.
General, Administrative and Support Costs
General, administrative and support costs of $45 million in fourth quarter 2007 were comparable with the same period in 2006.
Broadwater
As at December 31, 2007, TransCanada had capitalized $40 million related to the Broadwater liquefied natural gas project.
Corporate
Corporate net earnings for the three months ended December 31, 2007 were $17 million compared to $11 million for the same period in 2006. The increase was primarily due to $26 million of favourable income tax adjustments arising from legislated Canadian federal corporate income tax changes in fourth quarter 2007, compared to $12 million in income tax refunds and related interest in the same period in 2006. In addition, gains on derivatives used to manage the Company's exposure to foreign exchange rate fluctuations and the impact of positive tax rate differentials were more than offset by higher financial charges, primarily resulting from financing the ANR and Great Lakes acquisitions. Corporate's comparable expenses were $9 million and $1 million in fourth quarter 2007 and 2006, respectively, which excludes the $26-million and $12-million favourable income tax adjustments.
Net earnings from Corporate for the year ended December 31, 2007 and 2006 were $23 million and $39 million, respectively. Corporate's net earnings decreased due to factors discussed above, and included favourable income tax reassessments and adjustments of $68 million and $72 million for the year ended December 31, 2007 and 2006, respectively. Corporate's comparable expenses were $45 million and $33 million for the year ended December 31, 2007 and 2006, respectively, which excludes the $68-million and $72-million favourable income tax reassessments and adjustments.
Other Recent Developments
Pipelines
Alberta System
Effective January 1, 2008, the EUB was reorganized into the Alberta Utilities Commission (AUC) and the Energy Resources Conservation Board. The AUC will regulate the construction and operation of Alberta System facilities and the terms and conditions of Alberta System services, including rates.
In December 2007, TransCanada received approval to extend the deadline for submitting a 2008 General Rate Application (GRA) from fourth quarter 2007 to first quarter 2008. This extension was granted as negotiations are continuing on a settlement of the Alberta System revenue requirement with stakeholders. By the end of first quarter 2008, it is expected that a GRA or settlement, or some combination of the two, is expected to be filed with the AUC. The Alberta System will charge interim rates in 2008 until final rates can be determined.
On November 30, 2007, the Alberta System's 2008 generic formula ROE was issued at 8.75 per cent for 2008, an increase from 8.51 per cent in 2007.
Canadian Mainline
In December 2007, the NEB approved the interim tolls for transportation service that TransCanada proposed to charge effective January 1, 2008. TransCanada expects to file an application with the NEB for final 2008 tolls in early second quarter 2008.
On November 29, 2007, the NEB announced that Canadian Mainline's ROE for 2008 is 8.71 per cent, an increase from 8.46 per cent in 2007.
Keystone
On November 23, 2007, TransCanada filed an application with the NEB for additional pumping facilities required to expand the Keystone oil pipeline project from a nominal capacity of approximately 435,000 barrels per day to 590,000 barrels per day.
TC Pipelines, LP
In December 2007, TC Pipelines, LP purchased a one per cent ownership interest of Tuscarora Gas Transmission Company (Tuscarora) for approximately $2 million from Sierra Pacific Resources. In a separate transaction, TC Pipelines, LP also purchased TransCanada's one per cent ownership interest in Tuscarora for approximately $2 million. As a result of these transactions, TC PipeLines, LP owns 100 per cent of Tuscarora.
Consolidated Income
(unaudited) Three months ended Year ended
(millions of dollars per December 31 December 31
share amounts) 2007 2006 2007 2006
----------------------------------------------------------------------------
Revenues 2,189 2,091 8,828 7,520
Operating Expenses
Plant operating costs and
other 798 715 3,030 2,411
Commodity purchases resold 412 483 1,959 1,707
Depreciation 291 272 1,179 1,059
---------------------------------------------
1,501 1,470 6,168 5,177
---------------------------------------------
688 621 2,660 2,343
---------------------------------------------
Other Expenses/(Income)
Financial charges 195 213 943 825
Financial charges of joint
ventures 18 25 75 92
Income from equity investments (4) (5) (17) (33)
Interest income and other (24) (27) (135) (123)
Gains on sales of assets (16) - (16) (23)
---------------------------------------------
169 206 850 738
---------------------------------------------
Income from Continuing
Operations before Income
Taxes and Non-Controlling
Interests 519 415 1,810 1,605
Income Taxes
Current 85 23 432 301
Future 28 104 58 175
---------------------------------------------
113 127 490 476
---------------------------------------------
Non-Controlling Interests
Preferred share dividends of
subsidiary 5 5 22 22
Non-controlling interest in
TC PipeLines, LP 21 11 65 43
Other 3 3 10 13
---------------------------------------------
29 19 97 78
---------------------------------------------
Net Income from Continuing
Operations 377 269 1,223 1,051
Net Income from Discontinued
Operations - - - 28
---------------------------------------------
Net Income 377 269 1,223 1,079
---------------------------------------------
---------------------------------------------
Net Income Per Share
Basic
Continuing operations $ 0.70 $ 0.55 $ 2.31 $ 2.15
Discontinued operations - - - 0.06
---------------------------------------------
$ 0.70 $ 0.55 $ 2.31 $ 2.21
---------------------------------------------
---------------------------------------------
Diluted
Continuing operations $ 0.70 $ 0.54 $ 2.30 $ 2.14
Discontinued operations - - - 0.06
---------------------------------------------
$ 0.70 $ 0.54 $ 2.30 $ 2.20
---------------------------------------------
---------------------------------------------
Average Shares Outstanding
- Basic (millions) 539 489 530 488
---------------------------------------------
---------------------------------------------
Average Shares Outstanding
- Diluted (millions) 542 491 532 491
---------------------------------------------
---------------------------------------------
See accompanying notes to the consolidated financial statements.
Consolidated Cash Flows
Three months ended Year ended
(unaudited) December 31 December 31
(millions of dollars) 2007 2006 2007 2006
----------------------------------------------------------------------------
Cash Generated From Operations
Net income 377 269 1,223 1,079
Depreciation 291 272 1,179 1,059
Income from equity investments
less than (in excess of)
distributions received 5 (1) (1) (9)
Future income taxes 28 104 58 175
Non-controlling interests 29 19 97 78
Funding of employee future
benefits lower than/(in excess of)
expense 25 (14) 43 (31)
Gains on sales of assets, net of
current income taxes (14) - (14) (11)
Other - 11 36 38
---------------------------------------------
741 660 2,621 2,378
(Increase)/decrease in
operating working capital (46) (167) 215 (303)
---------------------------------------------
Net cash provided by operations 695 493 2,836 2,075
---------------------------------------------
Investing Activities
Capital expenditures (595) (570) (1,651) (1,572)
Acquisitions, net of cash
acquired (1) (112) (4,223) (470)
Disposition of assets, net of
current income taxes 35 - 35 23
Deferred amounts and other (94) (34) (368) (97)
---------------------------------------------
Net cash used in investing
activities (655) (716) (6,207) (2,116)
---------------------------------------------
Financing Activities
Dividends on common shares (129) (156) (546) (617)
Distributions paid to
non-controlling interests (20) (25) (88) (72)
Repayment of notes payable, net (600) (46) (46) (495)
Long-term debt issued 1,175 857 2,631 2,107
Reduction of long-term debt (229) (377) (1,088) (729)
Long-term debt of joint ventures
issued 20 18 142 56
Reduction of long-term debt of
joint ventures (18) (22) (157) (70)
Junior subordinated notes issued - - 1,107 -
Preferred securities redeemed - - (488) -
Common shares issued 14 14 1,711 39
Partnership units of subsidiary
issued - - 348 -
---------------------------------------------
Net cash provided by financing
activities 213 263 3,526 219
---------------------------------------------
Effect of Foreign Exchange
Rate Changes on Cash
and Short-Term Investments (4) 17 (50) 9
---------------------------------------------
Increase in Cash and Short-
Term Investments 249 57 105 187
Cash and Short-Term Investments
Beginning of period 255 342 399 212
---------------------------------------------
Cash and Short-Term Investments
End of period 504 399 504 399
---------------------------------------------
---------------------------------------------
Consolidated Balance Sheet
(unaudited) December 31, December 31,
(millions of dollars) 2007 2006
----------------------------------------------------------------------------
ASSETS
Current Assets
Cash and short-term investments 504 399
Accounts receivable 1,116 1,004
Inventories 497 392
Other 188 297
-----------------------------
2,305 2,092
Long-Term Investments 63 71
Plant, Property and Equipment 23,452 21,487
Goodwill 2,633 281
Other Assets 1,877 1,978
-----------------------------
30,330 25,909
-----------------------------
-----------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable 421 467
Accounts payable 1,767 1,500
Accrued interest 261 264
Current portion of long-term debt 556 616
Current portion of long-term debt
of joint ventures 30 142
-----------------------------
3,035 2,989
Deferred Amounts 1,107 1,029
Future Income Taxes 1,179 876
Long-Term Debt 12,377 10,887
Long-Term Debt of Joint Ventures 873 1,136
Junior Subordinated Notes 975 -
Preferred Securities - 536
-----------------------------
19,546 17,453
-----------------------------
Non-Controlling Interests
Preferred shares of subsidiary 389 389
Non-controlling interest in TC PipeLines, LP 539 287
Other 71 79
-----------------------------
999 755
-----------------------------
Shareholders' Equity
Common shares 6,662 4,794
-----------------------------
Contributed surplus 276 273
-----------------------------
Retained earnings 3,220 2,724
Accumulated other comprehensive income (373) (90)
-----------------------------
2,847 2,634
-----------------------------
9,785 7,701
-----------------------------
30,330 25,909
-----------------------------
-----------------------------
Consolidated Comprehensive Income
Three months ended Year ended
(unaudited) December December 31
(millions of dollars) 2007 2006 2007 2006
----------------------------------------------------------------------------
Net income 377 269 1,223 1,079
---------------------------------------------
Other comprehensive income/(loss),
net of income taxes
Change in foreign currency
translation gains and losses on
investments in foreign
operations (1) (8) 36 (350) 6
Change in gains and losses on
hedges of investments in
foreign operations (2) 2 (31) 79 (6)
Change in gains and losses on
derivative instruments designated
as cash flow hedges (3) 38 - 42 -
Reclassification to net income of gains
and losses on derivative
instruments designated as cash flow
hedges pertaining to prior
periods (4) 6 - 42 -
----------------------------------------------------------------------------
Other comprehensive income/(loss) for
the period 38 5 (187) -
----------------------------------------------------------------------------
Comprehensive income for the period 415 274 1,036 1,079
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Net of income tax expense of $6 million and $101 million for the three
months and year ended December 31, 2007, respectively (2006 - $19
million recovery and $3 million expense, respectively).
(2) Net of income tax expense of $1 million and $41 million for the three
months and year ended December 31, 2007, respectively (2006 - $16
million recovery and $3 million recovery, respectively).
(3) Net of income tax expense of $24 million and $27 million for the three
months and year ended December 31, 2007, respectively.
(4) Net of income tax expense of $4 million and $23 million for the three
months and year ended December 31, 2007, respectively.
Consolidated Shareholders' Equity
Year ended December 31
(unaudited)
(millions of dollars) 2007 2006
----------------------------------------------------------------------------
Common Shares
Balance at beginning of year 4,794 4,755
Proceeds from shares issued under
public offering (1) 1,683 -
Shares issued under dividend reinvestment plan 157 -
Proceeds from shares issued on exercise
of stock options 28 39
-----------------------------
Balance at end of year 6,662 4,794
-----------------------------
Contributed Surplus
Balance at beginning of year 273 272
Issuance of stock options 3 1
-----------------------------
Balance at end of year 276 273
-----------------------------
Retained Earnings
Balance at beginning of year 2,724 2,269
Transition adjustment resulting from
adopting new financial instruments
accounting standards 4 -
Net income 1,223 1,079
Common share dividends (731) (624)
-----------------------------
Balance at end of year 3,220 2,724
-----------------------------
Accumulated Other Comprehensive Loss
Balance at beginning of year (90) (90)
Transition adjustment resulting from
adopting new financial instruments
accounting standards (96) -
Other comprehensive income (187) -
-----------------------------
Balance at end of year (373) (90)
-----------------------------
Total Shareholders' Equity 9,785 7,701
-----------------------------
-----------------------------
(1) Net of underwriting commissions and future income taxes.
Accumulated Other Comprehensive Income
Currency
(unaudited) Translation Cash Flow
(millions of dollars) Adjustment Hedges Total
----------------------------------------------------------------------------
Balance at December 31, 2005 (90) - (90)
Change in foreign currency translation
gains and losses on investments in
foreign operations (1) 6 - 6
Change in gains and losses on hedge of
investments in foreign operations (2) (6) - (6)
------------------------------------
Balance at December 31, 2006 (90) - (90)
Transition adjustment resulting from
adopting new financial instruments
standards (3) - (96) (96)
Change in foreign currency translation
gains and losses on investments in
foreign operations (1) (350) - (350)
Change in gains and losses on hedge of
investments in foreign operations (2) 79 - 79
Change in gains and losses on derivative
instruments designated as cash flow
hedges (4) - 42 42
Reclassification to net income of gains
and losses on derivative instruments
designated as cash flow hedges pertaining
to prior periods (5) (6) - 42 42
------------------------------------
Balance at December 31, 2007 (361) (12) (373)
------------------------------------
------------------------------------
(1) Net of income tax expense of $101 million for the year ended December
31, 2007 (2006 - $3 million expense).
(2) Net of income tax expense of $41 million for the year ended December
31, 2007 (2006 - $3 million recovery).
(3) Net of income tax expense of $44 million for the year ended December
31, 2007.
(4) Net of income tax expense of $27 million for the year ended December
31, 2007.
(5) Net of income tax expense of $23 million for the year ended December
31, 2007.
(6) During the next 12 months, the amount reclassified to net income from
accumulated other comprehensive loss for gains and losses from cash
flow hedges is not expected to be significant.
Segmented Information
Three months
ended
December 31
(unaudited - Pipelines Energy Corporate Total
millions -----------------------------------------------------------
of dollars) 2007 2006 2007 2006 2007 2006 2007 2006
----------------------------------------------------------------------------
Revenues 1,212 1,034 977 1,057 - - 2,189 2,091
Plant operating
costs
and other (448) (386) (348) (329) (2) - (798) (715)
Commodity
purchases
resold (1) - (411) (483) - - (412) (483)
Depreciation (252) (235) (39) (36) - (1) (291) (272)
-----------------------------------------------------------
511 413 179 209 (2) (1) 688 621
Financial
charges and
non-controlling
interests (165) (194) - - (59) (38) (224) (232)
Financial
charges of
joint ventures (12) (19) (6) (6) - - (18) (25)
Income from
equity
investments 4 5 - - - - 4 5
Interest income
and other 3 8 2 - 19 19 24 27
Gain on sale of
assets - - 16 - - - 16 -
Income taxes (139) (87) (33) (71) 59 31 (113) (127)
-----------------------------------------------------------
Income from
Continuing
Operations 202 126 158 132 17 11 377 269
-------------------------------------------
-------------------------------------------
Income from
Discontinued
Operations - -
---------------
Net Income 377 269
---------------
---------------
Year ended
December 31
(unaudited - Pipelines Energy Corporate Total
millions -----------------------------------------------------------
of dollars) 2007 2006 2007 2006 2007 2006 2007 2006
----------------------------------------------------------------------------
Revenues 4,712 3,990 4,116 3,530 - - 8,828 7,520
Plant operating
costs
and other (1,670) (1,380) (1,353) (1,024) (7) (7) (3,030) (2,411)
Commodity
purchases
resold (72) - (1,887) (1,707) - - (1,959) (1,707)
Depreciation (1,021) (927) (158) (131) - (1) (1,179) (1,059)
-----------------------------------------------------------
1,949 1,683 718 668 (7) (8) 2,660 2,343
Financial
charges and
non-controlling
interests (793) (767) 1 - (248) (136) (1,040) (903)
Financial
charges of
joint ventures (52) (69) (23) (23) - - (75) (92)
Income from
equity
investments 17 33 - - - - 17 33
Interest income
and other 35 67 10 5 90 51 135 123
Gain on sale of
assets - 23 16 - - - 16 23
Income taxes (470) (410) (208) (198) 188 132 (490) (476)
-----------------------------------------------------------
Income from
Continuing
Operations 686 560 514 452 23 39 1,223 1,051
-------------------------------------------
-------------------------------------------
Income from
Discontinued
Operations - 28
Net Income 1,223 1,079
---------------
---------------
Teleconference - Audio and Slide Presentation
TransCanada will hold a teleconference today at 1:00 p.m. (Mountain) / 3:00 p.m. (Eastern) to discuss the fourth quarter 2007 financial results and general developments and issues concerning the company. Analysts, members of the media and other interested parties wanting to participate should phone 1- 866-225-6564 or 416-641-6136 (Toronto area) at least 10 minutes prior to the start of the teleconference. No passcode is required. A live audio and slide presentation webcast of the teleconference will also be available on TransCanada's website at www.transcanada.com.
The conference will begin with a short address by members of TransCanada's executive management, followed by a question and answer period for investment analysts. A question and answer period for members of the media will immediately follow.
A replay of the teleconference will be available two hours after the conclusion of the call until midnight (Eastern) February 5, 2008. Please call 1-800-408-3053 or 416-695-5800 (Toronto area) and enter passcode 3248038#. The webcast will be archived and available for replay on www.transcanada.com.
About TransCanada
With more than 50 years experience, TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure including natural gas pipelines, power generation, gas storage facilities, and projects related to oil pipelines and LNG facilities. TransCanada's network of wholly owned pipelines extends more than 59,000 kilometres (36,500 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 approximately 360 billion cubic feet of storage capacity. A growing independent power producer, TransCanada owns, or has interests in, approximately 7,700 megawatts of power generation in Canada and the United States. TransCanada's common shares trade on the Toronto and New York stock exchanges under the symbol TRP.