TransCanada Reports 8 Per Cent Increase in Comparable Earnings Per Share in 2008
CALGARY, Alberta – February 3, 2009 – TransCanada Corporation (TSX, NYSE: TRP) (TransCanada or the Company) today announced comparable earnings for the year ended December 31, 2008 of $1.3 billion or $2.25 per share, an increase of approximately eight per cent on a per share basis compared to 2007. TransCanada’s Board of Directors also declared a quarterly dividend of $0.38 per common share, an increase of six per cent.“TransCanada’s financial performance in 2008 demonstrates our ability to generate significant earnings and cash flow even in these uncertain economic times,” said Hal Kvisle, TransCanada president and chief executive officer. “This has enabled our Board of Directors to increase the dividend on common shares for the ninth consecutive year. The new quarterly dividend of $0.38 per common share equates to $1.52 per common share on an annualized basis, an increase of six per cent.
“TransCanada made significant progress on a number of major projects in 2008, including the Keystone oil pipeline system, the North Central Corridor expansion, the Bruce Power refurbishment, and three large-scale, gas-fired power plants. These major projects are all under construction today. In 2009, we expect to invest approximately $6 billion in these and other capital projects. The strong cash flow generated by our operating assets, along with recently completed debt and common equity issues, mean we are well-positioned to fund our sizable capital program. Looking forward, we expect to generate strong, long-term financial returns for our shareholders as a result of our growing portfolio of high-quality energy infrastructure assets, our proven project development and execution capabilities, and our strong financial position.”
Fourth Quarter and Year-End 2008 Highlights
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
– Comparable earnings for the year ended December 31, 2008 of $1.3 billion ($2.25 per share)
– Net income for the year ended December 31, 2008 of $1.4 billion ($2.53 per share)
– Comparable earnings for the year ended December 31, 2008 of $1.3 billion ($2.25 per share)
– Net income for the year ended December 31, 2008 of $1.4 billion ($2.53 per share)
– Funds generated from operations for the year ended December 31, 2008 of $3.0 billion
– Comparable earnings for fourth quarter 2008 of $271 million ($0.46 per share)
– Net income for fourth quarter 2008 of $277 million ($0.47 per share)
– Funds generated from operations for fourth quarter 2008 of $712 million
– Invested $6.4 billion in 2008 in a number of growth opportunities including the Keystone Pipeline system, Ravenswood generating station, Bruce Power, Portlands Energy Centre and Halton Hills generating station.
TransCanada reported net income for fourth quarter 2008 of $277 million ($0.47 per share) compared to $377 million ($0.70 per share) for fourth quarter 2007. Net income in fourth quarter 2007 included $56 million of favourable income tax adjustments and a $14 million gain on the sale of land. Fourth quarter 2008 and 2007 included $6 million and $10 million, respectively, of fair value gains in the natural gas storage business.
Comparable earnings were $271 million ($0.46 per share) for fourth quarter 2008 compared to $297 million ($0.55 per share) in fourth quarter 2007. The $26 million ($0.09 per share) decrease was primarily due to higher Corporate costs, which included unrealized losses of $39 million after-tax ($0.07 per share) from the change in the fair value of derivatives used to manage TransCanada’s exposure to rising interest rates that do not qualify as hedges for accounting purposes together with the impact of financing incremental debt to fund the Company’s growth. Partially offsetting these higher corporate costs were higher earnings in the Energy and Pipelines businesses.
Net income was $1.4 billion ($2.53 per share) for the year ended December 31, 2008 compared to net income of $1.2 billion ($2.31 per share) for 2007. Net income in 2008 included $152 million of gains from bankruptcy settlements with Calpine, $10 million of GTN lawsuit settlement proceeds, a $27 million write-down of the Broadwater liquefied natural gas (LNG) project costs and $26 million of favourable income tax adjustments. Net income in 2007 included favourable income tax adjustments of $102 million, $14 million gain on the sale of land and $7 million of net unrealized gains from natural gas storage fair value changes.
Comparable earnings for the year ended December 31, 2008 were $1.3 billion ($2.25 per share), compared to $1.1 billion ($2.08 per share) for 2007. The $179 million ($0.17 per share) increase was primarily due to higher earnings from the Energy and Pipelines businesses partially offset by higher Corporate expenses.
Notable recent developments in Pipelines, Energy and Corporate include:
– The Keystone Pipeline system has completed approximately 40 per cent of the engineering, procurement and construction activities for the initial phase of the project to Wood River, Patoka and Cushing. In November, an application was filed with the U.S. Department of State for a Presidential Permit for the Keystone expansion to the U.S. Gulf Coast.
TransCanada agreed to increase its equity ownership in the Keystone partnership to 79.99 per cent, which will reduce ConocoPhillips’ equity ownership to 20.01 per cent. Certain parties who have agreed to make volume commitments to the Keystone expansion have an option to acquire up to a combined 15 per cent equity ownership in the Keystone partnerships. If these options are exercised, TransCanada’s equity ownership could be reduced to 64.99 per cent.
– In November, ANR’s Cold Springs 1 storage facility was placed in service. The project added 14 billion cubic feet (Bcf) of natural gas storage and 200 million cubic feet per day (mmcf/d) of withdrawal capacity, and increased ANR’s total storage capacity to 250 Bcf.
– The Bison Pipeline project is a proposed 480 kilometre (km) pipeline from the Powder River Basin in Wyoming to the Northern Border system in North Dakota. The project has shipping commitments for approximately 405 mmcf/d and is expected to be in service in fourth quarter 2010. The capital cost of the project is estimated at US$500 – US$600 million. TransCanada continues to work with shippers to finalize the size and design of this project.
– In December 2008, the Alaska Commissioner of Revenue and Natural Resources issued the Alaska Gasline Inducement Act (AGIA) license to TransCanada. TransCanada has committed under AGIA to advance the Alaska Pipeline project through an open season and subsequent Federal Energy Regulatory Commission (FERC) certification. TransCanada has commenced the engineering, environmental, field and commercial work, and expects to conclude an open season by mid-2010.
– TransCanada recently concluded a binding open season for gas transmission service from the Montney Groundbirch area located in northeastern B.C. Shippers have committed to firm gas transportation contracts and volumes associated with these commitments are expected to reach 1.1 Bcf per day (Bcf/d) by 2014. The proposed pipeline will be approximately 77 km in length and is expected to commence service in fourth quarter 2010, subject to receipt of necessary regulatory approvals. The proposed project is expected to cost approximately $250 million.
– TransCanada is finalizing details associated with a binding open season and pipeline extension project to service the Horn River shale gas area in northeastern B.C. with the Alberta System. The Horn River project is expected to commence operation in early 2011.
– In fourth quarter 2008, Bruce Power completed a review of the end of life estimates for Units 3 and 4. Unit 3 is now expected to be in commercial service until 2011, which provides the benefit of nearly two additional years of generation before the unit commences an expected 36-month refurbishment period. After the refurbishment period, the end of life estimate for Unit 3 is expected to increase from the originally expected date of 2037 to 2038.
In addition, Unit 4 is now expected to be in commercial service until 2016, providing nearly seven years of generation before the unit commences a similar refurbishment period, after which, the end of life estimate for Unit 4 is expected to increase from the originally expected date of 2036 to 2042.
Refurbishment work continues on Units 1 and 2 and the units are expected to return to commercial service in 2010.
The 109 megawatt (MW) Carleton wind farm, the third of six phases of the Cartier Wind project, was placed in service in November 2008. The remaining phases are expected to be constructed through 2012, subject to receipt of necessary approvals. Once completed, the combined capacity of the six phases is expected to be 740 MW.
– The 550 MW Portlands Energy Centre is nearing the completion of construction and is expected to be placed in service in first quarter 2009. Construction of the 683 MW Halton Hills generating station is approximately 50 per cent complete and is anticipated to be in service in the third quarter of 2010.
– In other Energy developments, TransCanada advanced construction work on the Kibby Wind Power project, with commissioning of the first phase expected to begin in fourth quarter 2009. In December 2008, TransCanada received a Certificate of Environmental Compatibility from the Arizona Corporation Commission, approving the construction of the 575 MW Coolidge Generating Station in Arizona. Construction is expected to commence in the summer of 2009 and the facility is expected to be in service in 2011.
– The Board of Directors of TransCanada declared a quarterly dividend of $0.38 per common share, an increase of six per cent, for the quarter ending March 31, 2009, on TransCanada’s outstanding common shares.
– In late fourth quarter 2008, the TransCanada Board of Directors approved an increase in the discount on the issuance of common shares from treasury under TransCanada’s Dividend Reinvestment and Share Repurchase Plan from two to three per cent for the common share dividend payable on January 30, 2009.
– On November 25, 2008, TransCanada completed a public offering of 30,500,000 common shares. On December 5, 2008, an additional 4,575,000 common shares were issued upon exercise of the underwriter’s over-allotment option. Gross proceeds from the common share offering and the over-allotment option totalled approximately $1.157 billion. The proceeds of this offering will be used to partially fund capital projects, including the Keystone Pipeline system, for general corporate purposes and to repay short-term indebtedness.
– In addition, during the fourth quarter of 2008, a subsidiary of TransCanada closed a new US$1.0 billion committed bank facility with certain of its existing relationship banks. The revolving, extendable, expandable facility has an initial term of 364 days with a one-year term out at the option of the borrower and will support a new commercial paper program dedicated to funding expenditures for the Keystone Pipeline system.
– In January 2009, the Company issued US$750 million of 7.125 per cent and US$1.25 billion of 7.625 per cent Senior Unsecured Notes maturing on January 15, 2019, and January 15, 2039, respectively. Net proceeds from the issue are expected to be used to partially fund TransCanada’s capital projects, retire maturing debt obligations and for general corporate purposes. These notes were issued under the US$3.0 billion debt shelf prospectus filed in the United States in January 2009.
– Global financial markets remain volatile, however, TransCanada’s liquidity position remains sound, underpinned by highly predictable cash flow from operations, significant cash balances on hand from recent securities issues, as well as committed revolving bank lines of US$1.0 billion, $2.0 billion and US$300 million, maturing in November 2010, December 2012 and February 2013, respectively. To date, no draws have been made on these facilities.
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 2008 financial results and general developments and issues concerning the Company. Analysts, members of the media and other interested parties wanting to participate in the teleconference and webcast should phone (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 10, 2009. Please call (800) 408-3053 or (416) 695-5800 (Toronto area) and enter pass code 3280776#. The webcast will be archived and available for replay on www.transcanada.com.
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 370 Bcf of storage capacity. A growing independent power producer, TransCanada owns, or has interests in, over 10,900 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.
Note: All financial figures are in Canadian dollars unless noted otherwise.
This news release may contain certain information that is forward looking and is subject to important risks and uncertainties. The words “anticipate”, “expect”, “believe”, “may”, “should”, “estimate”, “project”, “outlook”, “forecast” or other similar words are used to identify such forward-looking information. Forward-looking statements in this document are intended to provide TransCanada shareholders and potential investors with information regarding TransCanada and its subsidiaries, including management’s assessment of TransCanada’s and its subsidiaries’ future financial and operational plans and outlook. Forward-looking statements in this document may include, amongst others, statements regarding the anticipated business prospects and financial performance of TransCanada and its subsidiaries, expectations or projections about the future, strategies and goals for growth and expansion, expected and future cash flows, costs, schedules, operating and financial results and expected impact of future commitments and contingent liabilities. All forward-looking statements reflect TransCanada’s beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those predicted in these forward-looking statements. Factors that 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 operating performance of the Company’s natural gas pipeline and energy assets, the availability and price of energy commodities, regulatory processes and decisions, changes in environmental and other laws and regulations, competitive factors in the natural gas pipeline and energy industry sectors, construction and completion of capital projects, labour, equipment and material costs, access to capital markets, interest and currency exchange rates, technological developments and the current economic conditions in North America. By its nature, 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 expectations expressed. Additional information on these and other factors is available in the reports filed by TransCanada with Canadian securities regulators and with the U.S. Securities and Exchange Commission. Readers are cautioned to not 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 to not use future-oriented information or financial outlooks for anything other than their intended purpose. 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.
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 Canadian 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 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. 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.
Management uses the measure of comparable earnings/(expenses) to better evaluate trends in the Company’s underlying operations. Comparable earnings comprise net income adjusted for specific items that are significant, but are not reflective of the Company’s underlying operations. Specific items are subjective, however, management uses its judgement and informed decision-making when identifying items to be excluded in calculating comparable earnings, some of which may recur. Specific items may include but are not limited to certain income tax refunds and adjustments, gains or losses on sales of assets, legal and bankruptcy settlements, and certain fair value adjustments. The table in the Consolidated Results of Operations section of this news release presents a reconciliation of comparable earnings to net income. 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 comprises 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 2008 Financial Highlights table in this news release.
Operating income is reported in the Company’s Energy business segment and comprises revenues less operating expenses as shown on the Consolidated Income Statement. A reconciliation of operating income to net income is presented in the Energy section of this news release.
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2008 Fourth Quarter Results