TransCanada enjoys profitable 2015 despite oil downturn, Keystone XL delay

TransCanada is enjoying a banner year, boosting 2015 revenue to $2.94 billion, up from $2.45 billion in 2014

TransCanada Corp. says its third-quarter profit was down from the same time last year as it received lower contributions from its Bruce Power and Western Power electricity generation operations and a small charge related to corporate restructuring.

The North American pipeline operator’s net income was $402 million or 57 cents per share, which was down $55 million from the same time last year.

A $6-million charge related to restructuring the pipeline and power company was included in the net income, which was down from $457 million or 64 cents per share for the same period in 2014.

Excluding the restructuring and items related to its risk management activities, TransCanada had $440 million or 62 cents per share of comparable earnings – down from $450 million or 63 cents per share in last year’s third quarter.

“Over the past nine months, our diverse suite of high-quality long-life assets has performed well in a challenging environment with comparable earnings and funds generated from operations up eight and nine per cent, respectively, compared to the same period last year,” said Russ Girling, TransCanada’s president and CEO.

The earnings report was issued early Tuesday, hours after TransCanada announced Monday evening that it has asked the U.S. government to suspend the review of its stalled Keystone XL pipeline system – which has cost US$2.4 billion so far.

The third-quarter report says it plans further restructuring activities in the current quarter and into next year, but didn’t provide details in its statement.

Total revenue was up year-over-year, rising to $2.94 billion from $2.45 billion.

 

Operational Highlights:

TransCanada – Liquids Pipelines

Energy East Pipeline: Amendments to the project are expected to be submitted to the National Energy Board (NEB) in fourth quarter 2015. The NEB has continued to process the application in the interim. The alteration to the project scope and further refinement of the project schedule is expected to result in an in-service date of 2020. The original $12 billion cost estimate is expected to increase due to further scope refinement as we consult with stakeholders and escalation of construction costs as the project schedule is refined.

Keystone XL: As of Sept. 30 TransCanada had invested US$2.4 billion in the project and has also capitalized interest in the amount of US$400 million. On Nov. 2 TransCanada sent a letter to U.S. Secretary of State John Kerry asking the Department of State to pause its review of the Presidential Permit application for Keystone XL while it seeks Nebraska PSC approval of the route. If heeded, that request could potentially have two major implications: First, it could spare the company a potential rejection from U.S. President Barack Obama. It could also punt the issue beyond the 2016 U.S. election, making it a campaign issue and placing the file in the hands of a future administration.

Grand Rapids Pipeline: On Aug. 6 Grand Rapids Pipeline Limited Partnership (Grand Rapids) entered into an agreement to contribute the southernmost portion of the 20-inch diluent Grand Rapids Pipeline into a 50/50 joint venture with Keyera Corp (Keyera). The 45 km (28 mile) pipeline will be constructed by us and will extend from Keyera’s Edmonton Terminal to our Heartland Terminal near Fort Saskatchewan.

TransCanada – Natural Gas Pipelines

• NGTL System Expansions: The NGTL System has approximately $6.8 billion of new supply and demand facilities under development. Approximately $2.8 billion of these facilities have received regulatory approval with $800 million currently under construction. In third quarter 2015, TransCanada continued to advance several of these capital expansion projects with an additional approximately $500 million of applied for facilities that now await regulatory review for approval.
• LDC Agreement on Eastern Mainline Project and Energy East: On Aug. 24 TransCanada announced an agreement with eastern LDCs that resolves their issues with Energy East and the Eastern Mainline Project. The agreement honours the previously stated commitment to ensure that Energy East and the Eastern Mainline Project will provide gas consumers in Eastern Canada with sufficient natural gas transmission capacity and reduced natural gas transmission costs. The Eastern Mainline Project capital cost is now estimated to be $2.0 billion with an expected in-service date of 2019. This increase resulted from the revised project scope resulting from the LDC agreement and updated cost estimates.

TransCanada – Energy

• Ironwood Acquisition: On October 8, 2015, we reached an agreement to acquire the Ironwood natural gas-fired, combined cycle power plant in Lebanon, Pennsylvania, with a nameplate capacity of 778 megawatts (MW), from Talen Energy Corporation for US$654 million. The Ironwood power plant delivers energy into the PJM power market, North America’s largest and most liquid energy region which includes a three-year forward capacity market. The facility is strategically located in the Marcellus shale gas play and is well positioned to access competitively priced natural gas in a market that is in the midst of transitioning away from coal-fired power generation to gas.
• Becancour: In Aug. TransCanada executed an agreement with Hydro Quebec (HQ) to amend Becancour’s electricity supply contract. The amendment allows HQ to dispatch up to 570 MW of firm peak winter capacity from the Becancour facility for a term of 20 years commencing in Dec. 2016. Annual payments received for this new service will be incremental to existing capacity payments earned under the new agreement.