TC PipeLines, LP Announces 2016 Third Quarter Financial Results
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HOUSTON, TEXAS -- (Marketwired) -- 11/04/16 -- TC PipeLines, LP (NYSE: TCP) (the Partnership) today reported third quarter 2016 net income attributable to controlling interests of $58 million and distributable cash flow of $69 million.
"Our diverse portfolio of pipeline assets continued to deliver strong financial results this quarter, generating increased earnings and cash flow compared to the same quarter in 2015," said Brandon Anderson, president of TC PipeLines, GP, Inc. "Our results reflect the addition of PNGTS to our partnership along with solid results from both GTN and Great Lakes during the quarter. GTN continued to benefit from increased demand for its short-term transportation services and contracting on Great Lakes has improved year-over-year."
Third Quarter 2016 Highlights (All financial figures are unaudited)
-- Generated net income attributable to controlling interests of $58
million
-- Generated distributable cash flow of $69 million
-- Paid cash distributions of $65 million
-- Declared cash distributions of $0.94 per common unit
-- Raised net proceeds of approximately $35 million in common equity
through the Partnership's At-The-Market (ATM) equity issuance program
and through a General Partner contribution
The Partnership's financial highlights for the third quarter of 2016 compared to the third quarter of 2015 were:
Three months Nine months
ended ended
(unaudited) September 30, September 30,
(millions of dollars except per common
unit amounts) 2016 2015 2016 2015
---------------------------------------- -------- -------- -------- --------
Net income attributable to controlling
interests 58 49 185 150
Net income per common unit - basic and
diluted (a) $0.65 $0.70 $2.51 $2.23
Cash distributions paid (65) (59) (184) (169)
Class B distributions paid - - (12) -
Cash distributions declared per common
unit $0.94 $0.89 $2.77 $2.62
EBITDA (b) 96 86 300 266
Distributable cash flow (b) 69 68 245 217
Weighted average common units
outstanding (millions) - basic and
diluted (c) 66.1 64.0 65.3 63.8
Common units outstanding at end of
period (millions) (c) 66.6 64.0 66.6 64.0
(a) Net income per common unit is computed by dividing net income
attributable to controlling interests, after deduction of amounts
attributable to the General Partner and Class B units, by the weighted
average number of common units outstanding. Refer to Financial
Summary-Consolidated Statements of Income section of this release.
(b) EBITDA and Distributable cash flow are non-GAAP financial measures.
Refer to the description of EBITDA and Distributable cash flow in the
section of this release entitled "Non-GAAP Measures" and the
Supplemental Schedule for further detail.
(c) During the third quarter of 2016, the Partnership issued 650,519
common units under the ATM program generating net proceeds of
approximately $35 million, including our General Partner's
proportionate equity contribution of approximately $0.7 million to
maintain its two percent effective interest, net of approximately $0.4
million of commissions to our sales agents.
Recent Developments
Cash Distributions - On October 20, 2016, the board of directors of our General Partner declared the Partnership's third quarter 2016 cash distribution in the amount of $0.94 per common unit payable on November 14, 2016 to unitholders of record as of November 1, 2016. The declared distribution to our General Partner will include a $1.3 million distribution for its effective two percent general partner interest and an IDR payment amounting to $1.9 million for a total distribution of $3.2 million.
Recent Conclusion of TransCanada MLP Strategy Review - TransCanada, the ultimate parent company of our General Partner, recently announced the execution of an agreement to acquire all of the outstanding publicly-held common units of Columbia Pipeline Partners LP and stated that the decision to acquire Columbia Pipeline Partners completed its review of strategic alternatives for its master limited partnership (MLP) holdings following its acquisition of Columbia Pipeline Group, Inc. This acquisition will leave TransCanada with a single MLP in TC PipeLines, LP, which it describes as a core element of TransCanada's future strategy.
TransCanada is advancing CAD $25 billion of near-term capital projects, approximately CAD $7.5 billion of which has been invested to date with the remainder to be spent largely over the next three years. TransCanada says it intends to prudently fund its capital program in a manner that is consistent with maintaining its financial strength, including dropdowns to the Partnership.
Three Months Ended September 30, 2016 Results of Operations
For the three months ended September 30, 2016, net income attributable to controlling interests increased by $9 million compared to the same period in 2015 mainly due to higher revenues from our wholly-owned subsidiaries together with higher equity earnings from unconsolidated affiliates:
Transmission revenues - the $8 million increase was primarily due to:
-- Higher discretionary revenues on GTN from short-term services sold to
its customers; and
-- New revenues from GTN's Carty lateral system which was placed in service
in October 2015.
Earnings from equity investments - the $7 million increase was mainly attributable to:
-- Higher equity earnings from Great Lakes primarily due to higher
transportation revenues resulting from higher levels of contracted
volumes; and
-- The acquisition of a 49.9 percent interest in PNGTS effective January 1,
2016.
Additionally, our EBITDA increased by $10 million compared to the same period in 2015 primarily due to higher transmission revenues on GTN and higher equity earnings from our equity investments.
Our Distributable cash flow remained comparable to that of the prior period primarily due to the same factors that impacted our EBITDA offset by higher distributions allocable to Class B units in 2016 compared to 2015.
Nine months Ended September 30, 2016 Cash Flow Analysis
The Partnership's net cash provided by operating activities increased by $27 million for the nine months ended September 30, 2016 compared to the same period in 2015 primarily due to higher earnings.
The Partnership's net cash used in investing activities decreased by $117 million as we invested a lesser amount for our recent acquisition of PNGTS compared to our investment during the same period in 2015. In 2015, we paid $264 million to acquire the remaining 30 percent interest in GTN compared to $193 million paid for the acquisition of a 49.9 percent interest in PNGTS in 2016. Additionally, we received higher net distributions in 2016 from our equity investments offset by higher capital expenditures in 2015 due to expenditures related to the construction of the Carty Lateral.
The Partnership's net cash provided by financing activities decreased by $113 million in the nine months ended September 30, 2016 compared to the same period in 2015 primarily due to the net effect of:
-- $188 million decrease in net issuances of debt in 2016 as compared with
2015;
-- $92 million increase in our ATM equity issuances in 2016 as compared
with 2015;
-- $15 million increase in distributions paid to our common units including
our General Partner's two percent share and its related IDRs;
-- $12 million of distributions paid to Class B units in 2016; and
-- $9 million of distributions paid to TransCanada as the non-controlling
interest owner of GTN until March 31, 2015.
At September 30, 2016, the Partnership's available borrowing capacity under its $500 million credit facility was $280 million.
About TC PipeLines, LP
TC PipeLines, LP is a Delaware master limited partnership with interests in seven federally regulated U.S. interstate natural gas pipelines which serve markets in the Western, Midwestern and Eastern United States. The Partnership is managed by its general partner, TC PipeLines GP, Inc., a subsidiary of TransCanada Corporation (NYSE: TRP). For more information about TC PipeLines, LP, visit the Partnership's website at www.tcpipelineslp.com.
Forward-Looking Statements
Certain non-historical statements in this release relating to future plans, projections, events or conditions are intended to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on current expectations and, therefore, subject to a variety of risks and uncertainties that could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, including, without limitation to the timing, terms and closing of future acquisitions of additional natural gas pipeline assets and the ability of these assets to generate ongoing value to our unitholders, competitive conditions in the natural gas industry, increases in operating and compliance costs, the outcome of rate proceedings, our ability to identify and complete expansion and growth opportunities, operating hazards beyond our control, availability of capital and market demand that the Partnership expects or believes will or may occur in the future. These and other factors that could cause future results to differ materially from those anticipated are discussed in Item 1A in our Annual Report on Form 10-K for the year-ended December 31, 2015 filed with the Securities and Exchange Commission (the SEC), as updated and supplemented by subsequent filings with the SEC. All forward-looking statements are made only as of the date made and except as required by applicable law, we undertake no obligation to update any forward-looking statements to reflect new information, subsequent events or other changes.
Non-GAAP Measures
This news release contains references to non-GAAP measures, including EBITDA and Distributable Cash Flow that do not have any standardized meaning as prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Distributable cash flow information and EBITDA are performance measures presented to assist investors in evaluating our business performance. We believe these measures provide additional meaningful information in evaluating our financial performance and the cash generating performance of our assets. The non-GAAP measures presented as part of this release are provided as a supplement to GAAP financial results and are not meant to be considered in isolation or as substitutes for financial results prepared in accordance with GAAP. The calculation of EBITDA and Distributable Cash Flow are reconciled to Net Income, the most comparable GAAP measure, and are included as part of this release. For more information on non-GAAP measures, refer to our Annual Report on Form 10-K for the year-ended December 31, 2015 as filed with the SEC.
TC PipeLines, LP
Financial Summary
Consolidated Statements of Income
Three months ended Nine months ended
(unaudited) September 30, September 30,
------------------- -------------------
(millions of dollars except per
common unit amounts) 2016 2015 2016 2015
---------------------------------------------- --------- --------- ---------
Transmission revenues 91 83 266 255
Equity earnings from unconsolidated
affiliates 24 17 88 63
Operation and maintenance expenses (14) (12) (36) (36)
Property taxes (4) (5) (14) (16)
General and administrative (1) (1) (5) (5)
Depreciation (21) (21) (64) (63)
Financial charges and other (17) (12) (50) (41)
--------- --------- --------- ---------
Net income 58 49 185 157
Net income attributable to non-
controlling interests - - - 7
--------- --------- --------- ---------
Net income attributable to
controlling interests 58 49 185 150
Net income attributable to
controlling interest allocation
-------------------------------------
Common units 43 45 164 143
General Partner 4 2 9 5
Class B units 11 2 12 2
--------- --------- --------- ---------
58 49 185 150
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per common unit - basic
and diluted (a) $ 0.65 $ 0.70 $ 2.51 $ 2.23
Weighted average common units
outstanding (millions) - basic and
diluted 66.1 64.0 65.3 63.8
Common units outstanding, end of
period (millions) 66.6 64.0 66.6 64.0
(a) Net income per common unit is computed by dividing net income
attributable to controlling interests, after deduction of amounts
attributable to the General Partner and Class B units, by the weighted
average number of common units outstanding. The amount allocable to
the General Partner equals an amount based upon the General Partner's
effective two percent general partner interest, plus an amount equal
to incentive distributions. For the year ending December 31, 2016, the
amount allocable to the Class B units is equal to 30 percent of GTN's
annual distributable cash flow, less the threshold amount of $20
million (2015 - less $15 million). During the six months ended June
30, 2016, the threshold was exceeded and during the nine months ended
September 30, 2016, 30 percent of GTN's total distributable cash flow
amounted to $32 million. As a result, $12 million of net income
attributable to controlling interests was allocated to the Class B
units at September 30, 2016, of which $1 million and $11 million was
allocated during the three months ended June 30, 2016 and September
30, 2016, respectively. From April 1, 2015 to September 30, 2015, 30
percent of GTN's total distributable cash flow was $17 million. As a
result, $2 million of net income attributable to controlling interests
was allocated to the Class B units for both the three and nine months
ended September 30, 2015.
TC PipeLines, LP
Financial Summary
Consolidated Balance Sheets
(unaudited) September 30, December 31,
(millions of dollars) 2016 2015
------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents 72 39
Accounts receivable and other 35 35
Inventories 7 7
------------------------------------------------------------------------
114 81
------------------------------------------------------------------------
Investments in unconsolidated affiliates 1,042 965
Plant, property and equipment 1,895 1,949
Goodwill 130 130
Other assets (a) - 1
------------------------------------------------------------------------
3,181 3,126
------------------------------------------------------------------------
------------------------------------------------------------------------
Liabilities and Partners' Equity
Current Liabilities
Accounts payable and accrued
liabilities 28 32
Accounts payable to affiliates 5 5
Accrued interest 13 8
Current portion of long-term debt 27 14
------------------------------------------------------------------------
73 59
Long-term debt 1,896 1,889
Other liabilities 28 27
------------------------------------------------------------------------
1,997 1,975
------------------------------------------------------------------------
Common units subject to rescission (b) 83 -
Partners' Equity
Common units 971 1,021
Class B units 107 107
General partner 26 25
Accumulated other comprehensive loss (3) (2)
------------------------------------------------------------------------
Controlling interests 1,101 1,151
------------------------------------------------------------------------
3,181 3,126
------------------------------------------------------------------------
------------------------------------------------------------------------
(a) As a result of the application of ASU no. 2015-03 and similar to the
presentation of debt discounts, debt issuance costs of $7 million at
December 31, 2015 previously reported as other assets in the balance
sheet were reclassified as an offset against debt.
(b) In connection with the late filing of an employee-related Form 8-K
with the SEC, we may have been ineligible to use the then effective
shelf registration statement upon the filing of our 2015 Form 10-K. As
a result, it was determined that the 1.6 million common units that
were issued after the filing of our Form 10-K on February 26, 2016 up
to and including June 30, 2016 under our ATM program may be subject to
rescission rights for an amount equal to the purchase price paid for
the units (or the difference between the purchase price paid and the
price at which the units were sold, assuming a loss), plus statutory
interest and less any distributions paid, upon the return of the units
to us. These rights expire one year from the date of purchase of the
unit. No unitholder has claimed or attempted to exercise any
rescission rights to date.
As a result, at September 30, 2016, the Partnership classified all the
1.6 million common units described above, outside of equity given the
potential redemption feature which is not within the control of the
Partnership. These units are treated as outstanding for financial
reporting purposes.
The total amount transferred outside of equity was approximately $83
million which includes interest and less distributions paid and
includes our General Partner's share to maintain its effective two
percent interest.
For more information refer to our Quarterly Report on Form 10-Q for
the period ended September 30, 2016 as filed with the SEC.
TC PipeLines, LP
Financial Summary
Consolidated Statement of Cash Flows
Nine months ended
(unaudited) September 30,
--------------------------------
(millions of dollars) 2016 2015
------------------------------------------------------------------------
Cash Generated From Operations
Net income 185 157
Depreciation 64 63
Amortization of debt issuance costs 1 1
Equity allowance for funds used during
construction - (1)
Equity earnings in excess of cumulative
distributions:
PNGTS (2) -
Change in operating working capital 8 9
------------------------------------------------------------------------
256 229
------------------------------------------------------------------------
Investing Activities
Cumulative distributions in excess of
equity earnings:
Northern Border 31 18
Great Lakes 19 12
Investment in Great Lakes (4) (4)
PNGTS Acquisition (193) -
Acquisition of the remaining 30 percent
interest in GTN - (264)
Capital expenditures (21) (45)
Other 3 1
------------------------------------------------------------------------
(165) (282)
------------------------------------------------------------------------
Financing Activities
Distributions paid (184) (169)
Distributions paid to Class B units (12) -
Distributions paid on non-controlling
interests - (9)
Common unit issuance, net 35 26
Common unit issuance subject to
rescission, net 83 -
Equity contribution by the General
Partner related to GTN Acquisition - 2
Long-term debt issued, net of discount 200 598
Long-term debt repaid (180) (390)
Debt issuance costs - (3)
------------------------------------------------------------------------
(58) 55
------------------------------------------------------------------------
Increase in cash and cash equivalents 33 2
Cash and cash equivalents, beginning of
period 39 26
------------------------------------------------------------------------
Cash and cash equivalents, end of period 72 28
------------------------------------------------------------------------
------------------------------------------------------------------------
TC PipeLines, LP
Supplemental Schedule
Non-GAAP Measures
Reconciliations of Net income to Distributable Cash Flow
Three months ended Nine months ended
(unaudited) September 30 September 30
--------- --------- --------- ---------
--------- --------- --------- ---------
(millions of dollars except per
common unit amounts) 2016 2015 2016 2015
-------------------------------- --------- --------- --------- ---------
-------------------------------- --------- --------- --------- ---------
Net Income $ 58 $ 49 $ 185 $ 157
Add:
Interest expense (a) 17 16 51 45
Depreciation and amortization 21 21 64 64
-------------------------------- --------- --------- --------- ---------
-------------------------------- --------- --------- --------- ---------
EBITDA $ 96 $ 86 $ 300 $ 266
-------------------------------- --------- --------- --------- ---------
-------------------------------- --------- --------- --------- ---------
Add:
Distributable cash flow from
equity investments (b)
Northern Border 23 23 67 69
Great Lakes 5 3 28 21
PNGTS (c) 3 - 19 -
--------- --------- --------- ---------
31 26 114 90
Less:
Equity earnings
Northern Border (18) (16) (52) (50)
Great Lakes (4) (1) (23) (13)
PNGTS (c) (2) - (13) -
------------------- -------------------
(24) (17) (88) (63)
Less:
Equity AFUDC - (1) - (1)
Interest expense (17) (16) (51) (45)
Distributions to non-
controlling interests (d) - - - (11)
Maintenance capital
expenditures (e) (2) (6) (9) (12)
-------------------------------- --------- --------- --------- ---------
-------------------------------- --------- --------- --------- ---------
Total Distributable Cash Flow $ 84 $ 72 $ 266 $ 224
-------------------------------- --------- --------- --------- ---------
-------------------------------- --------- --------- --------- ---------
General Partner distributions
declared (f) (4) (2) (9) (5)
Distributions allocable to
Class B units (g) (11) (2) (12) (2)
-------------------------------- --------- --------- --------- ---------
-------------------------------- --------- --------- --------- ---------
Distributable Cash Flow $ 69 $ 68 $ 245 $ 217
-------------------------------- --------- --------- --------- ---------
-------------------------------- --------- --------- --------- ---------
(a) Interest expense as presented here includes net realized loss related
to interest rate swaps.
(b) Amounts here are calculated in accordance with the cash distribution
policies of these entities. Distributions from each of our equity
investments represent our respective share of these entities'
quarterly distributable cash during the current reporting period.
(c) Our equity investee PNGTS has $22 million of senior secured notes
payment due in 2016, of which the Partnership's share is approximately
$11 million. While PNGTS debt repayments are not funded with cash
calls to its owners, PNGTS has historically funded its scheduled debt
repayments and other cash needs such as tax payments, by adjusting its
available cash for distribution, which effectively reduces the net
cash that we actually receive as distributions from PNGTS.
Accordingly, these amounts represent our 49.9 percent share of
distributions from PNGTS' available cash before our proportionate
share of the total debt repayment of PNGTS.
(d) Distributions to non-controlling interests represent the respective
share on our consolidated entities' quarterly distributable cash not
owned by us during the current reporting period.
(e) The Partnership's maintenance capital expenditures include cash
expenditures made to maintain, over the long term, our assets'
operating capacity, system integrity and reliability. Accordingly,
this amount represents the Partnership's and its consolidated
subsidiaries' maintenance capital expenditures and does not include
the Partnership's share of maintenance capital expenditures on our
equity investments. Such amounts are reflected in "Distributions from
equity investments" as those amounts are withheld by those entities
from their quarterly distributable cash.
(f) Distributions declared to the General Partner for the three and nine
months ended September 30, 2016 included an incentive distribution of
approximately $2 million and $5 million, respectively (2015 - $1
million and $2 million).
(g) During the nine months ended September 30, 2016, 30 percent of GTN's
total distributions amounted to $32 million. As a result of exceeding
the $20 million threshold since the end of the second quarter of 2016,
$12 million was allocated to the Class B units for the nine months
ended September 30, 2016, of which $1 million and $11 million were
allocated during the three months ended June 30, 2016 and September
30, 2016, respectively. From April 1 to September 30, 2015, 30 percent
of GTN's total distributable cash flow amounted to $17 million. As a
result, $2 million of net income attributable to controlling interests
was allocated to the Class B units for both the three and nine months
ended September 30, 2015.
Contacts: Media Inquiries: Mark Cooper / James Millar 403.920.7859 800.608.7859 Unitholder and Analyst Inquiries: Rhonda Amundson 877.290.2772 [email protected]
Source: TC PipeLines, LP
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