TC PipeLines, LP (NYSE: TCP) (the Partnership) reported today
fourth quarter 2019 net income attributable to controlling
interests of $76 million and distributable cash flow of $76
million. For the year ended December 31, 2019, net income
attributable to controlling interests was $280 million and
distributable cash flow was $340 million.
“2019 was a solid, constructive year for our
partnership. We worked hard to take full advantage of our
existing natural gas infrastructure and to deliver disciplined
capital projects, and as a result we finished 2019 in a very
healthy financial position,” said Nathan Brown, president of TC
PipeLines, GP, Inc. “Our commercial team succeeded in finding
incremental transportation revenue opportunities across our
portfolio, largely recouping the reduction in revenues that arose
from the 2018 FERC actions. Although adjusted earnings and
distributable cash flow were lower year-over-year, this was largely
the result of Bison’s contract terminations at the end of
2018.”
“We continue to execute on our growth projects. Phase II of
Portland’s PXP project went into service in November of 2019 as did
Phase I of its Westbrook XPress project,” continued Brown. “We
announced our largest-ever project last fall, the GTN XPress
project, which we are progressing and expect to be fully in-service
through a multi-phase construction process by November
2023. We’re also proceeding with an expansion on our Tuscarora
project as well as the final phases of PNGTS’ projects. As
we’ve announced previously, we see continued potential for organic
growth on other systems in our existing footprint via
compression-only expansions. Iroquois’ ExC project and the
potential North Baja XPress project are good examples of this type
of responsible expansion and development. We continue to build
a strong and diversified asset base of strategically located assets
and believe that this strong foundation of sustainable energy
infrastructure will deliver unitholder value well into the
future.”
Full year and fourth quarter 2019
highlights (unaudited)
- Full year highlights
- generated net income attributable
to controlling interests of $280 million
- paid cash distributions of $189
million to the common unitholders and the General Partner and $13
million to the Class B unitholder
- declared cash distributions of
$2.60 per common unit
- generated EBITDA of $460 million
and distributable cash flow of $340 million
- reduced long-term debt by $106
million
- announced the approximately $335
million GTN XPress project in November 2019 which will transport
approximately 250,000 Dth/day of additional volumes in late
2023
- announced $13 million Tuscarora
XPress project
- successfully concluded binding open
season for North Baja XPress project in April 2019 to transport
additional volumes of natural gas along the North Baja mainline
system
- received approval from the Federal
Energy Regulatory Commission (FERC) in July 2019 to increase the
certificated capacity on PNGTS for Phase I of its Westbrook XPress
project
- Standard & Poor’s (S&P)
upgraded credit rating to BBB/Stable from BBB-/Stable in July
2019
- Fourth quarter and other recent
highlights
- generated net income attributable
to controlling interests of $76 million
- paid cash distributions of $47
million
- declared cash distributions of
$0.65 per common unit
- generated EBITDA of $119 million
and distributable cash flow of $76 million
- placed Phase II of Portland XPress
and Phase I of Westbrook XPress projects into service on November
1, 2019
- filed an application with FERC to
authorize the construction of the North Baja XPress project and the
Iroquois Enhancement by Compression project (ExC Project)
The Partnership’s financial highlights for
the fourth quarter and full year of 2019 compared to the same
periods in 2018 were:
|
Three months ended |
|
Twelve months ended |
(unaudited) |
December 31, |
|
December 31, |
(millions of dollars, except per common unit amounts) |
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Net income (loss) attributable
to controlling interests |
|
76 |
|
|
|
(413 |
) |
|
|
280 |
|
|
|
(182 |
) |
Net income (loss) per common
unit – basic and diluted (a) |
$ |
0.95 |
|
|
|
($5.80 |
) |
|
$ |
3.74 |
|
|
|
($2.68 |
) |
|
|
|
|
|
|
|
|
Adjusted earnings (b) |
|
76 |
|
|
|
86 |
|
|
|
280 |
|
|
|
317 |
|
Adjusted earnings per common
unit – basic and diluted (a) (b) |
$ |
0.95 |
|
|
|
$1.06 |
|
|
$ |
3.74 |
|
|
|
$4.18 |
|
|
|
|
|
|
|
|
|
Earnings before interest,
taxes, depreciation and amortization (EBITDA) (b) |
|
119 |
|
|
|
(359 |
) |
|
|
460 |
|
|
|
27 |
|
Adjusted earnings before
interest, taxes, depreciation and amortization (Adjusted EBITDA)
(b) |
|
119 |
|
|
|
140 |
|
|
|
460 |
|
|
|
526 |
|
|
|
|
|
|
|
|
|
Cash distributions paid |
|
(47 |
) |
|
|
(47 |
) |
|
|
(189 |
) |
|
|
(218 |
) |
Class B distributions
paid |
|
- |
|
|
|
- |
|
|
|
(13 |
) |
|
|
(15 |
) |
Distributable cash flow
(b) |
|
76 |
|
|
|
95 |
|
|
|
340 |
|
|
|
391 |
|
|
|
|
|
|
|
|
|
Cash distribution
declared per common unit |
$ |
0.65 |
|
|
|
$0.65 |
|
|
$ |
2.60 |
|
|
|
$2.60 |
|
|
|
|
|
|
|
|
|
Weighted average
common units outstanding – basic and diluted
(millions) |
|
71.3 |
|
|
|
71.3 |
|
|
|
71.3 |
|
|
|
71.3 |
|
|
|
|
|
|
|
|
|
Common units
outstanding, end of period (millions) |
|
71.3 |
|
|
|
71.3 |
|
|
|
71.3 |
|
|
|
71.3 |
|
(a) Net income (loss) per common unit is computed by dividing
net income (loss) 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. Adjusted earnings per common unit is computed by
dividing Adjusted earnings, 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 Operations section of this
release.(b) Distributable cash flow, EBITDA, Adjusted EBITDA,
Adjusted earnings and Adjusted earnings per common unit are
non-GAAP financial measures. Refer to the description of these
non-GAAP financial measures in the section of this release entitled
“Non-GAAP Measures” and the Supplemental Schedule for further
detail, including a reconciliation to the comparable GAAP
measures.
Recent business
developments:
Cash distributions – On January 21, 2020, the board of directors
of our General Partner declared the Partnership’s fourth quarter
2019 cash distribution in the amount of $0.65 per common unit
payable on February 14, 2020, to unitholders of record as of
January 31, 2020. The declared distribution to our General Partner
was $1 million for its two percent general partner interest.
North Baja XPress Project (North Baja XPress) – The North Baja
XPress project is an estimated $90 million potential project to
transport additional volumes of natural gas along North Baja’s
mainline system. The project was initiated in response to
market demand to provide firm transportation service of up to
approximately 495,000 Dth/day between Ehrenberg, Arizona and
Ogilby, California. The binding open season for the project was
concluded in April of 2019. In December 2019, North Baja filed an
application with FERC to authorize the construction of this
project. The estimated in-service date is November 1, 2022, subject
to the satisfaction or waiver of certain conditions precedent,
including a positive Final Investment Decision (FID) from Sempra
LNG International, LLC.
Iroquois’ ExC Project - During the second quarter of 2019,
Iroquois initiated the ExC Project which will optimize the Iroquois
system to meet current and future gas supply needs of utility
customers while minimizing the environmental impact through
enhancements at existing compressor stations along the pipeline. In
February 2020, Iroquois filed an application with FERC to authorize
the construction of the project. The project’s total design
capacity is approximately 125,000 Dth/day with an estimated cost of
$250 million and in-service date in November 2023. This
project will be 100 percent underpinned with 20-year contracts.
Results of operations
During the three months ended December 31, 2019,
the Partnership generated net income attributable to controlling
interests of $76 million compared to a loss of $413 million for the
same period in 2018, resulting in net income per common unit of
$0.95 compared to a loss of $5.80 per common unit for the same
period in 2018. The loss generated during the three months ended
December 31, 2018 was primarily due to the $537 million long-lived
asset impairment recognized on Bison and the $59 million goodwill
impairment charge related to Tuscarora, partially mitigated during
that period by an additional $97 million in revenue proceeds
realized in the final quarter of 2018 from Bison’s contract
terminations.
Adjusted earnings, which excludes the
non-recurring items above, were $76 million during the three months
ended December 31, 2019, a $10 million decrease compared to the
same period in 2018. The decrease was primarily the result of lower
revenues due to approximately 60 percent of the Bison contracts
being terminated in the prior year, partially offset by decreased
depreciation and financial charges.
Transmission revenues – Excluding the non-recurring $97 million
revenue proceeds from Bison’s contract terminations in 2018,
revenues in the fourth quarter were lower than the same period in
2018 by $19 million. This result is due largely to the decrease in
revenue from Bison, as the early contract terminations resulted in
a decrease in Bison’s revenue of approximately $13 million per
quarter in 2019.
Revenues were also impacted by the following:
- lower revenue on GTN primarily due to the impact of its
scheduled 10 percent rate decrease effective January 1, 2019,
substantially offset by an increase in its contracting
activities;
- lower revenue from PNGTS primarily due to lower contracted
revenue resulting from the expiration of its legacy recourse rate
firm contracts, substantially offset by short-term sales and
incremental revenues from Phase II of the Portland XPress project
and Phase I of the Westbrook XPress project, both of which went
into service November 1, 2019;
- lower short-term firm transportation services sold by North
Baja; and
- lower revenue on Tuscarora due to its scheduled 10.8 percent
rate decrease effective August 1, 2019 as part of the settlement
reached with its customers in 2019.
Operation and maintenance expenses – The $1 million increase in
operation and maintenance expenses in the fourth quarter of 2019
compared to the same period in 2018 was primarily due to an overall
net increase in:
- operational costs related to our pipeline systems' compliance
programs; and
- TC Energy Corporation’s (TC Energy) allocated costs related to
corporate support functions and common costs such as
insurance.
Depreciation – The $4 million decrease in depreciation expense
in the fourth quarter of 2019 compared to the same period in 2018
was a result of Bison’s depreciable base being eliminated during
the fourth quarter of 2018.
Financial charges and other - The $2 million decrease in the
fourth quarter of 2019 compared to the same period in 2018 was
attributable to the full repayment of our $170 million term loan
during the fourth quarter of 2018, together with a further $106
million reduction in our overall debt in 2019 including a net $40
million repayment of borrowings under our senior credit facility
during the first quarter of 2019 and a $50 million payment on our
2013 term loan facility during the second quarter of 2019.
Adjusted EBITDA was lower for the fourth quarter of 2019
compared to the same period in 2018. The $21 million decrease was
primarily due to lower revenue and higher operation and maintenance
expenses during the period, as discussed above.
Our distributable cash flow decreased by $19 million in the
fourth quarter of 2019 compared to the same period in 2018 due to
the net effect of:
- lower Adjusted EBITDA from our consolidated subsidiaries;
- lower Class B allocation primarily due to the increase in
maintenance capital expenditures which reduced the distributable
cash flow generated by GTN; and
- lower interest expense due to the full repayment of the $170
million term loan during the fourth quarter of 2018, the repayment
of borrowings under our senior credit facility during the first
quarter of 2019 and the $50 million payment on our 2013 term loan
facility in the first half of 2019.
Cash flow analysis
Operating cash flows
In the twelve months ended December 31, 2019, the
Partnership’s net cash provided by operating activities decreased
by $128 million compared to the same period in 2018 primarily due
to the net effect of:
- lower net cash flow from operations of our consolidated
subsidiaries primarily due to lower revenue from Bison as a result
of the contract terminations in 2018 and an overall increase in our
operating expenses primarily due to higher costs related to our
pipeline system’s compliance programs and increases in TC Energy’s
allocated costs related to corporate support functions and common
costs such as insurance;
- increase in distributions received from operating activities of
equity investments as a result of:
- lower maintenance capital spending during 2019 on Northern
Border; and
- increase in distributions from Iroquois related to an increase
in its cash generated from prior years’ strong discretionary
revenues.
Investing cash flows
During the twelve months ended December 31, 2019, cash used
in our investing activities decreased by $3 million compared to the
same period in 2018 primarily due to the net impact of the
following:
- higher maintenance capital expenditures on GTN for major
compressor equipment overhauls and pipe integrity projects, initial
spending on GTN XPress project and continued capital spending on
our Portland and Westbrook XPress projects and other growth
projects;
- $4 million equity contribution to Iroquois representing the
Partnership’s 49.34 percent share of a $7 million cash call from
Iroquois to cover costs of regulatory approvals related to their
capital project; and
- $50 million distribution received from Northern Border that was
considered a return of investment during the second quarter of
2019.
Maintenance capital expenditures are added to our pipelines’
respective rate bases as spent and are expected to earn a return on
and of capital over time through the regulatory rate-making
process.
Financing cash flows
The Partnership's net cash used for financing activities was
$175 million lower in the twelve months ended December 31, 2019
compared to the same period in 2018 primarily due to the net effect
of:
- $191 million decrease in net debt repayments;
- $29 million decrease in distributions paid to common
unitholders as a result of a lower per unit declaration beginning
in second quarter 2018 in response to the 2018 FERC actions;
- $8 million increase in distributions paid to non-controlling
interests during 2019 as a result of increased income generated by
PNGTS;
- $2 million decrease in distributions paid to Class B units in
2019 as compared to 2018; and
- $40 million decrease in cash from equity issuances in 2019 as
the Partnership’s At-the-market (ATM) program was suspended during
the first quarter of 2018.
At December 31, 2019, our cash and cash equivalents balance was
higher than at December 31, 2018 by approximately $50 million and
our debt balance was lower by $106 million. As of February 20,
2020, the available borrowing capacity under our senior credit
facility is $500 million. We believe our cash position, remaining
borrowing capacity on our senior credit facility and our operating
cash flows are sufficient to fund our short-term liquidity
requirements, including distributions to our unitholders, ongoing
and planned capital expenditures and required debt repayments. As
our GTN XPress project progresses, we anticipate funding the
Partnership's share of the required capital using cash on hand and
drawings under our senior credit facility, if required.
Non-GAAP financial
measures
The following non-GAAP financial measures are
presented as a supplement to our financial statements:
- EBITDA
- Adjusted EBITDA
- Adjusted earnings
- Adjusted earnings per common unit
- Total distributable cash flow
- Distributable cash flow
EBITDA is an approximate measure of our operating cash flow
during the current earnings period and reconciles directly to the
most comparable measure of net income. It measures our earnings
before deducting interest, depreciation and amortization, taxes,
net income attributable to non-controlling interests, and includes
earnings from our equity investments.
We do not believe our net income or our EBITDA
for the year ended December 31, 2018 is reflective of our
underlying operations during the period and, therefore, we present
Adjusted earnings and Adjusted EBITDA as non-GAAP measures that
exclude the impact of the following non-recurring items that
occurred in the fourth quarter of 2018 from earnings and
EBITDA:
- Bison’s contract termination proceeds amounting to $97 million
recognized as revenue during the fourth quarter of 2018;
- $537 million non-cash impairment charge related to Bison’s
remaining balance of property, plant and equipment; and
- $59 million non-cash impairment charge related to Tuscarora’s
goodwill.
In 2019, we had no similar adjustments in our
Adjusted EBITDA. Accordingly, our EBITDA is the same as Adjusted
EBITDA for 2019.
Total distributable cash flow and distributable
cash flow provide measures of distributable cash generated during
the current earnings period and reconcile directly to the net
income amounts presented.
Total distributable cash flow does not factor in
any growth capital spending. It includes our Adjusted EBITDA
plus:
- distributions from our equity investments less:
- earnings from our equity investments,
- equity allowance for funds used during construction (AFUDC) if
any,
- interest expense,
- current income taxes,
- distributions to non-controlling interests, and
- maintenance capital expenditures from consolidated
subsidiaries.
Distributable cash flow is computed net of distributions
declared to the General Partner and any distributions allocable to
Class B units. Distributions declared to the General Partner are
based on its two percent interest plus, if applicable, an amount
equal to incentive distributions. Distributions allocable to the
Class B units equal 30 percent of GTN’s distributable cash flow for
the year ending December 31, 2019 less $20 million (2018 - less $20
million) and, if required, the percentage by which distributions
payable to common units were reduced (Class B Reduction). The Class
B Reduction was implemented during the first quarter of 2018
following the Partnership’s common unit distribution reduction of
35 percent. The Class B Reduction will apply to any calendar year
during which distributions payable in respect of common units for
such calendar year are less than $3.94 per common unit.
The non-GAAP financial measures described above 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 cash generating capacity.
The non-GAAP financial 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. Additionally,
these measures as presented may not be comparable to similarly
titled measures of other companies.
For a reconciliation of these non-GAAP financial measures to
GAAP measures, please see the table captioned “Reconciliation of
Net income to Distributable Cash Flow” included at the end of this
release.
Conference call
Members of the investment community and other interested parties
are invited to participate in a teleconference by calling
800.377.0758 on February 20, 2020 at 10:00 a.m. CST/11:00 a.m. EST.
Nathan Brown, President of the General Partner, along with other
members of management, will discuss the Partnership’s fourth
quarter and year-end financial results and provide an update on the
Partnership’s business, followed by a question and answer session.
Please dial in 10 minutes prior to the start of the call. No pass
code is required. A live webcast of the conference call will also
be available through the Partnership’s website at
http://www.tcpipelineslp.com/events-and-presentations.html or
via the following URL: http://www.gowebcasting.com/10493. Slides
for the presentation will be posted on the Partnership’s website
under “Events and Presentations” prior to the webcast.
A replay of the teleconference will also be available two hours
after the conclusion of the call and until 11 p.m. CST / 12 a.m.
EST on February 27, 2020, by calling 800.408.3053, then entering
pass code 3000045#.
About TC PipeLines, LP
TC PipeLines, LP is a Delaware master limited partnership with
interests in eight federally regulated U.S. interstate natural gas
pipelines which serve markets in the Western, Midwestern and
Northeastern United States. The Partnership is managed by its
general partner, TC PipeLines GP, Inc., a subsidiary of TC Energy
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.” 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
ability of these assets to generate ongoing value to our
unitholders, impact of potential impairment charges, decreases in
demand on our pipeline systems, increases in operating and
compliance costs, the outcome of rate proceedings, the impact of
recently issued and future accounting updates and other changes in
accounting policies, potential changes in the taxation of MLP
investments by state or federal governments such as the elimination
of pass-through taxation or tax deferred distributions, our ability
to identify and complete expansion and growth opportunities,
operating hazards beyond our control, and our ability to access
debt and equity markets that negatively impacts the
Partnership’s ability to finance its capital spending. These and
other factors that could cause future results to differ materially
from those anticipated are discussed in “Item 1A. Risk Factors” in
our Annual Report on Form 10-K for the year-ended December 31, 2019
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.
Media
Inquiries:
Hejdi Carlsen / Jaimie Harding 403.920.7859 or 800.608.7859
Unitholder & Analyst Inquiries:
Rhonda Amundson
877.290.2772
investor_relations@tcpipelineslp.com
|
TC PipeLines, LP |
Financial Summary |
|
Consolidated Statements of
Operations |
|
Three months ended |
|
Twelve months ended |
(unaudited) |
|
December 31, |
|
December 31, |
(millions of dollars, except per common unit amounts) |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
Transmission revenues |
|
|
104 |
|
|
|
220 |
|
|
|
403 |
|
|
|
549 |
|
Equity earnings |
|
|
45 |
|
|
|
44 |
|
|
|
160 |
|
|
|
173 |
|
Impairment of long-lived assets |
|
|
- |
|
|
|
(537 |
) |
|
|
- |
|
|
|
(537 |
) |
Impairment of goodwill |
|
|
- |
|
|
|
(59 |
) |
|
|
- |
|
|
|
(59 |
) |
Operation and maintenance expenses |
|
|
(20 |
) |
|
|
(19 |
) |
|
|
(71 |
) |
|
|
(67 |
) |
Property taxes |
|
|
(7 |
) |
|
|
(7 |
) |
|
|
(26 |
) |
|
|
(28 |
) |
General and administrative |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(8 |
) |
|
|
(6 |
) |
Depreciation and amortization |
|
|
(20 |
) |
|
|
(24 |
) |
|
|
(78 |
) |
|
|
(97 |
) |
Financial charges and other |
|
|
(20 |
) |
|
|
(22 |
) |
|
|
(83 |
) |
|
|
(92 |
) |
Net income (loss) before taxes |
|
|
80 |
|
|
|
(406 |
) |
|
|
297 |
|
|
|
(164 |
) |
Income tax benefit (expense) |
|
|
2 |
|
|
|
- |
|
|
|
1 |
|
|
|
(1 |
) |
Net income (loss) |
|
|
82 |
|
|
|
(406 |
) |
|
|
298 |
|
|
|
(165 |
) |
|
|
|
|
|
|
|
|
|
Net income attributable to non-controlling interests |
|
|
6 |
|
|
|
7 |
|
|
|
18 |
|
|
|
17 |
|
Net income (loss) attributable to controlling
interests |
|
|
76 |
|
|
|
(413 |
) |
|
|
280 |
|
|
|
(182 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to controlling interest
allocation |
|
|
|
|
|
|
|
|
Common units |
|
|
68 |
|
|
|
(414 |
) |
|
|
267 |
|
|
|
(191 |
) |
General Partner |
|
|
1 |
|
|
|
(8 |
) |
|
|
5 |
|
|
|
(4 |
) |
Class B units |
|
|
7 |
|
|
|
9 |
|
|
|
8 |
|
|
|
13 |
|
|
|
|
76 |
|
|
|
(413 |
) |
|
|
280 |
|
|
|
(182 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) per common unit – basic and
diluted (a) |
|
$ |
0.95 |
|
|
|
($5.80 |
) |
|
$ |
3.74 |
|
|
|
($2.68 |
) |
|
|
|
|
|
|
|
|
|
Weighted average common units outstanding – basic
and diluted (millions) |
|
|
71.3 |
|
|
|
71.3 |
|
|
|
71.3 |
|
|
|
71.3 |
|
|
|
|
|
|
|
|
|
|
Common units outstanding, end of period
(millions) |
|
|
71.3 |
|
|
|
71.3 |
|
|
|
71.3 |
|
|
|
71.3 |
|
(a) Net income (loss) per common unit is computed by dividing
net income (loss) attributable to controlling interests, after
deduction of amounts attributable to the General Partner, 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 two percent general partner interest. For the
year ended December 31, 2019, 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 and is further
reduced by the Class B Reduction for 2019 (2018 - less the
threshold of $20 million and the Class B Reduction). During
the three and twelve months ended December 31, 2019 $7 million and
$8 million was allocated to the Class B units, respectively
(December 31, 2019 - $9 million and $13 million).
TC PipeLines,
LPFinancial Summary
Consolidated Balance
Sheets
(unaudited) |
|
|
|
|
(millions of dollars) |
|
December 31, 2019 |
|
December 31, 2018 |
|
|
|
|
|
ASSETS |
|
|
|
|
Current Assets |
|
|
|
|
Cash and cash
equivalents |
|
83 |
|
|
33 |
Accounts receivable and
other |
|
43 |
|
|
48 |
Dividends receivable
from Iroquois |
|
14 |
|
|
- |
Inventories |
|
10 |
|
|
8 |
Other |
|
6 |
|
|
8 |
|
|
156 |
|
|
97 |
Equity investments |
|
1,098 |
|
|
1,196 |
Property, plant and
equipment |
|
|
|
|
(Net of $1,187
accumulated depreciation; 2018 - $1,110) |
|
1,528 |
|
|
1,529 |
Goodwill |
|
71 |
|
|
71 |
Other assets |
|
- |
|
|
6 |
TOTAL
ASSETS |
|
2,853 |
|
|
2,899 |
|
|
|
|
|
LIABILITIES AND
PARTNERS’ EQUITY |
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts payable and
accrued liabilities |
|
28 |
|
|
36 |
Accounts payable to
affiliates |
|
8 |
|
|
6 |
Accrued interest |
|
11 |
|
|
12 |
Current portion of
long-term debt |
|
123 |
|
|
36 |
|
|
170 |
|
|
90 |
Long-term debt, net |
|
1,880 |
|
|
2,072 |
Deferred state income
taxes |
|
7 |
|
|
9 |
Other liabilities |
|
36 |
|
|
29 |
|
|
2,093 |
|
|
2,200 |
Partners’ Equity |
|
|
|
|
Common units |
|
544 |
|
|
462 |
Class B units |
|
103 |
|
|
108 |
General partner |
|
14 |
|
|
13 |
Accumulated other
comprehensive income (loss) (AOCI) |
|
(5 |
) |
|
8 |
Controlling interests |
|
656 |
|
|
591 |
Non-controlling interest |
|
104 |
|
|
108 |
|
|
760 |
|
|
699 |
TOTAL LIABILITIES AND
PARTNERS’ EQUITY |
|
2,853 |
|
|
2,899 |
TC PipeLines,
LPFinancial Summary
Consolidated Statement of Cash
Flows
|
|
Twelve months ended |
(unaudited) |
|
December 31, |
(millions of dollars) |
|
2019 |
|
|
2018 |
|
|
|
|
|
|
Cash Generated from
Operations |
|
|
|
|
Net income (loss) |
|
298 |
|
|
(165 |
) |
Depreciation and
amortization |
|
78 |
|
|
97 |
|
Impairment of long-lived
assets |
|
- |
|
|
537 |
|
Impairment of goodwill |
|
- |
|
|
59 |
|
Amortization of debt issue
costs reported as interest expense |
|
2 |
|
|
2 |
|
Amortization of realized loss
on derivative instruments |
|
- |
|
|
1 |
|
Equity earnings from equity
investments |
|
(160 |
) |
|
(173 |
) |
Distributions received from
operating activities of equity investments |
|
200 |
|
|
188 |
|
Change in other long-term
liabilities |
|
(1 |
) |
|
(2 |
) |
Equity allowance for funds
used during construction (AFUDC) |
|
(2 |
) |
|
(1 |
) |
Change in operating working
capital |
|
(3 |
) |
|
(3 |
) |
|
|
412 |
|
|
540 |
|
Investing
Activities |
|
|
|
|
Investment in Great Lakes |
|
(10 |
) |
|
(9 |
) |
Investment in Iroquois |
|
(4 |
) |
|
- |
|
Distribution received from
Northern Border as return of investment |
|
50 |
|
|
- |
|
Distribution received from
Iroquois as return of investment |
|
8 |
|
|
10 |
|
Capital expenditures |
|
(73 |
) |
|
(40 |
) |
Other |
|
(3 |
) |
|
4 |
|
|
|
(32 |
) |
|
(35 |
) |
Financing
Activities |
|
|
|
|
Distributions paid to common
units, including the General Partner |
|
(189 |
) |
|
(218 |
) |
Distributions paid to Class B
units |
|
(13 |
) |
|
(15 |
) |
Distributions paid to
non-controlling interests |
|
(22 |
) |
|
(14 |
) |
Common unit issuance, net |
|
- |
|
|
40 |
|
Long-term debt issued, net of
discount |
|
30 |
|
|
219 |
|
Long-term debt repaid |
|
(136 |
) |
|
(516 |
) |
Debt issuance costs |
|
- |
|
|
(1 |
) |
|
|
(330 |
) |
|
(505 |
) |
Increase in cash and
cash equivalents |
|
50 |
|
|
- |
|
Cash and cash equivalents,
beginning of period |
|
33 |
|
|
33 |
|
Cash and cash
equivalents, end of period |
|
83 |
|
|
33 |
|
TC PipeLines,
LPSupplemental Schedule
Non-GAAP
MeasuresReconciliations of Net income to
Distributable Cash Flow
|
|
Three months ended |
|
Twelve months ended |
(unaudited) |
|
December 31, |
|
December 31, |
(millions of dollars) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net income
(loss) |
|
82 |
|
|
(406 |
) |
|
298 |
|
|
(165 |
) |
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
Interest expense (a) |
|
19 |
|
|
23 |
|
|
85 |
|
|
94 |
|
Depreciation and
amortization |
|
20 |
|
|
24 |
|
|
78 |
|
|
97 |
|
Income taxes |
|
(2 |
) |
|
- |
|
|
(1 |
) |
|
1 |
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
119 |
|
|
(359 |
) |
|
460 |
|
|
27 |
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
Impairment of goodwill |
|
- |
|
|
59 |
|
|
- |
|
|
59 |
|
Impairment of long-lived
assets |
|
- |
|
|
537 |
|
|
- |
|
|
537 |
|
Bison contract
terminations |
|
- |
|
|
(97 |
) |
|
- |
|
|
(97 |
) |
|
|
|
|
|
|
|
|
|
ADJUSTED
EBITDA |
|
119 |
|
|
140 |
|
|
460 |
|
|
526 |
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
Distributions from equity
investments (b) |
|
|
|
|
|
|
|
|
Northern Border |
|
24 |
|
|
25 |
|
|
93(c) |
|
|
85 |
|
Great Lakes |
|
16 |
|
|
17 |
|
|
55 |
|
|
66 |
|
Iroquois (d) |
|
13 |
|
|
14 |
|
|
69 |
|
|
56 |
|
|
|
53 |
|
|
56 |
|
|
217 |
|
|
207 |
|
Less: |
|
|
|
|
|
|
|
|
Equity earnings: |
|
|
|
|
|
|
|
|
Northern Border |
|
(19 |
) |
|
(19 |
) |
|
(69 |
) |
|
(68 |
) |
Great Lakes |
|
(14 |
) |
|
(14 |
) |
|
(51 |
) |
|
(59 |
) |
Iroquois |
|
(12 |
) |
|
(11 |
) |
|
(40 |
) |
|
(46 |
) |
|
|
(45 |
) |
|
(44 |
) |
|
(160 |
) |
|
(173 |
) |
Less: |
|
|
|
|
|
|
|
|
AFUDC equity |
|
(1 |
) |
|
(1 |
) |
|
(2 |
) |
|
(1 |
) |
Interest expense (a) |
|
(19 |
) |
|
(23 |
) |
|
(85 |
) |
|
(94 |
) |
Current income taxes (e) |
|
- |
|
|
- |
|
|
(1 |
) |
|
(1 |
) |
Distributions to
non-controlling interest (f) |
|
(7 |
) |
|
(8 |
) |
|
(21 |
) |
|
(20 |
) |
Maintenance capital
expenditures (g) |
|
(16 |
) |
|
(15 |
) |
|
(56 |
) |
|
(36 |
) |
|
|
(43 |
) |
|
(47 |
) |
|
(165 |
) |
|
(152 |
) |
|
|
|
|
|
|
|
|
|
Total Distributable
Cash Flow |
|
84 |
|
|
105 |
|
|
352 |
|
|
408 |
|
General Partner distributions
declared (h) |
|
(1 |
) |
|
(1 |
) |
|
(4 |
) |
|
(4 |
) |
Distributions allocable to
Class B units (i) |
|
(7 |
) |
|
(9 |
) |
|
(8 |
) |
|
(13 |
) |
Distributable Cash
Flow |
|
76 |
|
|
95 |
|
|
340 |
|
|
391 |
|
(a) Interest expense as presented includes net realized
loss related to the interest rate swaps.(b) Amounts are
calculated in accordance with the cash distribution policies of
each of our equity investments. Distributions from our equity
investments represent our respective share of these entities’
quarterly distributable cash for the current reporting
period.(c) Excludes the $50 million additional distribution
received from Northern Border. The entire proceeds were used by the
Partnership to partially repay our 2013 term loan
facility.(d) This amount represents our proportional 49.34
percent share of the distribution declared by our equity investee,
Iroquois, for the current reporting period and includes our 49.34
percent share of the Iroquois unrestricted cash distribution
amounting to approximately $2.6 million and $10.4 million,
respectively, for both the three and twelve months ended December
31, 2019 and December 31, 2018 and an additional cash distribution
we received amounting to approximately $15 million during the year
ended December 31, 2019 (2018 - none) related to the increase in
the cash Iroquois generated from its higher net income in 2017
(post- acquisition) and 2018. (e) Beginning the year
ended December 31, 2019, we reduced our distributable cashflows
based on the current income tax expense paid by PNGTS on its New
Hampshire state taxes which approximates net cash paid during the
current period. The change did not materially impact comparability
to prior periods. (f) Distributions to non-controlling
interests represent the respective share of our consolidated
entities’ distributable cash from earnings not owned by us for the
periods presented.(g) The Partnership’s maintenance capital
expenditures include cash expenditures made to maintain, over the
long term, the operating capacity, system integrity and reliability
of our pipeline assets. 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 for 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.(h) No incentive distributions were declared to the
General Partner for the twelve months ended December 31, 2019 and
2018.(i) Distributions allocable to the Class B units are
based on 30 percent of GTN’s distributable cash flow during the
current reporting period but declared and paid in the subsequent
reporting period.
Reconciliation of net income (loss) attributable to
controlling interest to Adjusted earnings
|
Three months ended |
|
Twelve months ended |
(unaudited) |
December 31, |
|
December 31, |
(millions of dollars) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income (loss) attributable
to controlling interests |
76 |
|
(413 |
) |
|
280 |
|
(182 |
) |
Add: Impairment of goodwill |
- |
|
59 |
|
|
- |
|
59 |
|
Add: Impairment of long-lived
assets |
- |
|
537 |
|
|
- |
|
537 |
|
Less: Bison contract
terminations |
- |
|
(97 |
) |
|
- |
|
(97 |
) |
|
|
|
|
|
|
|
|
Adjusted
earnings |
76 |
|
86 |
|
|
280 |
|
317 |
|
Reconciliation of net income (loss) per common unit to
Adjusted earnings per common unit
|
Three months ended December 31, |
|
Twelve months ended December 31, |
(unaudited) |
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income (loss) per common
unit – basic and diluted |
$ |
0.95 |
|
$ |
(5.80 |
) |
|
$ |
3.74 |
|
$ |
(2.68 |
) |
Add: Impairment of goodwill
(a) |
|
- |
|
|
0.81 |
|
|
|
- |
|
|
0.81 |
|
Add: Impairment of long-lived
assets (b) |
|
- |
|
|
7.38 |
|
|
|
- |
|
|
7.38 |
|
Less: Bison contract terminations
(c) |
|
- |
|
|
(1.33 |
) |
|
|
- |
|
|
(1.33 |
) |
|
|
|
|
|
|
|
|
Adjusted earnings per
common unit |
$ |
0.95 |
|
$ |
1.06 |
|
|
$ |
3.74 |
|
$ |
4.18 |
|
(a) Computed by dividing the $59 million impairment charge,
after deduction of amounts attributable to the General Partner with
respect to its two percent interest, by the weighted average number
of common units outstanding during the period.(b) Computed by
dividing the $537 million impairment charge, after deduction of
amounts attributable to the General Partner with respect to its two
percent interest, by the weighted average number of common units
outstanding during the period.(c) Computed by dividing the $97
million revenue, after deduction of amounts attributable to the
General Partner with respect to its two percent interest, by the
weighted average number of common units outstanding during the
period.
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