TransCanada Expects No Material Financial Impact From Proposed Tax Actions by the Federal Energy Regulatory Commission
March 19 2018 - 7:00AM
News Release – TransCanada Corporation (TSX:TRP) (NYSE:TRP)
(TransCanada) released the following statement regarding the
Federal Energy Regulatory Commission’s (FERC) recent pronouncements
on income tax matters with respect to pipeline ratemaking:
On March 15, 2018, FERC issued a Notice of Proposed Rulemaking
(NOPR) and revised policy statement to address the treatment of
income taxes for ratemaking purposes. There are two separate
avenues for these changes to be addressed: the first is a NOPR,
which focuses on evaluating and addressing impacts to pipeline
tariffs in regards to income tax rate changes enacted through the
Tax Cuts and Jobs Act of 2017 (U.S. Tax Reform); and the second is
a revision to FERC’s long-standing income tax allowance policy to
no longer permit master limited partnerships (MLPs) to recover an
income tax allowance in their cost of service rates.
Approximately 50 percent of our U.S. Natural Gas Pipelines 2018
revenues are derived from negotiated or discounted tariffs and
therefore would not be materially impacted by FERC’s actions. This
percentage is expected to increase to approximately 65 percent in
2019 as our growth projects are placed into service. As part of the
modernization settlement on Columbia Gas Transmission, we recently
filed for, and FERC approved, implementation of a rate reduction
due to the corporate tax rate changes on that system.
As noted previously in its annual disclosure documents and on
its fourth quarter 2017 results call, TransCanada expects a modest
increase in earnings and no fundamental change to its EBITDA
guidance, payout metrics, financial flexibility or funding plans
through 2020 as a result of U.S. Tax Reform. Furthermore,
given that a sizeable portion of our U.S. Natural Gas Pipelines
portfolio is held in corporate form, including ANR, Columbia Gas
and Columbia Gulf, along with the composition of its revenue base
and level of ownership in TC PipeLines, LP, changes to FERC’s tax
allowance policy for MLPs are not expected to have a material
financial impact on the Company.
TransCanada is currently reviewing details of these FERC actions
and plans to file comments with FERC both individually and through
our trade organizations. Once the public comment period is
complete, we expect FERC to issue final order(s) sometime in the
summer or in early fall 2018.
We appreciate that FERC is allowing TransCanada and our peers
the opportunity to comment on this NOPR and that FERC recognizes
there is not a one-size-fits-all solution. Each of our U.S. natural
gas pipelines are unique, with different customer bases and
contract structures. We will evaluate each of our pipelines
individually to determine specific impacts and paths forward and
will communicate additional information to the investment community
after we complete our evaluation of the impacts and the final FERC
order(s).
With more than 65 years' experience, TransCanada is a leader in
the responsible development and reliable operation of North
American energy infrastructure including natural gas and liquids
pipelines, power generation and gas storage facilities. TransCanada
operates one of the largest natural gas transmission networks that
extends more than 91,900 kilometres (57,100 miles), tapping into
virtually all major gas supply basins in North America. TransCanada
is a leading provider of gas storage and related services with 653
billion cubic feet of storage capacity. A large independent power
producer, TransCanada currently owns or has interests in
approximately 6,100 megawatts of power generation in Canada and the
United States. TransCanada is also the developer and operator of
one of North America's leading liquids pipeline systems that
extends approximately 4,900 kilometres (3,000 miles), connecting
growing continental oil supplies to key markets and refineries.
TransCanada's common shares trade on the Toronto and New York stock
exchanges under the symbol TRP. Visit TransCanada.com to learn
more, or connect with us on social media and 3BL Media.
FORWARD LOOKING INFORMATION
This publication contains certain information that is
forward-looking and is subject to important risks and uncertainties
(such statements are usually accompanied by words such as
"anticipate", "expect", "believe", "may", "will", "should",
"estimate", "intend" or other similar words). Forward-looking
statements in this document are intended to provide TransCanada
security holders and potential investors with information regarding
TransCanada and its subsidiaries, including management's assessment
of TransCanada's and its subsidiaries' future plans and financial
outlook. All forward-looking statements reflect TransCanada's
beliefs and assumptions based on information available at the time
the statements were made and as such are not guarantees of future
performance. 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, and not to use future-oriented
information or financial outlooks for anything other than their
intended purpose. TransCanada undertakes no obligation to update or
revise any forward-looking information except as required by law.
For additional information on the assumptions made, and the risks
and uncertainties which could cause actual results to differ from
the anticipated results, refer to the Fourth Quarter 2017 Financial
Highlights release and 2017 Annual Report filed under TransCanada's
profile on SEDAR at www.sedar.com and with the U.S. Securities and
Exchange Commission at www.sec.gov.
Media Inquiries:Scott Castleman304.357.2128 or
800.608.7859
TransCanada Investor & Analyst
Inquiries:David Moneta / Stuart Kampel403.920.7911 or
800.361.6522
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