TransCanada reports strong first quarter 2018 financial results

Diversified portfolio of high-quality assets continues to drive record performance

Photo: TransCanada

TransCanada Corporation today announced net income attributable to common shares for first quarter 2018 of $734 million or $0.83 per share compared to net income of $643 million or $0.74 per share for the same period in 2017. Comparable earnings for first quarter 2018 were $870 million or $0.98 per share compared to $698 million or $0.81 per share for the same period in 2017. TransCanada’s board of directors also declared a quarterly dividend of $0.69 per common share for the quarter ending June 30, 2018, equivalent to $2.76 per common share on an annualized basis.

“During the first quarter of 2018 our diversified portfolio of high-quality energy infrastructure assets continued to perform very well,” said Russ Girling, TransCanada’s president and chief executive officer. “Comparable earnings per share increased 21 per cent compared to the same period last year despite the sale of our U.S. Northeast power assets, reflecting the strong performance of our legacy assets and contributions from approximately $7 billion of growth projects that were placed into service over the last twelve months. These included expansions of our NGTL and Canadian Mainline systems in our Canadian natural gas pipelines business, the Gibraltar, Rayne XPress, Leach XPress and Cameron Access projects in our U.S. natural gas pipelines business and the Grand Rapids and Northern Courier liquids pipelines in Alberta.”

Looking forward, TransCanada will continue to advance their $21 billion near-term capital program with approximately $11 billion of projects expected to enter service by the end of 2018. This program is expected to generate significant additional growth in earnings and cash flow and support annual dividend growth at the upper end of an eight to 10 per cent range through 2020, and an additional eight to 10 per cent in 2021.

“We have invested approximately $7 billion into these projects to date and, despite recent significant changes to the MLP sector, are well positioned to fund the remainder through our strong and growing internally generated cash flow, along with a broad spectrum of financing levers including access to capital markets on compelling terms and potential portfolio management activities,” added Girling.

TransCanada continues to advance more than $20 billion of medium to longer-term projects including Keystone XL, Coastal GasLink and the Bruce Power life extension program.

“At the same time, we expect to secure additional organic growth opportunities associated with our extensive and well-positioned North American footprint. Success in advancing these and other projects into construction and operation could extend our dividend growth outlook beyond 2021,” concluded Girling.

Notable projects

  • Keystone XL: In December 2017, an appeal to Nebraska’s Court of Appeals was filed by intervenors after the Nebraska Public Service Commission (PSC) issued an approval of an alternative route for the Keystone XL project in November 2017. On March 14, 2018, the Nebraska Supreme Court, on its own motion, agreed to bypass the Court of Appeals and hear the appeal case against the PSC’s alternative route itself. We expect the Nebraska Supreme Court, as the final arbiter, could reach a decision by late 2018 or first quarter 2019.

    The Keystone XL Presidential Permit, issued in March 2017, has been challenged in two separate lawsuits commenced in Montana. Together with the U.S. Department of Justice, we are actively participating in these lawsuits to defend both the issuance of the permit and the exhaustive environmental assessments that support the U.S. President’s actions. Legal arguments addressing the merits of these lawsuits are scheduled to be heard in late May 2018 and we believe the court’s decisions may be issued by year-end 2018.

    The South Dakota Public Utilities Commission permit for the Keystone XL project was issued in June 2010 and recertified in January 2016. An appeal of that recertification was denied in June 2017 and that decision has been further appealed to the South Dakota Supreme Court. On April 6, 2018, the Supreme Court directed the parties to address whether the Court lacks jurisdiction under the governing statute to consider the appeal. Legal arguments are scheduled for April 2018. A decision from the Supreme Court is expected in second or third quarter 2018.

  • NGTL System: On April 9, 2018, we announced that the Sundre Crossover project was placed in service. The approximate $100 million pipeline project increases NGTL capacity at our Alberta / B.C. Export Delivery Point by 245 TJ/d (228 MMcf/d), enhancing connectivity to key downstream markets in the Pacific Northwest and California.

    The NGTL 2017 Expansion Program has also been completed with approximately $160 million of facilities placed in service since December 31, 2017, including the Northwest Mainline Loop-Boundary Lake pipeline on April 2, 2018. The 2017 Expansion Program added approximately 230 km (143 miles) of new pipeline along with additional compression facilities and increased the NGTL System capacity by approximately 535 TJ/d (500 MMcf/d).

    On February 15, 2018, we announced the successful completion of an open season for 260 TJ/d (242 MMcf/d) of existing and 1.1 PJ/d (1.0 Bcf/d) of expansion export capacity at the Empress / McNeill Export Delivery Point, with the expansion service expected to commence in November 2020 and April 2021. The average awarded contract term for the expansion capacity was approximately 29 years. We also announced that we had separately secured contracts for 664 TJ/d (620 MMcf/d) of incremental firm receipt service beginning in April 2021. Together, the incremental receipt and export delivery contracts will drive a $2.4 billion expansion program, bringing NGTL’s capital program to a total of $7.2 billion.

    On March 20, 2018, we announced the successful completion of an open season for additional expansion capacity at the Empress / McNeill Export Delivery Point for service expected to commence in November 2021. The offering of 300 TJ/d (280 MMcf/d) was oversubscribed with an average awarded contract term of approximately 22 years. The facilities and capital requirements for the expansion are still being finalized and are currently anticipated to increase NGTL’s capital program by a further approximate $120 million.

    On March 23, 2018, we filed an application with the National Energy Board (NEB) for approval of a negotiated settlement with our customers and other interested parties on the annual costs required to operate the NGTL System for 2018 and 2019, along with final 2018 tolls and revised interim 2018 tolls. The settlement fixes return on equity (ROE) at 10.1 per cent on 40 per cent deemed equity. The NEB is reviewing comments from interested parties and we anticipate a decision on the application in second quarter 2018.

  • White Spruce: In February 2018, the Alberta Energy Regulator issued a permit for the construction of the White Spruce pipeline. Construction has commenced with an anticipated in-service date in second quarter 2019.
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