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Calgary, Alberta - July 26, 2002 - (TSE: TRP) (NYSE: TRP)
Second Quarter 2002 Highlights:
(All financial figures are in Canadian dollars unless noted otherwise)
- TransCanada PipeLines Limited's net income applicable to common shares from continuing operations (net earnings), for the second quarter 2002 was $202 million or $0.42 per share compared to second quarter 2001 net earnings of $175 million or $0.37 per share. Second quarter 2002 results include $25 million of earnings related to the recent Fair Return Application decision by the National Energy Board (NEB) for the period January 1, 2001 to June 30, 2002.
- Net income applicable to common shares for the second quarter 2002 was $202 million or $0.42 per share compared to $96 million or $0.20 per share for the same period in 2001.
- TransCanada's net earnings for the six months ended June 30, 2002 were $388 million or $0.81 per share compared to $345 million or $0.73 per share for the comparable period in 2001. In addition to the $25 million of net earnings related to the recent Fair Return Application decision by the NEB, net earnings for the first six months of 2002 include $7 million related to TransCanada's proportionate share of a favourable ruling in the Great Lakes Gas Transmission Company regarding Minnesota use tax paid in prior years.
- Net income applicable to common shares for the six months ended June 30, 2002 was $388 million or $0.81 per share compared to $258 million or $0.54 per share for the same period in 2001.
- TransCanada continues to strengthen its balance sheet. Funds generated from continuing operations for the second quarter 2002 increased approximately $80 million compared to the same period last year. For the six months ended June 30, 2002 funds generated from continuing operations were $932 million compared to $814 million for the same period in 2001, an increase of approximately 14 per cent. In the first six months of 2002, TransCanada used a portion of its cash resources to fund debt maturities of $116 million and reduce notes payable by $240 million. The company invested $215 million in its operations in the first six months of this year.
- TransCanada's Board of Directors today declared a quarterly dividend of $0.25 per share for the quarter ended September 30, 2002 on the company's outstanding common shares. This is the 155th consecutive quarterly dividend on TransCanada's common shares and is payable on October 31, 2002 to shareholders of record at the close of business on September 30, 2002. The Board also declared regular dividends on TransCanada's preferred shares.
- Deliveries of natural gas on the Alberta System averaged 11.3 billion cubic feet per day (Bcf/d) for the first six months of 2002, equal to deliveries for the same period in 2001. Field receipts volumes for the Alberta System for the six months ended June 30, 2002 were 11.3 Bcf/d compared to 11.4 Bcf/d for the same period last year. Canadian Mainline deliveries averaged 7.2 Bcf/d for the first six months of 2002 compared to 6.7 Bcf/d for the same period in 2001. Canadian Mainline inlet volumes at the Alberta border and in Saskatchewan which are delivered to markets for the first six months of this year were 6.1 Bcf/d compared to 5.7 Bcf/d for the first six months in 2001. The BC System delivered an average of 1.0 Bcf/d of natural gas in the first six months of this year, compared to 1.1 Bcf/d in the same period in 2001.
"TransCanada's second quarter results demonstrate our disciplined and steady approach to maintaining and utilizing our strong financial position," said Hal Kvisle, TransCanada's chief executive officer. "The strategic moves we've made over the past couple of years have positioned us as a strong, financially stable company. And in a time when unstable financial markets are resulting in many of our peers experiencing difficulty, TransCanada continues to deliver solid value and returns for its shareholders.
"By continuing to focus on our five key strategies we're staying the course toward our ultimate goal to be a leader in natural gas transmission and electric power in the northern tier of North America. I'm proud we have not wavered from our strategies since adopting them more than two years ago. We know what we want to achieve and how we're going to accomplish it. We are a strong competitor in our core businesses of natural gas transmission and power, and we will continue to use our competitive advantages to create shareholder value through astute investments in the northern tier of North America."
TransCanada's five key strategies are to: sustain, grow and optimize its natural gas transmission business; negotiate a new regulatory framework; grow its power business; be operationally excellent; and maintain and utilize its strong financial position.
Commenting on the state of the regulated Canadian pipeline industry, Mr. Kvisle said TransCanada is the largest owner of Canadian natural gas pipelines, with a current regulated ratebase of approximately $14 billion in its wholly owned pipelines. Over the past six years, TransCanada's return on capital for the majority of its Canadian regulated pipelines (not including the Alberta System) has declined from more than 7 per cent to approximately 5.8 per cent, through the workings of a bond-indexed formula adopted by the NEB in 1995. By comparison, returns across the broader North American pipeline industry continue to average more than 7 per cent.
In June 2001, TransCanada filed its Fair Return Application with the NEB, seeking a 7.5 per cent return on Canadian Mainline capital of approximately $9 billion. On June 21, 2002, the NEB released its decision on the Fair Return Application, awarding TransCanada a return of approximately 5.8 per cent on capital in the Canadian Mainline. This equates to a return on common equity of 9.53 per cent on a deemed common equity ratio of 33 per cent.
"We are disappointed with the NEB's decision because it does not recognize the long-term business risks of our Canadian Mainline, particularly the portion of the system that transports natural gas east from Winnipeg," said Mr. Kvisle. "TransCanada needs to operate this portion of the system for at least 30 more years in order to recover its equity investment and repay the associated debt. And we are concerned that western Canadian gas may not flow to markets served by this portion of the Canadian Mainline for an equal amount of time. We do not believe the NEB has recognized this substantial business risk, as evidenced by the low return on capital it awarded TransCanada."
Mr. Kvisle said regardless of its disappointment in the NEB's decision, TransCanada remains committed to the Canadian pipeline business. "Our Alberta System, our BC System and the western portion of the Canadian Mainline have better risk/reward characteristics than the eastern portion (east of Winnipeg) of the Canadian Mainline. Today, TransCanada is much more than just the Canadian Mainline, which now makes up approximately 40 per cent of our total asset base. And because the eastern portion of the Canadian Mainline now comprises only approximately 20 per cent of our total assets, we are optimistic that the associated risks can be managed.
"We are currently discussing alternative business models with our customers that would enable us to reduce our risk on the Canadian Mainline by recovering our capital over a shorter period of time. Through this process, we would work to reach agreement on a return on capital that is appropriate for a lower business risk on the Canadian Mainline."
Commenting on opportunities in the North American pipeline and power businesses, Mr. Kvisle said many of TransCanada's competitors are currently experiencing financial difficulties, in part, due to significant exposures to marketing and trading activities.
"TransCanada exited its natural gas marketing business in 2001, before industry conditions reached their current difficult state. Now, our strong balance sheet positions us to pursue and acquire high-quality natural gas pipeline and power assets in preferred American markets--swiftly, strongly and decisively. We are enthused by many of the current prospects, but we continue to approach each opportunity cautiously and with discipline."
In conclusion, Mr. Kvisle said TransCanada has emerged as a strong and viable company because of its commitments to both financial prudence and operational excellence. "Over the past two years, we have simplified our business significantly and intensified our focus on activities that affect our customers and shareholders positively. We run TransCanada with an extremely capable team of leaders and employees. I'm proud to say that they, along with TransCanada's board of directors and external auditors, continue to work hard to maintain the highest levels of corporate governance and business ethics for the company."
Teleconference
TransCanada will hold a teleconference today at 1:00 p.m. (Mountain) / 3:00 p.m. (Eastern) to discuss the second quarter 2002 financial results and general developments and issues concerning the company. Analysts, members of the media and other interested parties wanting to participate in the call should dial 1-800-387-6216 or 416-405-9328 (Toronto area) at least 10 minutes prior to the start of the call. No passcode is required. A live audio web cast of the teleconference will also be available on TransCanada's web site at www.transcanada.com.
The conference will begin with a short address by members of TransCanada's executive management, followed by a question and answer period for investment analysts. A question and answer period for members of the media will immediately follow.
A replay of the teleconference will be available two hours after the conclusion of the call until midnight, August 3, 2002, by dialing 1-800-408-3053 or 416-695-5800 (Toronto area) and entering passcode 1219622. The web cast will be archived and available for replay.
About TransCanada
TransCanada is a leading North American energy company. It is focused on natural gas transmission and power services with employees who are expert in these businesses. The company's network of approximately 38,000 kilometres of pipeline transports the majority of western Canada's natural gas production to the fastest growing markets in Canada and the United States. TransCanada owns, controls or is constructing a total of approximately 2,250 megawatts of power -- an amount of power that can meet the needs of more than two million average households. The company's common shares trade under the symbol TRP on the Toronto and New York stock exchanges. Visit us on the internet at www.transcanada.com for more information.
For further information, please contact:
Media Inquiries:
Glenn Herchak / Kurt Kadatz
(403) 920-7877
Analyst Inquiries:
David Moneta / Debbie Persad
(403) 920-7911
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