TC Pipelines LP Q1 2010 Earnings Call Transcript

TC Pipelines LP Q1 2010 Earnings Call Transcript
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TC Pipeline LP (TCLP)

Q1 2010 Earnings Call

April 28, 2010 12:00 pm ET

Executives

Terry Hook - Manager of IR

Mark Zimmerman - President

Rob Jacobucci - Controller

Sean Brett - VP, Commercial Operations

Analysts

Michael Cerasoli - Goldman Sachs

Bradley Olson - Eagle Global Advisors

Ron Londe - Wells Fargo

Jeremy Tonet - UBS Securities

Presentation

Operator

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Previous Statements by TCLP
» TC PipeLines, LP Q4 2009 Earnings Call Transcript
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» TC PipeLines, LP Q2 2009 Earnings Call Transcript

Good day ladies and gentlemen, welcome to the TC Pipeline’s LP 2010 First quarter results conference call. I will now turn it over to Mr. Terry Hook, Manager of Investor Relations. Please go ahead, Mr. Hook.

Terry Hook

Thank you operator and good day everyone. I would like to welcome you to TC Pipeline’s first quarter 2010 conference call. With me today are Mr. Mark Zimmerman, President; Mr. Rob Jacobucci, Controller; and Mr. Sean Brett, Vice President, Commercial Operations. We are pleased to provide you with an opportunity to discuss our first quarter results and other general developments regarding the partnership.

Before we begin I would like to remind you that certain statements made during this conference call will balance sheet forward-looking regarding future events and our future financial performance. Our forward-looking statements are based on our beliefs, as all other assumptions made by and information currently available to us. These statements reflect our current views with respect to future events and are subject to various risks, uncertainties and assumptions as discussed in detail in our 2009, 10-K as well as our subsequent filings with the Securities and Exchange Commission. If one or more of these risks and uncertainties materialize or if the underlying assumptions prove incorrect actual results may differ materially from those described in the forward-looking statements.

Mark will begin today with the review of TC Pipeline’s achievements in the quarter, the recent cash distribution announcement and an update on the activities concerning our partnership and its general partner TransCanada Corporation. Rob will then review in detail the first quarter results. Following the prepared remarks we will ask the conference operator to coordinate your questions.

I will now turn the call over to our President Mark Zimmerman.

Mark Zimmerman

Thanks Terry and good morning everyone and thanks for joining us today. As outlined in today’s news release TC Pipeline has reported a $3.5 million in the first quarter partnership cash flows to $36.8 million compared to $33.3 million for the same quarter last year. Net income for the first quarter 2010 was 33.7 million, an increase of $1.9 million. Earlier this month we announced our first quarter cash distribution of $0.73 for common unit or $2.92 on an annualized basis.

This quarterly cash distribution is equal to the fourth quarter 2009 distribution and represent the 3.5% from the first quarter 2009 distribution of 70.5 cents. This is the 44th consecutive quarterly distribution paid by the partnership. Looking forward TC Pipeline’s believes that is well positioned to continue deliver stable and growing cash distributions to our unit holders. Our growth in earnings and cash flow this quarter was primarily due to lower financing costs and the positive impact of the acquisition of the North Baja Pipeline.

Since this acquisition back on July 1st, 2009 North Baja has not only enhanced and diversified the partnership to earnings and cash flow but the pipeline has performed and contributed at the top end of our expectations. Similar to North Baja, Tuscarora had an excellent quarter. Both North Baja and Tuscarora are situated in unique geographic locations and the profile of their long-term contracts provide securities consistent earnings and cash flow from quarter-to-quarter and this quarter is no different. As such these two pipelines are generally unaffected by the shifting natural gas supply and demand fundamentals. At the end other end of this spectrum are other two long-haul pipes, Great Lakes and Northern Border. While we have been challenged over the last few quarters by the current North American gas picture we remain optimistic on their long-term potential.

Northern Border experienced similar volumes in the first quarter of 2010 compared to the same period in 2009 at approximately 2.1 Bcf per day. Although overall volumes were consistent, revenues were lower as a result of the discounting rates in 2010 and utilization of shorter path segments. Those lower revenues were somewhat offset by a reduction in financing cost at the Northern Border level.

Turning to Great Lakes, revenues decreased 12% in the first quarter 2010 compared to the same period in 2009 as demand for its short-term services did not develop with the on set of a relatively warm winter, high gas storage inventory level and generally lower demand for natural gas. Lower operating expenses to some extent partially offset this reduction in revenues.

With respect to these systems the trend is continuing towards shorter term contracting. With our legacy contracts rolling off and sufficient transportation into the market demand centers there is less of an incentive for customers to lock up back to these transportation comps. However given that the rates charged in our systems relative to the cards to build infrastructure at low, we believe this systems will remain at cost effective alternative for shippers to transport natural gas for consumption in the markets they serve. While it does create some uncertainty for the cash flow and earning streams we believe that demand for gas and demand for services on both Northern Border and Great Lakes will remain.

The current downward pressure on revenues at Great Lakes and Northern Border caused by the current capital over supply situation is expected to be temporary and not indicative of the long-term value of these systems. With that said we are not resting on our laurels and we continue to do what we can to optimize the revenues from the pipeline and I am sure they are meeting the needs of their customers. In summary we believe our pipelines are critical North American infrastructure in the markets that they serve and we’ll continue to represent solid investments for TC PipeLines.

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