TransCanada Management Discusses Q3 2010 Results – Earnings Call Transcript
TransCanada Corp. (
)
Q3 2010 Earnings Call
November 3, 2010; 11:00 am ET
Executives
Russ Girling - President & Chief Executive Officer
Don Marchand - Executive Vice President & Chief Financial Officer
Alex Pourbaix - President of Energy & Oil Pipelines Business
Glenn Menuz - Vice President & Comptroller
Greg Lohnes - President, Natural Gas Pipelines
Analyst
Carl Kirst – BMO Capital
Ted Durbin – Goldman Sachs
Linda Ezergailis – TD Newcrest
Juan Plessis - Canaccord
Matthew Akman – Macquarie
Pierre Lacroix – Desjardin Securities
Robert Kwan - RBC Capital Markets
Andrew Kuske – Credit Suisse
Petro Panarites – CIBC
Faisel Khan – Citigroup
Sam Kanes – Scotia Capital
Brian Horey – Aurelian Management
Juan Plessis – Canaccord
Steven Paget – FirstEnergy
Justin Amoah – Argus Media
John Spears – Toronto Star
Presentation
Operator
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Good day ladies and gentlemen welcome to the TransCanada Corporation’s 2010 Third Quarter Results Conference Call. I would now like to turn the meeting over to Mr. David Moneta, Vice President of Investor Relations and Corporate Communications. Please go ahead Mr. Moneta
David Moneta
Thanks very much and good morning everyone. I'd like to welcome you to TransCanada's 2010 third quarter conference call. With me today are Russ Girling, President and Chief Executive Officer, Don Marchand, Executive Vice President and Chief Financial Officer, Alex Pourbaix, President of Energy and Oil Pipelines business; Glenn Menuz, our Vice President and Controller and Greg Lohnes also joins us, he is joining us from our Toronto office this morning.
Russ and Don will begin today with some opening comments on our financial results and other general issues pertaining to TransCanada. Please note that a slide presentation will accompany their remarks. A copy of the presentation is available on our website at transcanada.com. And it can be found in the Investor Section under the heading Events & Presentations.
Following their prepared remarks, we'll turn the call over to the conference coordinator for your questions. During the question-and-answer period, we'll take questions from the investment community first, followed by the media.
And in order to provide everyone with an equal opportunity to participate, we ask that you limit yourself to two questions. If you have additional questions, please reenter the queue. Also, we ask that you focus your questions on our industry, our corporate strategy, recent developments and key elements of our financial performance. If you have more detailed questions relating to some of our smaller operations for your detailed financial models, Terry and I would be pleased to discuss them with you following the call.
Before Russ begins, I'd like to remind you that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by TransCanada with Canadian Securities Regulators and with the U.S. Securities Exchange Commission.
Finally, I'd also like to point out that during this presentation, we will refer to measures such as comparable earnings, comparable earnings per share, earnings before interest, taxes, depreciation and amortization or EBITDA, comparable EBITDA and funds generated from operations. These measures do not have any standardized meanings under GAAP and are therefore considered to be non-GAAP measures. As a result, they may not be comparable to similar measures presented by other entities. These measures are used to provide you with additional information on our operating performance, liquidity and our ability to generate funds to finance our operations.
With that I’ll turn the call over to Russ.
Russ Girling
Thanks David and good morning everyone and thank you very much for joining us today. I’m pleased to report that TransCanada posted solid third quarter results. If you look at our net income and earnings per share year-over-year we saw that figure climbed by approximately 80%. As I told you last quarter, we’ve accomplished this by continuing to do the things that have made us successful for a number of years. That is following a disciplined approach that focuses on growing TransCanada’s core businesses.
We’re currently growing those core businesses by focusing on completing the reminder of our ambitious $21 billion capital program. In the future, we will continue to reinvest in additional growth opportunities where we have competitive advantage. We will grow earnings and cash flow and deliver long-term shareholder value. TransCanada’s core businesses of Pipe and Energy continue to perform well in a very challenging business environment.
Net income applicable to common shares for the third quarter was $377 million or $0.54 per share comparable earnings were $374 million or $0.54 per share. Comparable EBITDA for the third quarter was $1 billion and funds generated from operations in the third quarter were $861 million. Also today, the Board of Directors declared a quarterly dividend of $0.40 per common share for the three months ending December 31, 2010.
Well we did see year-over-year increases in third quarter earnings, the quarter was not without it’s challenges, power prices in our core Alberta and Northeast U.S. markets where we have exposure to market prices continue to be weak, which of course impacts our bottom line. And with natural gas prices hovering in the mid $3 range, conventional gas production is declined impacting throughputs on our Canadian pipeline systems.
We are confident in the recovery of energy commodity prices however, the timing of that recovery is dependent upon whether economic recoveries and demands grow. TransCanada is well positioned to benefit as and when that recovery occurs. As we’ve said before the majority of our business is not affected by short-term fluctuations in commodity prices and it has that stable base that underpins our large capital program.
Over the past quarter, we have made substantial progress bringing some of those major projects online and we have advanced to several others. When I spoke with you last quarter we just celebrated to start the commercial operations of our Keystone pipeline system near Saint Louis and however fourth months now oil has been flowing to refineries in the Wood River and Patoka areas under interim contracts.
The first phase of the Keystone pipeline has a nominal capacity of 435,000 barrels a day. TransCanada is now poised to mark another significant milestone in the construction of the Keystone project that is the extension to Cushing, which is now over 90% complete. This section of the Keystone project should be operational in the first quarter of 2011 and we will increase our capacity from 435,000 barrels a day to 591,000 barrels a day.
Third, in binding long-term contracts are in place for 530,000 barrels a day of crude oil to the Midwest including Cushing that commence concurrently with the start up of the Cushing segment. These contracts represent approximately 90% of the lines capacity. With the startup of Cushing, we will see a significant increase in cash flow from the Keystone project.
The Keystone Gulf Coast expansion continues to progress well, we remain confident the this crude oil pipelines should receive its final environmental impact statement by the end of 2010 or early into 2011. And the Presidential permits received with the construction in the first half of 2011. I’ll remind you that the market has supported for this project in a substantial way. Shipper have signed long-term contracts for 380,000 barrels a day or about 75% in the Keystone’s expansions initial capacity to delivery oil to refineries along the Gulf Coast.
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