TC PipeLines, LP Announces 2018 Third Quarter Financial Results

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HOUSTON, Nov. 09, 2018 (GLOBE NEWSWIRE) -- TC PipeLines, LP (NYSE: TCP) (the Partnership) today reported third quarter 2018 net income attributable to controlling interests of $62 million and distributable cash flow of $83 million.

“During the third quarter of 2018, our portfolio of high quality, natural gas pipelines performed very well, generating 30 percent higher net income per common unit than in the same quarter last year,” said Nathan Brown, president of TC PipeLines, GP, Inc. “Our strategically located pipelines continue to benefit from increased natural gas flows, largely out of the Western Canadian Sedimentary Basin, and from additional contracting, both of which are contributing to our current results.”

“We have a healthy balance sheet and strong coverage ratios,” continued Brown. “We have made significant progress in our response to the actions of the FERC earlier this year, and look forward to finalizing our regulatory strategy by year’s end. Our reliable and diversified pipeline assets are in high demand and we are pursuing further appropriately sized, well-placed and well-timed organic expansion opportunities. Our Portland XPress project is a good example of our ability to economically and efficiently expand our existing infrastructure.”

The Partnership’s financial highlights for the third quarter of 2018 compared to the same period of 2017 were:

(a)  Net income per common unit is computed by dividing net income attributable to controlling interests, after deduction of net income attributed to PNGTS’ former parent and amounts attributable to the General Partner and Class B units, by the weighted average number of common units outstanding. Refer to Financial Summary-Consolidated Statements of Income section of this release.(b)  EBITDA and Distributable cash flow are non-GAAP financial measures. Refer to the description of these non-GAAP financial measures in the section of this release entitled “Non-GAAP Measures” and the Supplemental Schedule for further detail.(c)  Under the ATM program, the Partnership issued 732,973 units during the nine months ended September 30, 2018 (no units were issued during the three months ended September 30, 2018).

For the three months ended September 30, 2018, we generated net income attributable to controlling interests of $62 million, an $8 million increase compared to the same period in 2017. The increase was primarily due to higher revenues and higher equity earnings of $3 million and $7 million, respectively.

The increase in our revenues was largely due to the net effect of:

The $7 million increase in equity earnings was primarily due to higher equity earnings from Great Lakes as a result of the elimination of Great Lakes’ revenue sharing mechanism beginning in 2018 as part of the 2017 Great Lakes settlement. Additionally, there was a slight increase in Great Lakes’ incremental short-term sales during the current period.

Our EBITDA was $10 million higher for the third quarter of 2018 compared to the same period in 2017 mostly due to higher equity earnings and the increase in our revenues during the period as discussed above.

Distributable cash flow increased by $18 million in the third quarter of 2018 compared to the same period in 2017 due to the increase in EBITDA as described above and reduced distributions allocated to both our General Partner and Class B unitholders as a result of lower declared common share distributions. These gains were partially offset by an increase in maintenance capital expenditures of $2 million, largely attributable to the timing of pipeline reliability projects on GTN.

The Partnership’s net cash provided by operating activities increased by $43 million for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to the net effect of (i) higher cash flow from operations at PNGTS and North Baja due to their increased revenues, (ii) the addition of quarterly distributions from Iroquois for the full nine months in 2018 as compared to the period from June 1 to the end of September in 2017, and (iii) higher distributions received from Great Lakes due to an increase in its revenue related to its increased contract levels.

Net cash used in investing activities decreased by $732 million for the nine months ended September 30, 2018 compared to the same period in 2017 primarily due to the net effect of:

The Partnership’s net cash from financing activities decreased by $769 million in the nine months ended September 30, 2018 compared to the same period in 2017 due to the net effect of:

As of September 30, 2018, our cash and cash equivalents totaled $48 million, an increase of $15 million or 45 percent, from December 31, 2017. In 2018 to the end of the third quarter, we reduced the outstanding balance of our credit facility by 68 percent, from $185 million at December 31, 2017 to $60 million at September 30, 2018.  As of November 9, 2018 the available borrowing capacity on our credit facility was $430 million. We believe our cash position, remaining borrowing capacity on our credit facility and operating cash flows are adequate to fund our liquidity requirements over the next twelve months, including distributions to our unitholders, ongoing capital expenditures and required debt repayments.

The following non-GAAP financial measures are presented as a supplement to our financial statements:

EBITDA is an approximate measure of our operating cash flow during the current earnings period and reconciles directly to the net income amount presented. It measures our earnings before deducting interest, taxes, depreciation and amortization and net income attributable to non-controlling interests and includes earnings from our equity investments.

Total distributable cash flow and distributable cash flow provide measures of distributable cash generated during the current earnings period and reconcile directly to the net income amounts presented.

Total distributable cash flow includes EBITDA

Distributable cash flow is computed net of distributions declared to the General Partner and distributions allocable to Class B units. Distributions declared to the General Partner are based on its effective two percent interest plus an amount equal to incentive distributions. For the year ending December 31, 2018, distributions allocable to the Class B units (30 percent of GTN’s 2018 distributable cash flow less $20 million) will be further reduced by 35 percent, which is equivalent to the percentage by which distributions payable to the common units were reduced in 2018 (Class B Reduction). The Class B Reduction was implemented during the first quarter of 2018 following the Partnership’s common unit distribution reduction of 35 percent. The Class B Reduction will continue to apply for any particular calendar year until distributions payable in respect of common units for such calendar year equal or exceed $3.94 per common unit.

The non-GAAP financial measures described above are performance measures presented to assist investors in evaluating our business performance. We believe these measures provide additional meaningful information in evaluating our financial performance and cash generating capacity.

The non-GAAP financial measures presented as part of this release are provided as a supplement to GAAP financial results and are not meant to be considered in isolation or as substitutes for financial information prepared in accordance with GAAP. Additionally, these measures as presented may not be comparable to similarly titled measures of other companies.

For a reconciliation of these non-GAAP financial measures to GAAP measures, please see the table captioned "Reconciliation of Net income to Distributable Cash Flow” included at the end of this release.

Members of the investment community and other interested parties are invited to participate in a teleconference by calling 800.273.9672 on Friday, November 9, 2018 at 10 a.m. CST/11 a.m. EST. Nathan Brown, president of the General Partner, will discuss the third quarter financial results and provide an update on the Partnership’s business, followed by a question and answer session. Please dial in 10 minutes prior to the start of the call. No pass code is required. A live webcast of the conference call will also be available through the Partnership’s website at  or via the following URL: . Slides for the presentation will be posted on the Partnership’s website under “Events and Presentations” prior to the webcast.

A replay of the teleconference will also be available two hours after the conclusion of the call and until 11 p.m. CST and midnight EST on November 16, 2018, by calling 800.408.3053, then entering pass code 2998492#.

TC PipeLines, LP is a Delaware master limited partnership with interests in eight federally regulated U.S. interstate natural gas pipelines which serve markets in the Western, Midwestern and Northeastern United States. The Partnership is managed by its general partner, TC PipeLines GP, Inc., a subsidiary of TransCanada Corporation (NYSE: TRP). For more information about TC PipeLines, LP, visit the Partnership’s website at .

Certain non-historical statements in this release relating to future plans, projections, events or conditions are intended to be “forward-looking statements”.  These statements are based on current expectations and, therefore, subject to a variety of risks and uncertainties that could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, including, without limitation to the ability of these assets to generate ongoing value to our unitholders, impact of potential impairment charges, decreases in demand on our pipeline systems, increases in operating and compliance costs, the outcome of rate proceedings, the impact of recently issued and future accounting updates and other changes in accounting policies, the impact of the 2017 Tax Act and the 2018 FERC Actions on our future operating performance and cashflows, potential changes in the taxation of MLP investments by state or federal governments such as the elimination of pass-through taxation or tax deferred distributions, our ability to identify and complete expansion and growth opportunities, operating hazards beyond our control, and our ability to access  debt and equity markets that negatively impacts the Partnership’s ability to finance its capital spending. These and other factors that could cause future results to differ materially from those anticipated are discussed in Item 1A in our Annual Report on Form 10-K for the year-ended December 31, 2017 filed with the Securities and Exchange Commission (the SEC), as updated and supplemented by subsequent filings with the SEC. All forward-looking statements are made only as of the date made and except as required by applicable law, we undertake no obligation to update any forward-looking statements to reflect new information, subsequent events or other changes.

(a)  Net income per common unit is computed by dividing net income attributable to controlling interests, after deduction of amounts attributable to the General Partner and Class B units, by the weighted average number of common units outstanding. The amount allocable to the General Partner equals an amount based upon the General Partner’s effective two percent general partner interest, plus an amount equal to incentive distributions. For the year ending December 31, 2018, the amount allocable to the Class B units is equal to 30 percent of GTN’s annual distributable cash flow, less the threshold amount of $20 million and is further reduced by the Class B Reduction for 2018 (2017 – less the threshold of $20 million and the Class B Reduction was not required).  During the three and nine months ended September 30, 2018, $4 million was allocated to the Class B units (2017 - $8 million).

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Globe Newswire: 12:30 GMT Friday 9th November 2018

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