Teleconference and webcast today at 1 p.m. (Eastern) TC PipeLines,
LP (NASDAQ:TCLP) (the Partnership) today reported fourth quarter
2005 net income of $12.3 million or $0.65 per unit (all financial
figures are unaudited and in U.S. dollars) compared to $15.2
million or $0.82 per unit for the same period last year. The
decrease in net income was primarily due to lower equity income
from Northern Border Pipeline. Cash generated from operations,
including return of capital from Northern Border Pipeline and
Tuscarora, in the fourth quarter of 2005 was $18.2 million, an
increase of $1.3 million, compared to $16.9 million for the same
period last year. The increase in cash generated from investments
was primarily due to higher distributions from Northern Border
Pipeline, partially offset by lower distributions from Tuscarora.
The increase in Northern Border Pipeline's distributions was
attributable to the positive revenue impact experienced by Northern
Border Pipeline during the third quarter of 2005 due to the
recognition of $9.4 million ($2.8 million positive impact on TC
PipeLines' net income) related to the sale of bankruptcy claims
held against Enron and Enron North America. The decrease in
distributions from Tuscarora was due to a one-time settlement
payment received in the fourth quarter of 2004, related to
termination of Tuscarora's 2005 expansion. "In 2005, Northern
Border Pipeline faced, for the first time, tariff discounting and
unsold capacity resulting from changing market conditions. This
resulted in a $16.2 million reduction in firm service
transportation revenues, or a $4.9 million reduction to the
Partnership's net income, relative to 2004. During the fourth
quarter, a rate case was filed with the Federal Energy Regulatory
Commission. As part of this filing, Northern Border Pipeline is
proposing changes to the rate design to allow it to more
effectively recognize the market and supply realities that it faces
and better address the risks being faced. We are confident Northern
Border Pipeline will continue to be a key link for Canadian gas
supply to the US Midwest market," said Ron Turner, president and
chief executive officer of the general partner, TC PipeLines GP,
Inc. "Overall, despite a drop in equity income from Northern Border
Pipeline, the Partnership continued to maintain its solid financial
position, delivered stable cash flows, and reduced its outstanding
debt level," Turner said. On January 20, 2006, the Partnership
announced its fourth quarter cash distribution in the amount of
$0.575 per unit, payable to unitholders of record on January 31,
2006. -0- *T Financial Highlights Three months Twelve months ended
ended (millions of dollars December 31 December 31 except per unit
amounts) 2005 2004 2005 2004
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Net income 12.3 15.2 50.2 55.1 Per unit (1) $ 0.65 $ 0.82 $2.70 $
2.99 Cash generated from operations 14.1 15.2 50.1 55.2 Return of
capital (2) 4.1 1.7 16.0 12.1 Cash distributions paid 10.8 10.8
43.0 41.8 Cash distributions declared per unit (3) $0.575 $0.575
$2.30 $2.275 Units outstanding (millions) 17.5 17.5 17.5 17.5 (1)
Net income per unit is computed by dividing net income, after
deduction of the general partner's allocation, by the number of
common and subordinated units outstanding. The general partner's
allocation is computed based upon the general partner's two per
cent interest plus an amount equal to incentive distributions. (2)
Current accounting practice requires the classification of
cumulative cash distributions in excess of cumulative equity
earnings to be reported as a return of capital. (3) The
Partnership's 2005 fourth quarter cash distribution will be paid on
February 14, 2006 to unitholders of record as of January 31, 2006.
*T Net Income Fourth Quarter 2005 The Partnership reported fourth
quarter 2005 net income of $12.3 million or $0.65 per unit, a
decrease of $2.9 million compared to $15.2 million or $0.82 per
unit for the same period last year. Equity income from Northern
Border Pipeline was $11.0 million in the fourth quarter of 2005, a
decrease of $2.8 million, compared to $13.8 million for the same
period last year. The decrease was primarily due to higher
operations and maintenance expense and lower revenues. Northern
Border Pipeline's operations and maintenance expense was $6.2
million higher in the fourth quarter of 2005 compared to the same
period last year. This increase was primarily due to positive
adjustments made in the fourth quarter of 2004, which reduced
operations and maintenance expense, including the reversal of a
$3.1 million provision previously recorded related to charges for
potential termination costs of Enron's Cash Balance Plan,
adjustments for charges related to Fort Peck amortization that was
reclassified to a regulatory asset and adjustments to allowance for
doubtful accounts for expected recoveries of claims against Enron.
The Partnership's share of the impact to higher operations and
maintenance expense was $1.9 million. In addition, firm demand
revenue decreased $2.6 million (TC PipeLines' share is
approximately $0.8 million), primarily as a result of sales of
discounted capacity. The balance of the $0.1 million decrease in
equity income from Northern Border Pipeline is attributable to
higher taxes other than income taxes partially offset by lower
interest expense. Equity income from Tuscarora was $2.0 million in
the fourth quarter of 2005, a decrease of $0.1 million, compared to
$2.1 million for the same period last year. The decrease was
primarily due to a one-time income item received in the fourth
quarter of 2004 related to the termination of Tuscarora's 2005
expansion, partially offset by lower operations and maintenance and
interest expenses. The Partnership's fourth quarter 2005 general
and administrative expenses of $0.5 million, decreased $0.1 million
compared to $0.6 million for the same period in 2004 primarily due
to timing of expenses incurred. Financial charges of $0.2 million
in the fourth quarter of 2005 increased $0.1 million, compared to
$0.1 million for the same period last year primarily due to higher
average interest rates. Year ended December 31, 2005 The
Partnership reported net income of $50.2 million or $2.70 per unit
for the year ended December 31, 2005, a decrease of $4.9 million
compared to $55.1 million or $2.99 per unit for 2004. The
Partnership's equity income from Northern Border Pipeline was $45.7
million for 2005, a decrease of $4.3 million compared to $50.0
million for 2004. The decrease was primarily attributable to lower
revenues and higher operations and maintenance expense. The
decrease in revenues of $7.4 million (TC PipeLines' share is
approximately $2.2 million) was primarily due to sales of
discounted transportation capacity, partially offset by the
recognition of $9.4 million ($2.8 million positive impact on TC
PipeLines' net income) related to the sale of Northern Border
Pipeline's bankruptcy claims against Enron and Enron North America.
Higher operations and maintenance expense for 2005 was primarily
the result of adjustments and settlements of charges which reduced
operations and maintenance expense in 2004. The Partnership's share
of the impact of higher operations and maintenance expense was $1.7
million. The balance of the $0.4 million decrease in equity income
from Northern Border Pipeline was attributable to higher taxes
other than income taxes and higher interest expense, partially
offset by higher other income. The Partnership's equity income from
Tuscarora remained flat at $7.5 million for 2005 and 2004. The
Partnership's general and administrative expenses were $2.0 million
for 2005, an increase of $0.1 million compared to $1.9 million for
2004. Financial charges were $1.0 million for 2005, an increase of
$0.5 million compared to $0.5 million for 2004. The increase was
due to both higher average interest rates and higher average debt
balances. Cash Flow Fourth Quarter 2005 The Partnership reported
cash generated from investments of $18.2 million in the fourth
quarter of 2005, a $1.3 million increase, compared to $16.9 million
for the same period last year. In the fourth quarter of 2005, the
Partnership received a cash distribution from Northern Border
Pipeline of $17.2 million, an increase of $2.3 million compared to
$14.9 million for the same period in 2004. The increase was
primarily due to Northern Border Pipeline's higher third quarter
earnings that were due to the recognition of $9.4 million ($2.8
million positive impact on TC PipeLines' net income) related to the
sale of bankruptcy claims held against Enron and Enron North
America. Cash distributions received in the quarter are based on
the respective financial results of the Partnership's equity
investments for the previous quarter. Cash distributions from
Tuscarora were $2.0 million in the fourth quarter of 2005, compared
to $2.7 million in the fourth quarter of 2004. Included in the
return of capital was a one-time settlement payment that was
received in the fourth quarter of 2004 related to the termination
of Tuscarora's 2005 expansion. The Partnership paid an aggregate
$10.8 million of cash distributions to unitholders and its general
partner in each of the fourth quarters of 2005 and 2004. This cash
distribution, on a per unit basis, represents $0.575 per unit, as
well as the general partner interest, including incentive
distributions. In the fourth quarter of 2005, the Partnership
repaid $6.5 million under its revolving credit facility, reducing
the Partnership's outstanding debt balance to $13.5 million as at
December 31, 2005. Year ended December 31, 2005 The Partnership
reported cash generated from investments of $66.1 million for the
year ended December 31, 2005, a $1.2 million decrease, compared to
$67.3 million for 2004. For 2005, the Partnership received cash
distributions from Northern Border Pipeline of $60.9 million, a
decrease of $0.8 million compared to $61.7 million in 2004. The
decrease was primarily due to higher maintenance capital
expenditures incurred in 2005 relative to 2004 and lower revenues
that were partially offset by the recognition of $9.4 million ($2.8
million positive impact on TC PipeLines' net income) related to the
sale of Northern Border Pipeline's bankruptcy claims held against
Enron and Enron North America. The Partnership also received cash
distributions from Tuscarora in 2005 of $8.3 million, an increase
of $0.4 million compared to $7.9 million for the same period last
year. The increase was primarily due to a one-time settlement
payment that was received in the fourth quarter of 2004 related to
the termination of Tuscarora's 2005 expansion. During 2005, the
Partnership repaid $23.0 million under its revolving credit
facility, reducing the Partnership's outstanding debt balance to
$13.5 million as at December 31, 2005. Conference Call -- Note time
change: 1 p.m. (Eastern) The Partnership will hold a conference
call Wednesday, February 15, 2006 at 1 p.m. (Eastern). Ron Turner,
president and chief executive officer of the general partner, will
discuss the fourth quarter 2005 financial results and general
developments and issues concerning the Partnership. Those
interested in listening to the call may dial (866) 540-8136. A
replay of the conference call will also be available two hours
after the call and until midnight (Eastern), February 22, 2006 by
dialing (800) 408-3053, then entering pass code 3174446. A live
webcast of the conference call will also be available through the
Partnership's website at www.tcpipelineslp.com. An audio replay of
the call will be maintained on the website. TC PipeLines, LP is a
publicly traded limited partnership. It owns a 30 per cent interest
in Northern Border Pipeline Company, a Texas general partnership,
and a 49 per cent interest in Tuscarora Gas Transmission Company, a
Nevada general partnership. Northern Border Pipeline, which is
owned 70 per cent by Northern Border Partners, L.P., a publicly
traded master limited partnership controlled by affiliates of
ONEOK, Inc., owns a 1,249-mile United States interstate pipeline
system that transports natural gas from the Montana-Saskatchewan
border to markets in the midwestern United States. Tuscarora owns a
240-mile United States interstate pipeline system that transports
natural gas from Oregon, where it interconnects to TransCanada's
GTN System. TC PipeLines, LP is managed by its general partner, TC
PipeLines GP, Inc., an indirect wholly owned subsidiary of
TransCanada Corporation. TC PipeLines GP, Inc., also holds common
units of the Partnership. Common units of TC PipeLines, LP are
quoted on the Nasdaq Stock Market and trade under the symbol
"TCLP." For more information about TC PipeLines, LP, visit the
Partnership's Internet site at www.tcpipelineslp.com. Cautionary
Statement Regarding Forward-Looking Information This news release
may include forward-looking statements regarding future events and
the future financial performance of TC PipeLines, LP. Words such as
"believes," "expects," "intends," "forecasts," "projects," and
similar expressions identify forward-looking statements. All
forward-looking statements are based on the Partnership's current
beliefs as well as assumptions made by and information currently
available to the Partnership. These statements reflect the
Partnership's current views with respect to future events. The
Partnership assumes no obligation to update any such
forward-looking statement to reflect events or circumstances
occurring after the date hereof. Important factors that could cause
actual results to materially differ from the Partnership's current
expectations include regulatory decisions, particularly those of
the Federal Energy Regulatory Commission, the Securities and
Exchange Commission, the ability of Northern Border Pipeline to
recontract its available capacity at maximum rates, operational
decisions of Northern Border Pipeline's operator, the failure of a
shipper on either one of the Partnership's pipelines to perform its
contractual obligations, cost of acquisitions, future demand for
natural gas, overcapacity in the industry, and other risks inherent
in the transportation of natural gas as discussed in the
Partnership's filings with the Securities and Exchange Commission,
including the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2004. -0- *T TC PipeLines, LP Financial
Highlights Statement of Income ------------------- Three months
Twelve months ended ended (millions of U.S. dollars December 31
December 31 except per unit amounts) 2005 2004 2005 2004
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Equity income from investment in Northern Border Pipeline (1) 11.0
13.8 45.7 50.0 Equity income from investment in Tuscarora (2) 2.0
2.1 7.5 7.5 General and administrative expenses (0.5) (0.6) (2.0)
(1.9) Financial charges and other (0.2) (0.1) (1.0) (0.5)
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Net income 12.3 15.2 50.2 55.1
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Net income per unit (3) $0.65 $0.82 $2.70 $2.99
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Units outstanding (millions) 17.5 17.5 17.5 17.5
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Balance Sheet ------------- December 31, 2005 December 31, 2004
(millions of U.S. dollars) (unaudited) (audited)
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ASSETS Cash 2.3 2.5 Investment in Northern Border Pipeline(1) 274.5
290.1 Investment in Tuscarora(2) 38.9 39.5
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315.7 332.1
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LIABILITIES AND PARTNERS' EQUITY Accrued liabilities 0.6 0.7
Current portion of long-term debt 13.5 6.5 Long-term debt - 30.0
Partners' equity 301.6 294.9
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315.7 332.1
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Cash Flow Information --------------------- Three months Twelve
months ended ended December 31 December 31 (millions of U.S.
dollars) 2005 2004 2005 2004
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Distributions received from equity investments Northern Border
Pipeline Company 13.1 13.8 45.7 50.0 Tuscarora Gas Transmission
Company 2.0 2.1 7.5 7.5 Changes in working capital and other (1.0)
(0.7) (3.1) (2.3)
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Cash generated from operations 14.1 15.2 50.1 55.2 Return of
capital from Northern Border Pipeline Company 4.1 1.1 15.2 11.7
Return of capital from Tuscarora Gas Transmission Company - 0.6 0.8
0.4
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Cash generated from investments(a) 18.2 16.9 66.1 67.3 Investment
in Northern Border Pipeline Company - (22.5) - (61.5) Investment in
Tuscarora Gas Transmission Company - - (0.3) - Distributions paid
(10.8) (10.8) (43.0) (41.8) Long-term debt issued/(repaid) (6.5)
17.0 (23.0) 31.0
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Increase/(decrease) in cash 0.9 0.6 (0.2) (5.0)
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(a) Reconciliation of non-GAAP financial measure: Cash generated
from investments is a non-GAAP financial measure which includes
cash generated from operations and return of capital. It is
provided as a supplement to results reported in accordance with
GAAP. Management believes that this is an important measure to
assist the Partnership's investors in evaluating the Partnership's
business performance. *T (1) Northern Border Pipeline Company TC
PipeLines holds a 30 per cent general partner interest in Northern
Border Pipeline Company. Summarized operating and financial
information of Northern Border Pipeline for the three and twelve
months ended December 31, 2005 and 2004 and as at December 31, 2005
and 2004 is as follows: -0- *T Three months Twelve months ended
ended December 31 December 31 2005 2004 2005 2004
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Operating Results Gas delivered (million cubic feet) 195,086
207,441 807,531 844,963 Average throughput (million cubic feet per
day) 2,173 2,324 2,277 2,377 Financial Results (millions of U.S.
dollars) Operating revenue 80.1 82.7 321.7 329.1 Operating expenses
Operations and maintenance 10.1 3.9 39.5 33.8 Depreciation and
amortization 14.9 14.7 58.1 58.3 Taxes other than income 7.9 7.0
31.3 29.4 --------------------------------------- Total operating
expenses 32.9 25.6 128.9 121.5
--------------------------------------- Operating income 47.2 57.1
192.8 207.6 Interest expense, net (10.7) (11.1) (42.6) (41.3) Other
income 0.2 0.2 2.1 0.5 --------------------------------------- Net
income 36.7 46.2 152.3 166.8
---------------------------------------
--------------------------------------- Capital Expenditures
(millions of U.S. dollars) Maintenance 6.3 5.4 18.3 12.4 Growth 5.3
(2.0) 10.3 (1.8) Summary Balance Sheet Data December 31, December
31, (millions of U.S. dollars) 2005 2004
--------------------------- Total assets 1,604.7 1,625.0
--------------------------- --------------------------- Other
current liabilities and reserves and deferred credits 60.8 54.0
Long-term debt (including current maturities) 628.9 603.9 Partners'
capital 912.7 963.3 Accumulated other comprehensive income 2.3 3.8
--------------------------- Total liabilities and partners' equity
1,604.7 1,625.0 ---------------------------
--------------------------- *T Certain reclassifications were made
to the 2004 financial statements to conform with the current year
presentation. (2) Tuscarora Gas Transmission Company TC PipeLines
holds a 49 per cent general partner interest in Tuscarora Gas
Transmission Company. Summarized operating and financial
information of Tuscarora for the three and twelve months ended
December 31, 2005 and 2004 and as at December 31, 2005 and 2004 is
as follows: -0- *T Three months Twelve months ended ended December
31 December 31 2005 2004 2005 2004
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Operating Results Gas delivered (million cubic feet) 7,484 7,954
25,286 24,679 Average throughput (million cubic feet per day) 81 86
69 67 Financial Results (millions of U.S. dollars) Operating
revenue 8.2 8.2 32.3 32.6 Operating expenses Operations and
maintenance 0.9 1.0 3.2 3.6 Depreciation and amortization 1.6 1.5
6.2 6.1 Taxes other than income 0.3 0.3 1.2 1.3
--------------------------------------- Total operating expenses
2.8 2.8 10.6 11.0 --------------------------------------- Operating
income 5.4 5.4 21.7 21.6 Interest expense, net (1.4) (1.5) (5.8)
(6.1) Other income 0.1 0.8 0.2 0.8
--------------------------------------- Net income 4.1 4.7 16.1
16.3 ---------------------------------------
--------------------------------------- Capital Expenditures
(millions of U.S. dollars) Maintenance - - 0.2 0.2 Growth - 1.1 0.7
2.2 Summary Balance Sheet Data December 31, December 31, (millions
of U.S. dollars) 2005 2004 --------------------------- Total assets
139.8 144.9 --------------------------- ---------------------------
Other current liabilities and reserves and deferred credits 2.0 2.0
Long-term debt (including current maturities) 75.9 80.8 Partners'
capital 61.8 62.0 Accumulated other comprehensive income 0.1 0.1
--------------------------- Total liabilities and partners' equity
139.8 144.9 --------------------------- ---------------------------
*T (3) Net income per unit is computed by dividing net income,
after deduction of the general partner's allocation, by the number
of common and subordinated units outstanding. The general partner's
allocation is computed based upon the general partner's two per
cent interest plus an amount equal to incentive distributions. TC
PipeLines, LP (NASDAQ:TCLP)
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