TransCanada Corporation (TRP, TRP.TO), a major North American natural gas pipeline operator, said Wednesday that third-quarter profit declined from last year, reflecting weakness in its energy segment, primarily due to lower power prices and volumes sold in Western Power and reduced generation volumes from New England and Bruce Power.
For the third quarter, the Calgary, Alberta-based company's net earnings were C$345 million compared with C$390 million in the prior-year quarter. On a per share basis, earnings declined to C$0.50 from C$0.67, reflecting an 18% increase in average number of shares outstanding, following TransCanada's issuance of 58.4 million and 35.1 million common shares in second quarter 2009 and fourth quarter 2008, respectively.
TransCanada used the proceeds from the offerings to fund acquisition of additional interests in Keystone and for other capital projects, general corporate purposes and to repay short-term debt.
Comparable earnings for the quarter were C$335 million, or C$0.49 per share compared to C$366 million or C$0.63 per common share last year.
On an average, three analysts polled by Thomson Reuters expected the company to earn $0.46 per share for the quarter. Analysts' estimates typically exclude special items.
In the third quarter of fiscal 2009 and 2008, comparable earnings excluded C$10 million of after tax net unrealized gains and C$2 million of after tax net unrealized losses, respectively, impacted by changes in fair value of proprietary natural gas inventory in storage and natural gas forward purchase and sale contracts. Comparable earnings in 2008 also excluded favorable income tax adjustments totaling C$26 million.
Revenues for the third quarter rose to C$2.25 billion from C$2.14 billion in the third quarter of fiscal 2008. TransCanada reports its results in three sections: Pipelines, Energy and Corporate.
In the pipelines segment, revenues for the quarter were C$1.15 billion versus C$1.14 billion in the prior year. Pipelines segment's comparable earnings before interest and tax, or EBIT, was C$475 million versus C$469 million in the same period in 2008.
In the energy segment, revenues rose to C$1.10 billion from C$996 million in the 2008-year period. Energy's comparable EBIT in the quarter was C$204 million compared to C$302 million in the year-ago period. Within this segment, Western Power's earnings plunged, primarily due to lower earnings from Alberta power portfolio resulting from lower overall realized power prices on lower volumes of power sold. Western Power sales volumes declined to 541 GWh from 598 GWh last year.
Bruce Power experienced higher operating costs as well as lower output as a result of increased outage days. TransCanada's share of Bruce Power's generation in third quarter 2009 decreased to 3,049 GWh from 3,509 GWh last year.
In the corporate segment, EBIT losses for the three-month period widened to C$28 million from a loss of C$23 million in fiscal 2008, reflecting higher support services costs in 2009.
The company's total operating and other expenses for the period increased to C$1.25 billion from C$1.07 billion a year earlier.
Funds generated from operations in the quarter were C$772 million as compared with C$711 million in the corresponding period prior year.
In the preceding second quarter, TransCanada had reported a net profit of C$314 million or C$0.50 per share compared to C$324 million or C$0.58 per share in the year-ago quarter. Revenues for the second quarter had increased to C$2.13 billion from C$2.02 billion in the second quarter of fiscal 2008.
For the nine-month period, the company's net earnings declined to C$993 million or C$1.55 per share from C$1.16 billion or C$2.07 per share in the 2008-year period. Year-to-date revenues were C$6.76 billion versus C$6.29 billion in the comparable period prior year.
At September 30, 2009, the company and its subsidiaries held cash and cash equivalents of C$2.4 billion.
Looking ahead, TransCanada said it does not expect the slowdown in the North American economy to have a material effect on its financial position, and added that earnings outlook for 2009 has declined due to the negative impact of reduced market prices for power on Energy segment results.
With respect to the pipelines segment, although the global economic downturn has an impact on throughput on certain pipelines and on some drilling activities, the short-term financial outlook for the pipelines segment is not expected to be materially impacted as the pipeline assets are generally underpinned by contracts or earn a regulated rate of return, TransCanada noted.
Among peers, energy transportation and distribution company Enbridge Inc. (ENB, ENB.TO) on Wednesday reported a profit for the third quarter that more than doubled from last year, helped by strong results at the company's liquids pipelines and natural gas businesses. Calgary, Canada-based Enbridge posted third-quarter earnings applicable to common shareholders of C$303.8 million or C$0.83 per share, up from C$148.4 million or C$0.41 per share in the previous-year quarter. Revenues for the latest quarter dropped 40% to C$2.63 billion from C$4.37 billion a year ago.
In Wednesday's regular trading session, TRP is currently trading on the New York Stock Exchange at $31.10 per share, up $0.41 or 1.34% on a volume of 101,226 shares. In the past 52-week period, the shares have been trading in a range of $20.01 to $32.90.
TRP.TO is currently trading on the Toronto Stock Exchange at C$33.14 per share up C$0.27 or 0.82% on a volume of 550,567 shares. In the 52-week period, the shares have been trading in a range of C$28.86 to C$37.45.
For comments and feedback: editorial@rttnews.com