Veresen announces 2011 fourth quarter and year-end results and updated 2012 guidance
/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./
CALGARY, Feb. 29, 2012 /CNW/ - Veresen Inc. ("Veresen" or the "Company") (TSX: VSN) announced today its 2011 fourth quarter and year-end results.
Financial highlights for the fourth quarter and year ended December 31, 2011 include:
- Net income attributable to Common Shares of $14.8 million for the fourth quarter or $0.09 per Common Share and $53.9 million or $0.33 per Common Share for the year.
- Excluding the effect of unrealized mark-to-market hedging losses, net income attributable to Common Shares was $18.3 million or $0.11 per Common Share for the fourth quarter and $70.2 million or $0.43 per Common Share for the year.
- Distributable cash of $53.2 million or $0.32 per Common Share for the fourth quarter and $193.0 million or $1.18 per Common Share for the year.
- Cash from operating activities of $55.5 million for the fourth quarter and $269.1 million for the year.
Key strategic activities for the fourth quarter and year ended December 31, 2011 include the following:
- Purchased the Hythe/Steeprock gas gathering and processing complex in the Montney region for $920 million. This acquisition closed subsequent to year end on February 9, 2012.
- Purchased, through Aux Sable, the Palermo Condensate Recovery Plant and the Prairie Rose Pipeline located in the Bakken region for US$79 million in July.
- In June, Alliance Pipeline announced plans to develop a pipeline in Bakken region of North Dakota that will connect production from Hess Corporation's gas processing facility to the Alliance pipeline for onward shipment to the Chicago market hub.
- Completed the majority of the construction of the 400 MW gas-fired York Energy Centre in Ontario which Veresen expects to place into service in the second quarter of 2012.
- Commenced construction of the first two phases of the Grand Valley wind power project in Ontario and the Dasque-Middle run-of-river power project in British Columbia.
"In addition to strong 2011 financial results, key activities within our midstream and pipeline businesses in the liquids-rich Montney and Bakken resource plays reflect the continued execution of our growth strategy," said Stephen White, President and Chief Executive Officer.
"Within our power business, we focused on integrating the employees and operations from the acquisitions we made in 2010 and early 2011, progressed key construction projects, in particular the York Energy Centre, and began construction and development of a number of new projects that will be a source of future growth."
Mr. White added, "Our most recent transaction, the acquisition of the Hythe/Steeprock complex from Encana, is especially exciting for us. This transaction represents the single largest acquisition in our history, and establishes an independent, leading midstream business for our company with significant growth potential."
FINANCIAL HIGHLIGHTS
Three months ended December 31 |
Year ended December 31 |
||||||||
($ Thousands, except per Common Share amounts) | 2011 | 2010 | 2011 | 2010 | |||||
Revenues | |||||||||
Pipeline (1) | 115,874 | 111,916 | 416,469 | 415,932 | |||||
Midstream | 91,549 | 55,116 | 260,987 | 179,404 | |||||
Power | 30,647 | 26,618 | 132,357 | 98,662 | |||||
Veresen - Corporate | 147 | 226 | 167 | 424 | |||||
238,217 | 193,876 | 809,980 | 694,422 | ||||||
Net income (loss) before tax and non-controlling interest | |||||||||
Pipeline | 23,627 | 25,117 | 94,709 | 99,305 | |||||
Midstream | 32,739 | 25,725 | 90,606 | 74,876 | |||||
Power | (8,126) | 2,158 | (20,029) | 10,294 | |||||
Veresen - Corporate | (17,066) | (24,060) | (65,810) | (73,216) | |||||
31,174 | 28,940 | 99,476 | 111,259 | ||||||
Tax expense | (16,017) | (12,034) | (44,439) | (31,324) | |||||
Net income attributable to non-controlling interest | (366) | (194) | (1,144) | (194) | |||||
Net income attributable to Common Shares | 14,791 | 16,712 | 53,893 | 79,741 | |||||
Per Common Share ($) | 0.09 | 0.11 | 0.33 | 0.55 | |||||
(1) Net of intersegment eliminations. |
Net income for the three months ended December 31, 2011 was $14.8 million or $0.09 per Common Share compared to $16.7 million or $0.11 per Common Share for the same period last year. Excluding the effect of mark-to-market gains and losses, discussed below, net income attributable to Common Shares was $18.3 million or $0.11 per Common Share compared to $13.5 million or $0.09 per Common Share for the same period in 2010.
Net income for the year ended December 31, 2011 was $53.9 million or $0.33 per Common Share compared to $79.7 million or $0.55 per Common Share for the prior year. Excluding the effect of mark-to-market gains and losses, discussed below, net income attributable to Common Shares was $70.2 million or $0.43 per Common Share compared to $75.6 million or $0.52 per Common Share for the prior year.
Recent Growth Activities in Midstream and Power Businesses Contribute to Earnings
Veresen's financial results for the three and 12 months ended December 31, 2011 reflect the continued execution of the Company's growth strategy. In particular, Aux Sable's focus on attracting liquids-rich natural gas from the prolific shale regions of the Montney, in Alberta and British Columbia, and the Bakken, in Saskatchewan and North Dakota, contributed to higher net income from Veresen's midstream business. Higher heat content natural gas, coupled with continued strong natural gas liquids ("NGLs") market conditions, resulted in the recognition of $30.6 million and $92.6 million in margin-based lease revenues during the three and 12 month periods, which represented record levels of margin-based earnings from Aux Sable. Aux Sable's recent asset infrastructure investments in the Montney and the Bakken also contributed to higher earnings relative to the comparative periods.
Veresen's power business also generated solid earnings from operations. Adjusted earnings before interest, depreciation, amortization and other non-cash charges from the Company's power business ("Adjusted EBITDA - Power") for the three months ended December 31, 2011 was $8.5 million, which was comparable to the same period last year (see reconciliation of Adjusted EBITDA - Power to Power net income before tax and non-controlling interest in the schedules attached to this news release). For the year ended December 31, 2011, Adjusted EBITDA - Power was $50.5 million, a $16.5 million increase compared to the prior year. This increase reflects higher earnings from Veresen's gas-fired and district energy facilities, and incremental earnings from power facilities acquired in February 2011 and November 2010. For both the three and 12 month periods, Adjusted EBITDA - Power was offset by the unrealized mark-to-market hedging loss, discussed below, and, to a lesser extent, higher depreciation and interest costs associated with the Company's new facilities.
Earnings from Veresen's pipeline business, comprised of Alliance and AEGS, decreased by $1.5 million and $4.6 million, respectively, primarily due to the ongoing reduction in equity returns on Alliance's declining investment base and, in respect of the 12 month results, the effect of the stronger Canadian dollar.
Corporate costs for the three and 12 months ended December 31, 2011 decreased by $7.0 million and $7.4 million, respectively, compared to the same periods last year. The decrease reflects lower foreign exchange losses and reduced spending on project development, partially offset by higher general and administrative costs associated with Veresen's growth intiatives.
Tax expense increased by $4.0 million and $13.1 million for the three and 12 months ended December 31, 2011 as a result of Veresen's conversion from a flow-through limited partnership structure to a taxable corporation at the start of the year, and from higher relative earnings from Veresen's midstream business.
Mark-to-Market Gains and Losses
Veresen's net income for the three and 12 months ended December 31, 2011 includes the effect of a respective $3.5 million or $0.02 per Common Share and $16.3 million or $0.10 per Common Share unrealized mark-to-market hedging loss associated with the Company's risk management activities. The unrealized loss relates to a 20-year interest rate swap for the York Energy Centre which was entered into to manage exposure to changes in interest rates. As the swap has a long-dated term, its fair value is highly sensitive to fluctuations in long-term interest rates. The pre-tax unrealized loss of $4.6 million and $21.7 million for the three and 12 month periods is recorded in the results of the Company's power segment.
Net income for the comparative periods in 2010 included a respective $3.2 million or $0.02 per Common Share and $4.1 million or $0.03 per Common Share mark-to-market gain on the York interest rate swaps and the Company's exchangeable debentures. The pre-tax gain of $4.2 million and $5.4 million for the three and 12 month periods was recorded in the results of the Company's power segment.
Distributable Cash (1) | |||||||||
Three months ended December 31 |
Year ended December 31 |
||||||||
($ Thousands, except per Common Share amounts) | 2011 | 2010 | 2011 | 2010 | |||||
Pipeline | 37,442 | 35,911 | 151,057 | 142,249 | |||||
Midstream | 34,649 | 24,546 | 94,217 | 78,546 | |||||
Power | 1,385 | 5,430 | 25,764 | 18,573 | |||||
Veresen - Corporate | (11,896) | (12,788) | (49,363) | (41,972) | |||||
Taxes | (8,349) | (6,883) | (28,682) | (16,819) | |||||
Distributable Cash | 53,231 | 46,216 | 192,993 | 180,577 | |||||
Common Share ($) | 0.32 | 0.30 | 1.18 | 1.24 | |||||
Cash From Operating Activities | 55,545 | 43,844 | 269,080 | 237,384 | |||||
(1) See the reconciliation of distributable cash to cash from operating activities the tables attached to this news release. |
2011 distributable cash reflects the positive results from Veresen's various growth initiatives. For the three and 12 months ended December 31, 2011, Veresen generated distributable cash of $53.2 million or $0.32 per Common Share and $193.0 million or $1.18 per Common Share, respectively, compared to $46.2 million or $0.30 per Common Share and $180.6 million or $1.24 per Common Share for the prior year. The main contributors include:
- Alliance's collection and distribution of a non-renewal charge. In January 2011, Alliance began collecting a non-renewal charge on the U.S. portion of its pipeline system from shippers who did not elect to extend their transportation contracts beyond December 1, 2015.
- Strong fundamentals in the midstream business. In addition to incremental cash flows from recently acquired Montney and Bakken assets, continued favourable NGL market conditions during the year resulted in record-level margin-based lease revenues.
- Positive year-over-year performance from Veresen's power business. In addition to incremental cash flows generated from power facilities acquired in late 2010 and early 2011, substantially all of the Company's other operating facilities generated higher levels of distributable cash compared to the prior year.
- Higher general and administrative costs, higher debt service costs and increased cash taxes. Veresen's growth initiatives resulted in increased general and administrative costs and overall debt levels, while the period-over-period cash tax increase reflects higher taxable earnings from Aux Sable.
Veresen generated $55.5 million and $269.1 million of cash from operating activities for the three and 12 months ended December 31, 2011, respectively, compared to $43.8 million and $237.4 million for the same periods last year. Each of the Company's businesses contributed to the increase in operating cash flows for the year.
OPERATING HIGHLIGHTS
Pipeline
Alliance continues to be in active discussions with shippers regarding the contracting of pipeline capacity beyond 2015. Alliance's key business objective is to transition to a multi-service business model, providing shippers with competitively priced infrastructure and energy transportation services to deliver natural gas to major markets in North America. The Alliance system is ideally positioned relative to unconventional liquids-rich shale developments in the Montney and Bakken regions, which are providing significant sources of new gas production.
Alliance has implemented a number of pipeline system optimization projects in response to shipper demand for increased receipt capacity from northeastern British Columbia. Alliance has also increased its receipt capacity from the Montney and Bakken regions. The Prairie Rose Pipeline, acquired by Aux Sable in 2011 and located in the Bakken region, is connected to the Alliance system. In 2011, the contract capacity of the Prairie Rose Pipeline doubled to 80 mmcf/d.
In 2011, Alliance filed plans with the Federal Energy Regulatory Commission to construct a new lateral pipeline, the Tioga Lateral, to transport liquids-rich natural gas. The proposed 126-km (77-mile) pipeline, underpinned with an executed, long-term shipper contract, will connect new natural gas supply from the Bakken region to the Alliance system, for onward shipment to the Chicago market hub. The proposed lateral has an initial design capacity of 106 mmcf/d and can be expanded based on shipper demand. This new infrastructure will enable producers to economically move to market natural gas and NGLs produced in association with oil production. The Tioga Lateral is planned to be in service in mid-2013 pending regulatory approval.
Midstream
Aux Sable continues to focus on a number of initiatives to ensure the optimal level of rich gas is delivered into the Alliance pipeline for recovery at the Channahon Facility. These activities have largely been focused on the Montney and Bakken regions.
In July 2011, Aux Sable acquired the Palermo Conditioning Plant and the Prairie Rose Pipeline in the Bakken region. Aux Sable earns processing and pipeline transportation fees from these assets, and realizes a margin on the NGLs recovered. The acquisition represents a significant step forward in Aux Sable's pursuit of its strategic growth objectives in the Bakken, which include owning key infrastructure assets that will increase deliveries of liquids-rich natural gas to the Channahon Facility. Aux Sable is also expanding its rail off-load capacity at the Channahon Facility in order to provide fractionation services for U.S. shale gas producers.
Aux Sable has also established an off-gas processing business. In 2010, Aux Sable entered into a long-term off-gas processing agreement to secure a feedstock source for its Heartland off-gas facility, located in Fort Saskatchewan, Alberta. Heartland commenced commercial operations in September 2011 and is capable of processing up to 20 mmcf/d of off-gas, producing hydrogen, ethane and a propane-plus mix.
Hythe/Steeprock Acquisition
On February 9, 2012, Veresen closed the acquisition of the Hythe/Steeprock gas gathering and processing complex from Encana for $920 million. The Hythe/Steeprock complex is located in the Cutbank Ridge region of Alberta and British Columbia. Natural gas and NGLs in the region are produced from the Montney, Cadomin and other geological formations. The Hythe/Steeprock complex includes two natural gas processing plants with combined functional capacity of 516 mmcf/d as well as approximately 40,000 horsepower of compression and 370 km of gas gathering lines. The Hythe plant processes both sour and sweet natural gas, while the Steeprock plant is a sour gas processing facility.
With this acquisition, Veresen has established an independent, high-quality, natural gas midstream business. The acquisition is consistent with Veresen's strategy of growing its businesses through the selective development and acquisition of contracted, long-life infrastructure assets that generate stable cash flows.
In connection with the transaction, Veresen entered into a Midstream Services Agreement with Encana, establishing a long-term, take or pay throughput commitment. Veresen will become the operator of the two interconnected gas processing plants following a transition period, and Encana will be the contract operator of the compression and gas gathering system.
Power
During 2011, Veresen expanded its power business through selective acquisitions, focused on integrating the operations of power facilities the Company acquired in late 2010 and early 2011, and advanced the construction and development of several power facilities.
Construction of the York Energy Centre, a 400 MW gas-fired generation facility in Ontario, proceeded on budget, and operations are expected to begin in the second quarter of 2012 under a long-term power purchase agreement with the Ontario Power Authority.
In 2011, Veresen acquired three run-of-river hydroelectric facilities in British Columbia representing an aggregate 33 MW of generation capacity. Veresen also increased its ownership interest in the Culliton Creek run-of-river power project from 50 percent to 100 percent.
Veresen is constructing the Dasque-Middle run-of-river power facility, a 20 MW project located near Terrace, B.C. Commercial in-service is projected for the first half of 2013.
Construction of the first two phases (9 MW and 11 MW, respectively) of the Grand Valley wind power project in Ontario is near completion. Veresen holds a 75 percent ownership interest in this project and commercial in-service is projected for March 2012.
NRGreen, in which Veresen holds a 50 percent ownership interest, is constructing a 14 MW waste heat power generation facility located at Alliance's compressor station at Whitecourt, Alberta. Construction of the facility is expected to be completed in the third quarter of 2013.
Earlier this month, Veresen purchased the 25 percent interest held by a partner in each of the East Windsor Cogeneration and EnPower power facilities, located in Windsor, Ontario and central British Columbia, respectively. The purchase increases Veresen's interest in each of these facilities to 100 percent.
LNG Development Project
In 2011, Veresen continued to explore alternative uses for the proposed Jordan Cove Energy Project and Pacific Connector Gas Pipeline. As part of this process, Veresen acquired the land necessary to site the facility. Also, in September 2011, Veresen filed an application with the U.S. Department of Energy to export up to six million metric tonnes per annum of liquefied natural gas (LNG) for a 30-year term. This application was part of initial activities required to support a dual use LNG export/import facility. Based on interest from a number of natural gas producers and potential off-take customers, Veresen continues to assess the development of an LNG export facility. If approved, market factors and contractual commitments would ultimately drive the direction of the project.
Corporate
In 2011, Veresen took several steps to advance its financing capability and flexibility in support of the Company's operating objectives and strategic growth initiatives. These included expanding and modifying Veresen's revolving credit facilities, raising equity to support the Company's growth initiatives and managing refinancing risk through term debt issuance.
In the fourth quarter, Veresen extended the term of its revolving credit facility to mature on November 30, 2015 and increased the principal amount available under this facility from $450 million to $550 million.
In November, Veresen completed the issuance of $150 million of senior unsecured seven year debt into the medium term note market.
In connection with the Hythe/Steeprock acquisition, in December 2011, Veresen issued subscription receipts at a price of $14.10 per subscription receipt for net proceeds of approximately $335 million. With the closing of the acquisition on February 9, 2012, each outstanding subscription receipt was automatically exchanged for one Common Share and a dividend equivalent payment of $0.1666 per subscription receipt in respect of dividends declared by Veresen for December 2011 and January 2012.
During 2011, Veresen also issued $111.5 million of Common Shares under the Company's Premium Dividend™ and Dividend Reinvestment Plan (trademark of Canaccord Genuity Corp.).
Veresen Directors to Retire
David Drybrough and Bob Reid have advised that they will not be standing for re-election to Veresen's Board of Directors at the Company's Annual General Meeting on May 1, 2012. Mr. Drybrough joined the Veresen Board in 2003 and Mr. Reid joined in 2007. Veresen extends its deepest thanks to Mr. Drybrough and Mr. Reid for their many years of dedicated service and valuable contributions to the Company, and wish them well in their future endeavors. The Board of Veresen has initiated a process to identify and evaluate candidates to replace these directors.
Updated 2012 Guidance
Veresen has updated its guidance for 2012 distributable cash to be in the range of $1.10 to $1.45 per Common Share, with the midpoint of $1.28 per Common Share, down from previous guidance of $1.15 to $1.50 per Common Share. The updated guidance range reflects the Company's reduced outlook for NGL pricing caused by an oversupply of ethane at Conway and high propane inventories due to unseasonably warm weather. The updated guidance range also reflects the Company's recent equity financing activities and increased ownership interest in East Windsor Cogeneration and EnPower. Further details concerning 2012 guidance can be found in the "Investor Information" section of Veresen's web site - www.vereseninc.com.
Conference Call and Webcast
Veresen will host a conference call and webcast today at 3:00 p.m. MT (5:00 p.m. ET) to discuss the Company's 2011 fourth quarter and year-end results.
Dial-in: 1 (888) 231-8191 or 1 (647) 427-7450 conference ID 42544108
A live webcast can be accessed on Veresen's web site at www.vereseninc.com in the Investor Information, Event Calendar section, or by entering http://event.on24.com/r.htm?e=395307&s=1&k=337B0B657E40FAEDD5EA721696D9FC64 in your web browser. The webcast presentation will be available on Veresen's website approximately 30 minutes prior to the conference call.
A replay of the call will be available from 5:00 p.m. MT (7:00 pm ET) on February 29, 2012 by dialing 1-855-859-2056 and 1-416-849-0833. The passcode is 42544108, followed by the pound sign. The replay will expire at midnight (ET) on March 6, 2012. The webcast will be archived for one year.
About Veresen Inc.
Veresen is a publicly-traded dividend paying corporation based in Calgary, Alberta, that owns and operates energy infrastructure assets across North America. Veresen is engaged in three principal businesses: a pipeline transportation business comprised of interests in two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; a midstream business which includes ownership interests in a world-class natural gas liquids extraction facility near Chicago, the Hythe/Steeprock gas gathering and processing complex, and other natural gas and NGL processing energy infrastructure; and a power business with renewable and gas-fired facilities and development projects in Canada and the United States, and district energy systems in Ontario and Prince Edward Island. Veresen and each of its pipeline, midstream and power businesses are also actively developing a number of greenfield projects. In the normal course of its business, Veresen and each of its businesses regularly evaluate and pursue acquisition and development opportunities.
Veresen's common shares, Series A Preferred Shares, and 5.75% convertible unsecured subordinated debentures, Series C due July 31, 2017 are listed on the Toronto Stock Exchange under the symbols "VSN", "VSN.PR.A" and VSN.DB.C", respectively. For further information, please visit www.vereseninc.com.
Forward-Looking Information
Certain information contained herein relating to, but not limited to, Veresen and its businesses constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Veresen expects or anticipates may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this news release include, but are not limited to, statements with respect to: the ability of Aux Sable to recognize margin-based lease revenues during the balance of 2012; the timing of completion of construction and start-up of the York Energy Centre, the NRGreen Whitecourt power facility, phases I and II of the Grand Valley wind project, the Dasque-Middle and Culliton Creek hydro projects and the Tioga Lateral Pipeline; Veresen's ability to realize its growth objectives; and the ability of each of its businesses to generate distributable cash in 2012. The risks and uncertainties that may affect the operations, performance, development and results of Veresen's businesses include, but are not limited to, the following factors: the ability of Veresen to successfully implement its strategic initiatives and achieve expected benefits; levels of oil and gas exploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price of capital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchange and interest rates; Veresen's ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and regulations; competitive factors in the pipeline, midstream and power industries; operational breakdowns, failures, or other disruptions; and the prevailing economic conditions in North America. Additional information on these and other risks, uncertainties and factors that could affect Veresen's operations or financial results are included in its filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time. Readers are also cautioned that the foregoing list of factors and risks is not exhaustive. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time. Although Veresen believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the information contained herein, as actual result achieved will vary from the information provided herein and the variations may be material. Veresen makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Veresen does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement.
Certain financial information contained in this news release may not be standard measures under Generally Accepted Accounting Principles ("GAAP") in Canada and may not be comparable to similar measures presented by other entities. These measures are considered to be important measures used by the investment community and should be used to supplement other performance measures prepared in accordance with GAAP in Canada. For further information on non-GAAP financial measures used by Veresen see Management's Discussion and Analysis, in particular, the section entitled "Non-GAAP Financial Measures" contained in the annual Management Discussion and Analysis, filed by Veresen with Canadian securities regulators.
Veresen Inc. | ||||||
Consolidated Statement of Financial Position | ||||||
($ Thousands; unaudited) | December 31, 2011 | December 31, 2010 | ||||
Assets | ||||||
Current assets | ||||||
Cash and short-term investments | 67,287 | 66,270 | ||||
Restricted cash | 363,516 | 10,572 | ||||
Receivables | 116,623 | 97,997 | ||||
Other | 96,291 | 26,080 | ||||
643,717 | 200,919 | |||||
Long-term receivables | 289,523 | 315,563 | ||||
Pipeline, plant and other capital assets | 2,611,500 | 2,419,671 | ||||
Intangible assets | 185,204 | 164,106 | ||||
Other assets | 7,144 | 18,320 | ||||
3,737,088 | 3,118,579 | |||||
Liabilities | ||||||
Current liabilities | ||||||
Payables | 140,131 | 103,292 | ||||
Subscription receipts payable | 348,622 | - | ||||
Transportation security deposits | 5,155 | 4,912 | ||||
Dividends payable | 2,741 | 4,493 | ||||
Current portion of long-term senior debt | 130,858 | 124,047 | ||||
627,507 | 236,744 | |||||
Long-term senior debt | 1,768,824 | 1,596,234 | ||||
Subordinated convertible debentures | 82,989 | 82,411 | ||||
Future taxes | 308,737 | 295,459 | ||||
Other long-term liabilities | 73,970 | 53,803 | ||||
2,862,027 | 2,264,651 | |||||
Shareholders' Equity | ||||||
Share capital | 1,381,750 | 1,270,285 | ||||
Cumulative other comprehensive loss | (43,764) | (61,367) | ||||
Cumulative net income | 717,352 | 663,459 | ||||
Cumulative dividends | (1,195,819) | (1,032,767) | ||||
Shareholders' equity attributable to Common Shares | 859,519 | 839,610 | ||||
Non-controlling interest | 15,542 | 14,318 | ||||
875,061 | 853,928 | |||||
3,737,088 | 3,118,579 | |||||
Veresen Inc. | ||||||
Consolidated Statement of Income and Cumulative Income | ||||||
Three months ended December 31 | Year ended December 31 | |||||
($ Thousands, except per Common Share amounts; unaudited) | 2011 | 2010 | 2011 | 2010 | ||
Revenues | ||||||
Operating revenues | 236,763 | 193,633 | 806,652 | 690,524 | ||
Interest and other | 1,454 | 243 | 3,328 | 3,898 | ||
238,217 | 193,876 | 809,980 | 694,422 | |||
Expenses | ||||||
Operations and maintenance | 94,334 | 57,737 | 291,450 | 210,673 | ||
Depreciation and amortization | 39,208 | 39,068 | 152,983 | 142,658 | ||
Interest and other finance | 28,636 | 29,543 | 117,180 | 112,895 | ||
General, administrative and project development | 39,820 | 33,637 | 124,034 | 108,330 | ||
Unrealized financial instrument loss (gain) | 4,628 | (2,193) | 21,661 | (3,413) | ||
Realized financial instrument gain | - | (2,004) | - | (2,004) | ||
Foreign exchange and other | 417 | 9,148 | 3,196 | 14,024 | ||
207,043 | 164,936 | 710,504 | 583,163 | |||
Net income before taxes and non-controlling interest | 31,174 | 28,940 | 99,476 | 111,259 | ||
Current taxes | 8,349 | 6,986 | 28,682 | 17,317 | ||
Future taxes | 7,668 | 5,048 | 15,757 | 14,007 | ||
Net income before non-controlling interest | 15,157 | 16,906 | 55,037 | 79,935 | ||
Net income attributable to non-controlling interest | 366 | 194 | 1,144 | 194 | ||
Net income attributable to Common Shares | 14,791 | 16,712 | 53,893 | 79,741 | ||
Cumulative net income at the beginning of the period | 702,561 | 646,747 | 663,459 | 583,718 | ||
Cumulative net income at the end of the period | 717,352 | 663,459 | 717,352 | 663,459 | ||
Net income per Common Share | ||||||
Basic and diluted | 0.09 | 0.11 | 0.33 | 0.55 | ||
Consolidated Statements of Comprehensive Income and Cumulative Other Comprehensive Income | ||||||
Three months ended December 31 | Year ended December 31 | |||||
($ Thousands; unaudited) | 2011 | 2010 | 2011 | 2010 | ||
Net income attributable to Common Shares | 14,791 | 16,712 | 53,893 | 79,741 | ||
Other comprehensive income (loss), net of taxes | ||||||
Cumulative translation adjustment | ||||||
Unrealized foreign exchange gain (loss) on translation of self-sustaining foreign operations | (9,854) | (13,770) | 13,533 | (17,823) | ||
Cumulative translation adjustment reclassified to net income | 203 | 9,154 | 2,258 | 14,260 | ||
Loss on hedge of self-sustaining foreign operation | - | 736 | - | (489) | ||
Other | (25) | (5,013) | 1,812 | (2,691) | ||
(9,676) | (8,893) | 17,603 | (6,743) | |||
Comprehensive income attributable to Common Shares | 5,115 | 7,819 | 71,496 | 72,998 | ||
Cumulative other comprehensive loss at the beginning of the period | (34,088) | (52,474) | (61,367) | (54,624) | ||
Other comprehensive income (loss), net of taxes | (9,676) | (8,893) | 17,603 | (6,743) | ||
Cumulative other comprehensive loss at the end of the period | (43,764) | (61,367) | (43,764) | (61,367) | ||
Veresen Inc. | ||||||
Consolidated Statement of Cash Flows | ||||||
Three months ended December 31 | Year ended December 31 | |||||
($ Thousands; unaudited) | 2011 | 2010 | 2011 | 2010 | ||
Operating | ||||||
Net income attributable to Common Shares | 14,791 | 16,712 | 53,893 | 79,741 | ||
Non-cash transportation revenue | (8,663) | (6,817) | 2,335 | (2,748) | ||
Depreciation, amortization and other | 46,278 | 36,744 | 171,819 | 141,517 | ||
Unrealized financial instrument loss (gain) | 4,628 | (2,193) | 21,661 | (3,413) | ||
Unrealized foreign exchange loss (gain) | 1,404 | 10,372 | (791) | 14,595 | ||
Future taxes | 7,668 | 5,048 | 15,757 | 14,007 | ||
Non-controlling interest | 366 | 194 | 1,144 | 194 | ||
Changes in non-cash working capital | (10,927) | (16,216) | 3,262 | (6,509) | ||
55,545 | 43,844 | 269,080 | 237,384 | |||
Investing | ||||||
Acquisitions, net of cash acquired | (50,000) | (5,724) | (150,661) | (95,582) | ||
Cash acquired through acquisition of Pristine Power Inc. | - | 28,233 | - | 28,233 | ||
Pipeline, plant and other capital assets | (55,608) | (22,226) | (209,834) | (43,378) | ||
Intangible assets | - | - | (15,076) | - | ||
Other | 16,058 | (4,384) | 18,101 | (13,898) | ||
(89,550) | (4,101) | (357,470) | (124,625) | |||
Financing | ||||||
Subscription receipts issued | 348,622 | - | 348,622 | - | ||
Restricted cash | (348,622) | - | (348,622) | - | ||
Long-term debt issued, net of issue costs | 159,519 | 14,754 | 245,038 | 14,754 | ||
Convertible debentures issued, net of issue costs | - | - | - | 82,148 | ||
Long-term debt repaid | (36,745) | (41,966) | (123,677) | (82,658) | ||
Convertible debentures and exchangeable debentures repaid | - | (24,646) | - | (24,646) | ||
Net change in credit facilities | (95,288) | (6,215) | 36,477 | (37,128) | ||
Dividends paid | (22,916) | (12,514) | (53,344) | (55,816) | ||
Other | (15,448) | 137 | (15,448) | 137 | ||
(10,878) | (70,450) | 89,046 | (103,209) | |||
Increase (decrease) in cash and short-term investments | (44,883) | (30,707) | 656 | 9,550 | ||
Effect of foreign exchange rate changes on cash and short-term investments | (1,382) | (1,407) | 361 | (1,225) | ||
Cash and short-term investments at the beginning of the period | 113,552 | 98,384 | 66,270 | 57,945 | ||
Cash and short-term investments at the end of the period | 67,287 | 66,270 | 67,287 | 66,270 | ||
Veresen Inc. | ||||||
Distributable Cash (1) | ||||||
Three months ended December 31 | Year ended December 31 | |||||
($ Thousands, except where noted; unaudited) | 2011 | 2010 | 2011 | 2010 | ||
Alliance distributions, prior to withholdings for capital expenditures and net of debt service | 33,506 | 31,845 | 135,256 | 127,000 | ||
AEGS distributable cash, after non-recoverable capital expenditures and debt service | 3,936 | 4,066 | 15,801 | 15,249 | ||
Aux Sable distributions, net of support payments, non-recoverable maintenance capital expenditures and debt service |
34,649 | 24,546 | 94,217 | 78,546 | ||
Power distributable cash, after maintenance capital expenditures and debt service (2) | 1,385 | 5,430 | 25,764 | 18,573 | ||
73,476 | 65,887 | 271,038 | 239,368 | |||
Corporate | ||||||
Interest income and other | - | 97 | - | 1,856 | ||
General and administrative | (6,424) | (5,881) | (23,535) | (18,459) | ||
Interest and other finance | (5,472) | (6,244) | (24,352) | (22,270) | ||
Principal repayments on senior debt | - | (760) | (1,476) | (3,099) | ||
(11,896) | (12,788) | (49,363) | (41,972) | |||
Taxes | (8,349) | (6,883) | (28,682) | (16,819) | ||
(20,245) | (19,671) | (78,045) | (58,791) | |||
Distributable cash (1) | 53,231 | 46,216 | 192,993 | 180,577 | ||
Distributable cash per Common Share ($) (3) | 0.32 | 0.30 | 1.18 | 1.24 | ||
Dividends paid/payable (4) | 41,560 | 38,429 | 163,052 | 145,157 | ||
Dividends paid/payable per Common Share ($) | 0.25 | 0.25 | 1.00 | 1.00 | ||
(1) | Distributable cash is not a standard measure under generally accepted accounting principles in Canada and may not be comparable to similar measures presented by other entities. Distributable cash represents the cash available to Veresen for distribution to shareholders after providing for debt service obligations and any capital expenditures that are not growth-oriented or recoverable but does not include distribution reserves, if any, held by Veresen's businesses, project development costs, or transaction costs incurred in conjunction with acquisitions. Project development costs are discretionary, non-recoverable costs incurred to assess the commercial viability of new greenfield business initiatives unrelated to the Company's operating businesses. The Company considers transaction costs to be part of the consideration paid for an acquired business and, as such, are unrelated to the Company's operating businesses. (Effective January 1, 2011, GAAP requires transaction costs to be expensed.) Distributable cash is an important measure used by the investment community to assess the source and sustainability of Veresen's cash distributions and should be used to supplement other performance measures prepared in accordance with generally accepted accounting principles in Canada. See the following table for the reconciliation of distributable cash to cash from operating activities. | |||||
(2) | In the case of Veresen's majority-owned power facilities, currently comprised of East Windsor Cogeneration LP and EnPower Green Energy Generation Limited Partnership, distributable cash is calculated based on the Company's 75 percent ownership interests in each of these businesses. | |||||
(3) | The number of Common Shares used to calculate distributable cash per Common Share is based on the average number of Common Shares outstanding at each record date. For the three months ended December 31, 2011, the average number of Common Shares outstanding for this calculation was 166,305,542 and 172,212,734 (2010 - 153,780,657 and 160,553,392) on a basic and diluted basis, respectively. For the year ended December 31, 2011, the average number of Common Shares outstanding for this calculation was 163,119,400 and 169,026,820 (2010 - 145,217,385 and 150,043,209) on a basic and diluted basis, respectively. The number of Common Shares outstanding would increase by 5,907,192 (2010 - 5,907,534) Common Shares if the outstanding Convertible Debentures as at December 31, 2011 were converted into Common Shares. | |||||
(4) | Includes $19.3 million and $111.5 million of dividends for the three and 12 months ended December 31, 2011, respectively, (2010 - $25.4 million and $91.3 million) satisfied through the issuance of Common Shares under the Company's Premium Dividend™ and Dividend Reinvestment Plan (trademark of Canaccord Genuity Corp.). | |||||
Veresen Inc. | ||||||
Reconciliation of Distributable Cash to Cash from Operating Activities | ||||||
Three months ended December 31 | Year ended December 31 | |||||
($ Thousands; unaudited) | 2011 | 2010 | 2011 | 2010 | ||
Consolidated cash from operating activities | 55,545 | 43,844 | 269,080 | 237,384 | ||
Adjusted for: Cash used for (generated from) operating activities applicable to jointly held businesses (5) | 5,719 | (3,894) | (87,655) | (85,748) | ||
Cash from operating activities applicable to wholly-owned businesses (6) | 61,264 | 39,950 | 181,425 | 151,636 | ||
Add (deduct) amounts applicable to wholly-owned businesses: | ||||||
Project development costs (7) | 2,474 | 4,317 | 11,086 | 15,813 | ||
Change in non-cash working capital | (13,674) | (3,428) | (2,268) | 4,159 | ||
Principal repayments on senior notes | (2,960) | (1,446) | (10,827) | (5,800) | ||
Maintenance capital expenditures | (1,057) | (36) | (2,897) | (4,449) | ||
Distributions earned greater than distributions received (8) | 7,184 | 6,859 | 16,474 | 19,218 | ||
Distributable cash | 53,231 | 46,216 | 192,993 | 180,577 | ||
(5) | Represents cash from operating activities applicable to jointly held businesses which is not under the Company's sole control and, consequently, is not included in distributable cash until distributions are declared by the jointly held businesses. | |||||
(6) | Net of aggregate support payments made to Alliance Canada Marketing and Sable NGL Services of $4.6 million and $14.4 million for the three and 12 months ended December 31, 2011, respectively (2010 - $4.3 million and $11.3 million, respectively). | |||||
(7) | Represents costs incurred by the Company and its wholly-owned businesses in relation to projects where the recoverability of such costs has not yet been established. Amounts incurred for the three and 12 months ended December 31, 2011 relate primarily to the Jordan Cove LNG terminal project, the Pacific Connector Gas Pipeline project, and various power development projects. | |||||
(8) | Represents the difference between distributions declared by jointly held businesses and distributions received. | |||||
Reconciliation of Adjusted EBITDA - Power to Power net income before tax and non-controlling interest | ||||||
Three months ended December 31 | Year ended December 31 | |||||
($ Thousands; unaudited) | 2011 | 2010 | 2011 | 2010 | ||
Adjusted EBITDA - Power | 8,459 | 8,593 | 50,504 | 34,023 | ||
Add (deduct): | ||||||
One-time transaction costs (9) | - | - | (1,847) | - | ||
One-time gains (10) | - | - | - | 1,559 | ||
Fair value gains (losses) related to financial instruments | (4,628) | 4,197 | (21,661) | 5,417 | ||
Foreign exchange and other | (16) | (1,416) | (129) | (364) | ||
Depreciation and amortization | (7,949) | (6,348) | (31,246) | (22,001) | ||
Interest and other finance | (3,992) | (2,868) | (15,650) | (8,340) | ||
Power net income (loss) before tax and non-controlling interest | (8,126) | 2,158 | (20,029) | 10,294 | ||
(9) | Represents transaction costs incurred in relation to the Company's acquisition of Furry Creek and Clowhom. (See "New Accounting Standards - Accounting for Business Combinations"). | |||||
(10) | Represents an insurance settlement received by the San Gabriel facility in the third quarter of 2010. | |||||
Dorreen Miller, Director, Investor Relations
Phone: (403) 213-3633
Email: [email protected]
www.vereseninc.com
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