TCP - Earnings call transcript Q3 2018

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Operator

All participants thank you for standing by. The conference is ready to begin. Good morning, ladies and gentlemen. Welcome to the TC PipeLines, LP 2018 Third Quarter Results Conference Call. I would now like to turn the meeting over to Ms. Amundson. Rhonda ahead. go Please

Rhonda Amundson

as Financial Morris. found tcpipelineslp.com Brown; will much, Events on welcome a close as at heading, & following review good our under quarter you joined update results. key President, quarter. will Nathan call. brief Presentations. very with can Janine that which the a Nathan General would be presentation Watson; highlights will the XXXX detailed everyone. Please financial for like I'm Pipelines' Nathan our up Janine begin by to the to today or provide TC a partnership's VP Investors operator, wrap you review with third and and and well the quarter website and a Principal morning, will Chuck environment, Manager, our and of and I the more assets an conference results update, our remarks, today some Thank our their on will remarks our note and slide third in section provide our accompany and call Officer, market Chuck of is regulatory available it takeaways. third return the

remarks, Following your questions. conference will I the operator prepared the ask to coordinate

happy contact will questions Semmens be this your Grady address please member following investment will from the community. the of But and questions. We media, take to a if you are call he

our performance. those various use also These to non-GAAP capability. statements and distributable made of the of statements. financial will in information period actual that or Exchange underlying Please based provided materially flow call statements our be measures events measures the the as a now or as the measure provide to filings. XXXX results provide available may measure evaluate cash-distribution the these respect most will closely by beliefs and subsequent future views Before uncertainties future reflect we uncertainties to materialize forward-looking would assumptions as are from GAAP results remind All turn are operating If to that, are With over flow currently as prove detail EBITDA in These SEC as the distributable our directly one during our made financial forward-looking as begin, more or I approximate forward-looking to to income, we conference well cash during a Commission. us. events with current measures cash incorrect, and Securities this during our and risks, supplement that a our to Nathan. cash financial EBITDA statements GAAP period note assumptions in certain and on XX-K to discussed call well related like we generated in to net regarding described is you and if of during subject to differ is an our future and presented and reconciliation with filings the risks reconciles assumptions our presentation. cash flow the I our and

Nathan Brown

Thanks, today. us thanks Rhonda. everyone, for morning, Good and joining

perform report of equity offset together news GTN. revenue X same earned - Lakes, third solid at during to pipeline from than pleased the of XXXX. at and net the $XX earnings generated another I'm morning I'm primarily results, We good - Pipelines by release XXXX, higher with our to this million Great at million with during the $X PNGTS due partially net This Baja, in as of outlined and period is higher looking revenues assets increased quarter quarter to $XX had lower portfolio million North expected. continue As in Slide TC income very that our

EBITDA $XXX to million Our year-over-year XXXX. in similarly million higher compared $XXX quarter at the for was

quarter increase the cash for $XX in XXXX, million in an XXXX. Our of was the $XX flow distributable third comparable million period from

a Partner offset in by reduction declared and our GTN. distributions distributions to bolstered cash unitholders, Our unit expenditures in per partially General We out B our $XX paid Class is an capital $X.XX maintenance paid or million flow in by on our increase in our to in common of the detail consistent unitholders per call. second quarter. a more Chuck partnership little unit, third quarter common discuss third The the XXXX which with financial during distribution results $X.XX is also distribution. later quarter will

in to business, have back good Rule we in Final FERC's On made the summer. response the of the side progress regulatory

a or to regulatory our Further, ongoing will organic our us progress, in that position confident stronger much our - an perspective we to our reduced growth and As either puts with we due not program their via require healthy are additional opportunities. discrete savings indebtedness, from $XX [ph] tax utilized [and reached coverage covenant related related improved of estimated distributions Northern any financial to equity complied only estimate Tuscarora fund reducing distribution an four annualized quarter pipelines to in times. just FERC our Form actions the our our And starting we to left in $XX from X Lakes over negative of leaving XXXX file is under have previous requirements its shippers with settlement to other] impact Great our already our million basis just position to This me, reported uncontested cash to early times. excuse a negative to million. in mid-October, repay in from Border, our leverage $XX our very and million this business ATM portion FERC million to December. on estimates our GTN X We of XXX-Gs $XX of the

are over without sustainable on Given Watson, and provide to to need corporate level distribution confident call the this partnership's current improvement, our our our an we any we With VP do Manager update need that assets outlook. not reductions. General see I our that, will Janine to for turn is further market restructuring at the and consider the and

Janine Watson

and morning, everyone. good Nathan, Thanks,

entire diverse Moving and demand to TCP on third In Slide network, will spans from is markets. benefit the and hubs, pipeline its which see to supply anchored key regional X, you that key major continues assets in of portfolio are well are continued revenue. positioned highly contracted realize reflecting areas, these pipelines fact perform have to opportunities our the well, incremental our that quarter, to and seasonal

interest day. which expand Portland from contracts system XPress the its On transportation the this energy services to increased as increase from southbound our project GTN with in to are potential asset's benefited then needs an California Portland quarter, and legacy be per short-term as transportation Baja contract, benefited from the pipeline, X.X capacity. into approximately together during long-term continued and Northwest. replace will mature. strong the Portland California to the East in Coast, Continent‐to‐Coast its customers, can legacy Mexico Pacific short-term got contracts, in contracts that contracting sold southern back service deliver this gas stimulated We serve available These North demand serving expiring into for Bcf on routed transportation

short-term Sedimentary flows feature as end benefiting associated it prior shippers. also of mid-western to out recent reported the its However, is advantage Border's to of during basis upstream of from gas. and to settlement incremental out on the varied, to The XXXX, continued. the now, shippers the NGTL as proximity Great incremental asset's Pipelines' outlook, its synergies continued debottlenecking asset expected, demand a continues of WCSB results gas from performed asset of mechanism, to supply the remainder elimination enjoy of this capacity of the that are to the the are revenue located of and quarter. assets. tariff] push by resulting strength with revenue this those to Lake's very compared And the largely XXXX to assets part of in unique Lakes in Northern our revenues stable regions some by both turning strategically enjoy as and [tools geographically is WCSB And was and QX TC with was allowing until markets sold TransCanada's system the supportive and due [ph] Canadian benefit settlement. Basin GTNs many Upstream uncontested of XXXX assets, Bakken improved revenue with portfolio TCP's sale. differentials Great between on Western sharing TCP agreed refund earned third were opportunities. offset TransCanada's its potentially XXXX tie to the its the our

consistent highly with manner of we First will a periods, though, the to predictable assets, produce and they pipeline results. that continue contracted steady nature thereby, in perform because past of our expect

strategically in opportunities and area a gas in providing otherwise to with England some Portland is located system markets asset Our Atlantic significantly natural that in up Canada. pipeline New bottlenecked, relatively easy expansion is this serve geographic

TCP's Portland to those November system. on facilities on seeking a the of The minimal estimated of of and of the facilities, time an of Portland for self-funded incremental legacy incremental on compression Permitting project, has the work example projects an facilities pipelines provides add project in XXXX dekatherms of well-placed associated footprint, existing Phase schedule XX,XXX planned I million, is level. project is competitive be phases of is November on phase XXXX. the at to joint commenced. has pre-construction bringing this to additions the currently TransCanada expansion phase construction well-timed are brownfield for to of by on on is PXP $XX a project firm, in-service fairly path modest and these or across contracting on their and the long and Work providing we regulatory with market underway, budget. expansion hand on XPress Portland the upstream term a the project, footprint. a PXP regulatory Our three Portland's of will type this Phase appropriately-scaled, this this capacity entailed an decatherms facilities of date. compressor needed in online expected of on fairly year, of or at line, be entailing Portland. day cost November XX,XXX extend of Canada, in came environmental re-contract asset in system. project supported to project PXP and and the construction approvals in total, which a volumes flows II built an be final In about service will out This

West, market Beyond on is in The the markets, to Portland system of natural in Northeastern Northeast of expected permitting end. additional back market its creating difficulties interest these potential TransCanada launched to by to Atlantic gas Atlantic opportunities the drivers. this still Portland the the capacity to in system. offshore season pending Canada's at is month decline recently on production North LNG time, of which for organic open capture in Mainline driving the wave with bring the to additional to At results the Canadian announced working ongoing response are Baja. Mainline for growth be recent combination new growth next with and U.S. gas path are opportunity, are arriving this has opportunities together in the same

to that the of TransCanada's located news it Mainline value-creating If of long-term as to As summary, to well. incremental to a well-positioned are its as with Sempra's as existing use to recently capacity U.S. growth effect new Great succeeds, fixed next be strategic pipeline working move that markets the our in systems export of in are provide is by value XXXX. to groups agreement TransCanada's as connection wave is WCSB case provide the North importance competitive existing pipelines of few as the supported project Great optimize shippers, this to forward. opportunities in - markets Mexico, explore long-term alternatives Baja, pipeline a identify low-risk, November price of to Canadian footprint tandem California, production In to contracts. that for projects we and market. advantage Lakes the major export with took Baja's could develop working platform days a Lakes the taking and TCP going Eastern of appear strength competitive LNG ago,

Now turning to Slide X.

during regulatory Let me more development on our third detail quarter. the little a provide

execute year. in response to regulatory this our FERC to earlier continue We the strategy actions

yesterday with explaining no rate that long-term XXX-G GTN announced are Our rate all and firm shippers, with XXXX filed submitted October in the On day of Bison's context its was the which settlement previous This shippers, its arrangement. of actions GTN's structured its with we is uncontested negotiated at warranted. that Bison XX, that as that an pipeline to the prior. is FERC an Form change addressing FERC FERC's settlement amendment had contracts reached the recent settlement

filed this XX. have its with XX, XXX-G, January FERC FERC's decision agreed Importantly, And GTN Form its on is North and upon on and based October pending. Iroquois moratorium on still XXXX. further prior existing on requirement waiver Portland a upon October rate X, to of moratorium customers XXX-Gs to file filed requesting XXXX. its their Baja changes Form request to a

XXXX. on are expected is assets recent payment of file The to our Form light shippers, scheduled to this progress in a revenue In remaining $XX million GTN, be million shippers initiative XXX-G the XXXX. The view to has impact negative XXXX December. million with our Our the management's the FERC's a range engaged December as and and and X, XXX-G process of $XX in to by we full estimated Form process now is starting outcomes at negotiated year to limited improved. to possible $XX of GTN in settlement of impact the discussions

our will now third Officer Morris, Principal the We financial quarter are our in progress discuss our more over with detail. Chuck these results in Financial I very far. to to turn call thus pleased matters

William Morris

good Thanks, morning, everyone. Janine, and

to PNGTS Net $XX Moving per review factors Several Baja, impacted up XX% to partnership's the results. the third on revenues. to short-term This the of $XX compared incremental the sales. its unit $XX short-term GTN, due services was results, on led XXXX. at XXXX and XXXX recent effect per third the higher $X.XX $X.XX resulted net and partnership income settlement to quarter of common I'll for $X.XX paid XXXX quarter. XXXX. lower the X, to in in North over second on distribution primarily in a sales. decrease approximately experienced These to in third higher in equates year-over-year. resulting and to increase per Slide QX revenue that the quarter million, earnings agreements common XXXX revenue which of third of demand was unit unitholders quarter in combination The now elimination over We higher million unit year-over-year short-terms provision Equity quarter on million in August Great The of QX distributions offset was results the million Lakes which our by increased seasonal the due sharing decrease XXXX. partially paid were net the increased from of and its lower $XX refund contracting

$XXX but third third Nathan quarter in This $X.XX it's XX% mentioned quarter of our As earlier, we of XXXX unit. per of to distribution The the a distribution represents the higher declared our decrease same common declared that in XX% actions. consistent that third second quarter following first FERC and with quarter of than XXXX, was the period partnership's of XXXX. EBITDA million in

Our higher third pipeline with GTN distributable of and our impacting to income offset on both partially increase unitholders, by cash factors $XX in the an the $XX reduction timing the to $X million flows were increase partner quarter in net allocated of maintenance distributions to general The Class XXXX, year-over-year. our capital due expenditures in work. related same million million B together primarily of the reliability was

pipelines increase consolidated X% a the than Baja and the same higher lower on third of was the quarter $XXX quarter at Operating, the XXXX. administrative were those incremental in to in GTN. increased Equity of to charges from last X, million at higher and XXXX, revenues contracting Slide in financial PNGTS, same third the North offset the expenses, were both earnings our Great partially during year, $X same by to the of results revenue period approximately result Turning than and comparable Lakes. primarily quarter quarter XXXX depreciation due all million maintenance the in the or

position on to Slide Moving our financial X. on

flexibility our us fund provide continue ratings credit we the grade financial growth. organic as with investment Our to

has credit as strong. facility X, November capacity borrowing of Our under $XXX and XXXX. million senior undrawn liquidity remains of our available partnership The position

to cash reduce credit advance we've outstanding we resulting deleveraging cash revolving execute in our continue borrowings As reductions our used savings of the related our to our FERC actions. portion program, facility the distributions, the flows anticipated of payoff a future from and on

approximately turn leverage the remarks X.X bank Nathan. This now results. our XX, to over in back as result, the financial September call is And third quarter my of concludes a As ratio XXXX. times I'll

Nathan Brown

good that has and see lot we refer clear of focusing business. our path a return in now a This partnership. made progress Slide Thanks, XX. regulatory on for to and can the Chuck. forward our a been I front of We've believe very quarter other we

the over confident past well, they months in are as We've our our Our was will solid we the ratio taken solid a as assets financial performed generate and and from leverage distribution as we value fundamentals managing over are position happy proactive times remained very in that well. and situated just well report coverage to to X future. few benefit their ratio underlying continue market to unitholders well approach

are area our times the range. equity Going to With the in ratio forward, and low solid times financial program. maintain are growth fund our targeting capital this position, current plans to we in X.X coverage there the ratio to markets X leverage our no access

Our wave focus optimization secure pipeline. as our on and These current such Portland our we're projects opportunities of Project. of is our growth on assets. North the also in portfolio opportunity next growth potential to our organic working XPress asset remains the on Baja PNGTS, There include

manner are position progressed with in All self-funding. to and these very be so will we a be near-term opportunities, a of in sequence, discipline size

that continue low-risk, for to opportunities results value-creating now managing history have We our assets I'll a generate of high-quality, our of Rhonda. for the unitholders. infrastructure confident projects of our to growth turn with crucial call financial and solid energy organic prudently partnerships portfolio are in back will

Operator

up like I'd Nathan. please ahead. to for the questions. open Operator, call go now Thanks,

Operator

ahead. you. J.P. question Please Jeremy is First Instructions] from [Operator from go Morgan. Thank Tonet

Unidentified Analyst

of just pipes I to did you kind the come need still option that like the similar speaking with a to maybe change already your operators to needed. Jeremy. we look for to was there regulatory update. submit form you was on of on of did Troy Or circle maybe going expectations? similar that Form what as to what just explaining is that lot you rate to any to on to This settlement seems thoughts you curious, XXX-Gs third you forward some GTN? Portland, wondering are why to no with back are I shippers is remaining morning. could good It in Hey, December, prior submitting for a if

Nathan Brown

And works strategy basis. is reaching on through circumstances Nathan. I'd the a we regulatory Certainly, fact their favor. in each basis. say that out our is to This and site-by-site different slightly we're one on a has do something progressing customer regular

We have going course. with like Also, adding the actual But should communications approach, month. with in the on about within this realm. be the all time regulator we public FERC terms ongoing in something filings that, of this we're next the finalizing will due that may be

Unidentified Analyst

Okay, just more And outlined, great. on opportunities then the specifically a of with detail you kind the of of North explain Thanks. these just this what be. some little would and size opportunity Baja, you growth bit in scope

Sempra is supply? LNG would this - is one ECA, this that project, be And this the is sorry, what - is the

Janine Watson

Azul. Costa

Unidentified Analyst

Yes, okay, right.

Janine Watson

on - it XXX Well, to that along But up. days too, X can come that to easy export the that do day Yeah. front. even we adds up a X early XXX to should of to some meet brownfield move it's certainly, the facility, LNG needs in that compression or new there is fairly line

Unidentified Analyst

that? on expectation What's on timing the

Janine Watson

is when issues on I have market these the up underway. to time, and to come that ready sign working think when they all we market the contracts we're but

we Year. think to we quarters hope be the the one in news So New pushing fairly over next more two quickly have and I this on should

Unidentified Analyst

Okay, great. you. Thank

Operator

Taylor The Please Tudor, Holt. Matthew you. go from from ahead. Thank Pickering, question next is

Matthew Taylor

taking up need those you how for the open if, question showing Thanks eastern the my stages those, on you much say, can seasons. starts systems and ongoing guys. expand early hey, more you us just remind triangle? new do capacity here. Still On Yeah, can volume in

Janine Watson

is still and not yet but have open closed, Yes, one that open that's announced. season. the TransCanada's They one

see they've is PNGTS So think the needed We're forward with some it point. that when come response, at triangle, positive got a we'll ability but Iroquois like they'll capacity I the they're ready amount what have that seems of that be hoping both in looks to unknown be robust new I then, point. have - potential be. to this PNGTS add shippers gas, more little a well if or as out Iroquois to at proves that add to quite ability want to more to those it's bit some direction And this think the that has move to that a more compression built take. and

Matthew Taylor

Okay. conversation you set similar probably just like Is And of that something a probably goes East them LNG on on well? fingers could such sort there. ability of then, ahead, to crossed, Coast the conversation, some Canadian if opportunity similar that capitalize expand That's helpful. a as the system

Janine Watson

LNG we should to to very and components I shippers Well, talking think of materialize, I see early involved want take. there out being interested think, is have TransCanada but days. lot a we're that in different And it's those to certainly path what

Matthew Taylor

think if border, volumes be use Bison, trending And to Northern system, have you seeing growth that of Bison. I'm maybe that volumes the to may connected that same that of piece but sort opportunity now something Canadian Canadian latent not just on you've don't been Northern flow thinking opportunities questions filled over get to switch to otherwise on else not system border. about often I any there. to with just some Northern Bison volumes Is then that of would there might are or capacity any at just highlighted downward you then, do even I volume Northern as and that look

William Morris

And border. certainly at. reflective flown had there's describing something that that solution be several we're that's regional volumes The just rising is Northern the of to things. coming of different on out that are certainly, there a the looking the dynamic Bakken Well, you're

think that capacity, flow it's the that we're and we're on asset into some can product Northern or the value along our the conversion solution on, but assets kind that capitalize realm them of certainly reverse fairly within again those, pipe the certainly whether involves the that's pursuing, out that's ground some there ultimately, do whether another to be of, of and the a pursue of prove it's opportunities other got the we in there within certain gas So we've value way. There will days of but local Bison, the are early we the to Bakken [ph] right of of of dynamic as possibility borders see well two to natural] - happening it's something pipes. things that realm going that around translates that the volumes intersection [try we the within in

Matthew Taylor

XX that Great. trending color some would just last helpful. et direction, Can cadence there? just supposed Or can more And And to your thinking no right where now messaging XX wait be growth, any helpful? be mode, you're think really corporate that's in see a there for then, about distribution give you're how be sense on just one strongly you one where FERC now and the cetera. you impact us, just of is to I is negative tied need thinking to restructuring us distribution the about Can growth? of you give

Nathan Brown

on view our for with capital with coming - not fruition, fund the need our on works We're more distributions how our situation these a come counting we watching have through get on growth they do, we But FERC a there to near-term we're being additional is, around so of and outcomes and to remaining so that we Sure. view working the also evaluating is flow have all staying self-funding, a those. opportunities persuasion the through TransCanada. cash as within little

on forward to a So and finalizing of from around some time parts are significant and look in the to necessary put confident growth got that terms clear FERC do very when ongoing that that we've are another for decrease We direction good a perspective, lot here, underpinning able precision message we pushes isn't from those of them feel comes. dynamics finalized. looking more yet an that some be story to right be have moving distribution

Matthew Taylor

Great. much. That's helpful. Thanks so

Operator

LP. TC Investor turn concluded, contact over any Relations call you. PipeLines The Amundson. call please Thank further there to has at now if I Rhonda questions will now the are

Rhonda Amundson

soon. We interest with Great. in PipeLines again forward Thank you your your certainly today. you for look everyone we participation and TC to speaking appreciate Thanks.

Operator

Thank lines ended. disconnect this your time thank at you. you for your now Please conference The participation. has and

TC Pipelines (TCP) 9 Nov 182018 Q3 Earnings call transcript