TC Pipelines LP CEO Discusses Q4 2010 Results - Earnings Call Transcript

| About: TC PipeLines, (TCP)
This article is now exclusive for PRO subscribers.

TC Pipelines LP (TCLP) Q4 2010 Earnings Call February 11, 2011 12:00 PM ET


Lee Evans - Manager of IR

Steve Becker - President and Director

Rob Jacobucci - Principal Financial Officer and Controller


Gabriel Moreen – Bank of America/Merrill Lynch

James Jampel – HITE Hedge Asset Management

Slate Lewis – Wabash at Research

Michael Cerasoli - Goldman Sachs

Ave Findberg – The MorningStar


The conference is now being recorded.

Lee Evans

Here’s with respect with future events and are subject to various risk, uncertainties and assumption as discussed in detail and our 2009 10-K as well as our subsequent filings with the Securities and Exchange Commission.

If one or more of these risks or uncertainties materialize or if the underlying assumption prove incorrect, actual results may vary materially from those described in the forward-looking statements.

Steve will begin today with a review TC Pipelines’ accomplishments in 2010. Following that, he will discuss the recent cash distribution announcement, our achievements in the fourth quarter, and provide an update on the activities concerning the partnerships and its general partner TransCanada Corporation.

Rob will then proceed to review in detail the financial results for the fourth quarter. Following the prepared remarks we will be pleased to take your questions and we’ll ask the conference operator to coordinate.

With that, I’ll now turn the call over to Steve.

Steve Becker

Thanks Lee, and good day everyone, and thank you for joining us. I’d like to start off with a quick review of the key accomplishments that contributed to this successful year that the Partnership had in 2010, which is one of delivery value to our unit holders while continuing our commitment to provide stability and growth.

Our strategy has been to invest in low-risk fee-based assets with strong fundamentals. These types of assets provide earnings and cash flow certainty due to their regulated nature. This strategy has served us well.

Over the past 10 years we’ve outperformed the Alerian MLP Total Return Index. An original investment back at the beginning of January 2001 would have produced an investor – provided an investor of 475% total unit-holder return over 10 years, which was 40% higher than the Alerian MLP Total Return Index or the same period of time.

This impressive track record of delivering values steams from our long history of providing stable and growing distributions in a conservative and responsible manner. As we reflect back on 2010, there are a number of accomplishments that have helped mark this successful year for the Partnership that I’d like to highlight.

In 2010, the Partnership’s cash flow has increased 20% to 180 million of which 139 million was paid in distributions, generating a healthy coverage ratio of 1.3 times distributions. Net income for the year increased 29% to 137 million or $2.91 per common unit.

We were also pleased to raise our quarterly cash distribution to unit holders back in the third quarter to $0.75 per common unit or $3 on an annualized basis, which was 3% increase over the previous quarter and demonstrates our long history of providing stable and growing cash distributions.

There are a couple of specific events in 2010 that enabled us to deliver these strong financial results that I would like to highlight. Northern Border saw a return of demand in 2010 for its transportation services that resulted in the pipeline generating increased cash flows and earnings for the year. The improvement in transportation demand was due to a number of factors including the completion of a new pipeline infrastructure over the past year carrying gas eastward, which contributed to a reduction in the level of competing gas supply in Northern Borders’ market area.

As we move forward, we expect this strong demand for transportation services to continue and we’ll speak more on this later in the call.

The other major event that I would like to note is the rate case proceeding in Great Lakes. In July 2010, we received FERC approval for the Great Lakes Section 5 Rate Proceeding that was originated originally initiated back in November of 2009.

To recap the terms of the settlement, long-haul reservation rates on Great Lakes were reduced by 8% effective May 1, 2010. Various short-haul paths also saw similar reductions. In addition, the factors used in calculating depreciation expense for Great Lakes were decreased from 2.75% to 1.48% per [inaudible].

Looking forward, we expect Great Lakes will be well positioned as it competes to capture volumes coming out of the Western Canada Sedimentary Basin.

I’d now like to talk about TC Pipelines accomplishments for the fourth quarter of 2010.

Last month we announced a $0.75 quarterly cash distribution for the fourth quarter. This is the partnership 47th consecutive quarterly distribution paid to our unit holders. As outlined in yesterday’s new release, TC Pipelines reported a 29% or a $12 million increase in fourth quarter Partnership cash flows to 52 million.

Net income increased 12 million in the fourth quarter 2010, to 37 million, which was equivalent to $0.79 per common unit.

Later in the call Rob will discuss our financial results for the fourth quarter in further detail.

The other accomplishment for the quarter that I’d highlight was that Northern Border accepted the certificate that FERC issued that enables Northern Border to construct, own, and operate the Princeton Lateral. This lateral will consist of 9 miles of 16-inch diameter Pipe under a 10-year firm service contract at an estimated capital cost of $18 million.

The lateral will supply natural gas through a power-generation facility which is expected to be in service in the fourth quarter of 2011, and demonstrates the strong demand for Northern Border services.

Moving on to specific results from our four pipeline assets; once again, Northern Border had another excellent quarter. Volumes for the fourth quarter of 2010 were approximately 2.7 Bcf per day compared to 1.8 Bcf a day for the same period last year.

Strong volumes in the quarter are attributed to the favorable net backs that are being seen in Northern Borders market.

On January 14, 2011, TransCanada announced that it had placed the Bison Pipeline into service, which is now flowing gas into our Northern Border pipeline. While we had first anticipated Bison to be online in the fourth quarter of 2010, we were able to contract the unused capacity that the Bison shippers had contracted downstream at maximum rates during the last half of the fourth quarter.

As we look forward, we continue to see strong demand for Northern Border’s transportation services as Northern Border is now substantially fully contracted through March of 2012.

Turning to Great Lakes. Volume throughput increased during the quarter to 2.4 Bcf a day compared to 1.8 Bcf a day for the same period in 2009. The rise in volumes was primarily a result of increased utilization of long-term contracts by its major shipper, TransCanada, during the quarter.

In terms of looking forward into 2011, Great Lakes has sold all of its available capacity through October of 2011. For both Northern Border and Great Lakes the trend is continuing towards shorter-term contracting even though demand for transportation services was stronger in 2010 and in prior years.

There’s less incentive for customers to enter into long-term contracts on these pipelines as there’s sufficient transportation options into the various market demand centers with the decline of Western Canadian supply.

These assets continue to move significant volumes year over year demonstrating the strong demand for natural gas and the demand for their transportation services, which we expect to continue into the future despite not having long-term contracts.

Strong business fundamentals and basis differentials drive the fairly predictable financial results and cash flows from these assets. And with the ability to discount rates, revenues are optimized to ensure proper return on investment and sustainability of cash flows.

In terms of our two smaller regional California pipelines, Tuscarora and North Baja, both assets continue to perform as expected in the fourth quarter. These pipelines are situated in unique geographic locations and their long-term contracts result in consistent earnings and cash flow.

As such, these pipelines are generally unaffected by shifting natural gas supply and demand fundamentals.

Moving into 2011, we believe TC Pipelines is well positioned to continue to deliver stable and growing cash distributions to unit holders. We believe our pipelines represent critical North American infrastructure to the markets that they serve and continue to represent solid investments for TC Pipelines.

I would now like to take a few minutes to update you on some of the developments and opportunities at the TransCanada Sponsorship level that may have a positive impact on the volume throughput, cash flows, earnings, and growths prospects for the partnership going forward.

While TransCanada is now close to halfway through its 20-billion multi-year capital program, TC Pipelines still has the potential to play a key role in financing needs to complete this program. TransCanada has a large portfolio of potential assets that would complement TC Pipelines business model that it would consider selling to us, which would assist the partnership to grow while allowing TransCanada to maintain an ownership interest in its asset base.

While we look for an opportunity to assist TransCanada with its capital needs, we continue to explore opportunities to acquire third-party assets that would complement our existing asset base. As we evaluate these opportunities, we will remain prudent in selecting opportunities to provide the ability to grow earnings, cash flows and distributions in a stable low-risk manner.

Looking more closely at the prospects within TransCanada’s capital program, there are a number of developments that may have a positive impact on TC Pipelines. As mentioned earlier, TransCanada announced that it placed the Bison pipeline into service back in January 2011 and now flowing gas into our Northern Border pipeline.

The Bison pipeline is a 303-mile 30-inch diameter pipeline that will ship natural gas from the Powder River Basin, Wyoming, through Montana and North Dakota and interconnect with Northern Border.

Bison shippers have 10-year downstream contracts for 407 million cubic feet per day from the Port of Morgan, Montana to Ventura, Iowa. These additional contracted volumes not only strengthen Northern Borders contract term, but also help to diversify its natural gas supply source.

While Bison pipeline is fully contracted, it also has a potential for expansion through additional compression. Early gas flows have ramped up and now flowing around 365 million cubic feet per day on to Northern Border from the Bison pipeline.

The addition of U.S. Rockies Gas now moving on to the Northern Border via the Bison pipeline means the traditional gas supplied out of Western Canada is now being displaced which creates the potential for Great Lakes to potentially attract some of these displaced volumes.

In November 2010, TransCanada began moving gas from the Montney Shale gas formation in North East British Columbia, on its newly constructed Ground Birch pipeline into the Alberta system. The project as firm transportation contracts that will reach 1.2 billion cubic feet per day by 2014.

TransCanada and other shale gas pipeline project will connect Horn River gas. The Horn River pipeline project just recently received its regulatory approval from the Natural Energy Board in Canada, and it’s expected to be operational in the second quarter of 2012. The project has contract commitments that will reach 630 million cubic feet per day by 2014.

Combined with the Montney pipeline, these two projects will bring roughly 1.9 billion cubic feet per day of new shale gas volumes in to TransCanada’s Alberta system that could ultimately be available for delivery [inaudible].

In addition to the committed volumes received to-date, TransCanada also has expressions of interest from producers for an additional 2.3 billion cubic feet per day of transportation services from these developing shale plays.

The continued interest from natural gas producers developed shale plays within Western Canadian Sedimentary Basin. Remain optimistic the volumes produced and exported out of the basin while stabilize in the near-term and we’ll start to increase over time as a potential of the Horn River and Montney Shale plays are developed and brought on stream.

Their hopeful that both Northern Border and Great Lakes can play an integral role in this regards as these producers require major, reliable pipelines to move this gas to market.

In addition to these two shale gas pipelines, TransCanada continues to advance other pipeline developments, BC and Alberta to tie-in on conventional shale gas.

These new development requests would help increase the gas supply entering into the Alberta system, which in turn, increases the amount of gas that can potentially be delivered over the providence.

In addition to Western Canada Sedimentary Shale Gas potentials, I’d also like to highlight the growth of the Bakken Shale play. Northern Borders pipeline route crosses Montana and North Dakota making it well positioned to capture gas volumes from this region, which has seen a large increase in drilling activity. Should producers decide to tie in the gas from these fields, Northern Border would have another supply source that would diversify its supply sources.

In closing, I’d like to emphasize that with strong fundamentals supporting our existing asset base, a promising long-term outlet for gas with growth in gas supplies from new shale plays and a sound financial position, I’m confident the Partnership is well positioned to continue its long history of delivering value to its unit holders and will provide stable and growing cash distributions well into the future.

That concludes my prepared remarks and I would like to now turn the call over to Rob, who will provide a more detailed discussion on our fourth quarter financial results.

Rob Jacobucci

Thanks, Steve, and good day everyone. As Steve mentioned, yesterday we released our fourth quarter results. Partnership cash flows increased $11.6 million to $51.7 million in fourth quarter 2010 compared to $40.1 million for the same period last year. This was primarily due to the $11.1 million increase in cash distributions from Northern Border.

The Partnership paid distributions of $35.4 million in fourth quarter 2010, which was an increase of $4.7 million compared to the same period last year due to the increase in the quarterly per-unit distribution amount.

The Partnership’s net income increased by $12.2 million to $37.1 million in fourth quarter 2010 compared to $24.9 million during the same period in 2009, primarily due to higher equity income from Northern Border.

Equity income from Northern Border increased $10.7 million to $19.5 million in fourth quarter 2010 compared to the same period in 2009. The increase in equity income was primarily due to increase transmission revenues partially offset by increased property tax expenses. The increase in Northern Border’s revenues was primarily due to strong demand for transportation services in the fourth quarter of 2010.

Equity income from Great Lakes increased $1.2 million to 14.7 million in fourth quarter 2010 compared to the same period last year. The increase in equity income from Great Lakes is primarily due to depreciation rate reductions from the Great Lakes rate preceding settlement, partially offset by decreased transmission revenues, which were impacted by the Great Lakes settlement rate reduction on long-term contracts as well as decreased sales of short-term capacity.

Net income from other pipes, which includes results from North Baja and Tuscarora of $9.3 million in fourth quarter 2010 was consistent 9.5 million in fourth quarter 2009. Cost at the Partnership level decreased by $500,000 to 6.4 million in fourth quarter 2010 compared to the same period last year due to lower average debt outstanding in the Partnership.

I’ll now turn to our liquidity and capital resources.

At December 31, 2010, we had $8 million outstanding on our revolving credit facility with 242 million available for future borrowings. The average interest rate on the credit facility was 4.3% for the three months ended December 31, 2010 which included the impact of interest rate hedging activity.

The Partnership expects to renew its Senior Credit Facility in 2011, as the facility matures on December 12, 2011.

Tuscarora issued $27 million of 3.82% Series D Senior Notes on December 21, 2010 in a private placement to replace its maturing debt. These notes, which mature on December 2, 2017, have a 7-year term and require principal and interest payments over the course of the term.

Partnership cash flows continue to provide strong support for our cash distributions to unit holders. The partnership paid cash distributions of $35.4 million while generating cash flows of 51.7 million in the fourth quarter of 2010.

We will continue to maintain a prudent approach to cash flow management, directing our free cash flow to maintaining appropriate debt levels, investing in ongoing operations, growing distributions to unit holders and positioning for further growth opportunities.

That concludes my prepared remarks on the fourth quarter 2010 financial results. I’ll now turn the call back to Lee.

Lee Evans

Thanks, Rob. I’d now like to open the call to any questions you guys may have. Operator, please go ahead.

Question-and-Answer Session


Thank you, Mr. Evans. We will now take questions from the telephone lines. (Operator Instructions). Our first question is from Gabe Moreen from Bank of America/Merrill Lynch. Please go ahead.

Gabriel Moreen – Bank of America/Merrill Lynch

Hi, everyone. A couple questions. I may have missed this because I jumped on the call a little bit late. But can you talk about the Princeton Lateral and where that in on NBPL and what the total capacity size is there?

Steve Becker

The Princeton Lateral is on the southern end of the Northern Border’s system. It’s a lateral off of the system and it has a capacity currently of 120 million cubic feet a day. It may not operate at that level depending on the customer who has the power plant. So it would take – it’s a market taking gas off of Norther Border. It would not be sort of an incremental amount to the full Northern Border path. It would just be a market that would be served by Northern Border.

Gabriel Moreen – Bank of America/Merrill Lynch

And the larger picture on the bakken opportunities – can you talk about where things may be in terms – I know the Grassland’s has, I think, extended their pipe a little bit to take additional bak in gas. I mean, is this something we should expect to hear more about in 2011? I guess, you know, kind of the size of the opportunities you might be looking at?

Steve Becker

I think you will hear more. I’m not sure exactly in 2011 whether it will stretch out a little bit further. In some cases the amounts that whether it’s Grasslands or Norther Border, or other pipelines we’ll get will depend then on the relative location of the drilling and its proximity to the pipeline. So that we have a number of discussions ongoing that way, some is drilling for natural gas, some is related where it’s drilling for oil and there’s solution gas that comes up with the oil so it’s – the timing is dictated a bit by some of the oil solutions out of the bakken. And those have different timings based on pipeline construction.

So it’s a little bit more dragged out a little longer than 2011, but there is some very strong, excellent opportunities there especially for individuals relative to their drilling and what pricing they’re getting if they’re drilling for oil and then selling the gas that comes with the oil.

Gabriel Moreen – Bank of America/Merrill Lynch

Right. And then maybe to follow up on a few, who would TC Pipelines consider going further upstream or TransCanada Corp for that matter, in terms of connecting laterals to get that gas to Northern Border, you know, or even, would you even go as far upstream as doing gathering systems?

Steve Becker

We have considered that and we have been in discussions with different producers. But in some cases it’s sort of – we don’t have anything to report on that right now. There’s different discussions going on.

Gabriel Moreen – Bank of America/Merrill Lynch

And my last question is a little bit of a hypothetical one. I know there’s been a lot of debate going back and forth between TransCanada corp and shippers on the mail line between tariffs and what the ultimate regime will end up being there. You know, does that really matter for Great Lakes or for Northern Border in terms of where those tariffs on the mainline end up in your view? You know, and were you, I guess, you know, if tariffs had been cut in half, which I think was the initial proposal, you know, would that have been an impact? Were you seeing shippers kind of maybe hesitating, waiting to see where the mainline negotiations sort of shook out?

Steve Becker

Well, in terms of the actual negotiations, TransCanada is conducting those and I can only speak on behalf of TC Pipelines LP. And so I think that within that I think that the pipelines complete – there’s five or six pipelines that compete for volumes out of Western Canada and so that would be part of that discussion. I think that’s probably a better question that could be answered on the TransCanada call where they can actually – Gabe, I think that would be a better spot for that answer.

Rob Jacobbucci

Thank you. Gabe, it’s Rob. If I could just add that Northern Border is essentially contracted through March of ’12. Great Lakes is fully contracted through October of ’11. So we wouldn’t see any near-term impact.

Gabriel Moreen – Bank of America/Merrill Lynch

Right, right. That’s right. Thanks, Rob. Thanks, Steve.

Steve Becker

Thanks, Gabe.


Thank you. (Operator Instructions). The following question is from James Jampel from HITE. Please go ahead.

James Jampel – HITE Hedge Asset Management

Yeah, I’m wondering if you look forward to March 2012, and you look at what scenarios might reverse the recent recovery/gains at Northern Border and how you might mitigate them?

Steve Becker

Well, I think when you look forward, there’s a variety of factors that would be going into that contract year and so what we as transportation services are what we sell and if you’re a producer in Alberta, you’ll try to judge what transportation route gets me the best net back for my gas. And that net back is a function of pricing in the markets that a pipeline like Northern Border would serve, the toll that is based on the historical cost and it is up to the maximum rates that are established and approved at FERC and how that plus the tolls on the competing pipelines upstream of Norther Border back to Western Canada compare with the other choices out of the basin. And so there’s a variety of other patterns that producers and shippers could select. There’s also downstream customers that in some case they’re served directly off of Northern Border and contract on Northern Border as one of their primary supplies.

So those kinds of factors are what sort of play into it. And as we look forward, we see that there’s – Northern Borders pretty positioned in sort of the stacking order of the different pipelines that are shipping gas out of Western Canada. So we’re optimistic that it will do fine, but that – there’s no contracts actually at that time. That contracting process will probably happen as we get closer to that date and shippers at that time will try to judge all these different factors and make their choices on the different pipelines at that date.

James Jampel – HITE Hedge Asset Management

So your view is that, you know, among the competing pipelines for bringing Western Canada gas into the United States, Northern Border is well positioned?

Steve Becker

Yes. It is very well positioned. I think at that stage it depends on the shippers and it depends on sort of where they’re spots are. But I think the short answer is yes, it is well positioned and we would expect to see the sort of fulsome contracting whether it’s to the same level or not is very dependent on a whole variety of market factors, so that’s what the shippers will judge as they get closer to that time when they make their decision to kind of contract usually on an annual basis or a summer basis, or even down to a monthly basis.

James Jampel – HITE Hedge Asset Management

Thank you.


Thank you. The following question is from Slate Lewis from Wabash at Research. Please go ahead.

Slate Lewis – Wabash at Research

Yes, thanks. Just a couple of questions for you. What do you see is the future of the supply of Western Canadian gas for the pipeline?

Steve Becker

Okay. Well, I think that’s a good question. The Western Canadian gas – the Western Canadian supply basin is a very large basin and produces about in the neighborhood of 14 billion cubic feet a year. So it’s a pretty key component of the North American natural gas market.

In the last three or four years, in a decline in the overall supply, natural gas naturally declines as it’s produced and then there’s future drilling that sort of rebuilds back up to that. And overall, Western Canada supply has declined in about an order of 500 million cubic feet a day. This year, our forecast, we think the decline will be either 200 million a day or even flat depending on some of the activity that occurs during the year. And then we’re optimistic that some of the developments and further drilling in the shale place, in the Montney and Horn River Shale Place that are, you know, very strong, very solid and we see that from both the activity and the commitments that the shippers are making on the TransCanada’s Alberta system will start to get where there may be some growth in the supply going forward. A lot of those predictions are based on what people forecast for pricing and how much drilling activity that the producers actually do. So that, I think when we look forward, we’re sort of cautiously optimistic that the basin will be at a similar level to this and may have some growth into the future.

Slate Lewis – Wabash at Research

What extents are the new drilling techniques, horizonal drilling and that sort of thing, being used in Western Canada at this point? It’s free depth, so much gas in the United States, how far along is this similar process in Western Canada?

Steve Becker

It’s pretty well identical. A lot of the players are active in both Canada and the U.S., so they’re using the same aspects in their companies. In the Western Canadian Sedimentary Basin there’s reserves that are sort of classified as tight gas and there’s a fair amount of drilling going on in those areas that are not – that’s sort of the shale gas areas that I identified. So I think if you actually went by well count, the number of rigs is a lot slower but – lower, not slower – is lower but those rigs that are drilling are then fracking ten times and getting a much higher amount. So we’re finding gas in that area that is sort of – that’s part of the results that are starting to show this turnaround from a decline to a flattening out and may lead eventually to some potential growth.

Slate Lewis – Wabash at Research

What do you think the chances are that – as this field sort of gets it production back up, that the contracting will stretch out to longer periods of time than this would have seasonal or monthly [inaudible] that you’ve been seeing on Norther Border?

Steve Becker

Well, I think that you’d have to see a little more stronger return in the supply so that there starts to be a little more competition for the pipelines in terms of their choices. So that, to me, would not likely happen for a few years yet. And that would be – you may see more in the 5-to-10 year range as opposed to the 2010-to-2015 range.

Slate Lewis – Wabash at Research

So producers are looking at it as something resembling an oversupply of pipelines up there? Is that what it is?

Steve Becker

Well, I think that would be much more a 10-to-20 year item. The decline rate is sizable enough that I think there’s some growth, but I think that the relative to the current capacity to expect out of Western Canada, you’ve had to see a fairly dramatic growth. And so I would see that would more likely be in a 10-to-20 year timeframe that people would start to see that there’s a, sort of a tightness in filling the existing capability that’s within the basin.

Now, during that timeframe, as it starts to grow it tends to be a little more certain that TC Pipelines’ assets of Northern Border and Great Lakes would have a higher chance or percentage chance of being contracted on this annual basis.

Slate Lewis – Wabash at Research

Thanks very much, and nice job.

Steve Becker

Thank you.


Thank you. The following question is from Michael Cerasoli from Goldman Sachs. Please go ahead.

Michael Cerasoli - Goldman Sachs

Thanks. Most of my questions have been asked. I just have one quick – one more question on Norther Borders just in terms of how much Bison is contributing currently. I apologize if you’ve already addressed this. Is it – is Bison just – is that fully utilized right now, contributing fully to Northern Border or is it – is there going to be a ramp?

Steve Becker

Bison has – when it started, has contracts for 407 million cubic feet per day and shippers signed similar contracts on Northern Border through the Canada U.S. border down to Ventura, Iowa where it interconnects with the pipe that goes up to Minneapolis. So that the actual volume is ramped up on Bison, but the shippers are actually paying the full contracted volume on both Bison and on Norther Border.

Recently it’s been around 365 million cubic feet a day. Going forward, that could vary and there’s a variety of numbers that will depend on how the individual shippers choose to utilize their capacity.

Michael Cerasoli - Goldman Sachs

Okay. That’s it for me. Thank you.

Steve Becker

Thanks, Michael.


Thank you. The following question is from Ave Findberg from The MorningStar. Please go ahead.

Ave Findberg – The MorningStar

Good morning, everybody.

Steve Becker

Good morning.

Ave Findberg – The MorningStar

Maybe just a quick follow up on the last question about Bison. So were the, I guess the volumes were around 2.65 Bcf a day. You know, about 300 million in excess of the design capacity. Was that entirely related to the timing of Bison coming on line and shorter-term arrangements?

Steve Becker

I think when we’d shown the volumes in this – it’s always a challenge to make sure that we understand what the volumes are. The volumes are – volumes build on differing rate pounds and so what ends up happening is we have had volumes that are – some volumes are taken off the system halfway down the pipeline. We can sell the bottom half of the pipeline in additional volume and that’s the volume that you’re seeing in the total as opposed to often what people see as just one pipeline that has a volume consistent through LP, the length of the pipeline.

So just to maybe re-summarize that is, our volumes have increased and we’ve sold volumes not only at the border going down, but selling other paths for incremental volumes. If you come back to Bison directly, when Bison comes in and the 365 million cubic feet a day was coming onto Bison that means that there’s less gas that can be shipped out of Alberta down that route compared to what was happening say in December before Bison started.

That would mean the 365 million cubic feet a day that was displaced back into Alberta has to go into one of the other five routes out of Western Canada. And one of those five routes is Great Lakes. So that may end up where there’s additional volumes flowing on Great Lakes as a result of the Bison volumes coming downstream.

Ave Findberg – The MorningStar

Okay, thanks. That’s helpful. Maybe just one other. On potential acquisitions or dropdowns, I’m just wondering given the strength of your balance sheet and your liquidity, just kind of what size of a deal you might be comfortable with at this point, if there’s anything you could comment on that?

Steve Becker

Well, I think in terms of acquisitions, perhaps maybe I’ll just address it in terms of dropdowns, perhaps. The first is that TransCanada has the choice to decide to sell assets to the LP – the TCLP does not have a call on specific assets. When you actually come back and say what’s – their program is ongoing and they have a variety of different financial options and TC Pipelines may or may not play a role in that, in terms of the size would probably be equal for both acquisitions and dropdown, and that would roughly be dictated a bit by the size of an equity issue that we could develop. So that – the size of that equity issue plus roughly 50% dead equity financing would give you an idea of the size we would undertake. There are a variety of different items that would make that larger or smaller depending on the asset.

Ave Findberg – The MorningStar

Okay. Thank you very much.


Thank you. There are no further question. I’d like to turn the meeting back over to Mr. Evans.

Lee Evans

Great. Thanks very much. I’d like to thank everyone for taking the time today to listen in. We appreciate your interest in TC Pipelines LP and we look forward to talking to you soon. Bye for now.


Thank you gentlemen. This concludes today’s conference call. Please disconnect your lines and thanks for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to All other use is prohibited.


If you have any additional questions about our online transcripts, please contact us at: Thank you!