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Spectra Emphasizes NatGas, Says More Access Northeast Contracts Coming

Executives at Spectra Energy Corp. (SE) and its Spectra Energy Partners LP (SEP) envision a future that is largely predicated on expanded use of natural gas for power generation, liquefaction and export and to serve utility demand, particularly in the Northeast.

During a presentation Thursday, executives outlined the company's outlook for this year after reporting fourth quarter and full year financial results on Wednesday.

"Our execution backlog of about $8 billion in secured projects is primarily driven by natural gas demand and will grow our cash flows during and beyond the plan period," said SE CEO Greg Ebel. "The strength of our projects in execution gives us confidence in our ongoing ability to deliver an annual 14-cent/share dividend increase at Spectra Energy and our quarterly penny-and-a-quarter per unit distribution increase at Spectra Energy Partners through 2018. Despite commodity prices and the Canadian dollar being significantly lower than a year ago, our 2016 and 2017 DCF forecasts and dividend and distribution coverage ratios are stronger than those we presented to investors a year ago."

During the Thursday outlook presentation, Bill Yardley, president of the U.S. transmission business, said the growth trend seen for natural gas over the first half of this decade will continue in the second half. He particularly emphasized the Algonquin Gas Transmission LLC and Maritimes & Northeast Access Northeast Project, which targets the gas-fired power generation market in New England. It is a competitor to Kinder Morgan Inc.'s Northeast Energy Direct project.

Yardley noted recent contracting on the project in Massachusetts with utilities there (see Daily GPIJan. 26). The Massachusetts contracts, which require state regulatory approval, equal more than 40% of the 0.9 Bcf/d project capacity designed for generators. Yardley said progress is being made on contracting in other New England states, with more news expected within the next month and more to follow around the end of the first quarter or beginning of the second.

SEP reported fourth quarter distributable cash flow (DCF) of $260 million, compared with $245 million in the prior-year quarter. For the year, DCF was $1.21 billion, up $150 million from $1.06 billion in 2014. Distributions per limited partner unit for 2015 were $2.43, compared with $2.245 per limited partner unit in 2014.

SEP's U.S. transmission business fourth quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) was lifted by increased earnings thanks to natural gas transmission expansion projects. EBITDA in the segment was $413 million, compared with $369 million in fourth quarter 2014.

SE EBITDA was $672 million, compared with $810 million in the prior-year quarter. For the year, ongoing EBITDA was $2.75 billion, compared with $3.15 billion in the prior year.

SE DCF for the quarter was $201 million, compared with $316 million in the same quarter last year. For the year, DCF was $1.29 billion, compared with $1.46 billion in 2014.

SE reported a net loss for the fourth quarter of $263 million (minus 39 cents/share), compared with net income of $316 million (47 cents/share) in 2014. Fourth quarter 2015 results include special items of $452 million (67 cents/share) driven largely by noncash goodwill and asset impairments totaling $445 million. For the full year, SE net income was $196 million (29 cents/share), compared with $1.08 billion ($1.61/share) in 2014. Full year 2015 results include special items of $579 million (86 cents/share) driven largely by noncash goodwill and asset impairments totaling $561 million.   

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