In its first report to shareholders since completion of itsmerger with Nova Corp., TransCanada PipeLines reported net incomefrom operations dropped to $139 million in the third quarter from$157 million in the third quarter of 1997, yielding net income pershare of 30 cents, down from 34 cents in the year-ago period.Revenues were up, however, to $4.43 billion from $3.91 billion.
The company’s gas marketing operation sold 500 Bcf, up from 437Bcf, including netback and non-netback volumes and excludingvolumes sold by Pan-Alberta Gas.
Net income was up in energy transmission, energy marketing, andinternational operations. However, net income dropped in energyprocessing, to $6 million from $16 million in the third quarter of1997. The United States, and, to a lesser extent, the Canadian gasgathering and processing businesses have suffered from increasinggas prices combined with declining product prices, which havecreated very narrow margins. Net earnings of these processingoperations continue to be negatively impacted by these unfavorablemarket conditions, which began late in the first quarter of 1997,the company said
TransCanada also had a net income loss of $30 million related tointegration costs from its July merger with Nova, financialcharges, preferred share dividends and securities charges.
Earnings were $143 million, or 31 cents/share, for the thirdquarter before $8 million in integration costs associated with theNova merger. Integration costs are expected to total about $390million before taxes and regulatory recoveries. The balance ofthese costs is expected to be recorded in the fourth quarter.
“These integration costs represent the business changesnecessary to realize promised savings and capture futureopportunities,” said George Watson, CEO. “Our financial position issolid. We have a strong balance sheet and a seasoned, experiencedmanagement team. We are now moving forward as a new, vibrant energysolutions company with a bright future.”
Net income from Energy Transmission for the third quarter was up$6 million to $142 million from $136 million in the same period in1997. The increase from growth in the rate base continues to morethan offset the decline in the allowed rate of return on commonequity.
“We are working hard to ensure the new TransCanada capturesevery possible benefit from the merger,” Watson told shareholders.”We are on target to realize $100 million in savings from increasedoperating efficiencies by the year 2000. This isn’t an easy timefor anyone in the energy business. Financial markets are turbulentand developing economies in Asia, Russia and South America haveencountered problems. This has decreased worldwide demand forenergy; as a result, oil prices are at their lowest level in morethan a decade. These conditions, plus the merger, demand that weexamine our business to deliver the value you expect and deserve.”
Negotiations regarding the sale of Pan-Alberta Gas arecontinuing. Completion of the sale process is not anticipatedbefore year end.
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