Cash Distributions
Price Range Declared per
High Low Common Unit
2007
First Quarter $37.54 $35.29 $0.600
Second Quarter $42.83 $36.34 $0.650
Third Quarter $40.69 $32.98 $0.655
The Partnership currently has 34,856,086 common units outstanding, of which 24,142,935 are held by the public, 8,678,045 are held by TransCan Northern, and 2,035,106 are held by TC PipeLines GP. The common units represent an aggregate 98 per cent limited partner interest and the general partner interest represents an aggregate two per cent general partner interest in the Partnership.
The general partner receives two per cent of all cash distributions in regards to its general partner interest and is also entitled to incentive distributions as described below. The holders of common units (collectively referred to as
unitholders) receive the remaining portion of the cash distribution. The Partnership’s quarterly cash distributions to its unitholders comprise all of its Available Cash. Available Cash is defined in the partnership agreement and generally means, with respect to any quarter of the Partnership, all cash on hand at the end of a quarter less the amount of cash reserves that are necessary or appropriate, in the reasonable discretion of the general partner, to:
• provide for the proper conduct of the business of the Partnership (including reserves for future capital expenditures and for anticipated credit needs);
• comply with applicable laws or any Partnership debt instrument or agreement; or
• provide funds for cash distributions to unitholders and the general partner in respect of any one or more of the next four quarters.
The general partner receives incentive distributions if the amount distributed with respect to any quarter exceeds the minimum quarterly distribution of $0.45 per common unit. Under the incentive distribution provisions, the general partner receives 15 per cent of amounts distributed in excess of $0.45 per common unit, 25 per cent of amounts distributed in excess of $0.5275 per common unit, and 50 per cent of amounts distributed in excess of $0.69 per common unit, provided the balance has been first distributed to unitholders on a pro rata basis. The amounts that trigger incentive distributions at various levels are subject to adjustment in certain events, as described in the partnership agreement.
In 2007, the Partnership made cash distributions to unitholders and the general partner that amounted to $86.7 million compared to $43.5 million in 2006. These payments represented $0.60 per common unit for the quarter ended December 31, 2006, $0.65 per common unit for the quarter ended March 31, 2007, $0.655 for the quarter ended June 30, 2007 and $0.66 per common unit for the quarter ended September 30, 2007. On February 14, 2008, the Partnership paid a cash distribution of $25.6 million to unitholders and the general partner, representing a cash distribution of $0.665 per common unit for the quarter ended December 31, 2007. The distribution was allocated in the following manner: $23.2 million to the holders of common units as of the close of business on January 31, 2008 (including $1.4 million to the general partner as holder of 2,035,106 common units and $5.8 million to TransCan Northern as holder of 8,678,045 common units), $1.9 million to the general partner as holder of incentive distribution rights, and $0.5 million to the general partner in respect of its two per cent general partner interest.
The selected financial data should be read in conjunction with the financial statements, including the notes thereto, and Item 7. ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’
Year Ended December 31
2006(2) 2005 2004 2003
Income Data
Equity income from investment in Great
Lakes – – – –
Equity income from investment in Northern
Border 56.6 45.7 50.0 44.5 Equity income from investment in Tuscarora 5.9 7.5 7.5 5.3 Transmission revenues 0.9 – – – Financial charges, net and other (15.8) (1.0) (0.5) (0.1) Net income 44.7 50.2 55.1 48.0 Basic and diluted net income per unit $2.39 $2.70 $2.99 $2.63
Cash Flow Data
Cash distribution paid per unit $2.325 $2.300 $2.275 $2.175
Balance Sheet Data (at December 31)
Total assets 777.8 315.7 332.1 288.1 Long-term debt (including current maturities) 468.1 13.5 36.5 5.5 Partners’ equity 303.9 301.6 294.9 282.0
(1)TC PipeLines acquired a 46.45 per cent interest in Great Lakes on February 22, 2007. The equity method is used to account for the Partnership’s investment in Great Lakes.
(2)TC PipeLines accounted for its investment in Tuscarora using the equity method until December 19, 2006 and began consolidating Tuscarora’s operations upon acquisition of the additional 49 per cent general partner interest.
The following discusses the results of operations and liquidity and capital resources of TC PipeLines, along with those of Great Lakes, Northern Border and Tuscarora (together ‘‘our pipeline systems’’) as a result of the Partnership’s ownership interests.
The following discussions of the financial condition and results of operations of the Partnership and its pipeline systems should be read in conjunction with the financial statements and notes thereto of the Partnership, Great Lakes and Northern Border included elsewhere in this report. See Item 8. ‘‘Financial Statements and Supplementary Data’’. For more detailed information regarding the basis of presentation for the following financial information, see the notes to the financial statements of the Partnership, Great Lakes and Northern Border. All amounts are stated in U.S. dollars.
TC PipeLines was formed in 1998 as a Delaware limited partnership. TC PipeLines was formed by TransCanada PipeLines Limited, a wholly-owned subsidiary of TransCanada Corporation (collectively referred to herein as TransCanada), to acquire, own and participate in the management of energy infrastructure assets in North America. Our strategic focus is on delivering stable, sustainable cash distributions to our unitholders and finding opportunities to increase cash
distributions while maintaining a low risk profile.