TransCanada officials said Tuesday they expect the gas storage business to produce modestly lower earnings in 2012 than in 2011.
The Calgary-based pipeline operator's natural gas storage comparable earnings before interest, taxes, depreciation and amortization (EBITDA) in fourth quarter 2011 were C$23 million compared with C$37 million ($37 million) for the same period in 2010.
The decrease was primarily due to decreased proprietary natural gas and third-party storage revenues as a result of lower realized natural gas price spreads, the company said.
For the year, the comparable EBITDA was C$83 million, down from C$132 million.
"We're obviously right now at the bottom of the cycle for gas storage," Greg Lohnes, president of Natural Gas Pipelines at TransCanada, said during a conference call regarding the company's fourth quarter 2011 financial results. "I would expect to see the gas storage business produce modestly lower EBITDA in 2012 than it did in 2011. We would see that improve as we come out of this bottom."
TransCanada reported earnings Tuesday of C$366 million for fourth quarter 2011, down almost 5% from the same period in 2010.
Lower contributions from Bruce Power related to planned plant outages, higher interest expense, reduced earnings from US power, and net realized losses in 2011 from derivatives used to manage foreign exchange rate fluctuations more than offset incremental earnings from Keystone and other recently commissioned assets, combined with higher power prices in Alberta.
For the year, the company reported earnings of C$1.57 billion, an increase of almost 15% over 2010's C$1.36 billion.
The company said it is positioned to complete another C$12 billion of new projects that are expected to come into service between now and early 2015, including the Bruce Power restart program in Ontario, additional extensions and expansions of the Alberta System, the final phase of the Cartier Wind power project in Quebec, nine Ontario solar projects and the Keystone Gulf Coast Expansion (Keystone XL).
Alex Pourbaix, president of energy and oil pipelines at TransCanada, said from an acquisition perspective, it is the company's preference to buy at the bottom of the cycle and that there are some "pretty attractive" opportunities.
He added that it looks like it is cheaper to buy than to build pipelines.
TransCanada's natural gas US pipeline sector saw earnings of C$264 million in fourth quarter 2011, compared with C$251 million in the fourth quarter 2010. For the Canadian natural gas pipelines, earnings were C$490 million in fourth quarter 20112010, compared with $507 million in the same period in 2010.
The company noted in its report that the Alaska Pipeline Project team is working toward the US Federal Energy Regulatory Commission application deadline of October 2012 for the Alberta option that would transport gas from Alaska to the Alberta System and on to other continental markets.
TransCanada has started discussions with Alaska North Slope producers on the liquefied natural gas option that would require a pipeline from Prudhoe Bay to LNG facilities, to be built by third parties, located in south-central Alaska.
"If the market wants to go to the west coast, we think we're a strong candidate to build that pipeline," Lohnes said.
He said the company would hope to see gas flowing on its other infrastructure, including the Canadian Mainline, as that was built up.
