TC PipeLines, LP Announces 2007 Third Quarter Results

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Third Quarter 2007 Quarterly Results [.pdf]

CALGARY, Alberta – November 1, 2007 – (Nasdaq: TCLP) – TC PipeLines, LP (the Partnership) today reported third quarter 2007 net income of $24.6 million or $0.64 per common unit (all amounts in U.S. dollars) compared to $12.0 million or $0.65 per common unit for the same period last year. The increase in net income is primarily due to the positive impact of the Partnership’s acquisitions which included a 46.45 per cent general partner interest in Great Lakes Gas Transmission Limited Partnership (Great Lakes) on February 22, 2007, and a 49 per cent general partner interest in Tuscarora Gas Transmission Company (Tuscarora) acquired on December 19, 2006. Partially offsetting these positive contributions to earnings were increased financial charges on higher outstanding debt balances and decreased equity income from Northern Border Pipeline Company (Northern Border).

In third quarter 2007, the Partnership received cash distributions from Great Lakes and Northern Border of $17.4 million and $14.8 million, respectively. The total cash distributions received of $32.2 million in third quarter 2007 represent a $12.1 million increase compared to the same quarter last year.  

Financial Highlights
(unaudited)
(millions of U.S. dollars, except per unit amounts)

(1) Net income per common unit is computed by dividing net income, after deduction of the general partner’s allocation, by the weighted average number of common units outstanding.  The general partner’s allocation is computed based upon the general partner’s two per cent interest plus an amount equal to incentive distributions.
(2) Partnership cash flows is a non-GAAP financial measure. Refer to the section entitled “Partnership Cash Flows” for further detail.
(3) The Partnership's 2007 third quarter cash distribution will be paid on November 14, 2007 to unitholders of record as of October 31, 2007.

NET INCOME

The Partnership reported third quarter 2007 net income of $24.6 million or $0.64 per unit, an increase of $12.6 million or 105 per cent compared to $12.0 million for the same quarter last year.

The Partnership’s equity income from Great Lakes in third quarter 2007 contributed $14.2 million to net income. Included in this amount is approximately $0.7 million related to a reduction in taxes other than income attributable to Michigan state tax changes.

The Partnership’s equity income from Northern Border of $16.2 million in third quarter 2007 decreased $0.4 million compared to $16.6 million for the same period in 2006. The decrease in the Partnership’s equity income from Northern Border was due primarily to lower revenues. Northern Border’s operating revenues were lower due mainly to the reduction of long-term rates effective January 1, 2007.

With the acquisition of an additional 49 per cent general partner interest in Tuscarora on December 19, 2006, the Partnership now consolidates its interest in Tuscarora. This increase in ownership contributed to a $1.5 million increase in the Partnership’s net income. The Partnership reported transmission revenues of $6.7 million and depreciation expense of $1.6 million for third quarter 2007 related to its consolidation of Tuscarora’s operations.

The Partnership’s operations, maintenance and administrative expenses of $2.2 million in third quarter 2007 increased $1.7 million compared to $0.5 million for the same period in 2006. The third quarter of 2007 includes $1.2 million related to the consolidation of Tuscarora operations. Excluding the $1.2 million of expenses related to Tuscarora, the Partnership’s general and administrative expenses increased $0.5 million compared to the same period last year due primarily to higher salary expenses and timing of expenses incurred relative to the same period last year.

PARTNERSHIP Cash FloWS

^(a) Reconciliation of non-GAAP financial measure: Cash distribution received is a non-GAAP financial measure which is the sum of equity income from investment in Great Lakes, equity income from investment in Northern Border, return of capital from Great Lakes, return of capital from Northern Border, equity income in excess of distributions received and up until December 19, 2006, equity income from investment in Tuscarora and return of capital from Tuscarora. It is provided as a supplement to results reported in accordance with GAAP. Management believes that this is a meaningful measure to assist investors in evaluating the levels of cash distributions from the Partnership's investments. Below is a reconciliation of Cash distribution received to GAAP financial measures:

^(b) Effective December 19, 2006, the Partnership began consolidating Tuscarora's operations upon acquisition of an additional 49 per cent general partner interest. The cash flows from Tuscarora's operating activities is the GAAP measure cash generated from operations reported in Tuscarora's financial statements.

^(c) Reconciliation of non-GAAP financial measure: Partnership cash flows is a non-GAAP financial measure which is the sum of cash distributions received and cash flows from Tuscarora's operating activities less Partnership costs. We exclude Tuscarora's costs from Partnership costs so that investors may evaluate our costs independent of costs directly attributable to our investments. Management believes that this is a useful measure to assist investors in evaluating the Partnership's cash flow from its operating activities. A reconciliation of Partnership costs is summarized below:

In third quarter 2007, Partnership cash flows were $29.7 million, an increase of $15.5 million compared to $14.2 million for the same period last year. Cash flows from Tuscarora’s operating activities were $6.2 million for the three months ended September 30, 2007. The Partnership incurred financing and other costs of $8.7 million in third quarter 2007 compared to $5.9 million in the same period last year. Total cash distributions received increased $12.1 million to $32.2 million in third quarter 2007 from $20.1 million in third quarter 2006 primarily due to cash distributions received from Great Lakes.

The acquisition of a 46.45 per cent interest in Great Lakes in February 2007 contributed $17.4 million to cash distributions received in third quarter 2007. This was the second cash distribution received by the Partnership from Great Lakes.

Total cash distributions of $14.8 million were received from Northern Border during third quarter 2007, a decrease of $3.5 million compared to the same period in 2006. The Partnership’s cash distributions received in any given quarter are based on the financial results of Northern Border from the previous quarter; therefore, this decrease is primarily due to decreased revenues, higher operating expenses and higher maintenance capital expenditures in second quarter 2007 as compared to second quarter 2006.

Cash balances of Tuscarora are consolidated by the Partnership effective December 19, 2006 and as a result, the Partnership ceased reporting distributions from Tuscarora after that date.  Tuscarora had capital expenditures of $0.9 million, financed by operating cash flow, in third quarter 2007 related to the compressor station expansion project in Likely, California.

The Partnership issued $11.5 million of debt in third quarter 2007, offset by debt repayments of $10.5 million.  As at September 30, 2007, there was $239.0 million available to the Partnership under its Senior Credit Facility.

Conference Call

Analysts, members of the public, the media and other interested parties are invited to participate in a teleconference and audio webcast on Thursday, November 1, 2007 at 12 p.m. (Eastern).  Mark Zimmerman, president of the general partner, will discuss the third quarter 2007 financial results and general developments and issues concerning the Partnership followed by a question and answer session for the investment community and media. To participate, please call (866) 542-4265.  A replay of the conference call will also be available two hours after the conclusion of the call and until midnight, Thursday, November 8, 2007, by dialing (800) 408-3053, then entering pass code 3239080#. 

A live webcast of the conference call will also be available through the Partnership’s website at www.tcpipelineslp.com.  An audio replay of the call will be available on the website.

Cautionary Statement Regarding Forward-Looking Information
This news release may include forward-looking statements regarding future events and the future financial performance of TC PipeLines, LP. Words such as "believes," "expects," "intends," "forecasts," "projects," and similar expressions identify forward-looking statements. All forward-looking statements are based on the Partnership's current beliefs as well as assumptions made by and information currently available to the Partnership. These statements reflect the Partnership's current views with respect to future events. The Partnership assumes no obligation to update any such forward-looking statement to reflect events or circumstances occurring after the date hereof. Important factors that could cause actual results to materially differ from the Partnership's current expectations include regulatory decisions, particularly those of the Federal Energy Regulatory Commission and the Securities and Exchange Commission, the ability of Northern Border Pipeline to recontract its available capacity at maximum rates, operational decisions of Northern Border Pipeline's and Great Lakes' operator, the failure of a shipper on any one of the Partnership's pipelines to perform its contractual obligations, supply of natural gas in the Western Canada sedimentary basin and in competing basins, such as the Rocky Mountains, future demand for natural gas, overcapacity in the industry, and other risks inherent in the transportation of natural gas as discussed in the Partnership's filings with the Securities and Exchange Commission, including the Partnership's Annual Report on Form 10-K for the year ended December 31, 2006 and subsequent quarterly reports on Form 10-Q.

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For further information, please contact:

Media Inquiries:

TransCanada
Shela Shapiro/Cecily Dobson
(403) 920-7859 or (800) 608-7859

Unitholder and Analyst Inquiries:

Myles Dougan
Toll-free (877) 290-2772
investor_relations@tcpipelineslp.com