Depth of company goes far beyond headlines projects generate
Russ Girling has always been far more interested in the numbers on a balance sheet than the words in a newspaper.
So while he accepts that the company’s high-profile projects will continue to generate headlines, TransCanada’s President and CEO puts his focus on delivering steady results to his shareholders through a business model built on strength and stability over sensationalism.
Company delivered record earnings and cash flow in difficult year
It’s a strategy that helped the company deliver record comparable earnings and cash flow in 2015 — a year widely considered one of the most difficult in recent years for the energy industry.
“As a result of our low-risk, long-life asset base and our disciplined strategy, TransCanada is well-positioned to not only deliver solid results in this environment, but also to continue to undertake transformational growth that will generate significant shareholder value over the near and long term,” Girling told shareholders this morning at the company’s Annual and Special Meeting (PDF, 6.83 MB) in Calgary.
Solid financial results highlight 2016’s opening quarter
This approach continued to pay off for TransCanada’s shareholders in what remains a challenging environment in the first quarter of 2016 as Girling was able to report:
- A six per cent increase in Q1 2016 comparable earnings per share compared to Q1, 2015
- Comparable earnings before deductions (EBITDA) of $1.5 billion
- Funds generated from operations at more than $1.1 billion
- Comparable distributable cash flow was $970 million or $1.38 per common share
That followed a record EBITDA of $5.9 billion in 2015, and a record $4.5 billion in funds generated from operations.
Low-risk strategy brings stability and strong financial performance
The company’s key to stability is a strategy dating back 15 years, based on a low-risk business model able to produce solid results in various market conditions.
In fact since 2001, strong financial performance has led the Board of Directors to raise dividends every year — from 80 cents in 2000 to the current rate of $2.26 on an annualized basis today.
Those assets have made TransCanada:
- One of the largest natural gas transmission companies in North America, tapping into most major supply basins
- Transporter of 20 per cent of North America’s natural gas demands
- One of the largest private sector power companies in Canada, with capacity to generate electricity for more than 10 million homes
- Transporter of one-fifth of Western Canada’s crude oil exports to U.S. markets
“It demonstrates that the depth of our company goes far beyond the headlines some of our projects generate,” said Girling.
And TransCanada will continue to be active to seek out opportunities that make good business sense, he said.
Columbia acquisition will strengthen company
Central to the company’s transformational growth plan, is TransCanada’s announced US$13 billion acquisition of the Columbia Pipeline Group.
“The acquisition represents an opportunity to invest in an extensive, growing network of regulated natural gas pipeline and storage assets in the Marcellus and Utica, the fastest growing gas production basins in North America.”
“Columbia’s assets fit very well with our overall strategy of owning and operating highly contracted and regulated assets that generate stable and predictable earnings and cash flow streams.”
It’s an acquisition that bodes particularly well for TransCanada’s future.
“Natural gas and renewables are expected to grow the fastest, in large part because of the shift away from burning coal to generate power, and towards using clean-burning natural gas,” Girling said.
“Looking forward, this global trend is reflected in the Columbia Pipeline acquisition and transformational growth plan that is well underway for our company.”
That plan now totals almost $90 billion in new projects and acquisitions, half of which are low-risk, near-term opportunities. This provides confidence that the company will deliver an 8-10 per cent growth rate in its dividend for the rest of the decade.
Girling recognizes that despite all that has been accomplished, a lot has changed in the energy industry over the last few years and TransCanada will need to adapt.
Energy prices have had a significant impact on our customers
The industry is facing unprecedented head winds with the collapse of prices in all of the energy products we transport.
“That’s had a significant impact on our customers, who are under significant pressure to reduce costs in order to remain profitable,” he said.
“That’s why last year we embarked upon a significant reorganization of our company to ensure we are conducting our business in the most effective and efficient manner possible. I’m confident the changes we are making today will position us for continued success for the next 15 years and beyond.”