Veresen Announces 2013 Fourth Quarter and Year-End Results and Affirms 2014 Guidance

CNW Group

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES ./

CALGARY , March 5, 2014 /CNW/ - Veresen Inc. ("Veresen" or the "Company") (VSN.TO) announced today its 2013 fourth quarter and year-end results.

Financial highlights for the fourth quarter and year ended December 31, 2013 include:

  • Distributable cash1 of $55.8 million or $0.28 per Common Share for the fourth quarter of 2013 compared to $56.5 million or $0.29 per Common Share for the fourth quarter of 2012 and $228.9 million or $1.15 per Common Share for the year ended 2013 compared to $211.4 million and $1.09 per Common Share for the year ended.
  • Net income attributable to Common Shares of $12.6 million or $0.06 per Common Share for the fourth quarter of 2013 compared to $13.1 million or $0.07 per Common Share for the fourth quarter of 2012, and $53.2 million or $0.27 per Common Share for the year ended 2013 compared to $43.6 million or $0.22 per Common Share for the year ended 2012.
  • Cash from operating activities of $81.6 million for the fourth quarter of 2013 and $218.0 million for the year ended 2013 compared to $65.1 million and $179.9 million for the corresponding periods, respectively, in 2012.

Key strategic activities for the year ended December 31, 2013 included:

  • Contracting of the Alliance pipeline beyond 2015 was an area of major focus. Alliance's proposed new services framework capitalizes on its competitive advantage for transporting liquids-rich natural gas out of the Alberta market and into large liquid markets in the U.S. Midwest.
  • Aux Sable executed a number of Rich Gas Premium ("RGP") agreements which are expected to result in increased volumes of liquids-rich natural gas for processing and fractionation at Aux Sable's Channahon facility in the near term and beyond 2015.
  • Veresen advanced engineering and permitting activities through the regulatory approval processes related to the Jordan Cove Energy Project, which proposes to export liquefied natural gas ("LNG") from Coos Bay, Oregon . Commercially, Veresen made good progress in its discussions with potential international off-take customers to secure long-term arrangements to produce LNG.
  • Veresen successfully executed a scheduled major turnaround at its Hythe natural gas processing plant in Alberta . During the turnaround, Veresen completed key tie-ins to expand the plant's processing capacity and to grow this business as market conditions allow.

"Each of our businesses performed well in 2013, and we achieved solid operating, environmental and health and safety performance across our portfolio of assets," commented Don Althoff , President and CEO. "Safe, efficient operations are driving our organizational culture as we focus on building a track record of success in these key areas."

Mr. Althoff added, "As we advance our significant commercial initiatives, particularly as it relates to the recontracting of the Alliance pipeline and our Jordan Cove LNG project, I believe 2014 will be a pivotal year for Veresen. We have a number of key milestones ahead of us this year and we are very well positioned to achieve them."

___________________________
1 This is not a standard measure under GAAP and may not be comparable to similar measures used by other entities. See the reconciliation of distributable cash to cash from operating activities in the tables attached to this news release.

FINANCIAL HIGHLIGHTS

     
  Three months ended Year ended
December 31 December 31
($ Millions, except per Common Share amounts) 2013 2012 2013 2012
Net income (loss) before tax and non-controlling
interest
       
  Pipeline 27.3 24.3 107.4 96.2
  Midstream 26.7 20.3 87.3 76.7
  Power 0.3 2.7 17.0 5.9
  Veresen - Corporate (30.5) (22.4) (113.9) (95.8)
  23.8 22.9 97.8 83.0
Tax expense (7.5) (7.6) (34.3) (31.6)
Net income attributable to non-controlling interest - - - (0.1)
Net income  16.3 15.3 63.5 51.3
Preferred Share dividends (3.7) (2.2) (10.3) (7.7)
Net income attributable to Common Shares 12.6 13.1 53.2 43.6
  Per Common Share  ($) 0.06 0.07 0.27 0.22

 

Financial Performance

For the three months and year ended December 31, 2013 , Veresen generated net income attributable to Common Shares of $12.6 million or $0.06 million per Common Share and $53.2 million or $0.27 million per Common Share, respectively. For the same periods last year, Veresen generated net income attributable to Common Shares of $13.1 million or $0.07 per Common Share and $43.6 million or $0.22 per Common Share. Fourth quarter and year-to-date earnings reflect increases in the Pipeline and Midstream segments, respectively, offset by an increase in Corporate costs and higher Preferred Share dividends compared to the same periods in 2012. The increase in Pipeline earnings includes a contribution from Alliance's Tioga Lateral Pipeline, which generates revenues based on take-or-pay commitments. The Tioga Lateral was placed into service on September 1, 2013 .

The Midstream business generated net income before tax of $26.7 million and $87.3 million for the three months and year ended December 31, 2013 compared to $20.3 million and $76.7 million for the same periods last year. Midstream earnings from Hythe/Steeprock increased in the fourth quarter reflecting a contractual step up in volume commitments and processing fees relative to the same period last year. The fourth quarter of 2012 was impacted by the deferral of revenues in conjunction with the Hythe /Steeprock take-or-pay contract. Aux Sable's fourth quarter earnings were positively impacted by higher gas volumes processed through the Palermo and Septimus facilities. The effect of higher propane prices was offset by higher natural gas costs. As well, Aux Sable continues to be impacted by unfavourable ethane market conditions, driven by the continued oversupply of ethane in Aux Sable's market region. Aux Sable reinjected ethane during much of 2013 when economics did not support production.

Earnings in the Power segment increased as a result of a $13.8 million fair value gain on the York Energy Centre interest rate hedge. Corporate costs for the full year increased due to higher spending on the Jordan Cove LNG project to support the regulatory and commercial processes and reorganization costs incurred to develop and implement the Company's strategy.

During the fourth quarter of 2013, ethane market conditions and higher natural gas prices continued to put downward pressure on fractionation margins. Surplus ethane supply, primarily originating from the Eagle Ford development, kept ethane inventories high. Propane inventories have started to return to historical norms and approached five-year lows by year end 2013. Cold weather, expanded exports and increased petrochemical demand contributed to this trend. Subsequent to year-end, propane inventories were further depleted by extended periods of cold weather in the U.S., resulting in record low inventory levels and further natural gas price appreciation. Propane prices have trended higher in recent months; however, this increase has been accompanied by higher natural gas prices which may largely offset any increase in propane pricing in 2014.

Distributable Cash(1)    
  Three months ended Year ended
December 31 December 31
($ Millions, except per Common Share amounts) 2013 2012 2013 2012
Pipeline 40.7 37.2 157.0 147.5
Midstream 39.4 36.3 133.7 124.3
Power 5.3 4.0 34.4 27.1
Veresen - Corporate (18.6) (15.6) (71.0) (64.4)
Taxes (7.3) (3.2) (14.9) (15.4)
Preferred Share dividends (3.7) (2.2) (10.3) (7.7)
Distributable Cash 55.8 56.5 228.9 211.4
  Per Common Share ($) 0.28 0.29 1.15 1.09
Cash From Operating Activities 81.6 65.1 218.0 179.9
 (1) See the reconciliation of distributable cash to cash from operating activities in the tables attached to this news release.

 

In the fourth quarter of 2013, Veresen generated distributable cash of $55.8 million or $0.28 per Common Share, a slight decrease compared to the same period last year. All of Veresen's businesses generated higher distributable cash than the corresponding period in 2012, offset by higher corporate costs and higher taxes.

On a full year basis, distributable cash increased to $1.15 per Common Share in 2013 from $1.09 per Common Share in 2012. Increases in each of Veresen's business segments were partially offset by higher corporate costs and Preferred Share dividends.

Overview of Business Segments

Pipelines

Alliance has firm-service transportation contracts with primary terms extending to December 2015 with a group of 30 shippers. In 2013, Alliance initiated a binding precedent agreement process, offering capacity on its system for natural gas transportation services effective December 1, 2015 . The transportation service offerings are consistent with the new services framework introduced by Alliance in late 2012, and reflect refinements based on feedback from potential customers. One refinement includes the proposed amendment of the Alliance pipeline's hydrocarbon dewpoint specification. This change, if approved, will facilitate an increase in the NGL component of the natural gas Alliance transports, further enhancing Alliance's rich gas advantage. Alliance anticipates seeking regulatory approval for this change in the first half of 2014. Alliance is also offering new services that will further enable shippers to optimize the heat content of the natural gas delivered on the Alliance system.

Alliance is in active negotiations with prospective and existing shippers regarding the new services framework. The signing of Precedent Agreements will be timed with the RGP agreements that Aux Sable is negotiating with the producer community. As such, Alliance expects to be in a position to file for regulatory approval by mid-2014.

Veresen believes the Alliance pipeline's rich gas advantage offers producers a strong value proposition and, with the liquids-rich Montney , Duvernay and Bakken resource plays driving drilling activity, the pipeline is well-positioned post-2015. Given the volatility and impact to Alberta prices experienced in the fall of 2013, it is anticipated that producers will look to access alternative market pricing for their liquids.  The U.S. Midwest is a very liquid pricing point and less exposed to the local supply / demand imbalances that occur in Alberta .

Supporting this view, in 2013 Alliance placed several new receipt interconnection facilities into service that have increased the pipeline's receipt capacity from developing liquids-rich sources of natural gas in northeastern British Columbia and northwestern Alberta . In the Bakken area of North Dakota , Alliance has also connected additional liquids-rich supply. The Prairie Rose Pipeline was connected in 2010 and Alliance completed construction and commissioned the 127-km (80-mile) Tioga Lateral Pipeline and associated facilities in North Dakota in 2013. The pipeline provides the transportation infrastructure to move 126 mmcf/d of liquids-rich natural gas.  

Alliance has several additional receipt interconnection facilities in the planning and design stage, and ongoing development of these prolific resource plays may result in a substantial expansion of the gas production and gathering infrastructure feeding into Alliance.

Midstream

Aux Sable       Aux Sable has been working with producers within an economic radius of the Alliance pipeline to provide options and value for natural gas and NGLs to reach large and liquid U.S. markets. Early discussions have been focused on producers not yet connected to the Alliance pipeline, who are developing new liquids-rich fields in the Montney and Duvernay which are expected to come on-stream in 2016. Veresen believes Aux Sable and Alliance provide a compelling value proposition as an alternative to these producers incurring capital to construct new deep cut facilities in Alberta .

Aux Sable currently holds a number of RGP agreements with producers which have increased the heat content of natural gas delivered to Aux Sable's Channahon facility for processing and fractionation. A number of these RGP agreements have terms that extend beyond 2015.

Earlier today, Aux Sable announced it has signed RGP agreements with Encana Corporation and Phoenix Duvernay Gas (a joint venture participant of Encana). These agreements provide for up to 195 mmcf/d of rich gas supplies from the emerging Duvernay shale play for connection to a receipt zone in Alberta , starting in July 2014 and continuing through to 2020.

Aux Sable is continuing to negotiate additional RGP agreements representing new, incremental liquids-rich production and also anticipates negotiating extensions to existing agreements with producers/ shippers who currently transport liquids-rich gas on Alliance. Veresen expects to see incremental demand for RGP agreements as producers advance development of rich gas in the Alliance fairway.  There is limited capacity available on Alliance relative to projected rich gas deliverability and, therefore, a more competitive market may develop for access to the Alliance pipeline.

In the fourth quarter of 2013, Aux Sable received notice from Crew Energy Inc. that they were exercising their option to repurchase 50% of the Septimus gas plant. The repurchase was effective January 1, 2014 .

Hythe /Steeprock      Veresen successfully executed a scheduled major turnaround at its Hythe natural gas processing plant in 2013. During the turnaround, Veresen completed key tie-ins that position the Company to expand the plant's processing capacity and grow this business. Veresen's Midstream team is actively soliciting producer interest to undertake expansion; however, given the current natural gas price environment, the Company expects producers to be cautious in making new volume commitments.

With ongoing growth in the Montney and continued drilling success in the Duvernay , Veresen believes that significant additional infrastructure will be required to support these resource plays. Veresen is building its reputation as a flexible, innovative midstream provider and the Company is well-positioned to provide producers with unique energy infrastructure solutions.

Power

The Power business performed in line with the Company's expectations in 2013, with a continued emphasis on operational efficiency and reliability.

Construction of the Dasque-Middle run-of-river project in northwest British Columbia is progressing. With the project's previous contractor being placed into receivership in 2013, and the resulting delays to the construction schedule, the updated capital cost estimate for Dasque-Middle is $115 million . This project is now expected to be in-service in the fourth quarter of 2014.

In January 2014 , Veresen received regulatory approval for its 33 MW St. Columban Wind Project and construction has commenced. The estimated capital cost of this project is approximately $110 million , with commercial in-service expected in the first half of 2015. The 40 MW Grand Valley III Wind Project is progressing through the regulatory process.

In February 2014 , Veresen sold its Culliton Creek run-of-river development project and its 50% interest in Alton Natural Gas Storage, a proposed underground salt cavern facility. The sale of these development projects resulted in proceeds of approximately $20 million ( $12.7 million after-tax gain).

LNG Development Project

During 2013, Veresen made significant progress on a number of fronts in advancing its Jordan Cove LNG project located in Coos Bay, Oregon .

From a regulatory perspective, Veresen completed the required activities to ensure that Jordan Cove maintains its advantaged position. Jordan Cove's application to export natural gas to countries with which the U.S. does not have a Free Trade Agreement ("FTA") is first in the queue for U.S. Department of Energy ("DOE") approval. While Veresen has approval to export LNG to FTA countries, the Company believes Jordan Cove ultimately requires access to non-FTA countries for the project to broaden its commercial and economic scale.

In May 2013 , Veresen filed formal applications with the Federal Energy Regulatory Commission ("FERC") to obtain approval and authority to construct the terminal. A similar filing was made with the FERC by the operator of the Pacific Connector Gas Pipeline, a 232-mile pipeline that will connect the Jordan Cove terminal to the natural gas trading hub at Malin, Oregon . Veresen holds a 50% in the pipeline. Based on current FERC progress, Veresen expects to be in a position to make a final investment decision on this project in early 2015.

Veresen filed an application with the National Energy Board ("NEB") for a long-term license to export natural gas from Canada to the United States and the application was approved in February 2014 . The favourable NEB decision allows for an export volume of 1.55 Bcf/d for 25 years. The issuance of the licence to export natural gas is subject to approval of the Governor in Council. Matching the terms of the NEB application, Jordan Cove also filed an application with the U.S. DOE for authorization to import 1.55 Bcf/d of natural gas from Canada to the United States for a 25 year term.

On the commercial front, Veresen has been working diligently to secure long-term arrangements to produce LNG for international customers and the Company is making solid progress. In 2013, Jordan Cove executed three non-binding Heads of Agreement, or HOAs, with large-scale prospective customers located in various Asian countries. The non-binding HOA template, which has been provided to a number of world-wide LNG players, sets out indicative commercial terms for the next step of the commercial process, which involves the negotiation of binding agreements. While Veresen anticipates signing additional HOAs, the Company is targeting the fall of 2014 for the execution of binding long-term service agreements for both the LNG terminal and the pipeline. These binding agreements known as Liquefaction Tolling Service Agreements and Transportation Service Agreements for the terminal and pipeline, respectively, are expected to advance upon the DOE granting Jordan Cove an export license to non-FTA countries.

To date, Veresen has retained Black & Veitch Corporation and Kiewit Energy Company for engineering and other related analysis. These two companies have brought substantial LNG expertise and experience to the Jordan Cove project.

Veresen has received preliminary capital cost estimates for the Jordan Cove Energy Project. Jordan Cove's capital cost is estimated to be $5.3 billion for the construction of the marine facility, liquefaction plants, storage tanks, gas treating facilities and power plant (100% owned by Veresen). The related pipeline has an estimated capital cost of $1.5 billion (50% owned by Veresen). These cost estimates exclude other costs including the allowance for funds used during construction, project financing costs and owners' costs.

Veresen believes the Jordan Cove LNG project has several strategic advantages:

  • the facilities will be built on an existing industrial site and Southwest Oregon is an ideal location to access broad labor markets and critical materials during the construction period;
  • Jordan Cove is ideally situated on the west coast of North America to access premium Asian markets, and where there is the ability to source both Canadian and U.S. natural gas, primarily through existing natural gas transmission systems;
  • Potential off-take customers favour Veresen's tolling arrangement and the ability to link LNG supply to gas pricing versus a crude-linked mechanism;
  • the project is in receipt of all local land use approvals and has strong local and political support; and
  • the economics underpinning the project are very compelling given substantially shorter shipping times relative to projects in the Gulf Coast of the U.S.

Strategically, Veresen's objective has been to de-risk Jordan Cove through the regulatory phase, while maintaining a disciplined approach to development spending. Veresen believes this strategy will bring the greatest value to the project and to the Company's shareholders. Upon receipt of DOE approval to export LNG to non-FTA countries, Veresen will finalize plans for evaluating financing and ownership options for the project.

Corporate

Veresen is committed to maintaining a strong balance sheet that will support its existing businesses and growth initiatives. During 2013, Veresen enhanced its capital structure through a $150 million Preferred Share offering.

Veresen expects its liquidity, together with cash from operations and anticipated future access to capital markets, will be sufficient to finance its current capital projects and to provide flexibility for new investment opportunities.

2014 Guidance

Veresen affirms its 2014 distributable cash to be in the range of $0.93 per Common Share to $1.25 per Common Share, with a midpoint of $1.09 per Common Share. Further details concerning 2014 guidance can be found in the "Invest" section of Veresen's web site at www.vereseninc.com.

Conference Call and Webcast

Veresen will host a conference call and webcast on March 6 at 8 am MT ( 10 am ET ) to discuss its results.

Dial-in: 1 (888) 231-8191 or 1 (647) 427-7450
Conference ID 64561707

The link to the conference call webcast is available on Veresen's website on the homepage or by selecting "Invest" and then "Events & Presentations".

A replay of the call will be available at approximately 10:00 am MT (12:00 pm ET) on March 6, 2014 by dialing 1 (855) 859-2056 and 1 (416) 849-0833. The access code is 64561707, followed by the pound sign. The replay will expire at midnight (ET) on March 13, 2014 .

MD&A, Financial Statements and Notes

The Management's Discussion and Analysis ("MD&A") and consolidated financial statements provide a detailed explanation of Veresen's financial results for the fourth quarter and year ended December 31, 2013 compared to the fourth quarter and year ended December 31, 2012 and should be read in conjunction with this news release. These documents are available at www.vereseninc.com and at www.sedar.com.

About Veresen Inc.

Veresen is a publicly-traded dividend paying corporation based in Calgary, Alberta , that owns and operates energy infrastructure assets across North America .  Veresen is engaged in three principal businesses: a pipeline transportation business comprised of interests in two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; a midstream business which includes ownership interests in a world-class natural gas liquids extraction facility near Chicago , the Hythe /Steeprock gas gathering and processing complex, and other natural gas and NGL processing energy infrastructure; and a power business with a portfolio of assets in Canada and the United States . Veresen is also actively developing a number of greenfield projects, including the Jordan Cove LNG Project located in Coos Bay, Oregon .  In the normal course of its business, Veresen and each of its businesses regularly evaluate and pursue acquisition and development opportunities.

Veresen's Common Shares, Series A Preferred Shares, Series C Preferred Shares, and 5.75% convertible unsecured subordinated debentures, Series C due July 31, 2017 are listed on the Toronto Stock Exchange under the symbols "VSN", "VSN.PR.A", "VSN.PR.C" and VSN.DB.C", respectively. For further information, please visit www.vereseninc.com.

Forward-Looking Information

Certain information contained herein relating to, but not limited to, Veresen and its businesses constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Veresen expects or anticipates may or will occur in the future, are forward-looking information.  Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook.  Forward-looking statements in this news release include, but are not limited to, statements with respect to: the ability of Alliance to implement new service offerings; the timing of completion of construction and start-up of the Dasque-Middle hydro project and the St. Columban Wind Project; the estimated capital cost and timing of the final investment decision of the Jordan Cove Energy Project, Veresen's ability to negotiate long term service agreements with offtake customers for LNG, Veresen's ability to realize its growth objectives; the availability of financing for current capital projects and new investment opportunities; and the ability of each of its businesses to generate distributable cash in 2014.  The risks and uncertainties that may affect the operations, performance, development and results of Veresen's businesses include, but are not limited to, the following factors: the ability of Veresen to successfully implement its strategic initiatives and achieve expected benefits; levels of oil and gas exploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price of capital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchange and interest rates; Veresen's ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and regulations; competitive factors in the pipeline, midstream and power  industries; operational breakdowns, failures, or other disruptions; and the prevailing economic conditions in North America .  Additional information on these and other risks, uncertainties and factors that could affect Veresen's operations or financial results are included in its filings with the securities commissions or similar authorities in each of the provinces of Canada , as may be updated from time to time.  Readers are also cautioned that the foregoing list of factors and risks is not exhaustive.  The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time.  Although Veresen believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements.  Undue reliance should not be placed on the information contained herein, as actual result achieved will vary from the information provided herein and the variations may be material.  Veresen makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information.  Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Veresen does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement.

Certain financial information contained in this news release may not be standard measures under Generally Accepted Accounting Principles ("GAAP") in the United States and may not be comparable to similar measures presented by other entities.  These measures are considered to be important measures used by the investment community and should be used to supplement other performance measures prepared in accordance with GAAP in the United States . For further information on non-GAAP financial measures used by Veresen see Management's Discussion and Analysis, in particular, the section entitled "Non-GAAP Financial Measures" contained in the annual Management Discussion and Analysis, filed by Veresen with Canadian securities regulators.

Veresen Inc.        
 
Consolidated Statement of Financial Position        
         
(Canadian $ Millions; number of shares in Millions; unaudited)  December 31, 2013     December 31, 2012 (1)
         
Assets        
Current assets        
  Cash and short-term investments  26.6     16.1
  Restricted cash  3.7     5.8
  Distributions receivable 46.2     39.9
  Receivables  46.4     53.7
  Accrued receivables  16.5     18.9
  Due from jointly-controlled businesses 1.5     1.5
  Other  9.8     10.0
  150.7     145.9
         
Investments in jointly-controlled businesses  857.7     807.0
Rate-regulated asset 34.7     43.8
Pipeline, plant and other capital assets  1,438.1     1,443.8
Intangible assets  430.7     455.0
Due from jointly-controlled businesses 46.6     48.1
Other assets 14.9     17.4
  2,973.4     2,961.0
         
Liabilities        
Current liabilities        
  Payables 12.7     19.6
  Interest payable 12.5     12.5
  Accrued payables 28.1     28.5
  Deferred revenue 1.6     2.8
  Dividends payable 13.2     12.9
  Current portion of long-term senior debt 212.4     11.7
  280.5     88.0
         
Long-term senior debt 975.1     1,247.6
Subordinated convertible debentures  86.2     86.2
Deferred tax liabilities 277.3     262.0
Other long-term liabilities  48.5     46.2
  1,667.6     1,730.0
         
Shareholders' Equity        
Share capital        
  Preferred shares 341.4     195.2
  Common shares (201.5 and 197.8 outstanding at December 31, 2013 and
December 31, 2012, respectively)
1,848.6     1,804.3
Additional paid-in capital 4.3     4.3
Cumulative other comprehensive loss (134.0)     (164.8)
Accumulated deficit (754.6)     (608.1)
  1,305.7     1,230.9
Non-controlling interest  0.1     0.1
  1,305.8     1,231.0
  2,973.4     2,961.0
(1) Certain comparative figures as at December 31, 2012 have been revised. See Note 2 in Veresen's December 31, 2013 consolidated financial statements.

 

 
Veresen Inc.
         
Consolidated Statement of Income
           
    Three months ended December 31     Year ended December 31
(Canadian $ Millions, except per Common Share amounts; unaudited)   2013 2012 (1)     2013 2012 (1)
           
Equity income     43.1  40.2      163.3  143.3
Operating revenues    78.8  67.7      324.7  264.2
Operations and maintenance    (36.9)  (31.0)      (153.8)  (112.4)
General, administrative and project development    (24.6)  (17.5)      (86.2)  (69.5)
Depreciation and amortization    (22.9)  (21.5)      (90.4)  (83.1)
Interest and other finance   (15.1)  (15.2)      (61.9)  (58.6)
Foreign exchange and other    1.4  0.2      2.1  (0.9)
Net income before tax and non-controlling interest    23.8  22.9      97.8  83.0
Current tax    (8.8)  (6.0)      (19.0)  (18.2)
Deferred tax    1.3  (1.6)      (15.3)  (13.4)
Net income before non-controlling interest     16.3  15.3      63.5  51.4
Non-controlling interest    - -     -  (0.1)
Net income     16.3  15.3      63.5  51.3
Preferred Share dividends    (3.7)  (2.2)      (10.3)  (7.7)
Net income attributable to Common Shares    12.6  13.1      53.2  43.6
               
Net income per Common Share              
  Basic and diluted    0.06  0.07      0.27  0.22
(1) Certain comparative figures for the three months and year ended December 31, 2012 have been revised. See Note 2 in Veresen's December 31, 2013 consolidated financial statements. 

Consolidated Statement of Comprehensive Income              
           
    Three months ended December 31     Year ended December 31
 (Canadian $ Millions; unaudited)    2013 2012 (1)     2013 2012 (1)
               
Net income before non-controlling interest   16.3 15.3     63.5 51.4
Other comprehensive income (loss)              
  Cumulative translation adjustment              
    Unrealized foreign exchange gain (loss) on translation   16.1 5.3     30.8 (5.6)
Other comprehensive income (loss)   16.1 5.3     30.8 (5.6)
Comprehensive income before non-controlling interest   32.4 20.6     94.3 45.8
Comprehensive income attributable to non-controlling interest   - -     - (0.1)
Comprehensive income   32.4 20.6     94.3 45.7
Preferred Share dividends   (3.7) (2.2)     (10.3) (7.7)
Comprehensive income attributable to Common Shares   28.7 18.4     84.0 38.0
1) Certain comparative figures for the three months and year ended December 31, 2012 have been revised. See Note 2 in Veresen's December 31, 2013 consolidated financial statements. 

             
Veresen Inc.            
             
Consolidated Statement of Cash Flows            
         
  Three months ended December 31     Year ended December 31
(Canadian $ Millions; unaudited)  2013 2012 (1)     2013 2012 (1)
             
Operating            
  Net income before non-controlling interest  16.3  15.3      63.5  51.4
  Equity income   (43.1)  (40.2)      (163.3)  (143.3)
  Distributions from jointly-controlled businesses  61.7  53.5      204.7  204.4
  Depreciation and amortization  22.9  21.5      90.4  83.1
  Foreign exchange and other non-cash items  1.7  (0.9)      3.3  (0.3)
  Deferred tax   (1.3)  1.6      15.3  13.4
  Changes in non-cash working capital  23.4  14.3      4.1  (28.8)
   81.6  65.1      218.0  179.9
Investing            
  Acquisitions, net of cash acquired  -  -      -  (890.5)
  Investments in jointly-controlled businesses  (15.6)  (43.0)      (68.8)  (106.0)
  Return of capital from jointly-controlled businesses -  -      -  8.5
  Pipeline, plant and other capital assets  (11.5)  (39.5)      (50.0)  (91.5)
  Restricted cash  0.8 -      (1.8)  0.4
  Other  (0.1)  (0.9)      -   (1.6)
   (26.4)  (83.4)      (120.6)  (1,080.7)
Financing            
  Restricted cash -  (0.2)      3.9  348.4
  Short-term debt issued, net of issue costs - -     -  249.1
  Short-term debt repaid - -     -  (250.0)
  Long-term debt issued, net of issue costs - -     -  347.8
  Long-term debt repaid  (3.9)  (3.6)      (11.8)  (11.2)
  Net change in credit facilities  (153.0)  41.2      (60.0)  154.2
  Preferred Shares issued, net of issue costs 144.8 -     144.8  193.7
  Common Share dividends paid  (38.9)  (38.7)      (155.1)  (104.2)
  Preferred Share dividends paid  (3.7)  (2.2)     (10.3)  (7.7)
  Repayments from (advances to) jointly-controlled businesses  0.4  0.3      1.5  (20.5)
  Other  (0.1)  (1.9)      (0.3)  (4.9)
   (54.4)  (5.1)      (87.3)  894.7
             
Increase (decrease) in cash and short-term investments  0.8  (23.4)      10.1  (6.1)
Effect of foreign exchange rate changes on cash and short-term investments  0.3  0.2      0.4  0.3
Cash and short-term investments at the beginning of the period  25.5  39.3      16.1  21.9
Cash and short-term investments at the end of the period  26.6  16.1      26.6  16.1
(1) Certain comparative figures for the three months and year ended December 31, 2012 have been revised. See Note 2 in Veresen's December 31, 2013 consolidated financial statements.

 

               
Veresen Inc.              
               
Distributable Cash              
           
    Three months ended December 31     Year ended December 31
(Canadian $ Millions, except where noted; unaudited)    2013 2012     2013 2012
               
Pipeline    40.7  37.2      157.0  147.5
Midstream    39.4  36.3      133.7  124.3
Power    5.3  4.0      34.4  27.1
Veresen-Corporate    (18.6)  (15.6)      (71.0)  (64.4)
Current tax    (7.3)  (3.2)      (14.9)  (15.4)
Preferred Share dividends    (3.7)  (2.2)      (10.3)  (7.7)
Distributable cash  (2)    55.8  56.5      228.9  211.4
               
Distributable cash per Common Share ($) (3)    0.28  0.29      1.15  1.09
               
Dividends paid/payable (4)    50.3  49.4      199.7  193.5
               
Dividends paid/payable per Common Share ($)     0.25  0.25      1.00  1.00
(2) Distributable cash is not a standard measure under generally accepted accounting principles in the United States and may not be comparable to similar measures presented by other entities. Distributable cash represents the cash available to Veresen for distribution to common shareholders after providing for debt service obligations, Preferred Share dividends, and any maintenance and sustaining capital expenditures. Distributable cash does not include distribution reserves, if any, available in jointly-controlled businesses, project development costs, or transaction costs incurred in conjunction with acquisitions. Project development costs are discretionary, non-recoverable costs incurred to assess the commercial viability of greenfield business initiatives unrelated to the Company's operating businesses. The Company considers transaction costs to be part of the consideration paid for an acquired business and, as such, are unrelated to the Company's operating businesses. Distributable cash is an important measure used by the investment community to assess the source and sustainability of Veresen's cash distributions and should be used to supplement other performance measures prepared in accordance with generally accepted accounting principles in the United States. See the following table for the reconciliation of distributable cash to cash from operating activities.
(3) The number of Common Shares used to calculate distributable cash per Common Share is based on the average number of Common Shares outstanding at each record date.  For the three months ended December 31, 2013 the average number of Common Shares outstanding for this calculation was 201,188,435 (2012 - 197,493,139) and 207,094,943 (2012 - 203,399,647) on a basic and diluted basis, respectively. For the year ended December 31, 2013 the average number of Common Shares outstanding for this calculation was 199,776,867 (2012 - 193,559,607) and 205,683,376 (2012 - 199,466,172) on a basic and diluted basis, respectively. The number of Common Shares outstanding would increase by 5,906,508 (2012 - 5,906,508) Common Shares if the outstanding Convertible Debentures on December 31, 2013 were converted into Common Shares.
(4) Includes $11.1 million and $44.3 million of dividends for the three months and year ended December 31, 2013, respectively (2012 - $10.6 million and $79.2 million) satisfied through the issuance of Common Shares under the Company's Premium DividendTM (trademark of Canaccord Genuity Corp.) and Dividend Reinvestment Plan.

 

               
Veresen Inc.              
               
Reconciliation of Distributable Cash to Cash from Operating Activities              
           
    Three months ended December 31     Year ended December 31
(Canadian $ Millions; unaudited)    2013 2012     2013 2012
               
Cash from operating activities    81.6  65.1      218.0  179.9
Add (deduct):              
  Project development costs (5)    9.6  6.8      33.5  23.5
  Change in non-cash working capital     (26.9)  (19.6)      (6.6)  30.4
  Deferred revenue    -   2.8      -   2.8
  Principal repayments on senior notes    (3.1)  (2.9)      (11.8)  (11.3)
  Maintenance capital expenditures     (0.8)  (2.7)      (5.8)  (7.5)
  Distributions earned greater (less) than distributions received (6)    (2.3)  6.3      8.0  (1.6)
  Preferred Share dividends    (3.7)  (2.2)      (10.3)  (7.7)
  Current tax on Preferred Share dividends    1.4 2.9      3.9 2.9
               
Distributable cash   55.8  56.5      228.9  211.4
(5) Represents costs incurred by the Company in relation to projects where the recoverability of such costs has not yet been established.  Amounts incurred for the three months and year ended December 31, 2013 relate primarily to the Jordan Cove LNG terminal project, the Pacific Connector Gas Pipeline project, and various power development projects.
(6) Represents the difference between distributions declared by jointly-controlled businesses and distributions received.

 

SOURCE Veresen Inc.

Contact:

Dorreen Miller, Director, Investor Relations
Phone: (403) 213-3633
Email: investor-relations@vereseninc.com

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