With Peak Expansion Construction Fast Approaching, Trans Mountain Begins the Year with a Focus on Safety and Performance
Trans Mountain Corporation (TMC) today posted to its website the company’s financial statements and associated management report for the three month period ending March 31, 2021. The company’s financial results were also included in Canada Development Investment Corporation’s consolidated quarterly financial statements.
Net income for the three-month period ended March 31, 2021 increased by $26.1 million to $51.3 million, as compared to $25.2 million in the same period of the prior year. The increase is mainly due to the $37.2 million increase in equity earnings (AFUDC), due to ongoing spending on the Trans Mountain Expansion Project, partially offset by the $8.5 million increase in income tax expense, due to higher pre-tax income. Adjusted EBITDA decreased by $2.4 million due to higher operating costs, and interest expense, paid to the Government of Canada, increased by $2.3 million due to higher borrowings to fund the expansion.
The pipeline operated at full capacity with an average daily throughput for the three-month period for the mainline of approximately 321,700 barrels per day, with 27,000 barrels per day to Westridge Marine Terminal and 212,100 barrels per day to Washington State on the Puget pipeline. While the Trans Mountain pipeline operated at full capacity for both the three months ended March 31, 2021 and 2020, throughput in the first quarter of 2021 increased on the mainline and the Puget line due to continued strong demand on Puget and a lighter commodity mix.
“Trans Mountain’s first quarter performance built on a strong 2020 both operationally and financially.” said Ian Anderson, President and CEO of Trans Mountain Corporation. “The end of March marked a full year for all of us living and working under the new realities the global pandemic has brought. Trans Mountain is an essential service provider with a major, national interest pipeline expansion project underway, and we are fulfilling our role as a leader in both community safety and economic recovery.”
During the COVID-19 pandemic, Trans Mountain and its construction contractors have been working diligently together to ensure adherence to all advice and direction from government and health officials both provincially and federally, while ensuring the safe operation of the Trans Mountain Pipeline System and the continued safe construction of the TMEP.
Work on the Expansion Project progressed to 25% construction completion by the end of the period. As of March 31, 2021, 11,560 people have been hired for the Expansion Project, of which 1,230 or more than 10% were Indigenous. There are currently 7,875 people working on the Project in hundreds of communities across B.C and Alberta.
“Following a voluntary, Project-wide safety stand down, and with a renewed focus on our safety culture, systems and training, construction progressed well during the first quarter of the year,” added Anderson. “As we head into peak construction across most of the Expansion in mid-2021, some of our most significant Project components – the Burnaby Mountain Tunnel and the Fraser River Crossing in the lower mainland are getting underway.”
Since the Project’s inception, $7.1 billion in capital spending has been incurred to the end of the first quarter in 2021, including $997.3 million in the quarter. Spending to-date on the Expansion Project also includes pre-construction costs of permitting, regulatory processes, legal matters, materials such as pipe, valves, buildings, and motors, and financing costs.
Trans Mountain anticipates mechanical completion of the Project by the end of 2022, with commercial operations commencing shortly thereafter. TMC’s projected Adjusted EBITDA is expected to be approximately $1.5 billion in the first full year of the Expansion Project’s operation and expected to grow annually thereafter. These projections are underpinned by long-term contractual commitments for 80% of the system’s 890,000 barrels a day of capacity.
On October 9, 2020, Trans Mountain submitted a variance application to the Canada Energy Regulator for the West Alternative Route through the Coldwater Valley in British Columbia. The regulatory process is expected to wrap up by the end of the second quarter.
In the second quarter of 2021, Trans Mountain will release its first ESG report outlining the Corporation’s results and aspirations through environment, social, and governance principles. Trans Mountain will be setting targets to reduce/offset our emissions. Our targets will support the Government of Canada’s ambition to reach net zero by 2050.
See the full financial statements and management report documents here. See Canada Development Investment Corporation’s Quarterly Report here.
Non-GAAP measures
We make use of certain financial measures that do not have a standardized meaning under U.S. GAAP because we believe they improve management’s ability to evaluate our operating performance and compare results between periods. These are known as non-GAAP measures and may not be similar to measures provided by other entities. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization and equity AFUDC) is a non-GAAP measure we use to evaluate our operating performance absent the impact of financing decisions, non- cash depreciation and amortization, and non-cash equity AFUDC.
AFUDC (Allowance for Funds Used During Construction) is an amount recognized by rate-regulated entities to reflect a return on the equity and debt components of capital invested in construction work in progress.