In-line Quarterly Results and Continued Momentum on Expansion Project

Trans Mountain Corporation (TMC) today posted to its website the company’s financial statements and associated management report for the three and six month periods ending June 30, 2022. The company’s financial results were also included in Canada Development Investment Corporation’s consolidated quarterly financial statements.

For the three-month period ended June 30, 2022, net income increased by $65.7 million to $128.8 million, as compared to $63.1 million in the same period of the prior year. The increase is due to the $76.6 million increase in equity AFUDC, the $8.9 million decrease in interest expense, net of capitalized interest, and the $0.4 million increase in Adjusted EBITDA, partially offset by the $21.5 million increase in income tax expense, and the $0.3 million increase in depreciation and amortization expense. The remaining movement in net income relates to changes in foreign exchange gains and losses, and other items.

Net income for the six-month period ended June 30, 2022, increased by $121.6 million to $236.0 million, as compared to $114.4 million in the same period of the prior year. The increase is due to the $143.7 million increase in equity AFUDC, and the $19.3 million decrease in interest expense, net of capitalized interest, partially offset by the $40.0 million increase in income tax expense, the $1.6 million decrease in Adjusted EBITDA and the $0.9 million increase in depreciation and amortization expense. The remaining movement in net income relates to changes in foreign exchange gains and losses, and other items.

The pipeline operated at full capacity for the quarter with an average daily throughput on the mainline of approximately 325,000 barrels per day, with 31,000 barrels per day to Westridge Marine Terminal and 218,000 barrels per day to Washington state on the Puget Pipeline. Pipeline capacity has been apportioned throughout 2022, as the barrels nominated to move on the system each month have exceeded available capacity.

“For the first half of 2022, the company’s financial and operational performance remained strong. We continue to have steady demand for access to the markets Trans Mountain serves, including our unique access to tidewater,” said Rob Van Walleghem, President (Interim), Trans Mountain Corporation. “We remain focused on safe construction of the Expansion Project and safe operations of the existing line while delivering on our strategic priorities for 2022.”

“Work at our pump stations and facilities is more than 85 per cent complete, while construction in the Lower Mainland is approximately 70 per cent complete. Pipeline construction overall stands at over 50 per cent complete, with more than 550 kilometres of pipe in the ground. We are hitting significant milestones in each region,” added Van Walleghem. “The Burnaby Mountain Tunnel, the 2.6-kilometre tunnel connecting Burnaby Terminal and Westridge Marine Terminal, is now more than halfway complete. Overall on the Project we anticipate substantial construction progress throughout summer and fall and we are targeting to be 80 per cent complete by year-end 2022.”

As of June 30, 2022, the overall Project including upfront costs of permitting, regulatory approval, advance purchase of materials and financial carrying costs is approximately 65 per cent complete. Construction is more than 60 per cent complete, with $15.9 billion in capital spending incurred, including a total of $2.2 billion and $4.3 billion for the three and six months ended June 30, 2022, respectively. Trans Mountain expects that 2022 will see peak construction for the Expansion Project, with thousands of people working at hundreds of sites across Alberta and British Columbia. To date, Trans Mountain and our contractors have hired approximately 24,000 people, of which more than 10 per cent were Indigenous. As of June 30, 2022, 13,535 people are currently working on the Project in hundreds of communities across British Columbia and Alberta.

Trans Mountain anticipates completion of the Project in the fourth quarter of 2023. Trans Mountain’s projected Adjusted EBITDA is expected to be approximately $1.7 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 per cent of the system’s 890,000 barrels a day of capacity.

During the quarter, Trans Mountain released its second environmental, social and governance report (ESG) report outlining the Corporation’s results and aspirations through ESG principles. Although the greenhouse gas (GHG) emissions associated with operating a pipeline are relatively small, Trans Mountain is setting targets to reduce and/or offset scope 1 and scope 2 emissions, which 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.

GAAP and 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 under U.S. GAAP by rate-regulated entities to reflect a return on the equity and debt components of capital invested in construction work in progress.