PIPELINES / IPL Energy Q2 Results
IPL Energy Earnings Growth Continues, Increased Dividend Declared
CALGARY, ALBERTA--(July 29, 1998)IPL Energy Inc. today announced
that its Board of Directors has declared a dividend of $0.575 per
common share, payable September 1, 1998 to shareholders of record
August 14, 1998. This represents an increase of $0.03 per common
share, or 5.5 percent, from the prior dividend rate.
"The dividend increase reflects IPL Energy's strong underlying
growth in earnings, resulting from the execution of the strategic
direction first outlined early last year," said Brian F. MacNeill,
President & Chief Executive Officer. "This continued earnings
momentum is particularly notable given the influence of this
year's extraordinarily warm winter weather, a good portion of
which we expect to mitigate through various actions. Our focus
continues to be on delivering superior returns to shareholders
through earnings growth and a steadily increasing dividend."
IPL Energy also announced earnings of $209.8 million ($2.90 per
common share) for the six months ended June 30, 1998. This
represents an 11 percent increase when compared with earnings of
$188.7 million ($2.79 per common share) for the same period in
1997. Improved results from Energy Transportation and Corporate
segments more than offset the impact of warm weather which reduced
earnings from the Energy Distribution segment.
FINANCIAL
The Energy Transportation segment contributed $71.0 million to
first half earnings, up from $57.9 million earned during the same
period last year. The IPL System improved earnings through further
operational and cost efficiencies achieved under incentive tolling
as well as additional returns generated from system expansion and
other capital programs outside of incentive tolling arrangements.
In the United States, Lakehead Pipe Line Partners, L.P. also
achieved higher throughput volumes, resulting in increased equity
earnings and higher incentive allocations to IPL Energy. Finally,
earnings from the Colombia pipeline increased, reflecting the
higher investment level in 1998.
Earnings from the Energy Distribution segment totalled $141.3
million (1997 - $150.6 million) for the six months ended June 30,
1998. The segment results represent income from The Consumers' Gas
Company Ltd., as well as earnings of approximately $22.9 million
from the Noverco Inc. investment acquired in mid 1997.
First half earnings include the results of Consumers Gas for the
period October 1997 through March 1998. The gas utility
contribution to IPL Energy was $121.8 million, down $28.8 million
from last year, reflecting both the impact of a lower allowed rate
of return on equity and warmer weather throughout the heating
season. For the first six months of the year, weather, as measured
in degree days, was about 11 percent warmer than in 1997 and about
15 percent warmer than normal. Growth in the core franchise area
continued with 43,000 new customers being added during the first
half of the year, reflecting strong economic conditions and
residential fuel conversions.
IPL Energy estimates that the 1998 impact of the warmer weather
represents a potential reduction in earnings of approximately $40
million when compared to earnings expected under normal weather
patterns. Through a variety of cost reduction initiatives,
operational efficiencies and other corporate actions across the
IPL Energy group of companies, management anticipates that the
adverse effect of weather on 1998 earnings should be substantially
mitigated with many of the initiatives already reflected in the
current six months results.
In addition to lower corporate provisions as compared to the prior
year, the Corporate segment results include one-time after tax
gains of approximately $8 million relating to the sale of a
non-strategic real estate property and the recovery of previously
expensed assets held in trust under a financing arrangement.
For the three months ended June 30, 1998, the Corporation's
earnings increased to $147.6 million ($2.04 per share) from $131.7
million ($1.95 per share) recorded during the same period last
year. Reductions in earnings from Consumers Gas due to warm
weather were more than offset by higher earnings from North
American and Colombian pipeline operations, contributions from the
investment in Noverco, as well as the impact of the Corporate
gains noted above.
On June 30, 1998, Noverco exercised a warrant to purchase 1.5
million common shares of IPL Energy. The warrant was issued in
August 1997, in connection with the acquisition by IPL Energy of a
32 percent interest in Noverco and the acquisition by Noverco of
an 8 percent interest in IPL Energy. Upon settlement scheduled
for November 13, 1998, IPL Energy will receive $76.5 million of
proceeds while Noverco's common share interest in IPL Energy will
increase to approximately 10 percent.
PROJECT UPDATE
ENERGY TRANSPORTATION
LINE 9 FINAL CONSTRUCTION NOTICE RECEIVED
IPL Energy's existing 30 inch diameter Line 9 pipeline between
Sarnia and Montreal will be reversed to transport crude oil from
Montreal, Quebec to refineries located in Oakville, Nanticoke and
Sarnia, Ontario. On July 16, refiners supporting the Line 9
Reversal Project issued the Final Construction Notice thereby
allowing construction to commence immediately. The ultimate
capacity of the 832 km line will be 240,000 barrels per day and
the projected in service date for the reversed Line 9 is April 30,
1999.
TERRACE EXPANSION RECEIVES NEB APPROVAL
The Corporation received approval from the National Energy Board
("NEB") to proceed with Phase I of the Terrace Expansion project
on June 9, 1998. Building on existing IPL and Lakehead pipeline
systems, Phase I will provide an initial 95,000 barrels per day
capacity increase by January 1999, rising to 170,000 barrels by
the end of 1999. The estimated investment for Phase I is $610
million in Canada and U.S. $138 million in the United States.
Subsequent phases are projected to provide the balance of the
Terrace project's incremental capacity, including a heavy crude
oil allocation of up to 520,000 barrels per day.
"NEB approval represents an important milestone for one of the
most significant crude oil pipeline projects in Canadian history,"
said Mr. MacNeill. "The Terrace Expansion project has received
widespread industry support and is a vital link in future Western
Canadian heavy and synthetic crude expansion programs. This
project builds upon the core strengths of our existing pipeline
system and strategically positions IPL Energy for future pipeline
expansion opportunities. At the same time, Western Canadian
producers can continue with their own expansion plans, confident
in the increased access to U.S. Midwest refinery markets that the
Terrace Expansion project will provide."
WILD ROSE CONSTRUCTION ON SCHEDULE FOR EARLY 1999 COMPLETION
TARGET
Construction continued on target on the $475 million, wholly owned
Wild Rose Pipe Line project with $131.6 million spent as at the
reporting date. The pipeline, which is scheduled for completion
in the first quarter of 1999, is designed to provide
transportation capacity of 570,000 barrels per day from the
Athabasca and Cold Lake, Alberta regions, south to the Hardisty
hub, where it will access the expanded IPL and Lakehead pipeline
systems, further reinforcing the strategic North American market
linkages IPL Energy continues to forge.
A 30 year shipping agreement with Suncor Energy Inc. will provide
a base return on the initial investment in the pipeline, while
laying the foundation for enhanced returns as the Corporation
markets the additional capacity to other transportation customers.
ALLIANCE DECISION ANTICIPATED IN FALL OF 1998
The NEB reserved its decision regarding the Alliance Pipeline
project on May 21, 1998 and a decision is expected this Fall. IPL
Energy is a founding partner in the Alliance Pipeline project, and
holds a 21 percent ownership position in the $3.6 billion natural
gas pipeline project. This investment is a significant step
forward in the Corporation's strategic plan to build a
transcontinental transportation alternative for Western Canadian
natural gas. The proposed pipeline will transport natural gas
through 1,900 miles of pipeline from Fort Saint John, British
Columbia to U.S. Midwest markets, including Chicago. During the
quarter, the project secured U.S. $2.6 billion of non-recourse
debt financing, providing the financial resources necessary to
complete construction of the pipeline, subject to regulatory
approval.
VECTOR CONTINUES ON SCHEDULE
The IPL Energy sponsored Vector Pipeline project, which starts
from the terminus of the Northern Border and Alliance Pipelines,
also continued on schedule. The project now expects to receive
preliminary Federal Energy Regulatory Commission (FERC) approval
in the Fall of 1998.
The U.S. $471 million pipeline will extend 344 miles from Chicago
to Dawn, Ontario where it connects to existing and proposed
pipeline systems to provide additional transportation linkages for
Western Canadian natural gas producers.
MILLENNIUM IN-SERVICE DATE REVISED TO NOVEMBER 1, 2000
During the quarter, the Millennium Pipeline project announced a
revised in-service date of November 1, 2000. In-service was
originally scheduled for November 1999. The pipeline has
requested a Preliminary Determination by FERC on non-environmental
aspects of the project by September 30, 1998 with final approval
by April 30, 1999.
Upon regulatory approval, IPL Energy has an option to acquire a
7.5 percent equity interest in the Millennium Pipeline from the
Columbia Gas Transmission Corporation in exchange for a 7.5
percent interest in the Vector Pipeline, further supporting the
Corporation's transcontinental gas transmission strategy.
ENERGY DISTRIBUTION
CORNWALL ELECTRIC ACQUISITION PROCEEDING
The acquisition of Cornwall Electric is expected to close on July
31, 1998, having received all necessary approvals from the Ontario
Municipal Board in late June. Cornwall Electric represents the
first step in the Corporation's expansion into the Ontario
municipal electricity distribution market, serving about 25,000
residential and business customers in Cornwall and surrounding
areas. The acquisition is the first sale of a municipally-owned
electric utility in Ontario to a natural gas distribution company
in the private sector, representing a key step in IPL Energy's
strategy to take advantage of the trend towards convergence of gas
and electricity.
IPL Energy Inc. is a leader in energy delivery and services,
operating the world's longest crude oil and liquids pipeline
through the combined Interprovincial Pipe Line Inc. and Lakehead
Pipe Line Partners, L.P. systems, and Canada's largest natural gas
distribution company through The Consumers' Gas Company Ltd. which
serves 1.4 million residential, commercial and industrial
customers in south central and eastern Ontario, Quebec and Upper
New York State. IPL Energy's common shares trade on the Toronto
and Montreal stock exchanges in Canada under the symbol "IPL". In
the United States, the shares trade on The NASDAQ National Market
under "IPPIF". Lakehead's preference units trade on the New York
Stock Exchange under "LHP".
/T/
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IPL ENERGY INC.
HIGHLIGHTS 1
--------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
(unaudited; Canadian dollars 1998 1997 1998 1997
in millions, except
per share amounts)
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FINANCIAL 2
Earnings
Energy Transportation 37.9 28.3 71.0 57.9
Energy Distribution 105.7 114.3 141.3 150.6
Corporate 4.0 (10.9) (2.5) (19.8)
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Consolidated Earnings 147.6 131.7 209.8 188.7
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Operating Revenue
Energy Transportation 133.1 125.5 259.7 251.9
Energy Distribution 761.3 859.6 1,262.8 1,353.6
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Consolidated Operating
Revenue 894.4 985.1 1,522.5 1,605.5
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Capital Expenditures 211.4 119.2 402.5 215.6
Cash from Operating
Activities 32.8 34.0 83.7 27.1
Dividends 40.5 34.9 80.9 69.7
Per Share Amounts
Earnings 2.04 1.95 2.90 2.79
Cash from operating
activities 0.46 0.51 1.16 0.40
Dividends 0.545 0.515 1.09 1.03
Weighted Average Shares
Outstanding (millions) 72.3 67.6
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OPERATING
Energy Transportation 3
Deliveries (thousands
of barrels per day) 2,188 2,028 2,179 1,997
Barrel miles (billions) 199 183 393 372
Average haul (miles) 999 992 995 1,029
Energy Distribution
Gas distribution volumes
(billion cubic feet) 163 174 275 284
Number of active
customers (thousands) 1,405 1,350 1,405 1,350
Degree day deficiency 4
Actual 1,616 1,919 2,922 3,270
Forecast based on
normal weather 2,027 1,968 3,435 3,316
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/T/
1. Highlights of Energy Distribution reflect the results of The
Consumers' Gas Company Ltd. and other gas distribution assets on a
quarter lag basis of consolidation for the three and six months
ended March 31, 1998 and 1997. Gas distribution earnings for the
nine months ended June 30, 1998 were $114.7 million (1997 - $158.7
million) and will be included in the September 30, 1998
consolidated IPL Energy results.
2. Due to the seasonal nature of gas distribution operations, the
amounts shown for the three and six month periods are not
indicative of the results for the full fiscal year.
3. Energy Transportation operating highlights include the
statistics of the 16.6 percent owned portion of the mainline
system located in the United States.
4. Degree day deficiency is a measure of coldness which is
indicative of volumetric requirements of natural gas utilized for
heating purposes in all markets. It is calculated by accumulating
from October 1 the total number of degrees each day by which the
daily mean temperature falls below 18 degrees Celsius. The
figures given are those accumulated in the Toronto area.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
IPL Energy Inc.
Byron Neiles
Media Relations Contact
(403) 231-5916
(403) 231-4844 (FAX)
byron.neiles@iplenergy.com
iplenergy.com
or
IPL Energy Inc.
Al Monaco
Investment Community Contact
(403) 231-3973
(403) 231-4848 (FAX)
(800) 481-2804 Toll Free
al.monaco@iplenergy.com
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