ENERGY TRUSTS / Gas Management Income Fund reports 1997 Results
TSE Symbol: GIF.UN
TORONTO, Feb. 23 /CNW/ - Gas Management Income Fund, a trust with
interests in Canadian natural gas wholesaling, today reported its financial
results - and the performance of its underlying business, Alliance Gas
Management Inc.- for the fourth quarter and fiscal year ended December 31,
1997.
Gas Management Income Fund distributed $1.30 per unit in 1997, including
32.6 cents per unit in the fourth quarter.
As expected, cash flow rebounded in the fourth quarter reflecting both
the implementation of Agent Billing & Collection (ABC) Service and the
contribution of acquisitions made during 1997. After accounting for long term
debt retirement and a deposit on customer contract acquisitions, cash flow per
unit in the fourth quarter was 54 cents. This included 39 cents which was
attributable to Alliance's existing customer base and 15 cents generated from
contracts purchased from Priority Gas Marketing Inc. of Toronto. Gas
Management was therefore able to fund its fourth quarter distribution entirely
from operations.
For the 12 months, operating cash flow contributed $5.6 million or 94
cents per unit, while $2.4 million or 36 cents per unit came from a guarantee
established at the time of the Fund's initial public offering.
''Alliance is one of the largest natural gas wholesalers in Ontario ando
we're only beginning to see the positive impact of our leading market
position,'' said Paul Woods, President and CEO of Alliance Gas Management.
''We will continue to benefit from the implementation of ABC service over the
next year.''
Alliance doubled its customer base to approximately 500,000 customer
equivalents (a standard industry term to measure residential and commercial
users) in 1997. Woods said this ''underscores the value of our natural gas
wholesaling services in Ontario and two key strategic acquisitions we made
during the year.
''Based on our new-found size, and the fact that ABC service, a new
industry pricing mechanism, allows us to offer our customers our Price
Protection Programs, we believe operating margins and cash flow will improve
this year.''
ABC service was mandated by the Ontario Energy Board and slated for
introduction at the beginning of 1997, but was not fully rolled out until the
third quarter. This delay was the major impediment Alliance faced in
generating expected margins in 1997.
''Despite these delays, we managed to convert 28% or 140,000 customer
equivalents to Stable Price programs during the third and fourth quarters,''
said Woods, ''which exceeded our 135,000 customer target. Alliance is
forecasting the conversion of 50% of our customer base by the end of 1998.
Joining the Alliance Stable Price program means residential customers can lock
in their natural gas prices for up to five years, thereby protecting
themselves from price volatility, while ensuring their natural gas supply.''
Gas Management Income Fund's sales for fiscal 1997 were $75.3 million,
and $30.4 million in the fourth quarter compared to $16.1 million in the third
quarter. Sales growth was due to higher natural gas volumes attributable to
Alliance's enlarged customer base. The Fund's results for 1996 include only
the results of operations for the 12-day period from the completion of its
public offering on December 18 to December 31, 1996. As such, year over year
results are not comparable.
Gross margin for 1997 was $11.9 million or 16% of sales. Gross margin
improved to $5.2 million or 17% of sales in the fourth quarter compared to
$1.8 million or 11.3% of sales in the previous quarter. The improvement was
due to approximately 100,000 customer equivalents flowing on ABC service at
year end versus 13,000 at the end of the third quarter.
Gas Management Income Fund provides unitholders with regular income and
the potential for growth through ownership of the common shares, preferred
shares and notes of Alliance Gas Management Inc., a leading Canadian
wholesalers of natural gas to residential and small commercial users.
Established in 1991, Alliance provides approximately 500,000 Canadian customer
equivalents (residential and commercial users) with access to stable price
natural gas contracts. Gas Management Income Fund units are traded on The
Toronto Stock Exchange under the symbol GIF.UN. The Fund is eligible for
RRSPs, RRIFs and DPSPs. |
