CALGARY, ALBERTA--(Marketwired - Dec. 1, 2015) - TransCanada Corporation (TSX:TRP) (NYSE:TRP) (TransCanada) announced today that its wholly-owned subsidiary NOVA Gas Transmission Ltd. (NGTL) has reached an agreement with customers and other interested parties on the annual costs, including equity return and depreciation, required to operate the NGTL System for 2016 and 2017.
"The NGTL System is a core asset in TransCanada's portfolio that continues to provide critical transportation services for the majority of natural gas produced in the Western Canada Sedimentary Basin," said Russ Girling, TransCanada's president and chief executive officer. "Significant new commercially-secured investment in NGTL represents a major component of TransCanada's $13 billion of small to medium-sized projects that are expected to enter service by 2018."
NGTL achieved strong stakeholder support for the two-year cost of service agreement that will start in 2016, subject to regulatory approvals.
"This agreement is the product of an open negotiation between NGTL and its stakeholders, and represents an acceptable balance of interests among the parties," added Girling. "We worked diligently with our stakeholders through a collaborative process to reach this consensus that brings greater certainty and stability to our operating costs through the end of 2017."
The agreement covers all elements of the NGTL System operating costs, including return on equity, equity thickness and depreciation, and includes a mechanism that incents NGTL to remain strongly focused on cost control as well as continuous operating efficiencies.
For the term, the agreement:
- fixes the equity return at 10.1 per cent on 40 per cent deemed common equity;
- establishes depreciation at a forecast composite rate of 3.16 per cent, which reflects continuation of 2015 parameters;
- fixes operating, maintenance and administration (OM&A) costs at $222.5 million annually with an incentive mechanism for variances that enables NGTL to capture savings from improved performance; and
- provides for flow-through of all other costs, including for example pipeline integrity expenses and emissions costs.
NGTL filed an application on December 1, 2015 with the National Energy Board for approval of the agreement.
TransCanada recently announced an increase of $570 million in overall secured investment on the NGTL system, resulting from 2.7 billion cubic feet per day (Bcf/d) of contracted new, firm natural gas transportation service commencing in 2018. This brings total project investment on the system to $7.4 billion. The agreement establishes earnings for the system and projects entering service through 2017.
With more than 65 years' experience, TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure including natural gas and liquids pipelines, power generation and gas storage facilities. TransCanada operates a network of natural gas pipelines that extends more than 68,000 kilometres (42,100 miles), tapping into virtually all major gas supply basins in North America. TransCanada is one of the continent's largest providers of gas storage and related services with 368 billion cubic feet of storage capacity. A growing independent power producer, TransCanada owns or has interests in over 10,900 megawatts of power generation in Canada and the United States. TransCanada is developing one of North America's largest liquids delivery systems. TransCanada's common shares trade on the Toronto and New York stock exchanges under the symbol TRP. Visit TransCanada.com and our blog to learn more, or connect with us on social media and 3BL Media.
FORWARD LOOKING INFORMATION
This publication contains certain information that is forward-looking and is subject to important risks and uncertainties (such statements are usually accompanied by words such as "anticipate", "expect", "believe", "may", "will", "should", "estimate", "intend" or other similar words). Forward-looking statements in this document are intended to provide TransCanada security holders and potential investors with information regarding TransCanada and its subsidiaries, including management's assessment of TransCanada's and its subsidiaries' future plans and financial outlook. All forward-looking statements reflect TransCanada's beliefs and assumptions based on information available at the time the statements were made and as such are not guarantees of future performance. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this news release, and not to use future-oriented information or financial outlooks for anything other than their intended purpose. TransCanada undertakes no obligation to update or revise any forward-looking information except as required by law. For additional information on the assumptions made, and the risks and uncertainties which could cause actual results to differ from the anticipated results, refer to the Quarterly Report to Shareholders dated November 2, 2015 and 2014 Annual Report filed under TransCanada's profile on SEDAR at www.sedar.com and with the U.S. Securities and Exchange Commission at www.sec.gov.