TransCanada PipeLines Ltd., Calgary, says it expects total proceeds of about $3.45 billion (Can.) from its sale of non-core assets this year, well above the original target of $3 billion.
As a result, the company will record a positive $200 million after-tax adjustment to its 1999 provision for discontinued operations in third quarter 2000. It also expects to record gains on asset sales in continuing operations of $45 million after-tax in 2000, resulting in a total positive adjustment from divestitures of $245 million after-tax.
The company began selling non-core assets in December 1999 to focus on its core natural gas transmission, power and gas marketing activities in Canada and the northern tier of the US.
Non-core sales have included international pipeline interests, its 50% interest in the Express crude oil pipeline system in the US, midstream operations and Cancarb Ltd., a black carbon business in Alberta.
CEO Doug Baldwin said the asset sale is achieving its intended result of strengthening the company�s balance sheet and providing a solid financial foundation for future growth.
Since the start of 2000, the company has retired or repurchased about $1.75 billion of term debt and preferred shares. It also plans to repurchase $200 million in redeemable preferred share securities in November.
Baldwin said the decrease in financing charges on debt and efficiencies in corporate costs will lead to improved earnings and cash flow for the company.
TransCanada also announced it will take a $120 million non-cash after-tax charge resulting from losses associated with certain long-term natural gas contracts entered into in previous years to support specific business initiatives and pipeline investments. As an overall result, the company expects to record a total $125 million after-tax gain in its year 2000 accounts.
The company said price differentials between gas supply points and market points in the contracts involved in the non-cash after-tax charge had deteriorated and the decline in the value of these contracts is no longer temporary. The company said it recorded a $13 million after-tax loss on these contracts in the first 6 months of this year.