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Trans Mountain Pipeline demonstrated it is critical Canadian infrastructure and the Expansion Project progressed to 55% overall completion.
Trans Mountain Corporation (TMC) today posted to its website the company’s financial statements and associated management report for the year ending December 31, 2021. The company’s financial results were also included in Canada Development Investment Corporation’s consolidated quarterly financial statements.
Net income for the year increased by $132.5 million to $273.3 million, as compared to $140.8 million in the prior year. The increase is mainly due to the $189.6 million increase in equity allowance for funds used during construction (“AFUDC”), due to spending on the Trans Mountain Expansion Project (the “Expansion Project”). Increased equity AFUDC is partially offset by the $44.4 million increase in income tax expense, due to higher pre-tax income, the $7.2 million decrease in Adjusted EBITDA, the $4.4 million increase in depreciation and amortization expense, and the $2.8 million increase in interest expense. The remaining movement in net income relates to changes in foreign exchange gains and losses and other items.
The overall performance of the system was impacted in the fourth quarter of 2021 by heavy rainfall and extreme weather conditions, which led to widespread flooding in British Columbia and Washington state. As a precaution, the pipeline was shut down on November 14, 2021, with operations safely restarting at reduced capacity on December 5, 2021. The mainline remained at reduced capacity until January 14, 2022, when full capacity was restored. The vast majority of costs related to Trans Mountain’s flood response activities are anticipated to be recoverable from shippers, insurance or third parties. As a result of the pipeline shutdown, throughput on the system was lower year over year, with daily throughput on the mainline averaging approximately 299,000 barrels per day, including 35,000 barrels per day to Westridge Marine Terminal and 189,000 barrels per day to Washington state on the Puget pipeline.
“Despite the pandemic’s impact on crude oil demand and price, and the flooding in BC, available capacity on the Trans Mountain pipeline was fully utilized for all of 2021 and 2020, with system nominations apportioned throughout” said Ian Anderson, President and CEO, Trans Mountain Corporation. “This reinforces that Trans Mountain is a valuable transportation link to shippers and we continue to provide critical infrastructure in Canada. I would like to thank all of Trans Mountain’s employees and contractors for their outstanding work during this challenging time. Their dedication to the safety of our pipeline and their support to local impacted communities has been recognized by so many. I am very proud of all of their efforts.”
Following a voluntary line-wide safety stand down that began in December of 2020, and completion of re-training of workers and supervisors, construction resumed on all active Expansion Project pipeline spreads, facilities, and reactivation sites midway through the first quarter of 2021.
Construction progress was made across all fronts along the pipeline route. As of December 31, 2021, the overall Project including upfront costs of permitting, regulatory approval, and advance purchase of materials is approximately 55 per cent complete. Construction is approximately 44 per cent complete, with $10.5 billion in capital spending incurred and $1.2 billion in financial carrying costs capitalized since the inception of the project, with approximately 490 km of the right-of-way stripped and graded, 380 km of pipe length welded and 350 km of pipe length in the ground. Additionally, significant progress was made on facilities along the route, which were approximately 73 per cent complete at year-end. As of December 31, 2021, there were more than 12,000 people working on the Project. As of May 5, 2022, construction of the TMEP has progressed to approximately 55 per cent completion.
“We are optimistic and confident about what’s ahead in 2022 and 2023 for Trans Mountain and the Expansion Project. We are excited to be delivering on our commitments to communities and to build a modern, environmentally conscious pipeline for tomorrow,” added Anderson. “We have 100 per cent of our route confirmed by the Canada Energy Regulator, including our construction methodology through Coldwater. With construction completed in the Greater Edmonton area and work underway in every spread with the recent start of construction in the Fraser Valley region in BC, we are making considerable progress.”
On October 9, 2020, Trans Mountain submitted a variance application to the Canada Energy Regulator (CER) for the West Alternative Route through the Coldwater Valley in British Columbia. Trans Mountain completed detailed environment and engineering work for the Western Alternative Route along with engagement with area Indigenous groups. The CER authorized the West Alternative Route in July 2021. The corresponding amendment to the BC Environmental Assessment Certificate was approved on October 27, 2021. Construction has started, with clearing activities commencing in January 2022.
In July 2021, Trans Mountain published its first Environment, Social and Governance (ESG) report sharing the company’s results and aspirations through an ESG lens. Trans Mountain will be setting targets to reduce/offset our emissions and our targets will support the Government of Canada’s ambition to reach net zero by 2050.
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 by rate-regulated entities to reflect a return on the equity and debt components of capital invested in construction work in progress.
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