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Trans Mountain Corporation Releases Second Quarter 2024 Results

Press Release

Aug. 29, 2024

Trans Mountain Corporation (“TMC” or “the Company”) today posted to its website the Company’s financial statements and associated management report for the three-and six-month periods ending June 30, 2024. The Company’s financial results were also included in Canada Development Investment Corporation’s consolidated quarterly financial statements.

The second quarter of 2024 was a significant transitional period for TMC as operations shifted from the previous negotiated toll settlement model to the expanded pipeline system’s commercial model. The combination of long-term committed contracts and a new toll structure for transportation service, resulted in significant increases both to revenues and operating expenses. Second quarter revenues, expenses and net income reflect a partial quarter’s contribution from the expanded system. Adjusted EBITDA recognized in the second quarter was also impacted by line-fill activities during May and make-up rights earned by customers for transportation capacity payments not utilized during the quarter. As a result, key financial measures such as revenues, Adjusted EBITDA and net income (loss) are not representative of a full quarter’s expected contribution, as the second quarter incorporated only two months from the expanded system.

The following table summarizes the results by month for the three months ended June 30, 2024, which demonstrates the transitional nature of the quarter:

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Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) reflect the results from TMC’s base business. For the three month period ended June 30, 2024, Adjusted EBITDA, increased by $234.8 million to $283.0 million, as compared to $48.2 million in the same period of the prior year. For the six month period ended June 30, 2024, Adjusted EBITDA increased by $220.5 million to $318.9 million, as compared to $98.4 million in the same period of the prior year. The increase in Adjusted EBITDA for both the three and six month periods ended June 30, 2024, as compared to the same periods in the prior year, is due to the commencement of commercial operations on the expanded system on May 1, 2024. All deliveries have since been subject to the expanded pipeline system’s tariffs. Revenues associated with the 15 to 20 year committed contracts for transportation service on the expanded pipeline system has resulted in a significant increase in transportation volumes, revenues and Adjusted EBITDA.

Net income incorporates depreciation expense and the significant financing impact of the Expansion Project, specifically Equity Allowance for Funds used During Construction (“AFUDC”), interest expense and capitalized debt financing costs. For the three month period ended June 30, 2024, TMC had a net loss of $47.8 million, as compared to net income of $172.1 million in the same period of the prior year. Net income for the six month period ended June 30, 2024, totalled $110.2 million, as compared to $356.3 million in the same period of the prior year. As expected, due to the transitional nature of the second quarter, the net loss recognized in the second quarter of 2024 reflects the commercial commencement of the expanded system on May 1, 2024, which resulted in a significant increase in Adjusted EBITDA, offset by increased depreciation and amortization expense, the cessation of AFUDC and capitalized debt financing costs on the expansion project, and higher interest expense.

The Company’s operational performance remained strong throughout the first half of the year with steady demand for Trans Mountain’s unique increased access to tidewater. With the expanded pipeline system now in service, start-up operations are going well and as expected. For June 2024, the first full month of operations under the expanded system, average daily throughput on the mainline was approximately 704,000 barrels per day. During the second quarter, the pipeline system had an average daily throughput on the mainline of approximately 471,000 barrels per day, with 157,000 barrels per day to Westridge Marine Terminal and 229,000 barrels per day to Washington state on the Puget Pipeline.

In July 2024, Trans Mountain released its fourth environmental, social and governance report (ESG) report outlining the Company’s ESG results.

See the full financial statements and management report documents. See Canada Development Investment Corporation’s Quarterly Report.

GAAP and Non-GAAP measures

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. The non-GAAP measures discussed above should not be considered as an alternative to or more meaningful than revenues, net income, operating income or other U.S. GAAP measures. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization and equity AFUDC) is a non-GAAP measure we use to evaluate our operating performance and is calculated from its most directly comparable U.S. GAAP measure, operating income but excludes 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 under U.S. GAAP 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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