Good day, ladies and gentlemen. Welcome to the TransCanada Corporation 2017 First Quarter Financial Results Conference Call. I would now like to turn the meeting over to Mr. David Moneta, Vice President, Investor Relations. Please go ahead, Mr.
Moneta.
Thanks very much, and good afternoon, everyone. I'd like to welcome you to TransCanada's Q1 2017 financial results conference call. With me today are Russ Girling, President and Chief Executive Officer Don Marchand, Executive Vice President and Chief Financial Officer Karl Johansen, Executive Vice President and President, Canada and Mexico Natural Gas Pipelines and Energy Paul Miller, Executive Vice President and President, Liquids Pipelines Glenn Manuse, Vice President and Controller. Stan Chapman, who was recently appointed Executive Vice President and President, U. S.
Natural Gas Pipelines, couldn't join us today, but will participate in all future calls. Russ and Don will begin today with some opening comments on our financial results and certain other company developments. Please note that a slide presentation will accompany their remarks. A copy of the presentation is available on our website at transcanada.com. It can be found in the Investors section under the heading Events and Presentations.
Following Russ and Don's remarks, we will turn the call over to the conference coordinator for questions from the investment community. If you are a member of the media, please contact Mark Cooper or James Miller following this call, and I would be happy to address your questions. In order to provide everyone from the investment community with an equal opportunity to participate, we ask that you limit yourself to 2 questions. If you have additional questions, please reenter the queue. Also, we ask that you focus your questions on our industry, our corporate strategy, recent developments and key elements of our financial performance.
If you have detailed questions relating to some of our smaller operations or your detailed financial models, Stuart and I would be pleased to discuss them with you following the call. Before Russ begins, I'd like to remind you that our remarks today will include forward looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by TransCanada with Canadian Securities Regulators and with the U. S. Securities and Exchange Commission.
And finally, during this presentation, we'll refer to measures such as comparable earnings, comparable earnings per share, comparable earnings before interest, taxes, depreciation and amortization or EBITDA, comparable funds generated from operations and comparable distributable cash flow. These and certain other comparable measures do not have any standardized meaning under GAAP and are therefore considered to be non GAAP measures. As a result, they may not be comparable to similar measures presented by other entities. They are measures used to provide you with additional information on our operating performance, liquidity and our ability to generate funds to finance our operations. A reconciliation to the nearest GAAP measures is included in the appendix.
With that, I'll turn the call over to Russ.
Thanks, David, and good afternoon, everyone, and thank you very much for joining us on Friday afternoon. As I've highlighted in the past and again earlier today at our annual meeting, 2016 was truly a transformational year for TransCanada. Our portfolio of high quality energy infrastructure assets performed very well, and our long term strategy and financial discipline enabled us to undertake unprecedented growth that will reward our shareholders for many years to come. We continue to build on those accomplishments here early in 20 17. Evidence of that can be seen in our Q1 record financial results, which support our Board of Directors' decision in February to increase our quarterly common share dividend to $0.625 per share.
That equates to $2.50 per share on an annual basis and represents a 10.6% increase over the dividend in 2016. During the Q1, we also continued to advance our $23,000,000,000 near term capital program, spending approximately $1,800,000,000 In aggregate, this portfolio of commercially secured and rate regulated projects remains on time and on budget. In addition, we completed the $920,000,000 U. S. Mill acquisition of Columbia Pipeline Partners.
To help fund our capital program, we completed $2,600,000,000 of external financing across the capital spectrum on very compelling terms and initiated a $765,000,000 dropdown to our U. S. MLP. And finally, we continue to advance a number of other strategic initiatives that will enhance our competitiveness and position us for additional long term growth. I'll touch on each of these developments in the next few slides, beginning with a brief review of our Q1 financial results.
Excluding certain specific items, comparable earnings for the Q1 2017 were $698,000,000 or $0.81 per share, an increase of $204,000,000 or $0.11 per share over the same period last year. That equates to a 16% increase on a per share basis and reflects the strong performance across the natural gas pipeline business, including Colombia, which we acquired in mid-twenty 16. Comparable EBITDA also increased $475,000,000 to approximately $2,000,000,000 while comparable funds generated from operations of $1,500,000,000 was $259,000,000 higher than the Q1 of 2016. Dom will provide more detail on those financial results in just a few minutes. Before he does, I'd like to offer a few comments on some of the recent developments in each of our businesses, beginning with our natural gas business.
Starting with the U. S. And Colombia, which I'm happy to report was essentially fully integrated here early in April when we added our new employees to an enterprise wide information system, effectively giving the entire organization the ability to share information and to use similar processes to carry out their work. This was the final major step in our integration process. We are on track to realize the majority of the targeted $250,000,000 in annual synergies in 2017, with the remainder showing up in 2018.
On the growth side, we continue to advance Colombia's $7,100,000,000 of near term capital by commencing construction on the $1,400,000,000 U. S. Beach Express Project and the $400,000,000 U. S. Rain Express Project.
Both of those are expected to be in service by November of this year. We also continue to advance the WB Express, Mountaineer Express and Gulf Express projects through the various stages of regulatory approval and expect all to be in service in 2018. Turning to Canadian Natural Gas Pipeline business, where we filed an application with the National Energy Board for a variance to the existing approvals for NGTL's $1,400,000,000 North Montney Pipeline Project to remove the condition that the project could only proceed once a positive final investment decision was made on the Pacific Northwest LNG project. North Montney is now underpinned by 20 year contracts with a broader group of shippers we announced the successful conclusion of the long term fixed price open season for service from Empress to Dawn. The open season resulted in binding long term contracts for Western Canadian with Western Canadian producers to transport 1.5 PJs per day for a term of 10 years at a total of $0.77 per gigajoule.
An application was filed with the NAB on April 26 for approval of the service, including a request to have it implemented starting November 1, 2017. These developments on NG Tail and the Canadian Mainline support our belief that Western Canada shale plays, particularly in the areas of Montney, Duvernay and the Deep Basin, are among the lowest cost sources of supply in North America. We believe the Western Canadian Sedimentary Basin gas continues to play an important role in meeting North American demand, which could lead to further growth on the NGTL system as facilities will be needed to increase access to the main export delivery points in the province. In Mexico, we continue to advance the Tula, the Adore project and the Sur de Texas projects that will see us invest a total of $2,500,000,000 in 3 projects with approximately $900,000,000 being spent to date on those projects. Finally, in the Natural Gas Pipeline business, during the Q4, we continued to advance our MLP strategy.
First, we completed the acquisition of all the outstanding publicly held common units of Columbia Pipeline Partners for approximately US920 $1,000,000 This provides us with 100 percent ownership of Columbia's core assets and simplifies our corporate structure, leaving us with a single MLP, which is TC PipeLines LP. And secondly, in February, we offered to sell the interests in Iroquois and PNGTS to TC PipeLines. And yesterday, we announced that we'd agreed to a sale for that for those pipelines for US765 $1,000,000 That transaction is expected to close in mid-twenty 17, subject to closing conditions. Turning now to liquids, where we continue to advance construction of the Grand Rapids and Northern Curtierville pipeline projects, which will see us invest a total of $1,900,000,000 Today, we have spent $1,700,000,000 on these projects, with both expected to enter service before the end of the year. Also in Liquids began to once again advance the Keystone XL project.
On March 24, we received the presidential permit, which as you know is a significant and long awaited milestone for this project. In February, we also filed an application with the Nebraska Public Service Commission seeking approval for the pipeline route through the state of Nebraska. The hearing on that application is scheduled in August, and a final decision is expected by the end of November 2017. In addition, we are updating our shipping contracts for the project, and we anticipate that the core contract shipper group will be modified somewhat and include the introduction of new shippers and the reductions in volume commitments by other shippers. In energy, we continue to advance construction of the Napanee gas fired power generation facility in Ontario.
That plant is expected to be completed in 2018 and is underpinned by a 20 year contract with the Ontario Independent Electric System Operator or the ISO. Bruce Power's long term refurbishment program also continues to progress with work on the asset management program advancing as planned in preparation of the 1st major component replacement, which is scheduled to commence in 2020. Finally, in energy, we continue to advance the sale of our U. S. Northeast power assets.
We completed the sale of the hydro assets for US1.065 billion dollars in April. The sale of Ravenswood, Ironwood, Ocean State and Kibbe Wind is expected to close in the Q2 of 2017. Proceeds from those transactions will be used to retire the remainder of the Columbia Acquisition Bridge facilities. So in summary, during the second during the Q1, our high quality portfolio of energy infrastructure assets continue to advance our $23,000,000,000 near term capital program on time and on budget. In total, we invested $1,800,000,000 during the quarter, principally in expansions of the NGTL and Columbia system, but as well on our Mexican natural gas pipeline projects, regional pipeline projects in Alberta and the Napanee and Bruce Power projects.
Bringing the cumulative investment to date in the $23,000,000,000 program to approximately $7,500,000,000 The remaining $15,000,000,000 required to complete these projects will largely be spent through the end of 2019, and we remain well positioned to fund the rest of that capital program. To remind you, each of these projects is underpinned by long term contracts or cost of service regulation, giving us good visibility to growth in earnings and cash flow as they enter service between now and the end of the decade. As a result, we expect to continue to grow the dividend at the upper end of the 8% to 10 percent range through 2020, supported by growth in both earnings and cash flow. And as a result, we also expect to maintain very strong coverage ratios. Finally, before I pass it on to Don, I'd like to make a few brief comments on our leadership team changes.
First, I'd like to thank Alex Corbe, our Chief Operating Officer, for his contributions to the company. He will officially retire from TransCanada on May 31. As a result of Alex's retirement and the natural evolution of our business, I'm pleased to announce that Stan Chapman, a Columbia employee who joined TransCanada in a senior role as part of the acquisition has been promoted to Executive Vice President and President of U. S. Natural Gas Pipelines.
Stan has 30 years of experience in the natural gas pipeline business, and we are very pleased to have him join our executive team. Karl Johansen will continue as President of of Canada and Mexico Natural Gas Pipelines and now has additional responsibility for the Energy business in place of Bill Taylor, who left the organization to pursue other opportunities. That concludes my remarks, and I'll now turn it back to Don for some additional comments on our Q1 results. Don?
Thanks, Russ, and good afternoon, everyone. As outlined in our quarterly report to shareholders issued earlier today, we reported net income attributable to common shares in the Q1 of $643,000,000 dollars or $0.74 per share compared to net income of $252,000,000 or $0.36 per share for the same period in 2016. Per share amounts include the dilutive effect of issuing 161,000,000 common shares in 2016 plus additional shares issued through the dividend reinvestment program in the Q1. Our results include a $24,000,000 after tax charge for integration related costs associated with the Columbia acquisition, a $10,000,000 after tax charge for costs related to the monetization of our U. S.
Northeast power business, a $7,000,000 after tax charge for maintenance of Keystone XL assets and a $7,000,000 income tax recovery related to the realized loss on a third party sale of Keystone XL assets. Q1 2016 results included $176,000,000 after tax impairment charge on the carrying value of our Alberta PPAs, a $26,000,000 after tax charge related to costs associated with the acquisition of Columbia, a $6,000,000 after tax charge related to Keystone XL costs for the maintenance and liquidation of project assets and a $3,000,000 after tax loss on the sale of TC Offshore, which closed in March 2016. Excluding these items and specific risk management activities, comparable earnings for Q1 2017 rose by $204,000,000 to $698,000,000 or $0.81 per share compared to $494,000,000 or $0.70 per share for the same period last year, a 16% increase on a per share basis. Turning to our business segment results on Slide 13. In the Q1, comparable EBITDA from our 5 business segments was approximately $2,000,000,000 $475,000,000 higher than the same period in 2016.
The increase was largely driven by the following factors: Canadian Natural Gas Pipelines EBITDA of $504,000,000 rose 16,000,000 dollars As outlined in the quarterly report, net income for the NGTL system increased $9,000,000 in the Q1 compared to the same period last year, mainly due to a higher investment base and incentive earnings on O and M costs, while net income for the Canadian Mainline increased $2,000,000 due to higher incentive earnings, partially offset by a lower investment base. U. S. Natural Gas Pipelines EBITDA of $720,000,000 increased by C382,000,000 or US292 $1,000,000 mainly due to the acquisition of Columbia on July 1, 20 16, and higher ANR transportation revenues resulting from higher rates that went into effect on August 1, 2016, as part of its rate settlement. Mexico Natural Gas Pipelines EBITDA of CAD 140 1,000,000 increased CAD 87 million or USD67 1,000,000 primarily due incremental earnings from Topla Bamba and Mazatlan, which began collecting revenue in July December 2016, respectively.
Liquids Pipelines EBITDA rose by $16,000,000 to $312,000,000 primarily as a result of a higher contribution from Liquids marketing, partially offset by higher business development costs to advance the Keystone XL project. These positives were partially offset by a $23,000,000 decrease in energy EBITDA to $305,000,000 This was primarily a result of lower earnings from Bruce Power, mainly due to lower gains from contracting activities and higher interest expense and a lower contribution from U. S. Power, largely due to lower realized capacity prices in New York and higher fuel costs and lower generation volumes at our New York and New England facilities. These negative energy variances were partially offset by a higher contribution from Western Power due to the termination of the Alberta PPAs in Q1 2016 as well as higher earnings from natural gas storage due to an increase in realized gas storage price spreads.
Note that Q1 2017 Energy EBITDA include CAD72 million or US54 million dollars contribution from our U. S. Northeast power assets. As assets held for sale, the generating facilities will continue to contribute to comparable earnings and funds generated from operations through the date that their sales are completed. Now turning to the other income statement items on Slide 14.
Depreciation and amortization of $510,000,000 in the first quarter increased by $56,000,000 largely due to the acquisition of Columbia as well as new assets placed into service. This was partially offset by the discontinuation of depreciation expense effective November 1, 2016, on our U. S. Northeast power assets upon their classification as held for sale. Interest expense of $500,000,000 increased by $80,000,000 compared to the same period in 2016, mainly due to debt assumed as part of the Columbia acquisition along with the new long term debt issuances, including amounts outstanding on the acquisition bridge facilities, partially offset by Canadian and U.
S. Dollar denominated debt maturities. Allowance for funds used during construction, or AFUDC, was unchanged year over year. Comparable interest income and other decreased by $42,000,000 in the Q1 compared to the same period in 2016 due to the net effect of realized losses in 2017 compared to realized gains in 2016 on derivatives used to manage our net exposure to foreign exchange rate fluctuations on U. S.
Dollar denominated income and the impact of currency fluctuations on the translation of foreign currency denominated working capital. With respect to sensitivity to foreign exchange rates, our U. S. Dollar denominated assets, including our interest in Mexico, are predominantly hedged with U. S.
Dollar denominated debt and the associated interest expense. We actively manage the residual exposure on a rolling 1 year forward basis. Comparable income tax expense of $244,000,000 in Q1 2017 was $64,000,000 higher than last year. The increase was mainly a result of higher pretax earnings in 2017 compared to 2016 and changes in the proportion of income earned between Canadian and foreign jurisdictions. Net income attributable to noncontrolling interests increased by $10,000,000 for the 3 months ended March 31, 2017, compared to the same period in 2016, primarily due to the acquisition of Columbia, which included a non controlling interest in CPPL.
As Russ noted, on February 17, 2017, we acquired all outstanding publicly held common units of CPPL for US921 million dollars And finally, preferred share dividends increased by $19,000,000 for the 3 months ended March 31, 2017 compared to the same period in 2016, primarily due to the issuance of Series 13 and Series 15 preferred shares in April November 2016, respectively. Now moving to cash flow and distributable cash flow coverage ratios on Slide 15. Comparable funds generated from operations of approximately $1,500,000,000 in the Q1 increased by $259,000,000 compared to the same period in 2016, primarily due to the increase in comparable earnings. For the Q1, comparable distributable cash flow was $1,200,000,000 or $1.41 per common share compared to just under $1,000,000,000 or $1.39 per common share in 20 16. Again, note that comparable distributable cash flow per share in 20 17 included the dilutive effect of issuing 161,000,000 common shares in 2016 as well as DRIP participation in Q1 2017.
Maintenance capital expenditures were $167,000,000 in the Q1 or $23,000,000 less than the level of spend last year. This amount includes $49,000,000 related to our Canadian regulated natural gas pipelines, which is largely consistent with Q1 2016 and is reflected in the NGTL and Canadian Mainline rate basis, which positively impacts net income. Maintenance capital of $70,000,000 on our U. S. Natural gas pipelines was similar year over year.
A reminder that ANR maintenance capital is expected to be at elevated levels through the balance of 2017 and will earn a return on and off capital per last year's rate settlement. While our Q1 DCF coverage ratio of 2.3x was very robust, Looking forward, we expect our maintenance capital spend to increase over the coming quarters, primarily in our regulated natural gas pipelines in both Canada and the U. S. As a result, we continue to expect our full year 2017 distributable cash flow coverage ratio to be in line with our outlook provided on the Q4 call in February. Finally, a few words on the progress we have been made we have made in financing our $23,000,000,000 capital program.
We believe our funding needs are manageable and will be met through our predictable and growing internally generated cash flow as well as a variety of financing levers available to us across the capital spectrum. As I mentioned, comparable funds generated from operations continues to grow. In the Q1, we generated $1,500,000,000 of FGFO and exited the period with approximately $900,000,000 of cash on hand. We also completed a significant amount of external financing on compelling terms. In March, we raised USD 1,500,000,000 through an offering of 60 year junior subordinated notes.
These notes have a fixed interest rate of 5.3 percent for their 1st 10 years, converting to a floating rate thereafter. Interest expense on these notes is fully deductible, and they are accorded 50 percent equity credit in the calculation of our key credit metrics. Also in the quarter, Bruce Power issued 7 10 year senior unsecured notes and subsequently distributed $362,000,000 from this financing activity to us. As highlighted in previous calls, TC PipeLance LP remains a core element of TransCanada's strategy, and future dropdowns of stable mature assets are expected to play a role in meeting our consolidated financing needs. Consistent with this, in February, we made an offer to sell a 49.3% interest in Yirikoi and our remaining 11.8% interest in the PNGTS system to TC PipeLines LP.
Yesterday, we announced that we reached agreements to sell these interests for a total transaction value of $765,000,000 and expect to close midyear 2017. Proceeds from debt of proportionate debt assumed are expected to be USD597 1,000,000 As Russ indicated, subsequent to quarter end, we closed the sale of our U. S. Northeast Hydro assets for USD 1,065,000,000 Proceeds were applied to the Columbia acquisition bridge facilities. The remaining balance on these lines of approximately $2,100,000,000 will be retired once we close the sale of the remainder of the U.
S. Northeast power thermal and wind assets, which is expected to be completed in the Q2. Our dividend reinvestment plan also continues to provide incremental subordinated capital in support of our growth and credit metrics. We are currently seeing approximately 40% of common dividends being reinvested into common shares under the program. Looking forward, we expect to continue to access the senior debt, hybrid and preferred share markets in a manner that is consistent with achieving targeted A grade credit metrics in 2018.
We also continue to assess the potential introduction of an at the market equity program. Use of an ATM would allow us to opportunistically issue common shares in a very cost effective, efficient manner and, as necessary, provide additional bespoke subordinated capital to support an A grade credit rating and our capital expenditure program over the next 2 years. We have successfully used an ATM at TC PipeLines LP since 2014 and in the Q1 raised an additional $69,000,000 at that entity. Use of an ATM program will be shaped by our spending profile as well as the availability and relative cost of the other funding mechanisms discussed. So in summary, while our external funding needs are sizable, they are viewed as eminently achievable given the clear, accretive and credit supportive use of proceeds.
With the dividend reinvestment plan, access to preferred share in hybrid security markets, LP dropdowns and the potential selective use of an ATM program, we do not foresee the need for additional discrete equity to finance our current $23,000,000,000 portfolio of near term growth projects. Turning now to Slide 17. In closing, I would offer the following comments. Our positive financial and operational performance in the Q1 continued continued to build upon our transformational 2016. Today, we are advancing a $23,000,000,000 near term capital program and have 5 distinct platforms for future growth in Canadian, U.
S. And Mexico natural gas pipelines, liquids pipelines and energy. Our overall financial position remains strong, supported by our A grade credit ratings and a simple understandable corporate structure. We remain well positioned to fund our near term capital program through resilient and growing internally generated cash flow and strong access to capital markets on compelling terms. Our suite of critical energy infrastructure projects is poised to generate significant growth and high quality earnings and cash flow for our shareholders.
That is expected to support annual dividend growth at the upper end of an 8% to 10% range through 2020. Success in adding to our growth portfolio in the coming years could augment or extend the company's dividend growth outlook through 2020 beyond. That's the end of my prepared remarks. I'll now turn the call back over to David for the Q and A.
Thanks, Don. Just a reminder before I turn it over to the conference coordinator for questions from the investment community, we ask that you limit yourself to 2 questions. And if you have additional questions, please reenter the queue. With that, I'll turn it back to the conference coordinator.
Thank you. We will now take questions from the telephone lines. The first question is from Rob Hope of Scotiabank. Please go ahead.
Yes. Good afternoon. Thank you for taking my calls. I was hoping or my questions. I was hoping we could first touch on Keystone XL.
Could you provide an update on the key work streams there and how your discussions have been going with potential shippers there, especially in the light of a uncertain BC election?
Bob, it's Paul Miller here. The key work streams, I guess, there's 2 primary work streams, that being securing the commercial support for Keystone XL and the Nebraska Public Service Commission approval for the route to that state. In regard to the shipping contracts, we are making progress with our existing shipping group as well as new entrants as they work through their analysis the documentation. A lot has changed since we were first denied the permits here in 2015 in regard to crude oil pricing and supply and various competitive alternatives. So they continue to work through that and I anticipate it will take a couple of months yet before we firm up our commercial support.
On the Nebraska Public Service Commission, we filed our application back in February. We are going through various open houses. 1 most recent here was on Wednesday of this past week. I was very encouraged by the format and the structure and the organization of the process by the Public Service Commission. We saw participants from both sides respectfully convey their position.
So I think it will be a very robust exercise. I would anticipate a second open house here in the next month or so. And finally, we would see the hearings conducted in early August in Nebraska with the decision received by the end of November.
All right. That's helpful. And then I believe the messaging on the Q4 call was that even with a Nebraska decision late in 2017, the project may not necessarily start construction until well into 2018. Is that still the expected time line there? Or could you move that forward or backwards?
No, that continues to be the timeline. We will work through Nebraska. We will work through our commercial negotiations with the shippers. And once we have certainty on both, in early 'eighteen, I would staging the project as far as securing what material we still have to secure as well as the contractors and that exercise would take upwards of 6 to 9 months. So I would not see construction starting until that sort of Q3 area of Q3 timeframe of 2018 and construction would take in probably a little over 2 years.
The following question is from Linda Ezergailis of TD Securities. Please go ahead. Thank you.
Just wanted to maybe shift focus a little bit on some of the elements of your financing strategy. With respect to your U. S. Power marketing business, will that be sold in Q2 as well? And if not, how might we see it to run down over time?
Is it still about a $400,000,000 value that will be kind of realized over the next couple of years?
Linda, it's Don here. Yes, it'll it's under a couple of paths here. We continue to actively look at the sale process as well as full monetization over time as a dual path here. We expect to realize proceeds, as we've indicated before, in that four $100,000,000 range, and that will crystallize over time. We've seen a little bit of that come through now that has been applied to the bridge loan.
But generally, really no change from what we indicated earlier, but we don't have definitive line of sight to whether that will be a monetization over time or a single point sale.
Okay. And maybe just a question on the $23,000,000,000 of projects. For some of the larger initiatives, what would be kind of some of the key potential bottlenecks? And I guess I'm specifically thinking of with some of the changes going on at FERC, how long can that drag on before that starts to affect the timeline of the projects?
Elena, it's Karl. I think we talked about on this previous call that with the lack of quorum there and I see they've lost another board member, so the lack of quorum is not getting better. We have 3, what I'd call, 3 significant projects in the queue that are going through the regulatory process right now. Our expectation, we were expecting earlier to get those the FERC approvals by the end of June. Realistically, if we can get them by the end of summer, I think we're in pretty good shape.
But quite frankly, if they can't get a quarter, we can't get them by the end of summer, we're going to start revisiting the in service dates on those. But we still have several months yet to get them. So we're still optimistic we'll be able to get them by the end of the summer here.
Great. Thank
you. Thanks, Linda.
Thank you. The following question is from Puneet Satish of Wells Fargo. Please go ahead.
Thanks. Just one quick question for me. So can you just remind us again your ability to recover development costs for the West Coast LNG projects? I think in the past you talked about $900,000,000 in total. And I guess just given recent announcements, would you expect to collect this?
And if so, what's the timing?
Yes. It's Karl again. Yes, we have provisions in our agreements with the sponsors of those projects that we can collect all of those monies. There are certain dates in which that we can call them back from the companies, which we haven't done at this time, but we are quite confident that we can get those monies back in due course. Now having said that, I would just say that both of our sponsors are still quite optimistic that they will ultimately provide an FID.
And we still are doing a little bit of work on the projects, but the work has slowed down quite a bit. And your number of 900 is approximately right.
Okay, great. Thank you.
Thanks.
Thank you. The following question is from Ben Pham of BMO. Please go ahead.
Okay, thanks. Good afternoon. I'm not sure this question is for Russ Foske. And then just thinking about some of your comments about organizational structure, you've had some pretty dramatic changes at the VP, director level last year and more recently, the senior levels more recently. And I'm just curious as you've gone through that process and seeing Alex leave here and more curious about how you got to the decision of not needing a replacement for him.
And is this copy now that structure, that position you're pretty comfortable with it for over the next few years?
I guess, maybe I'll start with, yes, I'm very comfortable with the structure of the organization. All of these things are natural evolutions at a company that's growing as considerably as we have over the last number of years. Today, as I mentioned in my prepared remarks, we have 5 significant platforms for growth. These are all sizable businesses that produce $1,000,000,000 to $2,000,000,000 each of EBITDA. Each of those has a president in charge of it that has now responsibility for all aspects of its business.
We reorganized and decentralized here over the last 24 months. So they're responsible for operations in all of their embedded services as well as capital projects. So a bit different sort of approach than we've taken in the past as the company is growing. We've decentralized to put decision rights and accountability in the hands of folks that are closer to the action and can make better and more efficient decisions. So the changes that have been made are what I call natural evolution.
We have a very, very strong bench and depth in our organization. And so we will continue to evolve our organization as our business change. But as I look at it today, the change that we announced here most recently with Stan Chapman being promoted to Executive Vice President President of U. S. Gas is just a reflection of the size of that business.
Half of our employees are now in the U. S, half of our EBITDA, half of our revenues. It's natural that we need a person based in Houston that is part of our executive leadership team. Stan, as I said, has got 30 years of experience. Deep bench and natural evolution of management.
And I guess in terms of looking forward, you can expect us to continue to evolve our management team to meet our business. And as I said, I'm very proud of the accomplishments of the folks that have left, but equally proud of the bench that we have and the strength of our team to evolve with our business.
Okay. Great. And then maybe just this question is for Don and some of the commentary on the PC pipes and the strategy there. And I'm just wondering, beyond the $1,000,000,000 target you've highlighted, just curious about just some other things that you look at when considering drops going forward. Is it looking at accretion to the trap or can it be liquids rather than just gas drops?
Maybe just share what else that you look at when considering drops to TCP?
Yes, the inventory is pretty deep. When you look at what's left of the legacy TransCanada assets that are qualifying assets, including the balance of Great Lakes, some of the stuff that's coming in with Columbia such as Millennium, the Columbia portfolio itself as it is built out. So the inventory of gas assets is very large. Liquids pipes are a qualifying asset for MLPs. That said, I'm not sure they would be fully described as mature assets the opportunity to potentially build out XL here.
So we don't have any specific color coding of what sequencing or when this might happen. But the first point I'd make is that there's a huge inventory of stuff that could ultimately go into CC Pipe LP. Our thought process as to when and what goes in, there's a number of factors that go into that. Firstly, it's driven by our financing needs at Big Trans Canada. It is a financing vehicle.
I'll speak about other growth possibilities for it in a second here. But the financing needs at the parent company are a pretty important component of this. In terms of the price at which we set these drops, it is a balancing act that we don't want to be transferring value from 1 shareholder base to the other at any point in time. So it is always a balancing act. In terms of moving forward on that, the pipe LP drops, what we do is we compare them to other forms of capital that we can raise and things in that camp would be, say, preferred shares here in Canada, probably something in the mid-4s after tax right now.
Hybrid securities, which is a very attractive vehicle right now for us, probably something in the 5 area pretax, 3% high 3% area after tax, additional portfolio management and the like. So an LP dropdown would be weighed those factors. Other key things in that would be what is the unit price of the LP and what is the capacity of the LP. So probably a long winded way of saying there's a whole lot of moving parts here. We do see it as an important vehicle going forward from a financing perspective.
As well, we would like to grow the LP through high quality but smaller scale acquisitions if we could going forward. We will do that on a disciplined basis. But stuff that may not move the dial at the parent company that might be a real good fit for the LP is what we'd be focused on there.
Can I follow-up? Are you always looking at accretion at the TCP level? But then when you bring it back to the corporate side, maybe on paper, it's neutral to EPS, but then when you factor an opportunity, cost of financing, maybe it's accretive to you overall?
Yes, that's a fair comment. We're always looking at share count at the parent company. So if the LP issues 3rd party equity, that is treated as dollar for dollar equity in calculating our credit metrics at the parent company. So it's avoided cost of equity and avoided share count increase at the parent. So that's a pretty important factor here.
I think as well, Ben, if you as Don said, those are our criteria, but all the transactions that we've done to date have been accretive to the parent trap. And the other piece that you have to take into consideration is the distribution splits at the LP level and calculating the accretion of the drop down to TRAP. So overall, we look for accretion. But as Don said, primarily driven off of our financing need and how that cost of capital compares to other cost of capital. But to date, we've been pretty fortunate.
Everything that we've done, I mean, our view has been accretive.
The following question is from Robert Kwan of RBC Capital Markets. Please go ahead.
Good afternoon. If I can just ask about some potential on the NGTL expansion. First, whether there's some color you can give on the West Pass open season, but as well as it relates to the mainline LTFP deal. What do you see in terms of additional investment as you think about expansion for delivery service as well as expansion upstream of JamServer?
Robert, it's Karl. Yes, you obviously noticed that this week, we put out a new open season for our Westpac deliveries, up to $400,000,000 a day. We'll see how that open season comes, but we do have 2 things. We've got customers asking for more delivery service, which this open season is meant to take care of. And we have a queue of customers looking for a receipt service that's still up in upstream in the Montney area and in the oil or the gas shale area.
So we will assess the response to the open season we've put out and we will assess the amount of receipt services that we need to put in and we'll be back to the market shortly thereafter with our plans. I can say, it's probably if we have success on this particular open season And with the resulting new receipt service that brings on, it will be $1,000,000,000 plus type of expansion starting construction starting in probably late 'eighteen, early 'nineteen.
Okay. And sorry, Carl, was that just for the West Pass and order that include the upstream James River as well as any delivery expansion you might need into Empress?
Yes. No, that would include the West Pass and any resulting new receipt services that comes on for the West Pass. So that would not be an expansion to the East Gate at this time.
Okay. And do you need anything on the East Gate to serve the LTFP deal?
No, not at this time. We have capacity for the Eastgate. Our volumes are growing large enough that I would expect at some point in the future, we might need some extra compression support for the Eastgate, but we certainly have enough right now for long term fixed price and some future growth of Eastgate deliveries beyond that.
Got it. Okay. If I
can just finish here with Keystone XL. The commentary about substantially similar customer support, I'm just wondering is that both volumes and toll? And then on as for cost, Russ, you mentioned at the AGM that the cost could actually be a little bit lower. I'm just wondering, was that a statement around the gross cost or is that net inclusive of the write down? I'll start with the first one is, it would be on the gross cost.
And certainly, my job is to push our team to make this as economic as possible for our shippers. And certainly, that's the directive that I've given to Paul and his team, and they're working hard to make that happen. I'm optimistic it can occur. With respect to the contract, I may turn it over to Paul, and he can talk about where we're at on the contract.
Sure, Robert. We do anticipate ultimately while we are targeting to secure the volume contracted volume we had previously as we move potentially move forward with Keystone XL. I do anticipate some of the current shippers will increase their commitments. I also anticipate some of the current shippers may decrease their commitments as they look at the total transportation requirement. And I would also anticipate that we will introduce new parties into the shipper group.
So the net result of this is we do anticipate to have contractual support similar to what we enjoyed previously, albeit amongst a different shipper group.
Okay. So just to be clear, roughly speaking, 90% of the capacity at a very similar toll to what you had prior?
That's what we'd be targeting. Our goal is to fully contract XL. As you know, we have to set aside some capacity for the spot shippers and we'll certainly do that. And our toll will our toll remains competitive, notwithstanding the delay. And we will with good CapEx cost management Russ talked about, we will keep our toll in line.
That's great. Thank you very much.
Thanks, Robert.
Thank you. The following question is from Robert Catellier of CIBC World Markets. Please go ahead.
Hi. I was just hoping to get a little bit of follow-up on West Coast LNG. And let's start with the North Montney request for variance. Do you see anything getting the way there? And what are sort of milestones when you expect an outcome there?
And then just secondly, with respect to the success of Canadian LNG projects, can you comment on that both in an environment with an NDP government and without? So in other words, what's really holding these projects back? Is it simply a question of proponents getting comfortable with the market?
Hi, this is Karl again. So maybe I'll start with the North Montney. We have put in our application for a variance review. What we are trying to do is ask the Board to release a condition on our approval we have already received for it and that condition is that the LNG goes ahead. We now have when we originally submitted that application for approval, we had one shipper and that gas was fairly was deemed to go into the LNG terminals.
Today, we have 11 shippers, one of which is the LNG proponent. We have 11 shippers that want to move gas into the markets right now, and they have all signed very long term agreements. So we believe we the circumstances have changed enough that this facility is not necessarily dedicated to any LNG facility, and we would we're asking the NEB to recognize that and to lift that condition. The process for it right now is NEB has came out and asked for comments on the process to looking at it. That process can be another hearing or it can be just the NEB opining on it by themselves as to whether they want to accept the variance or not.
They have suggested that they that through May and the first half of June, interested parties can submit their questions and concerns and positions and that the Board should respond as to what the process will be by the end of June. So that's about as much as we know about the process right now. On Canadian LNG projects with government whatever government that is, I would remind you that both of these LNG projects have very, very strong support from both the aboriginal communities and local communities I'm not it's really difficult for me to comment on what a sitting government of any particular party would want to do with those approvals. But it strikes me that this is more of an economic situation right now that the proponents are looking for and not a political one.
Okay. Thanks for that answer.
Thanks, Rob.
Thank you. The following question is from Patrick Kenny of National Bank Financial. Please go ahead.
Yes, good afternoon, guys. A quick question for Karl here on the gas storage margins. Now 3 relatively strong quarters in a row. Just wondering if you can remind us of some of the positive market dynamics that are at play right now, helping out contributions? And then maybe to the extent you can, how you see the market for storage and spreads through the summer and into next winter?
Yes. So a couple of things that's happening. We have had some good quarters of storage margins, both in Alberta and down in the U. S. I would say that this warm winter probably hasn't helped them a lot.
We have quite a lot to fill in Alberta, for example. We have a lot of gas going leaving Alberta with the long term fixed price still come the fall. So we may not get that storage filled up again. So I would suggest that what we've seen is probably what we're going to get, maybe not better, but it's not going to be a lot worse, but we do have some a little bit of headwinds on that just because of the warm winter and the extra gas we're taking out of Alberta with the long term fixed price. In the U.
S, a bit of a different situation. The storage in the U. S. Is highly contracted with LDCs. It tends to be a little bit more consistent.
Certainly, on the ex Colombia assets, it's very, very full with LDC contracts. And even on the old TransCanada assets, ANR specifically, still a lot of LBC contracts. And so probably less volatility there, less price sensitive stories there. So from the fundamentals that I think on storage right now is important is the surplus gas production. As the gas production does go up, you do need more storage.
You do need there is more of a need to manage volume swings, volumetric swings because the gas is coming at you every day. So we're still pretty satisfied with the storage business at TransCanada. We still think there's a need for storage. And with the increasing gas price, we see the utility storage staying the same, if not getting better in the long term.
All right. And then just maybe a cleanup question on Colombia. I know, Russ, you mentioned that synergies are on track here as expected, but are you at the full $125,000,000 run rate coming out of Q1 or you still need a couple of quarters to get there?
Got you. It's Don here. We're not at the full $125,000,000 right now, but we got a healthy chunk of that in the first half of this year. So it will still be a ramp up through the rest of the year, but we're on track for 125 for the year, but not at a full run rate yet.
Thank you. The following question is from Nick Raza of Citi. Please go ahead.
Just a couple of quick follow-up questions. The Great Lakes rate case, how will the rate case go with TransCanada contracting? What's essentially a fairly large chunk of capacity on there on the system? Do you sort of have any views on that?
Well, so a couple of things, Karl, again, a couple of things on that. First of all, we as you've obviously seen, we have filed with the NEB that we have completed a contract with Great Lakes to move approximately half of the volumes in the LTFB through Great Lakes. We did that because the northern going to taking that volume over the northern part of our mainline system and into the Triangle could not accommodate all of that volume going into Dawn through the Triangle. So that's why we've done that. The both the mainline and Great Lakes are in rate cases right now.
The mainline obviously has to go get approval for the volumes for the service that we're offering. And as part of that service, the Board will be interested in the prudence of how we're splitting the volumes between our Mainline and Great Lakes. Great Lakes will be is in a rate case, a regular 5 year rate case, so to speak, right now. So very difficult for us to say right now what those approvals will ultimately look like and what the rate cases on Great Lakes or the settlements on Great Lakes will look like as well. So it looks premature to start speculating on how we're going to come out of both of those rate cases.
So we'll have to wait and see as both of those rate cases get settled or litigated.
Okay. And then just one final question. In terms of expansions for Iroquois and Portland Natural Gas, Are there sort of plans to do anything as now the assets are completely sort of in TC pipelines?
It's Karl again. I think the short answer is yes. I don't think the fact that they're in TC pipelines has any bearing on whether there's plans on expanding them or not. But certainly, if there is a demand for extra capacity going on those facilities, us and TC PipeLines will be anxious to fill that demand. I can tell you we have been in the market with PNGTS with department system, marketing some capacity there, some increased capacity there for when the contracts roll off in 2018.
And we have gotten significant interest, not enough yet to get contracts signed and announce anything, but there is significant issue there. And of course, once we sell PNGTS, then we will see we will need more capacity going down the main line and TQM and Eastern Triangle of the main line. So it's I think it's pretty much business as usual there. If we can't find more capacity, more customers willing to ship on our systems, we will accommodate that.
There are no further questions registered at this time. I'd like to turn the meeting back over to Mr. Moneta.
Great. Thanks very much and thanks to all of you. We very much appreciate your interest in TransCanada, and we look forward to speaking to you again soon. Have a great weekend. Bye for now.
Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.