-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gz0BPY6w+nQLdlwT2sVg1a7Iq4WbuYIl1Jo0PtxtQUs0dMM879F9PYlh/CozBl3K 7bLKDVK2omTH2aYi4XQjvQ== 0001047469-04-014782.txt : 20040430 0001047469-04-014782.hdr.sgml : 20040430 20040430171101 ACCESSION NUMBER: 0001047469-04-014782 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOVA GAS TRANSMISSION LTD CENTRAL INDEX KEY: 0000831909 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09912 FILM NUMBER: 04770659 BUSINESS ADDRESS: STREET 1: 450 1 STREET SW CITY: CALGARY ALBERTA STATE: A0 ZIP: T2P 5H1 BUSINESS PHONE: 4039207669 MAIL ADDRESS: STREET 1: 450 1 STREET SW CITY: CALGARY ALBERT STATE: A0 ZIP: T2P 5H1 FORMER COMPANY: FORMER CONFORMED NAME: NOVA CORPORATION OF ALBERTA DATE OF NAME CHANGE: 19940520 6-K 1 a2135373z6-k.txt FORM 6-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 6-K REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of April 2004 COMMISSION FILE No. 1-9912 NOVA GAS TRANSMISSION LTD. 450 - 1ST STREET S.W., CALGARY, ALBERTA, T2P 5H1, CANADA (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F) Form 20-F Form 40-F X ----- ----- (Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.) Yes No X ----- ----- If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-___________. A copy of the Registrant's Interim unaudited financial statements for the first quarter, three months ended March 31, 2004, including Management's Discussion and Analysis of Results of Operations and Financial Condition for the three months ended March 31, 2004, is furnished herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NOVA GAS TRANSMISSION LTD. By: /s/ Russell K. Girling ---------------------------- Russell K. Girling, Director April 30, 2004 EXHIBIT INDEX 1 Interim unaudited financial statements for the first quarter, three months ended March 31, 2004; including Management's Discussion and Analysis of Results of Operations and Financial Condition for the three months ended March 31, 2004. - -------------------------------------------------------------------------------- EX-1 2 a2135373zex-1.txt EXHIBIT 1 EXHIBIT 1 NOVA GAS TRANSMISSION LTD. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2004 NOVA GAS TRANSMISSION LTD. CONSOLIDATED INCOME (MILLIONS OF DOLLARS)
Three Months Ended March 31 ------------------------- 2004 2003 (UNAUDITED) (unaudited) ----------- ----------- REVENUES 311 328 EXPENSES Operating expenses 101 100 Depreciation 71 74 ----------- ----------- 172 174 ----------- ----------- OPERATING INCOME 139 154 ----------- ----------- OTHER EXPENSES / (INCOME) Financial charges 62 70 Other (6) -- ----------- ----------- 56 70 ----------- ----------- INCOME BEFORE INCOME TAXES 83 84 INCOME TAXES 31 40 ----------- ----------- NET INCOME 52 44 ----------- ----------- ----------- -----------
See accompanying Notes to Consolidated Financial Statements NGTL CONSOLIDATED FINANCIAL STATEMENTS 2 NOVA GAS TRANSMISSION LTD. CONSOLIDATED CASH FLOWS (MILLIONS OF DOLLARS)
Three Months Ended March 31 ------------------------- 2004 2003 (UNAUDITED) (unaudited) ----------- ----------- CASH GENERATED FROM OPERATIONS Net income 52 44 Depreciation 71 74 Future income taxes 1 2 Other (1) 2 ----------- ----------- Funds generated from operations 123 122 Decrease in operating working capital 51 66 ----------- ----------- Net cash provided by operating activities 174 188 ----------- ----------- INVESTING ACTIVITIES Capital expenditures (14) (12) Deferred amounts and other assets -- (3) ----------- ----------- Net cash used in investing activities (14) (15) ----------- ----------- FINANCING ACTIVITIES Decrease in amounts due to parent (160) (173) ----------- ----------- Net cash used in financing activities (160) (173) ----------- ----------- CHANGE IN CASH -- -- CASH AT BEGINNING OF PERIOD -- -- ----------- ----------- CASH AT END OF PERIOD -- -- ----------- ----------- ----------- -----------
See accompanying Notes to Consolidated Financial Statements NGTL CONSOLIDATED FINANCIAL STATEMENTS 3 NOVA GAS TRANSMISSION LTD. CONSOLIDATED BALANCE SHEET (MILLIONS OF DOLLARS)
MARCH 31 December 31 2004 2003 (UNAUDITED) (unaudited) ----------- ----------- ASSETS CURRENT ASSETS Accounts receivable 109 128 Inventories 30 31 ----------- ----------- 139 159 PLANT, PROPERTY AND EQUIPMENT 4,667 4,724 DEFERRED AMOUNTS AND OTHER ASSETS 123 91 FUTURE INCOME TAXES 17 18 ----------- ----------- 4,946 4,992 ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable 46 39 Due to parent 164 324 Accrued interest 62 37 Long-term debt due within one year 185 184 ----------- ----------- 457 584 ----------- ----------- LONG-TERM DEBT 2,470 2,441 ----------- ----------- COMMON SHAREHOLDER'S EQUITY Common shares 1,706 1,706 Retained earnings 313 261 ----------- ----------- 2,019 1,967 ----------- ----------- 4,946 4,992 ----------- ----------- ----------- -----------
On behalf of the board: /s/ Ronald J. Turner /s/ Russell K. Girling ------------------------- -------------------------- (Signed) (Signed) Director Director See accompanying Notes to Consolidated Financial Statements NGTL CONSOLIDATED FINANCIAL STATEMENTS 4 NOVA GAS TRANSMISSION LTD. CONSOLIDATED RETAINED EARNINGS (MILLIONS OF DOLLARS)
Three Months Ended March 31 ------------------------- 2004 2003 (UNAUDITED) (unaudited) ----------- ----------- BALANCE AT BEGINNING OF PERIOD 261 143 Net income 52 44 ----------- ----------- BALANCE AT END OF PERIOD 313 187 ----------- ----------- ----------- -----------
See accompanying Notes to Consolidated Financial Statements NGTL CONSOLIDATED FINANCIAL STATEMENTS 5 NOVA GAS TRANSMISSION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of NOVA Gas Transmission Ltd. have been prepared in accordance with Canadian generally accepted accounting principles. The accounting policies applied are consistent with those outlined in the company's annual financial statements for the year ended December 31, 2003. These consolidated financial statements for the three months ended March 31, 2004 do not include all disclosures required in the annual financial statements and should be read in conjunction with the annual financial statements. Since a determination of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of these consolidated financial statements requires the use of estimates and assumptions which have been made using careful judgment. In the opinion of Management, these consolidated financial statements have been properly prepared within reasonable limits of materiality. NOTE 2 ACCOUNTING CHANGES HEDGING RELATIONSHIPS Effective January 1, 2004, the company adopted the provisions of the Canadian Institute of Chartered Accountants (CICA) new Accounting Guideline "Hedging Relationships," that specifies the circumstances in which hedge accounting is appropriate, including the identification, documentation, designation and effectiveness of hedges, and the discontinuance of hedge accounting. In accordance with the provisions of this new guideline, NGTL has recorded all derivatives on the Consolidated Balance Sheet at fair value. This new guideline was applied prospectively and there was no impact on net income in the first quarter of 2004. There was no material impact from this accounting change on the Consolidated Balance Sheet as at January 1, 2004. ASSET RETIREMENT OBLIGATIONS Effective January 1, 2004, the company adopted the new standard of the CICA Handbook Section "Asset Retirement Obligations", which addresses financial accounting and reporting obligations associated with asset retirement costs. This section requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value is added to the carrying amount of the associated asset. The liability is accreted at the end of each period through charges to operating expenses. The plant, property and equipment of the regulated natural gas transmission operations consist primarily of underground pipelines and above ground compression equipment and other facilities. No amount has been recorded for asset retirement obligations relating to these assets as it is not possible to make a reasonable estimate of the fair value of the liability due to the indeterminate timing and scope of the asset retirements. Management believes it is reasonable to assume that all retirement costs associated with the regulated pipelines will be recovered through tolls in future periods. NGTL CONSOLIDATED FINANCIAL STATEMENTS 6 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Effective January 1, 2004, the company adopted the new standard of the CICA Handbook Section "Generally Accepted Accounting Principles" that defines primary sources of generally accepted accounting principles (GAAP) and the other sources that need to be considered in the application of GAAP. The new standard eliminates the ability to rely on industry practice to support a particular accounting policy. This accounting change was applied prospectively and there was no impact on net income in the first quarter of 2004. In prior periods, in accordance with industry practice, certain assets and liabilities related to the company's regulated activities, and offsetting deferral accounts, were not recorded on the balance sheet. There was no material impact from this change on the Consolidated Balance Sheet as at January 1, 2004. NGTL CONSOLIDATED FINANCIAL STATEMENTS 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE MANAGEMENT'S DISCUSSION AND ANALYSIS DATED APRIL 23, 2004 SHOULD BE READ IN CONJUNCTION WITH THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF NOVA GAS TRANSMISSION LIMITED (NGTL OR THE COMPANY) AND THE NOTES THERETO FOR THE THREE MONTHS ENDED MARCH 31, 2004 - SEE "ADDITIONAL INFORMATION." FINANCIAL REVIEW NGTL's net earnings were $52 million for the first quarter 2004, compared to $44 million for the same period in 2003. This increase in net earnings was primarily due to a corporate tax refund as a result of a prior year tax reassessment and higher earnings realized from TransCanada Pipeline Ventures Limited Partnership (Ventures LP). Alberta System earnings in first quarter 2004 reflect the implicit return in the 2004 interim tolls approved by the Alberta Energy and Utilities Board (EUB). The 2004 interim tolls were based on the 2003 negotiated fixed revenue requirement of $1.277 billion plus certain adjustments. The 2003 negotiated settlement did not include an explicit rate of return on equity or capital structure; as such, the 2004 first quarter earnings approximate a return equivalent to a 10.9 per cent rate of return on 32 per cent deemed common equity or alternatively an 8.7 per cent rate of return on 40 per cent deemed common equity. The 32 per cent deemed common equity is the last approved by the EUB in the 1995 General Rate Application (GRA) and the 40 per cent deemed common equity is the requested amount in the current Generic Cost of Capital (GCOC) Proceeding. LIQUIDITY AND CAPITAL RESOURCES FUNDS GENERATED FROM OPERATIONS Funds generated from operations were $123 million for the three months ended March 31, 2004 compared with $122 million for the same period in 2003. NGTL expects that its ability to generate sufficient amounts of cash in the short term and the long term, when needed, and to maintain financial capacity and flexibility to provide for planned growth is adequate and remains substantially unchanged since December 31, 2003. INVESTING ACTIVITIES In the three months ended March 31, 2004, capital expenditures totalled $14 million (2003 - $12 million). Capital spending is comprised of construction of new facilities that are dependent on requests from customers for new services, as well as capital maintenance. FINANCING ACTIVITIES During the three months ended March 31, 2004, all required financing was provided by NGTL's parent company, TransCanada PipeLines Limited (TCPL). NGTL anticipates that future financing requirements will be obtained from TCPL or from third parties. NGTL MANAGEMENT'S DISCUSSION AND ANALYSIS 1 CONTRACTUAL OBLIGATIONS There have been no material changes to NGTL's contractual obligations, including payments due for each of the next five years and thereafter, since December 31, 2003. For further information on these contractual obligations, refer to Management's Discussion and Analysis in NGTL's 2003 Renewal Annual Information Form. RELATED PARTY TRANSACTIONS All transactions with related parties occurred in the normal course of operations under normal commercial terms. TCPL: During the first quarter of 2004, NGTL made interest payments to TCPL in the amount of $12 million (2003 - $13 million). FOOTHILLS PIPE LINES (ALTA.) LTD.: TCPL both directly and indirectly through its interest in Foothills Pipe Lines Ltd. has a 100 per cent interest in Foothills Pipe Lines (Alta.) Ltd. During the first quarter of 2004, Foothills Pipe Lines (Alta.) Ltd. invoiced NGTL $17 million for gas transportation services (2003 - $18 million). RISK MANAGEMENT NGTL's market, financial and counterparty risks remain substantially unchanged since December 31, 2003. For further information on risks, refer to Management's Discussion and Analysis in NGTL's 2003 Renewal Annual Information Form. CONTROLS AND PROCEDURES As of the end of the period covered herein, NGTL's management, together with NGTL's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the company's disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer of NGTL have concluded that the disclosure controls and procedures are effective. There were no changes in NGTL's internal control over financial reporting during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect NGTL's internal control over financial reporting. CRITICAL ACCOUNTING POLICY NGTL's critical accounting policy, which remains unchanged since December 31, 2003, is the use of regulatory accounting for its regulated operations. For further information on this critical accounting policy, refer to Management's Discussion and Analysis in NGTL's 2003 Renewal Annual Information Form. NGTL MANAGEMENT'S DISCUSSION AND ANALYSIS 2 CRITICAL ACCOUNTING ESTIMATE Since a determination of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of the company's consolidated financial statements requires the use of estimates and assumptions, which have been made using careful judgement. NGTL's most significant critical accounting estimate is depreciation expense. For further information on this critical accounting estimate, refer to Management's Discussion and Analysis in NGTL's 2003 Renewal Annual Information Form. ACCOUNTING CHANGES HEDGING RELATIONSHIPS Effective January 1, 2004, the company adopted the provisions of the Canadian Institute of Chartered Accountants (CICA) new Accounting Guideline "Hedging Relationships," that specifies the circumstances in which hedge accounting is appropriate, including the identification, documentation, designation and effectiveness of hedges, and the discontinuance of hedge accounting. In accordance with the provisions of this new guideline, NGTL has recorded all derivatives on the Consolidated Balance Sheet at fair value. This new guideline was applied prospectively and there was no impact on net income in the first quarter of 2004. There was no material impact from this accounting change on the Consolidated Balance Sheet as at January 1, 2004. ASSET RETIREMENT OBLIGATIONS Effective January 1, 2004, the company adopted the new standard of the CICA Handbook Section "Asset Retirement Obligations", which addresses financial accounting and reporting for obligations associated with asset retirement costs. This section requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value is added to the carrying amount of the associated asset. The liability is accreted at the end of each period through charges to operating expenses. The plant, property and equipment of the regulated natural gas transmission operations consist primarily of underground pipelines and above ground compression equipment and other facilities. No amount has been recorded for asset retirement obligations relating to these assets as it is not possible to make a reasonable estimate of the fair value of the liability due to the indeterminate timing and scope of the asset retirements. Management believes it is reasonable to assume that all retirement costs associated with the regulated pipelines will be recovered through tolls in future periods. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Effective January 1, 2004, the company adopted the new standard of the CICA Handbook Section "Generally Accepted Accounting Principles" that defines primary sources of generally accepted accounting principles (GAAP) and the other sources that need to be considered in the application of GAAP. The new standard eliminates the ability to rely on industry practice to support a particular accounting policy. This accounting change was applied prospectively and there was no impact on net income in the first quarter of 2004. In prior periods, in accordance with industry practice, certain assets and liabilities related to the company's regulated activities, and offsetting deferral accounts, were not recorded on the balance sheet. There was no material impact from this change on the Consolidated Balance Sheet as at January 1, 2004. NGTL MANAGEMENT'S DISCUSSION AND ANALYSIS 3 OUTLOOK The outlook for the company remains relatively unchanged since December 31, 2003. For further information on outlook, refer to Management's Discussion and Analysis in NGTL's 2003 Renewal Annual Information Form. OTHER RECENT DEVELOPMENTS In July 2003, NGTL, along with other utilities, filed evidence in the Generic Cost of Capital (GCOC) Proceeding with the EUB. NGTL has requested a return on equity of 11 per cent based on a deemed common equity of 40 per cent in its GCOC application. The EUB expects to adopt a standardized approach to determining the rate of return and capital structure for all utilities under its jurisdiction at the conclusion of this proceeding. The oral portion of the hearing was completed on January 16, 2004 with written argument and reply argument filed on February 23, 2004 and April 5, 2004, respectively. An EUB decision is expected in third quarter 2004. In September 2003, NGTL filed Phase I of the 2004 General Rate Application (GRA) with the EUB, consisting of evidence in support of the applied for rate base and revenue requirement. The company applied for a composite depreciation rate of 4.13 per cent compared to the current depreciation rate of 4.00 per cent. Phase II of the application, dealing primarily with rate design and services, was filed in December 2003. The EUB hearing to consider the GRA Phase I application began, in Calgary, on April 5, 2004, with the evidentiary portion concluding on April 14, 2004. Final argument and reply are due May 5, 2004 and May 26, 2004 respectively. A decision is expected in third quarter 2004. The Phase II hearing is scheduled to commence on June 8, 2004. In December 2003, the EUB approved NGTL's application to charge interim tolls for transportation service, effective January 1, 2004. Final tolls for 2004 will be determined based on the EUB decisions for the GCOC hearing and both phases of the GRA. SHARE INFORMATION As at March 31, 2004, NGTL had 100,004 issued and outstanding common shares. FORWARD-LOOKING INFORMATION Certain information in this Management's Discussion and Analysis is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information may differ from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of NGTL to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, regulatory decisions, competitive factors in the pipeline industry sector, and the prevailing economic conditions in North America. For additional information on these and other factors, see the reports filed by NGTL with Canadian securities regulators and with the United States Securities and Exchange Commission. NGTL disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. NGTL MANAGEMENT'S DISCUSSION AND ANALYSIS 4 -----END PRIVACY-ENHANCED MESSAGE-----