Financial Report - Veresen Inc.

Earnings also reflect increased corporate costs, which amounted to $22.4 million and $88.9 million for the three and 12 months ended
December 31, 2012, respectively, compared to $16.3 million and $62.4 million for the same periods last year. The increase results from
higher interest expense related to debt issued to finance the Hythe/Steeprock acquisition and non-recurring costs incurred to integrate
Hythe/Steeprock operations. The increase in corporate costs also reflects increased project development expenditures related to the
Jordan Cove LNG export terminal project.
Excluding the effect of the unrealized fair value gains and losses related to the York Energy Centre hedge, our Power business generated
a net loss before tax and non-controlling interest of $1.2 million for each of the three and 12 months ended December 31, 2012, compared
to net losses of $4.5 million and $2.3 million for the same periods last year. Power EBITDA, as determined on a proportionately
consolidated basis 11 , was $17.6 million and $65.5 million for the three and 12 months ended December 31, 2012, respectively, compared
to $8.1 million and $48.3 million for the same periods last year. The increase in EBITDA was primarily driven by contributions from
our newly commissioned power facilities, York Energy Centre and Grand Valley I and II, and a $3.0 million completion bonus related
to York Energy Centre recorded in the second quarter. Offsetting EBITDA was higher depreciation and interest expense associated with
our new facilities, and increased power project development expenditures incurred to advance several late-stage development projects.
Our Pipeline business generated $22.5 million and $88.7 million of net income before tax for the three and 12 months ended
December 31, 2012, respectively, compared to $23.1 million and $92.6 million for the same periods last year. The decrease reflects
the continued reduction in returns on Alliance’s declining investment base, partially offset by slightly higher earnings from AEGS.
Distributable Cash
Three months ended December 31, Year ended December 31,
($ Millions, except per Common Share amounts) 2012 2011 2012 2011
Pipeline 37.2 37.4 147.5 151.0
Midstream 36.3 34.6 124.3 94.2
Power 4.0 1.4 27.1 25.8
Veresen – Corporate (15.6) (11.9) (64.4) (49.4)
Taxes (3.2) (8.3) (15.4) (28.6)
Preferred Share dividends (2.2) – (7.7) –
Distributable Cash (1) 56.5 53.2 211.4 193.0
Per Common Share ($) 0.29 0.32 1.09 1.18
(1) See the reconciliation of distributable cash to cash from operating activities in the “Non-GAAP Financial Measures” section of this MD&A.
For the three months ended December 31, 2012, we generated distributable cash of $56.5 million or $0.29 per Common Share
compared to $53.2 million or $0.32 per Common Share for the same period last year.
For the year ended December 31, 2012, we generated distributable cash of $211.4 million or $1.09 per Common Share compared
to $193.0 million or $1.18 per Common Share for 2011.
Distributable cash reflects a $16.5 million and $60.3 million contribution from Hythe/Steeprock, for the three months ended
December 31, 2012 and for the period February 9 to December 31, 2012, respectively, and an aggregate $2.7 million and $7.5 million
contribution from the recently commissioned York Energy Centre and Grand Valley power facilities for the three and 12 months
ended December 31, 2012, respectively. These increases were partially offset by a $14.8 million and $30.2 million decrease in
distributions from Aux Sable, driven by lower fractionation margins; higher costs associated with our growth initiatives, mainly
corporate administrative and interest costs; and dividends on our Preferred Shares issued in February 2012. Taxes were lower than
the comparative periods due to lower U.S.-based earnings from our Midstream business. Distributable cash for the year from our
Pipeline business decreased relative to 2011, as first quarter 2011 distributions from Alliance U.S. included an additional amount
resulting from a realignment of its capital position, which occurs from time to time.
Distributable cash on a per Common Share basis, decreased by $0.03 and $0.09 compared to the same periods last year. In addition
to the variances described above, distributable cash per Common Share decreased as a result of Common Shares issued over the past
year through our Premium Dividend TM and Dividend Reinvestment Program (trademark of Canaccord Genuity Corp.) and the conversion
of 24.7 million subscription receipts to Common Shares in February 2012 upon our acquisition of the Hythe/Steeprock complex.
11
This is a non-GAAP measure. We have provided a reconciliation to Power net loss before tax and non-controlling interest as determined under US GAAP
in the “Non-GAAP Financial Measures” section of this MD&A.
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