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Press release from CNW Group

Veresen announces 2011 third quarter results and updated 2011 guidance

Thursday, October 27, 2011

Veresen announces 2011 third quarter results and updated 2011 guidance15:18 EDT Thursday, October 27, 2011/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./CALGARY, Oct. 27, 2011 /CNW/ - Veresen Inc. ("Veresen" or the "Company") (TSX: VSN) announced today its financial and operating results for the third quarter of 2011.Third quarter highlights include:Net income attributable to Common Shares of $10.4 million or $0.06 per Share.Excluding the effect of unrealized mark-to-market hedging losses, net income attributable to Common Shares was $22.4 million or $0.13 per Share.Distributable cash of $54.4 million or $0.33 per Share.Cash from operating activities of $96.6 million.Alliance Pipeline is proceeding with the development of a natural gas pipeline lateral and associated facilities to connect production from the Hess Tioga field processing plant in the Bakken region of North Dakota to the Alliance mainline. An open season is in progress to identify further shipper demand.Aux Sable successfully assumed operatorship of the Palermo Gas Plant (previously known as the Stanley Condensate Recovery Plant) and the Prairie Rose Pipeline.Construction and commissioning of Aux Sable's Heartland off-gas facility in Fort Saskatchewan, Alberta is nearing completion. The plant began producing propane plus in September 2011, while ethane and hydrogen production is expected to commence in the fourth quarter of this year.Construction commenced at the Company's Dasque-Middle 20 MW run-of-river project located in British Columbia, and the Grand Valley 20 MW wind project in Ontario.NRGreen is proceeding with the construction of the Whitecourt Recovered Energy Project, a 13 MW waste heat power generation facility to be located at Alliance Pipeline's Windfall compressor station at Whitecourt, Alberta. NRGreen was awarded a $7 million grant by the Climate Change and Emissions Management Corporation (CCEMC) under the Alberta Energy Efficiency Projects grant program to assist in the construction of this project."Veresen delivered another quarter of solid results," said Stephen White, President and Chief Executive Officer. "Our pipeline and power businesses continued to perform in line with our expectations, and our midstream business delivered exceptionally strong third quarter results. In addition, the recent acquisitions and development activities by Alliance, Aux Sable and our power business reflect continued progress in the execution of our growth strategy."FINANCIAL HIGHLIGHTS           Three months endedSept. 30Nine months endedSept. 30($ Thousands, except per Share amounts)2011201020112010Revenues     Pipelines (1)104,295103,033300,595304,016 Midstream74,14241,559169,438124,288 Power36,44427,893101,71072,044 Veresen - Corporate711920198 214,888172,604571,763500,546Net income (loss) before tax and     non-controlling interest     Pipeline24,28325,02571,08274,188 Midstream23,69318,81757,86749,151 Power(10,562)9,936(11,903)8,136 Veresen - Corporate(16,502)(14,599)(48,744)(49,156) 20,91239,17968,30282,319Tax expense(10,281)(8,643)(28,422)(19,290)Net income attributable to       non-controlling interest(264)-(778)-Net income attributable to     Common Shares10,36730,53639,10263,029 Per Share ($)0.060.210.240.44 (1) Net of intersegment eliminations.For the three months ended September 30, 2011, Veresen generated net income attributable to Common Shares of $10.4 million or $0.06 per Share compared to $30.5 million or $0.21 per Share for the same period in 2010.Veresen's net income for the three months ended September 30, 2011 includes the effect of a $12.1 million or $0.07 per Share unrealized mark-to-market hedging loss. The unrealized loss relates to a 20-year interest rate swap for the York Energy Centre which was placed to manage exposure to changes in interest rates. As the swap has a long-dated term, its fair value is highly sensitive to fluctuations in long-term interest rates. The pre-tax unrealized loss of $16.1 million for the three-month period is recorded in the results of Veresen's power segment.Net income for the comparative period in 2010 included a $3.4 million or $0.02 per Share unrealized mark-to-market gain on Veresen's exchangeable debentures. The pre-tax unrealized gain of $4.0 million for the three-month period in 2010 was recorded in the results of Veresen's power segment. The Company redeemed the exchangeable debentures in October 2010.Excluding the effect of the unrealized mark-to-market gains and losses, net income attributable to Common Shares was $22.4 million or $0.13 per Share for the three months ended September 30, 2011 compared to $27.1 million or $0.19 per Share for the same period in 2010.Aux Sable's focus on attracting liquids-rich natural gas from the prolific shale regions of the Montney and the Bakken contributed to higher net income from Veresen's midstream business. Higher heat content natural gas, coupled with continued strong NGL market conditions, resulted in the recognition of $24.4 million in margin-based lease revenues during the three months ended September 30, 2011, up from $20.3 million recognized in the same period last year.Veresen's power business also generated strong earnings from operations. Adjusted earnings before interest, depreciation, amortization and other non-cash charges from the Company's power business (Adjusted EBITDA) increased to $16.8 million for the three months ended September 30, 2011, compared to $11.2 million for the same period last year (see reconciliation of Adjusted EBITDA - Power to Power net income before tax and non-controlling interest in the schedules attached to this news release). The increase reflects improved financial performance from Veresen's gas-fired and district energy facilities, and incremental earnings from the Company's recently acquired B.C. run-of-river hydro facilities and assets acquired through the Pristine acquisition. These increases were more than offset by the unrealized mark-to-market hedging loss.Earnings from Veresen's pipeline business, comprised of Alliance and AEGS, decreased by $0.7 million for the three months ended September 30, 2011 compared to the same period in 2010, primarily due to the ongoing reduction in equity returns on Alliance's investment base and, to a lesser extent, the effect of the stronger Canadian dollar.Corporate costs for the three months ended September 30, 2011 increased by $1.9 million compared to the same period last year, reflecting higher general and administrative costs and higher interest costs, partially offset by lower spending on project development.Tax expense increased by $1.6 million for the three months ended September 30, 2011, as compared to the same period in 2010, primarily due to the Company's conversion from a limited partnership structure to a taxable corporation, and due to higher earnings from Aux Sable.   Distributable Cash (1)   Three months endedSeptember 30Nine months endedSeptember 30($ Thousands, except per Share amounts)2011201020112010Pipeline37,34938,496113,615106,338Midstream23,79519,63059,56854,000Power10,5158,69124,37813,142Veresen - Corporate(12,416)(9,853)(37,467)(29,184)Taxes(4,869)(3,589)(20,333)(9,936) 54,37453,375139,761134,360 Per Share ($)0.330.370.860.94Cash from operating activities96,60486,211213,535193,540(1)See the reconciliation of distributable cash to cash from operating activities in thetables attached to this news release.Distributable cash for the three months ended September 30, 2011 was $54.4 million or $0.33 per Share, compared to $53.4 million or $0.37 per Share for the same period in 2010. This reflects:Strong performance from Veresen's growing power business. Veresen's recently acquired run-of-river hydro facilities had an excellent quarter due to strong water flows. The assets acquired through the Pristine acquisition provided new sources of distributable cash relative to the third quarter of 2010. Veresen's other power facilities also generated higher distributable cash relative to the same period last year. The increased distributable cash from Veresen's power facilities was partially offset by higher administrative costs required to build the Company's growing power business.Continued strong fundamentals in the midstream business. Aux Sable recognized higher margin-based lease revenues, due to higher heat content natural gas being delivered to its Channahon Facility. As well, Aux Sable's infrastructure assets in the Montney region are now generating distributable cash.Alliance's collection and distribution of a non-renewal charge. In January 2011, Alliance began collecting a non-renewal charge on the US portion of its pipeline system from shippers who did not elect to extend their transportation contracts beyond December 1, 2015. In comparison to the third quarter of 2010, Alliance distributions have decreased, as last year's third quarter distribution included an additional $4.5 million of funds from the settlement of litigation claims arising from the original construction of the Alliance pipeline.Higher corporate administrative and interest costs, and increased cash taxes. The period-over-period cash tax increase reflects higher taxable earnings from Aux Sable and the effect of Veresen's corporate restructuring which utilized available tax losses and which, in turn lowered cash taxes in the third quarter of 2010.While distributable cash for the three months ended September 30, 2011 increased relative to amounts generated for the same period last year, the per Share amount decreased due to additional Shares issued over the past 12 months to fund  Veresen's various growth initiatives. Several of these initiatives, most notably the York Energy Centre, the first two phases of the Grand Valley wind project, and the Dasque-Middle run-of-river project, are currently under construction and are expected to begin contributing distributable cash in 2012 and 2013.Veresen generated $96.6 million of cash from operating activities for the three months ended September 30, 2011 compared to $86.2 million for the same period last year. Each of the Company's business segments contributed to the increase in operating cash flows.OPERATING RESULTSPipelinesAlliance continues to be in active discussions with shippers regarding the recontracting of pipeline capacity beyond 2015.Alliance's transportation deliveries for the three months ended September 30, 2011 averaged 1.495 billion cubic feet per day, compared to 1.551 bcf/d for the same period last year. Alliance's ability to offer higher Authorized Overrun Service levels was reduced as a result of maintenance work. The lower volumes have not impacted firm transportation service or earnings.Toll volumes for AEGS for the third quarter of 2011 were 287.5 thousand barrels per day, up slightly from 282.5 mbbls/d for the same period last year. The increase reflects higher ethane production at the extraction facilities connected to AEGS.MidstreamDuring the three months ended September 30, 2011, Aux Sable processed 98.3 percent of the natural gas delivered by Alliance, down slightly from the same period last year.  In September 2011, Aux Sable successfully completed a scheduled inspection-based turnaround in the ethane production and treating area of the Channahon Facility. The turnaround was completed in 17 days, well under the three weeks that had been anticipated, without any environmental or safety issues. The inspection results were very favourable, with no major repairs required.The three months ended September 30, 2011 marked the first quarter of Aux Sable's ownership of the Palermo Plant and the Prairie Rose Pipeline in North Dakota. Aux Sable assumed operations of these assets from the previous owner in mid-August, after completing the acquisition on July 1 of this year. Receipts into Prairie Rose averaged 44 mmcf/d during the third quarter, consistent with expectations. The average heat content of the natural gas delivered to the Alliance interconnection at Bantry, ND was 1,310 btu/ft3. In comparison, the typical heat content of western Canadian natural gas delivered on the Alliance system averages approximately 1,080 btu/ft3.Aux Sable sold 68.1 mbbls/d of NGLs during the third quarter of 2011, compared to 69.0 mbbls/d for the same period in 2010.  Average ethane volumes decreased to 36.7 mbbls/d during the third quarter of 2011 from 42.2 mbbls/d in the same period last year, reflecting the maintenance turnaround in September and lower volumes delivered by Alliance. Propane plus volumes were 31.4 mbbls/d for the third quarter of 2011 compared to 26.8 mbbls/d for the same period last year. The increase in propane plus volumes is due to richer gas delivered as a result of Aux Sable's field facilities and commercial arrangements entered into by Aux Sable with producers.PowerDuring the third quarter of 2011, Veresen's power facilities performed as expected, with no significant operational issues experienced at any of the Company's power facilities.Construction of the 400 MW gas-fired York Energy Centre in Ontario is progressing on budget and on schedule to begin commercial operations in late spring 2012.Veresen commenced construction of the Dasque-Middle run-of-river hydro facility, a 20 MW project located near Terrace, B.C. Commercial in-service is projected for the first half of 2013. The estimated capital cost for Dasque-Middle is $73 million.Veresen also commenced construction of the first two phases of the Ontario-based Grand Valley wind power project, in which we hold a 75 percent ownership interest. As part of the Ontario Power Authority's Renewable Energy Standard Offer Program and Feed-in Tariff ("FIT") initiative, Grand Valley was awarded 9 MW and 11 MW contracts for phases I and II, respectively, each with 20-year terms. Commercial in-service is projected for the second quarter of 2012. Veresen's share of the estimated capital cost for Grand Valley I and II is $44 million.NRGreen is proceeding with the construction of the Whitecourt Recovered Energy Project, a 13 MW waste heat power generation facility to be located at Alliance Pipeline's Windfall compressor station at Whitecourt, Alberta. NRGreen was awarded a $7 million grant by the CCEMC under the Alberta Energy Efficiency Projects grant program to assist in the construction of this project. In addition to finalizing the contribution agreement with the CCEMC, NRGreen has entered into agreements related to the purchase of major equipment, engineering and procurement, and a 10-year power purchase agreement. Construction of the Whitecourt facility is expected to be completed in the third quarter of 2012.Corporate and Business DevelopmentVeresen continues to focus on a number of initiatives to fully utilize and leverage the existing infrastructure capabilities of the Alliance pipeline and Aux Sable's Channahon Facility. Veresen's midstream growth strategy includes plans to buy, build and/or commercially contract energy infrastructure assets in order to capture market opportunities across the entire Alliance system, which reaches the significant basins in the Montney and Bakken regions of B.C. and North Dakota, respectively. The Company's strategy includes the development of targeted gas gathering pipelines to increase connected gas supplies, as well as trucking both NGLs and flare gas, particularly in the Bakken region.Veresen continues to advance its portfolio of power development projects, which are focused on gas-fired and renewable projects. Three new Ontario wind projects in which Veresen holds interests, Grand Valley phase III (40 MW) (75 percent interest) and St. Columban I and II (18 MW and 15 MW, respectively) (90 percent interest), have recently been awarded 20-year contracts under the Ontario FIT program.In June 2011, Veresen increased its ownership interest in Culliton Creek from 50 to 100 percent. Culliton Creek is a run-of-river development project in B.C. that holds a 30-year Electricity Power Agreement with BC Hydro. Veresen is advancing this 15 MW project through the permitting process.Veresen continues to explore alternative uses for the proposed Jordan Cove Energy Project and Pacific Connector Gas Pipeline. As part of this process, in September 2011, Veresen filed an application with the US Department of Energy to export up 6 MMTPA of liquified natural gas ("LNG") for a 30-year term. This application is part of initial activities required to support a dual use LNG export/import facility. Based on interest from a number of natural gas producers and potential off-take customers, Veresen continues to assess the development of an LNG export facility. If approved, market factors and contractual commitments would ultimately drive the direction of the project.Updated 2011 Guidance Based on Veresen's strong year-to-date performance and its current outlook, the Company has updated its guidance for 2011 distributable cash to be in the range of $1.16 to $1.30 per Share, with the midpoint of $1.23 per Share unchanged from previous guidance. Further details concerning 2011 guidance can be found in the "Investor Information" section of Veresen's web site - www.vereseninc.com.Conference CallA conference call to discuss Veresen's 2011 third quarter results will be held on Friday, October 28, 2011 at 8:00 am MT (11:00 am ET). The call can be accessed at 1 (888) 231-8191 or 1 (647) 427-7450 conference ID 17477843.A replay will be available shortly thereafter at 1-855-859-2056 and 1-416-849-0833. The access code is 84170925 (followed by the pound sign).About VeresenVeresen is a publicly traded dividend paying corporation based in Calgary, Alberta, that owns and operates energy infrastructure assets across North America.  Its common shares and 5.75% convertible unsecured subordinated debentures, Series C due July 31, 2017 are listed on the Toronto Stock Exchange under the symbols "VSN" and "VSN.DB.C", respectively.  Veresen is engaged in three principal businesses: a pipeline transportation business comprised of interests in two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; a midstream business which includes ownership interests in a world-class extraction facility near Chicago and other gas processing infrastructure; and a power business with renewable and gas-fired facilities and development projects in Canada and the United States, and district energy systems in Ontario and Prince Edward Island.  Veresen and each of its pipeline, midstream and power businesses are also actively developing a number of greenfield projects.  In the normal course of its business, Veresen and each of its businesses regularly evaluate and pursue acquisition and development opportunities.Certain information contained herein relating to, but not limited to, Veresen and its businesses constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Veresen expects or anticipates may or will occur in the future, are forward-looking information.  Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook.  Forward-looking statements in this news release include, but are not limited to, statements with respect to:  the ability of Aux Sable to recognize margin-based lease revenues during the balance of 2011; the timing of completion of construction of Aux Sable's Heartland off-gas facility, York Energy Centre, the NRGreen Whitecourt power facility, phases I and II of the Grand Valley wind project, and the Dasque-Middle and Culliton Creek hydro projects; the timing of commencement of construction of the NRGreen Whitecourt power facility; Veresen's ability to realize its growth objectives; and the ability of each of its businesses to generate distributable cash in 2011.  The risks and uncertainties that may affect the operations, performance, development and results of Veresen's businesses include, but are not limited to, the following factors: the ability of Veresen to successfully implement its strategic initiatives and achieve expected benefits; levels of oil and gas exploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price of capital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchange and interest rates; Veresen's ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and regulations; competitive factors in the pipeline, midstream and power  industries; operational breakdowns, failures, or other disruptions; and the prevailing economic conditions in North America.  Additional information on these and other risks, uncertainties and factors that could affect Veresen's operations or financial results are included in its filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time.  Readers are also cautioned that the foregoing list of factors and risks is not exhaustive.  The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time.  Although Veresen believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements.  Undue reliance should not be placed on the information contained herein, as actual result achieved will vary from the information provided herein and the variations may be material.  Veresen makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information.  Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Veresen does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement.Certain financial information contained in this news release may not be standard measures under Generally Accepted Accounting Principles ("GAAP") in Canada and may not be comparable to similar measures presented by other entities.  These measures are considered to be important measures used by the investment community and should be used to supplement other performance measures prepared in accordance with GAAP in Canada.   For further information on non-GAAP financial measures used by Veresen see Management's Discussion and Analysis, in particular, the section entitled "Non-GAAP Financial Measures" contained in the annual Management Discussion and Analysis, filed by Veresen with Canadian securities regulators. Veresen Inc.         Consolidated Statement of Financial Position          ($ Thousands; unaudited)   September 30, 2011December 31, 2010     Assets    Current assets     Cash and short-term investments   113,55266,270 Restricted cash  16,76910,572 Receivables  98,72097,997 Other  19,87126,080   248,912200,919     Long-term receivables   318,330315,563Pipeline, plant and other capital assets   2,608,5142,419,671Intangible assets  191,460164,106Other assets   6,79518,320   3,374,0113,118,579     Liabilities    Current liabilities     Payables  138,889103,292 Transportation security deposits   5,1364,912 Dividends payable  3,4254,493 Current portion of long-term senior debt   113,982124,047   261,432236,744      Long-term senior debt  1,765,8021,596,234Subordinated convertible debentures  82,84382,411Future taxes   306,772295,459Other long-term liabilities   65,36053,803   2,482,2092,264,651      Shareholders' Equity    Share capital  1,362,4251,270,285Cumulative other comprehensive loss  (34,088)(61,367)Cumulative net income  702,561663,459Cumulative dividends  (1,154,271)(1,032,767)Shareholders' equity attributable to Common Shares  876,627839,610Non-controlling interest  15,17514,318   891,802853,928   3,374,0113,118,579 Veresen Inc.         Consolidated Statement of Income and Cumulative Income      Three months ended September 30 Nine monthsended September 30($ Thousands, except per Share amounts; unaudited) 2011201020112010     Revenues     Operating revenues 214,172170,419569,889496,891 Interest and other7162,1851,8743,655 214,888172,604571,763500,546Expenses     Operations and maintenance80,79750,200197,116152,936 Depreciation and amortization38,17734,964113,775103,590 Interest and other finance 29,52328,06888,54483,352 General, administrative and project development30,01625,38984,21474,693 Unrealized financial instrument loss (gain)16,070(4,012)17,033(1,220) Foreign exchange and other(607)(1,184)2,7794,876 193,976133,425503,461418,227Net income before taxes and non-controlling interest20,91239,17968,30282,319 Current taxes6,6063,72920,33310,331 Future taxes 3,6754,9148,0898,959Net income before non-controlling interest10,63130,53639,88063,029Net income attributable to non-controlling interest264-778-Net income attributable to Common Shares10,36730,53639,10263,029Cumulative net income at the beginning of the period692,194616,211663,459583,718Cumulative net income at the end of the period702,561646,747702,561646,747     Net income per Common Share     Basic and diluted0.060.210.240.44               Consolidated Statements of Comprehensive Income and CumulativeOther ComprehensiveIncome         Three months ended September 30 Nine months ended September 30($ Thousands; unaudited) 2011201020112010     Net income attributable to Common Shares10,36730,53639,10263,029Other comprehensive income (loss), net of taxes     Cumulative translation adjustment       Unrealized foreign exchange gain (loss) on translation of   self-sustaining  foreign operations 34,569(12,777)23,387(4,053)   Cumulative translation adjustment reclassified to net income 1,246(390)2,0555,106   Gain (loss) on hedge of self-sustaining foreign operation -1,913-(1,225) Other(29)5,2081,8372,322 35,786(6,046)27,2792,150Comprehensive income attributable to Common Shares46,15324,49066,38165,179     Cumulative other comprehensive loss at the beginning of the period(69,874)(46,428)(61,367)(54,624)Other comprehensive income (loss), net of taxes35,786(6,046)27,2792,150Cumulative other comprehensive loss at the end of the period(34,088)(52,474)(34,088)(52,474)               Veresen Inc.         Consolidated Statement of Cash Flows      Three months ended September30 Nine months ended September 30($ Thousands; unaudited) 2011201020112010     Operating     Net income attributable to Common Shares10,36730,53639,10263,029 Non-cash transportation revenue 7,2341,99010,9984,069 Depreciation, amortization and other43,83236,447125,541104,773 Unrealized financial instrument loss (gain)16,070(4,012)17,033(1,220) Unrealized foreign exchange loss (gain)(1,450)(2,123)(2,195)4,223 Future taxes 3,6754,9148,0898,959 Non-controlling interest264-778- Changes in non-cash working capital16,61218,45914,1899,707 96,60486,211213,535193,540Financing     Long-term debt issued, net of issue costs12,509-85,519- Convertible debentures issued, net of issue costs-82,148-82,148 Long-term debt repaid(24,527)(2,658)(86,932)(40,692) Net change in credit facilities(2,594)(86,418)131,765(30,913) Dividends paid(9,507)(13,363)(30,428)(43,302) (24,119)(20,291)99,924(32,759)Investing     Acquisitions, net of cash acquired-(9,150)(100,661)(89,858) Pipeline, plant and other capital assets(102,969)(6,628)(151,320)(21,152) Intangible assets(17,982)-(17,982)- Restricted cash(1,014)1,307(5,539)3,077 Other1,478(963)7,101(3,419) Changes in non-cash investing working capital5,649455481(9,172) (114,838)(14,979)(267,920)(120,524)Increase (decrease) in cash and short-term investments (42,353)50,94145,53940,257Effect of foreign exchange rate changes on cash and short-term investments2,615(713)1,743182Cash and short-term investments at the beginning of the period153,29048,15666,27057,945Cash and short-term investments at the end of the period113,55298,384113,55298,384     Veresen Inc.         Distributable Cash (1)      Three months ended September 30 Nine months ended September 30($ Thousands, except where noted; unaudited) 2011201020112010     Alliance distributions, prior to withholdings for capital expenditures and net of debt service33,17534,563101,75095,155AEGS distributable cash, after non-recoverable capital expenditures and debt service4,1743,93311,86511,183Aux Sable distributions, net of support payments, non-recoverable maintenance capitalexpenditures and debt service23,79519,63059,56854,000Power distributable cash, after maintenance capital expenditures and debt service (2)10,5158,69124,37813,142 71,65966,817197,561173,480Corporate     Interest income and other-1,772-1,772 General and administrative(6,035)(4,842)(17,111)(12,591) Interest and other finance(6,381)(6,011)(18,880)(16,026) Principal repayments on senior debt-(772)(1,476)(2,339) (12,416)(9,853)(37,467)(29,184) Taxes(4,869)(3,589)(20,333)(9,936) (17,285)(13,442)(57,800)(39,120)     Distributable cash  (1)54,37453,375139,761134,360     Distributable cash per Share ($) (3)0.330.370.860.94     Distributions paid/payable (4)41,09636,154121,494106,730     Distributions paid/payable per Share ($) 0.250.250.750.75 (1)Distributable cash is not a standard measure under generally accepted accounting principles in Canada and may not be comparable to similar measures presented by otherentities.  Distributable cash represents the cash available to Veresen for distribution to shareholders after providing for debt service obligations and any capital expendituresthat are not growth-oriented or recoverable but does not include distribution reserves, if any, held by Veresen's businesses, project development costs, or transaction costsincurred in conjunction with acquisitions.  Project development costs are discretionary, non-recoverable costs incurred to assess the commercial viability of new greenfieldbusiness initiatives unrelated to the Company's operating businesses.  We consider transaction costs to be part of the consideration paid for an acquired business and, assuch, are unrelated to our operating businesses. (Effective January 1, 2011, GAAP requires transaction costs to be expensed.)  Distributable cash is an important measureused by the investment community to assess the source and sustainability of Veresen's cash distributions and should be used to supplement other performance measuresprepared in accordance with generally accepted accounting principles in Canada.  See the following table for the reconciliation of distributable cash to cash flow from operatingactivities.(2)In the case of Veresen's majority-owned power facilities, currently comprised of East Windsor Cogeneration LP and EnPower Green Energy Generation Limited Partnership,distributable cash is calculated based on our 75 percent ownership interests in each of these businesses.(3)The number of Shares used to calculate distributable cash per Share is based on the average number of Shares outstanding at each record date.  For the three months endedSeptember 30, 2011, the average number of Shares outstanding for this calculation was 164,451,010 and 170,358,430 (2010 - 144,674,764 and 152,723,392) on a basic anddiluted basis, respectively.  For the nine months ended September 30, 2011, the average number of Shares outstanding for this calculation was 162,057,352 and 167,964,848(2010 - 142,362,962 and 146,553,585) on a basic and diluted basis, respectively. The number of Shares outstanding would increase by 5,907,192 (2010 -7,931,496) Shares ifthe outstanding Convertible Debentures as at September 30, 2011 were converted into Shares.(4)Includes $31.0 million and $92.1 million of distributions for the three and nine months ended September 30, 2011, respectively, (2010 - $23.7 million and $65.9 million) satisfiedthrough the issuance of Shares under the Company's Dividend Reinvestment Plan.Veresen Inc.         Reconciliation of Distributable Cash to Cash Flow from Operating Activities        Three months ended September 30 Nine months ended September 30($ Thousands; unaudited) 2011201020112010     Consolidated cash from operating activities96,60486,211213,535193,540Adjusted for: Cash generated from operating activities applicable to jointlyheld businesses (5)(43,470)(38,858)(93,374)(81,854)Cash from operating activities applicable to wholly-owned businesses (6)53,13447,353120,161111,686     Add (deduct) amounts applicable to wholly-owned businesses:     Project development costs (7)3,3923,8458,61211,496 Change in non-cash working capital 1,115(9)11,4057,586 Principal repayments on senior notes(2,361)(1,460)(7,867)(4,354) Maintenance capital expenditures (904)(1,487)(1,840)(4,413) Distributions earned greater than distributions received (8)(2)5,1339,29012,359     Distributable cash54,37453,375139,761134,360  (5)Represents cash from operating activities applicable to jointly held businesses which is not under our sole control and, consequently, is not included indistributable cash until distributions are declared by the jointly held businesses.(6)Net of aggregate support payments made to Alliance Canada Marketing and Sable NGL Services of $3.3 million and $9.7 million for the three and ninemonths ended September 30, 2011, respectively (2010 - $1.8 million and $7.0 million, respectively).(7)Represents costs incurred by the Company and its wholly-owned businesses in relation to projects where the recoverability of such costs has not yetbeen established.  Amounts incurred for the three and nine months ended September 30, 2011 relate primarily to the Jordan Cove LNG terminal project,the Pacific Connector Gas Pipeline project, and various power development projects.(8)Represents the difference between distributions declared by jointly held businesses and distributions received. Reconciliation of Adjusted EBITDA - Power to Power net income before tax and non-controlling interest    Three months endedSeptember 30 Nine months ended September 30($ Thousands; unaudited) 2011201020112010     Adjusted EBITDA - Power 16,82211,19342,04525,430Add (deduct):     One-time transaction costs (9)--(1,847)- One-time gains (losses) (10)-1,559-1,559 Fair value gains (losses) related to financial instruments(16,070)4,012(17,033)1,220 Foreign exchange and other399486(113)1,052 Depreciation and amortization(7,613)(5,465)(23,297)(15,653) Interest and other finance(4,100)(1,849)(11,658)(5,472)     Power net income before tax and non-controlling interest (10,562)9,936(11,903)8,136(9)Represents transaction costs incurred in relation to our acquisition of Furry Creek and Clowhom. (See "New Accounting Standards - Accountingfor Business Combinations".)(10)Represents an insurance settlement received by our San Gabriel facility in the third quarter of 2010.  For further information: Stephen H. White President & CEO Phone: (403) 296-0140 Richard G. Weech Senior Vice President, Finance & CFO Phone: (403) 296-0140 Email: investor-relations@vereseninc.com www.vereseninc.com