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TC Pipelines L P (NYSE:TCP)
Q1 2019 Earnings Call
May. 8, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to the TC PipeLines, LP 2019 First Quarter Results Conference Call.

I would now like to turn the meeting over to Ms. Rhonda Amundson. Please go ahead.

Rhonda Amundson -- Investor Relations

Thank you, operator, and good morning, everyone. Welcome to TC PipeLines' First Quarter 2019 Conference Call. I'm joined today by our President, Nathan Brown; our VP and General Manager, Janine Watson; and our Principal Financial Officer, Chuck Morris. Please note that a slide presentation will accompany their remarks and is available on our website at tcpipelineslp.com, where it can be found in the Investor Section under the heading Events and Presentations.

Nathan, will begin our call today with a review of TC PipeLines' 2019 first quarter results. Janine, will provide an update on the Partnership's assets and the market environment, following which Chuck, will provide a review of our financial results for the first quarter. Nathan, will return and wrap up our remarks with a brief discussion of our growth strategies and close with some key takeaways. Following the prepared remarks, I will ask the conference operator to coordinate your questions.

Before we begin, I would like to remind you that certain statements made during this conference call will be forward looking regarding future events and our future financial performance. All forward-looking statements are based on our beliefs, as well as assumptions made by and information currently available to us. These statements reflect our current views with respect to future events and are subject to various risks, uncertainties and assumptions as discussed in detail in our 2018 10-K, as well as our subsequent filings with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize or if the underlying assumptions prove incorrect, actual results may differ materially from those described in the forward-looking statements.

Please also note that we use the non-GAAP financial measures EBITDA and distributable cash flow during our presentation. EBITDA is an approximate measure of our operating cash flow during the period and reconciles directly to net income. And distributable cash flow is presented to provide a measure of cash generated during the period to evaluate our cash distribution capability. These measures are provided as a supplement to GAAP financial results, and we provide a reconciliation of the most closely related GAAP measures in our SEC filings.

With that, I'll now turn the call over to Nathan.

Nathan Brown -- President and Director

Thanks, Rhonda. Good morning, everyone, and thanks for joining us today. As outlined this morning in our news release and looking at Slide 4, I'm pleased to report that TC PipeLines had a very good quarter with solid results and our portfolio of pipeline assets continued to perform as expected. We generated $93 million in net income during the first quarter of 2019, only 3% lower than the $96 million we earned at the same period in 2018, despite the impact of 2018 FERC actions and a decreased revenue from our Bison Pipeline. This is primarily due to the strong results at GTN from increased contracting together with additional revenue for PNGTS where Phase 1 of its Portland XPress Project that came on stream late last year.

Our equity earnings from Northern Border were also higher this quarter compared to Q1 of 2018, although earnings from Great Lakes and Iroquois were not quite as strong as last year at this time. Our EBITDA is similarly lower year-over-year at $142 million for the quarter compared to $150 million in 2018. Our distributable cash flow was $116 million for the first quarter of 2018 (ph), a 4% increase over the comparable period in 2018.

Northern Border's strong results drove a higher distribution, which offset the lower distributions from our other equity investees and our interest expense which was slightly lower this quarter as a result of our continued overall debt reductions. We paid out $47 million in distributions to our unit holders during the quarter together with $13 million to our Class B units, down significantly from a total of $91 million paid in Q1 of 2018. The Partnership also declared its first quarter distribution of $0.65 per common unit where it's consistent with our fourth quarter 2018 distribution and for each of the other three quarters in 2018.

Chuck, will discuss our financial results in more detail a little later in the call. We continued to progress in a number of organic growth projects and are excited to report on their status.

As I mentioned earlier, Phase 1 of our Portland XPress Project was placed in service in November of last year, is contributing to our bottom line results. Phase 2 will be in service later this year. The final Phase 3 is scheduled for late 2020. Westbrook XPress is moving forward as well with Phase 1 expected to be in service in November of this year and Phase 2 in late 2021. We've added a third phase to this project, add an additional 18,000 dekatherms per day to PNGTS capacity such that it will -- the total PNGTS capacity will grow to almost 400,000 a day from its pre-expansion capacity of 210,000 a day.

Our third expansion project, North Baja XPress, is currently being advanced in response to market demand for natural gas transportation in the region. And we look forward to sharing more details in the future as this project develops. Janine, will discuss these commercial developments in more detail in a minute or two. During the first quarter, our regulatory progress continued. We filed uncontested rate settlements for both Iroquois and Tuscarora and received FERC approval for both in early May. These settlements marked the final step in the completion of our regulatory strategy resulting from the FERC actions in 2018.

Looking at our financial position, with cash savings from our reduced distributions, we have continued to repay our outstanding debt balance such that we have no drawings under our Senior Credit facility and our bank leverage ratio is now approximately 3 times. Our distribution coverage also remains very strong at approximately 2.5 times for the quarter ended March 31, 2019. These results are a testament to the resiliency of our asset portfolio and the continued success of our commercial strategies, which combine to create ongoing value to our unitholders.

I will now turn the call over to Janine Watson, our VP and General Manager, to provide additional color on our assets and these commercial developments together with our market outlook.

Janine M. Watson -- Vice-President and General Manager

Thanks, Nathan, and good morning, everyone. Moving on to Slide 5, I will now review the Partnership's first quarter 2019 results and drill a bit further into the continued solid operating performance of our assets. Long-term contracts continued to be the cornerstone of TCP's solid commercial fundamentals, underpinning 87% of our 2018 distributable cash flow. In the West, demand is strong for transportation service on our GTN pipeline, serving energy needs in California and the Pacific Northwest.

GTN benefited from incremental Park and Loan and interruptible sales revenue in Q1 and is effectively sold out of firm capacity in and after 2020. In the northeast, PNGTS placed Phase 1 of its Portland Xpress project into service on November 1 of last year. And we, therefore, benefited from a full quarter of additional revenue in Q1.

Looking at our equity investments and as has been the case for the past few years, Northern Border continues to experience strong demand for its capacity, operating at very high levels of throughput. Its firm capacity was once again sold out in Q1, and our commercial team successfully generated incremental revenue by offering its maintenance and seasonally available capacity on short-term bases. Bakken receipts have climbed as high as 1.3 to 1.4 bcf per day and now account for more than half of the daily receipts onto this line. The remainder of our pipelines operated as expected generating solid results during the quarter. We remain committed to our Bison Pipeline and continue to explore both line reversal and liquids repurposing development opportunities for this asset. There is commercial interest in both options, and we continue to advance them both, although, we have no concrete update for you at this time.

Turning to our regulatory update. As Nathan mentioned, we filed settlements for Iroquois and Tuscarora in February and March of this year and received FERC approvals for both. Also, in early April, Northern Border filed with FERC to amend its 2017 settlement agreement and incorporated the 2% rate reduction in February of this year into that amended agreement for the life of the settlement through to July 1 of 2024. The 2% reduction was part of the limited Section 4 filing made by Northern Border in late 2018. With these actions behind us, we believe that our responses to the FERC actions initiated last year are complete. Now for your convenience, we have updated our chart of the impact of the 2018 FERC actions on each of our pipeline assets and placed it on our website on the right-hand side of our homepage.

Turning to Slide 6. As Nathan, touched on earlier, we are excited to provide an update on our Portland expansion project. Our Portland Xpress project is proceeding on time and on budget, with Phase 1 in service last November and Phases 2 and 3 planned to be in service November 1 of this year and 2020, respectfully (ph). This project is approximately $80 million in total capital costs and will add about 70,000 dekatherms per day of capacity to Portland. At the same time, we're also advancing our Westbrook XPress project at Portland. This is an approximately $100 million multi-phase expansion project designed to help serve markets in northern New England and Atlantic Canada that have, until recently, been served by offshore gas production from Sable Island and Deep Panuke. Phase 1 of this project will be supported by pressure agreements with our upstream affiliated pipeline, allowing Portland to bring an initial 43,000 dekatherms a day into service in November of this year without the need for any construction.

Phase 2 requires the addition of a compressor and associated facilities at an existing station on the Portland system, and is also reliant on planned construction activities north of the border on the TQM system. This phase will bring a further 60,000 dekatherms of firm capacity to this pipeline system. These new facilities are intended to be in service by November of 2021. We also just signed agreements with a group of shippers to add a Phase 3 expansion for an additional 18,000 dekatherms per day of capacity to be in service by November of 2022.

This final phase will be enabled by capacity enhancements north of the border on the Canadian Mainline and does not require significant capital spending on the Portland system. The cost of these projects will be financed at PNGTS through its credit facility. Once this project is fully in service and together with Portland Xpress, PNGTS' capacity will have increased by approximately 70% from 210,000 dekatherms to almost 400,000 dekatherms per day.

Looking forward, because of the highly contracted nature of our pipeline assets, together with their generally strong market position, we expect that they will continue to perform in a predictable manner and thereby produce steady results. We continue to assess other opportunities which may arise to take further advantage of TCP's existing pipeline network. North Baja's situation is one such opportunity. We noted in our earnings release today that we are developing the North Baja XPress project, an estimated $90 million project, to transport additional volumes of natural gas along North Baja's Mainline system. The project was initiated in response to market demand to provide firm transportation service of up to approximately 495,000 dekatherms per day between Ehrenberg, Arizona and Ogilby, California. A successful open season was concluded in April of 2019 with a potential in-service date in 2023. The project is subject to various commercial and regulatory conditions as we move forward.

I will now turn the call over to Chuck Morris, our Principal Financial Officer, to discuss our first quarter financial results in more detail.

William C. (Chuck) Morris -- Vice-President, Principal Financial Officer and Treasurer

Thanks Janine and good morning everyone. Moving on to Slide 7, I'll now review the Partnership's first quarter 2019 results. Net income in the first quarter was $93 million, down approximately 3% from $96 million in the first quarter of 2018. This equates to $1.28 per unit compared to $1.32 per unit in 2018. Several factors impacted our Q1 2019 results. The net effect of which led to the decrease year over year. First revenue from Bison was markedly lower as a result of the election of two of its customers in Q4 of 2018 to pay out their transportation agreements.

This decrease was offset however by higher demand at GTN leading to higher revenues on that system together with the additional revenue from Phase 1 of PNGTS' Portland XPress project that went into service in November of 2018. Equity earnings were lower by $5 million in Q1 of 2019 compared to 2018, as the 2019 and winter months were not as cold as in 2018 leading to lower earnings at both Iroquois and Great Lakes. Northern Border, however, was able to sell additional short-term firm services during the quarter and generate higher earnings which partially offset the lower results from our other two equity investments.

The Partnership paid distributions of $47 million to common unitholders in the first quarter and $13 million to our Class B unitholder, the latter of which related to the cash flow from 30% of GTN for the year ended December 31, 2018. The $29 million decrease in common unit distributions that was paid in Q1 of 2018 was primarily due to the decrease in quarterly distributions of $0.35 per common unit paid beginning in May of 2018 as a result of our response to the 2018 FERC actions. During Q1 of 2019, the 30% portion of GTN associated with the Class B units generated $12 million, none of which was allocated to the Class B units as the annual threshold of $20 million had not been exceeded.

As Nathan mentioned earlier, we declared our first quarter 2019 distribution of $0.65 per common unit. This is consistent with that declared in the fourth quarter of 2018 and for each preceding quarter in 2018. The Partnership's EBITDA was $142 million in the first quarter, 5% lower than that of the same period in 2018 and this distributable cash flows were $116 million in the first quarter of 2019, $4 million higher year over year. The increase was due to the same factors impacting net income together with the decrease in interest expense due to the repayment of $170 million term loan in the fourth quarter of 2018 and the continued repayment of our senior credit facility in the first quarter of 2019.

Turning to Slide 8. Revenues from our consolidated pipelines of $113 million were slightly lower than those in the same quarter for last year for the same reasons as impacted our earnings. Equity earnings in the first quarter of 2019 were $5 million lower than in the same quarter of 2018 primarily due to winter weather -- warmer winter weather temperatures this year impacting Iroquois and Great Lakes, offset by the higher earnings coming from Northern Border. Operating maintenance and administrative expenses during the first quarter were comparable to those in the same quarter of 2018.

Depreciation expense was lower by approximately 17%, resulting from the asset impairment on Bison that we recognized during the fourth quarter of 2018. Financial charges were slightly lower in the first quarter of 2019 versus the same period in 2018 due to the repayment of our $170 million term loan in Q4 of 2018 and further reductions in the outstanding balance of our senior credit facility during the first quarter of this year.

Moving on to our financial position on Slide 9, our investment grade credit ratings provide us with the financial flexibility as we look to organically grow our portfolio in the future. We believe our ratings reflect our solid financial condition and outlook. The Partnership's liquidity position remains strong. The Partnership has $500 million of undrawn and available borrowing capacity under its senior credit facility as of May 8, 2019. Consistent with our self-funding model in order to build capacity for organic growth, we continue to execute on our deleveraging program. In that regard, we have used available cash to repay our indebtedness during the quarter including the repayment of our senior credit facility, resulting in a bank leverage ratio of approximately 3 times. We anticipate that we will continue to repay a portion of our outstanding floating rate debt with available cash balances going forward with the end goal of maintaining our conservative leverage profile.

That concludes my remarks in the first quarter financial results and I'll turn the call back over to Nathan.

Nathan Brown -- President and Director

Thanks Chuck. I'll now refer to Slide 10. As I mentioned at the outset we had a very good quarter this year and our assets continue to perform well, proving out their resilience and strong competitive position. Going forward, our cash flow will continue to be derived from our portfolio of critical natural gas pipeline infrastructure assets underpinned by long term shipper pay contracts credit worthy shippers. We continue to prudently manage our financial position such that our bank leverage ratio is current -- excuse me, currently approximately 3 times and our distribution coverage this quarter is a very healthy 2.5 times. Longer term we're targeting to maintain our bank leverage ratio in the high three to low four times area in the distribution coverage ratio of approximately 1.3 times to 1.4 times. With a solid financial position, we reiterate that we do not need to access the equity capital markets to fund our current growth program.

Our focus remains on the optimization of our asset portfolio including organic growth over time such as our current Portland and Westbrook XPress projects and we continue to advance our business operators in our geographic footprint. Our North Baja XPress project is a good example of the type of development projects in which we will change. All of these will be progressed in a very disciplined manner with near-term opportunity sized and sequence so that we're in a position to be self -funding. We believe our portfolio of solid pipeline infrastructure assets will continue to be critical in their markets and we will continue to serve our North American stakeholders.

And I'll turn the call back over to Ron.

Rhonda Amundson -- Investor Relations

Thanks Nathan. I'd now like open the call up for questions. Operator Please go ahead.

Questions and Answers:

 

Operator

Thank you. (Operator Instructions) The first question is from TJ Schultz from RBC Capital Markets. Please go ahead.

TJ Schultz -- RBC Capital Markets -- Analyst

Great. Thanks. Good morning. I think first on North Baja XPress, does that in service need to coincide essentially with LNG export Phase 1? Just want to understand the commercial conditions that have to be met to hit that 2023 in service? And then if I understand the LNG right, is there an opportunity to expand further and supply into a larger Phase 2. It seems there may be some various options to supply that a bit?

Nathan Brown -- President and Director

Yes. Thanks for question, TJ. I'll say for now, in terms of further details we've got around North Baja XPress, we'll pretty much stop at what we've already disclosed. There's -- across our asset footprint with a lot of these development opportunities we certainly have conditions first, they'll have to be met before they go forward. So we'll watch those and update them as we have information come available.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay, fair enough. And then so Westbrook XPress, looks like Phase 3 was added with no change to the cost of the overall scope to some better returns. Is there more to flex and to do that project to improve that any further. And then I guess that kind of probably or more broadly as you allude to that next wave of growth projects, what options do you have similar to that Phase 3 on Westbrook. Or are there kind of larger scale newbuild type projects that you are also scoping?

Janine M. Watson -- Vice-President and General Manager

With regards to Westbrook XPress, I think that the, the limiting factor is going to be the availability of incremental capacity on TQM north of the border. So I would say that, that for these kinds of projects we're getting -- there might be a little bit more of room that they could find but we are getting to the end of the shall I say the easier compression-only adds in that respect.

Speaking to our larger sort of portfolio what we're looking at, no we don't have any large greenfield projects on the horizon. We are looking at this type of expansion across our entire footprint, the kinds of things we can do in the geographies we're in already with relatively minimal environmental footprints just to see what we can do to link the -- our existing markets up to the sources of supply that we've already got.

TJ Schultz -- RBC Capital Markets -- Analyst

Great thanks. I'll just leave it there. I appreciate it.

Operator

Thank you. The next question is from Mathew Taylor from Tudor Pickering and Holt. Please go ahead.

Matthew Taylor -- Tudor Pickering Holt -- Analyst

Hi there. Thanks for taking my questions here. Just. I know you said you didn't have anything concrete to say on Bison, but I'm just thinking through this out loud if contracts start to roll at the end of next year when do you think that you're going to have to update the market with if there is a path forward there. I'm just thinking in terms of construction timeline.

Janine M. Watson -- Vice-President and General Manager

And I hear you on that. The thing is that the solution for Bison will be market driven not really driven by the expiration dates of our contracts. So we continue to work with the commercial interests that we've got and we'll continue to explore that. As far as construction costs that will be obviously dependent on the path we ultimately choose and we do have these two competing -- these two potential paths we can go. A line reversal is of course a simpler path and requires less that -- less construction and less construction time.

Matthew Taylor -- Tudor Pickering Holt -- Analyst

Okay great. Thanks for the color there and then I'm just thinking so TC Energies talked about doing a supply push GTN project that might be announced later this year, obviously, still early days there but can you give us some sense of expandability on that pipe and even just financing of that project?

Nathan Brown -- President and Director

In terms of physical expandability there's design constraints and definite specific planning that has to be done all up and down the delivery chain there. So GTN is a link in that chain. We think the -- depending on the scope and scale of the volumes that are required GTN can be manageable handled within what we can finance here at the -- at either the asset level or with additional borrowing at TCP. But again to reiterate, we're not anticipating any moves into the equity capital markets at this time. So I think it's too early to say precisely what kind of facility or the capital outlay would be required on GTN in specific because again it would be part of a multi phase type of deal if we've got a supply push situation that's gone to the premium market that we've got on GTN.

Matthew Taylor -- Tudor Pickering Holt -- Analyst

Okay. Just to be clear, does it require looping and more pipe or can you still -- is there still room to do compression adds on that pipe?

Nathan Brown -- President and Director

It's compression adds in localized build. It would give us a measure of expansion on GTN and so it's not, we're not contemplating a complete loop.

Matthew Taylor -- Tudor Pickering Holt -- Analyst

Okay. And then just moving over to FERC impact, I know you mentioned the guidance since previously disclosed, but can give you just some color on how you're thinking about that, the amount of impact and timeline of that guidance in light of recent settlement.

Nathan Brown -- President and Director

So our updated chart has all the details, so I won't step through it pipe by pipe, but we still say on the other side of what we had prior to the FERC actions, the $30 million number on an annualized run rate is still fairly accurate. I say is as things develop and we get back into our normal commercial situations, it's really kind of hard to lose -- or hard to keep track of the specific impact of any one change but we've been successful at engaging our customers reaching positive settlements that will keep us going forward and then we'll -- it'll be able to just sort of roll that into normal operations. The full impact of the $30 million, I would say, would come in later this year in as settlements as we list on our chart on a website kind of click into place and then we move into the other pre-existing terms of our settlements that we've got that may or may not have been adjusted as we as we move through the years.

Matthew Taylor -- Tudor Pickering Holt -- Analyst

Okay. Great. One last one. It's my understanding that 2017 revenues are used for those 501-G filings. Just thinking about the large uptick in revenues like some of the pipes at Great Lakes, GTN, Northern Border, that benefited from additional contracts and even Canadian volumes with -- maybe those are ROEs tracking ahead of the 12% threshold. Are you guys risking that at all in your guidance, especially on Northern Border and Great Lakes that have no rate moratorium?

Nathan Brown -- President and Director

Well, the 501-G process was, it did use 2017 numbers but it was a -- it was an exercise to quantify the impact of the tax changes and for purposes of whatever the FERC may be going forward. It was really isolated to that. So to the extent that FERC has a initiative in place to look at other aspects where our customers are engaged with our pipes, we're treating that as a normal commercial condition that we always look at and we always evaluate.

So I think we've moved past whatever it was specifically quantified in the 501-G process and are moving into what we're going to see going forward and certainly, the settlements that we entered into contemplated the full commercial position of each of our assets and certainly the risks that we disclosed continue to be there and we continue to manage them as prudently as we can.

Matthew Taylor -- Tudor Pickering Holt -- Analyst

Okay, thanks for taking my questions.

Operator

Thank you. The next question is from Alex Kania from Wolfe Research. Please go ahead.

Alex Kania -- Wolfe Research -- Analyst

Hi good morning. Thanks. I just, I guess, a question just with respect to the leverage targets and coverage. I guess that Q1 was kind of you know it was very strong relative to those targets. Do you feel like as you look over the course of the year that you need to do anything different as you kind of, roll in the FERC settlements and get maybe the normal seasonality and you find yourself in the targets you want right now or do you need to do anything additional beyond you know as you had mentioned before paying down some of the floating rate debt.

William C. (Chuck) Morris -- Vice-President, Principal Financial Officer and Treasurer

Yeah, Alex, it's Chuck here and I'll speak to the leverage ratio and I guess the the leverage that we were pointing to in terms of the kind of target range going forward is relative to our bank leverage ratios. So the calculation there is debt over adjusted cash flow and there are some nuances in terms of the calculation with respect to property tax associated with that calculation. But ultimately, we see ourselves as we roll through -- 2019 here the calculation is based on a last you know 12 months basis where we're still having the impact of the buys and buyout at the end of Q4 of 2018.

So as we roll through 2019, we see ourselves migrating up to that high-3s, low-4s area, as we go through the year here. So the target still is looking to like you said, migrate to that sort of high-3s, low-3s. With respect to coverage ratio again it is a bit of an artefact of the quarter here, we still see ourselves you know again migrating to that 1.3 times to 1.4 times on an average kind of run rate basis going forward.

Alex Kania -- Wolfe Research -- Analyst

Great. Thanks very much.

Operator

The next question is from Michael Lapides from Goldman Sachs. Please go ahead.

Michael Lapides -- Goldman Sachs -- Analyst

Hey guys, can you talk about volume trends that you saw year-over-year in the quarter relative to kind of what your expectations were? Which specific pipes may have surprised to the upside in terms of volume, which ones may have surprised the other direction? And then how are you thinking about which ones could have the biggest upticks for the rest of the year?

Nathan Brown -- President and Director

Thanks for the question. I'd say we weren't really surprised too much by volumes. We certainly have some upside that come when we have weather events that can capitalize on services such as parking loan to a greater extent in some years versus others. But our big pipes primarily GTN and Northern Border are performing very well running essentially full. So no real surprises there. Our commercial guys can optimize things on some margins with some services to customers. But really in terms of volume flows, no real surprises.

You know the swing pipe can be Great Lakes, sort of varies from season to season, precisely how much volume wants to get into or out of the Michigan storage area or go around the -- kind of go around underneath the lakes to serve markets that are toward down Ontario. But you know that said, it's Great Lakes has had a couple -- good couple of years and our marketing departments have done well there. So no real anomalies, no real surprises I wouldn't say.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. And then when you think about the northeast US and the PNGTS system, how -- once you get done with Westbrook, how much more incremental capacity could you physically add? Like when does just the outright size of the system become a constraint kind of keeping you from using more compression to keep adding capacity there?

Nathan Brown -- President and Director

So as Janine mentioned, I think the first constraint we have to pay really attention to is upstream. But once those volumes come to the border where PNGTS could pick them up, there's an additional expandability of you know potentially another 400 a day. But that's kind of theoretical in early days definitely to say. PNGTS continues to not have any midpoint compression of its own, runs off of compression north of the border as well as compression on shared facilities that are being modified now for both PXP and Westbrook. But midpoint compression being added along could add potentially around another 350, 400 a day, but it's early days.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. And then last thing. I just want to make sure I'm following all the various rate changes and revenue changes tied to the 501-G. Are any of the pipes have all of the -- or all of the revenue changes that are coming from 2019 over the next couple of years the ones that are known are they all offshoots now of the 501-G process or there are some legacy settlements that still have revenue changes -- revenue reductions potentially that will kick in that were unrelated for 501-Gs?

Nathan Brown -- President and Director

Yeah. First, the latter, so we've modified some of the terms of the existing legacy settlements in places and in other places we sort of blend right into the original rate changes that were previously agreed upon. We separate in the chart as well as our discussion that we've got in our 10-Q, so yeah, there's a blend.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Thank you guys. Much appreciated.

Janine M. Watson -- Vice-President and General Manager

Thanks.

Operator

The next question is from Jeremy Tonet from JPMorgan. Please go ahead.

Tran -- JPMorgan -- Analyst

Hey, guys, this is Tran (ph) on for Jeremy. Most of our questions have been asked. I just wanted to do one quick follow up on the last question related to kind of pipe activity. Last quarter there was more short term activity on North Baja, a smaller pipe where you bought -- it seemed like the dynamics that would have been driving some of that didn't change a lot. So just curious if you could provide any color on that and maybe what you're seeing this quarter?

Nathan Brown -- President and Director

On North Baja, specifically, it has some flexibility and capacity available when the Southern California market needs some additional volumes and in quarters past we've seen it been optimized for that when I don't want to -- I don't want misquote and say the wrong system but there's some disruptions in the normal system that a lot of those customers use North Baja and serve as a bit of a relief valve for that, that commercial situation. So that has happened. As that ebbs and flows, as those maintenance activities get completed that can come back off, but as for right now I'd say Baja is going back to its steady state that we're used to over -- over history.

Tran -- JPMorgan -- Analyst

Fair enough. Thank you.

Operator

Ladies and gentlemen, this concludes the question-and-answer session. If there are any further questions, please contact Investor Relations at TC PipeLines, LP.

I will now turn the call over to Rhonda Amundson.

Rhonda Amundson -- Investor Relations

Great. Thank you everyone for your participation today. We appreciate your interest in TC Pipelines and we look forward to speaking with you again soon. Thanks.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

Duration: 36 minutes

Call participants:

Rhonda Amundson -- Investor Relations

Nathan Brown -- President and Director

Janine M. Watson -- Vice-President and General Manager

William C. (Chuck) Morris -- Vice-President, Principal Financial Officer and Treasurer

TJ Schultz -- RBC Capital Markets -- Analyst

Matthew Taylor -- Tudor Pickering Holt -- Analyst

Alex Kania -- Wolfe Research -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

Tran -- JPMorgan -- Analyst

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