Content
Earnings
|
(millions of Canadian dollars) Year ended December 31, |
2007 |
2006 |
|---|---|---|
Earnings before the impact of tax changes |
57.0 |
56.3 |
Revalue future taxes due to tax rate changes |
2.0 |
2.7 |
Earnings |
59.0 |
59.0 |
Earnings for the year ended December 31, 2007 were comparable the year ended December 31, 2006. In both years, substantial future tax rate reductions were enacted, which resulted in future tax recoveries and increased earnings for the period. Future taxes in Alliance Canada result from differences, which arose on the acquisition of Alliance Canada from Enbridge, between the accounting values and the tax bases of certain assets and liabilities. Excluding the future tax impacts on earnings, earnings increased due to a higher allowance for income tax reflected in tolls due to increased taxable income. Higher taxable income resulted from lower capital cost allowance claims and a decrease in a deductible repair and maintenance expenditures for 2007. Earnings were also positively impacted by a reduction in the capital tax rate, which decreased the tax incurred by the Fund related to its investment in Alliance Canada. These factors were partially offset by the reduction in the equity return caused by the depreciating investment base.
Earnings reflect a return on equity applied to investment base accounts, as well as an allowance for deemed income and provincial capital taxes on regulated activities. The rate used to calculate the equity return is not expected to change; however, related annual earnings will decline over time as the investment base is depreciated.
Revenue primarily reflects the cost of service recovery, whereby an increase in costs increases revenue. Revenues for the year ended December 31, 2007 were $209.1 million compared with $201.4 million for the year ended December 31, 2006. This increase was driven primarily by higher cost of service recoveries primarily related to property taxes. In 2006, Alliance Canada received a large property tax credit that resulted in lower cost of service recoveries reflected in revenue. This credit did not impact earnings since it was also reflected in the operating costs for Alliance Canada.