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Noverco
Enbridge owns an equity interest in Noverco through ownership of 32.1% of the common shares and a cost investment in preferred shares. Noverco is a holding company that owns approximately 71.0% of Gaz Metro Limited Partnership (Gaz Metro), a gas distribution company operating in the province of Quebec and the state of Vermont. Gaz Metro also has a 50% interest in TQM Pipeline, which transports natural gas in Quebec, and is partnering with the Company on the Rabaska LNG project (described under Other Natural Gas Distribution Strategies below). Noverco also has an investment in the common shares of Enbridge resulting in dividend and earnings elimination adjustments at Enbridge.
Results of Operations
Noverco earnings were $18.6 million for the year ended December 31, 2007 compared with $22.7 million for the year ended December 31, 2006. The $4.1 million decrease in earnings is a result of the recognition of a $4.0 million dilution gain in 2006 from a Gaz Metro unit issuance in which Noverco did not participate.
Noverco earnings were $22.7 million for the year ended December 31, 2006 compared with $28.3 million for the year ended December 31, 2005. Earnings decreased due to a $7.3 million dilution gain in 2005, which resulted from a Gaz Metro unit issuance in which Noverco did not participate, compared with a dilution gain of $4.0 million in 2006. Excluding dilution gains, earnings from Noverco were lower in 2006 as 2005 included a future income tax recovery stemming from the receipt of a significant cash dividend.
Weather variations do not affect Noverco's earnings as Gaz Metro is not exposed to weather risk. A significant portion of the Company's earnings from Noverco is in the form of dividends on its preferred share investment, which is based on the yield of 10-year Government of Canada bonds plus 4.34%.