Toronto Port Authority announces 2009 audited financial results

Second consecutive year of significant net income reported, as all lines of business generate an operating profit

Toronto - The Toronto Port Authority (“TPA”) reported its second straight year of positive net income in 2009, with total revenue rising 16 per cent to $23,569,000.

All TPA operating divisions were profitable in 2009, recording an operating net income of $5,137,000, more than double that observed in 2008. This impressive growth was led by the strong performance of Billy Bishop Toronto City Airport (“BBTCA”), which reported total revenue of $13,796,000 in 2009, an increase of 25 per cent over 2008’s revenue of $11,020,000.

After deducting amortization, adjustments, the royalty paid to the Government of Canada and Payments in Lieu of Taxes (“PILTs”) made to the City of Toronto, the TPA’s total net income was $1,346,000 in 2009, up 56 per cent from $863,000 in 2008.

“Considering that 2009 was a difficult year for the Greater Toronto Area economy, we’re very pleased with our financial performance last year,” said TPA President and CEO Geoffrey Wilson. “I am confident that further growth and sustained profitability can be achieved over the long term, not just at Billy Bishop Toronto City Airport, but across all of our lines of businesses. What is so encouraging about our success is that it allows us the freedom to make strategic investments and industry-leading environmental initiatives that will directly benefit our diverse stakeholders throughout the GTA.”

The Macro Settlement Agreement between the TPA and the City of Toronto (“City”) in December, 2009, had a positive impact on the relationship with the City, and ushered in a new era of co-operation. The two parties agreed to settle a series of long-standing disputes. It resulted in the TPA selling an 18.4-acre parcel of land to the City for one dollar, which will be the site of a proposed streetcar storage facility as part of Toronto Transit City expansion of rapid transit lines. The TPA also agreed to pay the City $6.4 million in PILTs for the period between 1999 and 2009. In addition, the City agreed to pay the TPA $11.7 million in capital and operating payments. The two parties also reached an agreement on Harbour User Fees (“HUFs”), which saw the TPA write-off $2.96 million of outstanding receivables due from the City, and agree to charge approximately 6 cents per Toronto Island ferry passenger, which represents less than one percent of the $6.50 adult fare charged by the City for round-trip passage on the ferries. If not for the accounting treatment required by the HUFs write-off, the TPA’s 2009 net income would have exceeded $4 million.

The BBTCA’s financial performance is on track to improve again in 2010, based upon increased passenger traffic experienced during the first quarter of 2010, as well as the pending allocation of additional operating slots to commercial carriers. A process calling for proposals from interested commercial carriers is currently underway, as has been previously disclosed by the TPA.

In addition, the TPA has begun the environmental assessment phase of a proposed pedestrian tunnel project under the Western Channel that would link the mainland to the main airport terminal. The cost of this project is estimated to be $45 million, with construction costs to be completely covered through airport improvement fees. The proposed project would be managed through a public-private partnership.

Earlier this year, the TPA announced a plan to spend $900,000 to construct three new noise barriers at the BBTCA in an effort to continue to mitigate the ambient noise generated by the airport. These noise barriers were based on recommendations from an extensive independent noise management study, and are designed to funnel noise away from the populated and recreational areas surrounding the BBTCA. Another initiative underway is the establishment of a permanent liaison committee for community members and airport stakeholders to be a forum for constructive dialogue on better managing and planning airport operations.

Porter Airlines, which has operated out of the BBTCA since its 2006 launch, opened the first phase of a new $50 million terminal building in March, 2010. The new terminal can accommodate well over a million passengers a year with expanded space for departure gates, customs areas, retail operations and passenger services. The TPA expects 1.2 million passengers to use the airport in 2010, up from 770,681 in 2009.

“The TPA is thrilled with the success and popularity of Billy Bishop Toronto City Airport, but we also see significant business opportunities emerging at the Port of Toronto,” Mr. Wilson said. “While 2009 was a chaotic year for cargo transportation on the Great Lakes, and sea cargo in particular, we do see new opportunities as we collaborate with several local public and private sector organizations.”

The TPA has set in motion three key initiatives to boost traffic in the Port of Toronto, including:

• Focussing on servicing infrastructure construction and transportation equipment cargo, with shipments expected to grow dramatically as a result of government infrastructure program spending;

• Expanding services from basic marine cargo transportation to include land-based supply-chain management services;

• Establishing a viable short-sea operation featuring regular scheduled water service between Montreal and Toronto, resulting in an increased number of jobs in the port and an environmentally sustainable alternative to shipping cargo by land.

“Environmental sustainability will be a guiding principle in the future direction of the Toronto Port Authority. We are committed to improving practices and procedures that will protect the waterfront habitat, encourage conservation, and reduce carbon and pollutions emissions,” Mr. Wilson said. “The TPA is committed to being a leader in environmental protection and encouraging sustainable practices throughout all of its business operations. I am looking forward to sharing our vision and determination with Torontonians over the coming months.”

“Over the past two years, the new Board of Directors has worked tirelessly to put the TPA on a firm financial footing, while living up to the expectations of our many stakeholders,” added Mark McQueen, Chairman of the TPA Board of Directors. “I believe that we have made great progress and can point to numerous meaningful accomplishments on several important fronts.”

• In 2007, the TPA reported a net loss of $4.61 million for the 2006 fiscal year. For fiscal 2008, the TPA reported a net profit of $0.86 million. For 2009, the TPA reported a net profit of $1.35 million, despite the recession. Importantly, each line of business turned an operating profit;

• In 2007, the TPA had current assets of $20 million; today, that figure has grown by ~50 per cent, even though the TPA spent $7.7 million of free cash flow and cash on hand as it invested in upgraded capital equipment during 2008 and 2009. None of this funding came from the federal government’s economic stimulus program announced in the 2009 Budget;

• The TPA’s 2010 infrastructure and environmental capital spending plan exceeds $16 million, all of which will come from existing TPA financial resources and airport improvement fees paid by BBTCA passengers;

• In 2008, in an effort to reduce Board of Directors’ costs, the TPA cancelled the $50,000 annual salary paid to its former Chair. It also cancelled the former Chair’s travel budget and reduced the frequency of board meetings to contain costs further;

• In September, 2008, and again in September, 2009, the TPA encouraged additional commercial airlines to utilize the BBTCA. In late 2009, the TPA initiated a public process that is expected to produce additional airline and destination choices for air travellers in 2010;

• Over the past two fiscal years, the TPA has paid an aggregate royalty of $1.2 million to the Government of Canada as a “Gross Revenue Charge”. The TPA charges no taxes, and receives no direct financial assistance from the Government of Canada, in accordance with the Canada Marine Act;

• In September, 2009, the TPA released all expenses for its Board of Directors dating back to 2005, and undertook to publicly release all travel and hospitality expenses incurred by its Chief Executive Officer and board members on a quarterly basis;

• In December, 2009, the TPA entered into a “Macro Settlement Agreement” with the City of Toronto, settling a long list of issues between the parties (other than the City’s outstanding PILTs litigation), some of which dated to the TPA’s creation in 1999. The agreement was approved by Toronto City Council by a vote of 36-0;

• Also in December, 2009, the TPA received the results of a five-year “Special Examination” performed by auditors Deloitte & Touche LLP, as required under the Canada Marine Act. It was an exhaustive review of every element and function of the TPA, concluding that no significant deficiencies were found in the systems and practices of the TPA, and that major positive strides in corporate governance were made in 2009;

• In January, 2010, the TPA initiated an environmental assessment process and a public consultation process in an effort to bring forward proposals that will see the construction of a pedestrian tunnel to the BBTCA via a public-private partnership process. This process would require no funding from any level of government as BBTCA passengers would ultimately finance 100 per cent of the design, construction, maintenance and operation of the proposed tunnel;

• In January, 2010, the TPA announced that 100 per cent of its operations will utilize renewable power provided through Bullfrog Power, the first federal agency to do so. As of April, 2010, the TPA’s consumption of “green” electricity was on par with both the Province of Ontario and the City of Toronto.

• Also in January, the TPA announced plans to invest $1 million for the creation of protective islands and wetland conservation at Tommy Thompson Park ;

• In April, 2010, the TPA announced a carbon offset initiative that would see it work with an internationally recognized firm to ensure that 100 per cent of all greenhouse gas emissions generated by commercial carrier takeoffs and landings at the BBTCA are offset by environmentally sustainable local initiatives and investments.

“Our work is not done, but the Board, management and staff of the TPA are committed to continue this positive momentum on behalf of the millions of people who personally benefit from the TPA’s activities each year,” Mr. McQueen said.

The Toronto Port Authority was incorporated on June 8, 1999, as a government business enterprise under the Canada Marine Act as the successor to the Toronto Harbour Commissioners. It is a federal public authority providing transportation, distribution, storage and container services to businesses. The TPA owns and operates the Billy Bishop Toronto City Airport, Marine Terminals 51 and 52, and the Outer Harbour Marina. The TPA also provides regulatory controls and public works services to enhance the safety and efficiency of marine navigation and aviation in the port and harbour of Toronto.

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The 2009 audited financial statements are available at http://www.torontoport.com/REPORTS/Finance_2009_ENG.pdf along with the 2009 Management Discussion and Analysis at http://www.torontoport.com/REPORTS/MDA2009.pdf

For more information contact www.torontport.com