On Jul 2, Zacks Investment Research upgraded natural gas
TC PipeLines L.P.
) to a Zacks Rank #1 (Strong Buy).
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Why the Upgrade?
We expect TC PipeLines' purchase of additional stakes in two
major U.S. gas systems from parent
) to be immediately accretive to earnings and distributable cash.
We also like TC PipeLines' steady cash-flow generating pipeline
assets, which provide stability and financial capacity to deliver
cash distributions in a disciplined manner.
With its investments in low-risk energy infrastructure assets, TC
PipeLines has been able to provide stable cash distributions.
Over the last few years, the partnership has consolidated its
business through a combination of organic efforts and accretive
Of particular significance is its stake in the Northern Border
Pipeline, a key player in natural gas transportation from western
Canada to the U.S Midwest. Northern Border's market share
position enables it to maintain strong relationships with
shippers. Coupled with continued robust demand for Canadian gas
in the U.S., this should help the partnership with re-contracting
its pipeline capacity.
TC PipeLines' recently concluded deal to increase its stake in
two important U.S. gas pipelines - Gas Transmission Northwest LLC
and Bison Pipeline LLC - to 70% from the pre-existing 25% is
expected to improve the partnership's distributable cash flow
immediately. The transaction will also lower its relative
exposure to the Great Lakes, which is presently experiencing
earnings and cash flow inconsistency.
Finally, TC PipeLines has established a track record of providing
stable and growing cash distribution to unit holders. The
partnership has a proven history of distribution growth with 13
hikes in as many years.
Other Stocks to Consider
In addition to TC PipeLines, there are certain other energy
pipeline partnerships like
Atlas Pipeline Partners L.P.
Rose Rock Midstream L.P.
) that offer value and are worth buying now. All these firms
sport a Zacks Rank #1 (Strong Buy).