Pipeline operator
TC PipeLines L.P.
(
TCP
) announced dull first-quarter 2012 results, hurt by low equity
income from Great Lakes and Northern Border pipeline systems along
with steeper operating charges.
The Calgary, Alberta-based master limited partnership ("MLP") -
with stakes in over 5,550 miles of federally regulated U.S.
interstate natural gas pipelines that cater to domestic and Eastern
Canadian markets - reported earnings per unit (
EPU
) of 71 cents, below the Zacks Consensus Estimate of 76 cents and
the year-ago profit of 90 cents.
Distribution & Cash flows
TC PipeLines announced its first quarter 2012 cash distribution
of 77 cents per unit ($3.08 per unit annualized), representing a
2.7% increase over the year-earlier quarter and equal to the fourth
quarter 2011 distribution.
This the 52
nd
consecutive quarterly distribution announced by the company. It
will be paid on May 15 to unit holders of record as of May 4,
2012.
Total partnership cash flows during the quarter was up 4.2% from
the year-earlier level at $50.0 million, mainly on the receipt of
cash distributions from TC PipeLines' interests in the Gas
Transmission Northwest LLC (
GTN
) and Bison Pipeline LLC - that were purchased from the parent
TransCanada Corp.
(
TRP
) in May last year. These were somewhat negated by the decrease in
cash distributions from Great Lakes.
TC PipeLines paid distributions of $42.0 million during the
quarter, up 20% from the year-earlier level, driven by an increase
in the number of common units outstanding and a rise in the
quarterly distribution that started in the third quarter of
2011.
Pipeline Systems Performance
Great Lakes:
The partnership's equity income from the Great Lakes decreased 50%
year over year to $9 million in the quarter, reflecting less
transmission revenues stemming from un-contracted long haul
capacity and unseasonal weather.
Northern Border Pipeline:
Equity income from Northern Border Pipeline ("NBPL") was down 4.7%
year over year from $21.0 million at $20.0 million, primarily due
to the low gas price environment and weak basis spreads across
North America.
GTN and Bison:
TC PipeLines' equity income from the GTN and Bison pipeline systems
came in at $6.0 million and $3.0 million, respectively.
Liquidity
As of March 31, 2012, TC PipeLines had $328.0 million
outstanding on the $500.0 million revolver portion of its senior
credit facility. The partnership had long-term debt (including
current portion) of $707 million, representing
debt-to-capitalization ratio of 34.7%.
During the quarter, TC PipeLines incurred maintenance capital
expenditure of $3.0 million and expend $1.0 million on growth
projects.
Rating & Recommendation
TC PipeLines units currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating. We are also maintaining
our long-term Neutral recommendation on the stock.
Considering TC PipeLines' strong infrastructural growth,
extended contracts for pipelines and lucrative acquisitions, we
expect the partnership to perform satisfactorily in the coming
months. 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.
However, we remain concerned on account of lower spending by
consumers and businesses on transportation fuels, which adversely
impact TC PipeLines' cash flows. Additionally, we remain wary of
cost overruns on expansion projects (which lead to lower
returns).
TC PIPELINES (
TCP
): Free Stock Analysis Report
TRANSCDA CORP (
TRP
): Free Stock Analysis Report
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