Natural gas transporter
TC PipeLines L.P.
) has priced a public offering of 7,700,000 common units at
$43.85 a piece, with a 30-day over-allotment option for an
additional 1,155,000 units. The offering is expected to close on
The master limited partnership (MLP) plans to use the proceeds
from this offering, expected at approximately $338 million, to
part finance its previously declared acquisition of 45%
additional interests (from the existing 25%) in two major U.S.
gas pipelines - Gas Transmission Northwest LLC and Bison Pipeline
LLC - from parent
Calgary, Alberta-based TC PipeLines, L.P. maintains interests in
six pipeline systems: the Northern Border Pipeline Company, Great
Lakes Gas Transmission, L.P, the Tuscarora Gas Transmission
Company, the North Baja Pipeline, LLC, Bison Pipeline, LLC, and
Gas Transmission Northwest, LLC.
Future growth prospects for the partnership have improved
considerably following the North Baja Pipeline acquisition and
the subsequent capping of general partner IDRs at 25% (which
allows limited partners to benefit from the partnership's
growth). 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
affects TC PipeLines' cash flows and distributions. Additionally,
we believe that while distribution is stable, growth is likely to
be a challenge for the partnership, particularly given the
volatile natural gas fundamentals.
As a result, TC PipeLines currently carries a Zacks Rank #3
(Hold), implying that it is expected to perform in line with the
broader U.S. equity market over the next one to three months.
Meanwhile, one can look at
Enbridge Energy Management LLC
Kinder Morgan Management LLC
) as good buying opportunities. These energy pipeline
partnerships -sporting a Zacks Rank #2 (Buy) - have solid secular
growth stories with potential to rise from current levels.
ENBRIDGE ENERGY (EEQ): Free Stock Analysis
KINDER MORG MGT (KMR): Free Stock Analysis
TC PIPELINES (TCP): Free Stock Analysis
TRANSCDA CORP (TRP): Free Stock Analysis
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