TC PipeLines L.P.
) announced weaker-than-expected fourth-quarter 2012 results. The
disappointment resulted from lower transportation rates in the
Great Lakes along with low income from other pipeline systems.
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The Calgary, Alberta-based master limited partnership (MLP)
reported earnings per unit (EPU) of 56 cents, missing the Zacks
Consensus Estimate by 7 cents. Comparing year over year, earnings
fell 20.0% from the year-ago profit of 70 cents.
Distribution & Cash Flows
TC PipeLines announced fourth-quarter 2012 cash distribution of
78 cents per unit ($3.12 per unit annualized), representing a
1.3% increase over the year-earlier quarter. The distribution
will be paid on Feb 14, to unitholders of record as of Jan 29,
Total partnership cash flows during the quarter were down 5.6%
from the year-earlier level at $54.0 million. The decrease was
mainly on account of lower cash distributions from TC PipeLines'
interests in Gas Transmission Northwest LLC ("GTN") and the Great
TC PipeLines distributed $43.0 million during the quarter, up
2.4% from the year-earlier level, driven by a rise in the
quarterly distribution relative to the fourth quarter of 2011.
Pipeline Systems' Performance
: The partnership's equity income from the Great Lakes plunged
63.6% year over year to $4 million in the quarter. The decline
reflects less transmission revenues stemming from a drop in
Northern Border Pipeline
: Equity income from Northern Border Pipeline was $18.0 million,
down 5.3% year over year.
GTN and Bison
: TC PipeLines' equity income from the GTN and Bison pipeline
systems came in at $4.0 million and $3.0 million, respectively.
While the Bison pipeline income was flat year over year, GTN
pipeline income decreased 20.0%.
As of Dec 31, 2012, TC PipeLines had $312.0 million outstanding
on the $500.0 million revolver portion of its senior credit
facility. The partnership had long-term debt (including current
portion) of $688.0 million, representing debt-to-capitalization
ratio of 34.6%.
During the quarter, TC PipeLines incurred a maintenance capital
expenditure of $9.0 million.
The partnership - with stakes in over 5,550 miles of federally
regulated U.S. interstate natural gas pipelines that cater to
domestic and Eastern Canadian markets - currently retains a Zacks
Rank #3 (Hold). This implies that it is expected to perform in
line with the broader U.S. equity market over the next one to
Over the last few years, the partnership has consolidated its
business through a combination of organic efforts and accretive
acquisitions. We believe that with investments in low-risk energy
infrastructure assets, TC PipeLines will be able to provide
stable cash distributions, going forward.
However, MLPs (like TC PipeLines) typically depend on equity and
debt markets for financial growth. Market turmoil from issues
such as the recent subprime crisis, which hindered access to the
debt/equity markets, will impact the MLP growth prospects.
Meanwhile, there are certain other MLP'S in the energy sector
that are expected to perform well in the coming one to three
months. These include
Golar LNG Partners LP
) with a Zacks Rank #1 (Strong Buy) and
Access Midstream Partners, L.P.
Atlas Pipeline Partners, L.P.
). Both Access Midstream and Atlas Pipeline have a Zacks Rank #2