Pipeline operator TC PipeLines L.P. TCP reported second-quarter 2015 earnings per unit (EPU) of 66 cents per unit, ahead of the Zacks Consensus Estimate of 55 cents and the year-ago quarter earnings of 58 cents. Robust growth in the partnership’s cash flows following certain accretive acquisitions led to the outperformance.
Distribution & Cash Flows
Late last month, TC PipeLines announced its second quarter 2015 cash distribution of 89 cents per unit ($3.56 per unit annualized), representing a 6% increase sequentially and year over year.
The cash distribution is the 65th consecutive quarterly distribution paid by it. TC PipeLines’ new distribution is payable on Aug 14 to unitholders of record as on Aug 4, 2015.
The partnership’s total cash flow during the reported quarter increased about 21% year over year to $93 million. The increase may be attributed to higher contribution from the GTN and Bison pipelines, as the partnership now owns 100% stake in both.
TC PipeLines distributed $55 million in the reported quarter, up almost 6% from the year-ago level.
Pipeline Systems’ Performance
Great Lakes: The partnership did not have any equity income from Great Lakes as against $2 million reported in the year-ago quarter.
Northern Border Pipeline: Equity income from the Northern Border Pipeline was $15 million compared with $16 million in the second quarter of 2014.
Liquidity
As of June 30, 2015, TC PipeLines had $300 million outstanding on the $500 million senior credit facility. The partnership exited the quarter with a long-term debt (excluding current portion) of $1,730 million, which represents a debt-to-capitalization ratio of 56.4%.
Acquisition
On Apr 1, 2015, TC PipeLines completed the acquisition of the remaining 30% interest in the Gas Transmission Northwest LLC from sponsor TransCanada Corp. TRP. The transaction was valued at $446 million.
Outlook
The partnership expects utilization rates for GTN and Northern Border pipelines to remain high for the remainder of the summer and thereafter. With natural gas prices set to remain low, gas-fired electric generation units will see strong usage. Even the Great Lakes pipeline might see some additional sales in the short-term, considering the robust seasonal strength in retail regional facilities.
Zacks Rank
TC PipeLines currently holds a Zacks Rank #3 (Hold).
Better-ranked players from the sector include Buckeye Partners L.P. BPL and CONE Midstream Partners L.P. CNNX. Both these stocks carry a Zacks Rank #2 (Buy).
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