Pipeline operator, TC PipeLines LP (TCP) announced better-than-expected fourth-quarter 2013 earnings. Contributions from the recently acquired Gas Transmission Northwest LLC (GTN) and Bison Pipeline LLC (Bison) were the primary drivers of the outperformance. Strong contribution from the other pipeline assets also aided the results.
The market reacted positively to the result as TC PipeLines touched an intraday high of $48.00 per unit, before settling at $47.86 on Feb 7, up 2.8% from the previous close.
The Calgary, Alberta-based master limited partnership (MLP) reported fourth quarter earnings per unit (EPU) of 63 cents, higher than the Zacks Consensus Estimate of 60 cents and also above the prior year quarter level of 56 cents.
For 2013, TC PipeLines reported per unit profits of $2.13, above the Zacks Consensus Estimate of $2.09 but lower than the 2012 earnings of $2.51 per unit.
Distribution & Cash Flows
TC PipeLines announced fourth-quarter 2013 cash distribution of 81 cents per unit ($3.24 per unit annualized), up 3.9% from the year-ago period and flat sequentially. The distribution will be paid on Feb 14, 2014, to unitholders of record as of Jan 28.
The partnership’s total cash flows during the reported quarter increased 3.9% to $53.0 million from the year-ago period. The increase came on the back of additional cash distributions from TC PipeLines’ extra 45% interest in GTN and Bison each, acquired during the third quarter of 2013. However, results were partially offset by reduced cash distribution from the Northern Border and Great Lakes.
TC PipeLines distributed $52.0 million during the quarter, up 20.9% from the year-ago level, primarily driven by a rise in the quarterly distribution. Hike in outstanding common unit following the May 2013 equity offerings, also aided the results.
For 2013, TC Pipelines’ total cash flow was $195.0 million, down 3.5% from the 2012 level of $202.0 million. The partnership distributed $188.0 million against $169.0 million in 2012.
Pipeline Systems’ Performance
Great Lakes: The partnership’s equity income from the Great Lakes decreased $1 million year over year to $3 million in the quarter. The decline reflects the sale of Great Lakes capacity at reduced rates and volume.
Northern Border Pipeline: Equity income from the Northern Border Pipeline was $16.0 million, down 11.1% year over year due to reduced reservation rates.
Liquidity
As of Dec 31, 2013, TC PipeLines had $120.0 million outstanding on the $500.0 million revolver portion of its senior credit facility. The partnership has long-term debt (including current portion) of $1,578.0 million, representing a debt-to-capitalization ratio of 46.9%.
Zacks Rank
The partnership currently holds a Zacks Rank #5 (Strong Sell).
Meanwhile, one can consider better-ranked players from the same industry such as Energy Transfer Equity, L.P. (ETE), NuStar Energy L.P. (NS) and Spectra Energy Partners, LP (SEP). All the stocks currently sport a Zacks Rank #1 (Strong Buy).
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