TC PipeLines L.P. (TCLP), a master limited partnership (MLP), announced better-than-expected fourth-quarter and full-year 2010 results, reflecting strong contributions from Northern Border and Great Lakes systems along with solid cash flows from pipelines.
The partnership reported earnings per unit (EPU) of 79 cents, comfortably ahead of the Zacks Consensus Estimate of 71 cents and well above the year-ago profit of 56 cents. Full-year 2010 earnings were $2.91 per unit, up 24.4% year over year and 2.8% higher than our projection.
Cash Distribution
TC PipeLines announced fourth quarter 2010 cash distribution of 75 cents per unit (unchanged sequentially), payable on February 14, 2011, to unitholders of record on January 31.
During fourth quarter of 2010, the partnership paid distributions of $35.4 million, up 15.3% from the year-earlier level. For full-year 2010, the partnership’s total distribution increased 18.5% year over year to $138.7 million, driven by a rise in the number of common units outstanding.
Pipeline Systems Performance
Great Lakes: The partnership’s equity income from the Great Lakes increased 8.9% year over year to $14.7 million in the quarter, reflecting reduced depreciation expense (due to lower depreciation rate in the GL Settlement), partially offset by decreased transmission revenues.
Northern Border Pipeline: Equity income from Northern Border Pipeline (“NBPL”) more than doubled year over year (up 121.6%) to $19.5 million, primarily on improved transmission revenues (as a result of its higher demand for transportation services) partially outweigh by increased operating expenses.
Liquidity and Balance Sheet
As of December 31, 2010, TC PipeLines had $8.0 million outstanding on revolving credit facility and $242.0 million available for future borrowings.
At the end of 2010, the partnership had $513.9 million of long-term debt (including current portion). The partnership’s debt-to-capitalization ration stood at 31.6%.
Cash Flows
TC PipeLines’ cash flows for the fourth quarter were $51.7 million (up 28.9% year over year). For the full year, cash flows were $180.1 million (up 19.9% from the prior year).
Our Recommendation
We believe future growth prospects for the partnership have improved considerably following the North Baja Pipeline acquisition. Other positive aspects of the partnership include steady cash-flow generating pipeline assets, strong volume growth and steady cash distribution.
TC Pipelines competes with peers, such as, BP plc (BP) and EQT Corporation (EQT). We are maintaining our long-term Outperform recommendation on the stock.
BP PLC (BP): Free Stock Analysis Report
EQT CORP (EQT): Free Stock Analysis Report
TC PIPELINES (TCLP): Free Stock Analysis Report
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