TC PipeLines Beats Estimate

TC PipeLines L.P. (TCLP), a master limited partnership (MLP), announced impressive first quarter 2011 results, reflecting commendable performances from Northern Border and Great Lakes systems along with solid cash flows generation.

The partnership reported earnings per unit (EPU) of 90 cents, comfortably ahead of the Zacks Consensus Estimate of 79 cents and well above the year-ago profit of 71 cents.

Cash Distribution

TC PipeLines announced first quarter 2011 cash distribution of 75 cents per unit (unchanged sequentially), payable on May 13, 2011, to unitholders of record on April 30.

During the first quarter, the partnership paid distributions of $35.4 million, up 2.9% from the year-earlier level.

Pipeline Systems Performance

Great Lakes: The partnership’s equity income from the Great Lakes increased 10.4% year over year to $18.0 million in the quarter, reflecting decreased depreciation expense (due to lower depreciation rate in the GL Settlement), partially offset by lower transmission revenues.

Northern Border Pipeline: Equity income from Northern Border Pipeline jumped 41.1% to $20.6 million, primarily on improved transmission revenues (as a result of its higher demand for transportation services).

Other Pipes (North Baja and Tuscarora): Equity income from Other Pipes was $10.5 million compared with $9.3 million in the prior-year quarter. The improvement was driven by lower average interest rates.

Financials

As of March 31, 2011, TC PipeLines had $ $250.0 million available for future borrowings and long-term debt (including current portion) of $505.9 million. The partnership’s debt-to-capitalization ration stood at 31.1%. TC PipeLines’ cash flows for the quarter were $48.3 million, up 31.3% year over year.

Our Recommendation

Calgary, Alberta-based TC PipeLines exhibits strong future growth prospects following the North Baja Pipeline acquisition and robust demand for pipeline’s transportation services. We also like the partnership’s steady cash-flow generating pipeline assets, which provide stability and financial support for disciplined cash distributions. We believe TC PipeLines is well positioned for the future and maintain our long-term Outperform recommendation on the stock.

TC Pipelines, which competes with peers such as Enbridge Energy Management LLC (EEQ - Snapshot Report) and Energy Transfer Equity, L.P. (ETE - Snapshot Report), currently retains a Zacks #1 Rank (short-term Strong Buy rating).

Read the full analyst report on TCLP

Read the full analyst report on ETE

Read the full analyst report on EEQ