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TC PipeLines, LP

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Taking into account a host of issues, we are recalibrating our investment thesis on TC Pipelines to a 'Sell'. We are concerned of the lower natural gas volumes in its Northern Border Pipeline along with substantial uncontracted capacity at Great Lakes. Further, uncertainty over the energy infrastructure provider's dropdown prospects has dampened investor sentiment on the stock of late. As such, units of the partnership have declined 34.75% in the last three months, wider than the industry’s loss of 14%. Sponsor TransCanada's purchase of Columbia Pipeline Group and TCP's higher cost of capital is likely to limit dropdowns. We also need to factor the high debt metrics of the partnership which limits its growth. Given these headwinds, we see TCP as a risky bet that ordinary investors should exit.

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