TC PipeLines, L.P. (TCLP) first-quarter 2008 results came in better than expected due to increased contributions from Tuscarora and Northern Borders. Management provided the first clearest possible indication of major asset draw downs in the near future from TransCanada Corp. (TRP), the general partner.
The general partner's major capital needs this year, largely due to its pending acquisition of a major power generation asset in the U.S., is expected to prompt it to sell assets to TCLP. Equity income from Northern Border Pipeline Line (NBPL) was $19.5 million, an increase of approximately $1.7 million from the year-ago level.
NBPL's net income in the quarter was $39.5 million, a nine year-over-year increase, driven by increased transmission revenue, partially offset by higher operating costs. The increase in transmission revenue reflected overall increases in volumes sold. Tuscarora's contribution to net income was flat year over year at $3.2 million.
The partnership's operating expenses increased by $0.2 million from the year-earlier quarter to $2.2 million, while interest expenses decreased by $0.5 million from the year earlier quarter to $7.6 million. The potential addition of quality assets to the partnership's portfolio over the next few quarters, which were not previously part of our distribution-growth expectations, is a major boost to its growth prospects.
On April 24, TC PipeLines reported better-than-expected first-quarter 2008 earnings of $31 million or $0.89 per common unit, compared to $19 million or $0.77 per common unit in the year-earlier quarter. The year-over-year positive comparison was driven by strong results from Northern Border and Tuscarora as well as increased equity income from Great Lakes.
Importantly, the partnership announced a greater than expected quarterly distribution of $0.70 per unit $2.80 per unit annualized, a 5.3% sequential and 7.7% year-over-year increase. The new distribution is payable on May 15 to unit-holders of record on April 30, 2008. The cash distribution is the 36th successive quarterly distribution paid by TCLP.
Read the analyst note on TCLP.
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.