TCP Pipelines (TCP) Q4 Earnings And Revenues Lag Estimates

TC PipeLines, LP (NYSE:TCP) reported fourth-quarter 2017 earnings of 77 cents per unit, marginally missing the Zacks Consensus Estimate of 78 cents. Higher expenses and lower-than-expected revenues led to weaker results. However, results were partly offset by higher equity earnings from Iroquois Gas Transmission System, LP.

However, the bottom line witnessed an increase from 70 cents per unit recorded in the year-ago quarter. Addition of equity earnings from Iroquois and higher earnings from Great Lakes on the back of lower pipeline integrity costs drove the improved year-over-year earnings.

Quarterly transmission revenues of $109 million missed the Zacks Consensus Estimate of $137 million. Further, the top line was also below the prior-year quarter level of $111 million.

Distribution & Cash Flow

On Jan 23, 2018, TC PipeLines announced fourth-quarter 2017 cash distribution of $1.00 per unit, in line with the prior-quarter figure but 6.4% higher from the year-ago quarter. This is the 75th consecutive quarterly distribution paid by the partnership and is payable on Feb 13, 2018 to unit holders of record at the close of business on Feb 2.

The partnership's total distributable cash flow increased more than 5.8% year over year to $72 million, primarily driven by the addition of equity interest in Iroquois.

TC PipeLines distributed $74 million in the reported quarter compared with $66 million in the year-ago quarter.

Pipeline Systems' Performance

Great Lakes: The partnership received earnings of $7 million from equity investment, higher than the prior-year quarter’s earnings of $5 million.

Northern Border Pipeline: Equity earnings at this pipeline totaled $17 million, unchanged from the prior-year quarter’s earnings.

Iroquois: Equity earnings at this pipeline totaled $13 million. TC PipeLines completed the acquisition of 49.3% interest in Iroquois from TransCanada Corporation (TO:TRP) on Jun 1, 2017.

Expenses

Operation and maintenance expenses increased to $19 million in the quarter compared with $17 million in the prior-year quarter. General/administrative and property charges came in at $3 million, compared with the year-ago figure of $2 million. Property taxes also increased to $7 million against $6 million recorded in the prior-year quarter. Depreciation costs decreased to $24 million in the reported quarter, compared with $25 million in the year-ago quarter. Financial charges in the quarter came at $23 million, witnessing a year-over-year increase of 27.7%.

Balance Sheet

As of Dec 31, 2017, TC PipeLines — whose peers include Boardwalk Pipeline Partners, LP (NYSE:BWP) and Delek Logistics Partners, LP (NYSE:DKL) among others — had cash and cash equivalents of $33 million. The partnership had long-term debt of $2,352 million, representing a debt-to-capitalization ratio of 68.8%.

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