TC Pipelines LPTCLP

Morningstar Rating

Stock Research and Analysis

by Avi Feinberg

Income investors seeking relatively stable distribution payments with some growth potential may want to consider TC Pipelines LP, a pure-play pipeline master limited partnership. We think TC's conservative approach will support modest distribution growth Read more

Bulls Say

By resetting incentive distribution rights and capping the GP share at 25%, TCLP reduced its cost of capital and made it easier to increase distributions to limited partners consistently.

Most pipelines have moats. Without a demonstrated economic need, new pipelines are not approved. This fact, along with large up-front building costs, creates sizable barriers to entry and switching costs.

TC has focused on the attractive pipeline business while shying away from less-attractive industries such as refining, power production, and energy trading. This makes TC one of few pure-play natural gas pipeline operators.

The Bison project and TransCanada's Pathfinder project could boost utilization and revenue on TC's Northern Border pipeline.

TC pays essentially no corporate income taxes, and the partnership pays a high and tax-advantaged yield. Read more

Bears Say

High costs of capital are a plague to all MLPs, even those with deep-pockets sponsors, as the MLP model requires access to capital markets to fund growth projects.

TC depends on the performance of relatively few pipelines; any sort of operational or financial problem at any of its core pipelines would have an outsize impact on TC's cash flows.

The Northern Border Pipeline's transport volume is directly tied to natural gas production volume in western Canada, which is showing signs of decline.

Both Northern Border's and Great Lakes' contracts have short durations, exposing TC to potential revenue declines as new pipelines bring competing gas into the pipelines' traditional markets.

The rates charged by natural gas pipelines do not contain inflation clauses. This will hinder TC's efforts to increase revenue by renewing expiring contracts. Read more

Strategy

The primary goal of TC's pipelines is to maintain or increase volume transported while keeping a close eye on overhead expenses. Each pipeline can be expanded as new opportunities arise. TC aims to keep Read more

Management

TC's general partner is an entity wholly owned by TransCanada, which also owns 43% of the firm's common units outstanding. Russ Girling is the CEO at TC's general partner. Girling also serves as president of pipelines at TransCanada. Because of the Read more

Profile

TC Pipelines is a master limited partnership that holds some of the U.S. assets of TransCanada, the largest Canadian pipeline company. TransCanada is the general partner Read more

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