Your Insider's Guide to TC PipeLines in 2016
TC PipeLines’ distributions
TC PipeLines’ (TCP) 4Q15 distribution per unit of $0.89 was flat compared to its 3Q15 distribution. This represents a 6% YoY (year-over-year) rise. The 4Q15 distribution was the 67th consecutive quarterly distribution paid by TCP. TC PipeLines currently (as of April 11, 2016) trades at a distribution yield of 7.1%.
Energy Transfer Partners (ETP) announced a 4Q15 distribution of $1.06 per unit, which was the same as its 3Q15 distribution. Plains All American Pipeline (PAA) announced flat distributions for 4Q15 compared to 3Q15. On the other hand, Kinder Morgan (KMI) slashed its 4Q15 dividends by 75%.
The above graph shows TC PipeLines’ EBITDA (earnings before interest, tax, depreciation, and amortization) and total capital expenditure over the past two years. The right axis shows the company’s per-share distribution. TC PipeLines generally increases its per unit distribution once per year. The company expects an annual increase similar to 2015 in 2016.
TCP’s capital expenditure
TC PipeLines’ growth capital expenditure increased from $10 million in 2014 to $54 million in 2015. This growth was driven by the construction of the Carty Lateral project, which was placed in service in October 2015. TCP expects to spend ~$3 million to close out construction expenditures on this project in 2016. Notably, Portland General Electric has a 30-year contract for 100% of Carty Lateral’s capacity.
TCP’s EBITDA
TC PipeLines’ EBITDA grew by 5% YoY in 2015. TCP expects its future growth to be driven by dropdowns from its sponsor, TransCanada (TRP). TCP comprises 1.5% of the First Trust North American Energy Infrastructure Fund (EMLP).
In the next part, we’ll discuss TC PipeLines’ forward distribution yield and see where it stands compared to its historical average.
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