Pipeline operator, TC PipeLines LP (TCP), has completed the purchase of an extra 45% stake in Gas Transmission Northwest LLC (GTN) and Bison Pipeline LLC (Bison) each. This purchase was made from the affiliates of North American energy company, TransCanada Corporation (TRP). TCP has paid $1.05 billion for this transaction.
The payment was funded with $381.0 million net proceeds from the offering of equity in May, a 5-year $500.0 million new term loan and $146.0 million of outstanding debt. The remaining $23.0 million was financed by the credit facility of TCP.
This deal has increased TCP’s stake to 70% from the pre-existing 25% in the GTN and the Bison pipeline system. Moreover, the partnership believes that this acquisition will immediately increase its earnings and cash flow.
Calgary, Alberta-based TCP is a master limited partnership (MLP), with interests in six pipeline systems: Northern Border Pipeline Company, Great Lakes Gas Transmission LP, Tuscarora Gas Transmission Company, North Baja Pipeline LLC, Bison Pipeline LLC, and Gas Transmission Northwest LLC.
The partnership owns stakes in natural gas transportation assets, which generate stable, recurring and low-risk earnings and cash flow. Of particular significance is its stake in the Northern Border Pipeline, a key player in natural gas transportation from western Canada to the U.S Midwest.
Northern Border’s market share enables it to maintain strong relationships with shippers. Coupled with continued robust demand for Canadian gas in the U.S., this should also help the partnership with re-contracting its pipeline capacity.
TCP currently retains a Zacks Rank #1 (Strong Buy). This implies that it is expected to significantly outperform the broader U.S. equity market over the next one to three months.
Other firms in the energy sector with a favorable Zacks Rank are Ferrellgas Partners LP (FGP) and InterOil Corporation (IOC). Both the stocks currently retain a Zacks Rank #1 (Strong Buy).
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