Transcanada reports lower Q4 earnings

Says Gulf Coast project 45 per cent done

TransCanada Corp. says its fourth-quarter earnings were dragged lower by power plant outages and weaker contributions from its natural gas pipelines.

The Calgary-based pipeline giant also said Tuesday its $2.3-billion pipeline between Cushing, Okla., and Texas refineries is 45 per cent complete and on track to come into service by the end of this year.

TransCanada reported comparable earnings of $318 million for the last three months of 2012, down from $365 million during the same period a year earlier.

On a per-share basis, that amounted to 45 cents, down from 52 cents a year earlier and missing the average analyst estimate of 49 cents, according to Thomson Reuters.

Revenues rose to $2.09 billion from $2.02 billion.

“TransCanada’s diverse set of high-quality critical energy infrastructure assets performed relatively well over the course of 2012,” CEO Russ Girling said in a release.

“While the majority of our assets continued to generate stable and predictable earnings and cash flow, plant outages at Bruce Power and Sundance A along with a lower contribution from certain natural gas pipelines did adversely affect our financial results.”

He added that the company has a number of pipeline and power projects on the go that will boost earnings and cash flow this year.

Lanny Pendill, an analyst at Edward Jones, said the quarter was a “slight miss,” mainly on the power side of the business.

The main issue was a slow restart to two refurbished units at the Bruce Power nuclear generating station on the shores of Lake Huron in Ontario.

“For more of a higher-level perspective, our long-term outlook remains intact,” said Pendill.

“If you look at the projects that the company has in place, commercially secured, we still see a company that’s going to be able to provide above-average earnings growth and dividend growth over the longer term. From a lower-risk type of utility company, that bodes very well for shareholders in our view.”

TransCanada has faced a litany of challenges in its efforts to connect oilsands crude to U.S. Gulf Coast refineries.

Early last year, the Obama administration rejected an earlier iteration of its controversial Keystone XL pipeline in its entirety, mainly as a result of an environmental backlash in Nebraska.

The U.S. State Department, which has final say over cross-border pipelines, invited TransCanada to file a new application addressing concerns over the pipeline’s impact on drinking water sources in the state and on an erosion-prone ecosystem known as the Sand Hills.

TransCanada broke the project up into two parts in August, beginning construction on the southern leg between a major storage hub at Cushing, Okla., and the Texas coast. That portion, with an initial capacity of 700,000 barrels per day, did not need a federal permit because it doesn’t cross the Canada-U.S. border.

The fate of the $5.3-billion northern portion is currently in the hands of new Secretary of State John Kerry. Last month, the Nebraska governor gave its blessing to a new route through the state that still crosses part of the Ogallala aquifer, but avoids much of the Sand Hills region.

TransCanada expects that 830,000-barrel-per-day line to start up in late 2014 or early 2015.

“We continue to believe XL (will get) approval. It looks like that approval is taking a little bit longer than I think what most expected. And now indications are that we may not get that approval until closer to summertime,” said Pendill.

Though Keystone XL has drawn the most attention to TransCanada in recent months, the company has been growing on a number of other fronts.

Last fall, it established a presence in the regional oilsands shipping business through a deal with a PetroChina subsidiary to build a $3-billion pipeline between a steamdriven oilsands site and the Edmonton area.

It was also selected to build a pair of pipelines from natural gas fields in northeastern B.C. to export terminals on the West Coast proposed by a Shell-led consortium and by Malaysia’s Petronas.

And TransCanada is in the early stages of converting part of its underused natural gas mainline to oil service in order to bring western crude to refineries in Quebec and potentially the East Coast. It believes the proposal to be economically and technically doable, and is in the midst of getting feedback from potential customers.

Last week, New Brunswick Premier David Alward visited Alberta. During his tour, he voiced strong support for pipeline proposals that would bring more Canadian crude to his province, home to the country’s largest oil refinery.