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Why Western Canada and Bakken development help TC PipeLines

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TC’s Northern Border pipeline

In 2013, TCP’s Northern Border pipeline delivered steady results despite its lower rates, which were instituted on January 1, 2013. Demand for its service has remained strong. The company has largely benefited from its pipeline base connecting the Canadian Rockies and the Bakken in North Dakota to the mid-west U.S. It provides a critical transportation route linking Canadian natural gas out of Western Canada as well as U.S. gas out of the Rockies Basin and the Bakken formation in North Dakota, with key markets in Minneapolis and around Chicago.

Northen border net income

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In January 2013, FERC approved a settlement agreement that established maximum long-term transportation rates and charges on the Northern Border system. This reduced the pipeline system’s reservation rates by 11%. A reservation rate is the rate on firm contracted capacity ratably over the contract period regardless of the amount of natural gas that’s transported.

Revenues from the Northern Canada pipeline system are stable, as its long-haul capacity is substantially contracted through June of 2015. Some of its contracts extend through to the end of the decade. Conventionally, the pipeline’s performance stays the strongest during peak winter months to serve heating demand and peak spring and summer months to serve electric cooling demand and storage injection.

Stuart Campel, the VP of TCP, said in the earnings conference call of 1Q14, “The value to our customers of signing long-term contracts, was highlighted this winter, with a capacity that they paid for on a long-term basis is highly utilized during periods of high demand. The value of these long-term contracts is ultimately passed on to our investors in the form of stable long-term distributions.”

TC PipeLines LP (TCP) is a master limited partnership operating in the midstream energy space. TC PipeLine’s general partner is wholly owned by TransCanada Corporation (TRP). TC Pipelines is also part of the Global X MLP & Infrastructure ETF (MLPX), Alerian MLP ETF (AMLP), and MLP ETF (MLPA).

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