Bloomberg News

TransCanada Profits Rise on Oil Pipelines, Power Generation

November 02, 2011

(Updates with closing share price in last paragraph.)

Nov. 1 (Bloomberg) -- TransCanada Corp., the Canadian energy company seeking to build a $7 billion pipeline from Alberta to Texas Gulf Coast refineries, said profit rose on new crude shipments and higher electricity prices for its power generation business in Western Canada.

Third-quarter net income rose to C$397 million ($390.9 million), or 55 cents a share, from C$391 million, or 54 cents, a year earlier, the Calgary-based company said in a statement today. Per-share profit excluding special gains and losses from contracts to hedge against currency and commodity price changes was a penny more than the 58 cents average of 12 analysts’ estimates compiled by Bloomberg.

The quarter benefited from revenue generated by an initial phase of the Keystone pipeline, which was not operational in the year-earlier period, Steven Paget, an analyst at FirstEnergy Capital Corp., said in a telephone interview. Paget, based in Calgary, rates TransCanada “market perform” and doesn’t own shares. Sales rose 12 percent to C$2.39 billion.

The company began shipping up to 591,000 barrels of crude a day from Alberta to Illinois and Oklahoma on Keystone in February, earning $78 million of operating income. The new pipeline has brought in $210 million so far this year, TransCanada said in its statement.

’Positive Progress’

TransCanada’s operating profits in oil and natural gas pipelines, as well as Canadian power transmission, were higher than analysts’ estimates, Paget said.

Operating income in the company’s power marketing and trading operations in Alberta more than tripled to C$152 million from C$45 million in the July-to-September 2010 period, driven by higher spot electricity prices in the region. Earnings from TransCanada’s Canadian power segment doubled to $231 million.

The company “continues to make positive progress with a large capital program,” Andrew Kuske, an analyst with Credit Suisse Group AG, said in a note to clients today. Kuske rates TransCanada “neutral” and doesn’t own shares.

Operating income rose 14 percent in TransCanada’s non- Canadian natural gas pipeline segment because of the newly opened Guadalajara gas pipeline in Mexico and Bison pipeline in the Northern U.S.

TransCanada’s plans for an oil pipeline expansion, known as Keystone XL, have ignited controversy among environmentalists opposed to oil-sands production and Nebraska ranchers that fear the pipeline’s route from Canada across six U.S. states endangers the region’s main water resource, the Ogallala Aquifer.

State Department Approval

The U.S. State Department must approve the pipeline project because it crosses an international border. A decision is expected by the end of the year.

Nebraska Governor Dave Heineman, a Republican, has called a special legislative session beginning today to consider whether the state can force the company to re-route the pipeline away from sensitive environmental terrain. Such legislation, if passed, might wind up killing the project, company officials have said.

TransCanada fell less than 1 percent to $42.09 at the close of trading in Toronto. The shares, which have 10 buy ratings, four holds and one sell from analysts, have gained 12 percent this year before today.

(TransCanada will hold a conference call at 11 a.m. New York time, accessible at EVTS <GO>.)

--Editors: Susan Warren, Jasmina Kelemen

To contact the reporter on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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