Bloomberg News

TransCanada Quarterly Profit Drops on Falling Power Price

April 27, 2012

TransCanada Corp. (TRP), the company proposing to build the Keystone XL oil pipeline, said first- quarter profit declined on falling power prices.

Net income fell to C$352 million ($359 million), or 50 cents a share, from C$411 million, or 59 cents, a year earlier, Calgary-based TransCanada said in a statement today. Excluding losses from financial contracts, per-share profit was two cents less than the 54-cent average of 12 analysts’ estimates compiled by Bloomberg. Sales rose 2.3 percent to C$1.91 billion.

The company, which owns 14 power plants and ships natural gas and oil on its pipelines, may convert some capacity on its gas mainline to carry oil from Alberta to eastern Canada, Chief Executive Officer Russ Girling told reporters after TransCanada’s annual meeting today in Calgary.

The line could carry 800,000 barrels daily to refineries from Canada’s oil sands, using capacity from tubes that have been idled because of a decline in demand for gas and competing pipelines to U.S. markets.

“It’s too premature to talk about” a potential startup date, Girling said. “The size of the pipe could range from 30 to 40 inches, depending on what lines you’re talking about and those kinds of things.”

TransCanada’s earnings were hurt by lower electricity prices in western Canada and lost revenue from planned maintenance at a nuclear plant in Ontario, Steven Paget, an analyst with FirstEnergy Capital Corp. in Calgary, said in an interview before earnings were released.

Falling Gas Prices

Power prices will be lower this year because of a decline in gas prices and reduced demand from a mild winter, said Paget, who rates the company at market perform, the equivalent of a hold recommendation.

President Barack Obama in January rejected TransCanada’s application to build the 1,661-mile (2,673-kilometer) Keystone XL pipeline, which would bring crude from Canada’s oil sands to the Texas Gulf Coast. The president said the rejection was because a decision deadline imposed by Congress didn’t allow enough time to weigh environmental risks.

TransCanada has said it plans to reapply for a new permit for the northern leg of the pipeline that would run from Alberta to Nebraska. With Obama’s blessing, the company may begin construction as soon as June on the southern leg of the pipeline from Oklahoma to Texas. That segment, now called the Gulf Coast Project, will be in service by mid-to-late 2013, according to the statement.

TransCanada rose 0.1 percent today to C$43.19 at the close in Toronto. The shares, which have eight buy, seven hold and two sell ratings from analysts, have dropped 3 percent this year.

To contact the reporters on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net; Jeremy van Loon in Calgary at jvanloon@bloomberg.net

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


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