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TransCanada Quarterly Profit Rises on Power Supply Boost

TransCanada Corp., the company proposing to build the Keystone XL oil pipeline, said fourth-quarter profit rose 37 percent as output from nuclear and coal-fired power plants in Canada increased.

Net income climbed to C$420 million ($379 million), or 59 cents a share, from C$306 million, or 43 cents, a year earlier, the Calgary-based company said in a statement today. Excluding a gain from hedging contracts, per-share profit was 2 cents below the average of 12 analysts’ estimates compiled by Bloomberg. The company boosted its quarterly dividend 2 cents to 48 cents.

TransCanada is awaiting a U.S. permit to build the $5.4 billion Keystone XL, a pipeline that would bring crude from Alberta oil-sands projects to U.S. Gulf Coast refineries. A judge ruled yesterday that Nebraska’s governor didn’t have authority to approve a revised route through the state, a decision that may push back the timeline for the project.

“The slightly weaker-than-expected dividend increase and the noise around Keystone XL with regard to an adverse ruling on the pipeline path in Nebraska may cause some near-term pressure on the stock, especially in light of its steady appreciation in recent weeks,” Pierre Lacroix, an analyst at Desjardins Securities Inc. in Montreal, wrote in a note today.

TransCanada fell 2.1 percent to C$48.83 at the close in Toronto. The stock, which has 12 buy and five hold recommendations from analysts, has gained 0.6 percent this year.

Selling Power

Quarterly results were helped by the restart of electricity generating units at Sundance, Alberta’s largest coal power plant, and Bruce Power, the world’s biggest operating nuclear plant in Ontario. TransCanada said it would consider boosting its ownership in the Bruce B nuclear plant as Cameco Corp. pursues the sale of its stake.

The company got about 34 percent of sales from its energy business in 2012, the rest came from shipping oil and natural gas on its 68,500-kilometer (42,500-mile) pipeline network.

While awaiting the presidential permit for the portion of Keystone XL that crosses the U.S.-Canadian border, TransCanada built the southern leg of the project and in January started delivering oil on it. Earnings from its Keystone system increased 11 percent from the prior fourth quarter to $C200 million as volume rose.

Total sales rose 12 percent to C$2.33 billion in the quarter.

Ruling Appeal

The U.S. State Department released a Jan. 31 report finding Keystone XL wouldn’t dramatically increase carbon dioxide emissions because the oil sands would be developed even without it. The report started a 90-day review of whether the pipeline is in the U.S. national interest before a final ruling by President Barack Obama. The judge’s decision may give the president a reason to delay the permit.

“This is a solvable problem and we are undeterred,” TransCanada Chief Executive Officer Russ Girling said on a conference call today. “We will work to minimize any potential impact on the project’s schedule.”

TransCanada delayed by one year its forecast start of the C$12 billion Energy East pipeline from Alberta to Canada’s Atlantic Coast to 2018. The company is in talks with aboriginal and other groups and plans to apply for regulatory approvals in mid-2014.

An extension for the Tamazunchale gas pipeline in Mexico is also being delayed because of archaeological discoveries along the route.

Download: Earnings

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