TransCanada Quarterly Profit Falls on Lower Power Contributions

TransCanada Corp., the company that acquired Columbia Pipeline Group Inc. this month, reported a drop in second-quarter profit as contributions decreased from its Canadian power division.

Net income fell to C$365 million ($277 million), or 52 cents a share, from C$429 million or 60 cents a year earlier, the Calgary-based company said Thursday in a statement. Excluding one-time items, the 52-cent profit matched the average of 10 analysts’ estimates compiled by Bloomberg.

TransCanada’s Canadian power results in the second quarter were affected by maintenance at some units of Bruce Power, a nuclear generation facility it co-owns in Ontario.

"With the addition of Columbia and Bruce Power’s planned maintenance outages now largely complete, we expect to generate stronger results going forward," Russ Girling, TransCanada’s president and chief executive officer, said in a statement.

Power prices in Alberta fell 74 percent from a year earlier to average about C$14.98 per megawatt-hour, according to data compiled by Bloomberg. Rising electricity supplies and a weaker economy from the oil crash have hit the power market in Alberta, where TransCanada has stepped back by ending coal power purchasing contracts after a provincial government policy change.

Growth Channels

TransCanada’s $13 billion takeover of Houston-based natural gas pipeline operator Columbia has eased investor concerns about sources of growth for the Canadian company. TransCanada has faced challenges winning approvals for megaprojects including the proposed Keystone XL and Energy East oil pipelines, and while it has reduced its exposure to the Alberta power market, has still suffered from low prices in the Canadian province.

“We view the stock as one of our best ideas,” in part because of the Columbia takeover, Robert Kwan, a Vancouver-based analyst at RBC Dominion Securities, wrote in a July 18 research note. TransCanada executives could offer more details on new project plans, revenues from the combined gas pipeline footprint, and potential for boosting business on the company’s Canadian gas mainline with long-term shipping contracts, Kwan said.

The results were reported before the start of regular trading on North American markets. TransCanada shares, which have ten buy and four hold recommendations from analysts, fell 1 percent to C$59.45 Wednesday in Toronto.

(TransCanada has scheduled a conference call to discuss the results at 11 a.m. New York time, accessible at EVTS.)

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