TransCanada: Lots of untapped value

Article Excerpt

TransCanada Corp. has considerable growth prospects in its huge $46-billion portfolio of projects now under construction. As well, it could unlock value by transferring assets to partly controlled affiliates. These transactions, called “drop downs,” help the parent free up cash for new projects. Activist investors could also pressure TransCanada to spin off its electrical-power operations as a separate firm. TRANSCANADA CORP. $55.25 (Toronto symbol TRP; Shares outstanding: 708.6 million; Market cap: $39.1 billion; TSINetwork Rating: Above Average; Dividend yield: 3.8%; www.transcanada.com) operates 68,500 kilometres of natural gas pipelines and over 11,800 megawatts of power generation in Canada and the U.S. In the three months ended December 31, 2014, TransCanada’s revenue rose 12.1%, to $2.6 billion from $2.3 billion a year earlier. Excluding one-time items, earnings per share rose 24.1%, to $0.72 from $0.58. The company completed $7.0 billion worth of growth projects in 2014. It plans to complete $46 billion of additional projects secured by long-term contracts by 2020 (an…

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