CALGARY – TC PipeLines LP slashed its distributions to unitholders after a move in March by the U.S. government to eliminate a tax break for owners of certain interstate pipelines.
The partnership, which is held in part by TransCanada Corp., says it would pay a first-quarter distribution of 65 cents per unit, down from its earlier payout of $1.
The decision by the U.S. Federal Energy Regulatory Commission to no longer allow master limited partnerships to recover an income tax allowance from cost of service tariffs came in response to a 2016 court ruling that found its long-standing tax policy could result in double recovery of costs.
TC Pipelines president Nathan Brown says the ultimate result is not precisely known but, if implemented as expected, will result in a material decrease in cash flows.
Brown says the reduction in the distribution is in the best interest of both the partnership and its unitholders and will allow it to fund its near-term capital expenditures and reduce its leverage.
TC Pipelines added that TransCanada does not view the partnership as a viable financing alternative at this time, so growth from dropdowns is not anticipated to materialize unless circumstances change.
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