October 28, 2008 / 1:59 PM / in 9 years

UPDATE 3-TransCanada boosts Keystone stake, profit rises

*Profit rises 20 percent

*Boosts stake in Keystone Pipeline

*Expects Keystone financing, plans $3 bln debt shelf offer

*Shares rise 2.8 percent (Adds detail and comment, updates shares. In U.S. dollars unless noted.)

By Scott Haggett

CALGARY, Alberta, Oct 28 (Reuters) - TransCanada Corp (TRP.TO) said on Tuesday it boosted its stake in the planned $12 billion Keystone pipeline by nearly 30 percent and expects to have new bank credit lines in place by year end to pay for its construction despite the global credit crunch .

The company, Canada’s biggest pipeline operator, reported a 20 percent hike in third quarter profit on Tuesday and said it had agreed to cut the stake of U.S. oil major ConocoPhillips (COP.N) in the Keystone oil export project to 20.1 percent.

The two companies had been equal partners in the planned line to take oil-sands crude to the U.S. Midwest and Gulf Coast.

TransCanada “was probably really happy” to get the additional stake in Keystone, said Steven Paget, an analyst with FirstEnergy Capital. “The debt-rating agencies had not been good to them because there was no clear consortium leader and the economics are the same. In general, it’s positive.”

Keystone’s first phase, a $5.2 billion, 590,000-barrel-per-day line to Illinois and Oklahoma, is expected to be in service next year. A second, $7 billion phase will carry 500,000 more barrels to refineries on the Gulf Coast.

TransCanada said it has given some shippers the option to take up to a 15 percent stake in the project, which would cut its ownership in the line to 64.99 percent if taken up.

The company also said it is looking to establish new bank credit lines to pay for Keystone’s construction.

It expects to have them in place by year end despite the tightening conditions spurred by the credit crunch and global financial turmoil. Even so, it said it expected the credit, which it considers a back-up to its commercial paper, to be expensive.

“We have seen a fairly significant run up in costs, in the several hundred basis-point range,” Greg Lohnes, TransCanada’s chief financial officer said on a conference call. “We’ve kept the facility short term in order to keep costs down.”

TransCanada currently has undrawn credit lines of C$2 billion and $300 million and said it has had no problem tapping the commercial paper market.

TransCanada also plans to issue a $3 billion debt shelf prospectus to replace a $2.5 billion debt shelf it said had been exhausted. POTENTIAL DELAY

The company said it was not worried about a spate of project delays and deferrals among oil-sands operators because of falling oil prices.

Last week Suncor Energy Inc SU.TO put off completion of a 200,000-barrels-a-day expansion of its oil sands operation while Petro-Canada PCA.TO is mulling cuts to its planned C$21 billion Fort Hills oil-sands project.

Still, TransCanada said it could defer completion of Keystone’s second phase by a year, to 2013 if needed.

The company could delay construction of part of Keystone’s second phase, concentrating instead on extending the system from Oklahoma to the Gulf of Mexico refining hub by 2012 and then completing a line from Hardisty, Alberta, to Steele City, Nebraska, a year later. PROFIT RISES

The company’s third-quarter profit rose 20 percent on new power generation capacity and an increased contribution from its U.S. pipeline business.

TransCanada earned C$390 million ($303 million), or 67 Canadian cents a share, up from a year-earlier C$324 million, or 60 Canadian cents.

Comparable earnings, which exclude most one-time gains and losses, rose 18 percent to C$366 million, or 63 Canadian cents a share, beating the average forecast of analysts for 54 Canadian cents, according to a Reuters Estimates.

Revenue fell 2.3 percent to C$2.14 billion.

The company said its quarterly results were helped by its larger power-generation portfolio. As well, earnings rose on its pipeline networks in the United States.

TransCanada shares rose 92 Canadian cents, or 2.8 percent, to C$33.55 midafternoon on Tuesday on the Toronto Stock Exchange. The shares have fallen 15 percent over the past year. ($1=$1.29 Canadian) (Editing by Frank McGurty)

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