Q3 2019 Earnings Call
Good morning, ladies and gentlemen, welcome to the PC Energy 2019 third quarter results Conference call.
Now I'll turn the meeting over to Mr., David My manner Vice President.
That's relations. Please go ahead Mr. Monday.
Thanks, very much and good morning, everyone I'd like to welcome you to TV Energy's 2019 third quarter conference call with me today, our Russ Girling, President and Chief Executive Officer, Don Marchand, Chief Financial Officer, Tracy Robinson President can.
Ladies and natural gas pipelines stand Chapman U.S. natural gas pipelines president of that business unit.
Paul Miller President of liquids pipelines, Francois <unk> executive Vice President corporate development strategy, and President power and storage and Mexico, and Glenn The news Vice President and.
Controller Rustom Dawn will begin today with some opening comments on our financial results and certain other company development a copy of the slide presentation that will accompany their remarks is available on our website. It can be found in the investor section under the heading events and presentations.
Following their prepared remarks, we will take questions from.
The investment community. If you remember the media please contact Jamie Harding following this call and she'd be happy to address your questions in order to provide everyone from the investment community with an equal opportunity to participate we ask that you limit yourself to two questions. If you have additional questions. Please reenter the queue also we asked.
To your focus your questions on our industry or corporate strategy recent developments in key elements of our financial performance. If you have detailed questions related to some of our smaller operations Dwayne and I'd be pleased to discuss some with you following the call.
Before us begins I'd like to remind you that our remarks today will include forward looking.
Payments that are subject to important risks and uncertainties for more information on these risks and uncertainties. Please see the reports filed by TC energy with Canadian Securities regulators and with the U.S. Securities Exchange Commission. Finally during this presentation, we'll refer to measures such as comparable earnings comparable earnings per share.
Chair comparable earnings before interest taxes, depreciation and amortization or comparable EBITDA comparable funds generated from operations and comparable distributable cash flow. These and certain other comparable measures are considered to be non-GAAP measures. As a result, they may not be comparable to similar measures.
Presented by other entities. These measures are used to provide you with additional information on T.C. Energy's operating performance liquidity and its ability to generate funds to finance operations with that I'll now turn the call over to Ross.
Thanks, David and good morning, everyone and thank you very much for joining us today.
As highlighted in our quarterly report to shareholders. During the third quarter 100 billion dollar portfolio of high quality long life energy infrastructure assets continued to profit from strong supply and demand fundamentals.
Those market fundamentals have resulted in demand for our services with the majority of our infrastructure now running at full capacity.
Any under either rate regulated constructs are long term contracts.
The demand.
For access to a continental footprint that we have has led to our industry, leading $30 billion capital expansion program, which is underpinned by contracts that are generally 20 years or longer or rate regulated constructs.
We continue to realize the growth expected from this program as we placed approximately $8 billion of new long term contracted and rate regulated assets into service during the first nine months of the year.
As a result, despite significant asset sales state of accelerated the strengthening of our balance sheet comparable earnings of one dollar for per share for three months ended.
Timber Thirtyth 2019 increased 4% or the same period in 2018, well comparable funds generated from operations at approximately $1.8 billion were 15% higher.
Good day, we are advancing $30 billion secured projects with approximately two and half billion of those projects expected to be completed in the fourth quarter of this year.
Sure.
In addition work continues on more than $20 billion of projects under development, including Keystone XL and the refurbishment of another five reactors at Bruce power as part of their long term life extension program.
We've also made significant pro dropped progress in funding our capital program during the third quarter through various portfolio management.
Tivity more specifically, we completed the partial monetization of our northern Courier pipeline in Alberta, as well as certain as as well as the sale of certain Columbia midstream assets in the Appalachian region, and we entered into an agreement to sell or natural gas fired power plants in Ontario.
These initiatives combined with the sale of our Coolidge generating station, which closed in.
May are expected to result in combined proceeds of approximately $6.3 billion.
Each transaction has allowed us to surface significant value for relatively mature assets and redeploy that capital into our expansion program, thereby reducing our need for external funding, including common equity.
As a result commencing.
And with our fourth quarter 2019 dividends, we have discontinued the issuance of common shares under.
From Treasury under a dividend reinvestment program.
Looking forward, we expect our strong operating and financial performance to continue and therefore 2019 comparable earnings per share are expected to be higher than record results that we produced in two.
2018 at the same time, our overall financial position remains solid and we're well positioned to achieve our targeted try to metrics down and provide more detail in third quarter results and funding programs and just a few minutes before that I wanted to expand some recent developments beginning with a brief review our financial results.
Moving certain specific items comparable earnings of $970 million or dollar for per share in the third quarter, an increase of $68 million or four cents per share over the same period in 2018.
That equates to a 4% increase on a per share basis. After recognizing the effective the previously mentioned asset sales and common shares.
We issued under the dividend reinvestment program in 2018, and 2019 and our ATM program in 2018 comparable EBITDA increased $288 million to approximately $2.3 billion, while comparable funds generated from operations of $1.8 billion for $231 billion higher than the third quarter of 2000.
18.
On a year to date basis comparable earnings were $3.11 per share an increase of 29 cents per share or 10% over the same period in 2018.
Comparable EBITDA increased 15% to approximately 7.1 billion or comparable funds generated from operations at $5.3 billion.
We're 40% higher than last year based on the strength of our financial performance. The board of directors declared a fourth quarter dividends of 75 cents per common share, which is equivalent to $3 per share on an annualized basis that represents an 8.7% increase over the Mt declared in the fourth quarter of 2018 and equates to a payout of.
Roughly 75% comparable earnings and 40, 540% of comparable funds generated from operations, leaving us with 60 of significant internally generated cash flow to continue to invest in our core businesses next few comments on our five operating businesses first in Canadian natural gas pipelines customary to bad for access to our.
Dennis remains strong and we continue to work with industry on options to connect growing western Canadian gas supply to markets across North America evidence of this can be seen in our announcement earlier today. It will see us investing an additional $1.2 billion and our west path delivery program, which is a combined expansion at the end detail which hills.
And GTN systems.
Expansion will add approximately 258 million cubic.
258 million cubic feet per day of capacity to the system and is underpinned by new from service contracts with average terms of approximately 30 years regulatory applications for the expansion are expected to.
We filed in 2020 subject to the receipt of regulatory approvals construction is expected to commence as early as the fourth quarter of 2021 within service dates ranging from the fourth quarter of 2022 to the fourth quarter 2023 with this announcement, we are now advancing a $10 billion expansion program in NGL that will add approximately 3.3.
Billion cubic feet, a day of incremental delivery capacity to the system by the end of 2023.
The project will be constructed concurrent with the GTN Express project announced by TC pipelines LP earlier today.
That Usthree hundred 35 million dollar GTN Express project.
Is integrated is an integrated.
Liability and expansion project on the GTN system that expect is expected to be fully complete in 2023 and provide the transport of additional volumes enabled by the NGL and foothills west path delivery program.
We also continue to work on with LNG, Canada on our coastal Gaslink project the six.
$6 billion project will have an initial capacity at approximately 2.1 billion cubic feet today with potential expansion capacity up to 5 billion cubic feet today. The estimated cost for the project has risen due to increased scope and refinement under our construction asked estimates and we expect those incremental costs will be incorporated into the final tolls.
Direction activities continue to many locations along the pipeline route during the third quarter and at the same time, we continue to advance funding plans for the project through a combination of a sale of up to 75% ownership.
And project financing both of those transactions are proceeding as planned.
Moving to our use natural gas.
Lines for demand for our services reached record levels. During this year as highlighted previously our broad network has historically served approximately 25% of us demand on a daily basis. In addition to moving those volumes our existing systems and on our existing systems. During the quarter. We continue to advance our 1.1 billion dollar us.
Modernization to program on the Columbia gas system as well as another $1.5 billion us of other capacity additions that now include the GTN explode GTN Express project, along with our previously announced Louisiana Express project. The branch in your Express project and the Eastern lateral Express project.
Turning to Mexico, where the sort of Texas pipeline began commercial operations in September following the execution of amending agreement with CFP as a result of that amendment. The contract has now been extended to 35 years with the CFPB now receiving transportation services under a levelized toll structure, all other terms and conditions of the contract remains.
Naturally unchanged.
Sure to Texas has the capacity of up to 2.6 billion cubic feet, a day of low cost clean burning to move low cost clean burning use natural gas supply into Mexico.
Finally in Mexico construction of the via to re pipeline is ongoing with phased in service anticipated to commence in.
Early 2020.
Construction on Central segment of the Tulip pipeline project can you just continues to face delays to as in service date is estimated to be two years.
After the indigenous consultations are successfully concluded.
Turning to our liquids business, where I wanted to start by acknowledging that we're.
Turning to an incident on Keystone pipeline system in North Dakota today.
Well the incident is unfortunate when one does occur we have world class capabilities to respond to protect the public and the environment and restore the pipeline to service as quickly as possible. In this instance, our leak detection systems enabled us to.
At least shut down the pipeline and our crews moved scene.
Immediately today, we are focused on cleaning up the site determining the cause and returning the line disservice to keep you informed on the progress we have launched a page on our website at TCT energy Dot Com, which provide you with updates as new information becomes available.
With respect to our financial performance the liquids business again produced strong results in the third quarter of 2019, Keystone, which is underpinned by long haul take or pay contracts for over 90% of its capacity essentially ran full in the third quarter moving an average of about 590000 barrels a day.
On the southern portion of the system.
Or what we call the us Gulf Coast segment capacity was increased to 2018 in 2019, reaching over 700000 barrels a day by year end as capacity increased we maintain near full utilization again in the third quarter of 2019.
In addition, we continue to benefit from higher contribution from the liquids marketing activities.
Largely due to improved volumes and margins because a favorable market conditions. Finally in liquids business. We continue to advance the Keystone XL pipeline project in March.
You guys President Trump issued a new presidential permit for the project, which preceded the 2017 permit and resulted in a dismissal of the cases related.
To the old permit.
In August the Nebraska Supreme Court affirmed the 27 their 2017.
Vision and that approved the Keystone XL pipeline route through the state of Nebraska and motion for rehearing of that decision by the Supreme Court was denied.
Addition on October .
Before us State Department issued a draft supplemental environmental impact statement for the project. It considers changes in the project since the 2014 Keystone XL supplemental environmental impact statement.
Including in included in that that new.
Yes, yes.
Is the routing of.
USCA as well as updated information and new studies. The Sci EPS is expected to be issued in final form by the end of 2019 moving forward, we will continue to carefully and methodically obtained the regulatory and legal approvals necessary before we consider advancing this approach commercially secured projects into construction.
Turning now to power and storage.
First quarter, we experienced and equipment failure on the $1.8 billion Napanee project, while we were progressing commissioning activities on the plant during the first quarter, we're addressing the situation and we expect the 900 megawatt plant to be placed into service late in the first quarter of 2020.
The sale of the Napanee facility, along with Hills and our interest in important was energy Senator Senator Center for approximately $2.9 billion is expected to close by the end of the first quarter of 2020 work also continues on the Bruce Power Life extension project, where we expect to invest approximately $2.2 billion in Bruce.
Powers unit six MCR program as well as ongoing asset management programs through 2023, when the units six refurbishment is expected to be completed.
Bruce Power's contract price increased to approximately $78 per megawatt hour on April 1st 2019 to reflect the capital to be invested under these programs as well as normal.
Anyone annual inflation adjustments.
Despite the recently announced sales of various power generation facilities, we remain committed to Bruce power and its refurbishment as well as our broader power and storage business, including future new low risk investments in the electricity sector in our core North American marketplaces.
So.
In summary, we are advancing $30 billion secured growth program program that is expected to answer service by 2023, we have invested approximately $9 billion into that program to date with approximately $2.5 billion of those projects expected to be completed by the end of 2019.
Notably all of these projects are.
Underpinned by cost to service regulation or long term contracts, giving us visibility to earnings and cash flows that they will generate as they enter service based on continued strong performance of our base business combined with our growth plans, we expect to grow our dividend at an average annual rate of 8% to 10% through 2021.
It has always been our.
Practice the growth in dividends is expected to be supported by sustainable growth in cash flow and earnings and strong coverage ratios in summary, I'd leave you have the following key messages today, we are leading North American energy infrastructure company with a strong track record track record of delivering long term shareholder value our assets provide an essential.
Service that is critical to the functioning of North American Society, and our economy and the demand for services remains very strong looking forward, we have five significant platforms for growth Canadian us and Mexican natural gas pipelines, our liquids pipeline business and power in storage.
Just as we've done since 2000, we as we.
We advance our $30 billion secured capital program, we expect to deliver growth in earnings cash flow and dividends per share.
In addition, we have more than $20 billion of projects that are in advanced stages of development and we expect numerous other growth opportunities to emanate from our extensive critical asset footprint.
Given our strong and growing internally generated cash flow access to debt capital markets and proceeds from approximately $6.3 billion from recently announced portfolio management activities, we're very well positioned to fund our secured capital program and achieve our targeted credit credit metrics without the need for additional common equity I'll now turn the call over to Don Marchand.
And who will provide some more details on our third quarter results Don.
Thanks, Ross and good morning, everyone.
As outlined in our quarterly results issued earlier today net income attributable to common shares was $739 million or 79 cents per share in the third quarter of 2019 compared to $928 million or one dollar.
Our two per share the same period in 2018.
Third quarter 2019 results included an after tax loss of $133 million at September Thirtyth 2019 related to the Ontario natural gas fired power plants held for sale.
An after tax loss of $133 million related to the disposition of.
In Colombia midstream assets in August and an after tax gain of $115 million related to the partial monetization of the northern Courier pipeline in July .
Third quarter 2018 results included after tax income of $8 million related to our U.S. northeast power marketing contracts.
Specific items as well.
It was unrealized gains and losses from changes in risk management activities are excluded from comparable earnings.
Excluding these specific items comparable earnings of $970 million or a dollar for per share in third quarter, 2019 were $68 million or four cents per share higher year over year.
This equates to.
A 4% increase on a per share basis, despite significant asset sales as well as of the dilutive impact of common shares issued under our dividend reinvestment plan in 2018 in 2019 and aftermarket program in 2018, all of which were in support of our growth in credit metrics.
These positive results reflect continued progress.
Placing new assets into service as well as operational strength and solid cash generation across all of our businesses.
Turning to our business segment results on slide 15.
In the third quarter comparable EBITDA from our five operating businesses was approximately $2.3 billion, representing a $288 million.
Or 14% increase from 2018.
Canadian natural gas pipelines comparable EBITDA of $572 million. So was 50 million higher than for the same period last year as a result in higher incentive earnings as well as increased depreciation on the Canadian mainline, resulting from higher rates approved by the any be 20.
Many 18 decision.
Along with increased rate base earnings and higher depreciation on the NGL system due to additional facilities that were placed in service.
These favorable variances were partially offset by lower flow through taxes on both the NGL system and the Canadian mainline attributed to accelerated tax depreciation enacted by the federal.
In June 2019.
I would note that for Canadian natural gas pipelines changes in depreciation financial charges and income taxes impact comparable EBITDA, but does not have a significant impact on net income as they are almost entirely recovered in revenues on a flow through basis.
Net income for the NGL system increased 20.
$3 million compared to third quarter 2018, driven by a higher average investment base from continued system expansions and reflects a base our OE of 10.1% on 40% deemed equity as approved and our 2018 2019 rate settlement.
Net income for the Canadian mainline increased $3 million year over year.
Year, primarily due to incentive earnings recorded in third quarter 2019.
We did not record incentive earnings in the third quarter of 2018 pending the outcome of the Canadian mainline 2018, 2020 total review.
US natural gas pipelines comparable EBITDA of $604 million us or 796.
Million dollars Canadian in the quarter increased by $57 million us or $81 million Canadian compared to the same period in 2018, mainly driven by increased contributions from Columbia gas and Columbia Gulf growth projects placed in service.
This was partially offset by decreased earnings from Verizon as a result in 2018 customer agreements.
Thats to pay out their future contracted revenues and terminate their contracts.
As well as the impact of the sale of certain Columbia midstream assets in August 2019.
Mexico natural gas pipelines comparable EBITDA of $115 million us or 153 million Canadian west consistent with third quarter 2018.
As.
Yes noted on September 17th 2019, following the execution of and amending agreement with Seifi.
Our to Texas pipeline entered service and we began recording equity income from operations under the now 35 year contract.
Liquids pipelines comparable EBITDA rose by $108 million to 570.
5 million in third quarter 2019.
Melting from higher volumes on the Keystone pipeline system.
Higher contribution from liquids marketing activities attributable to improve margins and volumes.
Income from the White spruce pipeline, which was placed into service in May 2019, partially offset by the impact of the sale of an 85%.
Equity interest in the northern Courier pipeline in July 2019.
Power and storage comparable EBITDA increased by $45 million year over year to 252 million driven by a larger contribution from Bruce power, primarily as a result of higher realized how realize sale price sale price and higher output as a consequence if.
We're outage days.
These positive results were partially offset by decreased western and eastern power contributions largely due to the sale of our interests and the car Jay wind encourage generating facilities in October 2018 in May 2019, respectively, as well as lower realized margins are lower generation volumes.
For all our businesses with U.S. dollar denominated income, including Us natural gas pipelines, Mexico natural gas pipelines and parts of our liquids pipelines business. Canadian dollar translated EBITDA was positively impacted by a stronger us dollar versus third quarter 2018.
This was largely offset by higher translated.
Interest expense on us dollar denominated debt and realized hedging losses reported in comparable interest income and other.
Regarding our exposure to foreign exchange rates, a sizable portion of our U.S. dollar denominated assets are hedged with U.S. dollar denominated debt.
We continue to actively manage the residual exposure on a rolling.
One year forward basis.
Now turning to the other income statement items on slide 16.
Depreciation and amortization of $610 million increased $46 million versus third quarter 2018, largely as a result of new facilities entering service across our businesses higher composite.
In rates approved and the mainline and maybe 2018 decision and a stronger U.S. dollar partially offset by the previously mentioned asset dispositions sedation of depreciation on our Ontario natural gas fired plants now held for sale and the buys an asset impairment.
Interest expense included and comparable earnings.
Earnings of $573 million for third quarter, 2019 was consistent year over year.
After you do you see for the three months ended September Thirtyth 2019 declined by $27 million compared to the same period in 2018.
$43 million decrease in us dollar denominated after you DC.
He was primarily due to Columbia gas in Columbia Gulf growth projects placed in service, partially offset by continued investment in our Mexico projects will or 30 million dollar increase in Canadian dollar denominated AFUDC was mainly driven by capital expenditures on our NGL system expansion projects.
Comparable.
Income and other a $49 million in the third quarter of 2019 was similar to the same period in 2018.
Income tax expense included in comparable earnings was $260 million in third quarter 2019, compared to 108 million for the same period last year as a result in higher comparable earnings before income.
Yes, and lower foreign tax rate differentials, partially offset by lower flow through income taxes on Canadian regulated pipelines attributed to the Canadian Federal government accelerated tax depreciation enacted in June 2019.
Excluding Canadian rate regulated pipelines were income taxes are a flow through item on our that's quite variable.
Along with equity AFUDC income and us in Mexico natural gas pipelines, we expect our 2019 full year effective tax rate to be in the mid to high teens.
Net income attributable to non controlling interests of 59 million for the three months ended September 32019 was unchanged from the same period in 2018.
And finally preferred share dividends were also comparable to third quarter 2018.
Now moving to cash flow and distributable cash flow on slide 17.
Comparable funds generated from operations of approximately $1.8 billion in the third quarter increased $231 million or 15% year over year.
Driven largely by higher comparable earnings despite asset sales.
Comparable distributable cash flow, reflecting only non recoverable maintenance capital.
Was approximately $1.7 billion or $1.78 per share compared to $1.4 billion or $1.56 per share in the third quarter of 2018.
Resulting in the coverage ratio of 2.4 times.
Now turning to slide 18.
During the third quarter, we invested approximately $2.1 billion in our capital program and successfully funded through strong and growing internally generated cash flow long term debt and hybrid security issuances common equity from our dividend.
Reinvestment plan and significant portfolio management activities.
In September we raised $1 billion through a Canadian medium term notes offering comprised of $700 million of 10 year notes at a fixed rate of 3% and $300 million of 30 year notes at a fixed rate of 4.18%.
Also.
In September we issued US $1.1 billion of 60 year Junior subordinated notes at an initial fixed rate of 5.5% for the first 10 years.
Converting to a floating rate thereafter.
Interest expense on these notes is fully tax deductible and they are generally accorded 50% equity credit in the.
One of our Creek key credit metrics.
Today, approximately 95% of our debt is fixed rate in nature with an average coupon of 5.1% and an average term 22.1 years, including the hybrid securities the final maturity.
The average term of our debt, including hybrids to first call is 13.2 years.
In the third quarter. We also continue to execute on asset dispositions completing the partial monetization of northern Courier for aggregate gross proceeds of $1.15 billion in July and the sale of certain Quinn the midstream assets for approximately $1.3 billion us for $1.7 billion Canadian in August .
Overall portfolio management activities have generated $3.4 billion of proceeds in 2019.
This will be supplemented by the previously announced sale of our Ontario natural gas fired power plants for an additional $2.9 billion with closing expected in the first quarter of 2020.
Our dividend reinvestment plan.
Or drip continue to provide incremental subordinated capital in support of our growth in credit metrics in the third quarter with a participation rate amongst common shareholders of approximately 35% representing $247 million of dividend reinvestment.
For the first first three quarters of 2019 participation rate was approximately.
34%, resulting in $711 million of common equity at a 2% discount.
Cumulatively with an additional $214 million, having been reinvested as part of the fourth quarter 2018 dividend paid in January 31 2019.
We have raised $925 million through drip discount.
Our year.
Commencing with the dividends declared yesterday, we have discontinued the issuance of common shares from treasury at a discount to satisfy participation in our drip and one instead acquire these shares on the open market at cost.
With our significant internally generated cash flow access to debt capital markets and pending.
In closing the sale of our Ontario gas fired power plants, we are well positioned to prudently fund our $30 billion secured capital program in a manner that maximizes earnings and cash flow per share and is consistent with achieving targeted run rate credit metrics, including debt to EBITDA in the high fours without recourse to further share count growth.
Now turning to slide 19.
This graphic highlights our forecast and sources and uses of funds in 2019, starting in the last call on our long term debt maturities of $3.3 billion dividend and Noncontrolling interest distributions of approximately $3.1 billion.
In 2019 capital X.
Then deters projected to be approximately $8.8 billion, including maintenance capital, bringing our total funding requirement for 2019 to approximately $15.2 billion.
The second column highlights aggregate sources of approximately 15.2 billion, including forecast full year internally generated cash flow of $6.9 billion.
And permanent funding of $7.8 billion put in place through a combination of long term debt hybrid securities trip and completed portfolio management.
The remaining $500 million has been source through a mix of cash on hand and commercial paper.
As a reminder, we continue to advance funding plans for the 6.6 billion.
And our coastal Gaslink project through the sale of up to a 75% equity interest and project financing both of which are progressing as planned and this chart. We reflect our ownership of 100% interest pending completion of those processes.
Now turning to slide 20.
In closing our for the following.
Amounts.
Our solid across the board financial and operational results in the third quarter highlight our diversified low risk business strategy.
And reflect the strong performance of both our Blue chip legacy portfolio.
Along with the contribution of equally high quality assets entering service from our ongoing capital program.
Today, we are advancing.
$30 billion suite of secured projects and have five distinct platforms for future growth and Canadian you SM, Mexico natural gas pipelines liquids pipelines and power in storage.
Our overall financial position remains strong we are well positioned to fund our secured capital program through resilient and growing internally generated cash flow.
Access to debt capital markets, the sale of our Antero gas fired power plants, along with the coastal Gaslink joint venture and project financing processes.
That ends my prepared remarks, I'll now turn the call back over to David for acuity.
Thanks, Don just a reminder, before I turn it over to the conference coordinator for questions from the.
Investment community, we ask that you limit yourself to two questions. If you have additional questions. Please reenter the queue.
Ill turn it to the conference coordinator.
Thank you.
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And the first question is from.
Linda Ezergailis from TD Securities. Please.
Go ahead.
Thank you.
Just maybe in advance of your Investor day give us a bit of a sneak peek in terms of.
Where you're spending your business.
Feldman time, and where your focuses on opportunities on clearly the west past delivery announcement today is a significant new project.
But I'm wondering how disbursed your opportunities are geographically.
For various business platforms.
And how might we think of kind of the cadence of spend beyond this year.
Evolving.
Sure.
And then ill.
Maybe taken for shot at that and supplemented by.
Our business unit heads here, but I think what youre seeing the west path expansion is is similar to what we're seeing across the system is.
Demand for our services continues to be strong.
As you know it's difficult to build things in the current market environment, but demand for.
For energy continues to grow both domestically and in things like LNG export.
And getting that product to market continues to grow so we see production increases and and demand for system. So just by way of example, I guess, what what I would first is that I would expect our footprint to continue to generate.
Great these kinds of.
$500 million 2 billion in half dollar expansions in lots of pockets across the system and maybe I'll just give you a few examples.
Obviously, the demand for risi capacity on the NGL system continues to grow.
And so we do we expect to see more capital.
We spent in that at that area as demand for risi capacity grows so does the demand for delivery capacity on our system. As you know our mainline has approximately $2 billion to $3 billion cubic feet today have a brownfield capacity that could be used to deliver that gas to market. So we see a potential expansion of that.
As well in Alberta, as the as we migrate from coal fired generation two gas fired generation.
And then two other industrial users that have been moving to the province, both things like petrochemicals fertilizers.
Yes.
Gas.
Two oil kind of kind of conversions again demand for our systems on delivery capacity continues to grow as you move downstream and you're down from from that across the country. Obviously, our view is that Marcellus Utica I will continue to grow as well in the longer term, but in the shorter term getting that gas to markets that need it.
Such as for example, the U.S. northeast.
Moving the gas back through our systems into Canada add through could backing into into the northeast United States, New York, New England.
Obviously, we have a pathway that is attractive to folks.
And then as you can see as is our as as Weve attached more markets and that.
Largest growing market for continental natural gas is offshore.
Exports for LNG, and we've done a great job of capturing a big chunk of that market through our Louisiana Express and other projects that generics press that we have announced here recently, we expect that activity to continue and looking to.
Zika, obviously Mexican natural gas demand will continue to grow we've completed the sort of Texas pipeline I'd expect to see that continue to grow.
So everywhere I guess, what I'd say as lenders everywhere across our system, where we can and find and ability to expand the system to provide new capacity for customers. It.
Here is that Theres, a demand for that capacity. So that's where we see that that the lions share of our growth for the next 2345 years to come from and I expected to come in those kinds of the kinds of increments of.
500 million 2 billion and a half kind of dollar size projects and you get a few of those a year and outside and.
In a position where we have sufficient projects within our core to our what we call organic growth and that.
Meets the free cash flow that we have available to reinvest in our core businesses.
Thank you and maybe just specifically on your liquids pipelines.
Are you.
Seeing some opportunities maybe to extend and pivot to more focus on exports there or any other incremental expansions you see there and maybe more broadly as you look at Keystone XL.
Some good progress being made on the regulatory and legal fronts, but but maybe you can also.
Give us an update on your thoughts to approaching the financing and mitigating any kind of last mile risks and when might all those workstreams come together to be able to.
I'd on on that potential project.
And as Paul here all on the.
First question around.
Opportunities on export et cetera, our.
Focus is growing.
And seeking opportunities around our existing footprint right from Alberta, all the way down to the us Gulf Coast and part of that effort sees us enhancing our connectivity both at the.
Hi side, and the market side and as we make the pipeline not much more attractive.
The market access and supply access perspective, it helps us greatly with our contracting efforts. It also makes all our spot capacity that much more attractive.
To to shippers and.
Produces into refiners.
Specifically around the export there was a lot of opportunities for us to connect to various export terminals in the us and those export facilities as just another example.
On what makes the.
Keystone and the other.
Finds that much more attractive.
For shippers to access because they can realizing that higher net back on there.
On the on their volumes in regard to Keystone XL, we continue to go through a number of processes here most on the.
Legal on the regulatory side.
On the.
Recent events in the last quarter, the Nebraska Supreme Court affirmed the decision by the public Service Commission to prove the route through the state, which means we now have a fully permitted permitted wrote for Keystone XL.
It remains a challenge to the.
2019 presidential permit.
Hearing occurred last month, and we would anticipate a decision on that carries later.
This month.
The state Department issued the draft.
Supplemental environmental impact statement in October .
Areas.
And houses occurring for that.
Statement and we expect the final environmental impact statement to be issued here before year end.
With the issuance of the final environmental impact statement. The Bureau of land management and the Army Corps of engineers will finalize their decision.
Visions and I would anticipate we would see their decisions being issued sometime in Q1.
We continue to work to various legal and regulatory.
Aspects of Keystone XL spas.
If I do we have to get these matters.
Hi, and us.
Got to last small risk and I'll defer to Don in a moment on the financing side, but in regard to the last fall with Keystone XL remains a very important pipeline for Canadian and US produces very important pipeline for us refiners and very important pipeline for.
Added in the United States.
US Gulf Coast is largest refining centers in the world and its significantly configured to run.
Heavy crudes like those produced here in Canada, and those refineries are seeing declining supplies from.
Additional.
Producers and they are looking and.
Needing.
Firstly to have supply and Keystone XL will provide.
Those supplies for them and that's evidenced by the contracting of Keystone XL, which is both producers and U.S. refiners.
When it's done.
Here with respect to the funding side.
The key thing here that work streams Apollo referred to as getting permitting finalized here and we'll continue to work the the costing and scheduling under various scenarios.
And as we progress towards an F. I'd decision point.
From a funding perspective, it remains all the above.
Well look at everything from additional portfolio management. This project would probably bring some hybrid capacity.
Equity in some form whether it be drip ATM, but.
Essentially joint venture partners here would be an important component of that.
And then as we as we assess the overall risk return parameters here if that equation is positive. We will proceed on including albeit the risk elements. We've talked about here. So looking at Holistically. We just continue to push and always streams right now to get to a point and if the risk return for Tc energy.
Is appropriate will move forward.
Thank you ill jump back into queue.
Thanks, Thanks Linda.
Your next question is from Robert Kwan from RBC capital markets. Please go ahead.
Morning.
Rescue mentions the ability to to.
If you're able to secure a few these 500 million to say billion and a half type.
Organic opportunities that could help you achieve your growth would be you could find that within your free cash flow. So I'm just wondering with the drip off now is this really signal that you see and have achieved.
Self funding model say outside of something like.
Keystone XL.
Yes, I think Thats, where we are today Robert based on what we see in our portfolio coming at us over the next few years.
We're comfortable that we're back to the place where we want to be which was.
And self funding model, where we are not issuing common equity to fund our day to day to business activities.
Yes, John to comment.
Robert again, we look at everything on a per share basis here. So.
Turning our share count growth right now is important and a signal to the market that we can get to that soft filing model of a really balancing on credit metrics, we expect to be in the high fours here in a debt to.
Basis, and 15% floated that kind of range, which equates to our current credit ratings.
Maintaining payout ratios as we've historically done for the past couple of decades.
And then.
Investing in these these low risk projects one thing I would note is.
We do add new projects to the hopper, the permitting processes, such where there's not any material spend generally for a couple of years on these things. So we do get visibility.
I would a couple of years now as to as to when those dollars are going to be required arm and we are comfortable here, turning the drip often and managing to balance all these things going forward.
Just to be clear turning the dropoff isn't just the I don't need the cash right here right now so I don't want to hit the share count, but say six to nine months down the road either it comes back on or ATM.
If you all you're doing at this I'm, just kind of going and appetite stuff.
Yeah, sorry.
If it's.
Pumping larger transformational.
Obviously reassess that but what we see right now with our runway of projects.
We think we're in that spot, where we can live with an internally generated cash flow debt capacity within within those credit metrics and we still do have asset sale proceeds coming into the Ontario.
Thermal plants in the first quarter of next year as well.
The other thing we're looking at on coastal Gaslink is.
Bringing joint venture partners and project financing there so when we look at this.
Big Picture Wise, Yes, we are comfortable that we can balance all these things and we can deliver on on these various initiatives and.
We can avoid share count growth in the absence of something very large that comes along.
Okay, I think Youve key Robert is.
As.
As John pointed out and as you see in the or that the the west path deliver expansion into 2023 expansion as we bring.
Bringing new projects today, and that's the kind of timeframe. So we're looking for to get through the regulatory process, you'll get through permitting and then actually ordering equipment and getting to construction you're out there and 20, 320, 425, and I think Thats thats the.
Positive arm of our system right now is it.
The existing.
Our doors and are the places where you can actually get these things done where you have roads already built in debt.
On the relationships with landowners and those kinds of things so existing corridors seems to be where where folks want to build these things. The unfortunate part about that is that from the time, we get the request of service to the time, we actually put it in this.
Request for service till.
Commencement of operations is now at three to four your processes, which is longer than it's been historically.
But thats just the fact of that that the link the regulatory processes. We now we now see in front of us So and that's that's the sort of the turnaround timeframe from from conception to like to cash flow.
I'll just add one more final comments here is.
In terms of share count growth, we'll always look at asset sales as well, our you've seen us do $6.4 billion this year and.
Sizable amounts in the past few years as well so that's the other counterbalance here, where we'll always look at portfolio management.
Versus.
Creasing share count.
As we would have per share metrics.
Got it if I can just finished with.
The main line Im just wondering what you can outline the process as you see it unfolding for both the timeline as well as just anything you can talk about with the framework for post 2020 tools.
Hey, Roberts Tracy.
We are continuing our dialogue with customers and I would say I'm optimistic.
That we will have an agreement of sorts and compete to fall by late this year. Early next year, we are completely aligned on from a principal perspective of using.
Our mainline assets too.
To support the basin and to reduce kind of that distance between the basin in the eastern market sell the dialogues are going well and as I said I'd anticipate kind of later this year earlier next year for us to come to lay out a conclusion on that.
Okay, and you see that is being a bit of a bridging agreement to something bigger or something that could be more.
Transformational.
And what we've seen historically.
We've had to this process a lot of conversations on those more transformational items I don't think we're going to get there and this one.
But we need to get disagreement done to give us that path to understand really what this mainline is capable of and I do see those conversations.
Going back as that as we get should this particular process.
Great. Thank you.
Thanks Robert.
The next question is from Jeremy Tonet from Jpmorgan. Please go ahead.
Hi, good morning.
Morning.
Just wanted to start off with.
Hi level question as far as.
Capital allocation, possibly here in the press release talked about the potential for 8% to 10% distribution growth in 2021.
And it seems like some in midstream overall kind of moderated that.
The growth outlook going forward and just wondering if you could refresh us as far as how you think about.
The rate.
Dividend growth.
Versus other means of.
Turning capital versus the right leverage levels, how does that all come together in decide that what is the right level dividend growth at this point.
I think maybe shot at the high level Jeremy is it I think our our capital allocation.
In philosophy has remained unchanged for 20 or so years.
And you I did that is core it's too.
Pay.
First of all focused on the balance sheet, making sure that we maintain the strongest balance sheet in our sector and that's the first sort of priority with.
The capital allocation secondly, as return of capital to shareholders via the dividend and historically that number's been about 40% of cash flow and approximately 80% of earnings plus or minus a bit and taking 60% of it and reinvesting in our core businesses to the extent that there are good opportunities on a risk adjusted basis that.
So that we think we'll add shareholder value to the extent that those opportunities aren't available. Our philosophy now has been return of capital to our shareholders and then within there how do we allocate capital between businesses and.
And geography.
And how compete for capital is really.
And on changes, where we try to high grade the projects across our system and and debt to the extent that.
We have more projects that.
And then our free cash flow I'd, then we look next to asset sales and portfolio management to augment those.
Most of the assets, we have in our portfolio our solid good.
Cash flowing assets, but to the extent that we see better platforms for future growth. So a good example of that is when we move to ACA acquire Colombia.
We saw the opportunity to exit the northeast power business and redeploy that capital back into a what we saw was eight a longer term growth set of assets in the.
Relation region, the Columbia gas system sat on top of the fastest and lowest cost basin in North America, and we saw that as a good way to add shareholder value. So that's the basic philosophy of our of our capital allocation remains unchanged for transformational opportunities like Colombia, we are willing to add to.
Access equity capital markets.
And our experiences and that our shareholders support us when we when we move on those transformational opportunities, but for most part our objective is to live within our means and we've done that are most of that history of 20 years.
Most recently.
When we.
When a pot that is is when we when we acquired Columbia. When you think of that acquisition. There was a 13 million dollar U.S. acquisition, So $20 billion Canadian and it had a show an 8 billion dollar us growth program around it so you'll pick a number $30 billion Canadian plus our own 10 or 15 billion.
Other.
Both program that we had we saw that is all being very positive we were able to lever our company up to about six and a half times debt to EBITDA with a recognition in our primary focuses our ways.
Around our balance sheet and a recognition from and rating.
And a commitment to them that we would bring our debt metrics back online we committed to the levels that we have not to today. So through this process of growing earnings and cash flow over the last couple of years.
The 8% to 10% growth. The you mentioned, we've also deleveraged our balance sheet quite considerably and we feel that were in place now where we can grow.
In our means but on a long term basis reinvesting our free cash flow and into our core businesses. If we can get a return of about 8% after tax on those kind of investments, we can grow our business and in a range of.
567, 8% and again looking back over our history over the last 20.
As you can see that by reinvesting our free cash flow in our businesses, we've grown earnings cash flow and dividends per share at above that that kind of rate.
And the larger growth the 8% to 10% through 2021 was driven by.
An opportunity to you.
Repositioned the company on I guess, what I'd call a higher levels through that.
Major acquisition in Colombia, along with significant organic growth and the filling up of our system as I mentioned the beginning in my opening remarks today the demand for our system has never been greater and pretty much across.
Most of our pipelines and our and our.
Operating assets Everything's full running.
Capacity and again those tailwinds have contributed to our our growth in earnings and cash flow above those kind of historic levels in that 8% to 10% range. So we're very comfortable through 2021 and post 2021, I'd expect to go back to something more closely aligned with our historic metrics, Yeah, Jeremy its Don here.
Well give you more color and granularity at Investor Day.
The next decades looking shaping up a lot like the last couple of decades.
And don't expect any any real change in our our risk preferences are payouts are our philosophy or keep it simple methodology here.
I.
I would just say that we're probably more utility like than midstream like in our thought process here.
Earnings matter for work, we're not 95% payout on cash flow kind of guys here, So watch from where the season.
That makes sense and then maybe just building off some of the comments there.
With regards to transformational.
Position opportunities seems like TRP has historically waited until there was the stress in the market to be opportunistic there.
Just wondering in the current marketplace as it is right now.
Do you see anything that fits your parameters and as far as.
In return out there or any other comments you could share.
I would say that the current time and we have theres some significant assets that we covet, we continue to monitor them as as we always do.
Nothing in in that sort of fits what I'll call. The risk return I kind of parameters, but there are very very solid assets out there in the marketplace.
Place right now that we would see is very complementary to our business.
And as you pointed out our approach has always been one of being financially disciplined.
When those opportunities present themselves in a way and in an economic form that adds value to our shareholders and then we're willing to act and by doing that I guess.
Our view is that capital market support us when we want to go do those those kinds of things.
Great. Thanks for taking my question.
Thanks Germn.
Thank you you next question is from Ben Pham from BMO. Please go ahead.
Okay. Thanks, good morning.
First question maybe.
Paul.
I'm wondering just more of a near term question Q4, 19, just wondering what what the directional outlook is here on.
So on how do you think this this bill.
Impacted results and maybe just to comment on liquids marketing.
Oh, Hey, Ben.
I'll start.
What the impact of the spill first and then I'll speak to the.
Liquids marketing and I might even touch a little bit on our on marketing bank.
The pipeline the solvent end of our system on the on the spill. Our teams are on site and we have secured the site and contain the spilt. This time, we don't.
No the cause of the incident, but we will conduct a third party assessment and.
Learn the cars and make any necessary improvements to our integrity and maintenance programs.
For now.
Hello early to determine the any financial impact we will be providing updates on our website.
Site as we learn more and hope to give you a little more visibility when we get to Investor day.
On on marketing, we had a good quarter on our marketing operations. We saw some good volume good margins in Q3, probably up about a couple cents from Q2.
And this higher result was.
The result of a number of factors.
Marketing.
Peter for capacity on various pipelines.
Those pipelines, which are offering good value because of various market differentials and they were able to secure capacity on some of these pipelines and relies on that differential.
We also saw some Brent Ti volatility both at the beginning of the quarter and towards ended the quarter and kept capture some of that value and the performance I think as just reflection continued evolution of our people are not programs.
I think Q4 will be softer I think you will see Q.
For migrating back towards levels, we saw our Q1 in Q2, but still one to two cents lower.
And going forward 2020, I think the still.
Going to be some continued variability in the market differentials I think you're going to see these differentials range trade.
Throughout 2020, as we work through the new pipelines coming into the Permian for example.
And various.
Line fill activities, which are occurring now.
Which is also having an impact on our Marketlink operations, we had a softer quarter, but still strong volumes supported by our uptick.
Contracts.
And as we've increased capacity over 2018, 2019, we've been able to attract additional contracts to that system and so these contracts have and they'll continue to provide stable cash flow.
Where we saw some softness in Q3 was in our spot volume.
But when I take a look at.
For example, Q4 than in the net impact in this quarter of the higher contracts and the lower spot volume was under two cents versus.
You too and even though we'll see continued variability I think in the entire pad three market again as these new Permian.
Lines come into service and calls but line fill.
Continue I think Q4 will see further softening but will be.
Supported by this.
Higher level of.
Contracts, we've been able to secure over the over the last on our marketing system.
Okay. Thanks, Brett.
And then on a mediatek ones for dawn on the drip I guess I'm wondering.
Just a timing.
Of that.
How how important was or is the coal so sale is in that.
Analysis, because I guess you could have.
Waited a month for so to get some visibility and its 75% sale or 50 or a little bit less I mean, how like how should we thinking about that.
First.
With respect to the JV process.
We remain quite encouraged by the.
The quality and quantity of participation in that so.
It's not a binary carl on weather and where that is that what we're looking at us.
Were bigger picture, it's we've got $8 billion of assets have come into service, we've got $6.4 billion of asset sales this year.
And.
We believe.
Leave our credit metrics are in line here. So it's a data point, but I Wouldnt say, it's the main driver of the decision to turn the drip off right now okay. Okay. Thanks, Thanks, everybody.
Thanks Ben.
The next question is from Robert Catellier from CNBC capital markets. Please go ahead.
Thank you there was lot of good commentary on your capital spending outlook.
Just wanted to do a double Chuck confirm that I've heard the message, but it sounded like there's enough.
Thanks for your existing corridors to account for.
Free cash flow generation is that correct.
That's what we're seeing right now I mean.
Obviously, it all hasn't materialized, yet, but based on conversations with customers and inbound demand.
Appears that we have a significant pipeline of new organic growth opportunities it'll extended so Joe.
The next Snam and X number of years here.
Okay, and then to the extent that.
Your capital.
Spending includes projects that are outside the existing corridors, where maybe the regulatory process a little bit more challenging.
Is there an understanding in the industry that there needs to be a more balanced risk sharing.
Aneurysm, given how difficult it has to get these project approves, particularly on the regulatory side.
I.
I think you've seen those kind of constructs come forward on on.
New new projects I mean, the west coast.
Okay and LNG projects are a great example of the kind of constructs that are necessary to take to get through new corridors and to build capacity to new markets.
It's at those are.
Those are hard work and heavy lifting and it requires capacity of.
Any sort of credit worthy and technically capable parties to actually make them happen, but those are examples of things that you can see neocon that can't come together and that and the kinds of contracts that are put together to make them happen. Similarly, our pipeline.
Due to Mexico and those are those are transformational for our company, but also for continental flow of.
Commodities and natural gas in particular and it had to constructs the have to put together to make make those work. So we think theres still out there and but obviously the marketplace to your question Amit is aware.
The risks and how to mitigate manage those risks as as a partnership as opposed to.
Kind of approach as we might have had historically.
Okay and then my.
Just my last question here are you in a position to quantify the potential financial impact from the.
Columbia rate settlement, if it's approved as a.
And.
Yes. This is stand the Columbia Gulf settlement is actually going to be filed today think of it is relatively straightforward. It's a black box settlement, what you're going to see as a big nameplate increase in terms of Max rates, increasing by about 20%, but keep in mind, particularly on the Columbia Gulf system virtually all of our.
Our revenues are covered by negotiated or fixed rate contracts, so you're not necessarily going to see a big revenue Bob I would just say that the settlement was that very much consistent with what we thought it was going to be.
To your moratorium seven year come back very straightforward.
Okay. Thank you.
Thank you the next quarter. Thanks, Robert.
Sorry.
Question.
A question is some funny Satish from Wells Fargo. Please go ahead.
Hi, Good afternoon, Im just wondering what kind of demand for gas you're seeing in the Pacific Northwest region.
Is the west path.
Delivery project and GTN expansion is that servicing new demand or just kind of displacing other pipelines in the region.
So this is that I could take a started that.
Our GTN express expansion as that 250000, a day going all the way down 2 million and is ultimately going to serve markets.
For the PGT system. So I think you'll see a fair amount of gas on gas competition, displacing gas that otherwise would come across from the Rockies, but great opportunity for us it's an in court or expansion. It's a compression expansion, we're going to take out some old and efficient compression put in some new units that is going to increase reliability is going to decrease our greenhouse gas foot.
Brent and provide the expansion capacity that the market needs.
Ill just add a little bit to that this is a combination of a pull from the market that stands talking about in a push from producers and I think tellingly 30 year contract terms on average so it's a pretty compelling statement about the attractiveness of that market.
Got it.
And then on coastal Gaslink can you just provide more details on what caused the the cost increase and then I guess, what's your confidence level that cost won't continue to creep higher.
This 400 million is a combination of two things that you heard rest mentioned one is scope. So we've got incremental meter station in a few other things and the other is.
Yes.
Rob quantities and water crossings. There was the section if you will recall of this type path that we couldn't access to do some restrictions until this year until we had if I b and dealt with some of those dishes and so as we've been in to that terrain now the first passes suggested that theres.
More rock issues than we had in our estimates and so the this adjustment reflects that and it as well as.
A greater number of water crossings across the full pipe path. So this is an estimate at that point in time, and we're going to be working very hard to mitigate that but we have now been on the pipe path.
In its entirety and this is our best estimate at that at this time.
Okay got it thank you.
Thanks.
Your next question is some Rob Hope from Scotia Bank. Please go ahead.
Good morning, everyone.
I'm, just hoping we could build.
On the comments on your crude oil export.
Rents earlier on if we pivot that over to to gas what do you have any interest and potentially moving past just accessing.
The Gulf Coast with your with your Das networks to potentially even holding some LNG capacity.
I think under the right.
Correct.
Obviously, that's a that's a business that it probably has a similar contracting profile credit profile to our existing business and under those scenarios, which certainly have that capacity. We've looked at those kinds of things in the past and we'll continue to look at them in the future. It it's a matter of having the right construct.
And to fit with that with our existing systems. So certainly something we'd look at.
All right and then just as a follow up to that would you look to do it in a kind of a smaller bite size manner or something larger there.
Again, we look for the right opportunity, we have a large platform and that we are we.
We work with a number of folks as well that we are delivering and natural gas too and so we have conversations with folks at all sort of ends of the spectrum of big and small.
The key for us is fit and financial stability and.
Growth potential and those kinds of.
Things and that I like the rest of our businesses those would be kind of parameters. It with you'll have to compete for capital obviously as as we pointed out here earlier and Theres a large demand for expansion along our systems. So theres a good call on capital today, and new projects have to compete for capital within.
Within the company.
Thank you.
Thanks, Rob.
Your next question is from Matt Taylor from Tudor Pickering Holt. Please.
Hey, Thanks for taking my questions here just.
Can you provide an update on conversations with customers in the northeast as Capex budgets are coming down growth has been revised lower.
Or just curious.
There has been any rate concessions, there and kind of whats your expectation impact.
Non contracted earnings and future growth plans there.
So I think if what you're getting at is the health of producers overall I would just.
Say that a big picture wise, we really don't have any.
Get concerns when you look at our top 10 producer customers for example.
We're all flowing their contracts at very high load factors, which to me says that they're getting proper value out of their capacity and that they all have a very strong acreage, which means that we believe that molecules are in the ground are going to be produced four up for some time come.
Have you made any.
Concessions there in the northeast.
No no we have it.
And just going back to equal there looks like theres been some life.
Back Insseco can you maybe talk through if you think that's the last into the summer months and then maybe just how this impacts discussions if you're seeing any impact to discussions on adding more mainline.
Pasadena producers are seeing better pricing.
Hi, Eco has jumped in the last month and it's all kinds of things that.
That impact eco pricing and you know the summer is normally a very difficult time, frankly, because one and a half or two bcf of market disappear in the Alberta area.
And.
There is no place for that production to go.
We did have had difficulty in getting into storage.
System has become completely contracted on from basis, such as meet storage access a little bit difficult. We did have some we did reach and general agreement with industry. This summer that we should.
We would agree to.
Introduced a temporary variation in how we restrict.
And how we prioritize services on the NGL system during the summer months and add well we are accessing the pipe from maintenance capital expansion purposes, and that just meaning that for temporary period of time, we would prioritize.
Interruptible service over our from services to create that access to storage. So we think that that's probably had some of this impact positive. We are now finished Adam are going into.
MBR in into the the winter season.
I think we're well positioned for that and we're hopeful that demand. This winter will support continued.
Hi, good strength in April pricing.
That adult we're seeing income increased demand for the mainline in fact, this and capacity on the mainline right now because the bottleneck is the engine TL capacity to get onto the mainline until 2021, we're finished that expansion.
But post 2021 most of the.
Double capacity in mainline has now been contracted and so we are working with our customers on.
Expansion, Tim potentially at the main line in the future to facilitate even a greater access for the basins volumes into the eastern markets, but that that will be a dialogue will have over the.
Most of the next year, so Matt just any to add on.
To that is is that we will work very hard.
All of our basins to to optimize our systems to be able to move as much gases, we can and in doing that hopefully improving the economics of our.
The increase is our focus has been longer term.
And if he can take a look what we're doing longer term, we believe in the long term economics of the basin and that the the gas in the Western sedimentary basin. Appalachian. We believe is that low cost gas, which will compete extremely well in the marketplace over the long haul.
With all the expansions we have underway in on NGL right now, we're increasing that delivery capacity by about three and a half billion cubic feet today over the timeframe that.
And that type of Tracy mentioned and Thats going south.
And it's going going east and it's going West and we'll continue to look at value on top of that.
With the coastal Gaslink project.
And we're going to add another 2 billion cubic feet today delivery capacity. So you'll 5 billion cubic you today or so of delivery capacity coming out of the basin.
Underpinned by the into more of the market fundamentals in the long term.
Liquids rich gas coming out of Asia that the major.
Plays in Western Canada will compete well and as we pointed out as the standpoint. It out as you think about things like exhibit northwest in California, there isn't that much new incremental demand.
But obviously Canadian gas is competing for market share and.
With 30 year contracts it appears that Theres no great confidence.
The basin will continue to grow into that 3.5 billion cubic feet today, a capacity that said that we made available and if we can make available anymore.
I think Canadian gas will compete very well into into into all of those marketplaces.
Just to clarify seriously when you say.
Mainline fleet contract did you need to add more.
Our investment dollars to add more mainline capacity or are you already have enough.
Congrats to get them.
Once we finish this is you know Matt we have a considerable expansion program underway on the NGL system then.
Big chunk of that comes into comes into service in.
2021, which should give us enough access often GTL into the mainline to think about how we get more volumes down that down that system.
Great. Thank you.
Okay. Thanks, Matt.
Thank you.
Your next question is from Shneur Gershuni Gershuni from TV.
Yes. Please go ahead.
Good morning. This is I guess from does that calling in from Schervish any.
Incident management.
Progress on Keystone XL pipeline now versus last earnings call. It all goes with the recent developments.
If they use administration changes do you feel there is there protections in place.
Hi, It's it's Paul Miller him.
We progressed Keystone XL over the last quarter. When you look back going into Q3, there was uncertainty around the wrote in Nebraska, there was uncertainty around the issuance for example of the.
Draft supplemental environmental impact statement since then the Nebraska Supreme Court.
Has affirmed the public service commissions approval of the wells. So we are.
Fully approved in the state and while the jurisdictions in which the.
The pipeline will be cited.
We have received the draft environmental impact statement, the we view that environmental impact statement is underway and we anticipate getting.
Finalized here by year end, and then wed look to see the Bureau of land management and the Army Corps issue their decisions in Q1.
Ultimately.
Comfort level is going to revolve around getting these various legal and regulatory proceedings behind us.
Before we commit to forward on and if I'd.
Oh, I'm, sorry, and then the second part of your risk I think.
It was in regard to.
Last August change administration and.
Although our focus is managing the legal regulatory and.
Project management activities.
Keystone XL.
Remains a very important pipeline for the industry and.
Very important pipeline for candidate in the United States.
It it is fully contracted by both Canadian and us interest.
And as a result, I think that.
The merits of the pipeline, a well established and well understood and we will continue.
When you to focus on the legal the regulatory and project management activities.
Okay.
Sorry, Thanks Saga.
Thank you. The next question is from Patrick Kennedy from National Bank Financial. Please go ahead.
Hey, good morning, just with the NGL expansion was curious to get your thoughts on dealing with the new CR.
Relative to the any b.
If we should be expecting any material change in the regulatory process.
At this the west path expansion Patrick is one that will fall under the new CR.
Pro set our current the all of the rest of the NGL expansion that we have underway will follow as.
As you know under the old kind of any be rules and processes.
So we've been working.
Around what you expect on this and were optimistic impact. So this falls underneath the level of an expansion that would trigger the impact assessment Agency review and it is an expansion of two separate assets. So we believe.
We're optimistic that this procession Brian .
Generally in line with the timeline that we would have seen under the former any be Rosenberg span rules and procedures, having said that it's new to west were working through it its new all of our stakeholders, who are also working through it.
So we will have to see how this goes.
Okay, great appreciate that.
And then.
Just on the Alberta power market year was interested to see you guys.
So on and off take agreement for renewable power I was just curious.
Maybe a little bit of background on that.
Then also just your your overall view.
Respect to your remaining Alberta power assets.
And the market in general.
Hi, Patrick its francoise I'd be happy to take that question.
That that transaction, obviously, it was very modest size, but complimentary to our existing trading business. It was an opportunity to acquire attractively priced energy and remarketed.
And really.
Capital light way for us to invest in a solar resource in Alberta.
We we like the Alberta market, we supported.
The Ria reaffirmation of the energy only market.
We.
We believe in the fundamental merits of all of our cogency.
Ladies and Alberta and.
Would look for opportunities to invest more capital along a similar construct if the opportunity presents itself.
Got it thanks everybody.
Thanks.
Thank you.
Ladies and gentlemen.
This concludes the question answer session. If there any further questions. Please contact Tc undersea Investor Relations I'll now turn the call back over to my data. Please go ahead.
Okay. Thanks very much.
We very much appreciate your interest in Tc energy.
And we look forward to speaking to begin soon bye for now.
Thank you.
First has now ended please disconnect your lines at this time and thank you for your participation.
This conference is no longer being recorded no hedges promoted coffeehouse it that the healthy.
The conference has ended please disconnect your lines at this time and thank you for your participation.