Q2 2020 TC PipeLines LP Earnings Call
All participants please stand by your conference is ready to begin.
Good morning, ladies and gentlemen, welcome to the TC pipelines LP 2022nd quarter results Conference call I would now like to turn the meeting over to MS. Rhonda Amundson. Please go ahead.
Thank you operator, and good morning, everyone I would like to lock in Q2, TC pipelines that second quarter 2020 conference call I'm joined today by our President Nathan Brown, our VP and general manager Jeanine Watson and our principal financial Officer Chuck Norris.
Please note that a slide presentation mother company their remarks, and it's scalable honor web site at TC pipelines LP Dot com, where it can be found in the investor section under the heading and that's the presentation.
Nathan will begin the call today with a review of TC pipelines, 2022nd quarter results Janine will provide a commercial update on the partnership's assets and our growth program following which Chuck will provide if you ever do you ever financial results for the second quarter made him overturned and wrap up our remarks I suppose the so key takeaways following them.
Remarks, I will ask the conference operator to coordinate your question.
Before we begin I would like to remind you that certain statements made during this conference call will be forward looking regarding future events in our future financial performance. All forward looking statements are based on our beliefs as well as assumptions made by in information currently available to us.
These statements reflect our current views with respect to future events that are subject to various risks uncertainties assumptions as discussed in detail in their 2019 10-K as well as their subsequent filings with Securities Securities and Exchange Commission, if one or more of these risks or uncertainties materialize or the underlying assumptions prove incorrect.
Correct actual results may differ materially from those described in the forward looking statements.
Please also note that we use the non-GAAP financial measures EBITDA, adjusted EBITDA and distributable cash flow during our presentation, EBITDA and adjusted EBITDA or approximate measures of our operating cash flow. During the current earnings period and reconcile directly to debt net income distributable cash flow was presented to provide a measure of cash.
Generated during the period to evaluate our cash distribution capability.
These measures are provided as a supplement to GAAP financial results and we provided reconciliations of the most closely related GAAP measures interests, you see filings with that I'll turn the call over to Nathan.
Thanks, Rhonda good morning, everyone and thank you for joining us today.
Really we continue to live in extraordinary times of the cold in 19 pandemic persisting 11 significant impact on people around the world.
I really hope you in your families continue to stay healthy unsafe during these uncertain times.
TC pipelines business continuity plans have been in place across our company since early March World Health organization declared Koby 19 to go and then it's a lot of guests continue safely and effectively operate our assets and execute our capital programs.
Services, we provide a broader consider essential critical given the important role our infrastructure plays the delivering energy to people and businesses across the United States.
We take this responsibility seriously it'll continue to deliver the energy and advanced projects vital to industries and institutions as well as meeting the needs of millions of Americans.
We've done this in a safe and reliable matter following rigorous health hygiene distancing protocols.
These actions and sure energy that is vital to the David why just so many continues to be delivered seamlessly across our country.
I'll now turn for a second quarter financial results.
As outlined in our news release and looking at slide floor.
Please to report TC pipelines solid quarterly results within our portfolio pipeline assets continued to perform as expected.
With approximately 90% of our cash flow coming from long term take or pay contracts were inflated do a great degree from recent volatility associated with volume throughput commodity prices, it's been experience by many others and energy business.
Customer demand for our services remained strong despite the impact of Coca 19 on a broader north American economy.
Aside from the impact of normal maintenance activities planned regulatory adjustments and seasonal factors.
We've not seen any meaningful change and utilization of our assets.
Further reinforcing the resilience and stability of our natural gas midstream business.
We generated $57 million net income during the second quarter 2020, slightly more than a 55 million at the same period between 19.
EBITDA was 103 million for the second quarter and adjusted EBITDA was 110 million compared to 99 million at 113 million respectively generated between 19 over the same period.
The results were larger comparable year over year.
We generated 55 million in distributable cash flow in the second quarter 2020, compared to 2019 or do you see up was considerably higher 70 million.
The decrease was largely result of higher maintenance and integrity capital expenditures.
Higher maintenance costs, although a drag on distributable cash flow with what the positive environment of higher natural gas flows. These costs will be added to rate base and enjoy return on capital for future Kohl's.
We paid out 47 million in distributions to unit holders during the second quarter same as and stayed in the same period in 2019.
The partnership also declared a second quarter distribution of 65 cents per common unit, which is consistent with our quarterly distributions in first quarter 2018.
The stability of our low risk business model, which is underpinned by long term take or pay contracts and strong demand for our central energy services. That's provided the basis for our solid financial performance and our ability to maintain the distribution to unitholders even in periods of economic stress and uncertainty.
Chuck will discuss our financial results in more detail later in called.
We also continue to advance our reported or excuse me our organic growth program work continued on both our GTN Express project and our tests were expansion.
Our PNG as organic projects are progressing well will provide for incremental capacity Rpgs pipeline system in the northeast.
We anticipate agents to work practices and other restrictions put in place by government that health authorities and responsibility 19 times then it could have an impact on construction timeline, but generally believed this will not be material for our operations.
They will discuss these and other commercial developments more detailed matter too.
During the second quarter, we also completed its notable financings.
Successfully refinanced 100 million <unk> maturing gotta, GTN and Upsized the transaction to allow for a necessary capital required for a GTN Express project.
We also extended the maturity date test for as long term loan by one year August 2021.
Both of these transactions were accomplished amidst the uncertainty in the financial markets and represent the continued confidence in our credit by the investment community.
Two more notable credit events transpired during the quarter standard and Poor's upgraded great Lakes credit rating by two notches Triple B plus stable.
Toward appeared GTS, one notch up they upgrade triple B plus stable.
Both result improvements in their financial risk profiles.
Looking at our financial position during the quarter, our bank leverage ratio was approximately 3.9 times distribution coverage is approximately 1.2 times.
Our liquidity position is likewise very strong.
No outstanding borrowings, we have full availability of our 500 million dollar revolving credit facility.
Well, we're proud of our financial performance and returns we generate for unitholders. We know our ongoing success depends on our ability to bounce profitability with safety environmental and social responsibility.
What a stress that safety and reliability are critical priorities for us.
Our general partner TC Energy has 65 year track record of safe and reliable operations and we're committed to protecting the environment all that we do.
Our natural gas assets are critical to the quality of life in the communities. They serve we believe our systems will be important contributors and achieving greenhouse gas emission targets further improved carbon footprint North American beyond.
Now turn call over Jeanine watching our VP and general manager provide additional color on or assets in our commercial development together with our market outlook.
Thanks, Nathan and good morning, everyone.
Moving on to slide five.
He pays assets are highly contracted critical infrastructure as is evident in their steady performance this past quarter.
As Dave noted these pipeline systems have firm take or pay contract structure that largely insulate them from volatility associated with fluctuations in market for throughput.
The plate and slow down of economic activity to cope with 19, we saw no meaningful change and utilization of our assets.
Q1, compared to our expectations based on prior Years' experience.
We expect to see better tied to our maintenance activity.
And our assets.
Real credit issued during this period, nor where there any noteworthy contract expirations or non renewal.
Turning first to yet.
The report, but you see energy of West South expansion work upstream of the South that came online in two phases.
In July for.
This work facilitate an incremental 270000 back from today.
Natural gas to slow down the pipeline for delivery onto GTN and it's fully supported by long term contracts that commenced service on those.
In Q2, GTN undertook a series of planned overhauls several of its complex is based.
Continued it said you old programmable automation upgrade and pipe replacement.
Actually we're covering the minor scheduling delays in Q1 as our crews prepared to perform network as per our corporate night.
Oh.
These activities help compared to <unk> commenced work on the DTN accretive projects as planned in late summer early fall this year.
Looking to the Midwest operationally northern border had a strong corridor is there anything no outages that required a restriction to firm contracted capacity.
However, due to market factors, we saw a decline in this outset typically high utilization rate.
Operating in an average of 79% load factor through Glenn Cohen for the quarter.
Balkan seats averaged about 1.34 Bcf per day down about half would be from Q1.
At the same time, the WCS being flowed about <unk> 0.66 Bcf per day down marginally from Q1.
Northern border from capacities, largely sold out and the take or pay nature of those arrangements means that revenue from this out that are largely insulated from fluctuations and utilization rate.
Furthermore, the strategy northern northern border.
In Q1 of locking up it seems more capacity for longer term.
By the National defense to the market dynamics that developing Q2.
As the collapse of oil prices and low demand drove down production.
In the Bakken.
At the same time storage fields in the WCS see entered their injection season was at historically low levels, creating a drive to fill storage in Canada.
<unk> prices threats strengthened and significantly tightened the Alberta venture a spread for most of the corridor.
As a result, northern border short term interruptible capacity went largely unfold for most of the corridor.
Interestingly Rocky gap responded to this opportunity starting with about 10 to 15000 Dekatherms a day a leveling off at about 95000, DEXTENZA a day of gas flowing on northern border Glenn Olin.
These flows are utilizing the remaining long term capacities on our bison pipeline, which expire in January of 2021.
We think the resumption of flows out of the Rockies illustrates the strength of the Lockett told dynamic on northern border down into the markets its or.
Now towards the end of Q2 as the price of oil save lives and Alberta sorts itself.
They should rates on northern border began to trend back to normal levels in the month of July.
Looking forward, we think that strong market demand in the Midwest, we'll keep northern border highly utilized and support contract renewals on the south that.
So the supply mix between the Bakken WCS C and rocky, making <unk> block.
Turning briefly to regulatory matters as we discussed last quarter Everquest filed on May for four and 11000, beating you keep calling <unk> safe Harbor provision the natural gas at northern border intimate many were quite the cost.
On May 29, the FERC accepted and suspended north and northern borders request change its tariff.
Subject to refund and the results the technical conference scheduled for Tomorrow August.
And before moving on I will note that we <unk>, we remain committed to working towards an economical expansion projects.
Slide approximately half of Bcf incremental takeaway capacity out of the Balkan.
A potential projects that could include reversing bison or making its close by directional.
The recent collapse in oil prices and resulting Balkan producer announcements have impacted progress on this effort. However, we believe that the block and it's a prolific basin and its producers and operators are highly resilient.
We continue to look for operate opportunities to progress our Vice and Express project. So it's in service date is being Retargeted for early 2012 24.
Subjective factors like blocking producer recovery timing and the resolution of the dapple shutdown uncertain.
Now moving on Great Lakes continues to be a steady performer with equity earnings roughly on par with Q2 2019.
First close the fiber one GE docket for this asset in Q2, noting that great lakes had voluntarily reduce it freight like 2% in Q1 to 2019 and had to come back provision by Q3 2022.
Because the last of our outstanding fiber one G docket and therefore, we believe there will be no further impact the flow from Fourq 2018 action.
Affecting Tc pipelines.
You are quite equity earnings were slightly ahead of its Q2 2019 results largely due to successful hedging and incremental firm capacity sales and lower property taxes.
In Q1, Iroquois received notice that the constitution pipeline with terminating the precedent agreement for you're quite right interconnect project in accordance with its term.
On July Thirtyth.
You are quite signed a reimbursement agreements with constitution and its guarantor Williams Partners LP.
For $48.5 million at payment for costs incurred and ability to sell with sign traveling to progress assets to constitution.
And it was quickly July the pretty firm.
<unk> accident share will be distributed as a return of and on capital.
Great.
Quarterly result on the remainder of our transmission system, we're all roughly comparable to Q2 2019.
Now turning to slide.
The chart illustrates our capital outlook from major projects over the 20 to 2023 period.
It is largely unchanged from what we presented in May.
To date, we have experienced no significant slowdown in our permitting preconstruction or construction activities, nor material changes to our planned capital expenditures.
Our operator, TC energy has successfully implemented business continuity plan across our footprint.
However, it's still too early to determine whether the pandemic will have any long term impacts on our capital program.
We continue to monitor the impact that cobot 19 may have on productivity as we execute our product our project.
The bars on the graph represents TC pipelines proportionate share of estimated capex based on our ownership level.
Looking first at GTN Express work continues on this project the class demolition work in support of Phase one horsepower enhancements is expected to commence on schedule starting in late summer and early fall.
Phase two calls for a new compressor new compression at existing station with a planned in service date of November 1st 2023.
Work is underway to prepare the necessary regulatory filing for that matter.
Looking at Cortland projects. The PXP project continues as planned.
Phases, one and two came into service on November 1st 2018 in 2019, respectively.
Construction on phase three continues without incident as our contractors Cobot 19 mitigation class had been successful in keeping the project on time, while maintaining all the necessary safety protocols.
Phase three gas flows are also contingent on the successful completion of a small scope of work upstream edit TQL compressor station.
We continue to monitor the progress of this work closely and currently anticipate that T X P will be fully in service on November of this year as planned.
Turning to Westbrook Express.
Phase one came into service on November 1st of last year in phases, two and green or they'll estimated to be in service November 2021, and 2022, respectively.
FERC issued certificates for both save two and three on June 18th of that year.
Looking to North Baja Express you will recall that this is a potential 495000 depofoam expansion Crocker rock project, along with assets mainline designed to transport supply I know the proposed costs as a whole LNG facility.
I noted on their recent analyst call that cobot 19 in Mexico has impacted the Mexican governments ability to issue permits.
I know I know the also said there have been no objections to with request for export.
So far as they are aware and indicated they expect to receive them once the Mexican government restart restart permitting coffee.
But north Baja has agreed to extend the date for an F.I.D. decision in its precedent agreements with its chipper she's a third quarter of this year.
The estimated project costs costs are means $90 million, excluding if beauty thing and we believe we can still achieve an in service date as early as November 2022.
North Baja filed for it section seven see application for this project at the end of last year and FERC issued a schedule for environmental review for the project, which targets relief of perks environmental assessment by September the eight.
Looking to Cook Aurora.
That's garage section seven feet filing with made on June 24, and FERC has solicited input into with environmental assessment project.
Comments on which are due by September the third.
This project will increase from capacity on Tuscarora by replacing existing compressor units with a larger capacity unit near Wadsworth, Nevada.
This project has a cost about $13 million with a planned in service date of November 2021.
And finally, you're quite <unk> Xcede project continues to progress to its regulatory.
Right.
FERC issued a notice of intent to pair the environmental assessment on March 20, Pizza and has garnered about 70 comments about safety individuals and groups.
For continues to be on schedule issue the eight by September Thirtyth.
Your claims also making some progress on state and local approval for example, because you're talking to see the successful coastal zone.
The review from Connecticut.
In summary worked towards FERC decision optimizing construction of this project is still in pop anticipated in early 2021.
And we continued to plan to self fund the capital during this period through a combination of death.
The asset level and contributions and keep the pipeline the latter funded with cash from operations together with our revolving credit facility if required.
And looking finally at maintenance Capex.
Though a small portion of our planned maintenance activities have been shifted the subsequent periods as the result of our business continuity planning.
Our proportionate share of normal course maintenance is expected to be.
151 million in Twentytwenty inclusive of a.
$38 million third quarter acquisition of a commercial I keep system again, all self funding.
I will now turn the call over to talk more our principal financial officer.
Our second quarter results in more than.
Thanks, Good morning, everyone.
Moving on to slide seven I'll now review the partnership second quarter financial results.
Net income attributable to controlling interest and the second quarter was $57 million or 78 cents per common unit compared to $55 million or 75 cents per unit in the second quarter of 2019.
This represents a 4% increase year over year and was primarily were real primarily reflect a little harder revenues appeal to tee us from what you expansion projects work on natural charges, partially offset by scheduled rate reductions on certain of our pipelines.
EBITDA was $103 million in Q2 of 2020 versus 99 million in your previous once again, primarily the result of higher revenues are PNG Tee us.
Adjusted EBITDA for the second quarter of 2020 was $110 million compared to $113 million in 2019, approximately 3% lower.
The decrease was largely the result of hard amendment spending of northern border together with a lower distribution from our equity investments in the World War.
You recall had been making quarterly payments to its owners of surplus cash whats Bell and true from the Dailyburn doesn't isn't there a clause in the Q4 2019 installment Mark for final payment associated with that obligation.
The partnership distributions of $47 million the common unit holders in the second quarter. The same amount that was paid in Q2 of 29 team.
As mentioned earlier, we declared a second quarter 2020 distribution of 65 cents per common unit.
This is consistent with not declared in each quarter since Q1 of them 22.
And distributable cash flow was $55 million in the second quarter of 22000 $15 million lower year over year.
The primary drivers of the decrease were lower adjusted EBITDA. The other with her normal course movements from integrity capital expenditures on GTN.
Moving from higher says don't utilization in response to sustained increase now can does transportation volumes.
The higher maintenance cost when their systems, although a drag on distributable cash flow reflect the positive environment of higher natural gas flows and these costs will be added to our pipelines respect the rig basins and will attract the return on capital to future tolls.
Turning to slide eight.
Revenues in our consolidated pipelines with $95 million in the second quarter of 2020 were $2 million higher than those are the same quarter last year.
This was partly the result of new revenues from P. and you just as good projects. The went into service on November 1st in 2019.
Chris was partially offset by scheduled <unk> reduction of 6.6% on GTN effective January 1st of this year and the 10.8% decrease on Tuscarora effective August 1st of 29 pm.
Together with lower opportunities for the sale of discretionary services by GTM during the period given increased natural gas storage injections upstream of GTN in Western Canada.
Equity earnings in the second quarter of 2020 were comparable year over year in second quarter overnight and depreciation expenses were also comparable to last year.
Financial charges, another $3 million were 14% lower in the second quarter of 2020 versus the same period of 2019.
Primarily attributable to higher allowance for funds you joined construction, where if you do see which more than offset higher interest charges, resulting in the decrease if you do you see increased primarily as a result of our continued spending on our expansion projects as well as higher maintenance capital spending.
Moving now to our financial position on slide nine.
Our healthy financial position is reflective of the proactive measures that we have taken over the past two years.
Our balance sheet, a strong with a solid capital structure underpinned by our high quality energy infrastructure pipeline out jobs.
Our investment grade credit ratings, including those of our subsidiary companies provide us with the financial flexibility as we look to organically grow our portfolio in the future.
We believe our ratings reflect or solid financial condition than outlook.
As mentioned earlier, Great Lakes, Great Lakes is credit rating was upgraded by two notches by S&P, the Triple B plus.
PNG Justin's rating was also upgraded by one dog.
Triple B plus flight search both will stay below looks.
Both upgrades were primarily the result of ongoing improvement other financial risk profiles to the increase in long term contracting levels, including PNG Ts was successful in November 2019 on time and on budget in service of the phase two of the PXP broad drugs.
The significant portion of a long term contract revenues he was with investment grade customers and we have not experienced any collection issues on our receivables to date.
We continue to execute our suite of organic growth projects on a self funded basis without the need to access the equity capital markets.
Capital market conditions in 2020 had been significantly impacted by the coldest 19 pandemic, resulting in periods of heightened volatility and reduce liquidity.
Despite this our liquidity position remains strong.
Underpinned by our stable cash flow from operations cash on hand, and full access to EUR $500 million senior revolving credit facility.
Turning now to some of our financing activities on the quarter.
Do you can successfully executed a 175 million dollar tenure private placement financing in June other than the truck the rate of 3.12%.
Proceeds were used to refinance maturing 100 million, 5.29% senior notes with an additional 75 million to utilize the fully funded got component of our GTM Express project through the rest of 20 Twond.
We also executed the 75 million dollar probably would show facility, which allow which will allow for draws overtime to fund the remaining debt capital for the do you can express project through the completion than 2023.
Additionally, we were successful in extending the maturity date of touch was 23 million dollar unsecured term loan. The August 2021 under generally the same terms.
And lastly, we are well above sonora activities to secure term financing or PNG Tee us to fully fund the couple of cost associated with the Portland Express in Westwood was Westbrook Express projects.
Consistent with our self funding model, we continue to prudently manage overall average debt balance, resulting in a bank leverage ratio at 3.9 times.
This ratio as increase from out of the previous quarter due to the funding of are ongoing capital expansion program.
And is expected to migrate to the low to mid four times or.
We maintained our quarterly distribution of 65 cents per common unit, resulting in solid distribution coverage ratio of 1.2 times for the quarter ended June Thirtyth 20 Twond.
Although lower than previous quarters, we expect or distribution coverage on a run rate basis to be in the 1.3 to 1.4 times area.
As Nathan engine no longer earlier, we continued to execute on <unk> organic growth program with our project is proceeding on time and on budget.
And we continue to use our steel only grown advantage or crossword pipeline system to explore additional growth opportunities.
That concludes my remarks on the second quarter financial results I'll now turn the call back over to Nate.
Thanks, Chuck I'll refer to slide 10.
As I mentioned at the outset had another good quarter this year and our assets continue to perform well proving out the resilience and strong low risk business model.
Going forward or cash flow will continue to be derived from our portfolio of critical natural gas pipeline infrastructure assets underpinned by long term take or pay contract for credit where the shippers.
In aggregate our system or approximately 90% contracted on his long term take or pay basis.
We continue to prudently manage our financial position and believe our actions resulted in a strong balance sheet our.
Our bank leverage ratios currently approximately 3.9 times distribution coverage is quarters are sold 1.2 times.
These healthy metrics are enabling us to self fund organic growth as we outlined earlier for each of our GTN customer and beauty as projects.
Well the term retiring and maintain a bank leverage ratio in high three low four times area and distribution coverage of approximately 1.3 to 1.4 times.
As Jeff mentioned, our leverage is expected to migrate up to the mid four times as we progress through our capital program.
We anticipate will settle back down long term target range with expansions are completed.
We reiterate that we do not need to access the equity capital markets to fund our current growth program.
Our focus remains on the provision of essential energy services together with the optimization morass, our portfolio and include organic growth over time.
We're excited to be pursuing approximately 700 million of growth projects across our suite of assets.
Include our current GTN Tuscarora <unk> did you guys express projects together with our north Baja and Yervoy development opportunities.
We continue to conservatively manage our financial position cellphone are ongoing capital expenditures and maintain or debt at prudent levels.
Believe we're well positioned to fund our obligation for a prolonged period of disruption should it occur.
Based on all available information. We noted today, we do you expect to deliver consistent financial performance going forward and our business.
Support are currently quarter lead distribution level of.
55 cents common unit.
I'll now turn the call back over Rhonda.
Thank you Nathan I'd now like to open the call up for questions. Operator. Please go ahead.
[noise] [noise] [noise] Hello, operator are you available.
[noise] [noise].
Hello, Operator are you there.
[noise].
Hello, everyone. If you can still here, we are reestablishing contact with our operator, please standby.
I apologize for the interruption are we ready for the question and answer session.
Yes, we are if you could go ahead that'd be great perfect I'm, sorry, how be instructions already been relate.
Yes.
Right. So the first question is from let me see Matt Taylor from Tudor Pickering. Please go ahead. Your line is now open.
Hey, Thanks for taking my questions here.
On bison rhythm supply push or demand pull volumes and just wondering if you collected interruptible on on those volumes or where they just existing shippers.
Utilizing their take or pay.
It was.
Nathan the.
The volumes are transferred it under the existing contracts. It was a capacity released by the existing contract holders.
I'd say, it's probably fair to look at it as a demand pool.
Just like we said underscore the value of the delivery market said that Rockies gases.
But yeah, there's elements why push there too.
I think for them and I was just thinking because I.
I believe you've now referenced spark.
Express being in 2024 is there an opportunity here that you could do some some re contracting in the interim I'm just trying to think if this is just a short term occurrence or if there's some some more to read through here.
There is some demand pull coming out of the Rockies.
Well certainly it's a it's an opportunity we're watching it to the extent, that's the sort of dynamic would persist beyond.
January 21, when the existing contracts run out we would be looking at a at a marginal upside to what we kind of had nor plans with.
With the expectation at some downtime before a button experts could materialize.
Excuse me advice express the Bakken.
Bakken outflows and that down.
Potential bi directional flow on bison is one that we see as a longer term persistent market structure, but in the meantime, yes, we have the infrastructure there in place to service that Rockies gas trying to find the element of value market. So we'll be looking forward to that in our marketing opportunities going forward.
Could I think we over to northern border. You mentioned, you expect to re contracting to be robust there to be resilient. How much is up for re contracting and 2020 and 2021 here. If if in fact Balkan flows take some time to normalize.
Oh, I don't have a committed to memory and I'll, let jeanine kind of chime in here, but.
But in terms of the longer term look on the value for northern border, we see it being very strong the the recourse really contracts on border.
Have a five year right of first refusal feature and then so if we see a market condition, providing value that it has historically here for the last decade.
At anywhere near those levels that value has been a pop out for all the people are going to want to bid for that capacity. So as that has a capacity becomes available on oh sort of a rolling basis.
Don't see any any real pressure on that re contracting.
Yes, the material on 20, 2020, 2021 or is it just a couple hundred million here and a couple hundred million there.
Are you asking about going in that sector Newell.
Yeah exactly yet.
Typically on northern border, it's got to quantify.
Got a contract structure that drive five year renewals and generally about 20% of these contracts come up every year change a little bit year to year, but not by much.
But this is still very economic.
Transportation on that path. So we do.
Yes, the paint that all the contracts will renew.
That's helpful and one last one of the FERC risk now behind you I'm wondering if you're going to thinking a ways to attract incremental shareholders to garner a higher multiple like one way im thinking about specifically is capacity to the C Corp, or something else I'm. Just curious if you can address that now is.
As you've effectively put some of these risks behind you you're looking at growth and now you're utilizing a self funding model.
Oh, yes sure. It's a question we get fairly often I'd say, it's something that we looked at from a strategic perspective as far as corporate formation are electing to be taxes C Corp, and.
Those are compelling from certain angles, but they also have cost. So we give those a thorough look on a fairly regular basis through with our.
GTN or board.
Something that we look at.
It does have some filling aspects to it but again not costless.
Great. Thanks for taking my questions. That's all for me.
Thank you. Your next question is from Jeremy Tonet from JP Morgan. Please go ahead.
Hi, Good morning, glad we got the operator back here.
Just wanted to start off with side Iroquois enhancing by compression. If you could just provide a little bit more detail I guess, how that regulatory process is proceeding here and ultimately how much capacity could be found New York city seeing that there's not really going to be any new pipelines built to send more gas in there.
And if they see the question I'd say, we're moving at a measured pace as Dan mentioned in the remarks.
The the process is going at pace.
Intervenors that have chimed in at this stage with the FERC part permit processing have.
I had mentioned there there are two cents, but nothing that we would say is.
Unexpected or unusual can just kinda waiting in due course to fill up that keep.
Moving down the the critical path, but.
It's it's taken a measured pace.
Ladies and ultimate customers via exceed to make sure we addressed the stakeholders and we're.
Taking that one jurisdiction over time as mentioned with the Connecticut water survey that we did.
So yes, that's so it's going on phase nothing unexpected there I think it's positive you know as you mentioned, there's limited capacity a physical assets that are going to be reaching.
Metro area, and we're looking to optimize that with this one is it the first step.
There's certainly other opportunities to expand Iroquois being more midpoint compression but.
Likely what or how that would would pencil out what the with the limits or of the engineering.
Don't really have anything in hand.
The reference, but there's certainly that opportunity there energy do you have anything else that.
Well I think that's it I think that any expansion needs to sit within me sort of legislative framework as well in New York and I think that you're caught coin exceed <unk> project really does that.
I'd be another dimension, we'd be looking at.
Down the road, if they want to be another opportunity.
That's very helpful. Thanks, and then want to come back to bison and ask a little bit of a different question. Here you know there seems to be risk that Dakota access pipeline could be faced with a shutdown.
At some point and you know if for some reason that were to happen for.
A period of time seems like there could be a call on the bison pipeline to provide crude oil you grass and.
If sufficient I guess demand materialize, there and contracts met or what you guys were looking for how does that how do you stack up there's two different opportunities that gas as far as the gas service bi directional you know the bison, probably because you talked about it versus potential crude oil type.
Yeah. That's that's that's a good question and that said.
It's a it's a moving its kind of a moving target on on how the backing out what's going to look I think everybody's looks looked at the base and can see that things change from kind of year to year on what maybe what maybe the solution for its needs.
As we mentioned in the past a liquid conversion option for four bison had been on the table.
It's it's clearly more kind of technically attempting to get it done, but it's definitely possible. So our jump Rgs Energy's converted that's why is the liquids in the past and sort of others in the industry. So it's certainly not in pricing.
And if the market where to play out to support that option better than the a better than a gas reversal pace and we've got a it's on commercial commitments to do it. That's that's the type of a project that we that does that it or risk profile in somebody's willing to invest in but then wait for the wafer the mark to mature make sure somethings executable and we didn't work through all the relevant stake.
Holders as we go so.
That's an interesting opportunity one that we've we've looked at in attach and have.
Had some plans to to work through an actualize it but it's a it's it's early days.
That's very helpful. Thanks, and just turning over north Baja expense real quick here, you go where ever to be upsides to large scale at some point the future would north Baja.
Be able to be expanded further there what type of project might that look like if the demand materialize.
So it's similar to sort of ER pipes in the northeast with your Cohentannoudji as the compression on north Baja is fairly limited as it sitting right now there's some ability for additional midpoint compression at least a kind of on the drawing board getting that completed and what.
Look physical limits are there to the fiber or one question. The other one is.
It's being sourced from and other infrastructure down south of border there'll be receiving it yeah, but again all of those opportunities are being.
Considered in concert.
We know that that as you mentioned the steel in the ground is the advantage that we got.
The than the avoidance of further a greenfield linear construction is of a premium so we see things just like that additional upsizing for potentially by a compression alone or in its been about or existing facilities is one it's a it's really kind of leading the charge in our industry as far as a in quarter expansion and developing.
Great. Thanks, just last one if I could just a quick question hydrogen well, it's pretty early in the development at this point and have some way to go begin to energy infrastructure company, and if opportunities materialize and to meet your investment criteria with long term take or pay contracts with good counterparties, we consider the possibility provide.
Hi, Jim logistics ore blending and for things like hydrogen or renewable natural gas. How much are you looking at those sorts of field right now and how could that be a part of your future mix.
Yeah, absolutely that's the type of thing that you stepped it up pretty well you you've.
Listening to that.
The way, we evaluate our projects very closely we if we've got the right kind of risk profile and can utilize our assets to meet that were welcoming to that and.
Yes, he said seen as a.
As a more more green or more renewable option were certainly looking and those types of investments as well.
Small scale stuff is already audience already included in some of the work that we do on across our assets. We've got a buyer manufactured gas facilities small scale with the indoor GTN pipe, we've got a waste heat recovery systems on our northern border pipe and we see this is as normal course stuff. So it's it's part of the stewardship part of what we can do to to me.
At the needs and demands that are out there and when you get something its economic and uses our is there still we're happy to do it.
Great. That's very helpful. Thank you.
Thanks, Jeremy.
Thank you.
Once again, please press star one on your telephone keypad, if you have a question or comment.
Next question is from Michael from Goldman Sachs. Please go ahead.
Hi, guys. Thank you for taking my question I have.
Really an easy one although it's more about.
<unk>.
Okay.
What happened.
Constitution that she talked about in the prepared remarks, how should we think about that at all in terms of cash between the two entities as well as any ongoing if any earnings or EBITDA.
For <unk>.
Yeah. Thanks My question My close there I'm going to legend, you take it she's a kind of on that front a differently that once you can give you more precise answer that I could.
It's like that.
I'm, hoping I heard you correctly, you're asking about the Iroquois aid with closure.
Right.
Yeah.
Apologies if we can't hear me just kind of you touched on a little bit with Constitution. Just trying to think yeah can you explain that a little more <unk> just how to think about the cash flow in earnings impact in the quarter and then going for.
I think that the impact will be a return of and on capital on that original project.
We have four right interconnect project was something Iroquois entered into old more than five years ago with constitution.
And of course, the it was terminated out there some of the.
Equipment had been purchased there had been stored for many years.
So as part of the unraveling.
There was that I need to.
To make Iroquois hole for lots of the project, which was done on an amicable basis here basically or just the but a week or so ago.
So the cash has been paid to hear a coin and Iroquois will give the equipment or has given the equipment who over the consequence him.
And the cast will flow from Iroquois to each of its partners in Q3.
Got it. Thank you much much much much appreciated and just can you remind us I know you Bob wrapped up all the the FERC related revenue actions. So post tax reform can you remind us over the next two to three year. So between now and kind of 2022, where do you have requirements for <unk>.
You have to come back in for a FERC rate case.
Yes, sure. So we have a pretty steady cadence out there to the future, but fortunately, where we sit right and I was pretty well pretty sets. Our first rate reset is on GTN with a with new rates set to go into effect Gen. One at 2022.
Follow after that with both great lakes, and northern border and fairly quick succession.
Beyond that it's going to be less material.
Got it.
Thank you guys much appreciated.
Thank you.
Ladies and gentlemen. This concludes the question and answer session. If there are any further questions. Please contact investor relations at TC pipelines LP I'll now turn the call over to Rhonda Amundson.
Okay, well, we may have a technical difficulty with rhonda thank everybody for joining today.
Great your interest and hope that you in your family stay in Philadelphia. Thanks Bye.
Thank you. The conference has now ended please disconnect your lines at this time, we thank you for your participation.
This conference is no longer being recorded no. She's promoted said coffeehouse it does that won't be.
Thank you. The conference has now ended please disconnect your lines at this time, we thank you for your participation.