Q3 2020 TC Energy Corp Earnings Call

Thank you for standing by this is the conference operator, welcome to the T.C. energy 2023rd quarter results Conference call. As a reminder, all participants are in listen only mode.

And the conference is being recorded.

After the presentation, there will be an opportunity to ask questions.

To join the question queue. Please press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing star and zero I would now like to turn the conference over to David Moneta, Vice President of Investor Relations. Please go ahead.

Thanks, very much and good morning, everyone I'd like to welcome you to TC Energy's 2023rd quarter Conference call.

Joining me today are Russ Girling, President and Chief Executive Officer Don.

Marchand Executive Vice President strategy, and corporate development, and Chief Financial Officer, Francois <unk>, Chief operating officer, and President power and storage Tracy Robinson, President Canadian natural gas pipelines in coastal Gaslink send Chapman, President U.S., and Mexico natural gas pipelines revenue.

Worst president liquids pipelines quite <unk>, senior Vice President power and storage and Glenn The news Vice President and controller.

And Don will begin today with some opening comments on our financial results and certain other company developments a copy of the slide presentation that will accompany the remarks is available on our website. It can be found in the investors section under the heading events and presentations.

Following their prepared remarks, we will take questions from the investment community. If you are a member of the media. Please contact Jamie Harding. Following this call and should 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.

Also we ask that you focus your questions on our industry, our corporate strategy recent developments and key elements of our financial performance. If you have detailed questions relating to some of our smaller operations or your detailed financial models Hunter and I'd be pleased to discuss them with you following the call.

Before Russ begins I'd like to remind you that our remarks today will include forward looking statements that are subject to important risks and uncertainties for more information on these risks and uncertainties. Please see the reports filed by Ci C. energy with Canadian Securities regulators and with the U.S. Securities Exchange Commission and finally during this presentation, we'll refer to measures such.

As comparable earnings comparable earnings per share comparable earnings before interest taxes, depreciation and amortization or comparable EBITDA and comparable funds generated from operations. 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 end.

With that I'll now turn the call over to Russ.

Thank you David and good morning, everyone and thank you all very much for joining us today clearly.

Clearly the past seven months, it's been a difficult time for many families and businesses across our North American footprint.

Carbonite <unk> declared a global pandemic in March of this year. The services, we provide in Canada, the United States and Mexico were deemed critical given the important role our infrastructure plays in delivering the energy people need across the continent.

It's essential designation included both our daily operations and our construction projects.

We take that responsibility seriously and I'm proud that we've continued to deliver the energy that millions of people rely on every day and at the same time at bats capital projects that are vital to the powering of the North American economy for many decades to come.

As always we conducted our business in a safe and reliable manner, employing thousands of workers fulfilling our obligations to suppliers and supporting the communities where we operate.

Despite the challenges brought like how about 19, our operations have largely been I named <unk> with few exceptions flows and utilization levels remained in line with historical seasonal norms underscoring the critical nature of our energy infrastructure assets.

Approximately 95%, that's comparable EBITDA coming from regulated and to our long term contracted assets. We continue to be largely insulated from the short term volatility associated with volume throughput and commodity prices.

As a result, it's highlighted in our third quarter report or $100 billion portfolio of high quality long life energy infrastructure assets continue to produce strong financial results.

And we continue to realize the growth expected from our industry, leading capital program. Today, we are advancing $37 billion of secured capital projects. In addition, we continue to progress $11 billion of projects under development, including the refurbishment of another five reactors at Bruce power as part of their long term life extension program.

Earlier this year, we took significant steps to find our 2020 capital expenditure program and maintain our strong financial position, despite the challenging capital market conditions.

Specifically, we enhanced our liquidity by more than $11 billion through the issuance of long term debt in both Canada, and United States establishment of incremental committed credit facilities and various portfolio management activities.

When combined with a predictable and growing cash flow from operations, we continue to be well positioned to fund our industry, leading capital program looking.

Looking forward, we expect our solid operating and financial performance to continue and therefore, despite the pandemic our outlook for full year 2020 remains essentially unchanged with comparable earnings and cash flow per share anticipated could be similar to the record results. We produced a 2019.

We're proud of our financial performance, we know our ongoing success depends on our ability to balance profitability with safety environmental and social responsibility. We had a 65 year track record of safe and reliable operations, but we recognize that we can always do better.

As a result, we remain focused on continuous improvement and understanding shifting long term fundamentals to ensure our business remains stable.

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And in an ever evolving energy landscape.

[noise] TB better informed we recently published our 2020 report on sustainability and U.S. and in U.S.G. Datasheet together. These reports demonstrate our ongoing focus on sustainability and transparency in reporting they provide a comprehensive look at TC Energy's performance on environmental social and governance topics that matter most to all of our stake.

Others sustainable that sustainability at TC energy means meeting today's energy needs, while safely reliably and economically finding responsible solutions for our energy future.

Due to the continuous evolution of our principled approach to creating enduring economic and societal value, while delivering the energy people rely on today and into the future.

Encourage you all to visit our website access these reports and learn more about what we're doing.

With that as an overview I'll expand on some of the recent developments beginning with a brief review of our third quarter financial results Don will provide a more detailed review of our financial results and liquidity in just a few moments.

So excluding certain items and comparable earnings were <unk> $893 million or 95 cents per common share for the three months ended September thirtyth compared to $970 million or dollar four per share 2019 comparable EBITDA was $2.3 billion for comparable funds generated from operations were $1.7 billion.

For the nine months ended September Thirtyth comparable earnings were 2.9 million billion dollars or $3.05 per common share compared to $2.9 billion or $3. An 11 cents for the same period in 2019 comparable EBITDA of $7 billion and comparable comparable funds generated from operations of $5.3 billion were also similar to the amounts reported last.

This year.

Each of these amounts reflect solid operating performance of our legacy legacy assets as well as contributions from $3.1 billion of new long term contracted and rate regulated assets placed into service in 2020, so far.

This was partially offset by a lower contribution from our liquids marketing business lower equity income from Bruce power due to the unit six major component replacement program and the effect of certain asset sales that helped that and our secured capital program.

Next I'll make a few comments about our three core businesses firstly in natural gas pipelines customer demand for our services remains strong despite the impact of COVID-19 on the broader North American economy.

This can be seen in the volumes transported across our network with the NHL system fields receipts, averaging 12.1 billion cubic feet a day Canadian mainline western receipts, averaging 3 billion cubic feet a day, our broader U.S. pipeline network moving approximately 24 billion cubic feet, a day and our Mexican pipelines moving approximately 1.8 Bcf a day.

Through the first nine months of this year each of these amounts are similar to or greater than the volumes. We moved over the same period last year at the same time, we continue to advance $22 billion of capital projects associated with our natural gas business. The program includes significant expansions of our NGL system capacity additions across our U.S. network.

Via to Ray project and that you have project in Mexico, and our coastal Gaslink project in British Columbia, which will play an important role in delivering clean Canadian natural gas Asian markets to displace call.

As part of this program. We're pleased to have recently received approval from the government of Canada for our 2021 NGL system expansion project. The approval will allow us to commence construction activities of this $2.9 billion program that will provide a total of 1.5 billion cubic feet a day of incremental capacity by April of 2022.

Turning to our U.S. natural gas pipelines, where our expansion plans now include the incremental investment of approximately $200 million you asked for the Wisconsin access project that will replace upgrade and modernize certain facilities, while reducing emissions along portions of the and our system enhanced facilities, which are expected to be placed into service in the second half.

2022, we're also improved reliability being our system and allow us to serve the needs of utilities in the mid western United States under long term contracts like the Atwood power and our host horsepower replacement project announced in July. This is another great example of an ink corridor expansion that will allow us to meet the growing demand.

By utilizing existing facilities and our existing right of ways.

I'll swing U.S. pipelines in later July our Colombian gas transmission system filed a section four rate case with FERC requesting an increase in its maximum transportation rates effective February 21 2021.

It's going to be its first rate case filing in over 20 years and seeks to recover prudently incurred operating costs as well as a fair return on and of our historical and future investments in this expansive system. It provides customers with reliable access to low cost natural gas.

At the same time, we continue to pursue a collaborative process to find a mutually beneficial outcome with the Columbia gas transmission customers through settlement negotiations finally.

Finally, natural gas pipelines construction activities continue on the 2.1 billion cubic feet a day coastal Gaslink project that will connect abundant western Canadian sedimentary basin natural gas reserves through the LNG, Canada export facility in Kitimat British Columbia.

More than 3000 workers, along the right away. This summer we've been installing pipe and advancing work on compressor and meter station facilities. Although the project continues to do a review at cost and schedule due to scope increases permit delays and koby 19 impacts we do not expect the results to have a significant impact on our future.

Equity contributions to the project.

Finally, we continue to work with 21st Nations that have executed agreements with coastal gaslink to provide them with an opportunity to invest in the pipeline through an option to acquire a 10% equity interest in that project.

Turning to our liquids business, which generated solid results during the first quarter.

During the first nine months of 2020, despite the extraordinary volatility in global crude oil markets.

Well the volatility has had a significant impact on our market Lincoln liquids marketing business. Keystone has continued to produce solid results as it serves important markets in the U.S. Midwest and Gulf Coast and is underpinned by long term take or pay contracts for 555000 barrels a day with very strong counterparties.

Also in the liquids pipelines business, we continue to advance construction on Keystone XL during the third quarter, while managing the various legal and regulatory matters.

Canada construction activities at our pump stations, and allowing more than 180 kilometers of mainland right away continue to advance.

You asked we continued to make progress under our revised 2020 construction plan with over 1500 Union workers building 12 pump stations and completing the Canada us border crossing.

At the same time, we continue to seek authorizations from the U.S. Army Corps of engineers for necessary permits and approvals to reconvene us mainline pipeline construction into 2021.

Keystone XL continues to be very important project growth, Canada, United States. It will create thousands of high paying union jobs and advanced energy security for both nations in an environmentally sustainable and responsible way.

September we're pleased to announce the signing of a historic agreement with natural law energy that will facilitate the largest in digit indigenous equity investment of its kind in north American energy infrastructure.

A final agreement, which is expected to be completed in the fourth quarter would formalize natural our energies participation in Keystone XL, providing with an opportunity to share in the benefits of pipeline over the long term as a very valued partner.

The project will require an additional investment of approximately $8 billion. It is underpinned by 20 year take or pay contracts that are expected to generate $1.3 billion. You asked some incremental EBITDA on an annual basis once placed into service in 2023.

To advance the project, we partnered with the Alberta government, who will invest approximately $1.1 billion you asked of equity into the project and fully guarantee a us $4.2 billion project level credit facility. Once the project is completed and placed into service. We expect to acquire the government of Alberta is equity investment in refinanced the credit facility.

Moving forward, we will continue to carefully manage the various legal and regulatory matter. It matters as we construct the pipeline, which will have the capacity to move 830000 barrels a day of responsibly produced energy from the Canadian oil sands to the carton continents largest refining market in the us Gulf Coast.

Turning now to power, where Bruce power continue to produce solid results through the first nine months of this year in January at Bruce Power also commenced work on the unit six major component replacement or MCR program, which took that unit offline.

We expect to index invest approximately $2.4 billion into that program as well as the ongoing asset management program through 2023, when the units six refurbish and is targeted for completion.

March Bruce Power declared force majeure under its contract with the independent electric system, operator, because of Kobe 19, The force majeure covered the Unix sex NCR and certain asset management work that said early in May work on the unit six MCR resumed with additional prevention measures in place for worker safety or the impact of the four.

This measure will ultimately depend on the extent and duration of the global pandemic on October 1st the unit six MCR project achieved a major milestone with the commencement of the dealer channel in theater replacement program at the same time operations and planned outage activities on all other units continued as expected through the third quarter.

So in summary today, we are advancing 37 $7 billion of secured growth projects that are largely expected to enter service by 2023.

We have invested approximately $13.5 billion into that program to date with approximately $5 billion of those projects expected to be completed by the end of 2020, notably they are all underpinned by cost of service regulation or long term contracts, giving us visibility to the earnings and cash flow they will generate as they enter service.

Based on the strength of our financial performance and promising outlet for the future earlier. This year PC Energy's board of directors increased the quarterly dividend 81 cents per common share, which is equivalent to $3.24 per common share on an annual basis. This represents an 8% increase over the amount declared in 2019 and is the twentyth consecutive year that our.

Word of directors has raised the dividend.

Over that same timeframe, we have maintained consistently strong coverage ratios for their dividend on average representing a payout of approximately 80% of comparable earnings and 40% of comparable funds generated from operations, leaving a significant internally generated cash flow to invest in our core businesses.

Based on the continued strong performance of our base business and the growth in earnings and cash flow, we expect to realize as we advance our $37 billion capital program. We expect to continue to grow our dividend at an average annual rate of 8% to 10% through 2021 in 5% to 7% thereafter.

Before I close I'd like to offer a few words on my pending retirement.

As we previously announced our Chief operating Officer Francoise, Cory will succeed me as President and Chief Executive Officer, and Mike joined the Board effective January Onest 2021, France wise been part of our ERP for five years now as being a significant contributor to our thinking our strategy and the execution of our plans. He has always been committed to our values.

And displayed consistent integrity vision and persistence I'm confident that he along with the entire executive team here at TCP and are 7500 dedicated employees.

They will continue to navigate the challenges and capture the growth opportunities that lie ahead with the same discipline that you've come to enjoy at our company over the last number of decades.

Forward I expect our assets will continue to provide an essential service to the functioning of the North American Society and to the economy and the demand for our services remains strong we have five significant platforms for growth, Canada, Us and Mexico natural gas pipelines, our liquids pipelines business and power and storage as we had been.

Thats, our $37 billion secured capital program, we expect to build on our long track record of growing earnings cash flow and dividends per share.

We also have $11 billion of projects in the advanced stages of development and expect numerous other in court organic opportunities like the $200 million, Wisconsin access project project that we announced today to emanate from our extensive and critical asset footprint looking forward. We will continue to focus on safety sustainability working according to our base.

Ill use and responding quickly to market signals and signposts to ensure we remain industry, leading and resilient as we grow shareholder value with that I'll turn it back to Don who will provide you with more details on our third quarter financial results and our financial position.

Great. Thanks, Russ and good morning, everyone.

As outlined in our results issued earlier today net income attributable to common shares was $904 million or 96 cents per share in the third quarter compared to $739 million or 79 cents per share for the same period in 2019.

For the nine months ended September Thirtyth 2020, net income attributable to common shares was $3.3 billion or $3.55 per share compared to net income of $2.9 billion or $3.09 per share in 2019.

Third quarter results included a $6 million adjustment to the after tax gain previously recorded on the sale of a 65% equity interest in coastal gaslink, along with an incremental $45 million after tax loss on the disposition of the Ontario natural gas fired power plants.

Third quarter 2019 also includes certain specific items as outlined on the slide and discuss further in our third quarter 2020 report to shareholders.

The specific items, including unrealized gains and losses from changes in risk management activities are excluded from comparable earnings.

Comparable earnings from the third quarter were $893 million or 95 cents per common share compared to $970 million or one dollar four per common share in 2019.

For the nine months ended September Thirtyth 2020, comparable earnings were $2.9 billion or $3.05 per share compared to $2.9 billion or $3.11 per share in 2019.

Turning to our business segment results on slide 16.

In the third quarter comparable EBITDA from our five operating segments was $2.3 billion, representing a 50 million dollar increase sorry decrease compared to 2019.

Canadian natural gas pipelines comparable EBITDA was $94 million higher than third quarter 2019, primarily due to the net effect of increased rate base earnings higher flow through depreciation and financial charges and lower flow through income taxes on the NGL system, along with the recognition of coastal Gaslink development fees.

I would note that for regulated Canadian natural gas pipelines changes in depreciation financial charges and income taxes impact comparable EBITDA, but do not have a significant effect on net income is there almost entirely recovered in revenues on a flow through basis.

NGL system net income increased $21 million compared to the same period in 2019.

As a result of the higher average investment base from continued system expansions and reflects an ROE of 10.1% on 40% deemed common equity.

Net income for the Canadian mainline decreased $3 million largely due to lower incentive earnings.

US natural gas pipelines comparable EBITDA of $647 million us.

Were 863 million Canadian in the third quarter rose by $43 million U.S., Rsixty 7 million Canadian compared to 2019.

This was mainly due to lower operating cost on Columbia gas in Columbia Gulf and increased earnings and are due to the sale of natural gas from certain gas storage facilities.

Mexico natural gas pipelines comparable EBITDA of $128 million you asked for 170 million Canadian increased by 13 million U.S. or 17 million Canadian versus third quarter 2019.

Primarily due to higher sort of Texas equity income, resulting from the commencement of transportation services in September 2019.

And lower interest expense on his peso denominated inter affiliate loan attributable to lower interest rates and the weakening of the Mexican peso.

Liquids pipelines comparable EBITDA declined by $160 million to $415 million in the third quarter compared to 2019 as a result of lower on contracted volumes on Keystone and reduced contributions from liquids marketing activities.

Third quarter power and storage comparable EBITDA fell by $65 million year over year, primarily due to the planned removed from service at Bruce Power unit six in January for its MCR program, along with lower Canadian power earnings largely as a result for the sale of our Ontario natural gas fired power plants in April.

For all our businesses with U.S. dollar denominated income include.

Including U.S. natural gas pipelines, Mexico natural gas pipelines and parts of liquids pipelines EBITDA was translated into Canadian dollars using an average exchange rate of one went.

33 in third quarter 2020, compared to 132 for the same period in 2019.

As a reminder, our U.S. dollar denominated revenue streams are in part naturally hedged by interest on us dollar denominated debt.

We then actively manage the residual exposure on a rolling two year forward basis with realized gains and losses on this program reflected in comparable interest income and other.

Now turning to the other income statement items on slide 17.

Depreciation and amortization of $673 million increased $63 million versus third quarter 2019, largely due to new projects placed in service in Canadian and us natural gas pipelines.

Which amounts in Canadian natural gas pipelines are fully recoverable in tools on a flow through basis.

Interest expense of $559 million in the quarter was $14 million lower year over year, primarily due to the net effect of higher capitalized interest mainly related to Keystone XL, partially offset by the completion of Napanee in first quarter 2020.

Lower interest rates and lower levels of short term borrowings and long term deferred debt issuance is net of maturities.

Hey, AFUDC decreased $29 million compared to the same period in 2019.

Partially due to NGL system expansion projects placed in service in 2020.

Comparable interest income and other was $32 million in the third quarter down from $49 million for the same period in 2019, primarily on account of lower interest income on the previously noted peso denominated intra affiliate loan receivable from the state of Texas joint venture, reflecting lower interest rates and the weakening of the Mexican peso in 2000.

20.

Again, our proportionate share of the offsetting interest expense on this loan is reflected in income from equity investments in our Mexico natural gas pipeline segment with no resulting impact on consolidated net income.

Income tax expense included in comparable earnings was $184 million in third quarter 2020, compared to 260 million for the same period last year.

The $76 million decrease was mainly due to lower pre tax earnings reductions to the Alberta corporate income tax rate and decreased flow through income taxes on Canadian regulated pipelines.

Excluding Canadian regulated pipelines were income taxes are a flow through items and are therefore quite variable along with equity AFUDC income and us and Mexico natural gas pipelines, we expect our 2020 full year effective tax rate comparable income to be in the mid to high teens.

Comparable net income attributable to non controlling interest of $69 million in the third quarter increased by 10 million relative to the same period last year, primarily due to higher earnings at Tc pipelines LP.

And finally preferred share dividends of $39 million were in line with third quarter 2019.

Now turning to slide 18 during the third quarter comparable funds generated from operations totaled $1.7 billion and we invested approximately $2.3 billion in our capital program.

In light of extreme market volatility earlier in 2020, we took significant steps to bolster our liquidity at that time, including the issuance of long term debt.

In addition, we have incremental committed credit facilities and the completion of various portfolio management and project financing activities.

When combined with our strong internally generated cash flow and cash on hand, we are effectively fully funded for the year.

Furthermore, through partnership arrangements and project level credit facilities substantial portion of the financing required to complete both Keystone XL and coastal Gaslink is also in place.

Now turning to slide 19.

This graphic illustrates our forecasted sources and uses of funds in 2020. The left column details total funding requirements of approximately $16.9 billion comprised of long term debt maturities and redemptions of 3.9 billion dividend and non controlling interest of distributions of approximately 3.2 billion in capital expenditures of Approx.

9.8 billion, reflecting 100% of coastal gaslink costs up to the date of its partial sale and only equity contributions to the project thereafter.

Capital expenditures, which were previously forecast to be $10.3 billion are trending somewhat lower primarily due to the delay of certain capital projects included in the 2021 NGL system expansion.

Funding sources are shown in the second column and.

And include forecast internally generated cash flow of approximately $7 billion proceeds from the disposition of our Ontario natural gas fired power plants sale of a 65% interest in coastal gaslink and associated project level financing, which together generated approximately $4.9 billion.

The government of Alberta is equity investment of Keystone XL projecting that you ask $1.1 billion.

And $3.8 billion comprised of long term debt that was issued in April along with movements in balances of cash on hand of commercial paper outstanding.

Taken together, we are effectively fully funded for 2020 and along with $13 billion of committed credit facilities in place and well supported commercial paper programs in both Canada and the us positioned to confident we navigate any prolong period of disruption should that occur.

Now turning to slide 20.

In closing, our solid financial and operational results highlight our longstanding diversified low risk business strategy the importance of our essential energy infrastructure to the North American economy, as well as the contribution of new high quality assets from our ongoing capital program.

Our overall financial position remains robust today, we're advancing a $37 billion suite of secured projects through resilient internally generated cash flow an array of attractive funding options.

Which are poised to generate high quality long life earnings and cash flow underpinned by strong fundamentals solid counterparties and premium service offerings.

Additionally, our business segments situated across three countries offer numerous distinct platforms to replenish our growth profile with further attractive and executable in court or organic investment that will be required as the world both consumes more energy and adapt to an evolving energy landscape.

That is expected to support annual dividend growth of 8% to 10% in 2021.

5% to 7% thereafter.

Finally, we will continue to maintain our historical financial strength and flexibility at all points of the economic cycle.

That's the end of 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 any additional questions. Please reenter the queue.

With that I'll turn it back to the conference coordinator.

Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.

I'll hear a tone acknowledging your request if you are using a speakerphone. Please pick up your handset before pressing any Keith.

Well your question. Please press Star then Q2 during the question queue. Please press Star then one now.

Our first question comes from Robert Catellier of RBC cap CBC capital markets. Please go ahead.

Hey, good morning, everyone and congratulations on your retirement plus on your new role.

Thank you I wanted to start with a capital allocation question.

Understanding that team focused on long term.

Yes.

Maintain your dividend guidance, obviously with this press release, but.

Widening spreads too.

Virtually any interest rate you look at that.

Influence your capital allocation strategy dividend growth.

I mean, I can start and I'll let.

And Thats why jump in and as you know may our capital allocation and as.

Strategy has been consistent for approximately two decades and is predicated on.

Firstly, focusing on our balance sheet and making sure that we maintain our financial strength in health, we've continuously strive to maintain the highest credit ratings in our in our sector and secondly, and to ensure that.

We we have a healthy split between return of capital to shareholders and debt and cash retained for for growing our businesses. Historically, that's been 60% of our free cash flow being reinvested in our core businesses and 40% being allocated to and to add to return of capital to our shareholders through through a dividend.

And.

That has worked well for us for and.

That the last two decades, where we've been able to reinvest you have 60% of our of our free cash flow into our.

Into our core businesses I doing that at at approximately an 8% return 70% return has resulted in a growth in earnings cash flow and dividends per share of approximately 7% over that period of time.

And we've tried to maintain discipline.

Payout ratios relative to.

As to our peers.

Focused on about 80% of that.

Our earnings being added.

Returning to our shareholders approximately 40% of cash flow as I said and maintaining a strong dividend coverage ratio. So as we move forward and the marketplace had debt at various points in time has pointed to you should increase or change that capital allocation model to increase payout ratios.

And and take on more financial leverage and at other points in the cycle, it's pointed us to add to changing it in any other direction. We believe in consistency over the long term and at this point in time as we look at our future and we don't see any reason that we would we would change that capital allocation and in order to to chase.

Short term.

Market debt market changes and what our job is quite frankly, Bob always as you know we focused on growth in earnings and cash flow per share.

And maintaining that strong discipline and our view is if we do that over the long long haul.

Will reward our shareholders and our shareholders will reward us with that with an appreciation in our stock price.

Thank you for that fulsome answer the other question I had has to do with the hydrogen economy, obviously very early days, but.

Can you give us a high level view of how you see the interplay with.

Mid of hydro caught hydrogen economy over time with me well.

All transmission assets.

Yeah, Robert It's France, why I think it's clearly early days, yet, but we do absolutely see it as a long term opportunity for us to.

Deploy additional capital.

Into our gas transportation assets.

Some of our storage fields actually would be.

Convertible to.

In storage and even in our power generation business going forward.

As and when hydrogen.

Becomes more cost competitive there.

There's a lot of work that still needs to be done to understand what percentage of hydrogen could be safely blended into our pipelines.

With methane obviously, we our foremost concern is for the safety of our employees and the communities in which we operate and so we're going to be very careful about making that assessment.

There are many existing natural gas turbines that can already accommodative blend over the long term impact on performance integrity maintenance et cetera are things that we're working very hard here to understand and then of course in the longer term potential for hydrogen to provide long duration storage in the power sector.

Could be a very interesting opportunity for us and is consistent with our theme of investing in affirming resources as we are developing our pump storage projects and our battery projects.

Everything you described there makes complete sense, but obviously, it's lumpy and I'm wondering at a high level. If you had any sense of what the.

When meaningful investment can be made what's the timeline for that I know, it's a shot in the dark at those points, but what's your best guess.

I think it's too early to speculate on on individual investment opportunities at this point Robert.

Okay. Thanks, everyone.

Okay. Thanks, Rob.

Our next question comes from Robert Kwan of RBC capital markets. Please go ahead.

Great. Good morning, if I can continue on that capital allocation question, you touched on payout ratios.

And the like but I think more about the businesses and some of the concerns out there about the existential risks to hydrocarbon infrastructure.

Any of this cause you to think about allocating material capital to new business lines in the near term or accelerating shift to greener infrastructure, particularly by a transformational large scale M&A.

There's a lot in your question Robert.

Is it.

We have one eye on her on our base business in one eye on on the future and how.

How quickly this energy transition is going to evolve and what it's going to look like.

We believe that our assets, which is sort of proven out by the resilience that you've seen over the pandemic. The importance of these assets for the foreseeable future and to your question, how long will that future be where it is a question that that people are asking as we think about our assets today that the primary and.

Asset base that we have is in is in the natural gas business and they.

They are all rate regulated assets for the most part and that we think about that life cycle of assets very carefully on an annual basis. We have historically and will continue to look forward, we have the ability to manage the capital stock turnover and with both depreciation rates and debt and with that we the battery.

Surcharges that we have in place on the pipe. If we think that the useful life is going to be less than than anticipated.

Useful life that we've got assumed in our in our rates today, we will make adjustments accordingly to recover or the return of and on capital and redeploy that capital into whatever infrastructure is going to required to service that you are that continued energy demand. What we know is that the energy demand isn't going to change.

It may take different forms going forward and we would look to reinvest as we've done historically and you've seen us rotate capital in and out of different.

Energy.

Transportation and delivery systems based on on on the demand I think what I can tell you about our experience.

Is that we have had experience in all forms of energy and a delivery.

Rental river hydro and new color we've got.

Our investment in nuclear power business, we built solar facilities, we built wind facilities.

And we've also participated in coal and natural gas.

And so as things transition, we believe that we're well positioned and as Frans. So I, just said things like hydrogen in order to move gaseous molecules around don't know what the timeframe as we just said Dr. Rob.

How long thats going to take but I think we're well positioned to capture those investments as they as they occur. So we'll continue to monitor that.

The pace of depreciation and other things in our system and look to redeploy capital.

Into whatever delivery systems are going to be required in the future I think one of our strong competitive advantages has been.

We we do touch a lot of customers today across the continent, and we see these changes coming probably sooner than that than others do and can adjust our capital Accordingly, and what we found is that you are building things you any existing footprints has a huge advantage our that Bruce refurbishment for example.

That can't be replicated outside of a of an existing footprint. So I think as things change, we believe that we're well positioned to manage the transition as it occurs.

And that's going to take some time some of some of our businesses may happen sooner rather than than that and.

And then later on in other businesses May last a lot longer than that some people are anticipating but I guess rest assured we're on top of it and I guess the way we're viewing the world is as people think about deploying literally trillions of dollars a capital into this transition and.

We're a company that knows how to deploy a large capital amounts into large scale projects getting them permitted and and working with regulators customers and other stakeholders to actually bring them into into reality. So to the extent that the that the North America is going to invest that kind of capital and we believe.

That's a great great growth opportunity for us are from for many years yet to come.

And just on your willingness to pursue transformational large scale M&A.

Either get into a new business line or really bulk up.

Green infrastructure within the business.

I'll take a shot and I will let that French joining.

Joining but I mean, I don't think it our disciplines going to changes we will look for opportunities that can add shareholder value.

So the confluence of both strategic opportunity as you've seen US act on in the past at a price that sad that we can add.

And economic and shareholder value and so we are always on the lookout for for things that make sense to us and and at the current time, there's nothing on our slate, but obviously, if we maintain the kinds of disciplines. We have in the past around a strong balance sheet access to capital I went.

As opportunities arise, we believe that will be best positioned in one of the reasons we.

Our number one sort of priority capital allocation is is is being positioned with a strong financial position and balance sheet to be able to act at all points in the cycle on opportunities that can add shareholder value, maybe France right now.

Maybe just to add to that Russ. Thanks for the question Robert I.

I think what we've demonstrated in the past not only from a capital discipline standpoint, but you look at the Columbia transaction, we have a competency.

Integrating businesses very well into our organization and we view that as a competitive advantage so to the extent an opportunity presents itself.

We have the ability to evaluate and integrate those types of opportunities and the willingness to do so.

Those types of situations present themselves rarely over.

Management teams career, and so we can't rely on that approach for us to build critical mass and the portfolio composition that we want to see overtime, we do actually through.

Our opportunities to develop organically different projects, we do see an opportunity even without M&A to actually builds and scale in in our power storage business as the economy looks too.

Continuing to electrify not only with respect to Bruce as Russ mentioned Oh.

Another example is our two pump storage projects that are under development.

We have our own electric load that we're starting to think about how to electrify that.

And so there will be a number of other opportunities aside from transformational M&A that will allow us to grow that business and if an opportunity does present itself to do something more substantial as I said, we've got the skills and and the willingness to consider it.

Got it. Thanks, if I can just finish that Colombia is there any update or anything you can give on potential timing as you get into the negotiations and just in terms of the magnitude I know you haven't wanted to talk about it.

Given the negotiations but.

Is it fair to say that you kind of just weighted.

One year to get out of the moratorium Saxon your filing early you see at least a bit.

So for a material financial impact to the company.

Hey, Robert This is Stan yes, with respect to the rate case and the timeline our attention is still to settle this case with our customers a FERC top sheets, which basically out their initial provisioning on the case are likely to be released sometime in mid December. So once those are at least we'll begin not meaningful.

She Asians with FERC staff, our customers and other interested parties and those discussions are likely to extend into Q2 of 2021 in the <unk>.

Unfortunate event that the settlement negotiations do not prove fruitful we've had had meetings with an administrative law judge and he has assigned the case that that includes a procedural schedule that would have a final ruling in the case sometime in Q4 of 2021, so either way the case will be resolved sometime next year.

With respect to guidance, yes, you're right you are correct that I really can't share anything with you at this point in time and I guess, you're also correct to the extent that we would not be filing a case to the extent there was not a meaningful uplift.

Thanks very much.

Thanks Robert.

Our next question comes from Linda Ezergailis of TD Securities. Please go ahead.

Thank you before I ask my questions I want to add my congratulations to both Ross and Francois on on the exciting announcements and wish you all the best rest in your retirement.

Thank you.

With just a further to Robert's question about your Columbia rate case settlement.

Just wondering how any potential tax increases and the U.S. might be incorporated into not just columbia gas rates, but prospectively across your pipeline network in the us.

Yes, Linda this is Stan I can address that.

All things equal we will have the ability to file rate cases to increase our federal income tax allowance that are embedded in our rates we.

We obviously have a case on going right now in the Columbia system, and our expectation would be that that any settlement would include some sort of a mechanism for us to recover that said higher efficacy rates be implemented. We also are planning on filing a rate case next summer on the in our system. So we will address any increased federal income tax rates there as well.

Colombia and eight arc together represent about two thirds of our revenue stream across all of the U.S. assets and in addition, we have got rate cases filed planned to be filed on GTN and great Lakes also in 22. So we'll have a mechanism in place to address those in relatively short order.

And also keep in mind that particularly on the Columbia system about 52% of our revenues are under fixed negotiated rates, which still have the higher federal income tax allowance embedded in them from prior to the 2018 tax reductions.

Thank you that's helpful context, moving on to your financing plans.

I guess, maybe this is a blended question with respect to your exciting announcement recently on the natural log energy ammo you.

Finally, I am just wondering.

How this might influence your.

Financing plans going forward, how meaningful to this first nations investment be.

What might be the scale of additional.

I'll use with some additional parties and.

And just wondering what the timing might be on on bringing on additional partners.

Having already joint.

The project.

Good morning, Linda its Don I'll start and I'll turn it over to Evan.

With respect to the Nasrallah.

And will you.

Our funding plans for Capex I really haven't fundamentally changed about two thirds of the funding will come from government of Alberta equity injections.

And the guarantee debt facility that will be in place there.

And ER, our proportionate share of the remaining funding will will be from drip and hybrid issuance as we'd outlined previously probably about a billion five U.S. of hybrids and ability into issue as of drip.

When we turn that on to the extent, we have third party investment would probably reduce those amounts somewhat but depends on the extent of.

That investment.

The natural audio is.

Still being finalized here, but I'll, let them speak to tour that size.

Sure. Thanks, Don Thanks, Linda for the question.

TC as you know has a long history of working with indigenous nations, but we're really proud to partner with.

In a historic way natural energy, who represents five first nations in Alberta, Saskatchewan were working closely with other nations in Canada, and the tribal nations in the us.

Similarly bring them in as partners.

We're operating on their traditional territories, and we share a set of core values about the environment and sustainable development. So.

We're working hard on those agreements right now we can anticipate.

Getting those done here hopefully in the fourth quarter.

And once they are finalized we'll be able to make the level of investment public and the structure of those those transactions.

In addition, I guess outside of those equity investments, we expect to create $500 million of of benefits to the indigenous nations directly through jobs on the K Excel project done and with indigenous suppliers. So all in all pretty exciting to move forward.

With with them being part of our project.

Thanks to the additional context, maybe just a follow up question on the renewable power opportunity and Im wondering what the current load is across TC Energy's network Thats compressors in pumps and what factors might you consider beyond.

Direct economics and cost savings on converting those to that run on solar or wind versus not.

I think the load on the base system is several hundred megawatts and we know would be when you when you factor in both based system and Keystone XL.

Over a thousand megawatts between the two.

To the extent, we were able to enter into some Uh huh.

As to consume renewable energy.

It would.

It would make us one of the top 10 core.

Corporate purchasers of renewable energy in the world.

So theres substantial scale, there as we think about opportunities to.

Going forward to reduce our greenhouse gas emissions. There is also an opportunity for us to electrify.

Some of our compression on our natural gas system I can tell you that there are several hundred thousand horsepower of energy that's consumed for moving gas along the system and.

There will be an opportunity there over the next week.

We expect as the capital stock turns over and turbines reached the end of their useful lives for us to be considering other alternatives.

We are starting to factor.

Carbon emissions into our capital allocation decisions.

I could.

Certainly a test that in many jurisdictions.

The cost of renewable power is.

Very competitive with others.

Other sources.

As to.

The cost of carbon emissions, we don't have clarity in every jurisdiction as to what.

The plan or the program is going to be so it's difficult for us to actually quantify those impacts, but when you factor in current competitiveness you factor and reliability concerns that there will be opportunity for us to be developing some renewable projects to meet our own load. We're very confident over the next several years.

I think maybe just I'd add to that Linda me why that you had asked what the criteria are what what we're looking for obviously the or that they they the milestones of moving from the policy initiatives that have been announced moving to legislative frameworks, which then move into into regulated frameworks mean, obviously were always concerned about.

Return of and on capital and capital recovery over over the life of the assets and in our view would be is if if if actually.

We're going to implement these policy initiatives and and have the manifest themselves into into legislation regulation I think those are some of the signals we're looking for.

How our regulators going to be.

Using carbon pricing in their cost benefit analysis, and then when we put forward our our lease cost alternatives.

They are seeing DAP with with where the regulators are going to be so these are the kinds of changes that are going to occur and I think as I said earlier, we're pretty excited about it theres some uncertainty with respect to it but this is the direction the marketplace is going and.

As we see capital stock turnover over the next 10 2030 40 years, there's going to be tremendous opportunity for us for a company like ours to continue to participate in that and and deploy capital into.

Infrastructure, that's going to reduce emissions over the long term.

Thank you I will jump back in the queue.

Thanks Linda.

Our next question comes from Jeremy Tonet of JP Morgan. Please go ahead.

Good morning.

Maybe maybe just starting off on energy transition been hit a bunch here, but maybe just kind of rounding it out a bit.

You talked about the E comm.

Pressers, there and it seems like a pretty sizable opportunity just wondering if you're able to share kind of what ballpark capex could be as far as renewables generating electricity for compressors there.

That would be helpful. I mean seems like more than a few billion here and.

Generally speaking along with pumped hydro do you see other opportunities to kind of participate in energy transition fuel types.

Thanks for the question Jeremy and.

That.

Literally like the entirety of our of our compressor fleet with.

We literally thousands upon thousands of megawatts.

Obviously, only a subset of those.

Would be actionable in the near term and over time as we factor in things like reliability access to backup.

Backup supply from an.

And access to the transmission grid, where gas supply for.

For backup.

Generation might be available as Russ said, we do need and this is one of the signposts. We're looking for is for legislation and regulation to catch up to policy. Obviously the policy trends are trending in that direction, but until the regulatory construct allows us to factor in all of those issues into our.

Equipment decisions.

We're going to continue to adhere to our conservative risk preferences as to other parts of the value chain, we might be interested in looking at an investing and obviously you see our storage projects in Alberta, and Ontario, particularly the one and Ontario is that as a significant scale. We're looking for other opportunities for pump storage, we think its a.

Technology, that's proven on a global scale about 98% of electricity storage comes from pumped hydro. So we're looking for other opportunities there and.

We talked about hydrogen already to the extent there are other opportunities for us around renewables and battery storage. We are developing some projects here in Alberta, and we'll be continuing to look at projects as I said before along that theme of firming resources, because we believe as the generation mix continues.

To trend towards renewable firming resources will be increasingly important to ensure the reliability of the grid and as well we want to make sure that we have investments as diversified well diversified as possible in terms of different fuel types in generation to the extent opportunities present.

And so for us to develop transmission assets its long linear infrastructure that's regulated.

It's.

Definitely a core competency of ours, and we will consider those as well maybe Jeremy I can just.

To provide some context. Your question is is it bigger than a breadbox and yes. It is but going back to my earlier comments around what it takes for this company to continue to grow at 5% to 7% on an annual basis going forward.

60% of our free cash flow is using it in and debt capacity is in the neighborhood of about $5 billion. So can we find $5 billion of investments going forward beyond our current capital program at to sustain the growth rate of the company and all the things that France, what I just said I mean, if you governments are measuring this in the in terms of trillion.

Tens of dollars.

When you look at our system and the other capital stock terminal over as you've mentioned you can measure that in multi billions of dollars and what we need to grow the company on an ongoing basis is about $5 billion. We think we're extremely well positioned to capture $5 billion of growth on an annual basis. If you just looked at the kinds of things that we're actually doing today.

Hey billion dollars year, Bruce power for the next 10 years, just refurbishing no those reactors to meet that emission lists.

Desire down the road and much less some of the other things that we're talking about so that's what gives us the confidence in the statements.

Statements Weve made with respect to future growth and that this is a trend and it is going to going to continue people are going to deploy capital and desire to deploy capital into making.

On the energy delivery systems across North America, more efficient and.

And more environmentally friendly and and we have one of the largest and best position footprint across North America to actually and I make make that occur. So we're very confident in that and comfortable that.

Opportunities will continue and that from a recovery of capital return on capital given the nature of our of our rate regulated businesses in our contracts and the fundamental position of our assets in the marketplace and that will get return of and on on our capital. We've got to play today and as that capital is returned to US we will be able to do.

Play back into into these other things that and that restocking boat.

Great.

Helpful detail. Thank you for that and then.

Yes, historically, you've talked about picking up high quality assets during periods of distress seems like we have distressed in spades These days and.

I was just wondering if you could update us here given what's happened in the markets before you talked about quality assets not being keeping up last year. It seems like maybe quality assets could be cheaper. This year and you talked about electric transmission, possibly being of interest for you, but as even thinking kind of like.

On the U.S. LDC side, given the precipitous decline in the PE, there maybe that present.

The map there is much easier than points in the past. So just wondering any thoughts that you could provide on on those topics.

I think as we think.

Jeremy about M&A as we always have.

We look to acquire high quality assets at distressed points in the cycle as opposed to distressed assets that.

Require.

Improvement Thats.

Been a successful formula for us underpinned by patients and a strong balance sheet.

So part of that is that you need to have a willing counterparty and I think as weve.

Assess the opportunities we've sent out some feelers and if I were on the other side of that inquiry I would be looking at my own.

Yes.

Internal and external cash requirements.

The implied cost of capital in the different sources of capital that I could raise to fund my own growth and.

And that would compare that to the implied.

Cost of capital.

That any of any potential acquirer is offering in the form of the purchase price.

So we don't think enough time has transpired yet that would be our observations for.

Any counterparty to be willing to consider.

Parting with in a very volatile environment, a high quality asset.

But we're patient and if those opportunities present themselves, we'll be ready Jeremy its Don here.

We are in the beneficial position of having $37 billion and our secured program and a proven ability to replenish that so.

We're not reliant on M&A to grow but again it's.

Per francoise answer.

We'll be patient.

We're looking for the the same high quality stuff that comprises our portfolio today, we're not looking to move up the risk spectrum, we're not looking at GNP assets and the like.

And in many cases, the crown jewels that we would want her are not sitting in distressed entities right now but.

Given who we are we see most of our transaction North America might transact and.

We'll act if and when it makes sense.

Got it that's helpful. Thank you.

Thanks, Jeremy.

Our next question comes from Rob Hope of Scotia Bank. Please go ahead.

Hi, good morning, everyone and.

Maturation Rustom transfer all a lot of that as well.

Thanks.

Yes, just another question on capital allocation, if the next U.S. administration sidelines Keystone XL have you look at your crude oil business with.

A potential lack of growth there could you.

Could you look to recycle that capital on some of those initiatives that you mentioned earlier.

I guess I mean, let's start with the fundamentals.

We will always look to.

And deploy capital in that that in a way that best sort of and add shareholder value.

But what we know is that the us Gulf Coast refining complex is the is that the largest and most sophisticated in the world every indication that we have today is that even in a as a a two degrees.

And.

Policy environment and that the world is still going to need 60, or 70 million barrels a day of oil the U.S. will still continue to refine oil and the Gulf Coast complex is still very resilient in that scenario and the options for heavy oil quite frankly, our limited there the middle East.

Venezuela, and Canada, and so as we look at our as our as they they Keystone corridor and as it exists today is an extremely valuable corridor I think thats being born out even in an environment, where we've seen a huge demand destruction in the short run and as a result of co VAT that that corridor still gets utilized.

At a very very high rate and we expect that to continue as you look at that that third largest crude oil reserves in the world being being in Canada connected to the.

And the world's largest and most sophisticated refining complex that seems to be something that it has and longevity and stability to it.

How we get value going forward, obviously is a question that will be on our minds.

But from a business standpoint, and and they are the biggest issue. The industry has today is lack of regress thats why were they.

Keystone XL is important thats why no.

Im actually not the other things are important to the industry today, and we expect that to continue going forward. So I think those are still in fundamentals will where as I think you've heard from from Dawn Francoise and what we've done historically, we look hard and longest fundamentals and then we look at who is willing.

To support those fundamentals with long term contracts and in.

And right now I would say that if we had any more capacity available on base Keystone.

We would be able to sell that capacity for for for 20 year terms to creditworthy counterparties.

All right. Thanks for that and then just pivoting over to the NGL system do you have a little bit of color on.

How much capital you think will be deferred from 2021 into 2022 and how the delays on the approvals of kind of altered construction schedules there.

Sure Rob.

Ill is of course critical asset to the WCS BW CSB is.

Ill.

Positioned really well I and volumes have been strong even through this current period very prolific in very competitive so the infrastructure that we put in place to facilitate access to market is critical we did go out to market. It.

In season earlier this year, just to check and whether all of the capacity that we had planned what's still needed. The result of that was that indeed is although a portion of that moved around a little bit from a timing perspective, either delayed the season or a year and we've accommodated that and as a results you've seen our capital program change a little.

But from a timing perspective.

If you are the one other thing that's happened of course is we had the delay in the approval of the 2021 program. We had that we received.

Finally at the GRC approval just recently here.

And that has a number of increased door or enhance conditions in it so.

So you know they didn't move all I can to delay of that program has altered the shape of our capital program as well, so I think weve laid out.

The movement in the program in our disclosure, but we've come off 2021, I just over a billion and then add that back on in 2022 and 2023, but net the capacity that we are providing innovation remains the same.

All right I appreciate that thank you.

Thanks, Rob.

Our next question comes from Ben Pham of BMO. Please go ahead.

Hi, Thanks, Good morning on cross ours comments around incorporate and.

Carbon.

And this ends our transition and capital allocation.

Yes.

Anything you are doing posts.

Yes Jade.

Since theres not just just one that this started then and really as you look forward on projects like you just announce on on and our hydro start yes actively including.

Alright, I call no snow carbon tax in your IR analysis.

Thanks for the question Ben I think at this point so.

The front part of your question was is this new for us.

I think it's emerged.

To the forefront of our analysis over the ensuing couple of years, where.

We're thinking long and hard about our own greenhouse gas emission reduction strategies I think there will be more to report on that here coming up in 2021.

We clearly are focusing from a qualitative standpoint on a on the impact of emissions to our objectives as a corporation and in our objectives in our business units.

We do run various scenarios of potential.

Economic costs, whether their carbon taxes or regulation, that's existing or proposed as we think about capital allocation going forward.

But until we have clarity from a legislation and a regulatory standpoint.

It's difficult for us to actually been down.

What the economic impacts might be and.

It's one of the signposts as we've been talking about they were looking for going forward too.

Incorporate economic impacts of emissions into our capital allocation yes.

As it is as you think about carbon pricing going forward theres uncertainty with respect to what is going to look like similarly, as we thought about.

Deploying 30, and 40 year capital, we we look to understand commodity prices for example, but we don't make our our capital allocation and decisions based on on a forward market view of of commodity prices and we wouldn't make our capital allocation decisions based on it on a forward view of of.

Of carbon pricing, because it's just too much uncertainty to try to financing and build long term and assets, what we look for us.

When did those fundamentals tell us and then Gil can.

Can we incorporate that capital investment either into a rate base, which gives us confirmation that did that they will get recovery off and on capital or through a long term contracted structure similar to our coastal Gaslink project for for example, where we look to.

Return on capital in the primary term of that that 25 year your contract.

Where we are we're not betting on the future what we what our view of commodity prices or or in this case and carbon pricing is going to be is is what is the investment community say about that what do counterparty say about that and are they willing to to provide the security that we need to bring the finance.

Turning to a to a large scale project thats, how we make capital.

Allocation decision so.

It has been incorporated in our thinking in the past.

But again as we put forward.

For example projects in the past that may have reduced.

Our missions, but ended up with a larger costs.

When we think about putting those in front of our regulator, we've always but those.

In front of our regulator and what they approve and don't approve is based on what their criteria for approval in a low cost relative to either whether those be suicidal or and other other benefits or costs you. The trade off of making a regulated regulatory decision as you know they're not always made.

Just on.

Your economics, and it's a it's a considered weighing of economics, but as well as other impacts on environment and and communities and then they come to a a conclusion on whether it's in the national interest or public interest or not so thats. How we think about it is that these dark carbonate.

In a conversation weve been having for for for many years and I will continue to be get incorporated as required into our decision, making and as people place and.

And their capital investment and allocation decisions based on on those things going forward.

Okay, great. Thanks, and on the pumped hydro our battery storage, where do you think that sits on your your target returns that 7% to 9%.

Ranjan Mark at Bruce Power Center at Turner them on NGL NGL sort of return.

So we have not yet had the conversation.

About commercial underpinnings, the two goalposts our rate base type treatment and the other goalpost would be at Bruce type.

Structure.

Each of those has an allocation of risk between the counterparty and ourselves and we would expect that the returns would be commensurate with the allocation of risk. So.

Think of it.

Think of.

The range as somewhere between the Bruce return and the NGL type return.

Thats the allocation of risk between the two parties that would determine where we land, but we have not yet had that conversation.

I think in all cases, you can expect it to that low risk end of the spectrum within that range and is that we have risk preferences that have allowed us to operate in that range for some time expect that to continue.

But don't expect us to take on as I said doing any sort of forward commodity risk or or things like that that are incorporated into into the into our thinking.

Okay, great well I'll I'll leave that one from me and Francoise, Congratulations again for us all to fast in retirement.

Im sure you are likely not going to Miss These earnings calls and thanks for taking our tough question over the years I appreciate it.

Appreciate it thanks, Thanks Ben.

Our next question comes from Praneeth Satish of Wells Fargo. Please go ahead.

Thanks, and I'll Echo my congrats to both for US some friends slot as well.

Looking at the Columbia rate case, the requested ROE of 16% at least on the surface it looks a little bit higher than.

Some of the other recent pipeline rate cases is there some specific circumstances here that want a higher ROI for Colombia.

Yeah, I think when you look at just our risk preferences risk factors overall, we are squarely within what FERC is mandating in their new policy with respect netting our OE is with respect to pick that DCF, 50% cap and so our take is that a.

A 65% equity thickness with a 16% return on equity.

Maybe at the high end, but it but it's justifiable given the environment that we're operating in today.

Okay got it then.

Sorry go ahead.

Did you say, a clearly an environment that we're in.

From a cost of equity standpoint, which is what they are are we is your cost of equity capital.

Clearly in the in any environment that we're in the risk that.

And as as being perceived to be.

Injected into the industry I don't think you can argue the cost of equity capital has declined.

And certainly that goes into our into our consideration of an ROI we ask.

Yes.

And then I'm just curious what is the advantage of doing a pumped hydro project for Ontario versus building out additional battery storage you have expertise in both or at least investments in both.

Just one more cost effective than others I guess, what's the puts and takes.

So certainly there is a.

At this scale, we are contemplating here. The metered project is a thousand megawatts. It's in a it's eight hours in duration.

From a from a reliability standpoint.

There is no battery alternative that can deliver that kind of scale in duration. So.

So yes, there is a a cost advantage.

For pump storage at that length of duration, but also as a reliability question.

Thank you.

Thanks for me.

Our next question comes from Patrick Kenny of National Bank Financial. Please go ahead.

Hey, good morning, everybody.

Just back on cake sale you.

You guys have done a good job with the Alberta government, taking the project as far as you can up until this point.

Can you just confirm that all the border crossing infrastructure required is essentially in place.

Then what legal recourse you might have.

Assuming the presidential permit is in fact retracted after the election.

And also maybe.

You might look to refile your previous NAFTA claim as well.

Okay. Thank you Patrick.

We have completed the 1.2 mile International border crossing we completed that earlier this year, but we've taken the past year to basically listen to all the stakeholders and have made great progress in creating a new vision for the project, we have signed for labor agreements with leading north.

American trade unions established to Green Energy fund for those unions partnered with five first nations as equity partners as we have already discussed so we've taken.

And we will continue to take a pretty progressive step and demonstrating how will develop the infrastructure responsibly and sustainably and we believe that.

By positioning that project this way it aligns with the expectations of either administration going forward.

And so you know the recourse and the plan certainly there are there are approaches we can take but we're taking a more proactive proactive approach and positioning the project to continue advancing it.

Okay. Thanks for those comments.

Lots of discussion already on the energy transition.

Just curious if we can get your updated thoughts around LNG infrastructure in.

Whether or not this accelerated push towards clean energy on a on a global basis income.

Increases or decreases your willingness to invest capital towards extending your gas network into LNG assets relative to say this time last year.

Thanks for that question Patrick its Francois.

No.

First of all the benefits of LNG are clear to the extent that.

Purchasers of LNG are replacing coal fired generation with natural gas fired there's obviously a greenhouse gas reduction component to that that we think is meaningful.

As Russ talked about and I will be talking about going forward, our risk preferences and our capital allocation model going forward will not change what might evolve overtime is where we allocate our capital based on where the opportunities are and so to the extent, we have an opportunity to invest capital in either.

Regulated assets or in the case of LNG more likely.

Underpinned by long term contracts with credit worthy Counterparties, we're very open to that type of investment and so if an opportunity presented itself in the future along that part of the value chain, we would we would certainly evaluate it.

And with respect to those opportunities.

On the hydrogen front can you just confirm its bruce power might be candidates for generating green hydrogen or is there something within the refurbishment agreement that legally prohibits you from integrating hydrogen.

Bruce.

On the latter question I don't have that level of detail. So we'll have to follow up with you, but clearly.

Nuclear power is.

Terrific asset class.

To participate in the production of green hydrogen through electrolysis and as we look for opportunities beyond the refurbishment of the units at Bruce power.

Part of our long term strategic planning an opportunity set for Bruce there.

The production of Green hydrogen is it's very much something that we're going to be contemplating.

Okay. Thanks for those comments and congratulations for us well into rest on your retirement. Thank.

Thank you. Thank you.

Thanks, Patrick.

Our next question comes from Michael defeated of Goldman Sachs. Please go ahead.

Hey, guys. Thanks for taking my question and I'll Echo the the retirement and succession congratulations announcements.

Couple of easy questions for you can you remind us if the cost of building coastal gaslink rises who in bed that incremental cost who bears that to the project owners, including new orders that simply raise the tariff that gets.

Just to shell and the other LNG owners.

Hey, Michael its Tracy so the agreement that we have with LNG, Canada would contemplate that any differences between the estimated cost and the Asheville cost of building the pipeline would be rolled into the tools.

So with respect to certain circumstances. So we as we go forward we are in constant dialogue with LNG, Canada about that but essentially that's how it works.

Got it and then on the U.S. gas pipeline side can you.

I am trying to think about what the dollar millions revenue RASK West is I'm trying to think about the Columbia gas rate case, the section four that's underway.

What is the revenue increase request that you guys have asked for in that case.

Yes, Michael I don't have the exact number off the top of my head in terms of what the buyout revenue increase was but we could circle back with David and get you that.

Okay and do you see yourselves is significantly under under earning at either Columbia gas. So now we're in our or is this more about getting the modernization trackers set up on an annualized basis. So you can kind of upgrade the compression on both systems.

Clearly the modernization program is a big part of the filing and what we proposed is a seven year $3 billion program, but also if you look back over time, our maintenance capital spend for example has outpaced our depreciation expense to the tune of about $1 billion on a cumulative basis. So when we talk to you that our maintenance capital is recovery.

All in rate cases. This is a rate case to recover that historical investment that we've made in the system.

Got it thank you much appreciated.

Thanks, Michael.

Our next question comes from Andrew Kuske of Credit Suisse. Please go ahead.

Thanks, Good morning in General you say birds, a pretty simple approach to corporate structure over the years.

Maybe for obvious reasons, you can get some partnership structures with CAC selling CTL.

But would you look to maybe enhance value.

And to extract capital out of certain assets with a partnership approach and then take the proceeds you could get.

Whether allocating the accelerated energy transition our share buybacks.

Could you give us some color on do you think about that possibility and that kind of approach.

Thanks for the question Andrew its Francois.

As we.

As we've done in the past with with CGM oil and with northern Courier and others to the extent and our and our equity.

And we have a need to raise either internal or external equity.

We look for opportunities to find that equity at the lowest possible cost our.

We're obviously always mindful about share count as we as we think about.

Our capital raising efforts, so if theres, an arbitrage opportunity between the private markets and the public markets.

And we have the ability to avail ourselves of that it's something that we will we will consider going forward.

So I wouldnt suggest that at the current time there are any specific initiatives to do that on any of our assets, but it's a tool in our in our toolbox and one that we've now built the mouse trap with CGM and it could possibly be a mouse trap, we could use again in other circumstances should the opportunities to redeploy.

Okay that capital look attractive and avail themselves to us it's Don here, it's always a balancing act as well because we do value simple structure and when it's hard to get stuff done owning 100% of it.

Great benefit to us and as always we look into things like tax consequences structural subordination from a fixed income perspective.

As we look at these things but.

Tackle Francoise comment there, we always look at per share metrics when a when we're looking at increasing share count.

Okay. That's very helpful color and then maybe just as an extension when you think about just cost of capital on we've seen.

Alternative capital providers with a longer term view.

I'm into some pipeline situations in particularly in the Middle East recently in the last few years.

What do you think that speaks to cost of capital in North America.

Yes.

Tough to say, if there's a direct read through on that there is a lot of.

Private money.

Looking at exactly the kind of assets, we look at and the kind of assets, we actually have a.

Our in house here.

From a debt capital perspective.

I would say our debt cost of capital is actually gone down on its really on the equity side and so it depends how much leverage these guys are able to use but it's.

It's the exact same annuity revenue streams that we're looking at here in terms of geographic location I'm not sure.

Exactly the extent of the the correlation between the middle East and in something and say Middle of America that we would.

We would.

Again try to read through on that front.

Okay. Thank you very much.

Thanks, Andrew.

Our next question comes from Alex Kania of Wolfe Research. Please go ahead.

Thanks, Jim.

Maybe two questions the.

The first one is just on the the TC pipelines transaction, if you could talk to us.

Im a little bit about how the timeline of that that could that would work out and are there any.

And thinking about structurally here, if there is any synergies or any kind of strategic.

Kind of elements that might work a little bit better with it integrated into the broader system more more strongly I guess and the second question is just on Colombia.

You know it's been a few months since we've had Atlantic coast pipeline get cancelled and we've heard that discussions with the those shippers looking elsewhere.

Are there any opportunities or how that evolves for for the Columbia system.

It's Don here I'll start with the in the pipe LP.

Question.

We do have an active proposal in front of the LP. So we are limited in what we can say here.

I would just say that these are core assets that are that we operate in.

We fully consolidated into our existing financial statements.

Simplification of structure.

For us it's important here as well.

We think what we've offered here is compelling and mutually beneficial to both the.

You see energy shareholder in the LP Tc shareholder and the LP unit holder.

Be some modest amount of operational synergies and the like but again, it's already fully consolidated into our operations and financials and and given just the relative size of the LP versus versus TCC EZ.

Any impact would be would be fairly small here.

Yes, and then this is stand with respect to your second question, you're correct that while Dominion's HCP project may have gotten away the the demand for gas in the region has not and we do have a couple of but I would say our small scale expansion opportunity, particularly in the beginning that would cover a portion of a.

Load.

Originating them is likely to take in the first quarter of next year. So we don't have anything definitive to share with you other than that this is a great opportunity for us to actually look at installing electric compression or additional electric compression across our system as part of this project. So stay with US and we'll give you an update Q1 next year.

Great. Thanks, Congrats rests in principle as well there. Thank you.

Ladies and gentlemen. This concludes the question and answer session. If there are any further questions. Please contact Tc energy Investor Relations I will now turn the call over to Mr. Moneta. Please go ahead.

Okay. Thanks, and thanks to all of you for participating today, we very much appreciate your interest in TC energy and we look forward to talking to you again soon have a great day.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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