Q4 2020 TC Energy Corp Earnings Call

[music].

Thank you for standing by this is the conference operator, welcome to the TC energy 2024th quarter results Conference call.

And as a reminder, all participants are in listen only mode.

And the conference is being recorded.

After the presentation there'll be an opportunity to ask questions to join the question queue. You May 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 Lynetta, Vice President Investor Relations. Please go ahead.

Thanks, very much and good afternoon, everyone I'd like to welcome you to TC Energy's 2024th quarter Conference call.

Joining me today are friends, while <unk>, President and Chief Executive Officer, Don Marchand Executive Vice President of strategy and corporate development, and our Chief Financial Officer, Tracy Robinson, President natural Canadian natural gas pipelines and coastal gas link Stan Chapman, President U S and Mexico natural.

Gas pipelines bevin worse, the president liquids pipelines, courthouses, president and power and storage and Glenn The news Vice President and controller.

Francois and Don will begin today with some opening comments and our financial results and certain other company development.

Copy of the slide presentation that will accompany their remarks is available on our web site. It can be found and 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 Jaimie Harding following this call and she'd be happy to address your questions.

In order to provide everyone from the investment community with an equal opportunity to participate we ask that you limit yourself to two questions. If you have additional questions. Please reenter the queue of.

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 would be pleased to discuss them with you following the call.

Before Francois 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 TC energy with Canadian Securities regulators and with the U S Securities Exchange Commission and.

And finally during this presentation will refer to measures such as comparable earnings comparable earnings per share comparable EBITDA and comparable funds generated from operations. These comparable measures are considered to be non-GAAP measures and as a result, they may not be comparable to similar measures presented by other entities. These measures are used to provide you.

Additional information on TC Energy's operating performance liquidity and its ability to generate funds to finance its operations with that ill turn the call over to Francois.

Thanks, David and good afternoon, everyone and thanks for joining us this afternoon.

While 2020 presented some of the greatest global challenges and recent history.

We quietly and reliably continued to deliver the energy millions of people rely on every day.

Notably the services, we provide and Canada, the United States and Mexico were deemed essential.

And the important role our infrastructure plays and the functioning of the North American economy, and the well being of people across the continent.

We take that responsibility seriously and as always we conducted our business and of safe and reliable manner, employing thousands of workers and supporting communities wherever we operate.

And we.

We delivered strong financial results for our shareholders.

As you are accustomed with our risk preferences, approximately 95% of our comparable EBITDA comes from of regulated and our long term contracted assets largely insulating us from the short term volatility associated with the volume throughput and commodity price fluctuations.

As a result, our $100 billion portfolio of high quality long life energy infrastructure assets produced record results again in 2020.

Highlighting the resiliency of our assets and.

And our utility like business model.

At the same time, we continued to advance the capital program that will help power the north American economy for decades to come.

More specifically, we placed $5 $9 billion of growth projects into service in 2020, and advanced another $20 billion of secured capital projects and Thats, excluding Keystone XL.

In addition, we continue to progress more than $8 billion of projects under development as well as numerous other opportunities.

Looking forward, we expect our solid operating and financial performance to continue with ongoing growth and EBITDA.

We also expect comparable earnings from common shares in 2021 and will be generally consistent with the record results. We produced in 2020.

Finally, we know our ongoing success will depend on our ability to balance profitability with safety environmental and social responsibility.

Society expects its energy to be delivered with care for people and our planet.

And we also demand and this of ourselves.

We have a 70 year track record of safe and reliable operations.

But we recognize we can always do better.

And so as a result, we are focused on continuous improvement, including potential path to reducing our <unk> emissions and understanding shifting long term fundamentals to ensure our business remains sustainable and resilient and and ever evolving energy landscape.

Now with that as an overview I'll expand on some recent development beginning with a brief review of our 2020 of results.

Excluding certain specific items comparable earnings reached a record $3 9 billion or $4 20 per common share and 2020 compared to $3 9 billion or $4 14.

And 2019 and increase of one 5% on a per share basis.

Comparable EBITDA of $9 4 billion was similar to last year, while comparable funds generated from operations also hit a record high of $7 4 billion, which is of 4% increase over 2019.

Each of these amounts reflect the solid performance of our legacy assets as well as contributions from the $5 9 billion of new assets, we placed into service during the year.

Based on the strength of our financial performance and our promising outlook for the future TC Energy's Board of directors declared a first quarter of 2021 dividend of <unk> 87 per common share, which is the equivalent of $3 48 per share on an annual basis.

This represents a seven 4% increase over the amount declared in 2020 and is the 20 <unk> consecutive year that our board has raised the dividend.

Next the few comments on our five operating businesses.

First and Canadian natural gas pipelines and customer demand for our services remains strong and 2020.

And this manifested itself and the volumes transported across our network with the <unk> system field receipts, averaging $12, one bcf per day, and Canadian mainline deliveries, averaging four five Bcf per day, both amounts were similar to the volumes, we transported and 2019.

At the same time, we placed $3 4 billion.

Of NGL system growth projects into service, we invested approximately $600 million and maintenance capital on our Canadian assets, which also forms part of rate base and we received final approval for <unk> 2021 expansion program.

As a result today, we are advancing $6 7 billion of commercially secured projects on and GTO.

That will provide an incremental three two bcf a day of capacity for our customers between now and 2024.

Finally, and Canadian natural gas pipelines. We also continued to advance the two one bcf per day coastal gasoline project that will connect Ws CSP natural gas reserves to the LNG, Canada export facility and Kitimat BC.

Due to COVID-19, and late December of the BC Provincial Health Officer issued an order of restricting the number of workers on industrial project sites in the Northern Health Authority region of British Columbia.

We're working with the provincial health authorities to safely resume construction activities in accordance with that order.

We are also working with LNG, Canada on establishing a revised project plan for coastal gas link.

We expect that project costs will increase and the schedule will be delayed due to scope increases permit delays and the impact of COVID-19, including the provincial health order.

Coastal gas link will continue to mitigate these impacts to the extent possible and these incremental costs will be included and final pipeline tolls subject to certain conditions.

Turning now to our U S natural gas pipelines business, where our broad network moved record volumes, averaging approximately 25 Bcf per day and 2020.

And increase of 1% over 2019 deliveries.

Now during the polar vortex that covered most of the us over the past week.

We experienced unprecedented sustained demand for our pipeline capacity as we set a record for coincidental three day peak deliveries.

Of over 101 Bcf from February 14th to the 16th.

Besting our prior Mark set in January of 2019 by about two five Bcf per day.

And I would like to extend the big shout out to our employees, who have been managing trying personal circumstances, yet continue to ensure that we deliver the energy people need every day and thank you.

Over the past year, we also placed US $1 9 billion of project and service, including the completion of the modernization II program on our Columbia gas transmission system, while adding nearly us $1 billion of growth projects to our backlog.

Each of those projects is underpinned by long term contracts and they are great. Examples of the and corridor expansions that will allow us to meet growing demand, while also reducing our emissions.

Also in U S pipelines and late July our Columbia gas transmission system filed a section four rate case with FERC.

The rate case is progressing as expected while we continue to pursue a collaborative process to find the mutually beneficial outcome with our customers through settlement negotiations.

Finally, and U S natural gas pipelines and late 2020, we entered into a definitive agreement and plan of merger to acquire all of the outstanding common units of TC pipelines LP not beneficially owned by us or our affiliates and exchange for TC energy common shares.

The vote on the plan of merger by unit holders is scheduled for February 26.

The transaction.

It is expected to close and late first quarter.

Approval by the holders of the majority of outstanding common units of TCP and is the remaining significant closing condition.

Turning now to our Mexican natural gas pipelines, where our five operating pipelines moved approximately one eight bcf per day during 2020.

In addition, we advanced the Villa de Reyes project, although a phased and service of the pipeline has been delayed due to COVID-19.

Subject to the timely reopening of government agencies, we now expect to complete construction during 2021.

Finally, and Mexico, we completed a project to allow of bi directional flows on our Guadalajara pipeline.

It is a good example of our ongoing collaboration with the Cfe on a project that provides access to either LNG imports from the men's the neo terminus or access to low cost continental and natural gas supply at the Guadalajara terminal for delivery to regional markets.

Turning now to our liquids pipelines business, which generated solid results despite extraordinary voluntary of volatility and.

Global crude oil markets.

While the volatility has a significant impact on our market link and liquids marketing business.

Keystone continued to produce strong results the.

And the system moved and average of 555000 barrels per day last year underscoring its role as an important conduit between the abundant natural gas and North American reserves and key markets.

Also and liquids pipelines on January 20th.

The U S president of revoke the existing presidential permit for the Keystone XL pipeline.

As the result of this disappointing decision we suspended the advancement of the project and ceased capitalizing costs, including interest during construction, while we assess our options along with our partners and other stakeholders.

We wish to thank our customers American and Canadian workers.

Our partners of the government of Alberta, and natural law energy.

Labor organizations industry, the government of Canada, and countless other supporters of this project over the past decade.

Turning to our power and storage business, where Bruce power. Once again produced solid results as its strong operating performance continued.

Last January work commenced on the unit six major component replacement or MCR program. When we took the unit offline.

We expect to invest approximately $2 6 billion and the program with unit six expected to return to service and 2023.

While COVID-19 has presented some challenges and good progress is being made on the project achieving a major milestone on October one with the commencement of the fuel channel and feet of replacement program.

We also continue to advance work on the refurbishment of another five reactors as part of Bruce Power's long term life extension program.

Finally, and power, we continue to engage various stakeholders and an effort to advance our large pumped storage opportunity in Ontario, and the project is designed to store emission free electricity and provide backstop to the intermittency associated with the energy provided by our renewable generation.

In summary today, we are advancing $20 billion of secured projects that are expected to enter enter service by 2024.

All of our underpinned by cost of service regulation or long term contracts, giving us visibility to the earnings and cash flow they will generate.

Approximately $4 2 billion of these projects are expected to be completed in 2021, including $1 $7 billion of maintenance and modernization initiatives tied to our regulated pipelines.

Looking forward our goal is to continue to invest $5 billion to $6 billion annually to deliver on our long term growth plans.

As you can see on this slide our starting point is our $20 billion secured capital program.

Beyond that we expect to continue to invest one 5% of $2 billion annually and maintenance and modernization programs across our extensive pipeline network approximately 85% of which is recoverable through our rate regulated businesses.

We're also developing of significant suite of future opportunities, including several projects that will allow us to deploy capital along our extensive pipeline corridors.

And we see opportunities in the renewables and the firming resources needed to manage their intermittency.

Electrifying our fleet as.

As well as emerging technologies such as hydrogen.

In summary, I believe we will continue to be opportunity rich.

And I believe that our challenge will be to allocate capital thoughtfully to those projects that are aligned with our capabilities, our risk preferences and our return requirements.

While playing a role and the evolving energy landscape.

Based on the continued strong performance of our base business combined with our organic growth plans, we expect to continue to grow our dividend at an average annual rate of 5% to 7%.

And I want to make it clear.

Debt there is no assumption of M&A embedded and our growth rates nor is the M&A of current area of focus for us.

As always the growth and dividends is expected to be supported by sustainable growth and earnings and cash flow per share and strong coverage ratios.

In closing I'd like to leave you with the following key messages.

Looking forward I expect our assets will continue to provide an essential service to the functioning of the North American economy.

And demand for our services will remain strong for decades to come.

We have five significant platforms for growth, our Canadian and U S and Mexico natural gas pipelines, our liquids pipelines and our power and storage business.

As we advance our $20 billion of secured capital projects and various other organic growth opportunities. We expect to build on our long term track record of growing earnings cash flows and dividends per share.

We will also continue to focus on safety and sustainability.

Working according to our values and responding quickly to market signals and sign posts to ensure we remain industry, leading and resilient as we grow shareholder value.

I'll now turn the call over to Don who will provide more details on our financial results and outlook John.

Thanks, Francois and good afternoon, everyone.

As outlined in our results issued earlier today net income attributable to common shares was $1 $1 billion of $1 20 per share and the fourth quarter of 2020 compared to $1 $1 billion of $1 18 per share for the same period and 2019.

Fourth quarter 2020 included an income tax valuation allowance release of $18 million related to reassessment of our ability to utilize certain prior year's U S tax losses and.

An additional $18 million income tax recovery related to state income taxes on the sale of Columbia midstream assets and 2019 and.

And and incremental after tax loss of $81 million to sell our remaining post closing of obligations on the sale of the Ontario natural gas fired power plants and April 2020.

Fourth quarter 2019 results also included several specific guidance as outlined on the slide and discussed in the fourth quarter 2020 financial highlights release.

All of the specific guidance as well as unrealized gains and losses from changes in risk management activities are excluded from comparable earnings which reached $1 $1 billion in the fourth quarter 2020, or $1 15 per share of $110 million or 12 cents higher than last year.

Turning to our business segment results on slide 18, and the fourth quarter comparable EBITDA from our five operating segments was approximately $2 3 billion consistent with 2019 results.

Canadian natural gas pipelines comparable EBITDA of $682 million was $64 million higher than same period last year.

Of the net effect of increased rate base earnings flow through depreciation and flow through financial charges on the and GTR system is our investment program of advanced and additional facilities were placed in service.

Coastal gas link development fee revenue recognized in 2020 and.

And lower flow through income taxes on the NGL system and the Canadian mainline.

I would note that for Canadian natural gas pipelines changes in depreciation and financial charges and income taxes impact comparable EBITDA, but do not have the significant effect on net income of.

And almost entirely recover the revenues on a flow through basis.

Net income per the NGL system increased $17 million compared to fourth quarter 2019, mainly due to a higher average investment base and continued system expansions.

Net income for the Canadian mainline decreased $2 million year over year.

The us natural gas pipelines comparable EBITDA of 706 million followers, you us or $919 million Canadian and the quarter rose by $58 million, you asked the $64 million Canadian compared to the same period and 2019.

The increase was mainly due to strong operating cost management across a number of our pipelines.

Mexico natural gas pipelines comparable EBITDA of 128 million U S of 166 million Canadian and was consistent with the results in fourth quarter 2019.

Liquids pipelines comparable EBITDA declined by $64 million of $408 million and fourth quarter 2020, primarily due to lower contribution from liquids marketing activities largely from reduced margins.

Power and storage comparable EBITDA fell by $49 million year over year, two of $161 million, primarily due to the net effect of the removed from service of Bruce Power unit six and January 2024, its MCR program and lower Canadian power earnings largely as a result of the sale of our Ontario natural gas fired power.

Plants and April 2020, partially offset by fewer plant outage days on the remaining Bruce units and improved results from our Alberta cogeneration plants.

So all of our businesses with US dollar denominated net income, including U S. Natural gas pipelines, Mexico natural gas pipelines and parts of liquids pipelines EBITDA was translated into Canadian dollars using the exchange rate of 130 and corn.

<unk> 2020, compared to a range of $1 32 for the same period and 2019.

As a reminder, our US dollar denominated revenue streams are and part naturally hedged by interest and the U S dollar denominated debt.

And then actively manage the residual exposure on a rolling two year forward basis with realized gains and losses on this program and proactive and comparable interest income and other and the corporate segment.

Now turning to the other income statement items on slide 19.

Depreciation and amortization of $652 million increased $27 million versus fourth quarter 2019, reflecting new assets placed in service and Canadian natural gas pipelines, which amounts of fully recoverable and told us on a flow through basis.

Partially offset by lower depreciation and power and storage, mainly due to a 2019 reassessment of the useful life of certain components of our Alberta cogeneration plants.

Interest expense of $539 million for fourth quarter, 2020 was $56 million lower year over year, primarily due to the net effect of higher capitalized interest related to Keystone XL lower capitalized interest due to the completion of Bath and first quarter 2020, and the application of the equity accounting to close the gasoline upon the sale of the <unk>.

65% interest and the project and May 2020.

Lower interest rates on short term borrowings.

And the foreign exchange impact from a weaker U S. Dollar on translation of the US dollar denominated interest.

<unk> decreased $22 million to 95 million for the three months ended December 31, and 2020 compared to the same period and 2019, primarily due to NGL system expansion projects placed in service and the suspension of reporting recording and PBC on Tula effective January one 2020 due to ongoing.

And delays.

This was partially offset by continued investment and our growth projects on Columbia gas.

Comparable interest income and other was $86 million and the fourth quarter up from $77 million of the same period and 2019, primarily due to realized gains in 2020 compared to realized losses and 2019 on derivatives used to manage our net exposure to foreign exchange rate fluctuations on us dollar denominated income.

This was partially offset by lower interest income in 2020 related to the peso denominated inter affiliate loan receivable from the sur de Texas joint venture due to lower interest rates and the foreign exchange impact of the with the peso.

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

Income tax expense included in comparable earnings was $134 million and fourth quarter 2020, compared to 211 millions of the same period last year the.

The $77 million decrease was mainly on account of lower flow through income taxes, and Canadian rate regulated pipelines and.

And the higher foreign tax rate differentials.

Comparable net income attributable to non controlling interest of $69 million and the fourth quarter decreased by $7 million relative to the same period last year.

Non controlling interest primarily captures public unitholder ownership and TC pipelines LP and the government of Alberta investment and Keystone XL.

And finally preferred share dividends were comparable to fourth quarter 2019.

Now turning to slide 20.

During the fourth quarter, we invested approximately $2 2 billion and the capital program, primarily on NGL system expansions various U S natural gas pipeline projects and Keystone XL prior to suspending its advancement.

Our investing activities were largely funded with comparable funds generated from operations of $2 1 billion and partner equity contributions to Keystone XL.

So the full year comparable funds generated reached a record $7 $4 billion.

Our balance sheet liquidity and financial flexibility or all of and their historical position of strength.

We exited 2020 with debt to EBITDA in line with the high fours and <unk> and a debt of approximately 15% that we had targeted and we are well positioned to fund our $20 billion secured capital program through our strong internally generated cash flow and debt capacity without increasing share count.

As we have suspended the advancement of Keystone XL, we no longer expect to issue hybrid securities or common shares through our dividend reinvestment program for the purpose of funding project.

Finally, we extinguished US $2 billion of 364 day committed bilateral credit facilities, which had been established and second quarter 2020 of the onset of the pandemic as they were no longer needed.

Now turning to slide 21.

This graphic highlights our forecasted sources and uses of funds for 2021 through 2023, which is similar to the slide we presented at Investor day, and updated to remove the Keystone XL and going forward.

Starting in the left column the total funding requirement over the next three years is projected to be approximately 28 billion.

Comprised of dividends of $11 billion capital expenditures, including maintenance capital of $15 billion and $2 billion attributed to the pennant and TC pipelines LP acquisition.

The second column highlights expected internally generated cash flow of $21 billion, which leaves the residual need of approximately $7 billion and far right column of which approximately $2 billion is attributed to the pipe LP share per unit exchange.

The remaining $5 billion will be funded through a combination of incremental debt commercial paper and other including capital and recoveries.

The program is consistent with our goal of maintaining debt to EBITDA and the high force range and <unk> and a debt of 15%.

Now turning to slide 22 next I'd like to spend a moment on our 2021 comparable earnings outlook.

Additional information is contained in our 2020 annual management's discussion and analysis, which is being filed on SEDAR today and will be available on our website.

Overall comparable earnings per share and 2021 are expected to be generally consistent with results achieved in 2020.

The net impact of the following.

Canadian natural gas pipelines earnings are anticipated to be higher mainly due to continued growth and the NGL system.

Higher incentive earnings and the Canadian mainline and increased coastal gas link development fee revenue due to unexpected rise and project activity.

The U S. Natural gas pipelines earnings are also expected to grow due to an increase and transportation rates on Columbia gas, which is dependent on the outcome of the section four rate case filed with FERC.

And Mexico, we forecast and needs to be lower year over year debt.

And the fees recognized in 2020 associated with the completion of the certain Texas pipelines.

And liquids earnings are anticipated to be lower than 2020, due to continued challenging market conditions impacting and contracted volumes on the Keystone pipeline system.

And margins and the liquid market liquids marketing business.

Operable earnings for the power and storage segment are expected to decline primarily due to a lower contribution from Bruce power as the world sales of greater planned outage days and higher operating costs as.

As well as the sale of our Ontario, natural gas fired power plants and 2020.

Bruce power availability, excluding and six was 88% and 2020 and <unk> and expect it to be in the mid 80% range in 2021.

Other items impacting the earnings include the suspension of the EDC and <unk> effective January one 2021, given ongoing delays and reduced capitalized interest due to the replication of the Keystone XL presidential permit which occurred on January 20th.

With respect to income taxes, excluding Canadian rate regulated pipelines, where income taxes are a flow through item and can be quite variable.

Along with equity and <unk> income and the U S. Natural gas pipelines, we expect our 2021 full year effective tax rate to be in the mid to high teens.

Finally, as part of the 2021 outlook I would note that our exposure to interest rate foreign exchange and commodity price variability remains quite limited and our diversified portfolio given approximately <unk> 95 per cent of EBIT coming from contract and the regulated assets variance flow through of insuring mechanisms as well as natural and active hedges in place.

And <unk>.

We do expect to record an impairment charge in 2021 related to the suspension of the advancement of Keystone XL and as previously noted we had stopped recording IDC for the project effective January 20th.

In terms of capital spending.

We expect to invest approximately $7 billion, and 2021 and growth projects maintenance capital and contributions to equity investments with the majority attributable to NGL system expansions U S natural gas pipelines project.

The Bruce power life extension program, and normal course maintenance capital of which approximately 85% is invested and regulated rate base or otherwise recoverable.

We do not believe disruptions related to COVID-19 will be material to our overall 2021 capital program and <unk>.

<unk> of the uncertainty exists and both the short and longer term.

Lastly, turning to slide 23.

Closing I offer the following comments are solid financial and operational results and the fourth quarter. Once again highlight our diversified low risk business strategy and reflect the robust performance of both our blue chip legacy portfolio, along with the incremental contribution of equally high quality assets from other ongoing capital program.

Today, we are advancing of $20 billion suite of secured projects and have five distinct platforms for future growth and Canadian U S. Mexico natural gas pipelines liquids pipelines and power and storage.

Our portfolio of critical energy infrastructure projects is poised to generate high quality long life earnings and cash flow for our shareholders as well and is offered further attractive and executable and corridor opportunities.

That is expected to support annual dividend growth of 5% to 7% and the future.

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

And as a proven shock absorber to unforeseen market events.

That's the end of my prepared remarks, I'll now turn the call back over to David for the Q&A.

Great. Thanks, Don just a reminder, before I turn it back over to the conference coordinator for questions from the investment community. We ask that you limit yourself to two questions. If you have additional questions. Please reenter the queue with that I'll turn it over to the conference coordinator.

Thank you we will now begin the question and answer session.

And the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone of acknowledging your request.

If you are using a speakerphone. Please pick up your handset before pressing any teeth to withdraw your question. Please press Star then two.

We will pause for a moment of callers join the queue.

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

Hey, good afternoon.

And recognizing you've got a lot of stakeholders and you can't necessarily say something definitive on cash kicks out.

It sounds like Youre, not expecting and path forward for the project at least one that involves any material Tc energy shareholder capital. So that's the case.

And just talk about how you view the liquids pipelines in general within your overall asset mix thinking about the lack of visibility.

More infrastructure, driven growth and especially what it does to your ESG profile.

Robert It's Francois and get started on this and I'll ask Kevin to provide some additional color. Our starting point is that this is irreplaceable infrastructure.

The very high quality cash flow stream underpinned by long term contracts with credit worthy Counterparties and.

Any alternative has to compete with the growth and earnings and cash flow debt that this is going to generate and.

And it can play a role and TC Energy's growth irrespective of where we decided to allocate our capital going forward.

We do see a tremendous amount of opportunities.

And I'll ask Kevin to speak to what we see on the liquid side, but and our natural gas and power storage businesses and.

And that's going to be of.

The high quality reliable cash flow debt, we can allocate wherever we see the best returns and how we want to manage the portfolio going forward, but revenue.

If I could ask you to comment on the growth prospect within the liquids business.

Sure. Thank you Francois.

Robert Robert to go after the question around the liquids.

The.

The us growth outlook and certainly we are base assets.

A link of very strategic supply base and with the highest demand.

Utilization and the Gulf Coast refining markets and the Midwest refining market, so very strategic corridor.

That is irreplaceable and so while we were developing the Keystone XL project, we were similarly and parallel advancing other opportunities.

To enhance our service offering for our customers.

Providing.

The different access points to delivery points and looking at as the market fundamentals shift and the.

Supply sources change looking at where the arbitrage is and the market and finding ways to leverage our existing assets too and.

Hence our our growth outlook.

And maybe I'll take care of you also mentioned our path forward and just to address that this is a very complex process and while we evaluate our path forward, we have begun to immediately wind down our construction activities and in both Canada and the U S and the safe and responsible.

Manner, and it's going to take some time to work with our partners and customers to determine what those exact next steps will look like but we'll do so consistent with our values and doing and doing the right thing. So hopefully that answers both your two questions.

That's great.

Thank you just finished turning to M&A and I appreciate the comments that it's not us and are needed to reach the 5% to 7% growth rate right at the.

And you said.

And just maybe just us for Francois just now that you are and the chair can you outline your approach your framework for let's call it opportunistic M&A.

And if you can comment on the willingness to take leverage above your target over kind of a medium term period.

And to execute that how you approach.

For the EPS accretion and maybe just structurally.

Your interest or.

Willingness to acquire assets of platforms of scale, where you might have and non controlling or non operating interest.

Four of those lots and there to unpack, but I'll I'll do my best driver Robert.

With respect to asset M&A I think as we've mentioned in the past, we always look for high quality assets at distressed points and the cycle, where we were able to acquire assets assets that otherwise would not be available because of their quality because the.

The existing owners are.

And.

And financial distress.

We typically don't look for assets that are of the lower quality and need and.

Need work.

And.

And deliver value from that perspective so.

We do have a list of assets that we've.

We would covet overtime I would characterize them as.

Enhancements and.

And directly connected to our existing footprint and.

Two to this point, we have not seen any of those assets become available. Although we have had conversations with various parties in terms of longer term M&A.

Our value proposition from my perspective is to deliver.

Reasonable amount of growth.

And and dividend with a low risk.

Business risk profile underpinned by growth and underlying earnings and cash flow.

So as we think about M&A, whether it's near term medium term of our long term.

<unk>.

The value proposition is that whatever assets, we acquire have to actually meet that requirement.

We.

We don't.

The feel that.

Our currency at the moment.

Given where we're trading and relative to our intrinsic value of lends itself to us doing anything dramatic.

It's very difficult when you're trading at a discount to intrinsic value to generate revenue and cost synergies that debt close those gaps. So we don't really think of accretion from the.

And financial accounting standpoint, and we think of accretion from and intrinsic value standpoint, and so were inclined to be patient, which is why I mentioned that we're going to be focusing on our own operational excellence.

Making sure our assets are delivering the.

Optimal amount of cash flow and.

And performing well from that perspective, and then looking to organic growth opportunities from our existing corridors and.

And those types of business opportunities so.

From a balance sheet standpoint.

And.

<unk>.

In order to be opportunistic you have to be able to maintain a strong balance sheet and have some dry powder.

And so any transaction that would see us taking on even temporarily significant amount of incremental leverage above our targeted levels is not something that we're really contemplating at this point.

Great and just on non controlling non operating interest that's typically been Tc energy thing, but your approach to guidance.

Yes. Thank you.

Not likely.

We enjoy.

Having the strategic control and operations of most if not all of the assets debt.

We have and ownership interest in.

You can see with the of transaction that we've.

The initiated to buy in.

The LP and Thats the situation, where we are the operator, where the general partner and we're very familiar with the assets and so comfortable with.

Properly assessing risk and managing risk and a situation where youre not necessarily of the operator.

The different proposition and I am not saying, we would never contemplate something like that but as you pointed out it's not something that we've typically done and that would not be our first approach.

Perfect. Thank you very much.

Thanks Robert.

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

Okay, Thanks, and good morning.

Sorry, good afternoon.

As part of the.

In terms of gear business.

The mix now you got kicked hell of often the roster.

And so you look at the percentage of of gas pipelines and and the rest of your business here, you've probably got Mark tells us the gas and oil now.

Okay. So is there a strategic.

Long term focus for you too.

And more towards diversifying.

Business net more and maybe balancing out overtime.

I think.

The way, we have thought about our portfolio composition and then over the last number of years is that we work hard too.

Originate opportunities to allocate capital in a manner, that's consistent with our risk preferences.

And net earn a reasonable rate of return given the risk profile of the opportunity and to some extent.

The portfolio composition has emanated from the opportunities that we've brought forward, we do think that having more diverse the diversity going forward would be to our benefit our our.

Our goal is to be.

Able to prosper irrespective of how the energy mix transitions over time, so as we look at opportunities to allocate our capital going forward, we do see significant opportunity for us to invest capital and our existing fairways, and our natural gas business and as we've talked about.

Other through firming resources or building renewables to meet our own electricity consumption from our power and storage business, we see some really interesting growth opportunities there as well.

And.

I think.

Also as we work towards our GHT emission reduction strategies, we do see and interesting potential for us to be electrifying some of our own footprint and.

For example by replacing natural gas turbines with electric motors that some of our compressor stations, along our natural gas pipeline.

Corridors. So I think you can see the migration of our capital allocation and moving to a bit more diversity and.

And perhaps more towards power and storage and has been.

The trajectory over the last few years as we've been monetizing some of those assets to fund our growth program along the.

Columbia system, and the Canada gas system as well.

Okay.

Maybe flip the switch.

The portfolio management and I know.

Probably a lot of neat.

And for that now you still have it and you are quite as is usually you've been able to harvest and.

From that and the last couple of years.

Oil pipelines are renewables and.

And then take that.

And the App more growth going forward.

The case and is there do you see any sort of arbitrage.

Opportunities and our portfolio between lower cost of capital of players and and get public equity valuation.

There could be in some circumstances I think.

From a capital allocation standpoint, our job is to maximize the spread between the return and we earn on and investments and the underlying cost of capital to fund that investment. So we have the traditional public sources through debt and equity capital markets, but we also have and.

Internal equity that can generated through monetizing individual assets and we keep it pretty close.

Pulse on.

The private market valuations for assets and it is something that we contemplate as we look to <unk>.

<unk> capital.

To fund our growth program and it's something that we would look to and the future I can tell you that.

With the growth and capital program that Dawn walk you through.

And just earlier in the prepared remarks, we're confident and our ability to fund our existing program through internally generated funds and don't expect to have the need to raise.

Our share count and any way so.

From my perspective.

<unk> of I would view the need to raise external capital beyond our internally generated funds as being a very good problem of half because it means that you've got an opportunity that's sort of accretive to your base case, but right now the base case does not contemplate any monetization of our existing assets.

Yeah, and it's Don I'll, just echo <unk> comments and just.

No. We our credit metrics are in line were largely self funded at this point.

Anytime we have we have to look at issuing shares we will look at selling things.

And everything is looked through the lens of per share metrics, but.

But we truly arms of the core assets now.

And with the portfolio effect of of what you see on the map and hard the hiving off.

Arms and legs of that is the more difficult to of proposition, but we feel we're in the sweet spot right now.

And we look at simplicity of structure, we look at the Optionality of embedded in these assets and also of the tax consequences of.

Of monetizing anything but.

And at this point and time Theres, a theres no pressing need to sell anything and we're we're pretty enamored with with our portfolio at this stage.

Okay. That's great. Thank you.

Thanks Ben.

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

Hi, good afternoon.

Hi, Jerry.

A couple of high level questions and.

And what's your thinking with energy transition of larger focus and the stock market and say this just wondering if your thought process has evolved from investor I guess conversations on.

Capital stock rotation overall, just the pace of that and at a high level. How do you see the TRP of portfolio of advancing overtime of vacuum.

And as you kind of touch on that and some of the questions before but just thinking about energy transition and capital stock rotation.

I think as you.

And we discussed in our on our Investor Day in November and you look at some of the tenants of our fundamental belief that sort of drive our views on.

Asset allocation and portfolio composition, and we believe that.

The energy demand globally will continue to grow I think the demographics are just such that that's going to be the case. We also believe that natural gas will continue to gain market share modestly on a percentage basis, but in absolute terms on and energy equivalent it will be significant growth. So we do see on.

And the opportunity for us to allocate incremental capital into our natural gas businesses. The two basins that we serve the western Canadian sedimentary basin and the Appalachian basin are extremely competitive and resilient and as a matter of fact, we expect that over time, they will gain market share and so we feel like we're serving the right basins.

And with respect to other parts of our portfolio. The other area of interest and growth for us will be and our power and storage business and.

As I mentioned.

We see an opportunity to electrify our own consumption our consumption on base Keystone is about 800 megawatts and on the natural and natural gas pipeline side of our system about 10% of our.

The compressor stations and Canada are driven by electric motors.

And about 5% of those and of the United States. So, we do see and opportunity to allocate more capital and our pipeline businesses to electrify and.

And those compressor stations and then beyond that once the electricity demand has been created build the renewable generation.

And that will be required to actually meet that consumption. So.

Over and above that as we think about.

Other growth opportunities we look at.

Our solar and battery projects, we have in development and in Alberta.

Just the announced the Siemens and conjunction with Siemens and new waste heat technology that will generate emission free power from waste heat at our compressor sites.

At a pilot and the installation and Alberta, but we see about 300 megawatts of potential for that across our system. So.

We're very confident and our ability to meet our internal goal of finding $5 to $6 billion per year of opportunity to allocate our capital and I think as you mentioned, the Jeremy or intimated that.

That allocation is likely to shift more towards the theme of our investments to electrify our asset base and reduce our emissions and also the.

Reflecting the increased percentage of renewable generation and the generation mix overall.

Understood yet it sure seems the events and Texas will highlight the value of natural thoughtful well understood and that point and then.

Maybe just kind of pivoting to.

Separate question here and and down about this before but just curious for your thoughts on what the right level payout ratio.

The <unk> here.

And if you believe us at TRP trading below intrinsic value.

Makes sense to lower the the payout ratio or.

A little bit to enable more buybacks to take advantage of that situation and can see that and see that the 'twenty 'twenty, one growth ticked down a little bit there.

And I'm just wondering your current thoughts on that.

Yeah. Thanks for the question Jeremy.

It's a balancing act all the time, but we have a multi decade model that has delivered pretty significant.

GSR and overtime.

We we think and the longer term in terms of the capital allocation.

The model and we have never flavor of the day, but I'd say, we're not also not tone deaf to us for what's going on out there.

The building blocks and we start started looking at the base business has anything fundamentally changed and we're pretty comfortable.

With the base business is resilient and we scenario and stress test of that AD nauseum. So.

We think the cash flow will be there as we look out of decade decrement in the coming decades here so the <unk>.

Looking at the dividend is it affordable and the Zip values.

And when we look at the interest rate backdrop right now.

And we would think that.

Over time the the.

The market will come back and appreciate the yielded us associated with.

With our with our shares right now.

And.

The opportunity set to reinvest cash flow is.

And as robust as we've seen it.

The quarter for a decade plus here so.

Francois has alluded to the.

So nothing has fundamentally changed here so.

So we stepped back and we.

We try not to make any decisions on the short term basis here on the knee jerk basis, but.

We look at our payout ratios that are largely in line on the comparable EPS basis, we've historically targeted the 80% to 90%.

We're certainly well within those parameters, which equates to about 40% of cash flow so as.

As we guide to five to seven per cent dividend growth.

And we see the payouts staying within those.

And those metrics going forward.

And you look at the share price from time to time.

We look at it every day every every hour.

And can be frustrating at times, but we've seen this movie before and if we continue to do.

To deliver on this model and.

And we think that the valuation will ultimately reflect that so.

Very long winded way of saying.

Nothing has fundamentally changed in terms of base business the opportunity set.

And I.

And a bit strained to figure out why.

6% yield right now and when interest rates of 1% or lower.

And is not reflected and the share price, but again, we've been through these air pockets before and if they persist for a very long time, we'll revisit it.

But fundamentally all of the building blocks of <unk> historically seen are in place.

Understood I'll stop there and thank you for the clock.

Yeah.

Thanks, Jeremy.

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

Good afternoon.

And I wanted to follow up on some prior comments on the on the opportunities for growth in this environment.

And the potential loss of Keystone XL because of a bit of a dent and the middle part of the decade's growth.

The growth outlook, how do you think about backfill and your growth.

To offset this or is that even required just given the fact that you do have about $15 million of backlog right now which is at the lower end of your 5% to six per year.

I think the way we look at it Rob.

Is what's our degree of confidence and being able the buildup to that 5% six every year and right out of the gate and we have the $1 billion of half of $2 billion of year of maintenance capital that's required 85% to 90% of that goes into rate base.

And given the very high utilization rate on our pipelines, we're expecting that that level of capital spend will be required going forward.

And over and above that you look at the.

Bruce Power MCR program I think as we included and if some of our slides we are.

Approaching of decision on the MCR unit, three and the fourth quarter of this year.

I think in our.

And our MD&A we have from.

And from 2024 through 2031, and the end of the program in $2018. Its about $6 billion of capital spend and actual dollars, let's call that $1 billion of year. So that gets you to pretty close to $3 billion right. There and then looking at and corridor expansions and our U S and Canadian natural gas pipeline business.

And as.

Each of our Canadian and U S businesses delivered about $1 billion of new growth projects in 2020, and as we look at.

The next few years and each of those businesses, we think that debt is a good and reasonable run rate. So that gets you to close to five right there and thats before we start thinking about.

And opportunities on the on the power side to invest capital and meeting our own consumption and it's even before looking at other things like electrifying, our own load and other capital investment opportunities that come from.

Reducing our emissions so.

We actually see ourselves as the opportunity rich.

And if we want to live within our means we're actually going to have to make some choices between all of the different items I just laid out for you in terms of priorities not only thinking about hurdle rates and the risk return and the underlying.

Commercial underpinning, but also what we want the portfolio to look like over time.

Alright, and thanks for that and then the follow up was going to be on hurdle rates. So how do you think about kind of of your hurdle rates and does.

The Keystone push the liquids hurdle rate up you have.

Our robust ROE ask and the Columbia rate filing and on the other side, our hurdle rates coming down on the on the <unk>.

And our side.

Don do you want to take that one yeah, well I'll start.

And we're looking at of Holistically.

And we're we're not going to.

Our hurdle rates of not really much much over the years.

And we're not going to chase.

Projects down below what we feel is an acceptable return so and we see some aspects of the state of the renewable space right now of that while we would like to invest capital and not and that business and that space.

It just doesn't meet our return hurdles.

In terms of the liquids side.

The bevans outlined some of the opportunities here, there's a lot of bolt ons and stop that.

Could be reasonably high return low execution risk stuff.

The challenge we have is finding.

Larger scale liquids opportunities that meet our risk preferences.

Are they out there and how significant of all of the day, but generally what we.

He pointed to is.

Unlevered after tax IRR is kind of in the mid to high single digit range.

And with variability for political risk and places like Mexico.

The unique nature of of nuclear refurbishment and the like but generally the pipelines space, you end up and that 7% to 8% range and.

And we still see a lot of opportunity coming certainly on the gas side, and we expect that will bring us.

Some bolt on stop on the liquids side and that range is maybe not the multibillion dollar stuff.

Thank you.

Yes.

Our next question comes from Linda as it gave us of TD Securities. Please go ahead.

Yeah.

Thank you congratulations for a resilient and strong here certainly of different ear and we all expected.

And I'm wondering if you can help us understand are recognizing that this is another dynamic situation. The recent cold weather and polar vortex, and Texas and the southern U S. And can you talk about what sort of impact it's having on your operations and how might we think of any financial impact.

And if any recognizing that there's out of.

Force majeure clauses that we might not be available.

And I guess the second part of my question is you know lessons learned.

You know at some point is it just going to be business as usual after you regroup and recover or might you rethink the value of connectivity maybe theres some.

The possibility of storm hardening, and becoming even more resilient and making those investments.

And that customers might ask for or.

Maybe Mike you rethink also the extent and pace of electrifying the tightened up pipeline network, if the electric power and might not be.

Avail.

Available as of <unk>.

Backup if the solar or any other investments you make them.

And I can't provide power to your compressors.

And.

The Linda this is Stan and I could address the first part of your question and then all of my colleagues to jump in at the at the rash.

Both of our pipelines and our people performed extraordinarily well during the I guess, what I would call the ongoing cold snap that really ripped across much of the us.

And yet again to service the the really valuable role that we play and providing energy to millions of individuals and businesses. When it is needed most and yet again, we saw record throughput level for us.

And our 13 pipeline network.

Francois I already mentioned that we had a coincidental 30 day peak between February 14, 15, and 16, where we delivered over 101 Bcf of gas.

On February 15th or Columbia Gulf pipeline set of New peak day delivery record spending out over three points of three Bcf and also on February 15th the across our combined <unk> owned and operated pipelines. We delivered just over 34 Bcf of gas, which was our second highest single day ever so net this.

And most impressive accomplishment from my perspective, and it doesn't happen by accident and I'd like to Echo <unk> comments at the beginning of the call and recognized literally the thousands of employees across the us from our field operations teams who were the <unk>.

And once that braved, the late night call outs and freezing temps.

Who are our gas control teams, who optimized literally every single deck of therm of capacity to ensure not only that we were meeting our customer obligations, which we did but also creating value for the company and debt Lastly, our office workers and especially those in Houston, who worked at most of the past week without any electricity heat or even.

Sometimes water and their homes.

With respect to your comment around electrification and <unk>.

<unk> and Texas make us rethink that for a relatively minor investment.

And it's likely that we would install dual drives that will have the opportunity to switch back and forth between electric or gas drives debt. We don't have average at the time of this branch will I believe mentioned that we have about 240000 horsepower of electric compression across our system. Today, we are going to continue to look to add additional electric where it makes.

Matter of fact, I just a few weeks ago. We spent the approved the capital project of about $100 million to two.

And to expand the project into Virginia, where were going to.

Basically replace some older inefficient gas compression with new electric drives maybe even the dual drive that will help us serve incremental load at the same time driving down our greenhouse gas footprint, so with that I'll pause and I'll just invite others to jump in if they want the.

Yes, Dan this is Kevin so Linda with respect to our liquids pipelines.

Certainly the first and foremost want to acknowledge the teams who and.

And our customers who had to work through some fairly horrendous.

Circumstances to get us to a spot where a very safe and secure with all of our assets.

We needed to.

And are within the liquids business unit and while the demand actually.

Cratered and that many of the refineries that we provide deliveries too.

It didn't have the power couldn't receive shipments and so we're in the midst of a number of circumstances, where both our delivery points were under force measure.

And as such even though our assets were very operational.

And functioning well and we had two similarly.

And make a force measure of.

And.

And that we needed to park securely those volumes that were and are in our pipe we see that this.

This will clear up.

Fairly quickly, we don't see it being material to our overall revenue for the year at all.

Nor should it impact.

Our customers and any material way.

That's helpful.

And I guess, just 10000 per view of maybe a follow up question from small or the team.

And considering.

You are and geography currently and you mentioned previously that there is the benefit to diversification and certainly asset diversification benefit it's beneficial geographic.

Vacations beneficial and do you how do you see your geographic mix potentially shifting.

Shifting over the next decade.

Even some of the <unk>.

Political change we're seeing.

Given some of the policy changes, we're seeing and specifically I'm wondering if maybe there's a bit more of a tilt to Canada and what.

Might prompt if at all any consideration of any investments outside of North America, and what would the criteria need to be to that to consider that.

Thanks for the question Linda.

Interesting, we do regularly at least annually ask ourselves. The question is the opportunity set and our current footprint, Canada, The U S and Mexico <unk>.

<unk> large and.

Does it intersected with our core competencies well enough that we have and opportunity set that.

Sizable enough not to.

Cause us to want to look further afield geographically.

To this point and the last several years and we've asked ourselves of that question. We've said that we believe there is plenty of opportunity for us and our existing.

Our footprint.

To grow the business in a manner that we want to.

Our experience has been that.

And where you have commercial relationships you have.

Political relationships with the state governors.

Or with the with members of Parliament of our members of provincial Parliament, where you have <unk>.

Relationships with the regulators with.

And with commercial organizations, it's just much easier to manage and what we we all know is the.

And.

And increasingly demanding standard from our stakeholders and how we develop energy infrastructure.

So anytime you think about going further afield.

You are flying a bit blind in terms of.

Your ability to assess.

How well you can manage some of those stakeholders. So.

For the time being again as we look at our opportunities. We are opportunity rich, we are very confident and our ability to originate $5 to $6 billion of year of opportunity.

In North America, with the set of core competencies and capabilities, where we can manage risk and earn a reasonable return so.

It's not to say that we won't contemplate.

Expanding further afield and the future, but those issues, particularly around having key stakeholder relationships and those new geographies is something thats bearing more and more weight and our assessments.

Thank you for the context and I'll jump back in the queue.

Our next question comes from Robert Italia of.

The <unk> capital markets. Please go ahead.

Hey, good afternoon.

Basically touched on most of my questions at this point on the capital allocation.

How are you of adopting the investment process to account for the uncertainty related both to the energy transition and also of the pandemic, which.

The corporate seem to have an uncertain.

The impact.

Personally in terms of us.

Timing. So maybe you can address that you've already addressed the really from the hurdles.

Returns point of view, but maybe you come and transferred from the risk transfer point of view.

Maybe I'll get started and I'll ask Don to supplement our correct me where I stray.

I guess the couple of things come to mind, Robert The first is we do scenario analysis, we run our models too.

And of life.

Sure.

And all of our capital investment opportunities and we do look at various scenarios for how energy transition might occur.

With the impact might be on supply and demand and prices for all of the different forms of commodities.

Whether it's the underlying commodity for that particular investment opportunity or competing commodities that might affect our ability to re contract and manage some of the residual risk.

So running all of our investment opportunity through those scenarios does allow us to assess the resiliency of.

Sure.

And when we make investments.

I will point out debt with most of our capital being allocated anywhere regulated business is particularly on the gas side and Canada in the us.

The the regulated construct does allow us to earn a return on and of capital.

And for when we make both of those investments and so to the extent.

Useful life of the base and we're too.

Jordan.

The inside of the remaining <unk>.

Years of depreciation we'd have the ability to to apply to the regulator to accelerated depreciation and recover our capital we don't we don't.

Foresee that happening anytime in the near future, but just to point out that there is that regulatory mechanism. There that's the mitigate the other is.

With respect to carbon emissions and how do we factor and what I call carbon competitiveness and through our capital allocation model and.

It's a bit more.

Straightforward to do.

For example, and Canada, where the federal government has proposed a mechanism and and escalation for for carbon taxes going forward we can.

A lot of economic value to those emissions.

Either with respect to the emissions of the actual opportunity or to create other opportunities to actually reduce our emissions and what the economic return will be for those I would say, it's early days for us on how to apply the concept of carbon competitiveness and our capital allocation, but.

It is something that we are beginning to more formally incorporate into our into our capital allocation going forward.

It's Don here I'll, just maybe speak to.

Covid.

And really of any other.

Event risk debt.

And that might might be Disney and upon us.

The true permitting or execution on any large project.

We do restrict the amount of capital we exposed at the early stages of any project and we and we look to towards mindful of risk sharing with other stakeholders.

To box and risk that we don't necessarily have the ability to control or all.

Or of a magnitude potentially that debt.

And is overly impactful to us so.

Sure.

That's really the way you've seen us change our approach here is.

Particularly and the large scale projects on the cash sales the coastal gas link.

And the like us.

So it is not COVID-19 specific and and sustaining event that.

We can't foresee our control.

Trying to limit how much capital we have exposure how much of a grind it could be to our returns.

Yes. Thank you.

And I was looking for us. Thanks.

Our next question comes from Michael Lapidus of.

Of Goldman Sachs. Please go ahead.

Hi, guys. Thank you for taking my question and Anna and I. Appreciate you taking the amount of time on the on the fourth quarter call us.

Actually up to one of its coastal gas link.

Can you remind us what is the lag and cash flow sort of like the Capex is going to go up on the coastal gasoline.

And the tolls go up and your reflective of.

What the Capex levels, so if capex in a given year and the forecast is up 500 Miller of bill with the toll and that year of go up as well to reflect that change and that year's capex with a lag and cash flow and so it has an impact on and kind of credit metrics that that part of the debt et cetera.

Maybe I'll start with that one and Michael and then and gone may have some comments on and as well so of course.

Of course.

And.

As we spend on coastal gas link if capex goes up and in all cases, we attempt to mitigate any impact on on Capex as we encounter issues.

And that capital flows into tools and in service.

And all of the Capex of clothing to tools at the same time. So the total recovery begins the seamless and we are adding services.

So and.

But we do from the perspective us of operating cash and we do achieve CDC on net right.

As we progress and we have caching of P. D C. Some of the joint venture partners as we go and I hope that answers. The question Don May have some comments.

And to add to that.

Sure.

So the way coastal gas link and structured it as an equity investment from our perspective on our on our financial statements.

There is significant project financing in place at the project level.

That will be shaped and the ultimate size of the project so the significant leverage their debt.

It does not hit our balance sheet.

It's the plant supplemented by as Tracy mentioned cash carry costs from the shippers over the course of the project and equity contributions from ourselves plus a KKR and Aimco are partners and.

Hopefully ultimately first nations.

So the yes the.

The impact on Tc energy.

<unk> is of the cost increase there is relatively insignificant.

On our balance sheet and on our credit metrics as.

As we noted in our disclosure, we don't expect the costs increase or the schedule delay to have any significant impact on the equity contributions we ultimately make to the project. So.

Meaningful of the project level, but.

In terms of the at the consolidated impact on the company.

And see it as being material.

Got it and then one just kind of coming back to capital allocation of little bit of Capex stays and the four and a half the $5 billion per year range.

That's up of the debt, we will continue to improve over time, even if the dividend growth is up 6% or so.

And the nearer and nearer three and therefore that and the apply here or you are kind of naturally deleveraging.

So unless there's some other headwind or some other sort of use of cash on the cash flow statement.

Thank you of positioning yourself, where there's not incremental growth projects like the hydro projects or something else where debt by year three of four you're likely buying back stock.

And it's Don here again I'm on.

Not sure of for buying back stock, but we do have we do have financial capacity and that grows over time.

So it's beyond just the cash the 40% or 60 per cent of cash flow debt.

Some of the or tend to reinvest each year the debt capacity as you pointed out within your credit metrics of of debt to EBITDA and the high force an episode of the 15% area.

And it does give you the ability to to grow that that investment base without.

The tripping any of your credit metrics over time, whether its share buyback or additional investment and similar kind of initiatives that we have going forward remains the scene.

Got it. Thank you got much appreciate it.

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

Hey, good morning, everybody.

I know you are looking to establish your emission reduction targets at some point this year.

Curious how far away you still might be from setting those targets and.

And maybe some initial thoughts around pledging net zero or setting absolute versus intensity targets by say 2030.

And I guess, just how youre thinking internally about aligning those emission targets with the broader government policies out there and.

And your overall, but the 7% growth objectives.

Okay.

Patrick It's Francois thanks for the question we.

We did mentioned at our Investor day that our intention well first of all we did establish.

Some policy initiatives and our sustainability and climate change report here in 2020.

The indicating that we believe we do have a responsibility as the at.

Irresponsible.

Owner and operator of infrastructure to reduce our emissions to every extent possible.

As the company decided to take the additional time to come back with a more granular answer not only with respect to what.

The interim targets might be and ultimately what our 2050 type.

And the timeframe targets would be but also the strategies that we would be employing and get there. We think it's important to have the credit the critical plan one that not only we can communicate to you all and others and the financial community, but our other stakeholders indigenous communities governments policymakers et cetera.

I would say.

You can expect us to be providing some clarity on that in the second half of the year are sustainable the climate change report.

As published in October and 2020.

We might be ready too.

The publish.

Our conclusions and our findings of bid earlier than that but it would be no later than and that type of timeframe. We think it's an important document.

Net out the.

To us our stakeholders as early as possible.

Give it and our culture and our propensity to be disciplined and under promise and over deliver I won't provide any hints as to where we think we might land. The good news is that from our perspective.

The technology exists today in order for us to.

The significant reductions in our emissions because of the.

A good a good percentage I would say the vast majority of our emissions come from burning gas.

At our compressor stations on our pipeline systems and simply by replacing those with the electric Motors you reduce your scope one emissions.

Immediately.

The scope two emissions and matter of course, and so if you're replacing of gas turbine air compressor station with.

Electricity.

Of the generated from gas fire generation like for example, with <unk>.

Currently be the case, and Alberta doesn't make a whole lot of sense to do that so.

And we think it's going to take some time for us to achieve those targets based on particularly around scope two emissions, how the underlying generation mix evolves over time.

So as I think Linda alluded and.

And earlier question you have to consider reliability.

And.

A lot of our compressor stations are in very remote areas of where there are no transmission lines and so from a reliability and of safety and redundancy standpoint.

It's not going to be applicable everywhere, but so I think we'll be able to get part of the way there at least with.

And pretty well defined set of strategies. The other important thing is how quickly the.

This takes place.

We think it's very important to have a vibrant and healthy.

The energy system with all participants and the energy value chain, having financial health and so the natural opportunity for us to rotate capital to lower emitting technologies is when a piece of equipment reaches the end of its useful life to the extent you're replacing it.

Other than that someone has to absorb that costs and we're very cognizant of not creating significant rate shock for our customers. So we think this is the strategy that's going to be pretty straightforward, but it will take some time to execute if you want to minimize rate shock and we will see what calling the policymakers provide in terms of <unk>.

Incentive for us to accelerate the rotation of the capital stock and.

And there's not a ton of clarity from policymakers, yet on what those mechanisms and might look like and I think those would.

The effect our ability to.

Reduce our emissions and more quickly than would otherwise be the case through natural attrition.

Yeah.

That's great appreciate the comments there kind of swollen.

And also just with respect to balancing the strategic plan.

To achieve your ESG goals with your financial growth schools as well just looking at your power portfolio.

And clearly it's been a strong first couple of months of the year, the Alberta power market.

And I'm sure. The main focus right now is beefing up your renewables footprint. So just wanted to get your thoughts on how you view the relative attractiveness of allocating more capital towards the Alberta market to capture more of a of an immediate and.

Impact financially versus building on some of your larger scale contracted renewables overtime, which again might might fit well with achieving your ESG goals.

Yes, perhaps I'll get started and I'll ask Cory to provide further comment just out of high level, our strategy and our power business.

We wanted to invest and more fuel diversification. So we like our co Gen business and Alberta.

<unk> been doing well and operating extremely well under severe cold temperatures over the last.

A few weeks.

We've been very pleased with the operating and financial performance of those we do want to have more of a balanced in terms of fuel diversity again are our goal is to be prosperous of the company irrespective of the pace and direction of energy transition over time, so that speaks to having more diversity and our fuel mix.

But having said that.

Perhaps I'll ask Cory to add.

And had some commentary on how he's thinking about the Alberta marketplace.

Hi, Thank you Francois.

<unk>.

And we would approach the.

Alberta marketplace and the entire power platform the way we approach the rest of our business.

We are looking for long term contracted relationships that meet our hurdle rates.

Or for us.

The power assets and I think we will go on and stick to our knitting and we really stay focused on that being a core business I think we want to avoid merchant exposure and it.

Boyd, adding that the two.

To our portfolio and and I think as Francois Ted and his comment the.

And firming assets and just pumped hydro long term contracted assets such as renewables, both in the province and in the lower 48 provide.

Provide opportunities as well as serving our existing load.

Okay. That's great. Thank you very much of it.

Yeah.

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

Thank you good afternoon, and probably a question for both of them to start and its religious on some of the legacy asset positioning and you have the harvesting of rounds, our base Keystone and.

And then what you have already built for really for what was the XL project and really unrelated to the pipeline connectivity and then the terminal positioning of house and.

And hardisty.

Thanks, Andrew.

Certainly.

Hardesty is the origination point for the Keystone system.

And it has us strategically connected and the Interconnects.

The data with other parties Terminalling assets.

Become more C. J equipped with how you how you manage those assets so we've been generating a.

Longer term plan for those assets.

That originally was space primarily off of the Keystone XL project, but there still is very strategic us.

For our investments and the Hardesty and net.

Extension to that.

Is that the asset set of already been.

Constructed or put us surface we were.

Our project teams are actively looking for ways to utilize that equipment.

It is strategically positioned again and that Spain and our.

And our core corridor and as such we would look to find ways to recover value on those assets.

And that's very helpful and then.

And maybe also just sort of a reference of another legacy business being of the power business, where you've been for many years.

Especially with renewables exposure and the waste heat.

Pumper 20, some odd years ago he started there.

Could you give us just some color and context and this is probably a question more of a francois just on the.

Your internal capabilities for scaling the renewables business or just associated power efforts with your and quarter assets. If you chose to go without revenue.

Yeah excellent question and.

Yeah.

And.

I'll point out debt at various points in time over the last 20 years and we either currently or have operated nuclear.

The wind solar and natural gas, we dispatched coal some geothermal as well I believe our run of river hydro so.

And for.

For the most part those people are still strewn about our organization.

One of the reasons for bringing cash.

Cory onboard with 20 years plus of experience and the.

The electric utility sector, and developing and generation business for a couple of our competitors over the two decades.

And was two reconsolidation and the reform.

Our team and.

Build back our origination of capabilities around those types of opportunities. So we can prosecute what we see us the opportunity set going forward and Corey I'll invite you to add any comment you want to.

And there.

Yes. Thank you very much I think that's it.

And excellent point.

We are as brands, where I said, we are have been how we're opportunity rich with the.

With the choices for investing and we are equally as opportunity rich with our.

Personnel and our team members that have a long history in the sector. So we are of high level of confidence that we can execute systematically and effectively and within our risk profile.

For the sector and I think as you would.

I've heard from many folks on this call we are very focused on.

Staying and corridor with what we do best and so we will manage those projects safely and effectively and and and really use the expertise that we've gained over the last 20 plus years and in the sector.

That's great. Thank you.

Our next question comes from <unk> Satish of Wells Fargo. Please go ahead.

Thanks, I have two quick questions first on cash so if you've decided not to proceed with the project.

Kim of steel that was ordered to be reuse for future projects are sold and if so is there any way to quantify the.

Savings.

71, and grab that one.

Yeah, absolutely sort of I had myself on mute.

And certainly our project team <unk> is evaluating what we can do with all of our equipment.

And it uses the VAT.

<unk> of steel and some cases has increased and certainly there's a market.

And for some of our spare materials, if that if we evolve to that point here. So our team is looking at the the best strategy to wind down and work closely with our partners.

To do so and.

And we'll provide further updates.

And our once once those plans are in place.

Okay got it and then.

It looks like Youre still and settlement negotiations on Columbia gas, but the rates became effective on February 1st. So I'm. Just wondering how this will be accounted for I guess, specifically will your EBITDA and Q1 reflect the higher proposed rate on Columbia gas.

And I can start and Don you could supplement as necessary, but yes that we did put the motion rates into effect on February one and we will continue to collect those until of settlement is finalized at that point and time will basically go back and restate.

Our revenues back to February one so you can kind of think of each month will be we'll be preserving the difference between what our filed rates are and what our expected. Her final settlement rate is and hope to have more clarity on the whole rate case process for you and the may conversation.

And just say at this point in time debt that things are progressing as expected. We've had two settlement conferences. So far a third one scheduled for next week and again, just going to ask for your patience and letting the process play out a little further.

Yeah.

Yes, it's Todd here there yes.

The the progress on the that the process will inform us as to what kind of and estimate we make in terms of recognition and the quarter idle I'll get smoothed out over time is as the settlement and see the reach door, we ended up going through litigation and and get the outcome of that but it will be a point and time estimate.

And.

Got it thank you.

Our next question comes from Harry Mateer of Barclays. Please go ahead.

Hi, good afternoon.

Two from me the first just on.

Hybrid securities. So I appreciate the comment earlier that with the <unk> out of the budget and no longer and intention to issue those for funding I guess I'm just wondering if we can.

Expand that.

Given you seem content with your leverage metric trajectories is the plan for any debt financing really just to be straight senior unsecured or might hybrid still play a role and sort of your base case of the next couple of years.

Yeah, and it's Don here.

We have a limitation of 15% of our capital structure being and preferred shares and the hybrid securities.

We're bumping up against that right now.

So and the absence of balance sheet growth.

I wouldn't expect any any change upward and not.

So that.

What you see on the slide in terms of debt financing gives us generally senior debt.

Okay.

And then the second question more of just financial policy, but away from hitting us specific credit ratings target.

Have you said anytime thinking about weather just with the energy transition, which I think carry some inherent uncertainty does that alone warrant, bringing leverage down further than your current target just the natural and bed.

It's a matter of cushion for the company.

Where we're and continuous dialogue with the rating agencies to get a sense of where their heads are at.

We're pretty satisfied with the strength of the portfolio right now as you look at the left hand side of the balance sheet, it's really never been stronger it's long term annuity streams.

The crown jewel assets and portfolios so from.

And from our perspective, it's very utility like and that sense.

And if the rating agencies start attributing more risk to that portfolio was Francois mentioned earlier, we have mechanisms such as accelerating depreciation to address that.

Because there is uncertainty out there it doesn't.

And.

At this point doesn't.

Make us move to reduce leverage we're quite comfortable with where our metrics are at and.

And just the stability of our cash flow here.

So if the goalposts you start changing we'll have to.

We'll have to assess that and see where true from there but at this point, we're quite comfortable and the rating agencies and rating agencies seem quite comfortable as well.

With the business risk and how it is funded and how it's financed.

Okay. Thank you for that.

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.

Oh, Thank you and thanks to all of you for participating today, we very much appreciate your ongoing interest and TC energy and we look forward to talking to you again soon and the meantime, we wish you and your families. Good health.

Thank you Goodbye and thank you.

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

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