Q1 2022 TC Energy Corp Earnings Call
Thank you for standing by this is the conference operator welcome.
Welcome to the TC Energy first quarter 2022 results conference call.
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I would now like to turn the conference over to Kevin Wiley Vice President Investor Relations. Please.
Please go ahead.
Thank you very much and good afternoon, everyone I'd like to welcome you to TC Energy's 2022 first quarter Conference call. Joining me today are French what 48, President and Chief Executive Officer, and Joel Hunter, Chief Financial Officer, along with other members of our senior management team French Ron and Joe will be joined today or sorry. It will begin today with some comments on our finance.
Results and certain other developments within the company a copy of the slide presentation that will accompany our remarks is available on our company's website in the Investor Relations section under events and presentations. Following their remarks, we will take questions from the investment community in order to provide everyone with an equal opportunity to participate we ask that you limit yourself to two.
Two questions. If you remember of the media. Please contact Jaimie Harding. After this 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.
Finally during this presentation, we will refer to measures such as comparable earnings comparable earnings per common share comparable EBITDA and comparable funds generated from operations. These and other certain other comparable measures are considered to be non-GAAP measures. As a result, they may not be comparable to similar measures presented by <unk>.
Their entities. These measures are used to provide 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 <unk>.
Thanks, Kevin and good afternoon, everyone and thanks for joining us today.
Before we discuss our results this quarter and I expect we're going to be talking about global geopolitical events here during the call I wanted to start by acknowledging the tragic humanitarian crisis happening right now and we extend our thoughts to all of those who are experiencing and such and then suffering.
Now within the context of our industry. These events have amplified the discussion around energy security and highlighted the important role our industry plays in meeting today's energy needs.
While the world confronts a serious geopolitical shift a transition to cleaner energy.
Also meets the world's demand is still required.
North America, and TC energy will play a critical role in securing the global energy supply, while also transitioning to a lower carbon future.
This intersection of energy security and energy transition isn't.
It is not an obstacle to growth we believe rather that is a catalyst.
We're particularly well positioned to support exports of LNG that represents one of the most significant growth drivers in the natural gas business in North America.
North American LNG exports peaked this year at $13 seven Bcf a day and we now expect that amount to grow by over 90% to 25 Bcf a day by the end of the decade.
Our critical energy infrastructure assets are well situated to support connecting north America's Premier basins to LNG export facilities.
Our Tc energy is already a significant player connecting approximately 25% of supply a portion for U S. LNG exports through our extensive pipeline network.
Going forward, we expect to compete for and win.
Our fair share of the growth in the LNG market, we continue to evaluate new expansion potentials and execute our portfolio of sanction projects.
For example, already this year, we have two new pipelines that directly support deliveries to LNG facilities in Louisiana.
Phase two of our Grand Cheniere Xpress projects started service in January and connects to the calculus, who pass LNG terminal.
And our Louisiana, Xpress project, which is expected to be fully in service in the coming months will deliver volumes to Sabine pass.
Now in addition, we've recently received approvals to move ahead with three more LNG linked projects the east lateral Xpress project on our Columbia Gulf system will support the proposed phase II Plaquemines facility in Louisiana.
The Alberta Xpress project will also deliver into Sabine pass and finally, our proposed north Baja Xpress project, which supports the Costa is it little LNG facility on the West Coast of Mexico.
And this is just the start.
Our unparalleled pipeline network is critical to the delivery of LNG volumes today and it underlines the tremendous opportunity that we have to connect supply to the growing LNG export market.
Like I said off the top the world has never needed safe sustainable and secure energy the way it does now.
And we are a company of energy problem solvers delivering solutions to address this challenge.
The demand for our services has never been stronger and operationally our assets performed extremely well throughout the first quarter.
Despite the warmer than average winter season, we saw a record send outs on our U S natural gas system, including Columbia gas P&G T S and G T N <unk>.
This contributed to daily average flows for the first quarter, a 30 Bcf a day up 5% versus 2021, including an all time daily system record of nearly 35 Bcf.
In January .
And we saw similar trends in Canada, our NGL system in Alberta.
Averaged winter demand was the highest on record since 2000 at $14 two Bcf a day.
Our Canadian mainline system experienced additional contracting in the quarter and is essentially sold out of long term capacity.
These tremendous performance results reinforce that our assets are ever more critical for the delivery of North American energy supply.
We also progressed, our secured and developing a portfolio of projects, including coastal gas link.
In March we were proud to announce the historic signing of option agreements to sell 10% equity interest in the coastal gas link pipeline limited partnership to indigenous communities across the project corridor.
We recognize that enduring relationships with our indigenous partners include long term economic opportunities and this is one of the ways. We can advance reconciliation.
On the construction front, we continue to make headway as we approach spring breakup overall the project is 63% complete with 100% of the route now cleared.
And power and storage, we continue to advance projects to add renewable and lower carbon energy to the mix and reduce the carbon footprint of our own operations.
For example, our Bruce power life extension program.
On March 7th the ISO verified the final cost and schedule duration estimate for Bruce Power's unit three MCR program.
And with our unit six MCR progressing well and expect it to be in service in 2023. The unit three M. C. R represents the next step and Bruce Power's Life extension program and is scheduled to begin in the first quarter of 2023 with anticipated completion in 2026.
Upon completion of unit three will provide enough emission less reliable and low cost energy to power over 800000, Ontario homes every year.
The power and storage business as we mentioned previously is also supporting the company's goal to serve our own energy use with renewables as exemplified by the RFID, we kicked off last year.
To date, we have finalized contracts for approximately 160 megawatts of wind and 240 megawatts of solar projects.
We continue to evaluate the proposals received through the RFA RFP process and expect to finalize additional contracts in 2022.
New fields will also be needed to power the energy grid of the future and we have existing skills and assets that can pivot to develop them.
For example were actively pursuing opportunities in the hydrogen economy developing hydrogen hubs to serve long haul transportation and other industrial uses.
Just this week, we announced that we've identified.
Our existing crossfield storage site as a potential hydrogen hub location.
The proposed hub would produce an estimated 60 tons of hydrogen per day with the capacity to increase to a 150 tonnes per day in the future.
Our joint development partner, Nicola, which serve as the hubs anchor customer for its long haul fuel cell electric vehicles.
We anticipate a final investment decision by the end of 2023.
The Alberta carbon grid, our joint venture project with Pembina is another significant opportunity to help industries and businesses decarbonize their operations and meet their sustainability goals.
In March we received notice from the government of Alberta that our proposal to build and operate a carbon storage hub and gathering lines and Alberta industrial Heartland was successful.
ACG is now moving into the next stage of the provinces C. C. U S process entering into an event and evaluation agreement.
Once fully constructed the ACG aims to transport and sequester up to 20 million tons of Cotwo annually, almost 10% of Alberta is industrial emissions.
It will have a vital role to play in supporting Alberta, carbon competitiveness and the development of a lower carbon economy.
As I previously mentioned, achieving a balance between energy reliability and security on the one hand.
And energy transition on the other hand is a catalyst for our growth there.
There are many opportunities to innovate.
Modernize and maintain our regulated natural gas pipeline network, while reducing emissions from our business.
We're also identifying and developing in corridor capital light projects, expanding reach and delivery points, while enhancing the returns of our existing corridors.
Support niches link project is an excellent example of our strategy, we're increasing the interconnectivity of the Keystone system and market link to enable direct access to north America's largest refinery.
This vital pipeline link will provide a reliable sustainable and stable source of domestic crude supply for decades to come.
And we're focusing on sustainable energy solutions to help Decarbonize the energy system.
Another example of N corridor capital light investments is an exciting initiative that we announced earlier this week to expand our intake of renewable natural gas.
We're entering into a strategic collaboration for the development of RMG transportation hubs.
We're green gas USA wood contract on our systems.
Beyond that we're also progressing initiatives, including pumped hydro storage in Alberta, and in Ontario, clean energy projects with Irving oil and further hydrogen production hubs with Nicola and her eyes on.
As a result of a rich opportunity set we expect to sanction approximately $5 billion and of new projects in each of the next several years, including recoverable maintenance capital.
And because of the barriers to entry in those new areas are high.
Returns are expected to be consistent with historical levels, while adhering to our conservative risk preferences.
Okay.
As I've highlighted before you.
You see on this slide our 2022 priorities I'm pleased with the progress we've made towards Ashish achieving these goals in the first quarter.
I look forward to providing further updates as we continue to advance towards these priorities throughout the year.
We have an incredible opportunity to play a vital role in enabling a transition to cleaner energy, while providing the safe reliable and secure energy that the world needs.
In summary, we have all the right ingredients to meet these energy challenges.
We have a world class base of assets in strategic locations.
We have commercial engineering and technical capabilities.
We have a culture of innovation.
And we have financial strength and capital discipline.
Our tireless efforts to make energy more sustainable and more secure will continue to strengthen our existing business and deliver long term results for our customers community stakeholders.
And our investors.
Thank you for your attention and I'll now turn the time over to Joel for a few comments on our first quarter results.
Thanks, Francois and good afternoon, everyone. It's Francois mentioned our assets continued to deliver strong results in the first quarter, while reliably meeting the growing demand for energy.
This highlights both the criticality and resiliency of our asset footprint.
Comparable earnings for the first quarter were $1 1 billion or $1 12 per common share compared to $1 1 billion or $1 16 per common share in 2020.
Comparable EBITDA and comparable funds generated from operations were $2 4 billion.
And $1 $9 billion, respectively, compared to $2 5 billion and $2 billion for the same period in 2021.
I won't spend a lot of time today reviewing the results we published earlier today, but I'll remind you that net income attributable to common shares was <unk> $358 million or <unk> 36 per share in the first quarter compared to a net loss of $1 1 billion or $1 11 per share the same period in 2020.
One.
First quarter results included a 531 million dollar or <unk> 54 per share after tax goodwill impairment charge related to great lakes and $193 million or 20 cent per share income tax expense for the settlement in principle related to prior year's income tax assessments in Mexico.
First quarter 2021 also included certain specific items as outlined on this slide and discussed further in our first quarter 2020 to report to shareholders.
As mentioned a few moments ago first quarter comparable EBITDA from our five operating units was $252.4 billion.
You can find more details on the variance explanations for each business unit and our financial highlights release. So I'll just comment on a few principles changes year over year.
Canadian natural gas pipelines comparable EBITDA decreased primarily due to lower flow through depreciation on the Canadian mainline. This was partially offset by increased flow through depreciation on the NGL system.
U S natural gas pipelines comparable EBITDA increased mainly due to higher earnings from Columbia gas as a result of increased transportation rates effective February one 2021.
Mexico natural gas pipelines comparable EBITDA decreased primarily due to a higher deferred income tax expense of certain taxes. As a result of a foreign exchange gain calculated for Mexico income tax purposes on the revaluation of U S dollar denominated launch.
Liquids pipelines and power and storage comparable EBITDA declined as a result of lower contributions from liquids marketing activities, mainly due to lower margins and lower realized natural gas storage spreads reflecting volatility seen in the quarter.
As a note we translated our U S dollar denominated income into Canadian dollars using an average exchange rate of $1 27 in the first quarter, which is similar to the same period in 2021.
This included U S and Mexico natural gas pipelines and the majority of our liquids pipelines.
And as a reminder, our U S. Dollar denominated revenue streams are in part naturally hedged with U S. Dollar denominated amounts below EBITDA and the residual exposure is actively managed on a rolling three year forward basis.
Now I will spend a moment highlighting a few of the primary variances below EBITDA.
Depreciation and amortization decreased largely due to the northern Ontario line portion of the Canadian mainline being fully depreciated in 2021 parsed.
Partially offset by higher depreciation on the NGL system from expansion at facilities that were placed in service and in U S. Natural gas pipelines, mainly due to the timing of certain adjustments related to the Columbia gas rate case settlement.
Income tax expense included in comparable earnings for the first quarter decreased compared to 2021, primarily due to lower earnings in the U S state tax adjustment, partially offset by lower foreign tax rate differentials and flow through taxes.
I want to take the opportunity to reiterate our outlook for 2022.
We expect 2022 comparable EBITDA to be modestly higher in comparable earnings per share to be consistent with last year.
In terms of capital spending we expect to invest approximately $7 billion. This year. This is up relative to our initial 2022 outlook of $6 $5 billion.
The increase is primarily due to higher costs for the NGL system, reflecting inflationary pressures on labor and materials.
Additional regulatory conditions weather and other factors.
We continue to work on cost mitigation strategies and assess market conditions developments in our construction projects and the impact of COVID-19 for further changes to our overall 2022 capital program.
Our 2022 capital program is primarily focused on NGL system expansions U S natural gas pipeline projects, the Bruce power life extension program and normal course maintenance capital.
Okay.
Turning to our funding program. This graphic illustrates our updated forecasted sources and uses of funds for 2022 through 2024.
Starting in the left column, our total requirements over the three years are projected to be approximately $26 billion, reflecting capital expenditures, including maintenance capital at $15 billion and dividends of $11 billion.
The second column highlights expected internally generated cash flow of $22 billion, leaving a residual need of approximately $4 billion.
Depicted in the far right column that we expect to fund through a combination of commercial paper incremental.
Incremental debt hybrids and Keystone XL project recoveries.
Today, we are advancing our diversified $25 billion capital program consistent with our historical risk and return preferences Importantly, our capital program not only focuses on modernizing and growing our core business, but also on advancing projects aimed at reducing emissions.
Offering carbon free or low emission energy alternatives.
These projects are underpinned by long term contracts or cost of service regulation, and we expect them to deliver a weighted average unlevered after tax IRR of approximately 8%.
Given our opportunity rich position and expectation of placing $6 $5 billion of assets into service. This year. We are confident in our ability to deliver EBIT growth of 5% through 2026, I'll remember that growth will not be linear.
And similar to today, approximately 95% of our EBITDA will continue to come from regulated and long term contracted assets.
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Looking at the continued strong performance of our base business and our organic growth plans, we expect to continue to grow our common share dividend at an average annual rate of 3% to 5%.
This is consistent with our conservative approach to capital allocation historical risk adjusted return profile and its expected to provide the capacity to fund our sizeable capital program, while enhancing our financial strength and flexibility.
And as always we expect to support the growth in dividends by sustainable growth in earnings and cash flow per share and strong coverage ratios.
So I'm excited when we look ahead, we have a track record of 13% average total shareholder returns since 2000.
We are well equipped to fund our $25 billion capital program.
We have increased our common share dividend for 22 consecutive years, and we will maintain our solid financial position.
When you pair our enduring business model and financial flexibility with our unmatched footprint and organizational capabilities you will see that we are differentiated and our potential to capitalize on the opportunity rich environment before us.
This will allow us to continue delivering superior long term shareholder value.
That's the end of my prepared remarks, I'll now turn the call back over to Gavin for the Q&A.
Yeah. Thanks, Joe So 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 just two questions. Please thank you.
Thank you we will now begin the question answer session.
Julian the question queue, you May Press Star then one on your telephone keypad.
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The first question comes from Linda <unk> with TD Securities.
Please go ahead.
Hum.
Hum very dynamic environment that we're in right now and I'm just wondering with all your focus on this.
This energy trends and there is also this expectation that hydrocarbon exports out of North America will accelerate and that was already a trend, but but there you know, we'll probably see more of it and I know you're already participating indirectly in transporting natural gas to LNG export facilities.
Your thoughts about potentially pivoting there.
Who support exports of liquids or NGL export facilities, and what factors would need to be in place for you to move down the value chain to actually get involved directly in exports.
Linda It's Francois I'll get started and I'll ask Stan to provide some proof points on what we're seeing in our in the LNG export market.
First of all you're quite right and the balance of a better.
Better balance between energy security and energy transition has brought forward.
Additional opportunities as we I alluded to in my prepared remarks.
We have enjoyed and benefited from the growth in LNG exports.
With LNG exporters as a customer and as I mentioned, we serve about 25% of aggregate natural gas demand in that area. We have not considered recently in the recent past participating down the value chain as an owner of equity interest in LNG facilities, we see that as.
A large global market.
Involving a party participants who have LNG.
LNG supply from various sources have.
We have significant scale as well as.
Marketing and commercial marketing and trading capabilities in that area. So our view is that there's plenty of growth opportunity for us are in.
In supplying the LNG facilities with their needed gas for their expansions and perhaps Alaska down here to provide some proof points.
Hi, Linda this is Stan I could address the LNG side, and then I'll kick things over to Devin and he can address the NGL side I do think that we're in a bit of a target rich environment. So to speak for just over the past several weeks approved three of our LNG export related projects in the aggregate they amount to one four bcf, a day or $700 million capital.
Investment for us and we're going to focus on getting that capacity online as quickly and as safely as we can.
Secondly, while our Columbia golf and aid our pipelines are generally fully compressed and fully contracted for north to south flows looping those systems to bring more Appalachian gas to the Gulf Coast is not out of the question.
And just as an example, if we were to build a new line from the Columbia system, all the way down to the Gulf Coast. It likely would have a transportation rate of about $2, but if you believe as I do that the war in Ukraine as cost of fundamental shift with respect to where our European allies source their gas from and that this incremental.
Demand for natural gas is going to keep prices in Europe , and in Asia, and the 13% to $20 range, which is where they currently are for 2023, and 2024 or $2 transportation rate for incremental pipeline capacity to the Gulf Coast may well clear the market.
So just to remind you that given our extensive 13 pipeline network that traverses 40 states we have a footprint everywhere. If the cost is all facility on the West Coast has expanded from 2 million tons to 10 million tons. We can further expand our north Baja system. If the Cove point facility on the East coast is ever expanding and we have the ability to further expand our WB line on the Columbia gas.
System, as well and with respect to the Permian I do think that there's a likelihood that youll see additional pipe capacity, specifically built directly to the Texas Gulf Coast LNG facilities, but not directly to the Louisiana Gulf Coast LNG facilities, instead, you're likely to see pipes built out of the Permian that will interconnect with our <unk>.
Existing infrastructure in Louisiana, where we can leverage our competitive advantage and take advantage of the last mile connectivity and then lastly, I would note that its out there there are more opportunities to ingest Appalachia or the Permian basin and don't discount the ability for gas out of the Haynesville to ultimately reach some of these Gulf coast LNG facilities, where again, we can leverage our existing footprint.
So with that I'll kick it over to Debbie to talk about the NGL side of things.
Thanks Linda.
On the liquid side I'll first go with our oil liquid system. We have as you know a very strategic footprint that connects our western Canadian sedimentary basin down through Cushing into the Gulf Coast and we're actively pursuing.
Expanding in corridor and part of that strategy includes looking at opportunities for.
Additional export points and access to different delivery points for our customers to do so we've brought on additional expertise into our marketing affiliate team that has that experience to address different.
Tidewater type markets.
With respect to Ngls or refined products those are still asset classes that are not in our portfolio from time to time, we evaluate whether there would be a fit.
Both the refined products and NGL businesses, though at this point we're not.
Advancing any capital towards.
Thank you that's very helpful update on how youre thinking about things, maybe just as a.
Follow up question I'm interested to hear maybe one of your smaller initiatives.
That might not get a lot of airtime, but maybe could be scalable into other.
Areas, you're Irving oil decarbonization initiatives.
Can you paint us a picture about what beyond power generation might that involve.
And with TC energy operate the facilities and there are.
And what other locations might Mike such initiatives.
Be possible.
Okay.
Okay.
Over to you Corey.
Hi. This is Corey has been I think when we think about the Irving oil opportunity are.
We obviously are starting with our core businesses the power.
Our side and being able to deliver renewable energy.
Moving forward as we talked about with many of our other opportunities. We have built a strong partnership with hydrogen opportunity across our north American footprint and that will create for us another.
Another opportunity with AR Irving oil as they think about how to best use their assets and apply them going forward. So as we think about that we think that.
It is a it looked like all of our emerging technologies, a little bit of a longer road, but it creates an opportunity for us to evaluate in a systematic fashion.
Okay.
Yeah.
The next question comes from Robert Kwan with RBC capital markets.
Please go ahead.
Good afternoon.
If I can start with inflation the last call focuses on opex. So I just.
I wanted to ask you about capex.
Generally what percentage of your Capex plan has cost recovery, either contractually or regulatory back and specifically just for the <unk> increase is that all rate base, where the entire cost increase.
Our return on and of.
Capital.
Yes, Robert it's Joel here I'll take the question. So first it's really worth noting that when.
When you look at all.
All of our major projects, including <unk>.
Bruce power. The MCR program. There are expansion projects are along our U S natural gas pipeline footprint, along with liquids pipelines those all remain on time and on budget.
<unk> is unique in that it is in western Canada, it's competing with two other major projects right now for labor in particular, Thats, obviously the team X project in CGM. So as a result, we are seeing inflationary pressures on labor and materials. In addition to our cost increases related to <unk>.
Regulatory conditions.
Along with the weather delays COVID-19 and at times are slowing down the work to ensure that our workers are safe.
So as a result.
The costs that you're seeing are primarily related to NGL system.
We are working to meet our customer needs, it's important to keep our tools as low as possible.
So we're looking ways to mitigate these costs, but as a reminder, any costs associated with NGL system similar to the Canadian mainline.
Costs are you earn a full return of and on capital for those projects.
Okay, and even though you're not seeing cost pressures on all of those other projects.
Do you like what percentage do you have recovery mechanisms.
For the other projects.
Robert just to clarify yeah yeah.
It all depends I'll, maybe turn it over to Stan if you any commentary on the U S side, and then maybe over to Corey for Bruce Power Hey, Robert This is Dan with respect to our growth projects that are underway I would say a vast majority I don't have a specific percentage for you, but a vast majority of covered contractually we will be able to recover the capital that we're investing very tip.
<unk> first half some sort of cost sharing mechanism built into a precedent agreements with our customers.
Yeah.
Hi, Robert Accordingly, with regards to <unk>.
Yeah with regards to Bruce power.
Unit six MCR is going to be completed plateau inside 2022, or early 2023, so both materials and services have already been fixed for that MCR and Theres no a very low risk of additional inflationary cost unit three MCR for both materials and services.
In excess of 95% fully contracted so we see limited risk of inflationary impacts for those units for that MCR program as well. Thank you.
Got it.
I finish at coastal gas line can you just talk about the nature of where you are in discussions like are you still negotiating over costs or have you now move to more around the mechanism of how to recover that.
And if you've got an update on timing.
That would be great specifically, how much does LNG, Canada go or no go decision on expansion matter in terms of what youre going to strike an agreement.
So Robert this is bevin.
We're very aligned right now with our customer with LNG, Canada.
We're working towards.
Towards resolving the dispute.
Really quickly but.
Our prime focus right now is to also deliver the project safely and ahead of the delivery of the LNG facility. So as we focus to resolve are resolved and negotiation here fairly fairly quickly.
Optimistic that we'll reach an agreement that will put us in a position to update update our shareholders on on the path forward with respect to phase II, It's a great opportunity not only for LNG.
LNG, Canada, but also ourselves in and the Western Canadian sedimentary basin as we could see the delivery out of the basin moved from a two Bcf a day export scenario to north of four Bcf. So that decision, though is clearly in the hands of our customer LNG, Canada.
In terms of preparing for a final investment decision on that front.
Okay. That's great. Thank you very much.
Thanks Robert.
The next question comes from Ben Pham with BMO Keith.
Please go ahead.
Alright. Thanks.
First question is on the LNG.
Commentary you had.
When you look at your current footprint today, and how you're positioning that you've mentioned a 25% market share as you look out to that 10, plus Bcf a day like you do you have enough visibility of the way you position until we maintain that.
Market share or are.
Are these projects that you usually.
She lives.
Yeah again this is Stan <unk> not only do I think we're going to maintain that market share, but my expectation is we're going to grow that market share and if you look at the one four Bcf a day of projects at the FERC approved that are under construction right now and when you look at the other alternatives that are opportunities that we have.
I could see a scenario where over the next two or three years. Its another two to three maybe four Bcf a day of capacity to the LNG terminals that were adding on our systems.
And is it reasonable to assume.
I know that you can use those.
Those projects in the Capex numbers, the BSF to to gauge the opportunity.
Okay.
I'm, sorry, van sorry could you clarify your question please.
Yes sure.
The the three projects that you have.
And moving forward your Capex numbers attached at a billion can we can we take those as examples to gauge that capital that's an opportunity.
Yeah, It really depends there they're not going to be a very good example, if we're going to build a new pipeline from the Appalachian all the way to the Gulf coast, but to the extent that we're going to leverage the competitive advantage, we have with our existing footprint. Yes. These at 123 or 400 million dollar type expansions would make sense.
Okay, that's great.
My follow up then is on the looping project that potential project in Colombia.
Do you need.
More LNG projects to start talking about commercial agreements.
Or is this just a matter of that that price at $2 price that you mentioned.
That's mitigating some of it.
Oh I was using the example, as a $2 price as an example to show that what we think is a high cost today may not be high cost given the environment that we're in and it fits within the overall stack. When you look at transportation rates and $2 for liquefaction or dollar for re gas $2 four for shipping and the like it again, it's basically an in the money proposition.
And Dan just to supplement that a little bit because they are here, where you're going with the question.
As usual, we allocate capital on the strength of long term contracts. That's the way, we typically do things shipper pay contracts.
And in conversations with shippers in the Appalachian Basin, we are seeing willingness to consider new Greenfield pipe.
Given the robust price environment that our producers expect to remain robust for the next several years.
Okay. That's great. Thank you.
The next question comes from Robert Hope with Scotiabank. Please.
Please go ahead.
Everyone I want to switch gears, a little bit and move over to the U S. Renewable projects that you are secured commitments for is this only for your existing Keystone capacity or would this be included in that kind of business idea of sharing it with some other parties in the earning a margin on on it and I guess secondly.
Eventually do you assume that you're going to taken ownership in these projects and when can we see it are put into the capital plan.
Hey, Robert It's Francois I'll, just start at a high level and our last Cory to provide some detail.
As we mentioned last quarter, we were very successful in aggregating incremental load and the neighboring areas two are our own demand at our pump stations and so as we are gradually contracting up.
The various projects. It is a combination of meeting the demand from a specific pump stations as well as aggregated load and in those specific areas and so you can see a gradual contract picking up off of both of those as we add.
Add volume towards our overall goal of two plus gigawatts and Cory over to you for a little bit more color there.
Hi, Robert Thank you very much Francois.
France was right on point there the way when you think about it is that we are not only serving our internal load, but we're serving the load of those.
Customers, who are in corridor for our basket.
The set of assets across North America, and so our goal is.
<unk> stated is to approximately secure two gigawatts of total.
Renewable resources and although it's two gigawatts to contracts, 70% of those Ah Ah Ah Ah resources.
Through our own parties and second party and third parties are and then have additional capacity available to then secure our next phase of opportunities with our own internal customers across our footprint. So we feel very solid.
Solid about our progress to date.
And we are continuing to.
The schedule that we outlined earlier, where by the end of the year, we should have met those two goals.
Robert You also asked a follow up question about ownership as we've contemplated these projects we have developed a an approach to the.
The capital stack, which would be inclusive of an opportunity for Tc energy to be an owner or those assets that makes sense for our footprint and our own ownership our goals and desires and that's also inclusive of the opportunity or third party.
Investment as well to ensure that our long term partners.
Have the opportunity to participate in these renewable assets across our footprint not the least of which is our business partners, who we regularly include in opportunities to co invest as we mentioned with our CGM project. Thank you.
<unk>.
And Robert just to add a little bit of color to help you out and we're in the middle of that.
Commercial negotiations on a number of projects. So you can expect that we'll be able to offer you a little bit more color and detail around timing.
Once we mostly get through that but you know our intention with some projects is to acquire them in late stage development, but for the most part I think we're looking at our.
Capital deployment at Cody and think of our equity interest being somewhere you know in aggregate between 25 and 50% of the equity in the overall portfolio. It may be 100% in some cases, and none and others and some mixed in between but not likely.
The additions to our capital.
Capital program until we get late into 2022, as Corey said, it's going to take US most of the balance of the year to contract that up and for commercial reasons. You know, we'll we'll hold on until we get near the end of those negotiations before we provide you with that detail.
Thank you and then just.
A clarification a follow up.
<unk> taken a look at that capital.
<unk> list in the U S natural gas pipelines. The other capital bucket has increased but it's also increased in time.
Is that just kind of extending the window of Debottlenecking that system have you added new projects for or is that cost creep.
No that's related to a an acquisition that we have we call. It our kao transmission project, we're going to spend about $80 million to acquire a line from a third party that's going to give us direct access into the northern Kentucky, and Cincinnati, Ohio markets with the opportunity to do additional bolt on expansions in the future.
Thank you.
Thanks Robert.
The next question comes from Jeremy Tonet with Jpmorgan.
Please go ahead.
Hi, good afternoon.
Hi, Jeremy.
Hi, I just wanted to touch.
Touch on nuclear or what about here as it relates to Bruce and the potential for hydrogen we are seeing a little bit about our potential there and just wondering.
If you could dive in a little bit more on your comments I guess, how should we think about do you know at the time frame of this evaluation and what are kind of some of the factors in play for a decision on whether something can be done just wondering any color that you could share at this point.
Hi, Jeremy it's Corey.
With regards to Bruce and their efforts as you know Bruce power.
Has a.
As a a strong position in the province, and as part of their overall.
Our growth program.
To finish the Refurbishments of all of the units along with the project 2030, that's growing the overall capacity.
The plant that creates an opportunity for.
For the problems that as as new technologies emerge and there is the need for the creation of the new technologies Bruce power is systematically investigating how they can apply this additional capacity that's being driven.
By virtue of project 2030, and the NCR to deliver new fuel sources to the province, and so the way I think about it is they are systematically looking at a broad range of opportunities, including S. M ours.
I'd origin and other other.
Other programs that will allow them through their nuclear and nuclear industry and <unk>.
Nuclear industry Institute to evaluate sort of in the 2030 timeframe. When most of these emerging technologies hoped to be in a position to deliver to the province.
Got it so anything Bruce hydrogen is pretty wait later dated at this point.
Summing up.
Yes, that's correct I think so I think they've got a full plate with the LCR program and with the upgrade program at the plant and as they look at these opportunities it's a matter of them being experts in being able to apply rigor to the process and deliver.
The information to the entire province.
Got it that's helpful and maybe just one more neutral or if I could we've noticed a lot of really interesting advances on small modular reactors and technologies there and it seems like over the next you know middle of this decade to the back half of this decade. Some of these things could be coming into.
It into focus a bit more and.
And may be applied in different ways than than done historically and just wondering I think it <unk> maybe in the past it talks about the role nuclear could have in the oil sands are feeding other parts of the business power wise and just wondering if you see any opportunity for TC energy at some point down the road.
To become involved with S them ours.
Jeremy It's Francois.
We really do when you think about it.
S. M ours are in the context of Oilsands and their needs for steam and power. It's really is an excellent use case for small modular reactors.
Through our affiliation with Bruce power, we've got the technical expertise to develop and evaluate those technologies, but I think equally as importantly, we have the commercial relationships with the oil sands producers.
We have all of the surrounding and supporting infrastructure at site to provide their steam and power needs and we understand how to dispatch energy into the energy only market, which which Alberta is it's similar to Texas, if you're familiar with with the market structure. There so very much.
Something that we're interested in pursuing from a timeframe standpoint, however, I think it might be a little bit later than what you were alluding to at least in our view.
Just getting an operating license on its own is a very.
Lengthy and costly process. It can take up to five years to do that technology still needs to be proven up.
In our view the oil sands producers would need to sort of buy in on one common technology. So that they have their requisite expertise to operate and maintain our fleet for those purposes. All of that is going to take time. So we view this more as an opportunity for the 2030 then than the <unk>.
Half of the 2000 Twenty's.
Okay.
Got it got it well, we will see hopefully, it's a little bit earlier, but thank you for all your thoughts there.
Thank you Jeremy.
The next question comes from Robert <unk> with CIBC capital markets.
Please go ahead.
Hi, Thank you I just wanted to go back to some of your earlier comments on the energy security and.
If you could speak to any changes in your capital allocation strategy, you mentioned LNG, but are there other project types you're pursuing.
Has there been a meaningful change in you.
You know what the counterparties might be willing to accept in terms of risk transfer or anything else.
And maybe you can address whether there has been an appreciable change in the permitting environment. That's required to enable these energy solutions to come to market.
Yeah.
Yes, Thanks, Robert I'll get started on that and I'll ask them.
Stand to reflect on some of the experiences we've seen with permitting for LNG recently with the FERC I I guess I would start Robert by saying that our strategy is unchanged. We we were believers in their requisite balance between energy security and energy transition.
You know for many years and if you look back to our our strategy and our parameters we discussed at our Investor day last year in many respects, we feel that what's transpired globally has confirmed the validity of our approach.
We believe that all forms of energy that will be required to meet the world's energy.
Demand and that requires an all of the above strategy. So at the same time as we're comfortable allocating approximately $20 billion of our $25 billion program to natural gas. We're also bullish on pursuing alternate sources of energy be they renewables hydrogen cc U S or otherwise.
Because we do have to achieve not only reliability and affordability, but also the lowest possible emission profile for in order to allow the industry to prosper.
Uh huh.
From that perspective really more of a validation of our view.
Certainly on the LNG front as Stan reflected.
The the pole in terms of.
Increasing frequency of conversations and acceleration of conversations around new infrastructure has accelerated.
I would say, though that its bifurcated in two parts. The first is governments wanting to help Ukraine in western Europe in the near term what can be done for the next heating season, and then there is the longer term conversation about how do we over the long run reduce western Europe's reliance.
On Russia for its oil and gas, which as we all know is it takes about five years to sanction and and build them energy infrastructure on the permitting front I'll turn it over to Stan to reflect on our recent experiences with the FERC Yeah. Robert you may be familiar with the Ferc's recent actions around its policy.
<unk>, which we believe are directionally positive all things equal we applaud FERC for its participation in the congressional hearings.
And really for listening to the various comments from industry and for ultimately reversing course, and making its policy statement now into a draft document as opposed to a final rule and the implications of that are such that now that its a draft policy. The pending certificate applications are no longer applicable and you've seen foresee actually come out and issue orders.
Which is part of the three projects that Francois mentioned early on so again directionally positive with respect to the need for new critically needed energy infrastructure in the United States. It remains to be seen however, what the final rule is going to look like so we'll continue to monitor that very closely and work with the various stakeholders to make sure that our interest.
Are properly represented.
And perhaps I'll ask Greg to provide some commentary on the regulatory environment in Canada.
Thanks Francois.
Similarly, I think we're seeing a lot of positives.
Mentum on that front, both with local community stakeholders regulatory front.
The energy security piece just reinforcing.
Just kind of a peak demand, we've been seeing inter province export and otherwise there's a lot of inbounds, whether it's coming in from from Europe East coast, otherwise looking for ways of getting more gas out of the WCS B and really when you look at the peak levels that we're seeing that is driving that.
That need for capacity and reliability. So we are getting a lot of support and you're trying to figure out ways that we can help make that regulatory process more efficient because we try to add more capacity.
Okay. Thank you for that very fulsome answer.
It was a little bit curious on coastal gas like why you felt it was necessary to increase the loan commitment there.
The.
Pretending to potentially or even a higher capex then.
What you were thinking previously.
Yeah, Robert It's Joel here are very similar to what we said before with that subordinated loan facility. It's just to make sure. There's there's sufficiency of funding.
For the project, we do have a credit facility in place for <unk> for $6 $6 billion.
And in order to make sure that we have all the funds in place. We just had to increase the subordinate loan by 500 million this quarter, our expectation going forward, though would be to increase the credit facility at $6 6 billion that I mentioned higher and by doing that that would lower the subordinated loan by the same amount. So again, we view that.
This facility is being temporary but.
But we did increase it just to make sure that we have the appropriate funds to fund the project.
Okay, great. Thank you.
The next question comes from Brian Brennan with UBS.
Please go ahead.
Hi, good afternoon, everyone maybe.
Maybe to start off and talk about the market open season.
Just kind of curious if you can give a little bit more color around it and super interesting.
Seen so far and just maybe talk about future future demand for capacity from Cushing to Houston Port Arthur demand markets, given the domestic and export market clearly demands more Canadian and U S barrels.
Yeah sure, thanks, but glad you're asking with the open season. So you know.
To start this is Richard Pryor, which by the way.
This open season, it's an example of our new strategy of finding ways to increase utilization, where we have latent capacity in the system. So this is through in corridor capital light and in this case zero capital opportunities. So we launched an open season on market link on April eight it closes in mid May and it's going to enable Cushing crude.
To reach the domestic markets in the Port Arthur and Houston areas before we launched the open season, we worked extensively with our customers, which gives a strong understanding of where the market is.
I'm quite pleased with the customer response that we've had and based on the feedback I'm confident that we will be successful and we will see an increase in committed contracts in markets like an on market link system.
You asked about other demand and on market Lincoln.
There's a number of things that we're doing with that asset.
To make sure that we increase volumes and we work to fill up that latent capacity I managed that I mentioned.
We're actively managing our spot tool and as a result of that we've seen additional spot toll movements, we've taken a different strategy around our Houston tank terminal position and were starting to see more barrels going to the Houston marketplace. We're starting to see an uptick in diversions from Potomac and Cushing flowing all the way to the Gulf Coast and that's a lot based on.
Refinery pull for increased heavies, and we're doing things like riding the port Neches link that.
The Francois mentioned in his opening comments, where we.
We're going to extend the Keystone system down to Motiva facility.
Our largest north American refinery and things like that we're confident are going to increase the pull down our system all the way to Gulf The Gulf Coast.
And I think the future is very very bright for that part of the system.
Great appreciate the color and then maybe as a follow up to the subordinated loan capacity question increase.
While I understand there is no update on the potential.
Total cost for coastal gas and you get this time could you, perhaps just let us know what the project spend has been to date the coastal gas link to help us gauge potential future capex needs with 60.
65% complete at this time.
Yes.
Yeah, It's Francois Brian .
We have.
Contractual agreements with our customer not to disclose what they view as market sensitive information.
You can expect a generally linear relationship between the fact that we're 63% a.
A complete and and.
The.
The aggregation of.
The project financing and the subordinated loans.
And we'll once.
We reach hopefully an amicable solution with our customer will be able to provide additional details and as Devin mentioned, we expect that to happen here in <unk>.
The near future.
Fair enough thought I'd ask a have a great weekend, everyone. Thank you, Brian and same to you.
The next question comes from Michael Lapides with Goldman Sachs.
Please go ahead, hey, guys Hey.
Guys. Thank you for taking my question I have one nuanced one for for first quarter earnings for our first quarter comparable EBITDA.
I look at the Canadian gas pipeline segment and down year over year around $20 million, but I assume the bulk of that is just.
Roll off of the mainline depreciate.
The net earnings neutral impact on the depreciation of the Canadian mainline.
And I felt that was around $40 million a quarter or so and if so that would imply EBITDA year over year was flat there.
Pretty good volume growth I, just want to make sure I understand what kind of Wi fly up why not why not up a bit year over year I think at at that segment.
Yeah. Michael This is Greg ground here from Canada guests and I think you got that right from an EBITDA upfronts certainly another partially mainline.
Also after remember and consider there's tax depreciation in the quarter.
Quarter to quarter, we have some offsetting effects to that I think net income is a much better measure for our business and I think as you would see in and as you model the increased.
Capacity and capital that we continue to put it in the ground and you will see the net income continue to follow that and correlate quite closely to that.
Got it Okay and then.
How are you all.
I noticed in the financing slide you showed the two bars and Joel you spent a good amount of home walking through that.
When I look at the fourth quarter slide that same slide so the 22022 to 2024 financings I don't know if you mentioned you some hybrids in the fourth quarter slide, but I think you did today.
Yeah.
And you have a need for convertible securities in the next couple of years.
Do you think it is a sizable portion of that panel that funding bar or is it just kind of tiny and rounding error relative to your enterprise value.
No Michael it's something that we are we always look at when you look at subordinated capital. It always comprises roughly 15% of our capital structure. So as the balance sheet grows obviously, the subordinated capital portion of the capital structure grows with it.
So as we see you know as we look out over the next couple of years certainly we're seeing additional hybrid capacity as a result of the growth in the balance sheet. So yes.
Yes, we didn't include it in fourth quarter, but we thought it was important just to highlight that for investors. This quarter that certainly as we move forward here in order to keep our leverage metrics in line and moving down.
Along with improving our earnings and cash flow per share debt hybrids will make up that you know an important component of it again capped at the 15% of the capital structure.
Got it okay. Thank you guys I'll follow up with Gavin and team offline, Mike I appreciate it.
Thanks, Michael.
The next question comes from Puneet <unk> with Wells Fargo.
Please go ahead.
Thanks, Good afternoon in the Bakken I know theres been some production outages due to the severe winter winter weather, but if you adjust for weather gas production growth has been very strong I guess, what's been the shipper feedback so far on your base and express project in and just hypothetically if the project doesn't get constructed.
Do you think there's a possibility at some point in the next few years, where you just stop accepting more Bakken gas on northern border.
They're pretty if this is stan.
As you noted and I alluded to in our call last call. We did launch an open season for some Bakken export capacity up to around 430000 a day.
The open season doesn't close for another week or so and as is typical we tend to receive all of our pits at the last minute to the last day. So Unfortunately, I don't have anything that I could share with you that would not be commercially sensitive at this point in time.
With respect to your other question, we're receiving about two Bcf a day of gas out of the Bakken right now 70% of the supply that comes into the northern border system. So there's another 30% of that capacity that has got to compete for space against the Canadian supply is that coming from the north so they feel a little gas on gas competition, perhaps that goes.
On at once that gets filled up.
<unk> is essentially full and that's just another six signal a pipe expansion down the road.
Got it.
And then I guess.
Just staying in the in the U S. The Haynesville production has started to pick up in the last few months and there's a few companies now looking at building egress out of the region. So I'm. Just wondering is this something that you're evaluating as well do you have any opportunities on an anr or CGT.
CGT to potentially increase capacity down to the Gulf coast.
Yes. It is something that we're looking at I'll go back to my remarks in the beginning with respect to our Haynesville production out of the basin is not that different from the Permian the growth opportunities are not that different from the Permian the distance from the base into the LNG export terminals in Louisiana is not that different from the permanent so theres a lot of overlap there.
Whether it's a greenfield or brownfield expansion, we do have the opportunity to interconnect with our existing lines on the Colombia on the Columbia Gulf on the Colombia, and HR systems I should say so yes, that's something that is very much at the top of our minds.
Thank you.
The next question comes from Matthew Weekes with <unk> capital markets. Please.
Please go ahead.
Good afternoon. Thanks for taking my question just looking at the quarter here and it looks like there were there was some impact to EBITDA little bit from sort of commodity related factors talking about natural gas storage.
Our liquids marketing and then some talk of some timing on earnings in the liquids related to risk management activities.
I'm just wondering keeping in mind that a lot of these factors are out of your control and subject to the volatile environment. We're in.
If you have any visibility on how these factors will sort of play going forward on results that as the year.
And if you have any visibility for for maybe some of these factors normalizing or moderating going forward.
Yeah.
Thanks, Matthew it's Francois I'll get started and Alaska, Alaska, Richard or Bev and to provide some some proof points.
There, we do undertake commercial marketing and and trading activities and sometimes there's a bit of a mismatch between the financial and physical and so if we're caught in between the two at the end of the quarter you might see the cost impact.
Of one and not see the revenue impact of the other until our next month, which is in the next quarter. So maybe Richard you can provide a bit of an example of that and then.
Provide some color as to what you see happening for the rest of the year from our business yes.
Yes, absolutely so.
You look at the first quarter between the pandemic and the warranty crane, we've seen tremendous volatility in the crude markets.
Right the way through and there's really a couple of things going on that impact our margin business and it's not necessarily specific to commodity prices on the one and then the others.
Francois mentioned has to do with the risk mitigation.
First of all the transportation differentials remained quite tight so despite the fact that we saw a steep increase in flat crude prices.
The differentials between the different trading hubs, which is what sets the margins for our marketing entity and that would really be between hardisty and the Gulf coast and Cushing on the Gulf Coast. They stayed very tight and so that sets a tight margin. In addition to that we saw steep backwardation throughout the first quarter and that further exacerbates the tight differentials is.
With the Keystone system due to the transit times.
You'll receive a barrel onto the system and then you deliver a barrel off of the system in the following month.
And so we saw you know calendar spreads as why is $4 at points in the first quarter so that put.
Further compression on margins.
Then we've got our risk mitigation strategy around the commodities and so we deploy disciplined financial risk mitigation measures to minimize our commodity exposure, but on a short term basis. We have this timing aspect between when we purchase accrued place the financial hedge and then sell the crude in the following month and so what we're expecting.
Is that the timing will catch up likely over the next quarter and so I think what we saw in Q1 as an arm is an anomaly and we would expect our future business to be more consistent throughout the rest of the year as we've seen in previous quarters from the marketing entity.
One thing I, just want to mention as well or is it because I do think it's important to note is that the majority of our liquids business is committed long term contracts and the demand for our pipeline throughput continued to be consistent and predictable we'd been flowing in excess of 600000 barrels a day now for the last two quarters and I am not seeing anything that's suggesting that.
That's going to decrease and were seeing that across the whole system, our Keystone system and in our Gulf Coast system, and then I already discussed some other things that we're doing to try to increase that on the southern part of our of our system, where we have some latent capacity.
Matthew It's Joel here with Richard just pointed out is why we are confident in reaffirming our outlook for the year, where our EPS to be generally in line with last year, and our EBITDA to be modestly higher than 2021.
Okay. Thank you I really appreciate the detailed commentary on that I'll turn the call back. Thanks.
Thanks Matthew.
The next question comes from Andrew <unk> with Credit Suisse. Please.
Please go ahead.
Thanks, Good afternoon, I guess the question is gonna be for standard for Greg.
We've spent a lot of time over the years talking about producer Health August is fairly robust right now, but do you see opportunities across the portfolio for an.
An acceleration of volumes in certain submarkets or certain basins that you serve and maybe that comes from outright drilling activity accelerating or just some of the docs.
No pun intended but it all lined up.
Point in time, and what does that mean from an upside to returns.
Yes, Great question, if you read gas daily today, the sustained by the way you'll see that Antero was talking about the value of their transportation capacity and how critical it is to their success in getting additional gas down to the Gulf Coast lets just a reinforcement of exactly what we do our producers are still living within their means and staying within our balance sheet at least for the Ah Ah moment, they're not.
Chasing the higher prices, which I think is the right thing to do but but going forward. There are clear signals and I think that you're likely to see.
Drilling activity increase that we're seeing that in the Bakken, we're seeing it in the Permian, we're seeing it a little bit in the Appalachian Basin.
And as that happens, there's going to be a need for more egress capacity and that's what we do I think about things like the Appalachian Basin. For example, we have the ability to further compress up our Buckeye Xpress project, which we put in service about a year ago that could bring a couple of hundred thousand day of capacity on online into Teco pool in very short order. So so absolutely we were bullish we're glad to.
See that the producers health is back to where it should be and we're glad to see that they recognize the value that our transportation capacity breaks.
Yeah.
And then.
Greg.
Oh, okay.
Thank you.
I think what we're seeing is just going back to the unparalleled footprint that we do have here yeah on the WCS b.
Comparisons to the gas. So we are seeing a lot of strength in the basin. We are operating at near.
Near capacity and we are seeing the Q grow.
From the regulated side of our business.
Fully expect that to continue to help support some of the guidance that we provided back in November on Investor day about $1 billion to $2 billion a year going forward as we see supply migration, we see absolute growth on the expansion side.
From a pure producer perspective.
I agree with Stan.
We still are seeing them very disciplined capital be put in but that said, we do expect upwards of a 20% increase in capital here from the producer community in the basin. So should continue to maintain those close and continue to see grow over the next couple of years, especially as we see a CGM.
Oh in LNG see coming along.
That's helpful and then I guess, maybe an extension of this are building upon the question is.
Where do you have.
Some operational where increased volumes effectively they're going to drop down to the bottom line and then that enhances EBITDA and earnings.
And then the extension of that extend your you mentioned a bit of this is just the looping and compression and then the capital opportunities just how do you think about that for bring in your business.
Andrew It's Francois I'll get started and then I'll ask Richard.
And stand to provide some proof points one of the things we talked about on our Investor day was improving the return on invested capital on our existing assets.
Firstly through.
Cost efficiency and some small.
Revenue enhancement initiatives around machine learning, but we talked about Villa de Reyes and we talked about market link as two examples of where the capital is largely in the ground in the case of Villa de Reyes and it's entirely in the ground in the case of market link and our job now is to commercially.
Phil.
Increase the throughput and fill those pipes.
Thats infinite return on incremental cash flow because of the cash was already in the ground. So lots of those are two great. Examples of where we've got some some good operating leverage and I know maybe I'll ask you Richard again to comment on market link and our strategies and then maybe Dan you can provide an update on on Villa de Reyes.
Yes, so just regarding the Gulf coast part of our system. So we look at the Gulf Coast pipeline, and it's used for either flowing or long haul barrel all the way from Alberta down downward delivery points in the Gulf coast or it or it originates barrels in Cushing to our market linked lease that delivers.
MST barrels into the Gulf Coast and where.
That is a significant and key part of our liquid strategy is to focus on.
Low capital or are capital light options that we can we can create more pull through that southern part of the system.
Things that we're doing are typically looking at one end and then we are looking at right now to to crease Apple as you know.
A lot of it is increasing the receipt points. So that we can we can find extra barrels to bring into the system and also looking for additional delivery points. So that we can get our crews to more markets.
One thing that I didn't mentioned that we're earlier that we're anticipating.
<unk> seen some additional pull for example of as we've recently.
Entered into a joint tariff with another pipeline and so we're going to be able to pull a barrel all the way from Cushing through into the Louisiana marketplace as well. That's currently a market that that isn't necessarily touched by our system, but I think we could see adding incremental volume.
Did the other place where.
Leaving it mentioned as well as just our our our long haul Keystone system.
We continue to work on optimizing the performance of.
Of that pipeline.
We did put an open season in the marketplace back in 2019.
But where we put 50000 barrels of capacity, we still have not delivered on that capacity and at some point in the future I am confident just through the work that we're doing with our engineering team our field operations and our commercial teams that we will be able to realize on that capacity at some point in the future.
And Andrew This is Stan just to follow up on the theater relative.
It is now mechanically complete for both the North and General segment. So we're glad to have that behind us and we expect to have the southern portion of complete here later this year and with respect to your general question around the optimization I guess, a couple of things I would point out is a given some of the headwinds we have with respect to the ability to build new critically needed energy infrastructure the value of pipe in the ground as <unk>.
<unk> and increasing exponentially and one of the things we're going to do is we're going to test the elasticity of the market and we're likely to see less discounts offered at our existing capacity less discounts all things equal is going to lead to higher revenues and then the other thing I would leave you with is innovation.
Doing some really neat things in the innovation space around machine learning, we have a tool that we referred to as our autonomous pipeline, which helps us use artificial intelligence machine learning and the like to make sure that we're maximizing the value out of the pipe at any given day and so far that's beginning to pay dividends for us as well.
That's great. Thank you very much.
Ladies and gentlemen, this concludes the question and answer session. If there any further questions. Please contact investor relations at Tc energy.
I will now turn the call over to Francois Poirier. Please go ahead Mr. Corey.
Thanks, very much appreciate everyone's time and attention.
Mid to late afternoon on a Friday. Thank you very much for your attendance.
Look our key messages are we continue to be opportunity rich beyond our $25 billion existing program. When you look at LNG export growth. When you look at our RFID program to electrify our own power consumption you look at pumped hydro storage you look at hydrogen you look at <unk> you look at recoverable main.
Since capital, we're very confident in our ability to deploy $5 billion a year in a responsible manner consistent with our historical risk return preferences.
One of the key things. We're learning here is that incumbency is extremely valuable not only with respect to our.
Our existing gas and liquids businesses, but as we contemplate hydrogen.
Production, and Cotr transport and sequestration, having assets in the ground regulatory relationships rights of way et cetera is all becoming increasingly valuable and then the third thing I want to mention is our capital discipline is very important we are going.
<unk> to deleverage at the same time as we grow our business we talked about a.
Long term debt to EBITDA multiple target of $4 75, our expectation continues to be that we will achieve that within our five year planning horizon. So we're bullish on the opportunity set and we're also bullish on our ability to maintain.
We maintain a strong balance sheet. So that we can be opportunistic for for opportunities in the future. So thanks very much for your time today everyone.
This concludes today's conference call you may disconnect your lines. Thank.
Thank you for participating and have a pleasant day.
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