Q3 2024 TC Energy Corp Earnings Call
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 then zero I would now like to turn the conference over to Mr. Gavin Wylie, Vice President and Investor Relations. Please go ahead Sir.
Gavin Wylie: Thanks, very much and good morning, I'd like to welcome you to TC Energy's 2024 third quarter Conference call. Joining me are <unk>, President and Chief Executive Officer, Sean Odonnell Executive Vice President and Chief Financial Officer, along with other members of our senior leadership team.
Thank you for standing by. This is the conference operator. Welcome to the TC Energy third quarter 2024 financial results conference call. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.
Gavin Wylie: One Sean will begin today with some comments on our financial results and operational highlights.
Copy of the slide presentation that will accompany their remarks is available on our website under the investors section.
Gavin Wylie: Following their remarks, we'll take questions from the investment community. We ask that you limit yourself to two questions and if you remember of the media. Please contact our media team.
To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0. I would now like to turn the conference over to Mr. Gavin Wylie, Vice President and Investor Relations. Please go ahead, sir.
Gavin Wylie: If you have questions regarding the liquids pipelines business or cellphone beyond what is included in our third quarter reporting please contact the Soho team.
I'll remind you that remarks today will include forward looking statements that are subject to important risks and uncertainties for more information. Please see the reports filed by TC energy with Canadian Securities regulators and with the U S Securities Exchange Commission.
Gavin Wylie: Thanks very much and good morning. I'd like to welcome you to TC Energy's 2024 third quarter conference call. Joining me are Francois Poirier, President and Chief Executive Officer, Sean O'Donnell, Executive Vice President and Chief Financial Officer, along with other members of our senior leadership team.
Gavin Wylie: Finally during our presentation will refer to non-GAAP measures that provide additional information on Tc Energy's operational and financial performance. However may not be comparable to similar measures presented by other entities a reconciliation of various GAAP and non-GAAP measures is contained in the appendix of the presentation.
Gavin Wylie: Francois and Sean will begin today with some comments on our financial results and operational highlights. A copy of the slide presentation that will accompany their remarks is available on our website under the Investors section.
Gavin Wylie: Following their remarks, we'll take questions from the investment community. We ask that you limit yourself to two questions, and if you're a member of the media, please contact our media team.
Russell: With that I'll turn it over to Russell.
Russell: Thanks, Kevin and good morning, everyone.
Speaker Change: Our focus on a clear set of priorities for 2024 that includes safety operational excellence and project execution has again delivered strong operational and financial results in.
Gavin Wylie: If you have questions regarding the liquids pipelines business or Southboat beyond what is included in our third quarter reporting, please contact the Southboat team.
Gavin Wylie: I'll remind you that remarks to date will include forward-looking statements that are subject to important risks and uncertainties. For more information, please see the reports filed by TC Energy with the Canadian Securities Regulators and with the U.S. Securities Exchange Commission.
Speaker Change: In the third quarter comparable EBITDA is up 6% compared to the third quarter of last year.
This positions us extremely well for the rest of 2024, where we now expect comparable EBITDA to be at the upper end of the range of our full year outlook.
Gavin Wylie: Finally, during our presentation, we'll refer to non-GAAP measures that provide additional information on TC Energy's operational and financial performance.
Speaker Change: We have advanced multiple strategic initiatives aimed at maximizing the long term value of our assets, including successfully completing the spinoff of our liquids pipelines business into south bow on October one.
Gavin Wylie: However, may not be comparable to similar measures presented by other entities.
Speaker Change: A reconciliation of various gap and non-gap measures is contained in the appendix of the presentation. With that, I'll turn it over to Francois.
Speaker Change: I'd like to take a moment to recognize our teams for the months of dedication focus and collaboration from every corner of our organization to make this milestone possible.
Thanks, Gavin, and good morning, everyone.
Francois Poirier: Our focus on a clear set of priorities for 2024 that includes safety, operational excellence, and project execution has again delivered strong operational and financial results.
Speaker Change: This marks the beginning of a new era for TC energy and I am excited to share with you our renewed vision at our upcoming Investor day on November 19th.
Francois Poirier: In the third quarter, comparable EBITDA is up 6% compared to the third quarter of last year.
Gavin Wylie: This positions us extremely well for the rest of 2024, where we now expect comparable EBITDA to be at the upper end of the range of our full year outlook.
Speaker Change: Next our focus on project execution is delivering meaningful results, we're making significant progress on our major projects, including Bruce power unit, three MCR and southeast Gateway, which I'll discuss in more detail on the next slide.
Gavin Wylie: We've advanced multiple strategic initiatives aimed at maximizing the long-term value of our assets, including successfully completing the spin-off of our liquids pipelines business into Southbow on October 1st.
Speaker Change: We've placed $1 2 billion of projects in service year to date and expect to place approximately $7 billion of assets into service in 2024, which includes coastal gas link with another $8 $5 billion coming online in 2025.
I'd like to take a moment to recognize our teams.
Gavin Wylie: for the months of dedication, focus, and collaboration from every corner of our organization to make this milestone possible.
Speaker Change: Now given our strong project execution and optimization efforts. We now expect 2024 net capital expenditures to be between seven four and $7 7 billion, which represents a midpoint reduction of approximately 8% versus our initial.
Gavin Wylie: This marks the beginning of a new era for TC Energy, and I'm excited to share with you our renewed vision at our upcoming Investor Day on November 19th.
Gavin Wylie: Next, our focus on project execution is delivering meaningful results. We're making significant progress on our major projects, including Bruce Power Unit 3 MCR and Southeast Gateway, which I'll discuss in more detail on the next slide.
Speaker Change: [noise] outlook of eight to eight 5 billion.
Speaker Change: Further enhancing our financial strength and flexibility.
Speaker Change: In combination with our strong year to date EBITDA performance, our revised outlook for capital expenditures and completed asset sales in 2024 totaling $1 6 billion. We are on track to achieve our year end debt to EBITDA target of 475 times.
Gavin Wylie: We've placed 1.2 billion dollars of projects in service year-to-date and expect to place approximately 7 billion dollars of assets into service in 2024, which includes Coastal GasLink, with another 8.5 billion dollars coming online in 2025.
Speaker Change: As to southeast Gateway this as our marine pipeline project that will supply up to one three Bcf a day of natural gas to meet the growing need for reliable and affordable energy in the southeast region of Mexico.
Gavin Wylie: Now, given our strong project execution and optimization efforts, we now expect 2024 net capital expenditures to be between $7.4 and $7.7 billion, which represents a midpoint reduction of approximately 8% versus our initial outlook of $8 to $8.5 billion.
Speaker Change: Importantly, our strong execution and safety record have resulted in an updated.
Speaker Change: Estimated capital cost for the project to be between three 9% and $4 $1 billion.
further enhancing our financial strength and flexibility.
Gavin Wylie: In combination with our strong year-to-date EBITDA performance, our revised outlook for capital expenditures, and completed asset sales in 2024, totaling $1.6 billion, we are on track to achieve our year-end debt-to-EBITDA target of 4.75 times.
Speaker Change: Which is approximately 11% lower than our initial cost estimate of $4 5 billion.
Speaker Change: And a significant driver behind our overall reduction in our 2024 capital program.
Speaker Change: We've now achieved mechanical completion on all major onshore facilities.
Gavin Wylie: As to Southeast Gateway, this is our marine pipeline project that will supply up to 1.3 BCF a day of natural gas to meet the growing need for reliable and affordable energy in the southeast region of Mexico.
Speaker Change: Which includes both compressor stations as well as a delivery meter station appear ISO.
Speaker Change: Both the deepwater and onshore pipe installation has been complete and we have hydro tested approximately 500 kilometers of the offshore section.
Gavin Wylie: Importantly, our strong execution and safety record have resulted in an updated...
Speaker Change: Only one four kilometers of shallow water pipe installation remains and we expect to complete that work during the fourth quarter.
Gavin Wylie: Estimated capital costs for the project to be between 3.9 and 4.1 billion U.S. dollars.
Speaker Change: We continue to anticipate reaching mechanical completion.
Gavin Wylie: which is approximately 11% lower than our initial cost estimate of $4.5 billion and a significant driver behind our overall reduction in our 2024 capital program.
Speaker Change: In late 2024 or very early in 2025 and are on track to achieve our commercial and service no later than mid 2025.
We've now achieved mechanical completion on all major onshore facilities.
Speaker Change: Now the outlook for our business has never been stronger.
Speaker Change: Underpinned by wide scale electrification demand for natural gas and reliable power generation continues to reach record highs.
Gavin Wylie: which includes both compressor stations as well as a delivery meter station at Paraiso.
Gavin Wylie: Both the deep water and onshore pipe installation has been complete, and we've hydro-tested approximately 500 kilometers of the offshore section.
Speaker Change: North American natural gas will play a critical role in increasing global access to reliable and sustainable energy.
Speaker Change: Our forecast highlights North America's natural gas demand will rise by about 40 Bcf a day by 2035.
Gavin Wylie: Only 1.4 km of shallow water pipe installation remains and we expect to complete that work during the fourth quarter.
Speaker Change: And this surge in demand is driven by LNG exports coal plant retirements utility reliability needs.
We continue to anticipate reaching mechanical completion.
Gavin Wylie: in late 2024 or very early in 2025 and are on track to achieve our commercial in service no later than mid-2025.
Speaker Change: And of course growing electricity consumption from AI and data centers.
Speaker Change: Rising demand will necessitate connections to new supply and demand centers and the maintenance and modernization of existing infrastructure to ensure its ongoing safety and reliability.
Now the outlook for our business has never been stronger.
Gavin Wylie: Underpinned by wide-scale electrification, demand for natural gas, and reliable power generation, continues to reach record highs.
Speaker Change: Collectively this growing demand is creating an environment that is rich with opportunities for the incremental build out of natural gas infrastructure.
Gavin Wylie: North American natural gas will play a critical role in increasing global access to reliable and sustainable energy.
Speaker Change: Now we will be walking through these opportunities in more detail at our upcoming Investor day on November 19th.
Gavin Wylie: Our forecast highlights North America's natural gas demand will rise by about 40 BCF a day by 2035.
Speaker Change: But suffice it to say TC energy is the only energy infrastructure company with incumbency and all three geographies in North America.
Gavin Wylie: And this surge in demand is driven by LNG exports, coal plant retirements,
Utility Reliability Needs
Speaker Change: And we believe that the strength of our base business combined with the vast opportunity set and disciplined capital allocation will allow us to deliver solid growth.
Gavin Wylie: and, of course, growing electricity consumption from AI and data centers.
Gavin Wylie: Rising demand will necessitate connections to new supply and demand centers and the maintenance and modernization of existing infrastructure to ensure its ongoing safety and reliability.
Speaker Change: Low risk.
Speaker Change: And repeatable performance.
Speaker Change: Safety and operational excellence form the foundation of everything we do at TC energy.
Gavin Wylie: Collectively, this growing demand is creating an environment that is rich with opportunities for the incremental build-out of natural gas infrastructure.
Speaker Change: The third quarter was no exception.
Speaker Change: Our team's focus on these core principles combined with the demand for our vital energy assets and ensured continued high utilization and availability across our asset base <unk>.
Gavin Wylie: Now we'll be walking through these opportunities in more detail at our upcoming Investor Day on November 19th
Gavin Wylie: But suffice it to say, TC Energy is the only energy infrastructure company with incumbency in all three geographies in North America.
Speaker Change: Including for example, achieving 98% availability at Bruce power.
Speaker Change: This in turn leads to increased year over year financial performance as illustrated on this slide.
Gavin Wylie: And we believe that the strength of our base business, combined with the vast opportunity set and disciplined capital allocation, will allow us to deliver solid growth,
Speaker Change: We will look to maintain this positive momentum through the end of 2024, and our focus remains on achieving our strategic priorities, while continuing to deliver long term shareholder value.
Low risk.
and repeatable performance.
Gavin Wylie: Safety and operational excellence form the foundation of everything we do at TC Energy.
Sean: And now I'll turn the call over to Sean.
Sean: Thank you Francois and good morning, everyone.
The third quarter was no exception.
Sean: I wanted to start this morning by highlighting how the improvements in our cost optimization and project execution programs that Francois mentioned are contributing to our results this year.
Gavin Wylie: Our team's focus on these core principles combined with the demand for our vital energy assets ensured continued high utilization and availability across our asset base.
Sean: On the left chart, we show our original net Capex outlook for the year of 8% to $8 5 billion.
Sean: On our second quarter call, we highlighted that our expectation was trending towards the lower end of that range. We now expect our 2024 net capex to be in the range of seven 4% to seven 7 billion.
Gavin Wylie: This, in turn, leads to increased year-over-year financial performance, as illustrated on this slide.
Gavin Wylie: We will look to maintain this positive momentum through the end of 2024, and our focus remains on achieving our strategic priorities while continuing to deliver long-term shareholder value.
Sean: This is a reduction of approximately $700 million.
Sean: Which creates a dollar for dollar impact on our deleveraging plan, which I'll touch on in a moment.
Sean: As you also heard from Francois the largest driver of the Capex savings is from the continued successful execution of our southeast Gateway project, but there have also been project and cost optimization gains across the entire portfolio.
And now I'll turn the call over to Sean.
Thanks, Francois, and good morning, everyone.
Sean O'donnell: I wanted to start this morning by highlighting how the improvements in our cost optimization and project execution programs that Francois mentioned are contributing to our results this year.
Sean: In addition to the $700 million in capital savings, we grew third quarter comparable EBITDA by 6% year over year.
Sean O'donnell: On the left chart, we show our original net capex outlook for the year of $8 to $8.5 billion.
Sean: Similar to prior quarters. This year, we enjoyed contributions from across our entire asset base as you can see on the chart to the left.
Sean O'donnell: On our second quarter call, we highlighted that our expectation was trending towards the lower end of that range.
Sean: Canada gas saw higher rate base earnings from continued system expansions coming into service on both <unk> and foothills.
Sean O'donnell: We now expect our 2024 net capex to be in the range of $7.4 to $7.7 billion.
Sean: U S gas put growth and modernization projects into service, including the Gillis access projects, serving the Gulf Coast LNG markets and results were partially offset from the closing of the Portland natural gas sale in August.
Sean O'donnell: This is a reduction of approximately $700 million, which creates dollar-for-dollar impact on our deleveraging plan, which I'll touch on in a moment.
Sean O'donnell: As you also heard from Francois, the largest driver of the CapEx savings is from the continued successful execution of our Southeast Gateway project, but there have also been project and cost optimization gains across the entire portfolio.
Sean: In Mexico, we had higher equity earnings at <unk>, primarily from the strengthening U S dollar over the peso.
Sean: As a reminder, our contracts in Mexico are U S dollar denominated, but we do see impacts from peso fluctuations due to equity accounting at sort of payoffs.
Sean O'donnell: In addition to the $700 million in capital savings, we grew third quarter comparable EBITDA by 6% year over year. And similar to prior quarters this year, we enjoyed contributions from across our entire asset base, as you can see on the chart to the left.
Sean: Our power and energy solutions team saw improved contributions from Bruce power, which achieved 98% availability in the third quarter up from 94% a year ago.
Sean O'donnell: Canada Gas saw higher rate-based earnings from continued system expansions coming into service on both NGTL and foothills.
Sean: Our liquid segment decreased primarily due to lower margins from marketing activities.
Sean: As a result of incremental WCS be egress capacity those are partially offset by higher volumes on the U S Gulf Coast system.
Sean O'donnell: U.S. Gas put growth and modernization projects into service, including the Gillis Access Project serving the Gulf Coast LNG markets.
Sean: Moving to the right chart, our comparable earnings of $1 1 billion were 4% higher than the third quarter of 2003.
Sean O'donnell: And the results were partially offset from the closing of the Portland natural gas sale in August.
Sean O'donnell: In Mexico, we had higher equity earnings at Cerditas, primarily from the strengthening U.S. dollar over the peso.
Sean: There is some variances on the right chart worth spending a moment on.
Sean: Depreciation was higher reflecting expansion facilities and new projects being placed into service.
Sean O'donnell: As a reminder, our contracts in Mexico are U.S. dollar denominated, but we do see impacts from peso fluctuations due to equity accounting at CERDA Tejas.
Sean: Interest expense was lower primarily due to reduced levels of short term borrowings and higher capitalized interest.
Sean O'donnell: Our Power and Energy Solutions team saw improved contributions from Bruce Power, which achieved 98% availability in the third quarter, up from 94% a year ago.
Sean: <unk> was higher due to continued capital spending on southeast Gateway.
Sean: And lastly, this quarter's deduction for Noncontrolling interests increased primarily due to the sale of the 40% interest in Colombia that closed in the fourth quarter last year.
Sean O'donnell: Our liquid segment decreased primarily due to lower margins for marketing activities.
Sean O'donnell: as a result of incremental WCSB egress capacity. Those are partially offset by higher volumes on the U.S. Gulf Coast system.
Sean: Our 2024 earnings outlook remains consistent with the outlook and our 2023 annual report and that our earnings per common share are expected to be lower this year than in 2023, driven largely by the NCI adjustments from the asset divestiture program.
Sean O'donnell: Moving to the right chart, our comparable earnings of $1.1 billion were 4% higher than the third quarter of 2023.
Sean O'donnell: There's some variances on the right chart worth spending a moment on.
Sean: Turning to page 12 will provide an update on our 2020 for EBITDA outlook.
Sean O'donnell: Depreciation was higher, reflecting expansion facilities and new projects being placed into service.
Sean: Our focus on safety and operational excellence have contributed to yet another quarter of exceptional asset performance.
Sean O'donnell: Interest expense was lower, primarily due to reduced levels of short-term borrowing and higher capitalized interest.
Sean: If you look at the chart on the left for 2024 comparable EBITDA is expected to be at the upper end of our 11, 2% 11 $5 billion range.
Sean O'donnell: AFUDC was higher due to continued capital spending on Southeast Gateway. And lastly, this quarter's deduction for non-controlling interests increased, primarily due to the sale of the 40% interest in Columbia that closed in the fourth quarter last year.
Sean: When we exclude liquids EBITDA contribution in 2024, we expect Tcs comparable EBITDA to be at the high end of our nine 9% to $10 $1 billion range.
Sean O'donnell: Our 2024 earnings outlook remains consistent with the outlook in our 2023 annual report in that our earnings for common share are expected to be lower this year than in 2023, driven largely by the NCI adjustments from the asset divestiture program.
Sean: For clarity.
Sean: This is the range, we expect to report in TC year end 2020 for financials when liquids has moved to discontinued operations.
Sean: On the right side of the page I wanted to recap several of the important financial and deleveraging milestones that the team has achieved this year.
Sean O'donnell: Turning to page 12, we'll provide an update on our 2024 EVA Outlook.
Sean: We have achieved strong EBITDA performance.
Sean O'donnell: Our focus on safety and operational excellence have contributed to yet another quarter of exceptional asset performance.
Sean: We've realized synergies through efficiency and integration measures, we close on $1 6 billion in asset sales.
Sean O'donnell: If you look at the chart on the left for 2024, comparable EBITDA is expected to be at the upper end of our $11.2 to $11.5 billion range.
Sean: And we have continued to improve our capital efficiency and capex cost optimization programs.
Sean: The combined impact of these improvements to the business plan put us on track to achieve our $4 75 times debt to comparable EBITDA target by the end of 2024.
Sean O'donnell: When we exclude Liquid's EBITDA contribution in 2024, we expect TC's comparable EBITDA to be at the high end of our $9.9 to $10.1 billion range.
Sean: As we look ahead to 2025, we expect to place approximately $8 $5 billion of assets in service, which will drive EBITDA growth in the second half of 2025 and full year 2026.
for Clarity.
Sean O'donnell: This is the range we expect to report in TC year-end 2024 financials when Liquids is moved to discontinued operations.
Sean O'donnell: On the right side of the page, I wanted to recap several of the important financial and deleveraging milestones that the team has achieved this year. We have achieved strong EBITDA performance.
Sean: I'll conclude my section this morning with a reflection on how our business model has delivered repeatable growth over the last few decades.
Sean: 24 represents a material inflection point for TC and that we are simultaneously experiencing improved capital efficiencies repeatable low risk growth projects at the beginning of an organic deleveraging cycle.
Sean O'donnell: We've realized synergies through efficiency and integration measures. We closed on $1.6 billion in asset sales.
Sean O'donnell: And we have continued to improve our capital efficiency and CapEx cost optimization programs.
Sean: And unprecedented increases in demand for natural gas and power on each of our systems.
Sean O'donnell: The combined impact of these improvements to the business plan put us on track to achieve our 4.75 times debt-to-comparable EBITDA target by the end of 2024.
Sean: With our focused strategy is a natural gas and power company. We believe we have the lowest risk business model in this sector with a growth portfolio that offers very attractive risk adjusted returns.
Sean O'donnell: As we look ahead to 2025, we expect to place approximately $8.5 billion of assets in service, which will drive EBITDA growth in the second half of 2025 and full year 2026.
Sean: Given that outlook and our continued strong financial performance Tcs Board of directors declared a fourth quarter dividend of 82 to five per common share.
Sean O'donnell: I'll conclude my section this morning with a reflection on how our business model has delivered repeatable growth over the last two decades.
Sean: This revised quarterly dividend reflects <unk> proportionate allocation of the dividend pro forma for the closing of the spinoff that closed on October one.
Sean O'donnell: 2024 represents a material inflection point for TC in that we are simultaneously experiencing improved capital efficiencies, repeatable low-risk growth projects,
Sean: When taken together with south those intended dividend for the fourth quarter, our shareholders combined dividends will remain hole in 2024.
Sean O'donnell: the beginning of an organic deleveraging cycle and unprecedented increases in demand for natural gas and power on each of our systems.
Speaker Change: With that I'll pass the call back to Francois.
Speaker Change: Thank you Sean.
Francois: In summary, our continued focus on a clear set of priorities in 2024, including safety operational Excellence and project execution Excellence is delivered strong operational and financial results. Our focus for the rest of the year remains clear and we will continue executing against these three priorities.
Sean O'donnell: With our focus strategy as a natural gas and power company, we believe we have the lowest risk business model in this sector with a growth portfolio that offers very attractive risk-adjusted returns.
Sean O'donnell: Given that outlook and our continued strong financial performance, TC's Board of Directors declared a fourth quarter dividend of $0.8225 per common share.
Sean: We look forward to connecting further at our Investor day in a couple of weeks I'll now turn the call back over to the operator for questions.
Sean O'donnell: This revised quarterly dividend reflects TC's proportionate allocation of the dividend pro forma for the closing of the spinoff that closed on October 1st.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: To join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.
Sean O'donnell: When taken together with Southbow's intended dividend for the fourth quarter, our shareholders' combined dividends will remain whole in 2024.
Speaker Change: Please limit yourself.
Speaker Change: To two questions and if you should have additional questions. Please reenter the queue.
With that, I'll pass the call back to Francois.
Sean: If youre using a speakerphone please pick up the handset before pressing any Keith.
Thank you, Sean.
Francois Poirier: In summary, our continued focus on a clear set of priorities in 2024, including safety, operational excellence, and project execution excellence.
Sean: To withdraw your question. Please press Star then two.
Speaker Change: And our first question will come from Puneet cities with Wells Fargo. Please go ahead.
have delivered strong operational and financial results.
Puneet cities: Thanks, and good morning all.
Speaker Change: So maybe you will touch on this.
Speaker Change: Coming analyst day, but I guess as you look across your portfolio here in all the various gas expansion opportunities can you maybe break down how.
Francois Poirier: We look forward to connecting further at our Investor Day in a couple of weeks.
Sean O'donnell: I'll now turn the call back over to the operator for questions.
Speaker Change: Much of the demand you're seeing from coal to gas switching versus higher.
Speaker Change: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request.
Speaker Change: Higher demand from power plants versus behind the meter generation.
Speaker Change: Kind of which of those categories represents the largest piece of the of the demand that youre seeing and then do you see any differences in the economics across those different types of projects or are they all kind of clustered in that six to eight times build range.
Please unmute, limit yourself.
Sean O'donnell: to two questions, and if you should have additional questions, please re-enter the queue. If you are using a speakerphone, please pick up the handset before pressing any keys. And to withdraw your question, please press star, then two.
Speaker Change: Hey, Good morning. This is Stan I could take a stab at that.
Speaker Change: I would just say that our growth across North America continues to be strong and supported by fundamentals that show that.
Speaker Change: And our first question will come from Praneeth Satish with Wells Fargo. Please go ahead.
Sean: There's 40 Bcf of incremental demand between now and 2035, which brings our total gas market to about 160 Bcf and from US. We look at that growth is coming across five core drivers. The first and the biggest of them. All is really LNG exports, where we see a tripling of North American.
Praneeth Satish: Can you maybe break down how much of the demand you're seeing from coal to gas switching versus
higher demand from power plants versus behind the meter generation.
Sean: Exports from 13 Bcf a day today to 39 Bcf a day, which is led by a more than doubling of exports in the U S.
Praneeth Satish: kind of which of those categories represents the largest piece of the of the demand that you're seeing and then do you see any differences in the economics across those different types of projects or are they all kind of clustered in that six to eight times build range?
Sean: With respect to power generation, there is lots of <unk> across our footprint in terms of increased power demand led by coal to gas retirements and emerging demand from data centers.
Praneeth Satish: Hey, good morning, Praneet. This is Stan. I could take a stab at that. I would just say that growth across North America continues to be strong and supported by fundamentals that show that there's 40 BCF of incremental demand between now and 2035, which brings our total gas market to about 160.
Sean: On the coal conversions there are nine plants within 15 miles of our pipes that are set to retire by 2031, and we think that could be an extra bcf a day of load for us.
Sean: When we look at the 300 or so data centers that are currently being contemplated across the U S.
Sean: 200 of those are located within 50 miles of our pipe and we're currently in negotiations with various entities for up to two Bcf a day of that load and I expect us to compete for and win our fair share and we're also focusing and opportunities around LDC reliability, which could be another one to two bcf as well as supply access to make sure that producers have.
Sean O'donnell: of them all is really LNG exports, where we see a tripling of North American exports from 13 BCF a day today to 39 BCF a day, which is led by a more than doubling of exports in the U.S.
Sean O'donnell: With respect to power generation, there's lots of tailwinds across our footprint in terms of increased power demand led by coal-to-gas retirements and emerging demand from data centers.
Sean: Export capacity out of constrained market areas.
Sean: Lastly, we're going to continue to invest in modernization and maintenance capital expenditures across our systems. So a big picture wise when I add all that up I see about 13 Bcf a day of growth opportunities that are in various stages of execution development or origination.
Sean O'donnell: You know, on the coal conversions, there are nine plants within 15 miles of our pipes that are set to retire by 2031, and we think that could be an extra BCF a day of load for us.
Sean: And in this target rich environment I don't think we're going to have any problems filling up our $6 billion to $7 billion of capital and allocating that to the projects that give us the highest risk adjusted return and building those projects within our five to seven times build multiple.
Sean O'donnell: When we look at the 300 or so data centers that are currently being contemplated across the U.S.
Sean O'donnell: 200 of those are located within 50 miles of our pipe, and we're currently in negotiations with various entities for up to two BCF a day of that load, and I expect us to compete for and win our fair share.
Speaker Change: And <unk> as Francois just for the last part of your question around color coding returns from each from the different customer classes. We don't really think about it that way I guess I would say.
Sean O'donnell: We're also focusing on opportunities around LDC reliability, which could be another 1 to 2 BCF, as well as supply access to make sure that producers have export capacity out of constrained market areas. And then lastly, we're going to continue investing in modernization and maintenance capital expenditures across our systems.
Sean: We have a finite amount of capital we want to invest to balance balance sheet strength dividend growth.
Sean: And repeatable performance.
Sean: The fact that there are six or seven different.
Sean O'donnell: So, big picture wise, when I add all that up, I see about 13 BCF a day of growth opportunities that are in various stages of execution, development, or origination.
Sean: Sources of demand competing for our capacity directionally increases the likelihood of us being able to sanction projects at higher returns going forward than we've been able to sanction projects out in the past and given the fact that we see our cost of capital heading in a favorable direction over the next year or two.
Sean O'donnell: And, you know, in this target-rich environment, I don't think we're going to have any problem filling up our $6 to $7 billion of capital and allocating that to the projects that give us the highest risk-adjusted return and building those projects within our 5 to 7 times billed multiple.
Sean: That means that we see the spread between our earned returns in our cost of capital.
Sean O'donnell: And Praneeth and Francois, just for the last part of your question around color-coding returns from the different customer classes, we don't really think about it that way. I guess I would say...
Sean: Widening in a meaningful way over the next couple of years, which which is gets us really excited.
Speaker Change: No that's helpful.
Sean O'donnell: We have a finite amount of capital we want to invest to balance balance sheet strength, dividend growth, and repeatable performance. The fact that there are six or seven different...
Speaker Change: At the risk of this being maybe too early to ask but I'll ask it anyway, there's a lot of opportunities.
Speaker Change: Obviously across the the gas pipeline footprint, you have a capex limit in place for 2025, but.
Sean: Do you view yourself as Capex constrained, where you need to high grade projects because the way we see it most of this demand pull most of these demand pull gas projects have long lead times and the four year range and so even if you sanction the projects today that spending doesn't really hit until the 2027 2008 timeframe when you lever.
Sean O'donnell: sources of demand competing for our capacity directionally increases the likelihood of us being able to sanction projects at higher returns going forward than we've been able to sanction projects at in the past.
Sean O'donnell: And given the fact that we see our cost of capital heading in a favorable direction over the next year or two, that means that we see the spread between our earned returns and our cost of capital widening in a meaningful way over the next couple of years, which gets us really excited.
Sean: Is much lower so how do you think about the long term capex trajectory of the company.
Sean: Given all these opportunities.
Speaker Change: Yes, what I'd say <unk> is that Directionally, we are now entering sort of an organic deleveraging phase of our evolution.
All right, now that's helpful.
Speaker Change: At the risk of this being maybe too early to ask, but I'll ask it anyway. There's a lot of opportunities, obviously, across the...
Sean: The beauty of our business and the strength of our franchise means that where we have visibility to where we're going to allocate capital and our confidence in being able to allocate that $6 billion to $7 billion of capital all the way out to the end of the decade, and we're going to give you more color on that.
Sean O'donnell: the gas pipeline footprint. You have a capex limit in place for 2025.
Speaker Change: But, I mean, do you view yourself as CapEx-constrained, where you need to high-grade projects? Because the way we see it, you know, most of this demand-pull, most of these demand-pull gas projects have
Sean: On November 19th at our Investor Day right.
Sean: Right now we feel it's a priority to them.
Sean O'donnell: long lead times in the four-year range. And so even if you sanction the projects today, that spending doesn't really hit until the 2027-28 time frame when your leverage is much lower. So how do you think about the long-term CapEx trajectory of the company, given all these opportunities?
Sean: Build a little bit of cushion or room.
Sean: Room to maneuver below that $4 75 debt to EBITDA leverage and until we see that.
Sean: Manifest itself, we're not likely to be considering increasing the size of our capital program, but as you said.
I guess what I'd say, Praneeth, is, you know,
Sean: We still have plenty of capital in the outer years of the decade.
Sean: Within which to allocate capital and that's our primary area of focus right now.
Speaker Change: Got it thanks al.
Sean O'donnell: We have visibility of where we're going to allocate capital and our confidence in being able to allocate that six to seven billion dollars of capital All the way out to the end of the decade and we're going to give you more color on that On November 19th at our investor day right now
Speaker Change: The next question will come from Rob Hope with Scotiabank. Please go ahead.
Rob Hope: Good morning, everyone.
Speaker Change: Good to see progress on the cost of the optimization on the capital expenditure front can you give us a little bit more color on what the key drivers had been there and then also I guess on the on the expense side has there been any progress been made to improve EBITA there as well.
Sean O'donnell: We feel it's a priority to build a little bit of cushion or room to maneuver below that 4.75 debt to EBITDA leverage.
Speaker Change: Yes. This is Stan again, I could take a start and we did announce that we are reducing our capital guidance from 885 to seven 4% to 707 and you could think about that in a couple of different tranches.
Sean O'donnell: And until we see that manifest itself, we're not likely to be considering increasing the size of our capital program. But as you said,
Sean O'donnell: You know, we still have plenty of capital in the outer years of the decade within which to allocate capital and that's our primary area of focus right now.
Speaker Change: One is coming from our focused initiatives that we've talked to you about historically roughly $270 million or so of that savings are directly tied back to initiatives associated with our focused program. So we're really pleased with respect to that a big part of the balance is just really good execution on our project and our maintenance capital expenditures and <unk>.
Got it. Thanks all.
Speaker Change: The next question will come from Rob Hope with Scotiabank. Please go ahead.
Rob Hope: Morning everyone. Good to see you. Progress on the cost optimization on the capital expenditure front. Can you give a little bit more color on you know what the key drivers have been there and then also I guess on the on the expense side has there been any progress been made to improve EBITDA there as well?
Speaker Change: Reducing those costs going forward.
Speaker Change: And then maybe just the other follow up there.
Speaker Change: Aside from the capital side of the business what about the operating cost side of the business have the has the focus the project yielded any incremental improvements there and can you help us quantify that.
Speaker Change: Yeah. It has with respect to the focused initiatives about 30% of the value of that would be created was tied to expense reductions O&M expense reductions and again, we'll be uploading those through to customers as we have various toll in rate cases in the future, but what it does is it puts an emphasis on cash and makes us more.
Speaker Change: and you can think about that in a couple different tranches.
Speaker Change: One is coming from our FOCUS initiative that we talked to you about historically, roughly $270 million or so of that savings are directly tied back to initiatives associated with our FOCUS program, so we're really pleased with respect to that. A big part of the balance is just due to really good execution on our project and our maintenance capital expenditures and reducing those costs going forward.
Speaker Change: Fisher going forward.
Speaker Change: Thank you.
Speaker Change: The next question will come from Theresa Chen with Barclays. Please go ahead.
Thank you for watching!
Speaker Change: Good morning, I wanted to touch on the Capex question, a bit more specifically related to southeast Gateway can you provide a little bit more color on the project cost on downtick, what drove that and is it related to that what is the probability.
Speaker Change: Aside from the capital side of the business, what about the operating costs side of the business? Has the FOCUS project yielded any incremental improvements there and can you help us quantify that?
Speaker Change: Yeah, it has. With respect to the FOCUS initiatives, about 30% of the value that we created was tied to expense reductions, O&M expense reductions. And again, we'll be flowing those through to customers as we have various toll and rate cases in the future. But what it does is puts an emphasis on cash and makes us more efficient going forward.
Speaker Change: <unk> commercial service nice start earlier than the mid 2020 time 2025 timeframe. Since mechanical completion is earlier can you remind us what the status is on the downstream power Gen.
Speaker Change: Yes, there's a lot there and I'll try to unpack that for you first of all with respect to the cost savings. It's just a really good project execution and you could think of about a $140 million in savings on the procurement side. So we were able to buy materials and equipment for less it was about $230 million in savings.
Thank you.
Speaker Change: The next question will come from Theresa Chin with Barclays. Please go ahead.
Speaker Change: Associated with more efficient construction and civil works activities and those two things allowed us to release additional contingency of about $130 million.
Speaker Change: Can you provide a little bit more color on the project cost downtake?
what drove that, and...
Speaker Change: is related to that. What is the probability that commercial service may start earlier than the mid-2025 timeframe since mechanical completion is earlier? Can you remind us what the status is of the downstream PowerGen assets, please?
Speaker Change: With respect to the power plants I would just say that these power plants generally remain on track and the two that we're most focused on are the meridia and Valladolid plant in both of those are tracking for Q1 2025 and service.
Speaker Change: With respect to in service I would just say that we're meeting with cfe on a consistent basis to ensure that we have alignment around the various project completion activities, which include both the favorable impact on tolls due to the lower cost as well as the potential for an accelerated project completion date and payment date.
Speaker Change: Yeah, there's a lot there, and I'll try to unpack that for you. First of all, with respect to the cost savings...
Speaker Change: It's just really good project execution, and you can think of about $140 million in savings on the procurement side, so we were able to buy materials and equipment for less. There was about $230 million in savings associated with more efficient construction and civil works activities, and those two things allowed us to release additional contingency of about $130 million.
Speaker Change: And those discussions are continuing and we'll have better line of sight on that with respect to the timing of in service and payment once we get a little further down the road with the project construction activities.
Speaker Change: Great. Thank you.
Speaker Change: As we look Q2 thousand 25, and beyond I would love to get an update on how.
Speaker Change: Your views on how you are going to thread the needle with leverage so will this be more of a.
Speaker Change: Self help organic growth our focus organic capex focused endeavor or are you contemplating additional off itself from here to complement that.
Speaker Change: Good morning, Theresa, it's Sean I'll take a stab at that one had a great. Great question I think maybe let me start just with a 2024 plan to give you a context of what the levers that we have been pulling on a deleveraging plan that will give you a sense of what 2025 and forward it looks like.
Speaker Change: And those discussions are continuing, and we'll have better line of sight on that with respect to the timing of in-service and payment once we get a little further down the road with the project construction activities.
Speaker Change: As we entered 2024 with $4 75 squarely in mind for year end, we were relying on EBITDA performance capital efficiency, and Capex and asset sales.
Speaker Change: Great, thank you. And as we look to 2025 and beyond, I would love to get an update on how
Speaker Change: what your views are on how you're going to thread the needle with leverage. So will this be more of a self-help, organic growth-focused, organic CapEx-focused endeavor, or are you contemplating additional asset sales from here to complement that?
Speaker Change: And we were guiding kind of our internal planning conservatively on EBITDA conservatively on Capex and we've targeted about $3 billion worth of asset sales for this year.
Speaker Change: What youre seeing in today's quarterly results were.
Speaker Change: We're at the high end of EBITDA couple of hundred million ahead on EBITDA $700 million ahead on Capex, that's a $1 billion and as Francois mentioned $8 billion in savings.
Sean O'donnell: Good morning, Teresa. It's Sean. I'll take a stab at that one. Great question. I think, maybe, let me start just with the 2024 plan to give you context for what the levers that we have been pulling on the leveraging plan. Then we'll give you a sense for what 2025 and forward looks like. As we enter 2024 with 4.75 squarely in mind for year-end, we were relying on EBITDA performance.
Speaker Change: It's a two for one it's almost the value of $2 billion worth of asset sales.
Speaker Change: So we have gotten into it we have gotten to our leverage target in 2024 through the lease cost or highest value retention path possible really through these capex savings that Stan talked about.
Speaker Change: So a little bit of a preview of Investor day, the $700 million, we're talking to you about today.
Capital Efficiency and CapEx and Asset Sales.
Sean O'donnell: And we were guiding kind of our internal planning conservatively on EBITDA conservatively on Capex and we've targeted about $3 billion worth of asset sales for this year.
Sean O'donnell: And, you know, we were guiding kind of our internal planning, conservatively on EBITDA, conservatively on CapEx, and we targeted about $3 billion worth of asset sales for this year.
Speaker Change: As a component of about $2 $5 billion worth of Capex savings that we have across the next couple of years of our development portfolio.
Sean O'donnell: What are you seeing in today's quarterly results were.
Speaker Change: In addition to some of the savings that are hitting EBITDA in the next couple of years. So we're going to get into the composition and the timing of all of that at Investor day, but that is to say our 25.
Sean O'donnell: We're at the high end of EBITDA couple of hundred million ahead on EBITDA $700 million ahead on Capex, that's $1 billion and as Francois mentioned $8 billion in savings.
Speaker Change: Leverage targeted in particular is going to benefit from the same trend on EBITDA and Capex as we're talking about today.
Sean O'donnell: It's a two for one it's almost the value of $2 billion worth of asset sales.
Sean O'donnell: It's a two-for-one, it's almost the value of $2 billion worth of asset sales.
Speaker Change: I will will unpack that further for you in two weeks.
Sean O'donnell: So we have gotten too we have gotten to our leverage target in 2024 through the lease cost or highest value retention path possible really through these capex savings that Stan talked about.
Sean O'donnell: So, we have gotten to our leverage target in 2024 through the least cost or highest value retention path possible, really through these CapEx savings that Stan talked about.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question will come from Maurice Choy with RBC. Please go ahead.
Speaker Change: Thanks, and good morning, everyone just wanted to come back.
Sean O'donnell: So a little bit of a preview of Investor day, the $700 million, we're talking to you about today.
Speaker Change: Dan mentioned about being target rich and not having any trouble filling up the capex plan.
Sean O'donnell: So, a little bit of a preview of Investor Day, the $700 million we're talking to you about today is a component of about $2.5 billion worth of CapEx savings that we have across the next couple of years of our development portfolio.
Sean O'donnell: As a component of about $2 $5 billion worth of Capex savings that we have across the next couple of years of our development portfolio.
Speaker Change: Just philosophically speaking like do you tend to want.
Speaker Change: Want to high grade some of these or.
Speaker Change: So that $6 billion to $7 billion or would you prefer to find alternatives.
Sean O'donnell: In addition to some of the savings that are hitting EBITDA in the next couple of years. So we're going to get into the composition and the timing of all of that at Investor day, but that is to say our 25.
Sean O'donnell: in addition to some of the savings that are hitting EBITDA in the next couple of years. So we're going to get into the composition and the timing of all of that at Investor Day, but that is to say our 25.
Speaker Change: It could be funding like feels like been JV partners to build more and keep it within 67 net.
Speaker Change: But with that specifically.
Sean O'donnell: Leverage targeted in particular is going to benefit from the same trend on EBITDA and Capex as we're talking about today, but will also unpack that further for you in two weeks.
Sean O'donnell: Leverage Target in particular is going to benefit from the same trend on EBITDA and CAPEX as we're talking about today. But we'll unpack that further for you in two weeks.
Speaker Change: Are you, bringing in partners first and then build or would you build and then of course funding solution leader.
Speaker Change: Maybe I'll take a crack at that one Maurice is Francois.
Sean O'donnell: Okay.
Speaker Change: Thank you.
Thank you.
Speaker Change: The next question will come from Maurice Choy with RBC. Please go ahead.
Francois: Yeah, absolutely we've talked about the benefit of having partners like Gee IP on our.
Speaker Change: The next question will come from Maurice Choi with RBC. Please go ahead.
Maurice Choi: Thanks, and good morning, everyone. So let me come back to queue.
Speaker Change: Our teco system, allowing us on a gross basis to continue to allocate the full amount of capital that the system needs in order to maintain its incumbency position while at the same time, allowing us to manage to our $6 billion to $7 billion capital spend on a net basis to the extent we.
Speaker Change: Thanks and good morning everyone. I just want to come back to a comment Dan mentioned about being target-rich and not having any troubles filling up the CAPEX plan. Just philosophically speaking, do you tend to want to high-grade some of these and max out at $6-7 billion, or would you prefer to find alternative non-equity funding like sales or even JV Partners?
Speaker Change: Dan mentioned about being target rich and not having any trouble filling up the capex plan.
Speaker Change: Just philosophically speaking like deep 10 two.
Speaker Change: I want to high grade some of these or.
Speaker Change: So that $6 billion to $7 billion. So would you prefer to find alternatives.
Speaker Change: It could be funding like <unk>.
Speaker Change: We see opportunities to bring in additional partners.
Speaker Change: <unk> been JV partners to build more and keep it within six to seven net.
Speaker Change: Or to rotate capital from mature assets down the road.
Speaker Change: to build more and keep it within 67 net. But with that, specifically, would you bring in a partner first and then build, or would you build and then look for a funding solution later?
Speaker Change: But with that specifically.
Speaker Change: In order to improve.
Speaker Change: Are you, bringing in partners first and then build out would you build and then funding solution leader.
Speaker Change: Improve our EBITDA growth and improve our return on invested capital on our existing assets, we will absolutely contemplate those for the time being however, we are resolute on the $6 billion to $7 billion. We think it's important for us to continue to organically delever over time and build some cushion below that four.
Francois Poirier: Maybe I'll take a crack at that one Maurice is Francois.
Sean O'donnell: Maybe I'll take a crack at that one, Maurice. It's Francois.
Francois Poirier: Yeah, absolutely we've talked about the benefit of having partners like Gi P on our.
Sean O'donnell: Yeah, absolutely, we've talked about the benefit of having partners like GIP on our TECO system, allowing us on a gross basis to continue to allocate the full amount of capital that the system needs in order to maintain its incumbency position.
Sean O'donnell: Our teco system, allowing us on a gross basis to continue to allocate the full amount of capital that the system needs in order to maintain its incumbency position while at the same time, allowing us to manage to our $6 billion to $7 billion capital spend on a net basis to the extent we.
Speaker Change: Seven five metric and because we see the spread between our earned return in our cost of capital widening over the next couple of years, we really are very confident in our ability to continue to grow EBITDA grow cash flow per share and therefore grow the dividend in a commensurate manner.
Sean O'donnell: while at the same time allowing us to manage to our six to seven billion dollar capital spend on a net basis
Sean O'donnell: We see opportunities to bring in additional partners.
Sean O'donnell: To the extent we see opportunities to bring in additional partners
Speaker Change: Thanks, and just to finish up on the question on southeast Gateway.
Sean O'donnell: Or to rotate capital from mature assets down the road.
Sean O'donnell: or to rotate capital from mature assets down the road in order to improve our EBITDA growth and improve our return on invested capital on our existing assets, we will absolutely contemplate those.
Speaker Change: You mentioned that there remains one four kilometers so shallow water construction is that the only mature construction, what's kind of left or are there. Other what kind of is that you're watching that might derail your cost of timing and in particular given that you have savings from this.
Sean O'donnell: In order to improve.
Sean O'donnell: Improve our EBITDA growth and improve our return on invested capital on our existing assets, we will absolutely contemplate those for the time being however, we are resolute on the $6 billion to $7 billion. We think it's important for us to continue to organically delever over time and build some cushion below that four.
Sean O'donnell: For the time being, however, we are resolute on the six to seven billion dollars.
Speaker Change: The overall cost structure.
Sean O'donnell: We think it's important for us to continue to organically delever over time and build some cushion below that 4.75.
Speaker Change: I assume that there's no change to the EBITDA and there's no sharing on the walls here.
Sean O'donnell: 75 metric and because we see the spread between our earned return in our cost of capital widening over the next couple of years, we really are very confident in our ability to continue to grow EBITDA grow cash flow per share and therefore grow the dividend in a commensurate manner.
Speaker Change: With respect to the work the 1400 meters. We have left for the most part is the last of the major work after that we're really going to turn our attention to pre commissioning activities and then commissioning activities and an in service date.
Sean O'donnell: metric, and because we see the spread between our earned return and our cost of capital widening over the next couple of years, we really are very confident in our ability to continue to grow EBITDA, grow cash flow per share, and therefore grow the dividend in a commensurate manner.
Speaker Change: No later than mid 2025, there is cost sharing and the agreement that we have with Cfe and we will be adjusting the tolls accordingly, once we know what the final capital expenditures are and more as youll see in our forecast and our outlook for EBITDA for 2025 and beyond we will have adjusted for the revised capital spend.
Tien Tsin: Thanks, Tien tsin.
Speaker Change: Finish up on a question on southeast Gateway.
Speaker Change: You mentioned that there remains one four kilometers so shallow water construction is that the only mature construction was kind of left or are there. Other what kind of is that you're watching that might derail your cost or timing.
Speaker Change: We thought that was.
Sean O'donnell: In particular, given that you have savings from this.
Speaker Change: The cost sharing basically on a 50 50 basis when Cfe only owns 13% currently of the common equity was a provided us with good downside protection, we have a happy customer we've.
Sean O'donnell: The overall cost structure.
Speaker Change: I assume that there is no change to your expected EBITDA and just shared on the walls here.
Sean O'donnell: With respect to the work the 1400 meters. We have left for the most part is the last of the major work after that we're really going to turn our attention to pre commissioning activities and then commissioning activities and an in service date.
Speaker Change: <unk> reduced our capital spend by $600 million. So I think it's a happy day for everybody.
Speaker Change: Understood. Thank you very much.
Speaker Change: The next question will come from Keith Stanley with Wolfe Research. Please go ahead.
Sean O'donnell: No later than mid 2025, there is cost sharing and the agreement that we have with Cfe and we will be adjusting the tolls accordingly, once we know what the final capital expenditures are and more as youll see in our forecast and our outlook for EBITDA for 2025 and beyond we will have adjusted for the revised capital spend.
Keith Stanley: Hi, good morning.
Speaker Change: I wanted to ask on the datacenter links opportunities or are you thinking at all about vertical integration and potentially even getting into behind the meter gas fired power plants I know the company used to build gas power plants.
Speaker Change: We thought that was.
Speaker Change: The cost sharing basically on a 50 50 basis when Cfe only owns 13% currently of the common equity was it provided.
Speaker Change: And then Relatedly how are you thinking about the EPA 111 D will eventually.
Speaker Change: Eventually require and Ccs for new gas plants.
Speaker Change: Provided us with good downside protection.
Speaker Change: That's impacting discussions with customers.
Speaker Change: We have a happy customer we've.
Speaker Change: Well I'll take I'll take the first part of your question around gas fired generation. So are we.
Speaker Change: <unk> reduced our capital spend by $600 million. So I think it's a happy day for everybody.
Speaker Change: Understood. Thank you very much.
Speaker Change: We are not as part as our power and energy solutions strategy.
Speaker Change: The next question will come from Keith Stanley with Wolfe Research. Please go ahead.
Speaker Change: Looking to build stand alone gas fired power generation are we clearly see benefits across our existing portfolio.
Speaker Change: Hi, good morning.
Speaker Change: I wanted to ask on datacenter links opportunities or are you thinking at all about vertical integration and potentially even getting into behind the meter gas fired power plants I know the company used to build gas power plants, and then Relatedly. How are you thinking about the EPA 111, do you will.
Speaker Change: Two increased electricity demand as a result of of that tailwind in the sector.
Speaker Change: It doesn't necessarily preclude us looking at gas fired generation to the extent it was supportive of our investment we were looking to make on our gas transmission side of the business. However, it would have to compete with capital across the portfolio. So we.
Sean O'donnell: <unk>.
Sean O'donnell: Essentially requiring ccs for new gas plants.
Sean O'donnell: That's impacting discussions with customers.
Speaker Change: So I'll take I'll take the first part of your question around gas fired generation. So.
Speaker Change: We'd be looking at.
Speaker Change: We would be looking at those projects only to the extent we saw returns that were competitive with the other opportunities that we have in the portfolio.
Sean O'donnell: We are not as part as our power and energy solutions strategy.
Sean O'donnell: Looking to Bell stand alone gas fired power generation, we clearly see benefits across our existing portfolio.
Speaker Change: And with respect to keep to the second part of your question around the EPA rule look.
Speaker Change: Obviously, we comply with regulations at all times.
Sean O'donnell: Two increased electricity demand as a result of of that tailwind in the sector and it doesn't necessarily preclude us looking at gas fired generation to the extent it was supportive of our investment we were looking to make on <unk>.
Speaker Change: That rule, if applied would be applied uniformly across the industry, meaning that every.
Speaker Change: Every form of or every app developer and operator of gas fired generation would have to come.
Speaker Change: Comply with it we'll see what policy changes come from a new administration in the United States.
Sean O'donnell: Our gas transmission side of the business. However, it would have to compete with capital across the portfolio. So we would be looking them, we would be looking at those projects only to the extent we saw returns that were competitive with the other opportunities that we have in the portfolio.
Speaker Change: And.
Speaker Change: As I said.
Speaker Change: When it comes to natural gas for.
Speaker Change: For power generation.
Speaker Change: The data centers have.
Speaker Change: Hi, ambitions around developing their projects.
Speaker Change: It's not only economics, it's time to in service.
Sean O'donnell: And with respect to keep to the second part of your question around the EPA rule look.
Speaker Change: And we feel that natural gas fired power generation is going to be the broad solution to meet their electricity requirements. There are only so many nuclear plants that you can de mothball.
Sean O'donnell: Obviously, we comply with regulations at all times.
Sean O'donnell: That rule, if applied would be applied uniformly across the industry, meaning that every.
Speaker Change: And they need the reliability of that natural gas provides so we're not concerned about regulation materially impairing the competitiveness of gas fired generation going forward.
Sean O'donnell: Every form of or every app developer and operator of gas fired generation would have to come.
Sean O'donnell: Comply with it we'll see what policy changes come from a new administration in the United States.
Speaker Change: Thank you for that.
Speaker Change: Second question, just curious if theres any update on discussions with stakeholders for a sell down of N V. T. L. If you're optimistic on that and potential timeline.
Sean O'donnell: And.
Sean O'donnell: As I said.
Sean O'donnell: When it comes to natural gas.
Sean O'donnell: For power generation the data centers have.
Speaker Change: Okay.
Speaker Change: So.
Sean O'donnell: Hi, ambitions around developing their projects.
Speaker Change: Two parts to that question Keith I'll answer the first part and then I'll ask Sean to.
Sean O'donnell: Not only economics, it's time to in service and we feel that natural gas fired power generation is going to be the broad solution to meet their electricity requirements. There are only so many nuclear plants that you can de mothball.
Speaker Change: To pick up the second part and I want to underscore that we do continue to work with our indigenous partners to find a pathway forward.
Speaker Change: We think indigenous economic participation is really important.
Sean O'donnell: And they need the reliability that natural gas provides so we're not concerned about regulation materially impairing the competitiveness of gas fired generation going forward.
Speaker Change: But I'm going to limit my comments on these ongoing discussions out of respect for the 72 communities and all of those involved in the process. We will of course provide material updates as they come available, but there is a question behind that one which as you know our need and reliance on that transaction for deleveraging and I'll pass.
Sean O'donnell:
Speaker Change: Thank you for that.
Speaker Change: Second question, just curious if theres any update on discussions with stakeholders for a sell down of N. GT L. If you're optimistic on that and potential timeline.
Speaker Change: That over to Sean yes, Thanks, Terrence and good morning, Keith.
Speaker Change: Look generally you know just the question about our asset sales required for our $4 75 target. The answer there broadly speaking is no and that is good news right, our EBITDA outperformance and the Capex savings not only the $700 million today, but the $2 5 billion that we'll talk about in a couple of weeks takes.
Sean O'donnell: Okay.
Speaker Change: So yes, there is.
Sean O'donnell: Kind of two parts to that question Keith.
Sean O'donnell: I'll answer the first part and then I'll ask Sean to.
Sean O'donnell: To pick up the second part and I want to underscore that we do continue to work with our indigenous partners to find a pathway forward.
Sean O'donnell: We think indigenous economic participation is really important.
Speaker Change: It takes it takes the pressure off really removes the pressure of selling assets and as we're going into this organic deleveraging phase. So we are we are pleased to to not have to look specifically at asset sales solely for the purpose of hitting our leverage targets going forward.
Sean O'donnell: But I'm going to limit my comments on these ongoing discussions out of respect for the 72 communities and all of those involved in the process. We will of course provide material updates as they come available, but there is a question behind that one which is.
Speaker Change: Thank you.
Sean O'donnell: Our need and reliance on that transaction for deleveraging and I'll pass that over to Sean Yes. Thanks first of all good morning Keith.
Speaker Change: The next question will come from Manav Gupta with UBS. Please go ahead.
Manav Gupta: Good morning, Thanks for all the positive updates on the southeast Keith I just wanted to talk about the other growth projects, which are also coming on in the next 12 to 18 months, you know and then Colombia again dose expansion or NGL system phase two can you give us an update on the progress you are making on the other.
Sean O'donnell: Look generally just the question about our asset sales required for our $4 75 target. The answer there broadly speaking is no and that is good news right, our EBITDA outperformance and the Capex savings not only the $700 million today, but the $2 5 billion that we'll talk about in a couple of weeks takes.
Speaker Change: Key growth projects expected to come online in the next 12 to 18 months.
Sean O'donnell: It takes it takes the pressure off really removes the pressure of selling assets and as we're going into this organic deleveraging phase. So we are we are pleased to to not have to look specifically at asset sales solely for the purpose of hitting our leverage targets going forward.
Speaker Change: Yeah over the next 12 months or so we have about $8 $5 billion of capital coming into service.
Manav Gupta: Largely led by STP, which as you heard is trending very positively.
Manav Gupta: We have two big projects in the U S. Both of which are trending on time and on budget. So very much a good news story overall.
Speaker Change: Thank you.
Speaker Change: The next question will come from Manav Gupta with UBS. Please go ahead.
Speaker Change: Well. Thank you and then how should we think about expansion plans and Bruce and how does that fit into your overall portfolio.
Manav Gupta: Good morning, Thanks for all the positive updates on the southeast Keith I just wanted to talk about other growth projects, which is also coming on in the next 12 to 18 months.
Speaker Change: So for Bruce power, we continue to progress our refurbishment program and it is going exceptionally well and as you likely are aware that our unit three MCR outage began in Q1 of 2023 with expected.
Manav Gupta: But then it's Colombia again does the expansion our NGL system phase two can you give us an update on the progress you are making on the other.
Manav Gupta: Key growth projects expected to come online in the next 12 to 18 months.
Speaker Change: Yeah over the next 12 months or so we have about $8 $5 billion of capital coming into service.
Manav Gupta: <unk> in Q2 of 2026 cost and schedule are tracking to plan with the field Channel Assembly removal of series complete and the inspection theory is well underway.
Manav Gupta: Largely led by STP, which as you heard is trending very positively.
Manav Gupta: We have two big projects in the U S. Both of which are trending on time and on budget. So very much a good news story overall.
Manav Gupta: And the next MCR.
Manav Gupta: Unit four.
Manav Gupta: We received the ICL approval to proceed in February and there is a refurbishment outage Stargate planned for Q1 of 2025. So all of that preparation work is well underway and we are now transitioning them to get ready for a construction start early next year.
Speaker Change: And then how should we think about expansion plans and Bruce and how does that fit into your overall portfolio.
Manav Gupta: So for Bruce power, we continue to progress the refurbishment program and it is going exceptionally well and as you likely are aware that our unit three MCR outage began in Q1 of 2023 with expected.
Manav Gupta: And so we continue to be very pleased with the capital that we continue to invest in Bruce power. It allows us an ongoing opportunity as part of our $6 billion to $7 billion capital program of about $1 billion per year at very good returns through to the.
Manav Gupta: Completion in Q2 of 2026 cost and schedule are tracking to plan with the field Channel Assembly removal of series complete and the inspections theory is well underway.
Manav Gupta: End of the decade.
Speaker Change: Thank you so much I don't need to learn.
Manav Gupta: And the next MCR.
Speaker Change: The next question will come from Olivia Halferty with Goldman Sachs. Please go ahead.
Speaker Change: Hi, Good morning, Thank you for taking our questions I wanted to go back to the Capex budget for next year onward, how much of that $6 billion to $7 billion.
Speaker Change: Capex budget is already committed over the next two years and on the other side how much is uncommitted and therefore open to add natural gas demand growth related projects.
Speaker Change: Thanks for the question Olivia.
Speaker Change: Again, I think because of the strength of our franchise and the visibility we have in terms of the development projects going forward.
Speaker Change: The lion's share of our capital for 2025 is committed.
Speaker Change: We've got a little bit of room, and we'll show you more data on this at.
Speaker Change: At the coming Investor day on the 19th of November we got a little bit of room in some of the other years, but we're already looking to fill them and sanction projects with expanded in service dates in the latter part of the decade again.
Speaker Change: Were I think a little bit unique in our ability to.
Speaker Change: Provide you with a fairly high degree of visibility on where the capital is going to be allocated and we know the return profiles are right to the end of the decade.
Speaker Change: Got it thank you.
Speaker Change: And one more following the spin off of the liquids business.
Speaker Change: As you near completion of southeast Gateway, how are you thinking of balancing the broader opportunity set in Mexico from here versus managing total business exposure in the region.
Speaker Change: So I think perhaps the one.
Speaker Change: The exception to the divestiture.
Speaker Change: Or deleveraging being organic and Divesture program being done would be in Mexico, but it's not really any more for deleveraging purposes.
Speaker Change: This would be about managing our customer concentration risk in our Mexico exposure overall.
Speaker Change: We are still working on it.
Speaker Change: We do have in our plans in the later latter part of 'twenty five or in the first half of 'twenty six to be looking at are either bringing in a partner or some other way to reduce our exposure.
Speaker Change: That's good news because we see additional growth opportunities in country. Once the backbone of the infrastructure is built.
Speaker Change: Adding fish fingers and toes to that infrastructure is a very attractive risk adjusted returns, but in order for us to be contemplating any additional capital we're going to have to reduce our exposure.
Speaker Change: Pro forma for southeast Gateway going into service will be at about 15% of consolidated EBITDA, we'd like to see that come down.
Speaker Change: We believe that Derisking and putting into service all of the cash flow streams, we have in Mexico before doing that is really the way to maximize shareholder value.
Speaker Change: Okay, great. Thanks for the time.
Speaker Change: The next question will come from Robert <unk> with CIBC. Please go ahead.
Speaker Change: Hey, good morning, you've answered most of my questions already so maybe just a couple of quick project updates first of all on the coastal gas link it sounds like that first phase will be in service.
Speaker Change: Before too long.
Speaker Change: Do you have any sense of where our where we are with the phase two.
Speaker Change: Yes. This is Stan really no new updates with respect to phase two since we last spoke we're continuing to do early development work as requested by LNG C and assess the phase II expansion opportunities and obviously the final investment decision rests with them.
Speaker Change: And a similar question for the Ontario pumped storage are there any updates on the progress there getting the required commercial framework.
Speaker Change: Yeah, I think it's an.
Speaker Change: And we continue to remain very excited about the project we continue to see a.
Speaker Change: <unk> economic benefit for the province.
Speaker Change: Our partnership with the soggy and edge away nation, and the benefits that are the long duration storage nature of the project can bring to the provinces nuclear ambition and there was a new minister of energy and electrification appointed in Ontario in June and Theres been a renewed focus on moving the pre.
Speaker Change: Jack to the next phase, which is simply some development work that will allow us to narrow the project capital cost estimate. So we are working on a new agreement.
Speaker Change: That would take the form likely of a cost recovery agreement. So that we will be in a position to be able to advance the project to that next age so that.
Speaker Change: The discussions continue and and we hope to be able to come to some conclusion from a commercial perspective that allows us to.
Speaker Change: To continue that project.
Speaker Change: Okay. Thank you.
Speaker Change: The next question will come from Ben Pham with BMO. Please go ahead.
Ben Pham: Hi, Thanks, good morning.
Ben Pham: Maybe start off with Bruce power and the high availability during the quarter I think it's a record from what I can see historically.
Speaker Change: Can you talk about what was driving that.
Ben Pham: Or is that something also externally driven and.
Speaker Change: And then can you talk about the availability of units on a post MCR basis.
Speaker Change: Yes, thanks very much for the question. So Bruce power did have a record availability in the quarter. It was not an externally driven a factor. It was because there were no planned outages in the quarter Forbes.
Speaker Change: <unk> power and so that just allowed them much higher availabilities for the units.
Speaker Change: And we only have one unit I'm Dr. NCR right now and so that's how we were able to achieve.
Speaker Change: To achieve the output that we did for the quarter heading into the fourth quarter. It will be similar because again, we will only have one unit under NCR and and we will we don't have any planned outages for the quarter. However, it will.
Speaker Change: Not continue into 2025, we expect to go back to having that availability factor around low ninety's as has been the case and that's just because we will continue to have planned outages them as we have historically.
Speaker Change: Okay got it on the low nines are still pretty good.
Speaker Change: Neither.
Speaker Change: Question on EBITDA growth guidance, maybe thinking about through the end of the decade, if you're hypothetically spending $6 billion to $7 billion self funded returns are still pretty good.
Speaker Change: What do you expect in terms of EBITDA growth on a CAGR basis through the decade.
Ben Pham: I think what we'd like to do Ben.
Ben Pham: With great respect for the question is to give you insights along with a whole bunch of information to support the credibility of that.
Ben Pham: Range at our Investor day in a couple of weeks. So if I if I could ask you to be patient until then we will we'll be able to answer that question in a very fulsome manner.
Speaker Change: Okay no problem okay. Thank you.
Ben Pham: Thank you.
Speaker Change: The next question will come from Jeremy Tonet with J P. Morgan. Please go ahead.
Jeremy Tonet: Hi, good morning.
Speaker Change: Good morning.
Speaker Change: I just wanted to come back to southeast Gateway, if I could a little bit of different angle here, just wondering all everything you're saying here it sounds like mechanical completion is imminent.
Ben Pham: In servicing you know all the commissioning very quick as well just wondering if it does region surface. We just had the potential to serve other customers in that market. If it's available before the agreed start date and just specifically as it relates to leverage how much deleveraging does this project concern.
Ben Pham: <unk> deliver.
Speaker Change: Yeah, Jeremy I'll take the first part of that we still have a little bit of work to do with respect to pre commissioning and commissioning activities, we should get to mechanical completion sometime around year end or slightly thereafter, and again, where we're working towards a contractual in service date in mid year 2025, and if we can improve upon that we will have with respect to.
Ben Pham: Two serving markets against Cfe was our customer and this gas is destined to serve power generation facilities in the Yucatan Peninsula.
Speaker Change: Maybe Jeremy yes.
Speaker Change: Yes, sorry, just Jeremy Sean Thanks for the question look we're going to we're going to give you all sorts of kind of modeling metrics for this year in the next two weeks, but look round numbers, you know full year basis, what SGP is going to deliver us $750 million kind of CAD EBITDA. So you can kind of just on a full year basis, depending on how you model.
Ben Pham: Kind of a debt numbers for us it's a it'll be a point kind of 0.05 to plus or minus one, but we'll we'll have all of that model detail for you at Investor Day.
Speaker Change: Got it interesting and fingers and toes in Mexico sounds like data center opportunities there essentially but.
Speaker Change: I want to shift a little bit I think you know the appetite for nuclear and Ontario kind of stands out versus other areas I think and we see the Bruce who studied their you've described yourself as the best intersection of electron molecules here could you walk us through.
Ben Pham: How the portfolio enables you to capitalize on the current environment, specifically the nuclear side granted it could be a little bit later dated but you know what do you see as potential there on your site.
Speaker Change: Why don't I I'll start with Bruce power, specifically, and so RF power and energy solutions I'm trying to do with respect to nuclear is really focused on our investment in Bruce power and that's because we have tried to incredibly strong a power purchase agreement that go.
Speaker Change: Was all the way out to 'twenty 64, and allows us to continue to invest meaningful capital through that agreement with them very good returns and so.
Speaker Change: We're committed to continuing the refurbishment program for Bruce see as I think we've shared I. It's still in the very early stages with a site impact assessment being gone, but it demonstrates that we see there's the potential for even further commitment to.
Speaker Change: Nuclear further out.
Speaker Change: But it gives us ample opportunity to really maximize the value of our existing investments to deploy capital at really strong returns.
Jeremy Tonet: And Jeremy.
Speaker Change: As to you know more broadly our interest.
Speaker Change: The secret sauce in nuclear is.
Speaker Change: In terms of growth potential is you have a good site.
Speaker Change: Do you have an operating license because those licenses are very expensive and time consuming to achieve and then you have a management team that has a strong track record of operational and project execution excellence.
Speaker Change: We believe that our team at Bruce has demonstrated that amply with them, bringing in a unit six MCR in the middle of Covid on budget and a month early so with those three factors being critical to us allocating capital into nuclear we don't really see the need for us to expand.
Speaker Change: Beyond the Bruce power site.
Speaker Change: We think there's ample opportunity for us to.
Speaker Change: Invest capital as part of our $6 billion to $7 billion going into really into the 'twenty thirties.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Got it I'll leave it there thank you.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen. This concludes the question and answer session. If there are any further questions. Please contact investor relations at TC Energy I will now like to turn the call back over to Mr. Gavin Wylie for any closing remarks. Please go ahead Sir.
Gavin Wylie: Well thank you.
Gavin Wylie: For for your interest in TC energy and joining US. This morning as you heard from Francois will be holding our 2020 for Investor Day on November 19th and we look forward to seeing you in person and providing you with a more detailed update at that time. Thanks again.
Speaker Change: This concludes today's conference call you May now disconnect. Your lines. Thank you for your participation and have a pleasant day.