Q4 2024 TC Energy Corp Earnings Call
Thank you for standing by this is the conference operator, welcome to the TC Energy fourth quarter 2024 results conference call.
All participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions to join the question queue. 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.
Speaker Change: I'd now like to turn the conference over to Gavin Wylie, Vice President Investor Relations. Please go ahead.
Gavin Wylie: Thank you very much and good morning, I'd like to welcome you to TC Energy's 2020 for fourth quarter Conference call. Joining me are first of all for you.
Speaker Change: President and Chief Executive Officer, Sean Odonnell, Executive Vice President and Chief Financial Officer, along with other members of our senior leadership team.
Gavin Wylie: Francois and Sean will begin today with some comments on our financial results and operational highlights.
Gavin Wylie: 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 will 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.
Gavin Wylie: I'll remind you today that remarks 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 regulator, and with the U S Securities Exchange Commission.
Gavin Wylie: Finally during the presentation, we will refer to non-GAAP measures provide additional information on TC Energy's operational and financial performance. However, these measures may not be comparable to similar measures presented by other entities.
Gavin Wylie: A reconciliation of various GAAP and non-GAAP measures is contained in the appendix of this presentation with that I'll turn it over to Francois.
Francois: Thanks, Kevin and good morning, everyone.
Francois: 2024, it's been a year of significant achievement and milestone for TC energy and we're continuing to deliver on our strategic priorities.
Francois: We're proud to report the best safety performance for our company in the past five years.
Francois: As I've mentioned previously we firmly believe that outstanding safety practices lead to superior operational performance, which of course drives strong financial results.
Francois: It went 2024, we increased comparable EBITDA from continuing operations by 6% compared to 2023.
Francois: We successfully completed the spin off of our liquids business and the declaration of commercial in service for coastal gas link.
Francois: We successfully placed $7 billion of assets into service, while reducing our net capital expenditures by 10%.
Francois: And have identified an additional $1.3 billion of capital reductions to be realized in 2026 and 2027.
Francois: With strong EBITDA performance lower capital expenditures and completed asset sales, we have significantly strengthened our balance sheet, which Sean will address further.
Francois: Finally, we're making substantial progress on our major projects, including Bruce Power's unit three M E R and of course, South East Gateway that remain on cost and schedule.
Francois: Our public private partnership with Cfe on Southeast Gateway has been a huge success delivering the project, 13% below our original budget by leveraging the strengths of both the C. F E N T C energy.
Francois: On January 20th we completed the final Golden Wells and reached mechanical completion.
Speaker Change: Monumental achievement for both Mexico and T C.
Speaker Change: In mid January we met with the Secretary of energy and the Cfe and all parties continued to be aligned and finalizing the remaining project completion activities in order to achieve commercial in service of southeast Gateway on May 1st.
Speaker Change: At a macro level President Shine Baum recently unveiled her planned Mexico 2030.
Speaker Change: This plan targets moving Mexico's economy from 12th largest overall the 10th spot in six years and aims to attract over U S 270 billion in investments in part through public private partnerships such as ours.
Speaker Change: We believe there is strong alignment between the priorities of the government and Cfe and the role of natural gas deliveries Tc energy enables.
Speaker Change: Our partnership with the Cfe will remain a critical part of achieving the goals outlined in planned Mexico.
Speaker Change: I want to thank our dedicated teams for their tireless efforts on the project and reiterate that this marks a material inflection point for Tc energy.
Speaker Change: Underpinned by wide scale electrification natural gas and electricity are projected to drive 75% of the growth and final energy consumption between now and 'twenty 35.
Speaker Change: This growth includes a threefold increase in LNG exports strong growth in power generation, driven by coal retirements and data center demand.
Speaker Change: L D C reliability needs and a material increase in Ontario's demand for additional nuclear generation capacity that all aligns with our north American footprint.
Speaker Change: Reflecting this opportunity, we recently announced five new growth projects with build multiples in the five to seven times range.
Speaker Change: The Pulaski in Maysville projects represent a combined investment of over U S $700 million on our Columbia Gulf system, and will facilitate coal to gas conversions at two existing power plants.
Speaker Change: The U S 300 million Southeast, Virginia Energy storage project is an LNG, peaking facility that'll serve an L. D CS growing winter peak day load.
At Bruce power, we are progressing the stage three a project 2030, which will provide incremental capacity of 90 megawatts.
Speaker Change: When complete project 30 will add approximately 700 megawatts of incremental capacity.
Speaker Change: So we expect total Bruce output to reach over 7000 megawatts post M C R and project 2030.
Speaker Change: Additionally on January 31, we submitted to the Ontario, ISO the final basis of estimate for Bruce Power's latest nuclear project the unit five major component replacement.
Speaker Change: The refurbishment is expected to extend units fives operational life by over 35 years.
Speaker Change: Let's take a closer look at Bruce power, and our power and energy solutions business in Ontario.
Speaker Change: The Ontario, ISO projects and approximately 69000 megawatt shortfall in total installed capacity by year 2050, driven by industrial expansion data center developments and population growth.
Speaker Change: Nuclear power and storage will be essential components to meeting Ontario's demand.
Speaker Change: We are actively involved in several key projects, including not only Bruce Power's M. C. R program, but potential future expansion at Bruce C and the Ontario pumped storage project.
Speaker Change: In January we announced that TC energy and the Soggy Ojibwe nation will begin pre development work on the Ontario pumped storage project supported by the Ontario government's investment of up to $285 million to develop a detailed cost estimate and environmental assessments to further assess it.
Speaker Change: Its feasibility.
Speaker Change: On the next slide this chart illustrates our growth visibility through the end of the decade.
And we will continue to add to this backlog.
Speaker Change: Our capacity to sanction incremental projects through the end of the decade is represented by the white space between our net capex limit of $6 billion to $7 billion and the colored bars.
Speaker Change: Collectively this totals approximately $8 billion between 2026 and 2030.
Speaker Change: Given the backlog of development projects, we are pursuing we anticipate filling the majority of this remaining project capacity by the end of 'twenty 'twenty six.
Speaker Change: With lower risk projects that can deliver attractive build multiples of five to seven times.
Speaker Change: Looking at 2020 six specifically.
Speaker Change: We will aim to fill that spare capacity through a combination of small projects that have short cycled to cash flow.
Speaker Change: And we are evaluating bringing forward capital expenditures from 2027, and 2028 to create additional capacity for new growth projects in those years.
Speaker Change: We will continue to assess projects and are pending approval bucket represented by the gray bars to ensure we have the flexibility.
Speaker Change: For capital to compete for higher returning projects.
Speaker Change: Our goal is to create significant value by maximizing the spread between our earned returns in our cost of capital.
Speaker Change: Now a word on tariffs.
Speaker Change: We continue to assess the ongoing trade negotiations between the U S, Canada and Mexico.
Speaker Change: There is significant energy flow between three countries, making our energy markets highly interdependent.
Speaker Change: We believe that 30 day pause on potential tariffs will support increased engagement with north America's leaders in order to reach an agreement that will benefit consumers across the continent.
Speaker Change: Given that 97% of our comparable EBITDA is under regulated cost of service frameworks are take or pay contracts, we do not anticipate any material impact on our financial performance.
Speaker Change: Our regulated Canadian natural gas pipelines business, which transports gas to be exported to the U S. By our shippers is protected against higher costs or loss of volumes.
Speaker Change: And our Mexico natural gas pipelines business, primarily receives gas from the southern U S for delivery in Mexico.
Speaker Change: And our contracts are in U S dollars and based on long term take or pay agreements.
Speaker Change: In our power and energy solutions business Bruce power is the most significant contributor and over 90% of its supply chain is based in Canada.
Speaker Change: Now, we recognize that prolonged tariffs could impact capital allocation decisions. However, our diverse portfolio across three jurisdictions enables us to continue allocating capital to markets with sustained energy demand.
Speaker Change: We will continue to work with our customers across all three jurisdictions to ensure safe reliable and competitive service.
Sean: And now I'll turn the call over to Sean.
Sean: Thank you Francois and good morning, everybody.
Sean: It's important to start this morning by recognizing that our team's outstanding safety and operational performance play a critical role in T sees continued strong financial results.
Sean: On the left table, we highlight several operational and financial highlights from the quarter.
Sean: Most notably our natural gas assets in each country set new delivery records from last November through February of this year.
Sean: Bruce power achieved exceptional performance with 99% availability, which drove a 28% increase in quarterly EBITDA growth for our power and energy solutions business unit.
Sean: You may recall the unit six concluded its MCR in 2023 and achieved availability of over 99% throughout calendar year 'twenty four.
Sean: That's an availability trend that we hope to see is every unit concludes its MCR program over the rest of the decade.
Sean: Overall, it is a remarkable accomplishment for T C to have each of our business units to deliver exceptional safety performance, while simultaneously setting new operational and annual EBITDA records from continuing operations.
Sean: Moving to the EBITDA bridge on the right I'll spend a moment on some of the more notable items.
Sean: Canada gas is the largest variance due to the $200 million incentive payment to coastal gas link and mechanical completion in the fourth quarter of 2023 that was not repeated in 'twenty four.
Sean: In Mexico, we posted gains primarily related to the weakening of the peso, where our revenues are paid in U S dollars.
And finally, our power and energy solutions team realized very strong results, primarily from Bruce Power's, 14% improvement in availability year over year.
Turning to page 13, we summarize the components of our comparable earnings of 1.1 billion, which were 8% lower than the fourth quarter of 2023.
Sean: Interest expense was higher in the quarter, primarily due to lower capitalized interest as assets were placed into service.
Sean: Increased levels of short term borrowing.
Sean: One time charges related to the spin and the timing of our liability management program.
Sean: Higher E F E. D. C was driven by our southeast Gateway project that is expected to be placed into service. This may which was partially offset by higher NCI deductions.
Sean: On the FX front, the EBITDA gains in Mexico are partially offset by losses in our corporate risk management program, where we hedge our Mexican net income from peso volatility.
Sean: So to conclude the 'twenty 'twenty four financial summary, TC delivered solid performance in the fourth quarter that was modestly ahead of our overall plan and contributed to another record year of comparable EBITDA from continuing operations, which grew 6% for the year.
Sean: This chart reflects how our record EBITDA from continuing operations of over $10 billion. In 2024 compares to the EBITDA outlook, we provided at Investor Day in November.
Sean: Our base case is to deliver 2025 comparable EBITDA of 10, 7% to $10 9 billion.
Sean: Which represents a 7% to 9% increase year over year.
Looking out to 2020 seven we projected target of 11, 7% to $11 9 billion.
Sean: Which implies a 5% to 7% three year growth rate.
Sean: It is important to note that our base case outlook uses an average U S to Canadian dollar exchange rate of one spot three five which is lower than rates, we're seeing today.
Sean: To help investors understand the potential upside to EBITDA from exchange rates. The rule of thumb, we provide on the bottom right is that every penny increase in USD CAD roughly translates into $45 million of incremental EBITDA.
Sean: As an example, if we pick an exchange rate of 1.43, that's eight cents above plan and would result in 2025, EBITDA being approximately $350 million higher than our base case outlook.
Sean: It's important to reiterate that we systematically hedge our U S. Dollar net income to insulate our comparable earnings from FX volatility.
Sean: Given our hedge strategy, we do not expect a material impact related to FX on our 2025 comparable earnings.
Sean: Longer term and on an unhedged basis, a penny change in USD CAD rates corresponds to roughly a one penny change in comparable EPS.
Sean: Moving to the right side of the page, we summarize several other factors that could impact our EBITDA outlook.
Sean: For a base case planning purposes, we tend to building conservative views on rate case settlements and other revenue enhancement and cost optimization initiatives that have the potential to drive additional upside.
Sean: We're also targeting better than historical availability on our operational portfolio, particularly at Bruce Power unit. Three is scheduled to return to service next year.
Sean: And finally, a key strategic priority remains placing our growth capital projects into service ahead of budget and schedule where possible.
Sean: Turning to page 15, we have made significant progress on our deleveraging efforts.
Sean: Since 2022 we've delivered a 0.6 times reduction in debt to EBITDA through asset divestitures cost optimizations revenue enhancements and reductions in actual capital expenditures.
Sean: We have companywide efforts ongoing in each of these areas to drive our organic deleveraging program.
Sean: One observation related to the year end 2024 leverage metric fourth quarter was an anomaly with how quickly FX rates moved we ended the year on December 31st with a spot rate of 1.44, USD CAD, which was used for our balance sheet calculations versus an average rate in 2024 of one.
Sean: Three seven which we used for income statement purposes.
Sean: That's 7% FX timing differential resulted in a year and 4.8 times debt to EBITDA ratio largely in line with our 475 times target.
Sean: Using the same average FX rate of 1.37 for our debt and EBITDA conversions would have resulted in a debt to EBITDA ratio of approximately 4.65 times.
Speaker Change: Regardless of the FX calculations, we made significant progress towards balance sheet, strengthening and I want to reiterate francoise comment that we all remained steadfast in our deleveraging efforts and maintaining our long term upper limit of 475 times debt to EBITDA.
Sean: To conclude.
Sean: D C had an exceptional year in 2024, and I am pleased to share that our board of directors has declared a first quarter 2025 dividend of <unk> 85 per common share, which is equivalent to $3 40 per share on an annualized basis.
Sean: This results in a three 3% increase compared with TC Energy's fourth quarter dividend, which now reflects T. Six proportionate dividend following the spin off of South Bell.
Sean: This represents our 25th consecutive year of dividend growth for our shareholders, which is a commitment we're proud to meet year after year as part of our shareholder value proposition, which is underpinned by our solid growth low risk and repeatable performance.
Francois: With that I'll pass the call back to Francois.
Francois: Thanks, Sean.
Francois: As I've said before we will maintain our focus on what got US here today maximizing the value of our assets through safety and operational excellence.
Francois: Executing on our selective portfolio of growth projects, including bringing eight $5 billion of assets into service in 2025.
And thirdly, ensuring financial strength and flexibility.
Francois: By focusing on these clear priorities, we'll be able to deliver that solid growth low risk and a repeatable performance year after year.
Speaker Change: I wanted to take a moment to acknowledge Stan Chapman retirement after an exceptional career at Tc energy.
Speaker Change: While we will continue to benefit from Stans experience as a member of Bruce Power's Board I want to express my gratitude for his leadership dedication and contribution over the years.
Speaker Change: Thank you Stan.
Speaker Change: I'm also pleased to announce two recent appointments to our executive leadership team with Tina for rocker and Greg Grant. These changes are part of our deliberate and plan for long term succession plan, reflecting the strength and talent of our internal leadership.
Speaker Change: We've appointed Tina to executive Vice President and Chief operating officer of our natural gas pipelines business.
Speaker Change: He has been a member of our executive leadership team since 2023.
Speaker Change: Bringing her on the executive leadership team at that time was a very intentional move to support the eventual transition of the chief operating officer role.
Speaker Change: Tina has extensive experience across project development engineering and operations as well as expertise in commercial operations and corporate strategy.
Speaker Change: She has a 30 plus year veteran of the industry and has a strong track record of both leadership and performance.
Speaker Change: We are also very pleased to announce Gregg grant.
Speaker Change: In the role of executive Vice President power and energy solutions.
Speaker Change: Greg has successfully led our Canadian natural gas pipelines portfolio for the last three years and brings extensive experience across strategy.
Sure.
Speaker Change: Corporate development.
Speaker Change: In commercial operations to his new role.
Speaker Change: I am confident that Tina and Greg will continue to deliver exceptional results.
Speaker Change: With that operator, we'd be pleased to answer questions.
Speaker Change: We will now begin the question and answer session to.
Speaker Change: To join the question queue you May Press Star then one on your telephone keypad.
Speaker Change: You will hear a tone acknowledging your request.
Speaker Change: Please limit your questions to two and if you have additional questions. Please reenter the queue.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing any keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: The first question.
Speaker Change: Comes from.
Speaker Change: Our deep expertise with Wells Fargo. Please.
Speaker Change: Please go ahead.
Speaker Change: Thanks, Good morning, first let me offer my congrats to Stan.
Speaker Change: Definitely be missed but I'm sure you're you're glad you don't have to.
Speaker Change: Answer annoying questions from sell side analysts. So let me start first with the southeast Gateway.
Speaker Change: Two questions here first is.
Speaker Change: The in service date of May 1st is that a little earlier than prior indications I think before it was it was the startup is expected for June 1st and then second maybe you can help us understand how you are commercial contracts are structured to protect returns if theres any delay to some of the <unk>.
Connecting pipelines like the Mayo can pipeline and.
Speaker Change: And can you share any other details on your dialogue that you've had with cfe.
Speaker Change: Around syncing up the various pieces of the network and if all parties are in agreement there.
Speaker Change: Yeah. Good morning, Puneet. This is Stan and thank you for the comments and it's always enjoy talking to you in your your comrades on the call with respect to May one I would just say that's very consistent with the guidance that we've given around.
Speaker Change: The earnings related to S. G P.
Speaker Change: To your broader statement with respect to the status of the plan.
Speaker Change: And the timing around payment from Cfe, Here's what I can share with you our understanding is that the metadata and via the lead plants, which are the two which are both most relevant to SGP are both now mechanically complete and will be placed in service as gas supply becomes available.
Speaker Change: Cfe is looking at rebalancing its overall supply portfolio to get gas to the met at a plant by Q4 of 2025 when the first phase of the mine can't expansion is complete in the first phase is a compression only expansion.
Speaker Change: Gas to the other plant via the lead is likely to commence around Q3 2027, when the phase two expansion of the mine can pipeline is complete and its the phase two expansion that will include the physical connectivity with with S. G P.
Speaker Change: In the meantime, S. Cfe is continuing to talk to both us and other third parties about the potential to build a short laterals off of SGP that could amongst other things get gas into the set of gas system for example to deliver gas to the plants, perhaps a little bit earlier.
Speaker Change: Now many of you have questions around our in service date of May one and the potential for us to get paid by Cfe and here's a couple of things that I would offer up for your consideration.
Speaker Change: First we have 30 year contracts with Cfe and we're building infrastructure, that's going to last more than twice as long we have a strong mutually beneficial partnership with Cfe and they understand that they may want an in service date represents the lowest overall cost for them and in support of that now our understanding is that Cfe has received Budd.
Speaker Change: Terry approvals sufficient to fund S. G P commencing on May one.
Speaker Change: Secondly, contractually the in service declaration for SGP is not tied to the availability of downstream third party capacity at our project is consistent with precedent shine bombs plant in Mexico to attract investment to build new infrastructure and to reduce emissions.
Speaker Change: Thirdly, given the limited amount of storage capacity across Mexico and in order to provide some level of utility upon in service, we've been discussing with cfe the potential to use the completed STP pipeline for parking mone or storage service until the downstream laterals and interconnects are in place.
Speaker Change: The fourth subject to further capacity approvals the process for commencing C. F. These additional 2% equity stake is also triggered upon in service. So there's an incentive from cfe for that perspective, but most importantly, what I wanted to leave you with is the comment that basketball I made earlier Francois myself our team went down.
Speaker Change: Out in Mexico in January we met with the energy Secretary, we met with the Cfe leadership and we are all aligned on our May one in service date for the project.
Speaker Change: Perfect that's very comprehensive.
Speaker Change: I wanted to switch gears and maybe ask conceptually how you think about.
Speaker Change: Some of these potential behind the meter gas projects that some of your peers are pursuing.
Speaker Change: Would you be open to developing an integrated gas to power project, where you provide both the pipeline infrastructure and potentially build the power generation assets to I know you have favorable slots in the in the order book for gas simple cycle gas turbine, so there's and their speed.
Speaker Change: Speed to market benefit here, if you decided to do the projects, but just curious for your views on that.
Speaker Change: Turning to his friends, while I'll start on that specific strategies, but then I'll ask Tina to give you an overall picture on how bullish we are on a data center.
Speaker Change: <unk> growth based on you know the the dozens of conversations we're having on a what I would call sort of a you know what.
Speaker Change: A fully bundled or complementary solution, where we're building a lateral and and also building the power plant for power generation. This is expertise that we've had for over 30 years in the company, where an owner and operator today.
Speaker Change: Of a gas fired power plants are in Alberta, as well as in New Brunswick.
Speaker Change: We are in fact, a are a large purchaser of gas turbines, but I would point out that those are primarily for the purpose of compression they tend to be smaller units. We do not have any prevention preferential position in the Q4 larger turbines that would be used for power generation.
Speaker Change: <unk>.
Speaker Change: But we are absolutely in.
Speaker Change: In conversations with a number of parties around direct connections.
Speaker Change: Where we would offer a combination of the two we're not really interested in growing in IPP independent IPP company within T C anymore.
Speaker Change: And we would only really contemplate new power generation.
Speaker Change: In in sort of complementary fully bundled.
Speaker Change: Type of product offering, but again, we are extremely bullish on data center demand and I'll ask Tina to expand on that thanks.
Tina: Thanks, Brent so on preneed, maybe I'll give you a holistic picture of how we're thinking about data centers.
Tina: Data centers are one component of our power demand opportunities that were dancing. In addition to coal to gas conversions and other electrification growth.
Tina: Speaking specific to the data center sector or that's the way it gives us access within 15 miles to 60% and the other 350 data centers that are under development.
Tina: Additionally, we connect to eight of the top 10 utilities now over 100 power plants, which is another competitive advantage for ours.
Tina: Data center demand.
Tina: We have about 10 gigawatts of requests into our business development team right now and.
Tina: We've increased commercial engagement with over 20 parties across the entire data center value chain.
Tina:
Tina: $2 billion of potential opportunities within within that sector, and our cross sell our systems, Wisconsin, Ohio, Virginia, Kansas, Indiana, Louisiana, Nevada.
Tina: Interestingly the customer needs differ and they vary among developers. So our focused strategy is to work with our established high quality utilities for the larger data center loads and provide the necessary gas infrastructure to support their portfolio build out.
Tina: Additionally, we will develop that direct connection direct connect behind the meter solutions, where it makes sense and fits our risk preferences. Let me give you a few key proof points and and and and data set here, our Anr Heartland project that we announced and sanctioned last year about a $900 million project.
Tina: Five to seven times multiple.
Tina: We will now be serving data center demand alongside overall economic development demand in Wisconsin, We're gonna be filing that project with FERC in the coming weeks and targeting end up on November 2027 E service.
Tina: We've been tracking to sanction another data center driven project anchored by some of our utility customers in the first half of 2024 and interestingly. We're now in discussions with with those counterparties to potentially upsize that particular project that might add a couple of minutes to a timeline that would be.
Tina: More meaningful expansion related to survey data center demand.
Tina: We've developed a behind the meter solution to a data center in Loudoun County, Virginia that we placed in service last year and we're in active discussions on several similar direct connect opportunities.
Tina: We also recently completed an open season on Columbia gas that resulted in a 60000 jacket terms a day being placed with a customer to supply gas to data center load behind the meter and then you Albany area in Ohio.
Tina: And Additionally, we are advancing new power plant.
Tina: Totaling about $4 seven gigawatts of generation that would be serving growing lettuce electricity demand, including data centers.
Tina: And as we advanced all of these projects our approach will be consistent with our strategy of low risk repeatable performance long term take or pay commitments and attractive build multiples in the five to seven times range.
Speaker Change: Perfect. Thank you I appreciate it.
Theresa Chen: The next question comes from Theresa Chen with Barclays. Please go ahead.
Theresa Chen: Hey, Good morning, first I would also like to offer my congratulations to stand on his retirement and wish them, well and congratulations as well Katina and Greg on your new roles.
Theresa Chen: And maybe pivoting.
Theresa Chen: Two the nuclear portion of your portfolio.
Theresa Chen: Relationship grew C. While early on and what are the next steps towards <unk> do you have a timeline in mind and could it be subject to accelerated cost recovery similar to NCR.
Francois: Thanks Theresa its francois.
Speaker Change: We're given the the fundamentals in Ontario, with a projected 69 gigawatt shortfall of capacity by 2050, <unk>, we're very bullish on the role nuclear will play.
Speaker Change: Nuclear is the way, Ontario will be serving data center demand as well as other industrial demand as Ontario looks to reassure manufacturing.
Speaker Change: For.
Speaker Change: The MCR program, we bear the cost and schedule risk on those projects. We have demonstrated with the successful return to service of unit six in unit three being on time and on budget as well that we are very effectively managing that risk.
Speaker Change: On Bruce C. It is still early days, we have many years of of development work and assessment work too.
Speaker Change: To assess the potential for that project.
Speaker Change: Including what technologies, we would use our supply chain impacts labor et cetera, what I would say there is you're unlikely to see us bearing a significant amount of cost of schedule risk on newbuild.
It's simply does not fit our low risk value proposition and we would look to be.
Speaker Change: I'm.
Speaker Change: Taking on a more traditional cost of service ratemaking.
Speaker Change: Model in the case of Bruce see maybe one way to think about this from a timing standpoint is.
Speaker Change: Nuclear sites have a huge competitive advantage in terms of nuclear growth first is you've got an operating license.
Speaker Change: Second you have a community.
Speaker Change: In the surrounding area, that's comfortable with having nuclear operations.
Speaker Change: Nearby third in the case of Bruce power, we have footprint to put Bruce C and Bruce D. On the site going forward and fourth we have I believe one of the most competent if not the most competent.
Speaker Change: Management team in the nuclear space.
The existing units are both operating at very high levels of efficiency now with that with <unk> ratings.
Speaker Change: So.
Speaker Change: <unk> was very strategic they invested in training building trades and labor are.
Speaker Change: To do the refurbishment work and a natural timeline would be to evolve from the M. C. R projects, which will wrap up in 2031 or 32 into new build at that time. So there's a lot of planning work to do.
Speaker Change: But as you pointed out we're very excited about the long term potential for nuclear it is going to be a significant growth wedge for this company over the long term.
Speaker Change: Thank you.
Speaker Change: And looking at to your leverage and general balance sheet outlook.
Speaker Change: What is the path forward with S&P at this point after a reaffirmed your triple B plus negative outlook rating late last month, what do you think it will take to improve the outlook.
Speaker Change: Hey, Theresa, it's Sean good morning.
Look without speaking the S&P, specifically, we don't like to speak to what any one rating agency may do I'll offer that.
Speaker Change: We're in regular contact with all the agencies they had previewed the investor day materials in each of them have gone through their annual review and as you noted S&P recently in the last two or three weeks completed it.
Speaker Change: And look the dialogue with each of the agencies. There is there's there was a major focus on STP coming on time and on budget and you heard from stand today, that's probably the most frequent conversation we have with each of the agencies and then as it relates to the balance of the year, it's more or less just delivering on the plan and.
Speaker Change: And that $6 billion to $7 billion capital range right that we execute on time and on budget within that $6 billion to $7 billion range I really think that's the recipe for for our organic deleveraging and continued success with with each of the agencies.
Speaker Change: Thank you so much.
Speaker Change: Youre welcome.
Speaker Change: The next question comes from Maurice Choy with RBC. Please go ahead.
Maurice Choy: Thank you and good morning, everyone.
Speaker Change: I wanted to turn.
Speaker Change: <unk>, Canada.
Speaker Change: And the question here is about mainline.
Speaker Change: How much mothballed capacity on the system and what we would put.
Speaker Change: Would it take to bring it back.
Speaker Change: Cause some timing and as part of that just obviously a lot of Canadian LNG projects that are being discussed right now given the onset of potential terrorists and some of these costs at pretty massive so to the extent that.
Speaker Change: The company is involved.
Speaker Change: You'd see a $6 billion to $7 billion.
Target.
Speaker Change: Hey, Morris I can take the first part of that this is Stan and Francois can answer the second piece.
Speaker Change: With respect to spare capacity on the mainline I would just say that given the strong demand that we've seen for natural gas the amount of spare capacity that we have is very different today than it was 10 years ago back in 2015. For example, the restoration work that we did on the Western mainline was completed in 2023 and 2024 and our contracts.
Speaker Change: Since then have increased from around three Bcf a day to five Bcf a day, which has resulted in all of the available mainline capacity being fully contracted.
Speaker Change: We do have one line that we referred to as line to that is currently not available for service and as market demand for this capacity continues to mature we're going to reevaluate things like the timing the cost and the potential capacity that could be optimized and perhaps restored our subject to any upstream and downstream constraint.
Speaker Change: So just bear with us and give us time to complete that work as the market needs materialize.
Maurice Choy: And Maurice with respect to our what I would call you know the energy corridor from coast to coast to coast.
Maurice Choy: You know a lots of inquiries on the liquid side I would refer those to our friends and former colleagues at South pole on the natural gas side.
Maurice Choy: There is absolutely demand for more LNG export and market opportunity for us to prosecute.
Maurice Choy: We're very bullish about the prospects for C. G L phase two happening.
Maurice Choy: That of course is only an input into the <unk>.
Maurice Choy: Decision that our customer LNG, Canada will make in due course.
Maurice Choy: And looking at other infrastructure in Canada, it's going to have to compete for capital in our company as it as it has for the last few years with projects in other jurisdictions right now we see the highest risk adjusted returns being in the United States.
Maurice Choy: The vast majority of our discretionary capital.
Maurice Choy: Is growing and we expect that it will continue to go into the United States. However, there is an interesting data center opportunity in Alberta, we've been working closely with a number of stakeholders to understand where there may be.
Maurice Choy: Spare capacity in our system in Alberta.
Maurice Choy: And we see some very exciting opportunities. There. There are 10000 Gigawatts pardon me 10, Gigawatts of interconnection requests within Alberta, It's a very natural market.
Maurice Choy: For data center development, and we feel will be very well positioned for that.
Maurice Choy: It would not necessarily be within our N G T L.
Maurice Choy: Entity it may be.
Maurice Choy: In separate unregulated entities, where the return are the risk return profile is different than for in GTO.
Maurice Choy: Understood and maybe just finishing up on capital allocation I E.
Speaker Change: Here you mentioned in the press release that prolonged tariffs could impact capital allocation decisions and I Wonder if you could just elaborate a little bit more on that recognizing as you say that the U S is already our largest geography for near term Capex with limited investments in Canada, Thus far so just curious what other.
Maurice Choy: Once you can make to capital allocation.
Speaker Change: So I'll start and I'll ask Tina to talk a little bit about our supply chains right now and you know where we are with respect to capital cost impacts simply a mortgage that was a reflection of the fact that we will reflect any changes in prices of key raw materials and input.
And any future capital allocation decisions.
Speaker Change: With.
Speaker Change: The vast majority of the future discretionary capital going into the U S for projects that would transport molecules from U S production to U S demand centers there.
Speaker Change: There would be no tariff impacts, we feel that theres plenty of domestic capacity.
Speaker Change: Capacity for steel production and pipe.
Speaker Change: Fabrication in the United States to meet our projects, but we would of course.
Speaker Change: Has the benefit of how things transpire and factor those into our projects maybe Tina you can expand on our current supply chain situation sure. Thanks, Francois we expect very modest impacts on materials for our Canadian and U S projects, primarily fittings and flanges no impacts to Mexico projects.
We take regular actions to address and mitigate any cost escalation risk across our entire portfolio for.
Speaker Change: The U S for all of our sanction projects pipe that's already been procured for those projects and were sourced from the U S. Mills are those pipe orders are firm pricing, so any market volatility that vendors risk.
Speaker Change: We also deploy a very diverse supplier base for all of our materials and are primarily procure large at scale materials in advance.
Speaker Change: On a subset of proven suppliers in exchange for a mutually beneficial commercial benefit.
Maurice Choy: So just to maybe come back around to that Maurice what I would say is as we look out to the end of the decade.
Speaker Change: As I mentioned in my prepared remarks, we expect to be filling the balance of our.
Maurice Choy: Incremental.
Maurice Choy: Capital capacity by the end of next year, and we still see build multiples in the five to seven times EBITDA range for the projects. We are looking to sanction between now and then.
Maurice Choy: Okay that makes sense.
Thanks for the question. Thanks, Unresponsive Sun, obviously, my congrats to stand for permanent.
Speaker Change: Greg for your new roles. Thank you.
Speaker Change: The next question comes from Jeremy Tonet with Jpmorgan. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Good morning.
Just want to echo that Stan Ah Ah Congrats on a great career, you will certainly be missed.
Speaker Change: Want to send a happy Valentine's day to everyone as well.
Speaker Change: But maybe just the first question here, if you could quantify I guess maybe ups.
Speaker Change: Upside to the plan at least as we see it seems like <unk> business operations are going well as far as nuclear operating rates and possibly what you get in some of these rate.
Speaker Change: Yeah reached settlements here and just seems like there is some upward pressure on the guide, but I was wondering if you could kind of provide more thoughts there.
Speaker Change: Yeah.
Sean: Hey, Jeremy Good morning, it's Sean.
Sean: Yeah look in my section, we gave you a couple of different things that we pay attention to that can impact the outlook arguably either way, but to your specific question.
Sean: Bruce just continues to perform incredibly well at levels at least in the fourth quarter above what we discount in the plan.
Sean: For conservatism kind of low 90 is how we think about it.
Sean: You've asked me in the past about FX rates, we provided a little bit of a little bit of clarity there.
Sean: And for benefit of just perspective, we've got kind of a high medium low rolling hedge program over three years.
And we're watching that curve very carefully to think about what we might do differently kind of in the medium to longer term to capture some impact there and and look some of the proven recipe about upside that you saw in 'twenty. Four continue right in terms of rate case strategy EBITDA and overall cost reduction. So it's a multifaceted plan that were solid year into.
Sean: <unk> into.
Sean: And to make it work so I appreciate the question.
Sean: Yeah.
Sean: Got it that's helpful. Thanks, and if I kind of walk through the deck, a little bit here slide seven nine.
Sean: It just seems like there's there's a lot of things cooking right now and so you know as you think about the potential for.
Sean: New projects here with leverage kind of really falling off both southeast gateway.
Sean: How do you think about the cadence of how these projects could materialize over kind of like that.
Sean: 2026, 2030 timeframe, just trying to get a feel for what's possible.
Speaker Change: Well as a as we mentioned in the prepared remarks Jeremy.
Speaker Change: In the near term, we're tackling the white space, we have in 2026.
We are working on a number of different.
Speaker Change: Proposals to deploy.
Speaker Change: Deploy smallish amounts of capital in short cycle projects to cash flow, we're looking at opportunities to bring forward some capital spend from two.
Speaker Change: 2027, and 2028 in order to create some additional capacity in those years as well.
Speaker Change: For us to sanction in aggregate approximately $8 billion of remaining capital to the end of the year by the end of 2026.
Speaker Change: See a regular cadence throughout the next several quarters submit.
Speaker Change: Submitting the basis of estimate on unit five.
Speaker Change: As we did on January 31st the basis of estimate was within the range contemplated inside the contract.
Speaker Change: The ISO of course has.
Speaker Change: Assurance and verification rights on the validity of the estimates, but given the fact that the estimate was inside the range contemplated in the contract we have a very high degree of confidence that we will be making an F D. On.
Speaker Change: Yet another unit at Bruce power in the very near future. So we're seeing opportunities not only in our gas business with coal to gas conversion with data centers, but also on the nuclear side with.
Speaker Change: With the shortfall.
Speaker Change: And the signals, we're getting from the Ontario government with a shortfall in supply.
Speaker Change: That's part of the reason why they were agreeable to provide us with 285 million of incremental capital to advance the development on Ontario pumped storage. So we're really bullish about where our footprint sits and.
Speaker Change: The growth.
Speaker Change: <unk>.
Speaker Change: Prospects that come with the fundamentals in each of those markets and so.
Speaker Change: Again, our goal is.
Speaker Change: A large number of small projects low risk inside our corridors and so youre going to see a regular cadence throughout the next seven or eight quarters and that's how we're going to be filling the remaining amount of our backlog and I would argue that.
Speaker Change: Our focus which is on extending the duration of our capital program is a little bit unique among our peers.
We feel it's very important in the near term to a.
Speaker Change: Manage and maintain capital discipline and Ste.
Speaker Change: At or below that $6 billion to $7 billion range, we are not losing out on any opportunities right now.
Speaker Change: But we're also able to sanction projects within service all the way through the end of the decade.
Speaker Change: Got it that's helpful I'll leave it there thanks.
Jeremy Tonet: Thanks, Jeremy.
Speaker Change: Okay.
Speaker Change: The next question comes from Manav Gupta with UBS. Please go ahead.
Manav Gupta: Good morning, I have two questions and I'll just ask them upfront first of all accurate on Enlistee, you announced for new projects and you've got some more updates today can you help us with some more details on how those four projects that you did announce are progressing and the second one you talked in detail about the data center.
Manav Gupta: Opportunities can you also talk a little bit about the coal to gas switching opportunities that you are seeing out there.
Manav Gupta: I'll take the first question about our AR announced projects and also roll into your second question.
Manav Gupta: We announced in the U S. Three projects two of those are the coal to gas conversion projects located off of our Columbia Gulf system and a.
Manav Gupta: Virginia project to support our local distribution companies reliability needs with LNG, peaking supply those projects are progressing nicely. We're in early stages of developing our FERC application.
Manav Gupta: Landowner notifications progressing that well and those will be delivered in the timelines noted and in our.
Manav Gupta: Disclosures. So those are going really well from a coal to gas perspective, we continue to see many opportunities across our footprint.
Manav Gupta: We've got 42 operating plants within 15 miles of our assets that are coal and nine of those plants are planned to retire by 2031.
Manav Gupta: Combined capacity about nine Gigawatts and there's about 19 gigawatts within 50 miles of our pipelines.
Manav Gupta: <unk> direct retire through 'twenty 33.
Manav Gupta: We're seeing many of those come to fruition for example in the Midwest, We had a couple of different projects, our Wisconsin reliability in our upcoming and our Heartland project that are supporting coal to gas conversions.
Manav Gupta: We are also in active discussions.
Manav Gupta: On about seven and a half gigawatts of generation of additional conversion opportunities and we'll continue to pursue all of those that adhere to our $6 billion to $7 billion of capital plan and achieved a five to seven times build multiple.
Manav Gupta: Thank you.
Manav Gupta: Yeah.
Speaker Change: The next question comes from John <unk> with Goldman Sachs. Please go ahead.
John: Hey, good morning, Thanks for the time I just wanted to circle back to Mexico in the context of everything we.
John: Pass through today in the context of tariff noise et cetera can you just give us an update on the potential separation or sell down or however, you want to frame it for the Mexico business is today.
Speaker Change: Thanks, John as Francois.
John: As we mentioned at our Investor day, our goal is to.
John: Get all of the pipes flowing gas and then get all of the pipes flowing cash if you will.
John: We expect to be doing that of course on southeast gateway by May 1st.
John: On to La Villa de Reyes, we are expecting to have that done by the end of the year as well so we'd like to see that behind us have all of our projects.
John: A complete and in service.
John: And then we'll be turning our attention to.
John: That opportunity as we mentioned, we'll be considering both capital market solutions and IPO of sorts as well as a minority interest sale too.
John: To a buyer along the same style of transaction as we did with the G IP on Colombia.
John: The timeline for that think of it as the first half of 2026.
John: We think that is the manner in which will maximize value for our shareholders and establish a positive mark for the balance of the portfolio and.
John: Uh huh.
John: We also see so much growth outside of Mexico that not only.
John: Yeah.
John: Selling down our interest is not the only tool to work down our exposure. The other tool will be growing our businesses in Canada, and the U S and the other way, we're thinking about managing and mitigating risk in Mexico. As you can expect us once S. GPS in service to start looking at some Mexico.
John: Level or perhaps even asset level financing.
John: To help reduce our equity capital at risk in Mexico, So stay tuned for that.
John: Okay. That's helpful. Thank you and then second one <unk>.
Speaker Change: Quick, but just looking at your breakdown of kind of forward growth projects on slide nine the breakdown looks pretty different from the analyst day is that new projects coming in is that just a repackaging of existing ones, maybe just walk us through that.
Speaker Change: Did you have a particular year, we may have changed the color scheme on you a little bit but that that pipeline hasnt changed much a few a few minor additions, particularly.
Speaker Change: Looking at the power Gen being 56% now versus a 32% in the investor deck, it might be remarketing, but.
Speaker Change: Quantitative on some new projects coming in.
Speaker Change: I think it's just the color coding that might just be picking up a little bit different in your slides I can provide a clarification after the call.
Speaker Change: Sure we can follow up on that thank you.
John: Thanks, John.
Speaker Change: The next question comes from Ben Pham with BMO. Please go ahead.
Ben Pham: Hey, thanks.
Ben Pham: Maybe start off on the Columbia rate case could you update us on a recent customer feedback and expected timing.
Ben Pham: Yes, I'd be happy to give you a brief update and as you're familiar we filed our rate case for our Columbia gas system last year rates do go into effect in April of this year.
Ben Pham: Right now we are waiting for what we call top sheets from FERC, which will outline their position of our rate case.
Ben Pham: And typically after you see those that loves top sheets, the negotiations with our customers.
Ben Pham: Ramp up in earnest towards a settlement discussions and so we would continue to plan to spend all of that rate case mutually beneficial to our customers and our all company here.
Ben Pham: In the third or fourth quarter of this year.
Speaker Change: Okay. Thanks for that Sam.
Ben Pham: And.
Ben Pham: And then maybe a second question the data centers more specifically.
Alberto Theres Theres matching you mentioned Francois maybe look at non Reg.
Part of things does that.
Ben Pham: Is that in reference to your gas plants you have there is you referenced something else.
Ben Pham: No it would be unregulated or pipelines.
Ben Pham: I should say not regulated by N G T L but.
Ben Pham: By the Alberta energy regulator.
Ben Pham: So theres no reference there to power Gen.
Ben Pham: Okay I got it okay.
Ben Pham: Okay. Thank you.
Ben Pham: Thanks Ben.
Speaker Change: I understand there is time for one last question that will come from Jessica oil from Scotiabank. Please go ahead.
Jessica Oil: Great. Thanks, Good morning, and thanks for taking my questions. So just starting with the power segment can you talk a little bit more about the path forward for the Ontario pumped storage project just given me the recent support from the government.
Speaker Change: Thanks, Jessica for that question.
Jessica Oil: The the.
Jessica Oil: Funding from the Ontario government is to advance the development of that project, including the requisite environmental assessments.
Getting us to a point, where we could make.
Jessica Oil: A final investment decision that timeline is 2028.
Jessica Oil: There is a considerable amount of work to do on continuing.
Jessica Oil: The work around contracting.
Jessica Oil: Oh technical work et cetera, we would not proceed with a project like that without having a very high quality class III estimate and of course, the environmental work, we will take a couple of years. When you look at both the federal and provincial requirements and then of course, it would be a four or five year construction.
Jessica Oil: Beyond then so there's lots of work continuing.
Jessica Oil: It's 1000 megawatts of effectively a 12 hour battery.
Speaker Change: The Ontario government, just recently announced a ban on Chinese.
Jessica Oil: Parts.
Jessica Oil: And of course that makes them.
This project more attractive to them for firming resources compared to the.
Jessica Oil: Battery alternatives, where much of the supply chain is reliant on China. So we're very interested in the project or.
Jessica Oil: Our intention at the end of the day would be not to sanction. This unless it was with cost of service regulation, we will not take cost and schedule risk on a project of that nature.
Jessica Oil: And then again it will have to compete with the balance of our.
Jessica Oil: Investment opportunities in the capital stack for four and allocation of capital.
Jessica Oil: I appreciate that color and then can you talk a little bit more about how you're thinking about the next wave of LNG and how TC Energy's pipelines could serve and support that.
Jessica Oil: Yeah, I'll start with the U S and we have a.
Jessica Oil: Great footprint in Louisiana in particular, with our Columbia, golfing or Ann our assets and have quite a bit of cat net Tiffany already with several of the LNG export terminals in that area.
Jessica Oil: We are now progressing a project called M. Eastern East lateral xpress and that will come on into service later this year to supply.
Jessica Oil: Capacity to one of the LNG export terminals in Louisiana. We also have an intra state project called Gillis.
That will be extending to serve I guess additional load in in Louisiana as well as in the Gulf Coast with LNG exports.
Stan Chapman: And I'll turn it over to Stan for any Canadian in Mexico updates.
Stan Chapman: So big picture Wise in Canada, you all aware that the <unk> pipeline is currently in service and we are currently now waiting for the in service of the terminal itself. We are continuing to advance our scope and other work products with respect to your phase III and again that Fid's F. I D decision rests with the with LNG C as well.
Stan Chapman: Thanks very much.
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.
Speaker Change: I'll now turn the call over to Gavin Wylie for any closing remarks.
Speaker Change: Well, thanks, everybody for joining I know everybody is out there today is a very busy day with several of our peers reporting. So thank you for your time for joining the call. Thank you for your interest in TC energy as drew mentioned here. If there are any additional questions. Please do feel free to contact the investor relations team at any time, we're always happy to help and we look forward to our next update.
Speaker Change: Following the first quarter, so let's talk to your debt.
Speaker Change: This brings to a close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Uh huh.
Speaker Change: Yeah.