TC Energy (TRP) Q3 2026 Earnings Call Transcript

TC Energy reported third-quarter comparable EBITDA of $3.0 billion, up 13% year over year, and comparable EPS of $0.94, up 22%; it raised 2026 EBITDA guidance by $200 million to $11.8 billion-$12.0 billion. Management forecast 5%-7% annual comparable EBITDA growth through 2031 and cited a $40 billion project origination funnel, including $25 billion in natural gas pipeline opportunities and $15 billion in power projects. The company sanctioned the $1.8 billion Crossroads expansion and expects debt-to-EBITDA of 4.55x-4.6x at year-end 2026, below its 4.75x target.

Analysis

The investable distinction is between contracted growth and pipeline optionality. TRP’s 2031 floor appears supported by projects already sanctioned or nearing approval; the incremental case for the upper end depends on converting early-stage opportunities, particularly Canadian power projects, into financeable contracts and FIDs. Treat the $40bn origination funnel as a conversion option, not backlog. The next few project announcements and growth in the pending-approval bucket matter more than the headline funnel size.

Second-order benefit: firm gas transport and storage may gain value as power systems prioritize dispatchable supply and peak reliability, even without a sustained rise in gas prices. Conversely, the power push creates execution and counterparty exposure that regulated/take-or-pay pipeline growth does not: equipment availability, permitting, contract quality, and whether contracts recover capital within their term are the key underwriting tests. The claimed AI contribution is worth monitoring, but should not yet carry a material valuation premium without evidence of repeatability and persistence.

Near term, watch for power FIDs and contract disclosures over the next few quarters; the NGTL customer-settlement target in Q1 2027 is a separate catalyst/risk. Crossroads and related capacity additions are a longer-dated growth driver, so they do not resolve near-term conversion risk. Contrarian view: consensus may be extrapolating power demand into earnings too quickly; the secured-project base supports a credible floor, but not necessarily the high end of guidance. Valuation and peer-spread data are needed before sizing a relative-value position.

Key Decisions for Investors

• Consider a staged long in TRP on weakness, rather than paying upfront for the full origination funnel. Add only as power projects become contracted and reach FID; use the secured-project growth trajectory, not management’s funnel estimate, as the thesis anchor.
• For a relative-value expression, monitor TRP against Enbridge, Williams, or Kinder Morgan, but do not initiate a pair until current valuation, leverage, and growth expectations are compared. The intended exposure is to TRP’s gas-and-power optionality, not a claim that peers lack growth.
• Track the next 1–3 quarters for disclosed power FIDs, contract tenor and capital-recovery terms, and movement from origination into pending approval. A lack of meaningful conversion would weaken the upper-growth case; a delayed or adverse NGTL settlement beyond Q1 2027 would raise execution risk.
• Falsify the long thesis if leverage trends above the stated 4.75x ceiling, project costs or schedules materially deteriorate, or management lowers the 5%–7% growth outlook. Reassess the AI contribution if reported EBITDA gains fail to recur or cannot be distinguished from temporary operating/commercial effects.