TC Energy Corporation (TC Energy or the Company) released its second quarter results today. François Poirier, TC Energy’s President and Chief Executive Officer commented, “During the first six months of 2024, we delivered 10 per cent year-over-year growth in comparable EBITDA1 and approximately 35 per cent growth in segmented earnings.” Poirier continued, “We continued to advance multiple strategic initiatives aimed at maximizing the long-term value of our assets and furthering our deleveraging efforts. We announced a historic equity ownership agreement that will enable Indigenous Communities to become owners in the NGTL and Foothills Systems, achieved a successful shareholder vote to spin off the Liquids Pipelines business and reached a five-year revenue requirement settlement on our NGTL System in Canada. Finally, our Southeast Gateway pipeline project in Mexico is making exceptional progress and we anticipate completing the offshore pipeline installation in the third quarter. This critical milestone means we are on-track to achieve commercial in-service by mid-2025. We remain steadfast in our execution against our clear set of 2024 strategic priorities."
Highlights
(All financial figures are unaudited and in Canadian dollars unless otherwise noted)
Second quarter 2024 financial results:
Comparable earnings1 of $1.0 billion or $0.94 per common share compared to $1.0 billion or $0.96 per common share in 2023 and net income attributable to common shares of $1.0 billion or $0.93 per common share compared to $0.3 billion or $0.24 per common share in second quarter 2023
Comparable EBITDA of $2.7 billion compared to $2.5 billion in 2023 and segmented earnings of $2.0 billion compared to $1.0 billion in second quarter 2023
Reaffirming 2024 outlook:
Comparable EBITDA is expected to be $11.2 to $11.5 billion2
Comparable earnings per common share is expected to be lower than 20232 due to the net impact of higher net income attributable to non-controlling interests, partially offset by increased comparable EBITDA and higher AFUDC related to increased capital expenditures on the Southeast Gateway pipeline project
Capital expenditures are anticipated to be at the low end of $8.0 to $8.5 billion on a net basis after considering non-controlling interests
TC Energy shareholders voted to approve the spinoff of the Liquids Pipelines business at our 2024 Annual and Special Meeting of shareholders
Reached unanimous support from customers for a five-year negotiated revenue requirement settlement for the NGTL System that aligns with maximizing the value of our assets
Announced approximately $2.6 billion of asset divestitures relative to our $3 billion asset divestiture program
Announced Canada’s largest Indigenous equity ownership agreement that will enable Indigenous Communities to acquire a 5.34 per cent minority interest in NGTL and Foothills Systems for gross proceeds of $1.0 billion
Completed the strategic alliance agreement with the CFE who became a partner in TGNH with a 13.01 per cent equity interest in our TGNH assets for cash proceeds of US$340 million and non-cash consideration
Completed a $7.15 billion refinancing by Coastal GasLink LP in June 2024 of its existing construction credit facility through a private bond offering of senior secured notes to Canadian and U.S. investors
Declared a quarterly dividend of $0.96 per common share for the quarter ending September 30, 2024.
CEO Message
During the first six months of 2024, our assets continued to safely and reliably meet the growing energy demands of North America. As a result, for the first six months of 2024, we have delivered approximately 10 per cent growth in comparable EBITDA and approximately 35 per cent growth in segmented earnings compared to the first six months of 2023. The outlook for our business has never been stronger, providing accretive investment opportunities across our natural gas and power and energy solutions assets. Natural gas demand continues to reach record highs and our business is strategically positioned to continue to grow through five meaningful drivers:
Next wave LNG growth that will feed exports from Canada, the U.S. and Mexico by 2025
Continued demand growth and reliability requirements for utilities across the continent
The increasing demands on power generation to support wide scale electrification, coal-fired retirements, and emerging energy needs
Ensuring supply access; connecting North America’s lowest cost basins to the largest demand markets
Decarbonization, maintenance and modernization projects that support the safe and reliable delivery of record volumes.
By having a disciplined view on capital allocation and adhering to our net capital expenditure limit of $6 billion to $7 billion per year, we will purposefully select projects that are expected to maximize the spread between our risk-adjusted return and cost of capital, creating incremental value for our shareholders.
For the remainder of the year, we will seek to maximize the value of our assets through safety and operational excellence, maintain our focus on project execution, and continue our deleveraging efforts by progressing our asset divestiture program and streamlining our business through efficiency initiatives.
Operational highlights include:
Total NGTL System receipts averaged 14.2 Bcf/d, up five per cent compared to second quarter 2023
NGTL System set an all-time record for total receipts on April 12, 2024 at 14.8 Bcf
NGTL System set an all-time single day record for deliveries to power generators of more than 1.1 Bcf on July 18, 2024
U.S. Natural Gas Pipelines (USNG) daily average flows were 26.2 Bcf/d, up three per cent compared to second quarter 2023
USNG systems set second quarter average delivery records to power generators and LNG facilities of 2.8 Bcf/d and 3.3 Bcf/d, respectively
New all-time daily send out record to power plants of 5.2 Bcf on July 15, 2024
Mexico Natural Gas Pipelines set an all-time delivery record of more than 4.0 Bcf on May 24, 2024
The Keystone Pipeline System achieved 94 per cent operational reliability in the second quarter 2024
Bruce Power achieved 78 per cent availability in second quarter 2024, taking into account planned outages on Units 5 to 8; average availability outlook for 2024 remains in the low-90 per cent range now that all planned maintenance is complete for 2024
Cogeneration power plant fleet achieved 95.7 per cent availability in second quarter 2024.
We continue to execute projects on-time and on-budget. During the second quarter, we made significant progress on our Southeast Gateway pipeline project having achieved critical milestones and remain on track to reach commercial in-service by mid-2025. Offshore pipeline installation has now reached over 98 per cent, with completion of the deepwater section and approximately three kilometres of shallow water installation remaining. We anticipate the shallow water pipeline installation to be complete in third quarter 2024. We have also finished all three landfall sites, with construction of onshore facilities and final pipeline and tie-in activities progressing well. The Bruce Power Unit 3 Major Component Replacement (MCR) program continues to advance on plan for both cost and schedule and the Unit 4 MCR is expected to begin in early-2025. We expect to place approximately $7 billion of projects into service in 2024 and $9 billion in 2025. Year-to-date, $1.2 billion of natural gas capacity projects have been placed in service, including our Gillis Access project and projects on the NGTL System. The remaining projects expected to be placed into service this year is largely comprised of Coastal GasLink.
Coastal GasLink (CGL) achieved mechanical completion in November 2023 and continues to progress post-construction reclamation activities. Commercial in-service is expected to follow the completion of plant commissioning activities at the LNG Canada facility and upon receiving notice from LNG Canada. In June 2024, Coastal GasLink LP completed the largest private bond offering in Canadian history, a $7.15 billion refinancing of its existing construction credit facility through a private offering of senior secured notes, representing significant demand for Canadian energy infrastructure. Additionally, following a positive FID announcement by Cedar LNG joint venture partners, Haisla Nation and Pembina Pipeline Corporation, Coastal GasLink LP sanctioned the Cedar Link project, a $1.2 billion expansion of the CGL pipeline which is expected to enable the delivery of up to 0.4 Bcf/d of natural gas to Cedar LNG. Funding for the Cedar Link project will be provided through project-level credit facilities of up to $1.5 billion, and equity to be provided by Coastal GasLink LP partners, including us. We estimate our share of equity contributions to fund the project will be approximately $50 million.
We reached unanimous support from customers for a five-year negotiated revenue requirement settlement on the NGTL System commencing on January 1, 2025. The settlement maintains a return on equity of 10.1 per cent on 40 per cent deemed common equity and is expected to result in approximately $150 million to $200 million per year increase in comparable EBITDA through increased depreciation rates and incentive mechanisms. The settlement also enables an investment framework that supports allocating $3.27 billion of capital towards progression of a new multi-year growth plan. It is comprised of multiple projects that are subject to final company and regulatory approvals, with targeted in-service dates between 2027 and 2030. The completion of the multi-year growth plan will enable approximately 1.0 Bcf/d of incremental system throughput. We thank our customers for this collaborative process finding alignment to address evolving needs of both the industry and our business.
During the second quarter 2024, we progressed toward our $3 billion asset divestiture target and completed our strategic alliance agreement with the CFE, who became a partner in TGNH with a 13.01 per cent interest for cash proceeds of US$340 million and non-cash consideration. On July 30 2024, we announced Canada’s largest Indigenous equity ownership agreement that will enable Indigenous Communities to collectively acquire a 5.34 per cent minority equity interest in the NGTL System and the Foothills Pipeline assets (together, Partnership Assets) for gross proceeds of $1.0 billion. This historic agreement is made possible by an equity loan guarantee provided by the Alberta Indigenous Opportunities Corporation in support of a newly formed Indigenous-owned investment partnership. Once finalized, the Communities will enter into definitive agreements as co-investors in the Partnership Assets. Investment in energy assets delivers access to long-term revenue sources, creating meaningful change for Indigenous Communities across Canada.
With these announcements, we are tracking to approximately $2.6 billion of asset sales that represents the majority of our $3 billion target prior to the end of the year. In combination with our asset divestiture plan, strong results in the first half of 2024, capital expenditures trending to the low end of our 2024 outlook and continued progress on our business efficiency initiatives, we are making significant progress towards our year end debt-to-EBITDA3 target of 4.75 times, which represents the upper limit we will manage to going forward. Further, we remain committed to staying within our $6 billion to $7 billion annual net capital expenditure limit, with a bias to the lower end, in 2025 and beyond.
In June 2024, we received approval from our shareholders to spin off the Liquids Pipelines business (the spinoff Transaction), South Bow Corporation (South Bow). We believe spinning off South Bow will allow both companies to maximize the long-term value of their respective assets. We anticipate that the effective separation date will occur in early fourth quarter 2024. As two separate entities, each company will have the ability to focus on their distinct strategies and opportunity sets – delivering essential energy that the world relies on.
We released our 2024 Report on Sustainability that details the company's overall sustainability performance and progress on our commitments. We reaffirm our role as part of a collective effort to advance a lower-emissions energy system that is affordable, reliable and secure, while working closely with our neighbours, customers, Indigenous peoples, and governments to build relationships and create mutually beneficial opportunities. Key highlights include:
Reduced absolute methane emissions by 15 per cent between 2019 and 2023
Invested $1.8 billion in 2023 with Indigenous and Native American suppliers in Canada and U.S., and launched a Canadian Indigenous Equity Framework
Introduced a new target to increase the representation of women at the company by two per cent annually over the next three years.
Following the spinoff Transaction, TC Energy will continue to play a pivotal role in North America's energy future – and increasingly provide global energy solutions through our highly integrated natural gas delivery network. The demand for energy in North America and globally has never been greater, and we believe we are positioned to meet this demand while balancing energy security, affordability and sustainability through our critical infrastructure. We remain selective and strategic in allocating capital in order to maximize risk-adjusted shareholder returns and deliver long-term shareholder value.
Teleconference and Webcast
We will hold a teleconference and webcast on Thursday, August 1, 2024 at 6:30 a.m. (MDT) / 8:30 a.m. (EDT) to discuss our second quarter 2024 financial results and Company developments. Presenters will include François Poirier, President and Chief Executive Officer; Sean O'Donnell, Executive Vice-President and Chief Financial Officer; and other members of the executive leadership team.
Members of the investment community and other interested parties are invited to participate by calling 1-844-763-8274 (Canada/U.S.) or 1-647-484-8814 (International). No passcode is required. Please dial in 15 minutes prior to the start of the call. Alternatively, participants may pre-register for the call here. Upon registering, you will receive a calendar booking by email with dial in details and a unique PIN. This process will bypass the operator and avoid the queue. Registration will remain open until the end of the conference call.
A live webcast of the teleconference will be available on TC Energy's website at www.TCEnergy.com/events or via the following URL: https://www.gowebcasting.com/13394. The webcast will be available for replay following the meeting.
A replay of the teleconference will be available two hours after the conclusion of the call until midnight EDT on August 8, 2024. Please call 1-855-669-9658 (Canada/U.S.) or 1-412-317-0088 (International) and enter passcode 6645236#.
The unaudited interim Condensed consolidated financial statements and Management’s Discussion and Analysis (MD&A) are available on our website at www.TCEnergy.com and will be filed today under TC Energy's profile on SEDAR+ at www.sedarplus.ca and with the U.S. Securities and Exchange Commission on EDGAR at www.sec.gov.
