TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company)
today announced net income attributable to common shares for second
quarter 2019 of $1.1 billion or $1.21 per share compared to net
income of $785 million or $0.88 per share for the same period in
2018. Comparable earnings for second quarter 2019 were $924 million
or $1.00 per common share compared to $768 million or $0.86 per
common share in 2018. TC Energy's Board of Directors also declared
a quarterly dividend of $0.75 per common share for the quarter
ending September 30, 2019, equivalent to $3.00 per common share on
an annualized basis.
"During the second quarter of 2019, our diversified portfolio of
critical energy infrastructure assets continued to perform very
well,” said Russ Girling, TC Energy’s President and Chief Executive
Officer. "Comparable earnings per share increased 16 per cent
compared to the same period last year while comparable funds
generated from operations of $1.7 billion were 14 per cent higher.
The increases reflect the strong performance of our legacy assets
and contributions from approximately $5.6 billion of growth
projects that entered service in the first half of 2019."
"With our existing assets benefiting from continued high
utilization rates and $32 billion of secured growth projects
underway, approximately $7 billion of which are expected to be
completed by the end of the year, we expect our strong operating
and financial performance to continue. They are underpinned by
regulated or long-term contracted business models that are expected
to support annual dividend growth of eight to 10 per cent through
2021,” added Girling. “We have invested $11 billion in these
projects to date and are well positioned to fund the remainder of
our secured growth program."
During the last few months we advanced a number of portfolio
management activities including the partial monetization of the
Northern Courier Pipeline as well as the sale of certain Columbia
Midstream assets and our Ontario natural gas-fired power plants.
These initiatives, combined with the sale of the Coolidge
generating station which closed in late May, are expected to result
in approximately $6.3 billion of proceeds from announced asset
sales in 2019. When combined with significant internally generated
cash flow, access to capital markets and potential additional
portfolio management, we are well positioned to prudently fund our
capital program with a strong focus on per share measures and in a
manner that is consistent with achieving targeted credit metrics
including debt-to-EBITDA in the high four times area in 2019 and
thereafter.
"Looking forward, we continue to progress more than $20 billion
of projects under development including Keystone XL and the Bruce
Power life extension program. Success in advancing these and other
growth initiatives that are expected to emanate from our five
operating businesses and exceptional footprint across North America
could extend our growth outlook well into the next decade,"
concluded Girling.
Highlights(All financial figures are unaudited
and in Canadian dollars unless otherwise noted)
- Second quarter 2019 financial results◦ Net income
attributable to common shares of $1.1 billion or $1.21 per common
share◦ Comparable earnings of $924 million or $1.00 per
common share◦ Comparable earnings before interest, taxes,
depreciation and amortization of $2.3 billion◦ Net cash
provided by operations of $1.7 billion◦ Comparable funds
generated from operations of $1.7 billion◦ Comparable
distributable cash flow of $1.5 billion or $1.64 per common
share
- Declared a quarterly dividend of $0.75 per common share for the
quarter ending September 30, 2019
- Continued construction activities on the Coastal GasLink
pipeline project; on July 26, 2019 the National Energy Board (NEB)
issued its decision affirming provincial jurisdiction for the
project
- Placed approximately $0.3 billion of NGTL System projects in
service in the first half of 2019
- Placed the White Spruce pipeline in northeast Alberta in
service in May 2019
- Achieved necessary milestones to move Louisiana XPress and
Grand Chenier XPress into secured projects at a combined cost of
approximately US$0.6 billion
- Received NEB approval of the North Bay Junction Long Term Fixed
Price (NBJ LTFP) service, as filed
- Closed the sale of our Coolidge generating station in Arizona
for US$448 million
- Entered into an agreement to sell certain Columbia Midstream
assets for approximately US$1.3 billion
- Issued $1.0 billion of 30-year fixed-rate medium-term
notes
- Completed the partial monetization of the Northern Courier
pipeline for aggregate gross proceeds of approximately $1.15
billion in July 2019
- On July 30, 2019, announced an agreement to sell our
interests in three Ontario natural gas-fired power plants for
approximately $2.87 billion.
Net income attributable to common shares increased by $340
million or $0.33 per common share to $1.1 billion or $1.21 per
share for the three months ended June 30, 2019 compared to the same
period last year. Per share results reflect the dilutive impact of
common shares issued under our Dividend Reinvestment Plan (DRP) in
2018 and 2019 and our Corporate At-The-Market (ATM) program in
2018. Second quarter 2019 results included an after-tax gain of $54
million related to the sale of our Coolidge generating station in
May 2019, a deferred tax benefit of $32 million related to the
impact of an Alberta corporate income tax rate reduction on our
Canadian businesses not subject to rate-regulated accounting and an
after-tax gain of $6 million related to our U.S. Northeast power
marketing contracts. Second quarter 2018 results included an
after-tax loss of $11 million related to our U.S. Northeast power
marketing contracts. These specific items, as well as unrealized
gains and losses from changes in risk management activities, are
excluded from comparable earnings.
Comparable EBITDA increased by $333 million for the three months
ended June 30, 2019 compared to the same period in 2018 primarily
due to the net effect of the following:
- higher contribution from Liquids Pipelines primarily due to
higher volumes on the Keystone Pipeline System and increased
earnings from liquids marketing activities
- higher contribution from U.S. Natural Gas Pipelines mainly due
to increased earnings from Columbia Gas and Columbia Gulf growth
projects placed in service
- higher contribution from Power and Storage primarily due to
increased Bruce Power results from a higher realized power price,
partially offset by the sale of our interests in the Cartier Wind
power facilities in 2018
- lower flow-through income taxes on the NGTL System and the
Canadian Mainline as a result of accelerated tax depreciation
enacted in June 2019, partially offset by increased depreciation
and higher incentive earnings for the Canadian Mainline in
2019
- foreign exchange impact of a stronger U.S. dollar on the
Canadian dollar equivalent earnings from our U.S. and Mexico
operations.
Due to the flow-through treatment of income taxes on our
Canadian rate-regulated pipelines, the beneficial income tax change
on these assets related to accelerated tax depreciation reduces our
comparable EBITDA despite having no impact on net income.
Comparable earnings increased by $156 million or $0.14 per
common share for the three months ended June 30, 2019 compared
to the same period in 2018 and was primarily the net effect of:
- changes in comparable EBITDA described above
- higher depreciation largely in Canadian Natural Gas Pipelines,
which is fully recovered in tolls as reflected in the comparable
EBITDA discussion above, therefore having no impact on comparable
earnings. In addition, higher consolidated depreciation reflects
new projects placed in service
- lower interest income and other due to realized losses in 2019
on derivatives used to manage exposure to foreign exchange rate
fluctuations on U.S. dollar-denominated income
- higher income tax expense due to higher comparable earnings
before income taxes and lower foreign tax rate differentials,
partially offset by lower flow-through income taxes in our Canadian
rate-regulated pipelines
- higher interest expense primarily as a result of higher levels
of short-term borrowings, long-term debt issuances, net of
maturities, and the foreign exchange impact on translation of U.S.
dollar-denominated interest.
Comparable earnings per common share for the three months ended
June 30, 2019 also reflects the dilutive impact of common shares
issued under our DRP in 2018 and 2019 and our Corporate ATM program
in 2018.
Notable recent developments include:
Canadian Natural Gas Pipelines:
- Coastal GasLink Pipeline Project: Following the October 2018
positive Final Investment Decision (FID) by LNG Canada,
construction activities continue at many locations along the
pipeline route including the area south of Houston, B.C. which
required a B.C. Supreme Court injunction for access. We expect a
further decision in third quarter 2019 from the B.C. Supreme Court
to extend the injunction to project completion.On July 26, 2019 the
NEB issued its decision affirming provincial jurisdiction for
Coastal GasLink. Accordingly, construction will continue to
proceed as planned under the permits granted to Coastal GasLink by
the B.C. Oil and Gas Commission.TC Energy continues to advance
funding plans for this $6.2 billion pipeline project through a
combination of the sale of up to 75 per cent ownership interest and
project financing, which are proceeding as planned. Both
transactions are expected to be completed in fourth quarter
2019.
- NGTL System: In the first half of 2019, the NGTL System placed
approximately $0.3 billion of capacity projects in service.On March
14, 2019, the NGTL System Rate Design and Services Application was
filed with the NEB which included a settlement agreement negotiated
between NGTL and members of its Tolls, Tariff, Facilities and
Procedures (TTFP) committee, which represents stakeholders. The
settlement is supported by a majority of members of the TTFP
committee. The Application addresses rate design, terms and
conditions of service for the NGTL System and a tolling methodology
for the North Montney Mainline (NMML). Given the complexity of the
issues raised in the Application, the NEB decided to hold a public
hearing which is expected to conclude in fourth quarter 2019.On May
16, 2019, the NEB approved the proposed NMML tolling methodology
including the surcharge, as filed, on an interim basis, pending the
outcome of the above Rate Design and Services Application.
- Canadian Mainline: On May 9, 2019, we received NEB approval of
the NBJ LTFP service, as filed.
U.S. Natural Gas Pipelines:
- Sale of Columbia Midstream assets: On July 2, 2019, we entered
into an agreement to sell certain Columbia Midstream assets to UGI
Energy Services, LLC, a subsidiary of UGI Corporation, for proceeds
of approximately US$1.3 billion. The transaction is expected to
close in third quarter 2019 subject to post-closing adjustments and
customary regulatory approvals. The sale is expected to result in a
pre-tax gain of $20 million ($130 million after-tax loss), which
includes the release of an estimated $589 million of Columbia's
goodwill allocated to these assets that is not deductible for tax
purposes. The gain and related tax impact will be recognized upon
closing of the transaction. This sale does not include any interest
in Columbia Energy Ventures Company, which is our minerals business
in the Appalachian basin.
- East Lateral XPress: In second quarter 2019, we approved the
East Lateral XPress project, an expansion project on the Columbia
Gulf system that will connect supply to Gulf Coast LNG export
markets. Subject to a positive customer FID, the anticipated
in-service is 2022 with estimated project costs of US$0.3
billion.
- Louisiana XPress and Grand Chenier XPress: Combined, the
Louisiana XPress and Grand Chenier XPress projects will connect
nearly 2 Bcf/d of supply to Gulf Coast LNG export facilities. Both
projects have now obtained necessary customer approvals or waivers
of conditions allowing the projects to move to the execution phase.
The anticipated in-service date of Louisiana XPress is in 2022 and
estimated project costs are US$0.4 billion. The anticipated
in-service dates for Grand Chenier are in 2021 and 2022 for Phase I
and II, respectively, with total estimated project costs of US$0.2
billion.
Mexico Natural Gas Pipelines:
- Sur de Texas: In June 2019, we completed construction and
commissioning activities for the 775 km (482 mile) Sur de Texas
pipeline, which has the capacity to provide up to 2.6 Bcf/d of
natural gas supply to Mexico directly from the United States. We
communicated the pipeline’s readiness for operation to both the
regulator, Comisión Reguladora de Energía (CRE), and our customer,
Comisión Federal de Electricidad (CFE), as required under our
service contract. We require CFE's acknowledgment of readiness
prior to commencing transportation service to CFE. To date, CFE has
not provided this acknowledgment and, as a result, we have not been
able to commence transportation services under their contract.
- Villa de Reyes: Construction of the Villa de Reyes project is
ongoing, but the project has experienced force majeure events that
have delayed the schedule. We anticipate a phased in-service
sequence to commence late 2019.
- Tula: Construction for the central segment of the Tula project
has been delayed due to a lack of progress by the Secretary of
Energy, the governmental department responsible for Indigenous
consultations. Project completion has been revised to the end of
2021.
- CFE Arbitration: In June 2019, CFE filed requests for
arbitration under the Sur de Texas, Villa de Reyes and Tula
contracts, seeking nullification of clauses that govern the
parties’ responsibilities in instances of force majeure and require
reimbursement of fixed capacity payments. We are analyzing the
content of the arbitration requests and preparing our response. In
our view, the contracts were properly established in accordance
with all original bid and regulatory requirements and remain valid
and enforceable. We will defend them as necessary through the
arbitration proceedings.We have received certain capacity
payments under force majeure provisions in the contracts
governing the Sur de Texas, Villa de Reyes and Tula projects but we
have not commenced recording revenues under these contracts.The
President of Mexico and the CEO of CFE have also made public
statements questioning various provisions of the Sur de Texas,
Villa de Reyes and Tula contracts. The parties have invited us to
participate in negotiations to address these perceived issues and
we have commenced discussions.
Liquids Pipelines:
- White Spruce: The White Spruce pipeline, which transports crude
oil from Canadian Natural Resources Limited's Horizon facility in
northeast Alberta to the Grand Rapids pipeline, was placed in
service in May 2019.
- Northern Courier: On July 17, 2019, we completed the sale of an
85 per cent equity interest in the Northern Courier pipeline to
Alberta Investment Management Corporation for gross proceeds of
$144 million before post-closing adjustments, resulting in an
expected pre-tax gain of $70 million after recording our remaining
15 per cent interest at fair value. On an after-tax basis, the gain
of approximately $115 million reflects the utilization of
previously unrecognized tax loss benefits. Preceding the equity
sale, Northern Courier pipeline issued $1.0 billion of long-term,
non-recourse debt, the proceeds from which were paid to TC Energy,
resulting in aggregate gross proceeds to TC Energy of approximately
$1.15 billion from this asset monetization.We will remain the
operator of the Northern Courier pipeline and will use the equity
method to account for our remaining 15 per cent interest in our
Consolidated financial statements.
- Keystone XL: A decision from the Nebraska Supreme Court on the
appeal of the Nebraska Public Service Commission route approval
remains pending. We expect the decision to be issued in third
quarter 2019.In March 2019, U.S. President Trump issued a new
Presidential Permit for the Keystone XL project, which superseded
the 2017 Permit.On June 6, 2019, the U.S. Court of Appeals
(Appellate Court) for the Ninth Circuit granted TC Energy’s and the
U.S. Government’s motions to dismiss the appeals from the various
rulings of the District Court in Montana affecting the 2017
Keystone XL Presidential Permit and the associated injunction
barring certain pre-construction activities and construction of the
project. The Appellate Court found that issuance of the new
Presidential Permit negates the challenges to the 2017 Permit. The
Appellate Court overturned the District Court’s injunction orders
and, on July 29, 2019, the injunction was dissolved.
Power and Storage (previously Energy):
- Ontario Natural Gas-Fired Power Plants: On July 30, 2019, we
entered into an agreement to sell our Halton Hills and Napanee
power plants as well as our 50 per cent interest in Portlands
Energy Centre to a subsidiary of Ontario Power Generation Inc. for
proceeds of approximately $2.87 billion, subject to timing of the
close and related adjustments. The sale is expected to close in
late 2019 subject to conditions which include regulatory approvals
and Napanee reaching commercial operations as outlined in the
agreement. We expect this sale to result in a total pre-tax
loss of approximately $230 million ($150 million after tax),
with $125 million of the pre-tax loss recorded at July 30, 2019
upon classifying the net assets as held for sale. The remaining
loss will be recorded on or before closing of the transaction. In
March 2019, Napanee experienced an equipment failure while
progressing commissioning activities. Steps are being taken to
address the situation and commercial operations are expected to
commence by the end of 2019.
- Coolidge Generating Station: In December 2018, we entered into
an agreement to sell our Coolidge generating station in Arizona to
SWG Coolidge Holdings, LLC (SWG). Salt River Project Agriculture
Improvement and Power District (SRP), the PPA counterparty,
subsequently exercised its contractual right of first refusal
(ROFR) on a sale to a third party and we terminated the agreement
with SWG. On May 21, 2019, we completed the sale to SRP for
proceeds of US$448 million before post-closing adjustments, as per
the terms of their ROFR, resulting in a pre-tax gain of $68 million
($54 million after tax).
- Monetization of U.S. Northeast power business: In May 2019, we
sold our remaining U.S. Northeast power marketing contracts. This
transaction concludes the wind-down of our U.S. Northeast power
marketing business.
Corporate:
- Common Share Dividend: Our Board of Directors declared a
quarterly dividend of $0.75 per common share for the quarter ending
September 30, 2019 on TC Energy's outstanding common shares. The
quarterly amount is equivalent to $3.00 per common share on an
annualized basis.
- Issuance of Long-term Debt: In April 2019, TCPL issued $1.0
billion of Medium Term Notes due in October 2049 bearing interest
at a fixed rate of 4.34 per cent. The net proceeds of this debt
issuance were used for general corporate purposes and to fund our
capital program.
- Dividend Reinvestment Plan: In second quarter 2019, the DRP
participation rate amongst common shareholders was approximately 34
per cent resulting in $238 million reinvested in common equity
under the program. Year-to-date in 2019, the participation rate
amongst common shareholders has been approximately 33 per cent
resulting in $464 million of dividends reinvested.
- Corporate Name Change: On May 3, 2019, TransCanada
Corporation changed its name to TC Energy Corporation following
shareholder approval at our 2019 annual and special meeting.
Teleconference and Webcast:
We will hold a teleconference and webcast on Thursday, August 1,
2019 to discuss our second quarter 2019 financial results. Russ
Girling, President and Chief Executive Officer, Don Marchand,
Executive Vice-President and Chief Financial Officer, and members
of the executive leadership team will discuss TC Energy's second
quarter financial results and company developments at 9 a.m. MDT /
11 a.m. EDT.
Members of the investment community and other interested parties
are invited to participate by calling 800.377.0758 or 416.340.2218
(Toronto area). Please dial in 10 minutes prior to the start of the
call. No pass code is required. A live webcast of the
teleconference will be available on TC Energy's website
at www.TCEnergy.com/events or via the following URL:
www.gowebcasting.com/10024.
A replay of the teleconference will be available two hours after
the conclusion of the call until midnight (EDT) on August 8, 2019.
Please call 800.408.3053 or 905.694.9451 (Toronto area) and enter
pass code 6470380#.
The unaudited interim Condensed consolidated financial
statements and Management’s Discussion and Analysis (MD&A) are
available under TC Energy's profile on SEDAR at
www.sedar.com, with the U.S. Securities and
Exchange Commission on EDGAR at
www.sec.gov/info/edgar.shtml and on our
website at www.TCEnergy.com.
TC Energy and its affiliates deliver the energy millions of
people rely on every day to power their lives and fuel industry. We
are not only focused on what we do, but how we do it - guided by
core values of safety, responsibility, collaboration and integrity,
our more than 7,000 people are committed to sustainably developing
and operating pipeline, power generation and energy storage
facilities across Canada, the United States and Mexico. TC
Energy's common shares trade on the Toronto (TSX) and New York
(NYSE) stock exchanges under the symbol TRP.
Visit www.TCEnergy.com and connect with us on social
media to learn more.
Forward Looking Information
This release contains certain information that is
forward-looking and is subject to important risks and uncertainties
(such statements are usually accompanied by words such as
"anticipate", "expect", "believe", "may", "will", "should",
"estimate", "intend" or other similar words). Forward-looking
statements in this document are intended to provide TC Energy
security holders and potential investors with information regarding
TC Energy and its subsidiaries, including management's assessment
of TC Energy's and its subsidiaries' future plans and financial
outlook. All forward-looking statements reflect TC Energy's beliefs
and assumptions based on information available at the time the
statements were made and as such are not guarantees of future
performance. As actual results could vary significantly from the
forward-looking information, you should not put undue reliance on
forward-looking information and should not use future-oriented
information or financial outlooks for anything other than their
intended purpose. We do not update our forward-looking information
due to new information or future events, unless we are required to
by law. For additional information on the assumptions made, and the
risks and uncertainties which could cause actual results to differ
from the anticipated results, refer to the Quarterly Report to
Shareholders dated July 31, 2019 and the 2018 Annual Report filed
under TC Energy's profile on SEDAR at www.sedar.com and with
the U.S. Securities and Exchange Commission at www.sec.gov.
Non-GAAP MeasuresThis news release contains
references to non-GAAP measures, including comparable earnings,
comparable earnings per common share, comparable EBITDA, comparable
distributable cash flow, comparable distributable cash flow per
common share and comparable funds generated from operations, that
do not have any standardized meaning as prescribed by U.S. GAAP and
therefore are unlikely to be comparable to similar measures
presented by other companies. These non-GAAP measures are
calculated on a consistent basis from period to period and are
adjusted for specific items in each period, as applicable except as
otherwise described in the Condensed consolidated financial
statements and MD&A. For more information on non-GAAP measures,
refer to TC Energy's Quarterly Report to Shareholders dated July
31, 2019.
Media Enquiries:Jaimie Harding / Warren
Beddow403.920.7859 or 800.608.7859
Investor & Analyst
Enquiries: David Moneta / Duane
Alexander403.920.7911 or 800.361.6522
Download full
report: http://ml.globenewswire.com/Resource/Download/2edb0913-24e1-41ad-a7a3-7c3e58ee7edc
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