TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company)
today announced net income attributable to common shares for third
quarter 2020 of $904 million or $0.96 per share compared to net
income of $739 million or $0.79 per share for the same period in
2019. For the nine months ended September 30, 2020, net income
attributable to common shares was $3.3 billion or $3.55 per share
compared to net income of $2.9 billion or $3.09 per share for the
same period in 2019. Comparable earnings for third quarter 2020
were $893 million or $0.95 per common share compared to $970
million or $1.04 per common share in 2019. For the nine months
ended September 30, 2020, comparable earnings were $2.9 billion or
$3.05 per common share compared to $2.9 billion or $3.11 per common
share for the same period in 2019. TC Energy's Board of Directors
also declared a quarterly dividend of $0.81 per common share for
the quarter ending December 31, 2020, equivalent to $3.24 per
common share on an annualized basis.
"During the first nine months of 2020, our diversified portfolio
of essential energy infrastructure continued to perform very well,”
said Russ Girling, TC Energy’s President and Chief Executive
Officer. ”Results once again highlight the resiliency of our assets
despite significant volatility in global energy markets. We
continue to deliver the energy and advance projects vital to
powering the North American economy in a safe and reliable manner,
employing thousands of people and fulfilling our obligations to all
stakeholders in these unprecedented times."
Despite the challenges brought about by COVID-19, TC Energy's
assets have been largely unimpacted. Across our extensive North
American operations, flows and utilization levels generally remain
in line with historical and seasonal norms, underscoring the
importance of our assets to the North American economy. Given the
regulated and/or long-term contracted nature of our portfolio, we
continue to be largely insulated from volatility associated with
volume throughput and commodity prices. As a result, the Company's
outlook for full year 2020 is essentially unchanged.
TC Energy also continues to advance its industry leading $37
billion secured capital program and placed over $3 billion of
assets into service during the first nine months of 2020.
Importantly, all of our capital projects are underpinned by
long-term contracts highlighting the market need for this critical
new infrastructure while at the same time giving us visibility to
the earnings and cash flow they will generate as they enter service
over the next four years. Looking beyond the current suite of
projects, we are well positioned to capture future growth
opportunities associated with our extensive asset footprint and
deep organizational capabilities as well as others that may arise
as the world both consumes more energy and transitions to a cleaner
energy future.
“Our significant internally generated cash flow, strong
financial position and continued access to capital markets will
enable us to prudently fund our secured capital program in a manner
that is consistent with maintaining our strong credit profile and
targeted metrics," added Girling. "Once completed, approximately 98
per cent of the Company’s EBITDA is expected to come from regulated
and/or long-term contracted assets. Success in advancing these and
other organic growth opportunities emanating from our five
operating businesses across North America is expected to support
annual dividend growth of eight to 10 per cent in 2021 and five to
seven per cent thereafter in this historically low-interest rate
environment."
Highlights(All financial figures are unaudited
and in Canadian dollars unless otherwise noted)
- Third quarter 2020 financial results
- Net income attributable to common shares of $904 million or
$0.96 per common share
- Comparable earnings of $893 million or $0.95 per common
share
- Comparable EBITDA of $2.3 billion
- Net cash provided by operations of $1.8 billion
- Comparable funds generated from operations of $1.7 billion
- Declared a quarterly dividend of $0.81 per common share for the
quarter ending December 31, 2020
- Announced the retirement of our President and CEO, Russ
Girling, effective December 31, 2020 and named his successor,
François Poirier, currently Chief Operating Officer and President,
Power & Storage
- Placed approximately $3.0 billion of NGTL System and $0.1
billion of Canadian Mainline capacity projects in service in the
first nine months of 2020
- Continued to advance $37 billion secured capital program by
investing $2.3 billion in various projects during the third
quarter
- Received approval for the NGTL System 2021 Expansion
Program which will add incremental capacity of 1.45 Bcf/d
- Approved the US$0.2 billion Wisconsin Access project on
October 28 to replace, upgrade and modernize certain ANR
facilities
- Received approval from the Canada Energy Regulator (CER) in
August for the NGTL System's 2020-2024 Revenue Requirement
Settlement Application as filed
- Announced a non-binding offer to acquire all of the
publicly-held outstanding common units of TC PipeLines, LP in
exchange for TC Energy common shares.
Net income attributable to common shares increased by $165
million or $0.17 per common share to $904 million or $0.96 per
share for the three months ended September 30, 2020 compared to the
same period last year. Per share results reflect the dilutive
impact of common shares issued under our Dividend Reinvestment and
Share Purchase Plan (DRP) in 2019. Third quarter 2020 results
included an incremental after-tax loss of $45 million related to
the sale of the Ontario natural gas-fired power plants on April 29,
2020 and a $6 million reduction to the after-tax gain related to
the sale of a 65 per cent equity interest in Coastal GasLink. Third
quarter 2019 included an after-tax loss of $133 million related to
the sale of the Ontario natural gas-fired power plants, an
after-tax loss of $133 million due to the sale of certain Columbia
Midstream assets and an after-tax gain of $115 million related to
the partial sale of Northern Courier. These specific items, as well
as unrealized gains and losses from changes in risk management
activities, are excluded from comparable earnings as we do not
consider them to be reflective of our underlying operations.
Comparable EBITDA decreased by $50 million for the three months
ended September 30, 2020 compared to the same period in 2019
primarily due to the net effect of the following:
- decreased earnings from Liquids Pipelines as a result of lower
uncontracted volumes on the Keystone Pipeline System and reduced
contributions from liquids marketing activities
- lower Power and Storage earnings mainly attributable to
decreased Bruce Power results due to the planned removal from
service of Unit 6 on January 17, 2020 for the Major Component
Replacement (MCR) program and decreased Canadian Power earnings
largely as a result of the sale of our Ontario natural gas-fired
power plants on April 29, 2020
- higher comparable EBITDA from Canadian Natural Gas Pipelines
primarily due to the impact of increased NGTL System rate base
earnings and flow-through depreciation from additional facilities
placed in service as well as higher financial charges on the NGTL
System, plus Coastal GasLink development fees, partially offset by
lower flow-through income taxes on the NGTL System
- lower operating costs in U.S. Natural Gas Pipelines on Columbia
Gas and Columbia Gulf and increased earnings from ANR as a result
of the sale of natural gas from certain gas storage facilities
- increased Mexico Natural Gas Pipelines results mainly due to
higher earnings from our investment in the Sur de Texas pipeline
which was placed in service in September 2019
- foreign exchange impact of a
stronger U.S. dollar on the Canadian dollar equivalent earnings in
our U.S. and Mexico operations.
Due to the flow-through treatment of certain expenses including
income taxes, financial charges and depreciation on our Canadian
rate-regulated pipelines, changes in these expenses impact our
comparable EBITDA despite having no significant effect on net
income.
Comparable earnings decreased by $77 million or $0.09 per common
share for the three months ended September 30, 2020 compared
to the same period in 2019 and was primarily the net effect of:
- changes in comparable EBITDA described above
- a decrease in Income tax expense mainly due to lower pre-tax
earnings, a reduction in the Alberta corporate income tax rate and
decreased flow-through income taxes on Canadian rate-regulated
pipelines
- lower Interest expense as a result of higher capitalized
interest mainly related to Keystone XL, net of the impact of
Napanee completing construction in first quarter 2020, and lower
interest rates on reduced levels of short-term borrowings,
partially offset by the effect of long-term debt issuances, net of
maturities
- higher depreciation largely in Canadian Natural Gas Pipelines
and U.S. Natural Gas Pipelines reflecting new assets placed in
service
- lower AFUDC predominantly due to NGTL System expansions placed
in service
- lower Interest income and other
primarily related to the peso-denominated inter-affiliate loan
receivable from the Sur de Texas joint venture reflecting lower
interest rates and the weakening of the Mexican peso in 2020.
Depreciation in Canadian Natural Gas Pipelines is recoverable in
tolls on a flow-through basis as discussed in comparable EBITDA
above, and therefore has no significant impact on comparable
earnings. Similarly, the interest income and our share of the
interest expense on the Sur de Texas inter-affiliate loans offset
within each reporting period, resulting in no impact on comparable
earnings. Comparable earnings per common share for the three months
ended September 30, 2020 also reflects the dilutive impact of
common shares issued under our DRP in 2019.
On March 11, 2020, the World Health Organization declared the
novel coronavirus, or COVID-19, a global pandemic. Company business
continuity plans are in place across our organization and we
continue to effectively operate our assets, conduct commercial
activities and execute on projects with a focus on health, safety
and reliability. Our businesses are broadly considered essential in
Canada, the United States and Mexico given the important role our
infrastructure plays in providing energy to North American markets.
We are confident that our robust continuity and business resumption
plans for critical teams, including liquids and gas control as well
as commercial and field operations, will continue to ensure the
safe and reliable delivery of energy for our customers.
With approximately 95 per cent of our comparable EBITDA
generated from rate-regulated assets and/or long-term contracts, we
are largely insulated from the short-term volatility associated
with fluctuations in volume throughput and commodity prices. Aside
from the impact of maintenance activities and normal seasonal
factors, to date we have not seen any pronounced changes in the
utilization of our assets, with the exception of the Keystone
Pipeline System which has experienced a reduction in uncontracted
volumes that we expect to remain until market conditions rebalance
and normalize. To date, we have not encountered any significant
impacts on our supply chain. While it is too early to ascertain any
long-term impact that COVID-19 may have on our capital program,
directionally we have observed some slowdown of our construction
activities and capital expenditures in 2020, largely due to
permitting delays as regulators have been unable to process permits
and conduct consultations in time frames that were originally
anticipated. In March 2020, as a result of COVID-19 impacts, Bruce
Power declared force majeure with respect to its Unit 6 MCR and
certain Asset Management work. As the MCR and Asset Management
activities continue to progress, the ultimate impact of the Unit 6
force majeure will depend on the extent and duration of the
pandemic and their ability to implement mitigation measures.
The full extent and lasting impact of the COVID-19 pandemic on
the global economy is as yet undetermined but to date has included
extreme volatility in financial markets and commodity prices, a
significant reduction in overall economic activity, widespread
extended shutdowns of businesses and supply chain disruptions. The
degree to which COVID-19 has a more pronounced longer-term impact
on our operations and growth projects will depend on future
developments, policies and actions, all of which remain highly
uncertain.
Other notable recent developments include:
Canadian Natural Gas Pipelines:
- Coastal GasLink: Field activity
continues along the pipeline route with crews continuing to
incorporate our COVID-19 guidelines for construction safety.
Ongoing work activity includes construction of roads, bridges,
worker accommodations, right of way grading and mainline mechanical
construction with a majority of the required pipe supply already
delivered to site.The introduction of partners, utilization of
dedicated project-level credit facilities, recovery of cash
payments through construction for carrying charges on costs
incurred and remuneration for costs paid to close of the sale are
expected to substantially satisfy our funding requirements through
project completion.Although the project continues its review of an
updated baseline of cost and schedule, we expect that project costs
will rise compared to the previously disclosed estimate due to
scope increases, permit delays and COVID-19 impacts; however, we do
not expect our future equity contributions to increase
significantly following the conclusion of this process.
- NGTL System: In the nine months
ended September 30, 2020, the NGTL System placed approximately $3.0
billion of capacity projects in service. On February 19, 2020, the
CER issued a report recommending that the Governor in Council (GIC)
approve the 2021 NGTL System Expansion Program. The GIC
approved the program on October 19, 2020 and the NGTL System plans
to immediately progress construction activities in accordance with
regulatory requirements. Compressor station field work is expected
to begin in December 2020 with pipeline construction
activities planned to commence in January 2021. Once
facilities are placed in service, the 2021 NGTL System Expansion
Program will provide 1.59 PJ/d (1.45 Bcf/d) of incremental system
capacity underpinned by long-term receipt and delivery contracts,
connecting incremental supply to growing intra-basin and export
markets. In-service is expected through 2021, with all program
components expected to be completed by April 2022.On August 17,
2020, the CER approved the NGTL System's 2020-2024 Revenue
Requirement Settlement negotiated with its customers and other
interested parties. The settlement, effective January 1, 2020,
maintains the equity return at 10.1 per cent on 40 per cent deemed
common equity, provides the NGTL System with the opportunity to
increase depreciation rates if tolls fall below projected levels
and includes an incentive mechanism for certain operating costs
where variances from projected amounts are shared between the NGTL
System and its customers. It also includes a mechanism to review
the settlement should tolls exceed a pre-determined level, without
affecting the equity return.
U.S. Natural Gas Pipelines:
- Wisconsin Access: On October 28,
2020, we approved the Wisconsin Access project that will replace,
upgrade and modernize certain facilities while reducing emissions
on a highly utilized segment of the ANR pipeline system. The
enhanced facilities will improve reliability of the ANR pipeline
system and also allow for additional contracted transportation
services of approximately 77 TJ/d (72 MMcf/d) to be provided to
utilities serving the Midwestern United States under long-term
contracts. The anticipated in-service date of the combined project
is in the second half of 2022 with estimated costs of US$0.2
billion.
- Elwood Power Project/ANR
Horsepower Replacement: On July 29, 2020, we approved the Elwood
Power Project/ANR Horsepower Replacement that will replace, upgrade
and modernize certain facilities while reducing emissions along a
highly utilized section of the ANR pipeline system. The enhanced
facilities will improve reliability of the ANR pipeline system and
also allow for additional contracted transportation services of
approximately 132 TJ/d (123 MMcf/d) to be provided to an existing
power plant near Joliet, Illinois. The anticipated in-service date
of the combined project is in the second half of 2022 with
estimated costs of US$0.4 billion.
- Columbia Gas Section 4 Rate Case:
Columbia Gas filed a general Natural Gas Act Section 4 Rate Case
with FERC on July 31, 2020 requesting an increase to Columbia Gas's
maximum transportation rates expected to become effective February
1, 2021, subject to refund. The rate case continues to progress as
expected, and we intend to pursue a collaborative process to reach
a mutually beneficial outcome with our customers through settlement
negotiations.
Mexico Natural Gas Pipelines:
- Villa de Reyes: Villa de Reyes
project construction is ongoing. The project has been delayed due
to COVID-19 contingency measures which impeded our ability to
obtain work authorizations as a result of government administrative
closures. We expect to complete construction of Villa de Reyes in
the first half of 2021.
Liquids Pipelines:
- Keystone XL: On March 31, 2020, we
announced that we would proceed with construction of Keystone XL,
resulting in an expected additional investment of approximately
US$8.0 billion. Construction commenced in April and the pipeline is
expected to be placed into service in 2023.As part of the funding
plan, the Government of Alberta has agreed to invest approximately
US$1.1 billion as equity in Keystone XL which substantially covers
planned construction costs through the end of 2020. The remaining
capital investment of approximately US$6.9 billion is expected to
be financed through the combination of a US$4.2 billion
project-level credit facility to be fully guaranteed by the
Government of Alberta and a US$2.7 billion investment by us. Our
remaining capital contribution is expected to be funded through a
combination of internally generated cash flows, hybrid securities
and common equity through the activation of our DRP in 2021 and
2022. Once the project is completed and placed into service, we
expect to acquire the Government of Alberta's equity investment
under agreed terms and conditions and to refinance borrowings under
the US$4.2 billion credit facility in the debt capital
markets.Keystone XL is underpinned by new 20-year transportation
service agreements which are expected to generate approximately
US$1.3 billion of EBITDA on an annual basis. Subject to terms and
conditions outlined in the agreements, 50 per cent of any
differences between the estimated capital cost and final cost of
Keystone XL are subject to a sharing mechanism and will be
reflected in the pipeline tolls.The Company continues to manage
various legal and regulatory matters related to the project.
Power and Storage:
- Bruce Power – Life Extension: In
late March 2020, as a result of COVID-19 impacts, Bruce Power
declared force majeure under its contract with the Independent
Electricity System Operator. This force majeure notice covers the
Unit 6 MCR and certain Asset Management work. On May 11, 2020, work
on the Unit 6 MCR and Asset Management programs was restarted with
additional prevention measures in place for worker safety related
to COVID-19 and progress continuing on critical path activities.
The impact of the force majeure will ultimately depend on the
extent and duration of disruptions resulting from the pandemic and
their ability to implement mitigation measures.On October 1, 2020,
the Unit 6 MCR project achieved a major milestone with the
completion of the preparation phase and the commencement of the
Fuel Channel and Feeder Replacement Program. Operations on the
remaining units continues as normal with scheduled outages on Units
3, 4 and 5 successfully completed in second quarter 2020 and the
Unit 8 outage, currently underway, is progressing as expected.
Corporate:
- Retirement of our President and
CEO, Russ Girling: On September 21, 2020, we announced the
retirement of Russ Girling as President and CEO of TC Energy and
from our Board of Directors effective December 31, 2020. François
Poirier, currently Chief Operating Officer and President, Power
& Storage, will succeed Mr. Girling as President and CEO and
will join the Board on January 1, 2021. Mr. Girling will assist Mr.
Poirier with the transition through February 28, 2021.
- Common share dividend: Our Board
of Directors declared a quarterly dividend of $0.81 per common
share for the quarter ending December 31, 2020. The quarterly
amount is equivalent to $3.24 per common share on an annualized
basis.
- Proposed acquisition of common
units of TC PipeLines, LP: On October 5, 2020, we announced a
non-binding offer to acquire all of the publicly-held outstanding
common units of our master limited partnership, TC PipeLines, LP,
in exchange for TC Energy common shares. Under the proposal, TC
PipeLines, LP common unitholders would receive 0.65 common shares
of TC Energy for each issued and outstanding publicly-held TC
PipeLines, LP common unit. The proposed exchange ratio reflected a
value for all the publicly held common units of TC PipeLines, LP of
approximately US$1.48 billion, or 35.2 million TC Energy common
shares based on the price of our common shares on October 2, 2020.
The transaction is subject to the review and favourable
recommendation by an independent conflicts committee of the Board
of Directors of the general partner of TC PipeLines, LP (the TC
PipeLines, LP Board), approvals by the TC PipeLines, LP Board and
the TC Energy Board of Directors, along with the holders of a
majority of the outstanding common units of TC PipeLines, LP, as
well as customary regulatory approvals.
Teleconference and Webcast:
We will hold a teleconference and webcast on Thursday, October
29, 2020 to discuss our third quarter 2020 financial results. Russ
Girling, President and Chief Executive Officer, Don Marchand,
Executive Vice-President, Strategy & Corporate Development and
Chief Financial Officer, François Poirier, Chief Operating Officer
and President, Power & Storage along with other members of the
executive leadership team will discuss TC Energy's financial
results and Company developments at 9:00 a.m. MDT / 11:00 a.m.
EDT.
Members of the investment community and other interested parties
are invited to participate by calling 1.855.327.6838. No pass code
is required. Please dial in 15 minutes prior to the start of the
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: http://www.gowebcasting.com/10883.
A replay of the teleconference will be available two hours after
the conclusion of the call until midnight (EDT) on November 5,
2020. Please call 1.855.669.9658 and enter pass code 5322.
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.sedar.com and with the U.S. Securities and
Exchange Commission on EDGAR at
www.sec.gov.
About TC Energy
We are a vital part of everyday life – delivering the energy
millions of people rely on to power their lives in a sustainable
way. Thanks to a safe, reliable network of natural gas and
crude oil pipelines, along with power generation and storage
facilities, wherever life happens – we’re there. Guided by our core
values of safety, responsibility, collaboration and integrity, our
more than 7,500 people make a positive difference in the
communities where we operate across Canada, the U.S. and
Mexico.
TC Energy's common shares trade on the Toronto (TSX) and New
York (NYSE) stock exchanges under the symbol TRP. To learn more,
visit us at www.TCEnergy.com.
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 most recent Quarterly
Report to Shareholders and 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 Measures
This news release contains references to non-GAAP measures,
including comparable earnings, comparable earnings per common
share, comparable EBITDA 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 most recent Quarterly Report to
Shareholders.
Media Inquiries:Jaimie Harding / Hejdi
Carlsen403.920.7859 or 800.608.7859
Investor & Analyst
Inquiries: David
Moneta / Hunter Mau403.920.7911 or 800.361.6522
Download full report here:
https://www.tcenergy.com/siteassets/pdfs/investors/reports-and-filings/annual-and-quarterly-reports/2020/tc-2020-q3-quarterly-report.pdf
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