TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company)
released its first quarter results today. TC Energy's President and
Chief Executive Officer, François Poirier commented that, “During
the first three months of 2022, our diversified and
opportunity-rich portfolio of essential energy infrastructure
assets continued to deliver strong results and reliably meet North
America's growing demand for energy. By working closely with our
customers, we are developing long-term strategic partnerships and
innovative energy solutions with the expectation of sanctioning
over $5 billion of new projects annually, in line with our historic
risk and return preferences."
Highlights
(All financial figures are unaudited and in Canadian dollars
unless otherwise noted)
- First quarter 2022 results were underpinned by solid
utilization and reliability across our assets, further supported by
the constructive fundamental outlook for North American energy. The
growing need for energy security has placed renewed focus on the
long-term role our infrastructure will play in responsibly
fulfilling North America's energy demands:
- The NGTL System had its highest average winter demand since
2000 of 14.2 Bcf/d
- U.S. Natural Gas Pipelines reached average flows of 30 Bcf/d,
up five per cent compared to first quarter 2021, including an
all-time daily system delivery record of nearly 35 Bcf in January
2022
- Today, around a quarter of the U.S. LNG export volumes travel
through our U.S. Natural Gas Pipelines
- First quarter 2022 financial results
- Net income attributable to common shares of $0.4 billion or
$0.36 per common share compared to a net loss of $1.1 billion or a
loss of $1.11 per common share in 2021. Comparable earnings1 of
$1.1 billion or $1.12 per common share compared to $1.1 billion or
$1.16 per common share in 2021
- Segmented earnings of $1.2 billion compared to segmented losses
of $0.9 billion in 2021 and comparable EBITDA1 of $2.4 billion
compared to $2.5 billion in 2021
- Net cash provided by operations of $1.7 billion was consistent
with 2021 results and comparable funds generated from
operations1 was $1.9 billion compared to $2.0 billion in 2021
- Declared a quarterly dividend of $0.90 per common share for the
quarter ending June 30, 2022
- Consistent with our 2021 Annual Report outlook, 2022 comparable
EBITDA is expected to be modestly higher than 2021, while 2022
comparable earnings per common share are expected to be consistent
with 2021
- Continued to advance our $25 billion secured capital program by
investing $1.7 billion in various growth projects
- Filed ANR rate case with FERC in January and filed Great Lakes
unopposed rate settlement in March 2022
- Received FERC approval for Alberta XPress and North Baja XPress
projects in April 2022
- Received verification of final cost and schedule estimates for
the Bruce Power Unit 3 MCR program from IESO in March
- To date in 2022, finalized contracts for approximately 160 MW
and 240 MW from our wind energy and solar projects, respectively,
following the RFI process initiated in 2021. Expect to finalize
additional contracts in 2022
- Received notice on March 29, 2022 from the Government of
Alberta that the Final Project Proposal to build and operate the
Alberta Carbon Grid, a joint-venture with Pembina Pipeline
Corporation, moves forward to the next stage
- Announced a plan to evaluate a hydrogen production hub in
Crossfield, Alberta in April 2022
- Issued US$800 million of Junior Subordinated Notes through
TransCanada Trust in March 2022.
|
|
three months endedMarch 31 |
(millions of $, except per share amounts) |
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
Income |
|
|
|
|
Net income/(loss) attributable
to common shares |
|
|
358 |
|
|
|
(1,057 |
) |
per common share – basic |
|
$0.36 |
|
|
($1.11 |
) |
|
|
|
|
|
Segmented
earnings/(losses) |
|
|
|
|
Canadian Natural Gas Pipelines |
|
|
358 |
|
|
|
356 |
|
U.S. Natural Gas Pipelines |
|
|
310 |
|
|
|
873 |
|
Mexico Natural Gas Pipelines |
|
|
120 |
|
|
|
152 |
|
Liquids Pipelines |
|
|
272 |
|
|
|
(2,508 |
) |
Power and Storage |
|
|
76 |
|
|
|
163 |
|
Corporate |
|
|
31 |
|
|
|
32 |
|
Total segmented earnings/(losses) |
|
|
1,167 |
|
|
|
(932 |
) |
|
|
|
|
|
Comparable
EBITDA |
|
|
|
|
Canadian Natural Gas Pipelines |
|
|
644 |
|
|
|
686 |
|
U.S. Natural Gas Pipelines |
|
|
1,107 |
|
|
|
1,055 |
|
Mexico Natural Gas Pipelines |
|
|
148 |
|
|
|
180 |
|
Liquids Pipelines |
|
|
329 |
|
|
|
393 |
|
Power and Storage |
|
|
157 |
|
|
|
178 |
|
Corporate |
|
|
3 |
|
|
|
(3 |
) |
Comparable EBITDA |
|
|
2,388 |
|
|
|
2,489 |
|
Depreciation and amortization |
|
|
(626 |
) |
|
|
(645 |
) |
Interest expense |
|
|
(580 |
) |
|
|
(570 |
) |
Allowance for funds used during construction |
|
|
75 |
|
|
|
50 |
|
Interest income and other included in comparable earnings |
|
|
67 |
|
|
|
92 |
|
Income tax expense included in comparable earnings |
|
|
(179 |
) |
|
|
(203 |
) |
Net income attributable to non-controlling interests |
|
|
(11 |
) |
|
|
(69 |
) |
Preferred share dividends |
|
|
(31 |
) |
|
|
(38 |
) |
Comparable earnings |
|
|
1,103 |
|
|
|
1,106 |
|
Comparable earnings per common share |
|
$1.12 |
|
|
$1.16 |
|
|
|
|
|
|
Net cash provided by
operations |
|
|
1,707 |
|
|
|
1,666 |
|
Comparable funds generated
from operations |
|
|
1,865 |
|
|
|
2,023 |
|
Capital spending1 |
|
|
1,724 |
|
|
|
1,885 |
|
|
|
|
|
|
Dividends
declared |
|
|
|
|
Per common share |
|
$0.90 |
|
|
$0.87 |
|
Basic common shares
outstanding (millions) |
|
|
|
|
– weighted average for the period |
|
|
981 |
|
|
|
953 |
|
– issued and outstanding at end of period |
|
|
983 |
|
|
|
979 |
|
1. Includes Capital expenditures, Capital projects in
development and Contributions to equity investments.
CEO Message
During the first three months of 2022, our diversified and
opportunity-rich portfolio of essential energy infrastructure
assets continued to deliver strong results and reliably meet North
America's growing demand for energy. Comparable earnings of $1.12
per common share and comparable funds generated from operations of
$1.9 billion reflect the solid performance of our assets and the
utility-like nature of our business together with contributions
from projects that entered service in 2021.
The global environment continues to be complex, representing an
urgent need to develop greater energy security. Now more than ever,
we understand the importance of North America's role in securing
global energy supply. By working closely with our customers, we
continue to develop innovative energy solutions to move, generate
and store the energy people need daily while also advancing our
shared goals for sustainability.
Our results are underpinned by strong demand for our services
along with a constant focus on operational excellence. Flows and
utilization levels across many of our systems are robust, with the
NGTL System having its highest average winter demand since 2000 of
14.2 Bcf/d and U.S. Natural Gas Pipelines reaching average flows of
30 Bcf/d, up five per cent compared to first quarter 2021,
including an all-time daily system delivery record of nearly 35 Bcf
in January. Given the solid performance year-to-date, we reiterate
that 2022 comparable EBITDA is expected to be modestly higher than
2021 and our 2022 comparable earnings per common share outlook is
expected to be consistent with 2021. Please refer to the 2021
Annual Report for additional details.
We are advancing our $25 billion secured capital program and
expect to sanction over $5 billion of new projects per year
throughout the decade, including recoverable maintenance capital.
Importantly, all of our secured capital projects are underpinned by
long-term contracts and/or regulated business models, giving us
visibility to deliver earnings and cash flow growth, while reducing
our GHG emissions intensity and continuing to lower our overall
leverage metrics.
Looking forward, we remain opportunity-rich and intend to
continue expanding, extending and modernizing our existing natural
gas pipeline network, advancing the Bruce Power life extension
program and continuing plans to use renewable energy to power
certain of our proprietary and aggregated demand. With an emphasis
on capital discipline, we continue to advance our renewable and
emission-free projects under development including pumped hydro
storage, solar and wind PPAs, the Alberta Carbon Grid and
large-scale hydrogen production. Success in progressing our current
slate of secured projects and various other growth initiatives is
expected to support long-term growth in earnings before interest,
taxes, depreciation and amortization, or comparable EBITDA, as well
as comparable earnings and cash flow per share. Based on the
confidence we have in our business plans, we expect to continue to
grow the common share dividend at an annual rate of three to five
per cent. This is consistent with our conservative approach to
capital allocation, historic risk-adjusted return profile and is
expected to provide the capacity to fund our sizeable capital
program while enhancing our financial strength and flexibility.
OUTLOOK
Consolidated comparable earnings
- Our overall comparable EBITDA and
comparable earnings per common share outlook for 2022 remains
consistent with the 2021 Annual Report. 2022 comparable EBITDA is
expected to be modestly higher than 2021 and 2022 comparable
earnings per common share outlook is expected to be consistent with
2021. Please refer to the 2021 Annual Report for additional
details. We continue to monitor the impact of changes in energy
markets, our construction projects and regulatory proceedings as
well as COVID-19 for any potential effect on our 2022 comparable
EBITDA and comparable earnings per common share.
Consolidated capital spending
- Our total capital expenditures for
2022 are expected to be approximately $7 billion. The increase in
2022 capital expenditures from what was outlined in the 2021 Annual
Report is primarily due to higher costs for the NGTL System,
reflecting inflationary pressures on labour and materials,
additional regulatory conditions and other factors. We continue to
work on cost mitigation strategies and assess market conditions,
developments in our construction projects and the impact of
COVID-19 for further changes to our overall 2022 capital
program.
NOTABLE RECENT DEVELOPMENTS INCLUDE:
Canadian Natural Gas Pipelines
- Coastal GasLink:
The Coastal GasLink project is approximately 63 per cent complete.
The entire route has been cleared, grading is more than 74 per cent
complete and more than 275 km of pipeline has been installed, with
reclamation activities underway in many areas.On March 9, 2022, we
announced the signing of option agreements to sell a 10 per cent
equity interest in Coastal GasLink Pipeline Limited Partnership
(Coastal GasLink LP) to Indigenous communities across the project
corridor. The opportunity to become business partners through
equity ownership was made available to all 20 Nations holding
existing agreements with Coastal GasLink LP. The Nations have
established two entities that together currently represent 16
Indigenous communities that have confirmed their support for the
option agreements. The equity option is exercisable after
commercial in-service of the pipeline, subject to customary
regulatory approvals and consents, including the consent of LNG
Canada.Coastal GasLink is in dispute with LNG Canada with respect
to the recognition of certain costs and the impacts on schedule;
however, the parties are in active and constructive discussions
toward a resolution of this matter. We do not expect any suspension
of construction activities due to the dispute while discussions
continue. The ultimate level of debt financing and the amounts to
be contributed as equity by Coastal GasLink LP partners, including
us, will be determined by the substance of a resolution with LNG
Canada.We increased our commitment under a subordinated loan
agreement to Coastal GasLink LP by $500 million in March 2022. This
brings the total commitment under the subordinated loan agreement
to $3.8 billion, which has been arranged in order to provide
temporary financing to the project to fund incremental costs, if
necessary, as a bridge to a required increase in project-level
financing. At March 31, 2022, $289 million was outstanding on these
loans (December 31, 2021 – $238 million).
- NGTL System: In the
three months ended March 31, 2022, the NGTL System placed
approximately $0.2 billion of capacity projects in service.
U.S. Natural Gas Pipelines
- Columbia Gas Section 4 Rate
Case: Columbia Gas reached a settlement with its customers
effective February 2021 and received FERC approval on February 25,
2022. As part of the settlement there is a moratorium on any
further rate changes until April 1, 2025. Columbia Gas must file
for new rates with an effective date no later than April 1, 2026.
Previously accrued rate refund liabilities were refunded to
customers, including interest, in second quarter 2022.
- ANR Section 4 Rate
Case: ANR filed a Section 4 rate case with FERC on January
28, 2022 requesting an increase to ANR's maximum transportation
rates effective August 1, 2022, subject to refund upon completion
of the rate proceeding. The rate case is progressing as expected as
we continue to pursue a collaborative process to find a mutually
beneficial outcome with our customers, FERC and other stakeholders
through settlement negotiations.
- Great Lakes: On
March 18, 2022, Great Lakes reached an uncontested pre-filing
settlement with its customers and filed an unopposed rate
settlement with FERC by which Great Lakes and the settling parties
agreed to maintain existing recourse rates through October 31,
2025.While the settlement created short-term rate certainty, it
prompted a re-evaluation of Great Lakes’ long-term free cash flows
which resulted in a US$451 million goodwill impairment charge being
recorded in first quarter 2022.
- KO Transmission Enhancement
Acquisition: On April 28, 2022, we approved the
approximately US$80 million acquisition of KO Transmission assets
to be integrated into our Columbia Gas pipeline. After filing for
and receiving FERC approval of Columbia Gas’ acquisition of KO
Transmission assets, which is expected by the end of 2022, this
expanded footprint will provide additional last-mile connectivity
of Columbia Gas into northern Kentucky and southern Ohio to growing
LDC markets. It will also provide a platform for future capital
investments including future conversions of coal-fueled power
plants in the region.
- Renewable Natural Gas Hub
Development: In April 2022, we announced a strategic
collaboration with GreenGasUSA to explore development of a network
of natural gas transportation hubs, including renewable natural gas
(RNG). The transportation hubs would provide centralized access to
existing energy transportation infrastructure for RNG sources, such
as farms, wastewater treatment facilities and landfills. This
collaboration will rapidly expand and provide incremental
capability to the 10 current RNG interconnects across our U.S.
natural gas pipeline footprint. The development of these hubs is a
critical step towards the acceleration of methane capture projects
and the concurrent reduction of GHG emissions.
- Alberta XPress and North Baja XPress Projects:
In April 2022, FERC provided certificate orders approving our
Alberta XPress and North Baja XPress projects. The Alberta XPress
project is an expansion of ANR that utilizes existing capacity on
Great Lakes and the Canadian Mainline to connect growing supply
from the WCSB to U.S. Gulf Coast LNG export markets. The
anticipated in-service date is late 2022 or early 2023 with an
estimated project cost of US$0.3 billion. The North Baja XPress
project is designed to expand capacity on North Baja to meet
increased customer demand by upgrading one existing compressor
station and two existing meter stations in Arizona and California
with a mid-2023 expected in-service date and total anticipated cost
of $0.1 billion. All the upgrades required for North Baja XPress
will occur on property and within facilities currently owned and/or
operated by North Baja.
Mexico Natural Gas Pipelines
- Tula and Villa de
Reyes: The CFE initiated arbitration in June 2019 for the
Tula and Villa de Reyes projects, disputing fixed capacity payments
due to force majeure events. Arbitration proceedings are currently
suspended while management holds collaborative settlement
discussions with the CFE.We successfully achieved mechanical
completion of the Villa de Reyes project's lateral and north
sections in April 2022. Construction of the south section is
ongoing and we expect to complete the construction of the Villa de
Reyes project in 2022, subject to the successful resolution of
ongoing negotiations with neighbouring communities to obtain
pending land access.
Power and Storage
- Bruce Power Life
Extension: On March 7, 2022, the IESO verified Bruce
Power's Unit 3 MCR program final cost and schedule duration
estimate submitted in December 2021. The Unit 3 MCR program is
scheduled to begin in first quarter 2023 with an expected
completion in 2026.Bruce Power's contract price increased by
approximately $10 per MWh on April 1, 2022, reflecting capital to
be invested under the Unit 3 MCR program and the 2022 to 2024 Asset
Management program plus normal annual inflation adjustments.
- Renewable Energy Contracts
and/or Investment Opportunities: Through an RFI process
conducted in 2021, we are seeking potential contracts and/or
investment opportunities in wind, solar and energy storage projects
to meet the electricity needs of the U.S. portion of the Keystone
Pipeline System and supply renewable energy products and services
to industrial and oil and gas sectors proximate to our in-corridor
demand. To date in 2022, we have finalized contracts for
approximately 160 MW and 240 MW from our wind energy and solar
projects, respectively. We continue to evaluate the proposals
received through the RFI process and expect to finalize additional
contracts in 2022.
Other Energy Transition Developments
- Alberta Carbon Grid
(ACG): On March 29, 2022, the ACG received notice from the
Government of Alberta that our Final Project Proposal to build and
operate a carbon storage hub and gathering lines in Alberta’s
industrial heartland was among the successful proponents. The
project has been invited to move forward into the next stage of the
Province’s carbon capture utilization and storage (CCUS) process
and enter into an evaluation agreement to further assess the
viability of this project. Designed to be an open-access system,
the ACG proposes to leverage existing right of ways and/or
pipelines to connect the Alberta Industrial Heartland emissions
region to a key sequestration location.
Corporate
- Mexico Tax Audit:
In 2019, the Mexican tax authority, the Tax Administration Services
(SAT), completed an audit of the 2013 tax return of one of our
subsidiaries in Mexico. The audit resulted in a tax assessment that
denied the deduction for all interest expense and an assessment of
additional tax, penalties and financial charges totaling less than
US$1 million. We disagreed with this assessment and commenced
litigation to challenge it. In January 2022, we received the tax
court’s ruling on the 2013 tax return, which upheld the SAT
assessment. From September 2021 to February 2022, the SAT issued
assessments for tax years 2014 through 2017 which denied the
deduction of all interest expense as well as assessed incremental
withholding tax on the interest. These assessments totaled
approximately US$490 million in income and withholding taxes,
interest, penalties and other financial charges.During first
quarter 2022, we received a settlement offer from the SAT with
respect to the above matters for the tax years 2013 through 2021
and subsequently reached a settlement-in-principle. In first
quarter 2022, we accrued US$153 million of income tax expense
(inclusive of withholding taxes, interest, penalties and other
financial charges). This amount was fully paid in
April 2022.
Teleconference and Webcast
We will hold a teleconference and webcast on Friday,
April 29, 2022 at 1 p.m. (MDT) / 3 p.m.
(EDT) to discuss our first quarter 2022 financial results
and company developments. Presenters will include François Poirier,
President and Chief Executive Officer; Joel Hunter, 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
1.800.319.4610. 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/11768.
A replay of the teleconference will be available two hours after
the conclusion of the call until midnight EDT on May 6, 2022.
Please call 1.855.669.9658 and enter pass code 8702.
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’re a team of 7,000+ energy problem solvers working to move,
generate and store the energy North America relies on. Today, we’re
taking action to make that energy more sustainable and more secure.
We’re innovating and modernizing to reduce emissions from our
business. And, we’re delivering new energy solutions – from natural
gas and renewables to carbon capture and hydrogen – to help other
businesses and industries decarbonize too.
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, including the sustainability commitments and
targets contained in our 2021 Report on Sustainability and our GHG
Emissions Reduction Plan, 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 the 2021 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 and the
"Forward-looking information" section of our 2021 Report on
Sustainability and our GHG Emissions Reduction Plan which are
available on our website at www.TCEnergy.com.
Non-GAAP Measures
This release contains references to the following non-GAAP
measures; comparable earnings, comparable earnings per common
share, comparable EBITDA and comparable funds generated from
operations. Non-GAAP measures do not have any standardized meaning
as prescribed by GAAP and therefore may not be comparable to
similar measures presented by other entities. These comparable
measures are calculated by adjusting certain GAAP measures for
specific items we believe are significant but not reflective of our
underlying operations in the period. These comparable 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. Refer to: (i) each business segment for a
reconciliation of comparable EBITDA to segmented earnings; (ii)
Consolidated results section for reconciliations of comparable
earnings and comparable earnings per common share to Net income
attributable to common shares and Net income per common share,
respectively; and (iii) Financial condition section for a
reconciliation of comparable funds generated from operations to Net
cash provided by operations. Refer to the About this document –
Non-GAAP measures section of the MD&A in our most recent
quarterly report for more information about the non-GAAP measures
we use, which section of the MD&A is incorporated by reference
herein. The MD&A can be found on SEDAR (www.sedar.com) under TC
Energy's profile.
Media Inquiries:Jaimie Harding / Hejdi
Carlsenmedia@tcenergy.com403.920.7859 or 800.608.7859
Investor & Analyst
Inquiries: Gavin
Wylie / Hunter Mau investor_relations@tcenergy.com403.920.7911 or
800.361.6522
____________________1 Comparable earnings, comparable earnings
per common share, comparable funds generated from operations and
comparable EBITDA are non-GAAP measures used throughout this news
release. These measures do not have any standardized meaning under
GAAP and therefore are unlikely to be comparable to similar
measures presented by other companies. The most directly comparable
GAAP measures are Net income attributable to common shares, Net
income per common share, Net cash provided by operations and
Segmented earnings, respectively. For more information on non-GAAP
measures, refer to the Non-GAAP section of this news release.
Download full report here:
https://www.tcenergy.com/siteassets/pdfs/investors/reports-and-filings/annual-and-quarterly-reports/2022/tc-2022-q1-quarterly-report.pdf
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