TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company)
today announced net income attributable to common shares for second
quarter 2021 of $982 million or $1.00 per share compared to net
income of $1.3 billion or $1.36 per share for the same period in
2020. Comparable earnings for second quarter 2021 were $1.0 billion
or $1.07 per common share compared to $863 million or $0.92 per
common share in 2020. TC Energy's Board of Directors also declared
a quarterly dividend of $0.87 per common share for the quarter
ending September 30, 2021, equivalent to $3.48 per common share on
an annualized basis.
"During the first half of 2021, our diversified portfolio of
critical energy infrastructure assets continued to safely and
reliably meet North America's growing demand for energy," said
François Poirier, TC Energy’s President and Chief Executive
Officer. "Comparable earnings of $2.23 per common share and
comparable funds generated from operations of $3.8 billion in the
first six months of the year reflect the utility-like nature of our
business along with the consistently strong performance of our
legacy assets and contributions from projects that entered service
in 2020."
Our results are underpinned by strong demand for our services
together with a constant focus on operational excellence. Flows and
utilization levels across our network continue to be in line with
historical norms despite the ongoing impacts of COVID-19, extreme
weather events and energy market volatility. Once again, this
highlights the vital role our infrastructure plays in the
functioning of the North American economy and the well-being of
millions of people across the continent. Given the solid start to
the year, we continue to expect full-year 2021 comparable earnings
to be generally consistent with last year's record results.
"We are advancing a $21 billion secured capital program and
working on a substantive portfolio of other similarly high-quality
opportunities under development," continued Poirier. "Importantly,
all of our secured capital projects are underpinned by long-term
contracts and/or regulated business models highlighting the
fundamental 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 in the coming years. Through
prudent financial management, we are poised to effectively
self-fund our growth program through our internally generated cash
flow and debt capacity."
Looking beyond our current suite of projects, we are well
positioned to capture future growth prospects associated with our
extensive asset footprint and deep organizational capabilities as
well as others that arise as the world both consumes more energy
and transitions to a cleaner energy future. Today we announced
that, subject to customary conditions precedent and regulatory
approvals, we have sanctioned the VR project on our Columbia Gas
system. This project represents an approximate US$0.7 billion
capital investment and, among other elements, includes the
installation of electric compression which will reduce direct
carbon dioxide equivalent emissions while addressing growing market
demand by providing additional transportation services under
long-term contracts. We are exploring other opportunities to
electrify and use renewable energy to power certain of the
Company's proprietary energy loads, with the goal of a net
reduction in emissions across our footprint. Bruce Power also
continues to progress its multi-billion dollar life extension
program, a source of significant emission-less power in Ontario,
and we recently announced an initiative to jointly develop, along
with Pembina Pipeline Corporation (Pembina), a carbon
transportation and sequestration system for Alberta-based
industries to manage their emissions and contribute to a
lower-carbon economy.
In all our operations and projects, we remain focused on
managing and reducing our greenhouse gas emissions and building
constructive, enduring relationships with our communities and
stakeholders. We believe our creativity, technical strength and
unparalleled market connectivity provide us the ability to prosper
regardless of the pace and form of energy transition. Success in
advancing our current slate of secured projects and other organic
growth opportunities is expected to support annual dividend growth
of five to seven per cent in this historically low-interest rate
environment.
Highlights (All financial figures are unaudited
and in Canadian dollars unless otherwise noted)
- Second quarter 2021 financial results
- Net income attributable to common shares of $982 million or
$1.00 per common share
- Comparable earnings of $1.0 billion or $1.07 per common
share
- Comparable EBITDA of $2.2 billion
- Net cash provided by operations of $1.7 billion
- Comparable funds generated from operations of $1.8 billion
- Declared a quarterly dividend of $0.87 per common share
for the quarter ending September 30, 2021
- Continued to advance our $21 billion secured capital program by
investing $1.4 billion in various growth projects during the second
quarter
- Sanctioned the VR project, an approximate US$0.7 billion
enhancement project on our Columbia Gas system to improve
reliability and lower emissions
- Columbia Gas notified FERC on July 28 that it has reached a
settlement-in-principle with its customers addressing all remaining
issues related to its Section 4 Rate Case filing
- Announced a partnership with Pembina to jointly develop a
carbon transportation and sequestration system in Alberta
- Issued Requests for Information (RFI) seeking to identify
potential wind, solar and energy storage projects and/or investment
opportunities to meet the electricity needs of a portion of our
U.S. pipeline assets
- Recognized $1.1 billion in the Consolidated statement of equity
principally from the repurchase of partner interests in Keystone
XL, retirement of its non-recourse project-level credit facility
and issuance of Class C Interests, partially offsetting the $2.2
billion after-tax impairment charge recorded in first quarter
2021
- Issued $750 million of three-year floating-rate Medium Term
Notes, $500 million of 10-year fixed-rate Medium Term Notes and
$250 million of 26-year fixed-rate Medium Term Notes
- Redeemed $500 million of Series 13 preferred shares in May
utilizing proceeds from the junior subordinated debt offering
completed in March.
Net income attributable to common shares decreased by $299
million or $0.36 per common share to $982 million or $1.00 per
share for the three months ended June 30, 2021 compared to the same
period last year. Per share results reflect the impact of common
shares issued for the acquisition of TC PipeLines, LP in first
quarter 2021. Net income attributable to common shares includes a
number of specific items that we believe are significant but not
reflective of our underlying operations in the period. More
information on these items, which are excluded from comparable
earnings, can be found in the table entitled "Reconciliation of net
income/(loss) to comparable earnings".
Comparable EBITDA of $2.2 billion increased by $47 million for
the three months ended June 30, 2021 compared to the same period in
2020 primarily due to the net effect of the following:
- higher EBITDA from Canadian Natural Gas Pipelines largely due
to the impact of increased flow-through income taxes and
depreciation along with higher rate-base earnings on the NGTL
System and Coastal GasLink development fees
- increased earnings in U.S. Natural Gas Pipelines from Columbia
Gas following the application for higher transportation rates
effective February 1, 2021, subject to refund upon completion of
the current rate proceeding, as well as improved earnings across
our U.S. Natural Gas Pipelines assets following the cold weather
events of 2021 impacting many of the U.S. markets in which we
operate
- higher Power and Storage results attributable to increased
earnings at Bruce Power in 2021 due to fewer outage days and a
higher contract price partially offset by higher operating
expenses, as well as increased Natural Gas Storage and Other
earnings following the November 2020 acquisition of the remaining
50 per cent ownership interest in TC Turbines
- decreased earnings from Liquids Pipelines due to lower volumes
on the Keystone Pipeline System, partially offset by increased
contributions from liquids marketing activities reflecting higher
margins and volumes
- foreign exchange impact of a weaker
U.S. dollar on the Canadian dollar equivalent segmented earnings in
our U.S. dollar-denominated operations. U.S. dollar-denominated
comparable EBITDA increased by US$105 million compared to 2020 to
US$1.1 billion, however, this was translated at 1.23 in 2021 versus
1.39 in 2020. While the weakening of the U.S. dollar in 2021
compared to the same period in 2020 had a considerable negative
impact on 2021 comparable EBITDA, the corresponding impact on
comparable earnings was not significant due to offsetting natural
and economic hedges.
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 of $1.0 billion or $1.07 per common share
increased by $182 million or $0.15 per common share for the three
months ended June 30, 2021 compared to the same period in 2020
and was primarily the net effect of:
- changes in comparable EBITDA described above
- higher Interest income and other mainly attributable to
realized gains in 2021 compared to realized losses in 2020 on
derivatives used to manage our net exposure to foreign exchange
rate fluctuations on U.S. dollar-denominated income
- decreased Non-controlling interests following the March 3, 2021
acquisition of all outstanding common units of TC PipeLines, LP not
beneficially owned by TC Energy
- higher Income tax expense primarily due to higher comparable
earnings and flow-through income taxes in our Canadian
rate-regulated pipelines.
Comparable earnings per share reflects the impact of common
shares issued for the acquisition of the remaining ownership
interests in TC PipeLines, LP in first quarter 2021.
Certain of our businesses generate all or most of their earnings
in U.S. dollars and, since we report our financial results in
Canadian dollars, changes in the value of the U.S. dollar against
the Canadian dollar directly affect our comparable EBITDA and may
also impact comparable earnings. As our U.S. dollar-denominated
operations continue to grow, this exposure increases. A portion of
the U.S. dollar-denominated comparable EBITDA exposure is naturally
offset by U.S. dollar-denominated amounts below comparable EBITDA
within Depreciation and amortization, Interest expense and other
income statement line items. The balance of the exposure is
actively managed on a rolling two-year forward basis using foreign
exchange derivatives, however, the natural exposure beyond that
period remains. As noted previously, the net impact of the U.S.
dollar movements on comparable earnings for the three months ended
June 30, 2021 compared to 2020, after considering natural offsets
and economic hedges, was not significant.
NOTABLE RECENT DEVELOPMENTS INCLUDE:
Canadian Natural Gas Pipelines
- Coastal GasLink: From December 2020
until April 13, 2021, in response to the COVID-19 pandemic, an
order of the British Columbia Provincial Health Officer restricted
the number of workers on industrial sites across northern British
Columbia, including Coastal GasLink, and, as a result, only
critical construction activities continued during this time. Major
erosion and sediment control work was required in the absence of
continued pipeline construction during the winter period. On April
13, 2021, the provincial health order was lifted allowing the
project to finalize remobilization plans for the summer
construction program.As a result of scope changes, permit delays
and the impacts from COVID-19, including the provincial health
order, we continue to expect project costs to increase
significantly along with a delay to project completion compared to
the original project cost and schedule. Coastal GasLink has sought
and will continue to mitigate cost increases and schedule delays.
Coastal GasLink expects incremental costs will be included in the
final pipeline tolls, subject to certain conditions.Coastal GasLink
is in dispute with LNG Canada with respect to the recognition of
certain costs and the impacts on schedule. If a resolution is not
reached in the near term, Coastal GasLink may be required to
suspend certain key construction activities but would continue with
work required for safety reasons and compliance with regulatory
requirements. Any equity required to be contributed by Coastal
GasLink LP partners, including us, to fund incremental costs will
be determined by the substance of a resolution with LNG
Canada.Coastal GasLink continues to have access to a subordinated
demand revolving facility with TC Energy which provides the project
with additional short-term funding and financial flexibility and on
which $220 million was drawn at June 30, 2021. If necessary, as an
interim measure, the total amount of available credit facilities
provided to Coastal GasLink by TC Energy may be expanded to allow
Coastal GasLink to access incremental short-term funding as a
bridge to a required increase in project-level financing or project
recoveries.
- NGTL System: In the six months ended June 30, 2021, the NGTL
System placed approximately $0.1 billion of capacity projects in
service.
U.S. Natural Gas Pipelines
- VR Project: We are actively
developing projects that will replace and upgrade certain
facilities while reducing emissions along portions of our pipeline
systems in principal delivery markets. The enhanced facilities will
improve reliability of the systems and allow for additional
transportation services to address growing demand under long-term
contracts while reducing direct carbon dioxide equivalent (CO2e)
emissions. Consistent with this initiative, the VR project on the
Columbia Gas system has been sanctioned, subject to customary
conditions precedent and normal-course regulatory approvals and is
included in the secured projects table within the Capital program
section. This project represents an approximate US$0.7 billion
capital investment and is targeted to be placed in service during
the second half of 2025.
- Grand Chenier XPress: Phase I of Grand Chenier XPress, an
expansion project on the ANR pipeline system connecting supply
directly to U.S. Gulf Coast LNG export facilities, went into
service in April 2021. Phase II is expected to be placed in service
in early 2022.
- Columbia Gas Section
4 Rate Case: Columbia Gas filed a Section 4 Rate Case with FERC in
July 2020 requesting an increase to its maximum transportation
rates effective February 1, 2021, subject to refund upon completion
of the rate proceeding. On July 28, 2021, Columbia Gas notified
FERC that it has reached a settlement-in-principle with its
customers addressing all remaining issues in the case, including
but not limited to the resolution of rates and continuation of
Columbia Gas's modernization program. While definitive terms are
still being finalized, Columbia Gas expects a final settlement to
be filed with FERC in third quarter 2021, with 2021 revenue
expected to be generally consistent with estimates recorded to
date, subject to revision following completion and approval of
settlement terms.
Mexico Natural Gas Pipelines
- Villa de Reyes: Construction is
ongoing but has been delayed due to COVID-19 contingency measures
which have impeded our ability to obtain work authorizations as a
result of administrative closures. We expect to reach partial
in-service by the end of 2021, with the remainder of the
construction of Villa de Reyes completed in the first half of
2022.
Liquids Pipelines
- Keystone XL: On June 9, 2021,
following the revocation of the Presidential Permit for the
Keystone XL pipeline project on January 20, 2021, and after a
comprehensive review of options in consultation with our partner,
the Government of Alberta, we terminated the Keystone XL pipeline
project. Termination activities and related costs will continue
through 2022 with any adjustments to the estimated fair value and
future contractual and legal obligations expensed as determined and
excluded from comparable earnings.Although we recorded a $2.2
billion after-tax asset impairment charge, net of expected
contractual recoveries and other contractual and legal obligations
related to the Keystone XL pipeline project termination activities,
a significant portion of this amount was shared with the Government
of Alberta, thereby reducing the net financial impact to TC Energy.
In June 2021, Class A Interests previously issued to the Government
of Alberta totaling $394 million were repurchased for a nominal
amount, the $1.0 billion (US$849 million) balance on the credit
facility was guaranteed and fully paid by the Government of Alberta
and $91 million of Class C Interests were issued to the Government
of Alberta entitling them to future liquidation proceeds from
specified Keystone XL project assets. After considering these
transactions, including the tax impact thereon, the net financial
impact to us as a result of the termination of Keystone XL and
related projects at June 30, 2021 was $1.1 billion.After the
Presidential Permit was revoked, construction activities ceased
except for certain activities required to clean up and reclaim
worksites in adherence to our commitment to safety, the
environment, and our regulatory requirements. We will continue to
coordinate with regulators, stakeholders and Indigenous groups to
meet our environmental and regulatory commitments and ensure a safe
exit from the Keystone XL pipeline project. The majority of these
associated costs were funded through a final drawdown on the
project-level credit facility which occurred in June 2021,
subsequent to which the credit facility was fully repaid by the
Government of Alberta and terminated.On July 2, 2021, TC Energy
filed a Notice of Intent to initiate a legacy North American Free
Trade Agreement (NAFTA) claim to recover economic damages resulting
from the revocation of the Presidential Permit for the Keystone XL
pipeline. We will be seeking to recover more than US$15 billion in
damages as a result of the U.S. Government's breach of its NAFTA
obligations. This claim is in a preliminary stage and the timing of
outcome is unknown at present.
Power and Storage
- Renewable Energy RFI: Through an RFI process in second quarter
2021, we announced that we were seeking to identify potential
contracts and/or investment opportunities in up to 620 MW of wind
energy projects, 300 MW of solar projects and 100 MW of energy
storage projects to meet the electricity needs of a portion of our
U.S. pipeline assets. We are currently evaluating the responses
received.
- Bruce Power outage: As part of the
planned inspections, testing, analysis and maintenance activities
at Bruce Power during the current Unit 6 MCR outage and planned
Unit 3 outage, higher than anticipated readings of hydrogen
concentration in pressure tubes were detected. The other six units
currently in operation at the facility have all been inspected
during recent planned outages and it was determined that there is
no impact on their safe operation. Bruce Power has advised the
Canadian Nuclear Safety Commission (CNSC) and is working on next
steps.These developments are expected to result in a delay to the
return to service of Unit 3 following its planned outage which was
expected to be completed in early fourth quarter 2021. The timing
of the return to service will depend upon the final results of the
analysis and Bruce Power’s submission to CNSC. We do not expect
this development to have a material impact on our earnings or cash
flows.
Alberta Carbon Grid
- Carbon transportation and sequestration system: On June 17,
2021 we announced a partnership with Pembina to jointly develop a
carbon transportation and sequestration system which, when fully
constructed, would be capable of transporting more than 20 million
tonnes of CO2 annually. By leveraging existing pipelines and a
newly developed sequestration hub, the Alberta Carbon Grid (ACG) is
expected to provide an infrastructure platform for Alberta-based
industries to manage their emissions and contribute to a
lower-carbon economy. Designed to be an open-access system, the ACG
would connect the Fort McMurray, Alberta Industrial Heartland and
Drayton Valley regions to key sequestration locations and delivery
points across the province.
Corporate
- Common share dividend: Our Board of
Directors declared a quarterly dividend of $0.87 per common share
for the quarter ending September 30, 2021. The quarterly amount is
equivalent to $3.48 per common share on an annualized
basis.
- Retirement and appointment of our
Executive Vice-President and Chief Financial Officer (CFO): On May
17, 2021, we announced that Don Marchand, Executive Vice-President
and CFO, will retire from TC Energy on November 1, 2021, stepping
down as CFO on July 31, 2021. Joel Hunter, currently Senior
Vice-President, Capital Markets, will succeed Mr. Marchand as
Executive Vice-President and CFO. Mr. Marchand will assist Mr.
Hunter with the transition from August through November.
- Issuance of long-term debt: On June
9, 2021, TCPL issued $750 million of Medium Term Notes due in June
2024 bearing interest at a floating rate, $500 million of Medium
Term Notes due in June 2031 bearing interest at a fixed rate of
2.97 per cent, and $250 million of Medium Term Notes due in
September 2047 bearing interest at a fixed rate of 4.33 per
cent.
- Redemption of $500 million series 13 preferred shares: We
redeemed all issued and outstanding TC Energy Series 13 preferred
shares on May 31, 2021, pursuant to their terms, utilizing proceeds
from the junior subordinated debt offering completed in March
2021.
Teleconference and WebcastWe will hold a
teleconference and webcast on Thursday, July 29, 2021 to discuss
our second quarter 2021 financial results. François Poirier,
President and Chief Executive Officer; Don Marchand, Executive
Vice-President and CFO; and other members of the executive
leadership team will discuss TC Energy's 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 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 TCEnergy.com/events or via the following
URL: http://www.gowebcasting.com/11357.
A replay of the teleconference will be available two hours after
the conclusion of the call until midnight (EDT) on August 5, 2021.
Please call 1.855.669.9658 and enter pass code 7144.
The unaudited interim condensed consolidated financial
statements and Management’s Discussion and Analysis (MD&A) are
available on our website at 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 EnergyWe 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 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 TCEnergy.com.
Forward-Looking InformationThis 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 MeasuresThis 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
Carlsenmedia@tcenergy.com 403.920.7859 or 800.608.7859
Investor & Analyst Inquiries:David Moneta /
Hunter Mau investor_relations@tcenergy.com 403.920.7911 or
800.361.6522
Download full report here:
https://www.tcenergy.com/siteassets/pdfs/investors/reports-and-filings/annual-and-quarterly-reports/2021/tc-2021-q2-quarterly-report.pdf
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