TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company)
released its fourth quarter results today. François Poirier, TC
Energy’s President and Chief Executive Officer, commented “2022 has
been a record setting year with continued demand and strong
utilization across our systems, which is highlighted by TC Energy's
comparable earnings per common share1 of $4.30 and comparable
EBITDA1 of $9.9 billion.” Poirier continued, “Our business remains
resilient and is expected to deliver strong comparable EBITDA
growth in 2023. We have a defined funding plan in place that will
allow us to continue to progress our industry leading capital
program and accelerate our deleveraging target. Reflecting the
confidence in our outlook, TC Energy’s Board of Directors has
declared a quarterly dividend increase to $0.93 per common share
for the quarter ending March 31, 2023, equivalent to $3.72 per
common share on an annualized basis, an increase of 3.3 per cent.
This is the twenty-third consecutive year the Board has raised the
dividend.”
Highlights
(All financial figures are unaudited and in Canadian dollars
unless otherwise noted)
- Reaffirmed 2023 financial outlook with comparable EBITDA
expected to be five to seven per cent higher than 2022, while
comparable earnings per common share is expected to be modestly
higher than 2022
- Capital spending in 2023 is expected to be approximately $11.5
to $12.0 billion which we anticipate will be funded through a
combination of internally generated cash flow, incremental
long-term debt and hybrid capacity and through our asset
divestiture program
- Majority of the 2023 capital program is focused on NGTL System
expansions, advancement of the Southeast Gateway Pipeline and the
Coastal GasLink pipeline project, U.S. Natural Gas Pipelines
projects, the Bruce Power life extension program and normal course
maintenance capital expenditures
- Fourth quarter 2022 results were underpinned by strong
utilization across our assets, reflecting the continued high demand
for our services
- On December 19, 2022, NGTL System set a new record for delivery
of 16.4 Bcf
- On December 23, 2022, U.S. Natural Gas Pipelines experienced an
all-time peak delivery record of 36.6 Bcf
- Bruce Power achieved 87 per cent availability and the Unit 4
planned outage was completed approximately 22 days ahead of
schedule
- Power and Energy Solutions had high power plant availability
during the coldest days in December when the average of Alberta
power prices reached approximately $312/MWh
- Financial results: Fourth quarter 2022
- Net losses attributable to common shares of $1.4 billion or
$1.42 per common share, compared to net income of $1.1 billion or
$1.14 per common share in 2021
- Segmented losses of $1.0 billion compared to segmented earnings
of $1.9 billion in 2021 and comparable EBITDA of $2.7 billion
compared to $2.4 billion in 2021
- Financial results: year ended December 31, 2022
- Net income attributable to common shares of $0.6 billion or
$0.64 per common share, compared to net income of $1.8 billion or
$1.87 per common share in 2021
- Segmented earnings of $3.6 billion compared to $4.1 billion in
2021 and comparable EBITDA of $9.9 billion compared to $9.4 billion
in 2021
- TC Energy's Board of Directors approved a 3.3 per cent increase
in the quarterly common share dividend to $0.93 per common share
for the quarter ending March 31, 2023
- Dividend Reinvestment and Share Repurchase Plan (DRP)
participation rate amongst common shareholders was approximately 33
per cent, resulting in $607 million reinvested in common equity
from the dividends declared in 2022
- Sanctioned $8.8 billion of projects and placed $5.8 billion of
projects in service in 2022, and expect to place approximately $6
billion of new projects in service in 2023
- Continued to advance industry leading $34 billion secured
capital program, with various projects helping advance GHG
emissions reduction goals
- Placed the Alberta XPress project in service in January 2023
and approved a 63 km (39 mile), 1.4 Bcf/d extension of the Gillis
Access project in February 2023 to further connect supplies from
the Haynesville basin at Gillis
- Executed main land acquisition agreements required for land
falls and compressor stations in Veracruz and Tabasco for the
Southeast Gateway Pipeline project, supporting our commitment and
execution of the first critical path milestones
- Announced updated cost estimates to the Coastal GasLink
pipeline project on February 1, 2023. TC Energy's project cost
estimate has increased to $14.5 billion.
|
three months endedDecember 31 |
|
year endedDecember 31 |
(millions of $, except per share amounts) |
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
|
|
|
Net (loss)/income attributable
to common shares |
(1,447 |
) |
|
|
1,118 |
|
|
|
641 |
|
|
|
1,815 |
|
per common share – basic |
($1.42 |
) |
|
|
$1.14 |
|
|
|
$0.64 |
|
|
|
$1.87 |
|
|
|
|
|
|
|
|
|
Segmented
(losses)/earnings |
|
|
|
|
|
|
|
Canadian Natural Gas Pipelines |
(2,592 |
) |
|
|
389 |
|
|
|
(1,440 |
) |
|
|
1,449 |
|
U.S. Natural Gas Pipelines |
882 |
|
|
|
818 |
|
|
|
2,617 |
|
|
|
3,071 |
|
Mexico Natural Gas Pipelines |
96 |
|
|
|
123 |
|
|
|
491 |
|
|
|
557 |
|
Liquids Pipelines |
322 |
|
|
|
373 |
|
|
|
1,123 |
|
|
|
(1,600 |
) |
Power and Energy Solutions |
298 |
|
|
|
191 |
|
|
|
833 |
|
|
|
628 |
|
Corporate |
(4 |
) |
|
|
(6 |
) |
|
|
8 |
|
|
|
(46 |
) |
Total segmented (losses)/earnings |
(998 |
) |
|
|
1,888 |
|
|
|
3,632 |
|
|
|
4,059 |
|
|
|
|
|
|
|
|
|
Comparable
EBITDA |
|
|
|
|
|
|
|
Canadian Natural Gas Pipelines |
768 |
|
|
|
674 |
|
|
|
2,806 |
|
|
|
2,675 |
|
U.S. Natural Gas Pipelines |
1,141 |
|
|
|
1,032 |
|
|
|
4,089 |
|
|
|
3,856 |
|
Mexico Natural Gas Pipelines |
211 |
|
|
|
151 |
|
|
|
753 |
|
|
|
666 |
|
Liquids Pipelines |
364 |
|
|
|
380 |
|
|
|
1,366 |
|
|
|
1,526 |
|
Power and Energy Solutions |
203 |
|
|
|
168 |
|
|
|
907 |
|
|
|
669 |
|
Corporate |
(4 |
) |
|
|
(10 |
) |
|
|
(20 |
) |
|
|
(24 |
) |
Comparable EBITDA |
2,683 |
|
|
|
2,395 |
|
|
|
9,901 |
|
|
|
9,368 |
|
Depreciation and amortization |
(670 |
) |
|
|
(634 |
) |
|
|
(2,584 |
) |
|
|
(2,522 |
) |
Interest expense included in comparable earnings |
(722 |
) |
|
|
(611 |
) |
|
|
(2,588 |
) |
|
|
(2,354 |
) |
Allowance for funds used during construction |
115 |
|
|
|
72 |
|
|
|
369 |
|
|
|
267 |
|
Foreign exchange (loss)/gain, net included in comparable
earnings |
(40 |
) |
|
|
44 |
|
|
|
(8 |
) |
|
|
254 |
|
Interest income and other |
53 |
|
|
|
59 |
|
|
|
146 |
|
|
|
190 |
|
Income tax expense included in comparable earnings |
(259 |
) |
|
|
(257 |
) |
|
|
(813 |
) |
|
|
(830 |
) |
Net income attributable to non-controlling interests |
(9 |
) |
|
|
(8 |
) |
|
|
(37 |
) |
|
|
(91 |
) |
Preferred share dividends |
(22 |
) |
|
|
(32 |
) |
|
|
(107 |
) |
|
|
(140 |
) |
Comparable earnings |
1,129 |
|
|
|
1,028 |
|
|
|
4,279 |
|
|
|
4,142 |
|
Comparable earnings per common share |
$1.11 |
|
|
|
$1.05 |
|
|
|
$4.30 |
|
|
|
$4.26 |
|
|
|
|
|
|
|
|
|
Net cash provided by
operations |
2,025 |
|
|
|
1,801 |
|
|
|
6,375 |
|
|
|
6,890 |
|
Comparable funds generated
from operations |
2,285 |
|
|
|
2,073 |
|
|
|
7,353 |
|
|
|
7,406 |
|
Capital spending¹ |
3,139 |
|
|
|
2,123 |
|
|
|
8,961 |
|
|
|
7,134 |
|
Proceeds from sales of assets,
net of transaction costs |
— |
|
|
|
35 |
|
|
|
— |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
Dividends
declared |
|
|
|
|
|
|
|
Per common share |
$0.90 |
|
|
|
$0.87 |
|
|
|
$3.60 |
|
|
|
$3.48 |
|
|
|
|
|
|
|
|
|
Basic common shares
outstanding(millions) |
|
|
|
|
|
|
|
– weighted average for the period |
1,016 |
|
|
|
980 |
|
|
|
995 |
|
|
|
973 |
|
– issued and outstanding at end of period |
1,018 |
|
|
|
981 |
|
|
|
1,018 |
|
|
|
981 |
|
¹ Includes Capital expenditures, Capital projects in
development and Contributions to equity investments.
CEO Message
Throughout 2022 we saw how geopolitical events heightened energy
security and the importance of sustainability when planning for the
future. TC Energy has a significant role in contributing to local
and global energy transition solutions, and we continue to leverage
our vast infrastructure to deliver safe, affordable and reliable
energy. Our team and, by extension, our assets continue to achieve
high utilization across our systems and our focus on operational
excellence allowed us to provide peak availability of our assets
during periods of peak demand. This record operational performance
is demonstrated by TC Energy reporting comparable earnings per
common share of $4.30 and comparable EBITDA of $9.9 billion –
approximately six per cent above 2021 comparable EBITDA.
During the year we set new records, including peak deliveries on
our Canadian and U.S. natural gas systems. Additionally, we
executed a first-of-its kind strategic alliance with the Comisión
Federal de Electricidad (CFE) in Mexico to build the Southeast
Gateway Pipeline, while investing in reducing our emission
intensities with our VNBR and Gillis Access projects. In the U.S.,
we increased our share of LNG feedgas deliveries from approximately
25 to 30 per cent and remain on-track to increase our market share
to 35 per cent by 2025. TC Energy remains well positioned to expand
the connection between North America’s premier basins and LNG
export facilities to support energy security, reliability and
affordability.
We expect this positive momentum to continue into 2023 despite
macroeconomic challenges, with 2023 comparable EBITDA expected to
be five to seven per cent higher than 2022. This further showcases
the resiliency and sustainability of our earnings and cash flows
that provides the foundation for TC Energy’s Board of Directors to
declare a quarterly dividend increase to $0.93 per common share for
the quarter ending March 31, 2023, equivalent to $3.72 per common
share on an annualized basis, an increase of 3.3 per cent. This is
the twenty-third consecutive year the Board has raised the
dividend.
We continue to expand, extend and modernize our diversified
energy portfolio. In 2022, we sanctioned $8.8 billion of projects
that are consistent with our risk preferences and expected to
deliver a combined return that is above our targeted range of seven
to nine per cent. We placed $5.8 billion of projects in service
during 2022, with an additional $6 billion expected in 2023. We are
advancing our unparalleled $34 billion fully sanctioned secured
capital program that is expected to generate comparable EBITDA
growth and grow our common share dividend at an annual rate of
three to five per cent. To enhance and extend our growth outlook,
we anticipate sanctioning additional high-quality projects that are
consistent with our risk and return preferences, underpinned by
long-term take-or-pay contracts or rate regulation and capturing a
spread above our cost of capital to maximize shareholder value.
However, we are actively managing our capital spending to minimize
incremental funding requirements as we realize our deleveraging
target. Capital rotation will feature more prominently in our
go-forward funding plan in the event that capital spending exceeds
an annual run-rate of $5 to $7 billion.
We are advancing our 2023 $5+ billion asset divestiture program
to accelerate our deleveraging, execute on our vast opportunity set
and provide a self-funding source for high-value growth
opportunities. Our sanctioned capital program is expected to be
funded through a combination of growing cash flows, incremental
long-term debt and hybrid security capacity, commercial paper and
our discounted DRP that is expected to be in place through the
dividend declarations for the quarter ending June 30, 2023.
While 2022 was a record setting year in many ways, we were faced
with challenges. On December 7, 2022, we activated our emergency
response protocols after detecting an oil release on the Keystone
Pipeline System in Washington County, Kansas. We replaced the
impacted section of pipe and have engaged a third-party to analyze
the incident to determine the root cause. On December 31,
2022, we accrued an environmental remediation liability of $650
million (US$480 million), before expected insurance recoveries.
This amount represents our estimate of costs relating to emergency
response, environmental remediation and cleanup activities required
to fully remediate the site and has been recorded on an
undiscounted basis. While no incident is ever acceptable to us, the
effectiveness of our emergency response protocols resulted in a
quick response by our team to begin the remediation process. Within
seven minutes of detecting a volume imbalance, the Keystone
Pipeline System was shut down and isolation valves were closed
while field resources located the incident and installed
containment booms. We continue to progress our recovery and
remediation efforts and are working closely with the Environmental
Protection Agency, Kansas Department of Health and Environment,
impacted landowners, communities, Tribal Nations, agencies and
local, state and federal officials. To date, our oil recovery
efforts continue to progress successfully with 90 per cent of the
release volume recovered. We expect to continue to be able to
fulfill our Keystone Pipeline System contract commitments and will
continue to provide updates on the Milepost 14 incident as
information becomes available.
On February 1, 2023 we announced updated cost estimates for the
Coastal GasLink pipeline project after conducting a comprehensive
cost and schedule risk analysis (CSRA) to assess current market
conditions and potential risks and uncertainties facing the
remaining project scope. As a result of the CSRA, TC Energy's
estimate of the costs to complete the pipeline has increased to
approximately $14.5 billion. The CSRA review also considered the
potential impact of an extension of construction well into 2024,
which would further increase costs by up to $1.2 billion. We
continue to make significant progress and, to date, the project is
approximately 84 per cent complete and we are targeting mechanical
completion by year-end 2023. In addition, the entire route has been
cleared, grading is more than 96 per cent complete and more than
510 km of pipeline has been welded, lowered and backfilled with
restoration activities underway in many areas.
Safety, project execution and operational excellence will
continue to be key focus areas, and we will look for new ways to
maximize the value of our existing assets by optimizing system
availability and throughput. Finally, we remain committed to the
sustainable development of our business. By leveraging our highly
integrated North American energy footprint, we will further advance
opportunities to originate low-carbon solutions, expand our
capabilities and establish partnerships to support decarbonization
initiatives for both us and our customers.
OUTLOOK
Comparable EBITDA and comparable earnings
We expect our 2023 comparable EBITDA to be higher than 2022 and
our 2023 comparable earnings per common share are expected to be
modestly higher than 2022 due to the net impact of the
following:
- growth in the NGTL System from advancement of expansion
programs
- higher contributions from our Mexico Natural Gas Pipelines
segment primarily related to the new Transportadora de Gas Natural
de la Huasteca (TGNH) Transport Service Agreement (TSA) with the
CFE
- full-year impact from assets placed in service in 2022 and new
projects anticipated to be placed in service in 2023, net of
incremental depreciation expense
- lower contributions from the Keystone Pipeline System including
liquids marketing, primarily as a result of the de-rate associated
with the Milepost 14 incident and continuing lower margins
- higher Interest expense as a result of long-term debt
issuances, net of maturities and higher floating interest
rates
- higher AFUDC related to the
Southeast Gateway Pipeline.
We continue to monitor developments in energy markets, our
construction projects, regulatory proceedings and our asset
divestiture program for any potential impacts on the above
outlook.
Consolidated capital spending and equity
investments
We expect to spend approximately $11.5 to $12.0 billion in 2023
on growth projects, maintenance capital expenditures and
contributions to equity investments. The majority of the 2023
capital program is focused on NGTL System expansions, advancement
of the Southeast Gateway Pipeline and the Coastal GasLink pipeline
project, U.S. Natural Gas Pipelines projects, the Bruce Power life
extension program and normal course maintenance capital
expenditures.
Canadian Natural Gas Pipelines
Comparable EBITDA and earnings in 2023 are expected to be higher
than 2022 mainly due to continued growth of the NGTL System as we
advance expansion programs which extend and expand supply
facilities, enhance delivery facilities in Alberta and provide
incremental service at our major border delivery locations in
response to requests for firm service on the system. Due to the
flow-through treatment of certain costs on our Canadian
rate-regulated pipelines, changes in these costs can impact our
comparable EBITDA despite having no significant effect on
comparable earnings.
- Capital spending:
We expect to spend approximately $2.8 billion in 2023, primarily on
NGTL System expansion projects and maintenance capital
expenditures, all of which are immediately reflected in investment
base and related earnings. We also contributed $1.4 billion to our
investment in Coastal GasLink LP in 2022, and are obligated to
contribute an additional $0.5 billion in 2023, primarily related to
installments of partner equity contributions in accordance with the
July 2022 agreements with Coastal GasLink LP. We also expect to
make further contributions related to the revised estimated capital
cost of the project in 2023.
U.S. Natural Gas Pipelines
Comparable EBITDA in 2023 is expected to be consistent with
2022. This is due to, among other factors, completion of expansion
projects in 2022 and 2023 on the ANR and Columbia Gulf systems as
well as higher revenues on ANR due to the full-year implementation
of higher transportation rates as part of the uncontested Section 4
rate case settlement filed with the Federal Energy Regulatory
Commission (FERC). Our pipeline systems continue to see
historically strong demand for service and we anticipate our assets
will maintain the high utilization levels experienced in 2022.
These positive results are expected to be partially offset by
higher operational costs, reflective of increased system
utilization across our footprint, and an anticipated increase in
property taxes from capital projects placed in service.
- Capital spending:
We expect to spend approximately US$1.9 billion in 2023 primarily
on our Gillis Access, North Baja and Columbia Gas expansion
projects and our Columbia Gas Modernization III program, as well as
Columbia Gas and ANR maintenance capital expenditures, the return
on and recovery of which is expected to be reflected in future
tolls.
Mexico Natural Gas Pipelines
Comparable EBITDA for 2023 is expected to be higher than 2022
due to full-year revenues from the north section of the Villa de
Reyes pipeline (VdR North) and east section of the Tula pipeline
(Tula East) which were placed in service in third quarter 2022
under the new TGNH TSA with the CFE.
- Capital spending:
We expect to spend US$2.1 billion in 2023 to advance construction
of the Southeast Gateway, Villa de Reyes and Tula pipelines.
Liquids Pipelines
Comparable EBITDA in 2023 is expected to be modestly lower than
2022 for the Keystone Pipeline System including liquids marketing
as a result of the de-rate associated with the Milepost 14 incident
and continuing lower margins on the U.S. Gulf Coast section of the
Keystone Pipeline System; however, we expect to continue to be able
to fulfill our Keystone Pipeline System contract commitments.
- Capital spending:
We expect to spend approximately $0.1 billion in 2023.
Power and Energy Solutions
Comparable EBITDA in 2023 is expected to be consistent with 2022
provided Alberta power prices experienced in 2022 continue into
2023. We expect that Bruce Power's equity income will be higher in
2023 than 2022 due to the full year impact of the Unit 3 Major
Component Replacement (MCR) program contract price increase and
fewer non-MCR planned outage days, partially offset by greater MCR
outage days. The planned maintenance for 2023 is currently
scheduled to begin on Unit 4 in the second quarter and on Unit 8 in
the second half of 2023. The average 2023 plant availability
percentage, excluding the Unit 3 and Unit 6 MCR programs, is
expected to be in the low-90 per cent range.
- Capital spending:
We expect to invest approximately $1.0 billion in 2023.
NOTABLE RECENT DEVELOPMENTS INCLUDE:
Canadian Natural Gas Pipelines
- Coastal GasLink: The Coastal GasLink pipeline
project is approximately 84 per cent complete. The entire route has
been cleared, grading is more than 96 per cent complete and more
than 510 km of pipeline has been welded, lowered and backfilled
with restoration activities underway in many areas.Subsequent to
execution of the July 2022 agreements, the project has faced
material cost pressures that reflect challenging conditions in the
Western Canadian labour market, shortages of skilled labour,
impacts of contractor underperformance and disputes, as well as
other unexpected events, including drought conditions and erosion
and sediment control challenges. A CSRA was conducted to assess
current market conditions and potential risks and uncertainties
facing the remaining project scope. As a result of the CSRA, the
estimate of the cost to complete the pipeline has increased to
approximately $14.5 billion. This estimate excludes potential cost
recoveries and incorporates contingencies for certain factors that
may be outside the control of Coastal GasLink LP such as labour
conditions, contractor performance and weather-related events. The
work plan continues to target mechanical completion by year-end
2023, with commissioning and restoration work continuing into 2024
and 2025. TC Energy expects to fund the incremental project costs
and is actively pursuing cost mitigants and recoveries that may
partially offset a portion of these costs, some of which may not be
conclusively determined until after the pipeline is in service. The
CSRA review also considered the potential impact of an extension of
construction well into 2024. In that event, costs would increase
further by up to $1.2 billion.This increase in the capital cost
estimate for the project and our corresponding funding requirements
were indicators that a decrease in the value of our equity
investment had occurred.As a result, we completed a valuation
assessment and concluded that the fair value of our investment was
below its carrying value at December 31, 2022. We determined that
this was an other-than-temporary impairment of our equity
investment in Coastal GasLink LP and, as a result, we recognized a
pre-tax impairment of $3.0 billion ($2.6 billion after tax) in
fourth quarter 2022. The pre-impairment carrying value of our
investment in Coastal GasLink LP at December 31, 2022 consisted of
amounts in Equity investments ($2.8 billion) and Loans receivable
from affiliates ($250 million), which were reduced to a nil
balance. Due to the funding provisions of the July 2022 agreements,
we expect to fund an additional $3.3 billion related to the revised
estimated capital cost to complete the Coastal GasLink pipeline. A
portion of this funding is expected to be impaired. We will
continue to assess for other-than-temporary declines in the fair
value of our investment and the extent of any additional impairment
charges will depend on our valuation assessment performed at the
respective reporting date. Refer to Note 7, Coastal GasLink, of our
Consolidated financial statements for additional information.
- NGTL System: In the year ended December 31,
2022, the NGTL System placed approximately $3.0 billion of capacity
projects in service.
- Valhalla North and Berland River Project: In
November 2022, we sanctioned the Valhalla North and Berland River
(VNBR) project which will serve aggregate system requirements and
connect migrating supply to key demand markets, providing
incremental capacity on the NGTL System of approximately 527 TJ/d
(500 MMcf/d) and is expected to contribute to lower GHG emission
intensity for the overall system. With an estimated capital cost of
$0.6 billion, the project consists of approximately 33 km (21
miles) of new pipeline, one new non-emitting electric compressor
unit and associated facilities. An application for the project is
expected to be submitted to the CER in third quarter 2023, with an
anticipated in-service date in 2026 subject to regulatory
approval.
U.S. Natural Gas Pipelines
- ANR Section 4 Rate Case: ANR filed a Section 4
rate case with FERC in January 2022 requesting an increase to ANR's
maximum transportation rates effective August 1, 2022, subject to
refund upon completion of the rate proceeding. In November 2022,
ANR notified FERC that it reached a settlement-in-principle with
its customers. In January 2023, the presiding Administrative Law
Judge certified the settlement as uncontested and recommended it
for approval by FERC. While there is no timeframe in which FERC
must act on the settlement, in line with other recent rate case
settlement approval timelines, we expect to receive FERC approval
of the settlement in early 2023.
- Alberta XPress Project: The Alberta XPress
project, an expansion project on ANR that utilizes existing
capacity on the Great Lakes and the Canadian Mainline systems to
connect growing supply from the WCSB to U.S. Gulf Coast LNG export
markets, was placed in service in January 2023.
- Elwood Power and Wisconsin Access Projects:
The Elwood Power and Wisconsin Access projects, both including
upgrade and reliability components, while reducing GHG emissions
along portions of the ANR pipeline system, were placed in
commercial service on November 1, 2022.
- Gillis Access Project: In November 2022, we
sanctioned the development of the Gillis Access project, a 1.5
Bcf/d greenfield pipeline system that will connect supplies from
the Haynesville basin at Gillis to markets elsewhere in Louisiana.
The 68 km (42 mile) Louisiana header system will also enable the
rapidly growing Louisiana LNG export market to access
Haynesville-sourced gas production as well as create a platform for
further growth into the southeast Louisiana markets. The project
has an anticipated in-service date in 2024 and a total estimated
cost of US$0.4 billion.
- In February 2023, we approved a 63 km (39 mile), 1.4 Bcf/d
extension of the Gillis Access project to further connect supplies
from the Haynesville basin at Gillis. Subject to customer FID, the
project has an anticipated in-service date in 2025 and a total
estimated cost of US$0.3 billion.
- Ventura XPress Project: In December 2022, we
approved the Ventura XPress project, a set of ANR projects designed
to improve base system reliability and allow for additional
long-term contracted transportation services to a point of delivery
on the Northern Border pipeline at Ventura, Iowa. The project has
an anticipated in-service date in 2025 and a total estimated cost
of US$0.2 billion.
Mexico Natural Gas Pipelines
- Strategic Alliance with the
CFE: On August 4, 2022, we announced a strategic alliance
with Mexico’s state-owned electric utility, the CFE, for the
development of new natural gas infrastructure in central and
southeast Mexico. This alliance consolidates previous TSAs executed
between TC Energy’s Mexico-based subsidiary TGNH and the CFE in
connection with our natural gas pipeline assets in central Mexico
(including the Tamazunchale, Villa de Reyes and Tula pipelines)
under a single, U.S. dollar-denominated, take-or-pay contract that
extends through 2055. This agreement also resolved and terminated
previous international arbitrations with the CFE related to the
Villa de Reyes and Tula pipelines.In connection with the strategic
alliance, we reached an FID to develop and construct the Southeast
Gateway Pipeline, a 1.3 Bcf/d, 715 km (444 mile) offshore natural
gas pipeline to serve the southeast region of Mexico with an
expected in-service by mid-2025 and an estimated project cost of
US$4.5 billion.The lateral section of the Villa de Reyes pipeline
was mechanically completed in second quarter 2022, while VdR North
and Tula East were placed in commercial service in third quarter
2022. We are working with the CFE, and expect the lateral and the
south sections of the Villa de Reyes pipeline to begin commercial
service in 2023. Additionally, we have agreed to jointly develop
and complete the central segment of the Tula pipeline, subject to
an FID in the first half of 2023. Finally, we are working with the
CFE on the Tula pipeline’s west section to procure necessary land
access and resolve legal claims.Subject to regulatory approvals
from Mexico’s economic competition commission and the Regulatory
Energy Commission, the strategic alliance provides the CFE with the
ability to hold an equity interest in TGNH, which is conditional
upon the CFE contributing capital, acquiring land and supporting
permitting on the TGNH projects. Upon in-service of the Southeast
Gateway Pipeline, the CFE’s equity interest in TGNH will equal 15
per cent, and will increase to approximately 35 per cent upon
expiry of the contract in 2055. Regulatory approvals related to the
CFE's equity participation in TGNH are expected to take up to 24
months.
Liquids Pipelines
- Milepost 14 Incident: In December 2022, a
pipeline rupture occurred in Washington County, Kansas on the
Cushing Extension section of the Keystone Pipeline System. Recovery
and remediation efforts are underway and we are committed to fully
remediating the site. To date, our oil recovery efforts continue to
progress successfully with 90 per cent of the 12,937 barrel
measured release volume recovered. The affected segment was
restarted following approval of the repair and restart plan by
PHMSA. Per the terms of a Corrective Action Order, the pipeline is
required to operate under a pressure de-rate until the conditions
are satisfied. The cause of the release remains the subject of an
investigation.At December 31, 2022, we accrued an
environmental remediation liability of $650 million, before
expected insurance recoveries and not including potential fines and
penalties which are currently indeterminable. This amount
represents our estimate of costs relating to emergency response,
environmental remediation and cleanup activities required to fully
remediate the site and has been recorded on an undiscounted basis.
The accrual is based on certain assumptions such as the scope of
remediation efforts that are subject to revision in future periods
which could result in future modifications of this accrual.
Therefore, it is reasonably possible that we will incur additional
costs beyond the amounts accrued; however, we are currently unable
to estimate the range of possible additional costs.We have
appropriate insurance policies in place and it is probable that the
majority of estimated environmental remediation costs will be
eligible for recovery under our existing insurance coverage. We
have recorded an asset of $650 million, representing the expected
recovery of the estimated environmental remediation costs. To the
extent costs beyond the amounts accrued are incurred, they will be
evaluated under our existing insurance policies. We expect
remediation activities to be substantially completed within a
year.
- CER and FERC Proceedings: In 2019 and 2020,
certain Keystone customers initiated complaints before FERC and the
CER. The complaints indicated that Keystone had provided
insufficient information to support its 2020 and 2021 estimated
variable rates and challenged the just and reasonableness of
Keystone’s committed rates charged dating back to 2018 and 2020 at
FERC and the CER, respectively.CER proceedings concluded in
September 2022 and in December 2022, the CER issued a decision
which has resulted in a one-time adjustment related to previously
charged tolls of $38 million. In January 2023, Keystone filed a
Review and Variance application with the CER challenging the
correctness of the original decision.The FERC hearing commenced in
June 2022 and concluded in August, with a judiciary recommendation
expected to be issued in early 2023.
Power and Energy Solutions
- 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 March 2023 with expected
completion in 2026.Bruce Power's contract price increased on April
1, 2022, in accordance with contract terms, reflecting capital to
be invested under the Unit 3 MCR program and the 2022 to 2024 Asset
Management program, plus normal annual inflation adjustments.Unit
4, the third unit in the Bruce Power MCR program, completed its
definition phase in June 2022 and is now in the preparation phase
leading up to an FID, expected in fourth quarter 2023. A
preliminary basis of estimate (including an initial cost and
schedule duration estimate) was submitted to the IESO in fourth
quarter 2022.
- Saddlebrook Solar Project: On October 4, 2022,
we announced that we have commenced pre-construction activities on
the 81 MW Saddlebrook Solar project located near Aldersyde,
Alberta. The expected capital cost is $146 million, with the
project partially supported by $10 million from Emissions Reduction
Alberta. Construction is expected to be completed in 2023.
Other Energy Solutions
- Alberta Carbon Grid: In June 2021, we
announced a partnership with Pembina Pipeline Corporation to
jointly develop a world-scale carbon transportation and
sequestration system which, when fully constructed, is expected to
be capable of transporting more than 20 million tonnes of carbon
dioxide annually. On October 18, 2022, ACG announced that it has
entered into a carbon sequestration evaluation agreement with the
Government of Alberta to further evaluate one of the largest AOI
for safely storing carbon from industrial emissions in Alberta.
This agreement will allow ACG to continue evaluating the
suitability of its AOI and move forward into the next stage of the
province’s CCUS process to provide confidence to customers,
Indigenous communities, stakeholders and the Government of Alberta
in the project's carbon storage capabilities. ACG is exploring
options to potentially leverage existing infrastructure and
right-of-ways to connect the Alberta Industrial Heartland emissions
region to a key sequestration location.
- Lynchburg Renewable Fuels: On October 17,
2022, we announced a US$29 million investment for a 30 per cent
ownership interest in the Lynchburg Renewable Fuels project, a
Renewable Natural Gas (RNG) production facility in Lynchburg,
Tennessee being developed by 3 Rivers Energy Partners, LLC. Along
with our ownership interest, we will market all RNG and
environmental attributes generated from the facility once
operational, which we expect in 2024. We also have the option to
jointly develop future RNG projects with 3 Rivers Energy Partners,
LLC.
Corporate
- Dividend Reinvestment and Share Purchase Plan:
To prudently fund our growth program that includes increased
project costs on the NGTL System and following our July 2022
obligation to make an equity contribution of $1.9 billion to
Coastal GasLink LP, we reinstated the issuance of common shares
from treasury at a two per cent discount under our DRP commencing
with the dividends declared on July 27, 2022. On dividends declared
in 2022, the participation rate by common shareholders was
approximately 33 per cent, resulting in $607 million
reinvested in common equity under the program. The discounted DRP
is expected to be in place through the dividend declarations for
the quarter ending June 30, 2023.
- Common Shares Issued Under Public Offering: On
August 10, 2022, we issued 28.4 million common shares at a price of
$63.50 each for gross proceeds of approximately $1.8 billion.
Proceeds from the offering are being used, directly or indirectly,
together with other financing sources and cash on hand, to fund
costs associated with the construction of the Southeast Gateway
Pipeline.
- Asset Divestiture Program: In late 2022, we
announced our plan to proceed with a $5+ billion asset divestiture
program that will include the sale of assets, and may include
partial monetization of certain assets.The objectives of this asset
divestiture program are to accelerate our deleveraging, execute on
our vast opportunity set and provide a self-funding source for
high-value growth opportunities. We believe that executing these
steps will strengthen our balance sheet to ensure we remain
competitively positioned to capitalize on future
opportunities.
Teleconference and Webcast
We will hold a teleconference and webcast on Tuesday, February
14, 2023 at 6:30 a.m. (MST) / 8:30 a.m. (EST) to discuss our fourth
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:
https://www.gowebcasting.com/12438.
A replay of the teleconference will be available two hours after
the conclusion of the call until midnight EST on Tuesday, February
21, 2023. Please call 1.855.669.9658 and enter pass code 9820.
The audited annual 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. Along the way, we invest
in communities and partner with our neighbours, customers and
governments to build the energy system of the future.
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 2022 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 2022 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 2022 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. These 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 non-GAAP
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 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.
Additional Information
This release should also be read in conjunction with our
December 31, 2022 audited Consolidated financial statements and
notes and the MD&A in our 2022 Annual Report. Capitalized
abbreviated terms that are used but not otherwise defined herein
are defined in our 2022 Annual Report. Certain comparative figures
have been adjusted to reflect the current period's
presentation.
Media Inquiries:
Stone Grissom / Suzanne Wilton
media@tcenergy.com
403.920.7859 or 800.608.7859
Investor & Analyst Inquiries:
Gavin Wylie / 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/2022/tc-2022-q4-quarterly-report.pdf
___________________________
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. For more information on non-GAAP measures, refer to the
Non-GAAP section of this news release.
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