TC Energy reports strong first quarter 2024 operating and financial results
Press Release
CALGARY, Alberta, May 03, 2024 — TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company) released its first quarter results today. François Poirier, TC Energy’s President and Chief Executive Officer commented, “During the first three months of 2024, we delivered 11 per cent year-over-year growth in comparable EBITDA1 and approximately four per cent growth in segmented earnings, which was underpinned by the continued reliability, availability, and exceptional performance of our assets.” Poirier continued, “Our clearly defined 2024 strategic priorities focused on maximizing the value of our assets, project execution and enhancing balance sheet strength remain unchanged as we progress throughout the year.”
Highlights
(All financial figures are unaudited and in Canadian dollars unless otherwise noted)
- First quarter 2024 financial results:
- Comparable earnings1 of $1.3 billion or $1.24 per common share compared to $1.2 billion or $1.21 per common share in 2023 and net income attributable to common shares of $1.2 billion or $1.16 per common share compared to $1.3 billion or $1.29 per common share in first quarter 2023
- Comparable EBITDA of $3.1 billion compared to $2.8 billion in 2023 and segmented earnings of $2.3 billion compared to $2.2 billion in first quarter 2023
- Reaffirming 2024 outlook:
- Comparable EBITDA is expected to be $11.2 to $11.5 billion2
- Comparable earnings per common share is expected to be lower than 20232 due to the net impact of higher net income attributable to non-controlling interests, partially offset by increased comparable EBITDA and higher AFUDC related to increased capital expenditures on the Southeast Gateway pipeline project
- Capital expenditures are anticipated to be approximately $8.0 to $8.5 billion on a net basis after considering non-controlling interests
- Advanced our $3 billion asset divestiture program with the agreement to sell the Portland Natural Gas Transmission System (PNGTS) for expected pre-tax proceeds of approximately $1.1 billion (US$0.8 billion), including the assumption by the purchaser of US$250 million of Senior Notes outstanding at PNGTS
- Announced the sale of Prince Rupert Gas Transmission (PRGT) entities to Nisga’a Nation and Western LNG demonstrating continued focus on our strategic priorities
- Remain committed to limiting annual net capital expenditures to $6 to $7 billion, with a bias to the lower end, in 2025 and beyond
- Published our 2024 Management Information Circular for our June 4, 2024 Annual and Special Meeting of shareholders with further details related to the spinoff of the Liquids Pipelines business (the spinoff Transaction) and related transactions
- Received favourable Canadian and U.S. tax rulings on the spinoff Transaction, and leading proxy advisor Institutional Shareholder Services (ISS) published a voting recommendation supporting the spinoff Transaction
- TC Energy’s Board of Directors appointed Sean O’Donnell to succeed Joel Hunter as Executive Vice-President and Chief Financial Officer effective May 15, 2024
- Declared a quarterly dividend of $0.96 per common share for the quarter ending June 30, 2024.
| three months ended March 31 | ||||
| (millions of $, except per share amounts) | 2024 | 2023 | ||
| Income | ||||
| Net income (loss) attributable to common shares | 1,203 | 1,313 | ||
| per common share – basic | $1.16 | $1.29 | ||
| Segmented earnings (losses) | ||||
| Canadian Natural Gas Pipelines | 501 | 411 | ||
| U.S. Natural Gas Pipelines | 1,043 | 1,079 | ||
| Mexico Natural Gas Pipelines | 212 | 254 | ||
| Liquids Pipelines | 316 | 176 | ||
| Power and Energy Solutions | 252 | 252 | ||
| Corporate | (58 | ) | (2 | ) |
| Total segmented earnings (losses) | 2,266 | 2,170 | ||
| Comparable EBITDA | ||||
| Canadian Natural Gas Pipelines | 846 | 740 | ||
| U.S. Natural Gas Pipelines | 1,306 | 1,267 | ||
| Mexico Natural Gas Pipelines | 214 | 172 | ||
| Liquids Pipelines | 407 | 317 | ||
| Power and Energy Solutions | 320 | 281 | ||
| Corporate | (3 | ) | (2 | ) |
| Comparable EBITDA | 3,090 | 2,775 | ||
| Depreciation and amortization | (719 | ) | (677 | ) |
| Interest expense included in comparable earnings | (837 | ) | (757 | ) |
| Allowance for funds used during construction | 157 | 131 | ||
| Foreign exchange gains (losses), net included in comparable earnings | 43 | 33 | ||
| Interest income and other | 77 | 42 | ||
| Income tax (expense) recovery included in comparable earnings | (333 | ) | (280 | ) |
| Net (income) loss attributable to non-controlling interests | (171 | ) | (11 | ) |
| Preferred share dividends | (23 | ) | (23 | ) |
| Comparable earnings | 1,284 | 1,233 | ||
| Comparable earnings per common share | $1.24 | $1.21 | ||
| Cash flows | ||||
| Net cash provided by operations | 2,042 | 2,074 | ||
| Comparable funds generated from operationsi | 2,436 | 2,066 | ||
| Capital spendingii | 1,897 | 3,033 | ||
| Acquisitions, net of cash acquired | — | (138 | ) | |
| Dividends declared | ||||
| per common share | $0.96 | $0.93 | ||
| Basic common shares outstanding (millions) | ||||
| – weighted average for the period | 1,037 | 1,021 | ||
| – issued and outstanding at end of period | 1,037 | 1,023 | ||
| i | Comparable funds generated from operations is a non-GAAP measure used throughout this release. This measure does not have any standardized meaning under GAAP and therefore is unlikely to be comparable in similar measures presented by other companies. The most directly comparable GAAP measure is Net cash provided by operations. For more information on non-GAAP measures, refer to the Non-GAAP Measures section of this release. |
| ii | Capital spending reflects cash flows associated with our Capital expenditures, Capital projects in development and Contributions to equity investments. Refer to Note 4, Segmented information, of our Condensed consolidated financial statements for additional information. |
CEO Message
Throughout the first quarter of 2024, TC Energy continued to safely and reliably deliver energy across North America, while maximizing the value of our assets through operational excellence. This resulted in approximately 11 per cent growth in comparable EBITDA compared to first quarter 2023 and approximately four per cent growth in segmented earnings year-over-year. As we progress throughout the remainder of the year, our strategic priorities remain unchanged. We’ll seek to maximize the value of our assets through safety and operational excellence, remain focused on project execution and continue our deleveraging path by advancing our asset divestiture program and streamlining our business through efficiency efforts. Our business is not exposed to material volumetric or commodity price risks and strong utilization rates demonstrate the continued demand for our services and the long-term criticality of our assets.
First quarter 2024 operational highlights include:
- Total NGTL System deliveries averaged 15.3 Bcf/d, up 0.7 Bcf/d compared to first quarter 2023
- The NGTL System achieved a new daily delivery record of 17.3 Bcf
- U.S. Natural Gas Pipelines (USNG) daily average flows in first quarter 2024 were 30 Bcf/d, up over five per cent compared to first quarter 2023
- USNG deliveries to power generators set a record for the quarter with average flows of 2.9 Bcf/d, up approximately 11 per cent year-over-year
- The overall USNG portfolio and specific assets including Columbia Gas, Columbia Gulf and Great Lakes Gas Transmission achieved all-time delivery records
- Throughput on our Mexico Natural Gas Pipelines assets increased 13 per cent year-over-year, reaching almost 3 Bcf/d largely driven by higher flows on our Sur de Texas pipeline
- Bruce Power achieved 92 per cent availability, in line with 2024 outlook that anticipates an average availability in the low-90 per cent range
- Cogeneration power plant fleet achieved 98.7 per cent availability
- Wide heavy oil differentials resulted in strong demand for uncommitted capacity on long-haul segment of the Keystone Pipeline System
- The Keystone Pipeline System achieved 96 per cent operational reliability in first quarter 2024, which, when paired with favourable market conditions, contributed to a 28 per cent increase in Liquids Pipelines comparable EBITDA relative to the first quarter 2023.
We continue to execute projects on-time and on-budget. On our Southeast Gateway pipeline project in Mexico, over 70 per cent of deepwater offshore pipe installation is now complete. We have also completed all three landfall sites and construction of onshore facilities and pipe activities continue to progress well. Following mechanical completion of the Coastal GasLink (CGL) pipeline project ahead of our year end 2023 target, post-construction reclamation activities are currently underway and are expected to continue through 2024. Commercial in-service of CGL will occur after completion of plant commissioning activities at the LNG Canada facility and upon receiving notice from LNG Canada. We are progressing towards approximately $7 billion of projects that are expected to be placed into service in 2024. Within the U.S., we placed the US$0.1 billion Virginia Electrification project in service on time and on budget in February 2024. In March 2024, we also placed the approximately US$0.3 billion Gillis Access project in service, a 68 km (42 mile) greenfield pipeline system that connects natural gas production sourced from the Gillis hub to downstream markets in southeast Louisiana. Including projects placed into service on our NGTL System, we’ve placed approximately $1 billion of projects into service year to date, largely within budget. The remaining projects expected to be placed into service this year is largely comprised of CGL.
During the quarter, we progressed toward our $3 billion asset divestiture target with an agreement to sell PNGTS for expected pre-tax proceeds of approximately $1.1 billion (US$0.8 billion), which includes the assumption by the purchaser of the US$250 million of Senior Notes outstanding at PNGTS. This transaction implies a valuation multiple of approximately 11 times 2023 comparable EBITDA, and is expected to close in the second half of 2024 subject to regulatory approvals and customary closing conditions. In addition, we announced the sale of PRGT entities to Nisga’a Nation and Western LNG. This transaction demonstrates TC Energy’s commitment toward delivering its 2024 capital allocation priorities while supporting the continued development of critical natural gas infrastructure. This also highlights our commitment of staying within our $6 to $7 billion annual net capital expenditure limit, with a bias to the lower end, in 2025 and beyond. We are firmly on a path to enhancing balance sheet strength and achieving our 4.75 times debt-to-EBITDA3 target by year end 2024, which represents the upper limit we will manage to going forward.
We continue to progress the spinoff of the Liquids Pipelines business. Ahead of our June 4, 2024 Annual and Special Meeting, we published our 2024 Management Information Circular on April 16, 2024 which includes further details around the spinoff Transaction. Under the spinoff Transaction, common shareholders of TC Energy as of the record date established for the spinoff will receive, in exchange for each TC Energy share, one new TC Energy share and 0.2 of a South Bow Corporation (South Bow) common share. Shareholder dividends, on a pro forma combined basis, are expected to remain whole between TC Energy and South Bow following the spinoff Transaction4.
South Bow plans to develop the Blackrod Connection project in Alberta for approximately $250 million, which consists of a 25 km (16 mile) crude oil pipeline and 25 km (16 mile) natural gas lateral and associated facilities to provide crude oil transportation from International Petroleum Corporation’s Blackrod project to the Grand Rapids Pipeline System. South Bow is expected to achieve average long-term growth in comparable EBITDA of approximately two to three per cent and the Blackrod Connection project is expected to contribute to this growth. This is just the first example of how the spinoff Transaction will allow the new entity to better focus and fully capture the incremental value that exists within South Bow’s unique opportunity set.
TC Energy’s Board of Directors and management team are confident that the proposed separation will enhance long-term value for TC Energy shareholders by creating two highly focused, premium energy infrastructure companies. Each company will be structured to reflect distinct value propositions and the ability to pursue and achieve greater success independently by executing tailored strategies targeted to distinct customer sets and market fundamentals.
Teleconference and Webcast
We will hold a teleconference and webcast on Friday, May 3, 2024 at 6:30 a.m. (MDT) / 8:30 a.m. (EDT) to discuss our first quarter 2024 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 1-844-763-8274 (Canada/U.S.) or 1-647-484-8814 (International). No passcode is required. Please dial in 15 minutes prior to the start of the call. Alternatively, participants may pre-register for the call here. Upon registering, you will receive a calendar booking by email with dial in details and a unique PIN. This process will bypass the operator and avoid the queue. Registration will remain open until the end of the conference 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/13193. The webcast will be available for replay following the meeting.
A replay of the teleconference will be available two hours after the conclusion of the call until midnight EDT on May 10, 2024. Please call 1-855-669-9658 (Canada/U.S.) or 1-604-674-8052 (International) and enter passcode 0831.
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.sedarplus.ca 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 delivering solutions to the world’s toughest energy challenges – from innovating to deliver the natural gas that feeds LNG to global markets, to working to reduce emissions from our assets, to partnering with our neighbours, customers and governments to build the energy system of the future. It’s all part of how we continue to deliver sustainable returns for our investors and create value for communities.
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
Media Inquiries:
Media Relations
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
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