TC Energy Corporation (TRP) Earnings

Management highlights

- Overall Business Momentum and Pipeline Backlog - The company has placed ~$2 billion of assets into service in the first half of 2026, largely on time and on or under budget, with an additional ~$3.5 billion expected to enter service by the end of 2026. - Year-to-date 2026, the company has sanctioned ~$3 billion of growth projects, and late-stage projects pending approval now total ~$7 billion, an increase of $1 billion from the prior quarter. - The Crossroads project has executed precedent agreements with multiple anchor customers, is in advanced discussions with additional potential shippers, and is expected to receive final sanctioning in Q4 2026. There is also active evaluation of opportunities to expand the project scope. - Over $20 billion of additional projects are in advanced origination, all targeting the company's 5-7x build multiple range, supporting long-term growth visibility. Nearly two-thirds of this origination backlog is tied to power generation demand. - Demand Fundamentals - TC Energy now projects 51 BCF per day of incremental North American natural gas demand by 2035, a 40% increase over 2025 levels and an 11 BCF per day increase from the company's original outlook. Accelerating power demand (including from data centers) accounts for more than half of this increase, with nearly 70% of total demand growth concentrated in regions where TC Energy has a strong incumbent position: the U.S. heartland, Alberta, and Mexico. - Canadian natural gas demand is projected to grow by over 8 BCF per day by 2035, driven by next-wave LNG development, industrial growth, and power/data center demand. The 2029 Greater Edmonton Area capacity offering was fully subscribed, and the 2030-2032 intra-Alberta offering saw record participation from data center developers, prompting the company to explore expanding this offering. - Bruce Power Operational Progress - Bruce Power Unit 3 returned to service after its major component replacement outage more than seven months ahead of the ISO schedule and approximately 15% under the cost of the prior Unit 6 refurbishment. - Productivity and cost improvements have been driven by a repeatable staged approach, capturing learnings from prior outages, upfront planning, and adoption of new technologies and automation. Unit 4 recently achieved the most efficient defuel on record. - Sustainability Highlights - Methane emissions intensity has been reduced by 24% since 2019, while throughput increased 20% and natural gas business comparable EBITDA grew 57% over the same period. The company maintains a target of 40-55% methane intensity reduction from 2019 levels by 2035. - From 2021 through 2025, TC Energy invested $5.4 billion with Indigenous and Native American businesses, supporting meaningful community and economic participation in company projects.

Guidance

- 2026 comparable EBITDA guidance is now targeted at the upper end of the prior range of $11.6 to $11.8 billion, reflecting strong year-to-date operational performance and confidence in execution for the remainder of the year. - 2028 comparable EBITDA guidance is maintained at $12.6 to $13.1 billion, representing approximately 6% annualized midpoint growth from 2025 results. - The company expects the majority of sustained growth in capital investment pacing to occur in 2029, 2030 and beyond, with FID timelines for early-stage origination projects remaining dynamic. - The company reaffirmed its commitment to maintaining its target leverage ratio of 4.75x, and all capital allocation increases will be underpinned by strong risk-adjusted returns, on-time/on-budget project execution, and balance sheet strength. - TC Energy expects total project sanctioning in 2026 to come in at $6 to $8 billion, which would meet or exceed the company's stretch target for the year. - The company has a 2026 target of $100 million in incremental EBITDA from AI optimization initiatives, and is on track to meet this target, halfway through the year.

Segment performance

TC Energy delivered 12% year-over-year growth in comparable EBITDA for Q2 2026, with positive contributions from all segments: - Canada Gas: EBITDA increased by $38 million (+4%), driven by higher flow-through depreciation on the NGTL and Canadian Mainline systems, plus higher incentive earnings on NGTL. - U.S. Natural Gas: EBITDA increased by $129 million (+12%), driven by additional contract sales and higher earnings from A&R and Columbia Gas. - Mexico Natural Gas: EBITDA increased by $90 million (+28%), driven by higher earnings from the Southeast Gateway project (placed in service May 2025) and higher contributions from CertiTeos. - Power and Energy Solutions: EBITDA increased by $60 million (+20%), driven by higher contributions from Bruce Power, due to the early return of Unit 3 from its planned outage, strong overall system availability, and an annual price increase. Bruce Power achieved 99% availability in the quarter.

Risks & headwinds

- FID timelines for early-stage origination projects are dynamic, and sustained capital growth will not occur until after 2028. - Regulatory and investment return frameworks for new NGTL projects in Alberta are still under discussion with customers, and final terms have not yet been determined. - Regional stakeholder pushback on data center development in some U.S. jurisdictions could impact the timing of some associated natural gas projects, though it has not changed the ultimate viability of projects in TC Energy's backlog to date. - Supply chain and contractor constraints are a potential risk as industry growth expectations increase, though TC Energy reports it has secured all necessary equipment for currently sanctioned projects and proactively manages the supply chain via strategic alliances with top contractors, with no expected impact to current in-service dates.

Analyst Q&A

• Q: Theresa Chin (Barclays) asked for details on Alberta natural gas demand, including data center, oil sands, and LNG impacts, plus how constrained capacity affects tolling negotiation. /

  A: Management confirmed 8-10 BCF per day of projected incremental Alberta demand by 2035 across multiple sectors, with half a dozen ongoing capacity offerings totaling 1 BCF per day to test demand and inform future growth planning. The 2029 Greater Edmonton offering was fully subscribed, and the 2030-2032 expansion will unlock over 1 BCF of intra-basin and egress capacity, with strong current interest across demand segments. This demand data will directly guide the next phase of NGTL growth.

• Q: Chin also asked for details on the size, economics, and expansion potential of the Crossroads project in the U.S. Midwest. /

  A: Management confirmed the project is on track for Q4 2026 sanctioning, with the project falling within the company's 5-7x build multiple target. The Midwest is projected to see 5-6 BCF per day of demand growth by 2035, with 2 BCF per day of that growth representing a year-over-year increase from prior projections. TC Energy's large incumbent, integrated footprint in the region creates a significant competitive advantage for capturing this demand, and additional expansion opportunities are being evaluated alongside the base project.

• Q: Praneesh Satish (Wells Fargo) asked for clarification on the $1 billion increase in pending projects and $5 billion increase in origination backlog, including geographic and segment splits. /

  A: Management confirmed the $1 billion increase in the pending approval bucket is largely the Crossroads project, consistent with the timing of the recently signed precedent agreements. Of the $20+ billion total origination backlog, approximately two-thirds is allocated to U.S. projects, and the remaining one-third to Canadian projects, with two-thirds of the entire backlog tied to power generation demand. Most of this backlog is targeted for execution after 2030.

• Q: Satish also asked for an update on the company's AI pipeline optimization initiative, including current progress, benefits, and scaling plans. /

  A: Management reported that the company is running small proof-of-concept pilots on selected segments of pipeline, selected for their high low-hanging fruit potential, so gains cannot be linearly extrapolated to the full network. Teams must compete for AI implementation capital by submitting business cases with committed outcomes to ensure accountability. The company is on track to hit its 2026 target of $100 million in incremental AI-related EBITDA, and expects to publish a detailed long-term outlook for the initiative by November 2026.

• Q: Aaron McNeil (TD Cowen) asked how TC Energy plans to fund its projected growth capital in 2029-2030 while maintaining its leverage target, before Bruce Power's free cash flow inflection. /

  A: Management reaffirmed its firm commitment to the 4.75x leverage target, with organic EBITDA growth over the next few years expected to set up the company for 2029-2030 growth. Bruce Power's major refurbishment program concludes in 2031-2032, which will unlock $2-3 billion per year of additional free cash flow for growth. If a funding gap exists in 2029-2031 before Bruce's inflection, the company has multiple levers (capital rotation, capital market options) available, and has 2-3 years to develop the least-cost, per-share optimal solution.