South Bow Corporation Q1 FY2025 earnings call

• First quarter had solid financial start with normalized EBITDA of $266 million. • Completed pipeline scope of Blackrod Connection Project and implemented new enterprise resource planning system. • Declared quarterly dividend of $0.50 per share payable on July 15th to shareholders of record on June 30th. • Responded quickly to Milepost 171 incident, contained release, replaced damaged pipe section, and is working on remediation. • Invested in integrity programs over the years and will continue, with 90% of EBITDA contracted over seven years providing cash flow stability during incidents.

In the first quarter, normalized EBITDA was $266 million. Approximately 90% of South Bow's normalized EBITDA is contracted over the next seven years, providing stability in the base business.

• Reaffirmed normalized EBITDA guidance of $1.01 billion for 2025. • Adjusted upside case to 1% from 3% of base case and downside case to a decrease of 2% from a 3% decrease of the $1.01 billion base case. • Expect to exit 2025 with a net debt to normalized EBITDA ratio of approximately 4.8 times, with deleveraging to begin in 2026 as cash flows from Blackrod start.

• Uncertainty around the Milepost 171 incident investigation, corrective action order, and time frame for resolving issues. • Potential impact on spot volumes and future incident prevention efforts.

Q: Jeremy Tonet asked about the range of outcomes and open items impacting the financial and operational outlook.

A: Bevin Wirzba said the base business is underpinned by contracted EBITDA, and they're working closely with regulators on root cause assessment.

Q: Robert Hope asked about pressure restrictions duration and spot volumes.

A: Richard Prior said it's too early to speculate, but referenced previous incidents and ongoing investigations.

Q: Maurice Choy asked about costs of the incident and spot volumes.

A: Van Dafoe said costs will be covered by insurance or variable toll, and Bevin Wirzba mentioned it's early to disclose total costs.

Q: Robert Catellier asked about long-term guidance and policy permitting.

A: Bevin Wirzba talked about capital allocation and regulatory certainty.

Q: Benjamin Pham asked about asset sales and First Nations partnerships.

A: Bevin Wirzba said assets are core, and they consider partnerships for new projects.

Q: Patrick Kenny asked about business development and Blackrod.

A: Bevin Wirzba said there's inbound interest and they're working on customer solutions.

Q: Keith Stanley asked about contractual commitments and insurance.

A: Richard Prior clarified they expect to move 585,000 barrels per day, and Richard Prior and Bevin Wirzba discussed insurance and incident investigation.