TC Energy Corporation Q4 FY2024 earnings call

Safety and EBITDA Performance

• 2024 had the best safety performance in the past five years. Comparable EBITDA from continuing operations increased by 6% compared to 2023.

Project Completions and Capital Expenditures

• Successfully completed the spinoff of the liquids business and the commercial in-service of Coastal GasLink. Placed $7 billion of assets into service while reducing net capital expenditures by 10% and identified an additional $1.3 billion of capital reductions for 2026 and 2027.

Major Projects Progress

• Southeast Gateway is on cost and schedule, with public-private partnership with CFE delivering the project 13% below original budget, reaching mechanical completion in January and expected to be in commercial in-service on May 1. Major projects like Bruce Power's Unit 3 MCR and others remain on track.

Plan Mexico 2030 and Growth Projects

• President Sheinbaum's Plan Mexico 2030 aligns with TC Energy's role in natural gas deliveries. Announced five new growth projects, including Pulaski and Maysville projects, Southeast Virginia Energy Storage Project, etc.

Tariffs Assessment

• 97% of comparable EBITDA is under regulated cost of service frameworks or take-or-pay contracts, so no material impact on financial performance is anticipated from tariffs, but prolonged tariffs could impact capital allocation decisions.

In 2024, TC Energy's comparable EBITDA from continuing operations increased by 6% compared to 2023. The Natural Gas Pipelines in each country set new delivery records from November last year to February this year. Bruce Power achieved 99% availability, driving a 28% increase in quarterly EBITDA growth for the Power and Energy Solutions business unit. The Regulated Canadian Natural Gas Pipelines business, which transports gas to be exported to the US by shippers, is protected against higher costs or loss of volumes. The Mexico Natural Gas Pipelines business primarily receives gas from the Southern US for delivery in Mexico, with contracts in US dollars and based on long-term take-or-pay agreements. The Power and Energy Solutions business, with Bruce Power as a significant contributor, has over 90% of its supply chain in Canada.

2025 Guidance

• Base case to deliver 2025 comparable EBITDA of $10.7 billion to $10.9 billion, representing a 7% to 9% increase year-over-year.

2027 Guidance

• Project a target of $11.7 billion to $11.9 billion for 2027, implying a 5% to 7% three-year growth rate.

Exchange Rate Impact

• Base case outlook uses an average US to Canadian dollar exchange rate of 1.35. Every penny increase in USD/CAD roughly translates into $45 million of incremental EBITDA. Systematically hedges US dollar net income to insulate comparable earnings from FX volatility, with no material impact expected on 2025 comparable earnings.

• Prolonged tariffs could impact capital allocation decisions. - Risks related to interconnecting pipelines delays for projects like the Mayakan pipeline in Mexico.

Q: Praneeth Satish asked about the in-service date of Southeast Gateway and how commercial contracts protect returns if there are delays to interconnecting pipelines.

A: Stan Chapman responded that the in-service date of May 1 is consistent with guidance, CFE is rebalancing supply portfolio, and all parties are aligned on May 1 in-service date.

Q: Praneeth Satish asked about developing integrated gas to power projects.

A: Francois Poirier said TC Energy has expertise in such solutions, is in conversations with parties, and Tina Faraca expanded on data center demand and related opportunities.

Q: Theresa Chen asked about Bruce C's next steps and leverage outlook.

A: Francois Poirier said Bruce C is early days with much planning work, and Sean O'Donnell said dialogue with rating agencies focuses on SGP and $6 billion to $7 billion capital range.

Q: Maurice Choy asked about mothball capacity on Canada mainline and capital allocation commitment.

A: Stan Chapman said spare capacity has changed with strong demand, and Francois Poirier said most discretionary capital going to US with data center opportunity in Alberta.

Q: Jeremy Tonet asked about EBITDA upside and project cadence.

A: Sean O'Donnell said Bruce performs well and Francois Poirier said regular cadence of projects to fill backlog.

Q: Manav Gupta asked about announced projects' progress and coal-to-gas switching opportunities.

A: Tina Faraca said announced projects are progressing, and there are many coal-to-gas conversion opportunities.

Q: John Mackay asked about Mexico business separation and growth project reclassification.

A: Francois Poirier said timeline for Mexico business consideration is first half of 2026 and it might be re-bucketing due to color scheme change.

Q: Ben Pham asked about Columbia rate case and Alberta data center.

A: Tina Faraca said waiting for FERC top sheets and Francois Poirier said it's unregulated pipelines in Alberta.

Q: Jessica Hoyle asked about Ontario Pumped Storage project and LNG support.

A: Francois Poirier said work continuing on Ontario Pumped Storage and Tina Faraca and Stan Chapman talked about LNG projects in US and Canada respectively