CALGARY, Alberta – TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company) today announced net income attributable to common shares for fourth-quarter 2020 of $1.1 billion or $1.20 per share compared to net income of $1.1 billion or $1.18 per share for the same period in 2019. For the year ended December 31, 2020, net income attributable to common shares was $4.5 billion or $4.74 per share compared to net income of $4.0 billion or $4.28 per share for 2019. Comparable earnings for fourth quarter 2020 were $1.1 billion or $1.15 per common share compared to $970 million or $1.03 per common share in 2019. For the year ended December 31, 2020, comparable earnings were $3.9 billion or $4.20 per common share compared to $3.9 billion or $4.14 per common share for 2019. TC Energy’s Board of Directors also declared a quarterly dividend of $0.87 per common share for the quarter ending March 31, 2021, equivalent to $3.48 per common share on an annualized basis, an increase of 7.4 per cent. This is the twenty-first consecutive year the Board has raised the dividend.
“We are very pleased with the performance of our diversified portfolio of regulated and long-term contracted assets which generated record financial results again in 2020,” said François Poirier, TC Energy’s President and Chief Executive Officer. “In the midst of a global pandemic, our people and business remained healthy. Our services were deemed essential given the critical role our infrastructure plays in providing energy to North Americans and our results demonstrate the resiliency of our assets and utility-like business model in these unprecedented times. Comparable earnings per share improved by 1.5 per cent compared to what was a record 2019 while comparable funds generated from operations of $7.4 billion were four per cent higher. The increases reflect the strong performance of our legacy assets and contributions from approximately $5.9 billion of growth projects that entered service in 2020. Based on these strong results, together with the confidence we have in our future outlook, we are pleased to announce a 7.4 per cent increase in our common share dividend for 2021.”
Despite the challenges brought about by COVID-19, TC Energy’s operating assets have been largely unimpacted. Across our extensive North American operations, flows and utilization levels generally remain in line with historical and seasonal norms, underscoring the importance of our assets to the North American economy. Given the regulated and/or long-term contracted nature of our portfolio, we continue to be largely insulated from volatility associated with volume throughput and commodity prices.
“While we were disappointed with the recent action to revoke the Presidential Permit for the Keystone XL pipeline, we have a large and diversified asset base that continues to perform extremely well and are advancing $20 billion of secured capital projects, together with a substantive portfolio of other similarly high quality opportunities under development,” continued Poirier. “Our footprint is comprised of irreplaceable corridors of critical energy infrastructure that are expected to contribute to the continuous replenishment of our growth portfolio in the years ahead under all energy mix scenarios. Through prudent financial management, our balance sheet continues to exhibit its historical strength allowing us to self-fund our growth program without the issuance of additional common shares.”
Looking forward, safety remains at the forefront of all that we do. In addition, we are committed to sustainably managing our business and reducing or eliminating our environmental impact. As part of our efforts, TC Energy continues to progress the multi-billion dollar Bruce Power life extension program, a source of significant emission-less power in Ontario, and advance other financially, operationally and environmentally attractive initiatives. Additional growth opportunities are expected to arise as the world both consumes more energy and transitions to a less carbon intensive energy mix and we are well positioned to participate in the substantial investment that will be required. With a deep understanding of energy markets, strong stakeholder relationships, significant financial capacity, and extensive technical expertise across a broad range of energy sources including natural gas, crude oil, nuclear, hydro, wind, solar and other emerging technologies, TC Energy expects to continue to grow its portfolio in a manner that fully aligns with the company’s long-established risk preferences, return expectations and organizational capabilities. Success in advancing our secured capital program and other organic growth opportunities emanating from our five operating businesses across North America, is expected to support future dividend growth of five to seven per cent per year.
(All financial figures are unaudited and in Canadian dollars unless otherwise noted)
- Fourth quarter 2020 financial results
- Net income attributable to common shares of $1.1 billion or $1.20 per common share
- Comparable earnings of $1.1 billion or $1.15 per common share
- Comparable EBITDA of $2.3 billion
- Net cash provided by operations of $1.9 billion
- Comparable funds generated from operations of $2.1 billion
- For the year ended December 31, 2020
- Net income attributable to common shares of $4.5 billion or $4.74 per common share
- Comparable earnings of $3.9 billion or $4.20 per common share
- Comparable EBITDA of $9.4 billion
- Net cash provided by operations of $7.1 billion
- Comparable funds generated from operations of $7.4 billion
- Fourth quarter and other recent highlights
- François Poirier assumed the position of President and Chief Executive Officer and joined the Board of Directors on January 1, 2021
- TC Energy’s Board of Directors approved a 7.4 per cent increase in the quarterly common share dividend to $0.87 per common share for the quarter ending March 31, 2021
- Placed approximately $3.4 billion of NGTL System and $0.2 billion of Canadian Mainline capacity projects in service during 2020
- Received Governor in Council (GIC) approval for the NGTL System 2021 Expansion Program which will add incremental capacity of 1.45 Bcf/d
- Placed approximately US$1.9 billion of U.S. capital projects in service during 2020 including completion of Columbia’s Modernization II program and BXP project
- Approved the US$0.2 billion Wisconsin Access Project on October 28, 2020 to replace, upgrade and modernize certain ANR facilities
- Continued to advance the Bruce Power Major Component Replacement (MCR) project on time and on budget
- Announced a definitive agreement and plan of merger on December 15, 2020 to acquire all the outstanding publicly-held common units of TC PipeLines, LP in exchange for TC Energy common shares.
Net income attributable to common shares increased by $16 million or $0.02 per common share to $1.1 billion or $1.20 per share for the three months ended December 31, 2020 compared to the same period last year. For the year ended December 31, 2020, net income attributable to common shares was $4.5 billion or $4.74 per share compared to $4.0 billion or $4.28 per share in 2019, an increase of $0.5 billion or $0.46 per common share. Per share results reflect the dilutive impact of common shares issued under our Dividend Reinvestment and Share Purchase Plan (DRP) in 2019. Net income attributable to common shares includes a number of specific items that we believe are significant but not reflective of our underlying operations in the period. More information on these items which are excluded from comparable earnings can be found in the table entitled “Reconciliation of net income to comparable earnings” later in the news release.
Comparable EBITDA of $2.3 billion increased by $8 million for the three months ended December 31, 2020 compared to the same period in 2019 primarily due to the net effect of the following:
- increased earnings from U.S. Natural Gas Pipelines mainly attributable to lower operating costs
- higher comparable EBITDA from Canadian Natural Gas Pipelines due to the impact of increased rate-base earnings, flow-through depreciation from additional facilities placed in service as well as higher financial charges on the NGTL System along with Coastal GasLink development fee revenue recognized in 2020, partially offset by a decrease in flow-through income taxes on the NGTL System and Canadian Mainline
- lower contribution from Liquids Pipelines primarily attributable to reduced margins from our liquids marketing activities
- decreased contribution from Power and Storage primarily due to the net impact of lower Bruce Power earnings in 2020 reflecting the commencement of the Unit 6 MCR program on January 17, 2020, partially offset by fewer outage days on the remaining units, the sale of our Ontario natural gas-fired power plants on April 29, 2020, and improved results from our Alberta cogeneration plants
- foreign exchange impact of a weaker U.S. dollar on the Canadian dollar equivalent earnings from our U.S. dollar-denominated operations.
Due to the flow-through treatment of certain expenses including income taxes, financial charges and depreciation on our Canadian rate-regulated pipelines, changes in these items impact our comparable EBITDA despite having no significant effect on net income.
Comparable earnings of $1.1 billion or $1.15 per common share increased by $110 million or $0.12 per common share for the three months ended December 31, 2020 compared to the same period in 2019 and was primarily the net effect of:
- changes in comparable EBITDA described above
- a decrease in income tax expense mainly attributable to lower flow-through income taxes on Canadian rate-regulated pipelines and higher foreign tax rate differentials
- a decrease in interest expense primarily due to higher capitalized interest related to Keystone XL, partially offset by the completion of Napanee construction and the application of equity accounting to our Coastal GasLink investment. The reduction in interest expense was also a result of lower interest rates on short-term borrowings and the foreign exchange impact of a weaker U.S. dollar on translation of U.S. dollar-denominated interest
- higher Interest income and other primarily related to derivatives used to manage our net exposure to foreign exchange rate fluctuations on U.S. dollar-denominated income
- lower Allowance for Funds Used During Construction (AFUDC) primarily due to NGTL System expansion projects placed in service and the suspension of recording AFUDC on the Tula project, partially offset by Columbia Gas growth projects
- higher depreciation in Canadian Natural Gas Pipelines reflecting new assets placed in service as discussed above.
Comparable earnings per share reflected the dilutive impact of common shares issued under our DRP in 2019.
Comparable EBITDA of $9.4 billion in 2020 decreased by $15 million compared to 2019 primarily due to the net result of the following:
- decreased earnings from Liquids Pipelines as a result of lower uncontracted volumes on the Keystone Pipeline System, reduced contributions from liquids marketing activities and the July 2019 sale of an 85 per cent equity interest in Northern Courier
- lower Power and Storage results mainly attributable to decreased Bruce Power results in 2020 primarily due to the net impact of lower overall plant generation with the commencement of the Unit 6 MCR program on January 17, 2020, partially offset by fewer outage days on the remaining units and a higher realized power price. As well, reduced earnings in Canadian Power in 2020 were largely as a result of the sale of our Ontario natural gas-fired power plants on April 29, 2020 and the May 2019 sale of our Coolidge generating station
- higher comparable EBITDA from Canadian Natural Gas Pipelines primarily due to the impact of increased rate-base earnings and flow-through depreciation from additional facilities placed in service as well as higher flow-through financial charges on the NGTL System, along with Coastal GasLink development fee revenue recognized in 2020, partially offset by lower flow-through income taxes on the NGTL System and the Canadian Mainline
- increased contribution from Mexico Natural Gas Pipelines mainly due to higher earnings from our investment in the Sur de Texas pipeline following its September 2019 in-service. This includes revenues of US$55 million recognized in first quarter 2020 related to fees associated with our successful construction of Sur de Texas
- incremental earnings in U.S. Natural Gas Pipelines from Columbia Gas and Columbia Gulf growth projects placed in service and from ANR due to the sale of natural gas from certain gas storage facilities, partially offset by decreased earnings as a result of the sale of certain Columbia Midstream assets in August 2019
- foreign exchange impact of a stronger U.S. dollar on the Canadian dollar equivalent earnings from our U.S. dollar-denominated operations.
Due to the flow-through treatment of certain expenses, including income taxes and depreciation on our Canadian rate-regulated pipelines, the accelerated tax depreciation changes in 2019 and increased depreciation expense impacts our comparable EBITDA despite having no significant effect on net income.
Comparable earnings of $3.9 billion or $4.20 per common share in 2020 were $94 million or $0.06 per common share higher than in 2019, and were primarily the net result of:
- changes in comparable EBITDA described above
- a decrease in income tax expense mainly due to lower flow-through income taxes on Canadian rate-regulated pipelines and the impact of higher foreign tax rate differentials
- lower interest expense as a result of higher capitalized interest largely related to Keystone XL, net of the impact of Napanee completing construction in first quarter 2020, and lower interest rates on reduced levels of short-term borrowings. These were partially offset by the effect of long-term debt issuances, net of maturities, as well as the foreign exchange impact from a stronger U.S. dollar on the translation of U.S. dollar-denominated interest
- a decrease in AFUDC predominantly due to NGTL System expansions placed in service and the suspension of recording AFUDC on the Tula project resulting from continued construction delays, partially offset by further construction of the Villa de Reyes pipeline
- higher depreciation largely in Canadian Natural Gas Pipelines and U.S. Natural Gas Pipelines reflecting new assets placed in service. In Canadian Natural Gas Pipelines, however, it is fully recovered in tolls on a flow-through basis as discussed in comparable EBITDA above, and therefore has no significant impact on comparable earnings.
Comparable earnings per share were impacted by the dilutive impact of common shares issued under our DRP in 2019.
Notable recent developments include:
Canadian Natural Gas Pipelines:
- NGTL System: In 2020, the NGTL System placed approximately $3.4 billion of capacity projects in service.On February 19, 2020, the Canada Energy Regulator issued a report recommending that the GIC approve the 2021 NGTL System Expansion Program, which the GIC approved on October 19, 2020. The NGTL System subsequently progressed construction activities in accordance with the regulatory requirements resulting in compressor station field work beginning in December 2020 and pipeline construction activities in January 2021.Once facilities are placed in service, the 2021 NGTL System Expansion Program is expected to provide 1.59 PJ/d (1.45 Bcf/d) of incremental system capacity underpinned by long-term receipt and delivery contracts, connecting incremental supply to growing intra-basin and export markets. In-service is expected to commence in late 2021 with remaining program components completed by April 2022.
- Canadian Mainline: During 2020, Canadian Mainline placed approximately $0.2 billion of capacity projects in service.
- Coastal GasLink: Due to COVID-19, on December 29, 2020, the British Columbia Provincial Health Officer issued an order restricting the number of workers on site for industrial projects in the Northern Health Authority region of British Columbia. Industrial projects must submit restart plans to the Provincial Health Officer detailing steps to resume site work. Coastal GasLink is working with the provincial health authorities to safely resume construction activities in accordance with the objectives and timelines defined in the order.The project is also working with LNG Canada on establishing a revised project plan for Coastal GasLink. We expect that project costs will increase significantly and the schedule will be delayed compared to the previously disclosed estimate due to scope increases, permit delays and the impacts from COVID-19, including the provincial health order, although Coastal GasLink will continue to mitigate these impacts to the extent possible. These incremental costs will be included in the final pipeline tolls, subject to certain conditions. We do not anticipate our future equity contributions will increase significantly following the conclusion of this process.
U.S. Natural Gas Pipelines:
- Wisconsin Access: On October 28, 2020, we approved the Wisconsin Access Project that will replace, upgrade and modernize certain facilities while reducing emissions along portions of the ANR pipeline system. The enhanced facilities will improve reliability of the ANR pipeline system and also allow for additional contracted transportation services of approximately 77 TJ/d (72 MMcf/d) to be provided to utilities serving the Midwestern U.S. under long-term contracts. The anticipated in-service date of the combined project is in the second half of 2022 with an estimated cost of US$0.2 billion.
- BXP: The US$0.2 billion BXP project, a Columbia Gas project representing an upsizing of existing pipeline replacement, in conjunction with our modernization program, was partially placed into service in October 2020 with full in-service commencing on January 1, 2021.
- Columbia Gas Section 4 Rate Case: Columbia Gas filed a Section 4 Rate Case with FERC on July 31, 2020 requesting an increase to Columbia Gas’ maximum transportation rates effective February 1, 2021, subject to refund. The rate case is progressing as expected as we continue to pursue a collaborative process to find a mutually beneficial outcome with our customers through settlement negotiations.
Mexico Natural Gas Pipelines:
- Villa de Reyes: Villa de Reyes project construction is ongoing. Phased in-service has been delayed due to COVID-19 contingency measures which have impeded our ability to obtain work authorizations as a result of administrative closures. Subject to the timely re-opening of government agencies, we expect to complete construction of Villa de Reyes in 2021.
- Guadalajara: A project to allow bidirectional flows was completed in December 2020 and the TSA with the CFE was renegotiated. The bidirectional flow allows access to either LNG imports from the Manzanillo terminus or access to continental natural gas at the Guadalajara terminus for delivery to regional markets.
- Keystone XL: On January 20, 2021, U.S. President Biden revoked the existing Presidential Permit for the Keystone XL pipeline. As a result, we suspended the advancement of the Keystone XL pipeline project and ceased capitalizing costs, including interest during construction, and also ceased accruing a return on the Government of Alberta interests as of that date, while we assess our options along with our partner, the Government of Alberta, and other stakeholders. We expect to record a substantive, predominantly non-cash, after-tax charge to our earnings in first quarter 2021, which will be excluded from comparable earnings.Accounting implications in first quarter 2021 and beyond will depend on the assessment and consideration of options as noted above, including the impacts that this had on contractual arrangements. As a result, the magnitude of the impairment charge and related recoveries cannot be quantified at this time. The determination of the amount of the pre-tax impairment of the Keystone XL assets will consider the then-carrying value of the project and any associated projects, outstanding contractual commitments, the estimated net recoverable value of tangible plant and equipment and specified contractual recoveries, which cannot be reasonably estimated until the options have been assessed and next steps have been determined. The viability of certain projects currently associated with the Keystone XL pipeline is also being reviewed.
Power and Storage:
- Bruce Power – Life Extension: The Unit 6 MCR outage commenced on January 17, 2020 and is expected to be completed in late 2023. On October 1, 2020, the Unit 6 MCR project achieved a major milestone with the completion of the preparation phase and commencement of the Fuel Channel and Feeder Replacement Program and as of December 31, 2020 the Unit 6 MCR project remains on schedule and on budget. Operations on the remaining units continue as normal with scheduled outages successfully completed on Units 3, 4 and 5 in second quarter 2020 and on Unit 8 in fourth quarter 2020.
- TransCanada Turbines Ltd. (TC Turbines): On November 13, 2020, we acquired the remaining 50 per cent ownership interest in TC Turbines for cash consideration of US$67 million. TC Turbines provides industrial gas turbine maintenance, parts, repair and overhaul services. Following the acquisition, we began to fully consolidate TC Turbines within our financial results.
- Retirement and appointment of our President and CEO: On September 21, 2020, we announced the retirement of Russ Girling as President and CEO of TC Energy and from our Board of Directors effective December 31, 2020. François Poirier, previously Chief Operating Officer and President, Power & Storage, succeeded Mr. Girling as President and CEO and joined our Board of Directors on January 1, 2021. Mr. Girling will assist Mr. Poirier with the transition through February 28, 2021.
- Common share dividend: Our Board of Directors declared a quarterly dividend of $0.87 per common share for the quarter ending March 31, 2021. The quarterly amount is equivalent to $3.48 per common share on an annualized basis, an increase of 7.4 per cent.
- Acquisition of common units of TC PipeLines, LP: On December 15, 2020, we announced that we have entered into a definitive agreement and plan of merger to acquire all the outstanding common units of TC PipeLines, LP not beneficially owned by TC Energy or our affiliates in exchange for TC Energy common shares. Pursuant to the agreement, TC PipeLines, LP common unitholders will receive 0.70 common shares of TC Energy for each issued and outstanding publicly-held TC PipeLines, LP common unit. The exchange ratio reflects a value for all publicly-held common units of TC PipeLines, LP of approximately US$1.69 billion, or 38 million TC Energy common shares based on the closing price of TC Energy’s common shares on the New York Stock Exchange on January 19, 2021. A vote on the plan of merger by the unitholders of the publicly-held common units is scheduled for February 26, 2021. The transaction is expected to close in late first quarter 2021 subject to approval by the holders of a majority of outstanding common units of TC PipeLines, LP and customary regulatory approvals. Upon closing, TC PipeLines, LP will be wholly owned by TC Energy and will cease to be a publicly-held master limited partnership.
Teleconference and Webcast:
We will hold a teleconference and webcast on Thursday, February 18, 2021 to discuss our fourth quarter and year-end 2020 financial results. François Poirier, President and Chief Executive Officer, Don Marchand, Executive Vice-President, Strategy & Corporate Development and Chief Financial Officer, and other members of the executive leadership team will discuss TC Energy’s financial results and Company developments at 2 p.m. MST / 4 p.m. EST.
Members of the investment community and other interested parties are invited to participate by calling 1.855.327.6838. 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: http://www.gowebcasting.com/11058.
A replay of the teleconference will be available two hours after the conclusion of the call until midnight (EST) on February 25, 2021. Please call 1.855.669.9658 and enter pass code 5971.
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 are a vital part of everyday life – delivering the energy millions of people rely on to power their lives in a sustainable way. Thanks to a safe, reliable network of natural gas and crude oil pipelines, along with power generation and storage facilities, wherever life happens – we’re there. Guided by our core values of safety, responsibility, collaboration and integrity, our 7,500 people make a positive difference in the communities where we operate across Canada, the U.S. and Mexico.
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.