Tc Energy Corporation · TSX:TRP
Tc Energy — Q2 2023 Earnings Presentation
34 slides from Tc Energy's earnings presentation, Jul 28, 2023
Slide 1: Second quarter 2023 conference call
Second quarter 2023 conference call J U LY 2 8 , 2 0 2 3
Slide 2: Call participants
Call participants François Poirier – President and Chief Executive Officer Joel Hunter – Executive Vice-President and Chief Financial Officer Stanley G. Chapman, III – Executive Vice-President and Chief Operating Officer, Natural Gas Pipelines Annesley Wallace – Executive Vice-President, Strategy, C
Slide 3: Forward-looking information and non-GAAP measures
Forward-looking information and non-GAAP measures This presentation includes certain forward-looking information, including future oriented financial information or financial outlook, which is intended to help current and potential investors understand management’s assessment of our future plans and
Slide 4: François Poirier
François Poirier President and Chief Executive Officer
Slide 5: Incumbency across a range of energy infrastructure platforms
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL STRATEGIC ADVANTAGE Incumbency across a range of energy infrastructure platforms WCSB Appalachian Basin Shortest transit time to Gulf Coast Building access into Mexico Nuclear in Canada We are partner of choice for a magnitude of accretive, high-quality
Slide 6: Leveraging synergies between our businesses
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Leveraging synergies between our businesses TC Energy: post-spinoff Primary energy consumption mix, 2022 Adjusted comparable EBITDA(2) 2022 Adjusted comparable EBITDA(2) North America Canadian Natural Gas Pipelines 33% U.S. Natural Gas Pipelines 48% 96%
Slide 7: Liquids Pipelines’ competitive advantages
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Liquids Pipelines’ competitive advantages Unrivaled, Shortest transit Minimal times and Flexible delivery low-risk contract volumetric or industry-leading options for structure and commodity price product quality customers tenure preservation risk Premiu
Slide 8: 2023 priorities are clear
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL 2023 priorities are clear PROJECT EXECUTION ENHANCING BALANCE SHEET MAXIMIZING THE VALUE OF OUR STRENGTH AND FLEXIBILITY ASSETS THROUGH SAFETY AND OPERATIONAL EXCELLENCE • Continue to track planned cost • Monetizing 40% interest in • Reiterating 2023 com
Slide 9: Creating two premium energy infrastructure companies
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Creating two premium energy infrastructure companies to deliver superior and enduring shareholder value Separating Liquids Pipelines business, via a Entities will leverage leadership expertise, tax-free spinoff for TC Energy shareholders operational exce
Slide 10: Bevin Wirzba
Bevin Wirzba Executive Vice-President and Group President, Liquids Pipelines and Coastal GasLink
Slide 11: Liquids Pipelines Company strategic asset base
LI QUI DS P I P ELI N ES COMPA N Y Liquids Pipelines Company strategic asset base White Spruce Grand Rapids Liquids pipeline network spans 4,900 km (3,000 miles) • Highly competitive liquids pipelines businesses: • Keystone System / Marketlink • Grand Rapids PADD 2 • White Spruce Refining Direct cap
Slide 12: Premium value proposition
Premium value proposition Our system's competitive advantages Peer average(1) Liquids Pipelines Company Unrivalled, low-risk contract structure and tenure Shortest transit times and industry- leading product quality preservation Contract profile(2) (% of cash flow) Flexible delivery options for cust
Slide 13: Ability to pursue growth opportunities to unlock incremental value
LI QUI DS P I P ELI N ES COMPA N Y RESILIENCE Ability to pursue growth opportunities to unlock incremental value Initial focus on in-corridor growth projects, Comparable EBITDA(1) enhancing and extending reach of the system Billions 2-3% Optimizing latent capacity CAGR • Successful Marketlink Open S
Slide 14: Attractive total shareholder return expected
LI QUI DS P I P ELI N ES COMPA N Y Attractive total shareholder return expected Significant cash flow creates optionality to drive incremental shareholder value: Reduce leverage by 0.25x to 0.5x over 3 years Year 1 Year 2 Year 3 Evaluate share buybacks Expected sustainable annual dividend growth out
Slide 15: Liquids Pipelines Company team
LI QUI DS P I P ELI N ES COMPA N Y Liquids Pipelines Company team BEVIN WIRZBA INTENDED LIQUIDS PIPELINES COMPANY PRESIDENT AND CFO, additional members of the CHIEF EXECUTIVE OFFICER management team and Board of Directors will be announced in the coming months RICHARD PRIOR INTENDED LIQUIDS PIPELINE
Slide 16: Strong operational and financial performance in Q2
LI QUI DS P I P ELI N ES COMPA N Y LIQUIDS PIPELINES HIGHLIGHTS Strong operational and financial performance in Q2 HIGHLIGHTS Liquids Pipelines Comparable EBITDA(1) • Comparable EBITDA(1) up 6% vs. Q2 2022 $Millions • Commercialization of 30,000 bbl/d of Keystone System long-term contracts • Strong
Slide 17: Joel Hunter
Joel Hunter Executive Vice-President and Chief Financial Officer
Slide 18: Second quarter comparable EBITDA up 4 per cent year-over-year
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL EARNINGS GROWTH BREAKDOWN Second quarter comparable EBITDA(1) up 4 per cent year-over-year Comparable EBITDA Comparable Earnings(1) $Millions $Millions Depreciation Net income and attributable amortization to non- controlling interests 18 (1) Comparable
Slide 19: Robust demand met with strong operational performance
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Q2 OPERATIONAL HIGHLIGHTS Robust demand met with strong operational performance LIQUIDS PIPELINES POWER & ENERGY SOLUTIONS • Comparable EBITDA(1) up 6% vs. Q2 2022 • Bruce Power availability of 94% • Favorable market conditions driving strong • Cogenerat
Slide 20: Utilizing and building on capacity
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Q2 OPERATIONAL HIGHLIGHTS Utilizing and building on capacity CANADIAN NATURAL GAS PIPELINES U.S. NATURAL GAS PIPELINES MEXICO NATURAL GAS PIPELINES • Net income(1) up 7% vs. Q2 2022 • Comparable EBITDA(2) up 1% vs. • Comparable EBITDA(2) up 2% vs. Q2 202
Slide 21: Advancing critical energy infrastructure projects
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL DELIVERING ON 2023 PRIORITIES Advancing critical energy infrastructure projects COASTAL GASLINK SOUTHEAST GATEWAY PIPELINE • Approximately 91% complete • Continue to track expected cost of US$4.5 billion • 92% of all classified water crossings are comple
Slide 22: 2023E financial outlook
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL REITERATING EXPECTED SUSTAINABLE GROWTH IN 2023 2023E financial outlook Comparable EBITDA(1) $Billions Comparable Following the 40% monetization of Columbia EBITDA expected to Gas and Columbia Gulf: be ~5-7% higher 6% • 2023 Comparable EBITDA outlook rem
Slide 23: Funding our capital program
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL 2023 – 2026E OUTLOOK Funding our capital program $Billions Approach to capital allocation • Conservative risk preferences • Limit annual sanctioned net capital expenditures to $6 to $7 billion beyond 2024 March 2023 long-term debt issuances • Future capi
Slide 24: Advancing deleveraging targets
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Advancing deleveraging targets Comparable EBITDA (1) growth driven by assets expected to be placed into service 2023-2026 Monetization of 40% of Columbia Gas and Southeast Gateway adds ~$800 million in annual Columbia Gulf for $5.2 billion incremental co
Slide 25: Sustainable dividend growth through disciplined investment
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Sustainable dividend growth through disciplined investment Maintaining dividend growth outlook: 3-5% Comparable EBITDA(1) Supported by growth in earnings and cash flow per share 2000-2023E Russia- Maintain conservative payout ratios Ukraine war COVID-19
Slide 26: Key takeaways
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Key takeaways Unlocking Creating a strategic Simplifying processes shareholder value by and building efficiencies partnership with creating two premium by integrating our Global Infrastructure energy infrastructure Partners natural gas businesses compani
Slide 27: Second quarter 2023 conference call – Appendix
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Second quarter 2023 conference call Appendix J U LY 28, 2023
Slide 28: Appendix A – Non-GAAP reconciliations
UNLOCKING SHAREHOLDER VALUE Appendix A – Non-GAAP reconciliations Comparable EBITDA Comparable EBITDA is a non-GAAP measure, which does not have any standardized meaning under U.S. GAAP and therefore is unlikely to be comparable to similar measures presented by other companies. The most directly com
Slide 29: Appendix B – Non-GAAP reconciliations
UNLOCKING SHAREHOLDER VALUE Appendix B– Non-GAAP reconciliations Comparable EBITDA(1) Billions TC Energy Pre-Spin Post-spinoff Shareholder Outlook (2022 Investor Day) TC Energy 6% CAGR 7% CAGR AFFO(2) forecast Comparable FGFO(1) forecast 2022 Net cash 2022 provided by Segmented 2022 2026E 2022 2022
Slide 30: Appendix C – Non-GAAP reconciliations
UNLOCKING SHAREHOLDER VALUE Appendix C– Non-GAAP reconciliations 2022 Adjusted comparable EBITDA(1) 2022 Adjusted segmented earnings(2) Canadian Canadian Natural Gas Natural Gas Pipelines Pipelines 33% 26% Mexico Natural Gas Mexico Pipelines Natural Gas 9% Pipelines U.S. U.S. 8% Natural Gas Natural
Slide 31: Appendix D – Adjusted Debt/Adjusted Comparable EBITDA
UNLOCKING SHAREHOLDER VALUE Appendix D – Non-GAAP reconciliations – Adjusted Debt/Adjusted Comparable EBITDA (D/EBITDA) Adjusted Debt/Adjusted Comparable EBITDA (1) Millions Year ended December 31 2022 2021 Reported total debt 58,300 52,766 Management adjustments: Debt treatment of preferred shares
Slide 32: Appendix – Non-GAAP reconciliations
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Appendix – Non-GAAP reconciliations Three months Six months (Millions of dollars, except per share amounts) ended June 30 ended June 30 2023 2022 2023 2022 Net income attributable to common shares 250 889 1,563 1,247 Specific items (net of tax): C oastal
Slide 33: Appendix – Non-GAAP reconciliations
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Appendix – Non-GAAP reconciliations (Millions of dollars) Three months Six months ended June 30 ended June 30 2023 2022 2023 2022 Comparable EBITDA(1) 2,474 2,369 5,249 4,757 Depreciation and amortization (694) (635) (1,371) (1,261) Interest expense incl
Slide 34: Appendix – Non-GAAP reconciliations
TC ENERGY SECOND QUARTER 2023 CONFERENCE CALL Appendix – Non-GAAP reconciliations (Millions of dollars) Three months Six months ended June 30 ended June 30 2023 2022 2023 2022 Net cash provided by operations 1,510 942 3,584 2,649 Increase (decrease) in operating working capital 177 618 117 578 Funds