Tc Energy Corporation · TSX:TRP
Tc Energy — Investor Day (November 2023)
61 slides from Tc Energy's investor day presentation, Nov 28, 2023
Slide 1: TC Energy's 2023 Investor Day
T C E N E R G Y 2 0 2 3 I N V E S T O R D AY WELCOME TO TC Energy’s 2023 Investor Day November 28, 2023
Slide 2: Land Acknowledgement
TC ENERGY 2023 INV ESTOR DAY Land Acknowledgement Gavin Wylie Vice-President, Investor Relations 2
Slide 3: Forward-looking information and non-GAAP measures
TC ENERGY 2023 INV ESTOR DAY 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 asses
Slide 4: Today's Agenda
TC ENERGY 2023 INV ESTOR DAY Land acknowledgement & Safety moment – Gavin Wylie and Annesley Wallace Strategic Overview – François Poirier Today’s Agenda TC Energy Strategic Outlook Presentations – François Poirier 8:00 – 9:00 am EST TC Energy Financial Outlook – Joel Hunter Q&A 9:00 – 10:00 am EST
Slide 5: Safety moment
TC ENERGY 2023 INV ESTOR DAY Safety moment Annesley Wallace Executive Vice-President, Strategy and Corporate Development, and President, Power and Energy Solutions 5
Slide 6: Strategic Overview
TT C C EE N N EE R RGG YY 2 2002 233 II N NVV EE SS TT O ORR D DAA YY October 7, 2023: The final “Golden” weld on Coastal GasLink at the base of Cable Crane Hill Strategic Overview François Poirier President and Chief Executive Officer 6
Slide 7: Delivering on our 2023 commitments
TC ENERGY 2023 INV ESTOR DAY Delivering on our 2023 commitments PROJECT ENHANCING BALANCE MAXIMIZING THE VALUE EXECUTION SHEET STRENGTH OF OUR ASSETS Coastal GasLink mechanically complete 2023 divestiture target exceeded with 2023 comparable EBITDA(1) expected to in November, ahead of target $5.3 bi
Slide 8: Our goal: Demonstrate how our strategic vision maximizes the value of our five leadership positions
TC ENERGY 2023 INV ESTOR DAY Our goal: Demonstrate how our strategic vision maximizes the value of our five leadership positions Three Natural Gas Pipelines businesses: Low-risk, rate-regulated and long-term, take-or-pay contracts Diversified across North America One Power and Energy Solutions busin
Slide 9: Two premier energy infrastructure companies
TC ENERGY 2023 INV ESTOR DAY Two premier energy infrastructure companies TC Energy South Bow Corporation Natural gas pipelines, power and storage businesses Liquids pipelines and storage business Above average growth from integrated natural gas and power Strong and sustainable base dividend underpin
Slide 10: Next steps
TC ENERGY 2023 INV ESTOR DAY Next steps Targeting closing second half of 2024, with key dates as follows: July August – December Second half of Mid-2024 Mid-2024 Mid-2024 2023 2023 2024 Spinoff Ongoing updates/ Receipt of tax rulings File proxy Shareholder vote on Spinoff to be announced Investor Da
Slide 11: TC Energy Strategic Outlook
TC ENERGY 2023 INV ESTOR DAY POST-SPINOFF TC Energy Strategic Outlook 11
Slide 12: TC Energy's strategic vision aligns to our value proposition
TC ENERGY 2023 INV ESTOR DAY TC Energy’s strategic vision aligns to our value proposition Alignment with the evolving energy mix $Billions Comparable EBITDA(1) LONG-TERM VIEW GROUNDED 12 2000-2023E Strategic investments in low-carbon energy IN FUNDAMENTALS solutions 10 8 Post-2024, net capital expen
Slide 13: Delivering above average, sustainable growth
TC ENERGY 2023 INV ESTOR DAY Delivering above average, sustainable growth 2023E–2026E Comparable EBITDA(1) outlook $Billions Sustainable growth underpinned by ~7% 11.2 – 11.5 rate-regulation and long-term contracts CAGR Beyond-2026 deliver AFFO per 3% 9.2 – 9.3 share growth at the upper end of 17% A
Slide 14: Strategically positioned to meet growing energy demand
TC ENERGY 2023 INV ESTOR DAY LONG-TERM VIEW GROUNDED IN FUNDAMENTALS Strategically positioned to meet growing energy demand North American natural gas demand outlook(1) Electrification driving natural gas demand in North America Bcf/d 22% ~140 Bcf/d and abroad 150 Well positioned to capture next wav
Slide 15: Leveraging leadership positions in baseload and firming resources
TC ENERGY 2023 INV ESTOR DAY LONG-TERM VIEW GROUNDED IN FUNDAMENTALS Leveraging leadership positions in baseload and firming resources North America power market by fuel(1) GW Growing electricity demand in Ontario requires 3,000 Natural Gas Nuclear additional baseload and firming resources 2,400 Hyd
Slide 16: Enhanced capital allocation process
TC ENERGY 2023 INV ESTOR DAY DISCIPLINED CAPITAL ALLOCATION Enhanced capital allocation process Vast opportunity set Appropriate allocation of cost and schedule risk amongst parties Lower the execution risk profile (rate-regulation focus, Class 3 estimates, commercial framework, policy support, ESG
Slide 17: High grading projects to maximize returns
TC ENERGY 2023 INV ESTOR DAY FINANCIAL STRENGTH AND FLEXIBILITY High grading projects to maximize returns Unlevered after-tax IRR of projects sanctioned Protections inherent in our regulatory vs. government 10-year yields Per cent frameworks ~10.0 ~9.5 Cost of debt is a direct ~8.5 flow-through for
Slide 18: Disciplined capital expenditure outlook
TC ENERGY 2023 INV ESTOR DAY ADHERING TO CONSERVATIVE RISK PREFERENCES Disciplined capital expenditure outlook $Billions 12.0 – 12.5 9.3 8.0 – 8.5 6.0 – 6.5 Targeted 5.0 – 5.5 $6 – $7 billion annual net capital expenditure range 2022 2023E 2024E 2025E 2026E Sanctioned net capital expenditures Net ca
Slide 19: Allocating $6 to $7 billion annual net capital spend beyond 2024
TC ENERGY 2023 INV ESTOR DAY DISCIPLINED CAPITAL ALLOCATION Allocating $6 to $7 billion annual net capital spend beyond 2024 $Billions Appropriate risk mitigations during project execution 7.0 Optionality: Canadian Natural Gas Pipelines Reduce debt, buy back shares, Cost pass-through subject to prud
Slide 20: Above average growth, below average risk
TC ENERGY 2023 INV ESTOR DAY ADHERING TO CONSERVATIVE RISK PREFERENCES Above average growth, below average risk Utility Midstream TC Energy(1) peer average peer average 2023E–2026E Comparable EBITDA CAGR(2) ~7% 6% 4% % natural gas(3) 89% N/A 71% 2023E Dividend EPS payout ratio(4) 88% 68% 95% % take-
Slide 21: 2024 strategic priorities
TC ENERGY 2023 INV ESTOR DAY 2024 strategic priorities PROJECT ENHANCING BALANCE SHEET MAXIMIZING THE VALUE OF OUR EXECUTION ON-TIME STRENGTH AND FLEXIBILITY ASSETS THROUGH SAFETY AND AND ON-BUDGET OPERATIONAL EXCELLENCE Elevated focus and governance on Achieve below 4.75x debt-to-EBITDA(3) Safely,
Slide 22: TC Energy Financial Outlook
TC ENERGY 2023 INV ESTOR DAY TC Energy Financial Outlook Joel Hunter Executive Vice-President and Chief Financial Officer 22
Slide 23: My focus today
TC ENERGY 2023 INV ESTOR DAY My focus today SUPPORTING TC ENERGY’S VALUE PROPOSITION Adherence to conservative risk preferences Delivers Prioritizing and managing our balance sheet Financial strength and flexibility 2024 outlook Continuing to deliver long-term shareholder value 23
Slide 24: Diversified, utility-like business offers premium value
TC ENERGY 2023 INV ESTOR DAY Diversified, utility-like business offers premium value 2023E Comparable EBITDA(1) breakdown 3% 4% 7% 17% 80% Regulated 89% Rate-regulated Long-term contracted Other Natural Gas Pipelines Bruce Power Other Power & Energy Solutions 97% rate-regulated and long-term contrac
Slide 25: Sanctioned capital delivers long-term predictability
TC ENERGY 2023 INV ESTOR DAY Sanctioned capital delivers long-term predictability Comparable EBITDA(1) $Billions Four leadership 14 platforms provide additional opportunities 10 ~7% Visibility to comparable CAGR EBITDA(1) growth through 2030 Expected completion of 6 $32 billion(2) secured capital pr
Slide 26: Delivering above average, sustainable growth
TC ENERGY 2023 INV ESTOR DAY Delivering above average, sustainable growth 2023E–2026E Comparable EBITDA(1) outlook $Billions ~7% 11.2 – 11.5 Sustainable growth underpinned by CAGR Beyond-2026 high-quality assets deliver AFFO per share 9.2 – 9.3 growth at the upper 97% of earnings underpinned by end
Slide 27: Stable earnings underpinned by rate regulation
TC ENERGY 2023 INV ESTOR DAY Stable earnings underpinned by rate regulation CANADIAN NATURAL GAS PIPELINES Net Income Comparable EBITDA(1) $Billions $Billions Earn a return on capital in the year capital is deployed 1.6 4.0 ~4% Base return of 10.1% ROE on 40% deemed common CAGR ~3.4 equity ~3.1 NGTL
Slide 28: Strong fundamentals underpin strategic positioning to deliver continued results
TC ENERGY 2023 INV ESTOR DAY Strong fundamentals underpin strategic positioning to deliver continued results U.S. NATURAL GAS PIPELINES Comparable EBITDA(1) outlook US$2.4 billion of gross discretionary growth projects coming into $Billions service between 2024–2025 ~5% Virginia Electrification CAGR
Slide 29: Industry-leading position in a growing natural gas market
TC ENERGY 2023 INV ESTOR DAY Industry-leading position in a growing natural gas market MEXICO NATURAL GAS PIPELINES Comparable EBITDA(1) outlook $Billions Comparable EBITDA(1) growth driven by assets placed in service between 2023E–2025E US$4.5 billion Southeast Gateway pipeline project expected ~1.
Slide 30: Bruce Power driving significant growth
TC ENERGY 2023 INV ESTOR DAY Bruce Power driving significant growth POWER & ENERGY SOLUTIONS Comparable EBITDA(1) outlook $Billions ~6% ~1.5 CAGR ~75% of 2030E comparable EBITDA(1) from Bruce Power Largely underpinned by long-term contracts with creditworthy ~3% counterparties CAGR ~1.1 Bruce Power
Slide 31: Disciplined sanctioned capital spend profile
TC ENERGY 2023 INV ESTOR DAY ADHERING TO CONSERVATIVE RISK PREFERENCES Disciplined sanctioned capital spend profile $Billions 12.0 – 12.5 8.0 – 8.5 6.0 – 6.5 Targeted $6 – $7 billion 5.0 – 5.5 annual net capital expenditure range 2023E 2024E 2025E 2026E Net sanctioned capital expenditures Canadian N
Slide 32: Funding our capital program 2023E–2026E
TC ENERGY 2023 INV ESTOR DAY Funding our capital program 2023E–2026E $Billions 60 NCI distributions(1) 2 50 Net long-term debt, commercial paper and other Excludes the potential impact of $3 billion 2023 debt issuances 4 asset divestitures aimed at reducing net 40 7 long-term debt requirements and e
Slide 33: Reducing leverage to further strengthen balance sheet
TC ENERGY 2023 INV ESTOR DAY Reducing leverage to further strengthen balance sheet 2023 2024 2025+ Executing 2023 priorities Near-term plan Going forward Place ~$5.5 billion assets into service Place ~$7 billion(2) assets into service Place ~$9 billion of assets into service ~8% growth in comparable
Slide 34: Financial risks and levers
TC ENERGY 2023 INV ESTOR DAY Financial risks and levers F I N A N C I A L M O D E L E R ’ S TO O L K I T Debt portfolio ~89% fixed rate; long-term debt with average term of ~18 years to final maturity Interest rates Regulatory and commercial arrangements mitigate impact of rate movements Expected no
Slide 35: Balanced debt portfolio with protection against interest rate volatility
TC ENERGY 2023 INV ESTOR DAY Balanced debt portfolio with protection against interest rate volatility Debt maturities 2024E–2026E Debt portfolio: fixed versus floating rate mix Strong and balanced debt profile $Billions 89% fixed-rate debt 5.3 Weighted average rate of Low sensitivity to interest rat
Slide 36: Ability to optimize and offset interest exposure
TC ENERGY 2023 INV ESTOR DAY Ability to optimize and offset interest exposure Optionality in a dynamic interest rate environment South Bow has the flexibility to optimize the timing and amount of debt issued Minimal impact to TC Energy’s ability to meet its 4.75x debt-to-EBITDA(1) deleveraging targe
Slide 37: 2024E growth underpinned by superior operational performance
TC ENERGY 2023 INV ESTOR DAY 2024E growth underpinned by superior operational performance Comparable EBITDA(1) outlook $Billions 5% – 7% ~8% CAGR CAGR 9.9 Interest rate: Δ +/- 25 bps 1.4 Financial charges: $15MM Comparable EPS(1): ~$0.02/share Foreign exchange: Δ +/- $0.01 USD/CAD EBITDA: $45MM 8.5
Slide 38: South Bow Corporation Strategic & Financial Outlook
TC ENERGY 2023 INV ESTOR DAY South Bow Corporation Strategic & Financial Outlook Bevin Wirzba Intended President and Chief Executive Officer 38
Slide 39: My focus today
TC ENERGY 2023 INV ESTOR DAY My focus today Unrivalled, low-risk contract structure and incumbency underpins value proposition Premium value proposition Long-term fundamentals support strategic footprint Maximizing the potential of our Competitively positioned for optimization and growth Liquids bus
Slide 40: Premium value proposition
TC ENERGY 2023 INV ESTOR DAY Premium value proposition Strong total shareholder return Unique value proposition Operational and commercial excellence Strong and sustainable base dividend Keystone System operational reliability of 94% Fully-funded by high cash flow generation year-to-date Premium cor
Slide 41: Highly competitive path connecting the most resilient supply, demand and export markets
TC ENERGY 2023 INV ESTOR DAY Highly competitive path connecting the most WCSB ~95% of Canadian oil sands production committed to resilient supply, demand and export markets Reserves Life Index net zero by 2050(1) >50 years WCSB long-term crude supply outlook(2) White Spruce (MMbbl/d) WCSB supply Gra
Slide 42: Competitive advantages to capture additional market share
TC ENERGY 2023 INV ESTOR DAY Competitive advantages to capture additional market share Examples of regulator-approved potential Pathways Alliance WCSB export supply & capacity by pipe(1)(2) WCSB supply members’ projects incremental to supply outlook:(2) Kbbl/d expected to exceed Capacity 6,000 Proje
Slide 43: Most competitive corridor with the shortest transit time
TC ENERGY 2023 INV ESTOR DAY Most competitive corridor with the shortest transit time South Bow Pipelines End market demand Peer Pipelines requires additional shipping costs Approximated map for illustrative purposes Our system's competitive advantages Shortest, most direct route In backwardated mar
Slide 44: Unrivalled low-risk contractual framework
TC ENERGY 2023 INV ESTOR DAY Unrivalled low-risk contractual framework Liquids Pipelines unique 12% ~8 years contractual framework weighted average contract length on 6% of Keystone System volumes South Bow 88% Keystone System reserved for spot providing greater stability in cash flows Longest tenur
Slide 45: Operational and commercial optimization plus in-corridor growth
TC ENERGY 2023 INV ESTOR DAY Operational and commercial optimization plus in-corridor growth White Spruce Grand Rapids Strengthening demand outlook for Grand Rapids and White Spruce Organic potential Recontracting capacity expansions Keystone System Port Neches Link-type last Latent capacity optimiz
Slide 46: Debt optimization to maintain the ability to return significant cash to shareholders
TC ENERGY 2023 INV ESTOR DAY Debt optimization to maintain the ability to return significant cash to shareholders Modeling assumptions: $Millions Initial leverage target moderately Illustrative example of annualized figures* below ~5.0x debt-to-EBITDA(2) expected to support Flexibility to lower inve
Slide 47: Spin allows for compounding of shareholder value over time
TC ENERGY 2023 INV ESTOR DAY Spin allows for compounding of shareholder value over time NEAR TERM 2 – 3 years MEDIUM TERM 3 – 5 years LONGER TERM 5 – 8 years Operational and latent Sanctioning and Recontracting capacity optimization developing capital More frequent open seasons Originate 6–8x build
Slide 48: South Bow's balance sheet strength
TC ENERGY 2023 INV ESTOR DAY South Bow’s balance sheet strength Initial debt-to-EBITDA(1) ratio moderately below 5.0x $7.9 billion of senior debt and junior subordinated notes established at South Bow ~$6 billion of senior debt ~$2 billion of junior subordinated notes receiving 50% equity credit Acc
Slide 49: Incremental growth underpinned by strong commercial contracts
TC ENERGY 2023 INV ESTOR DAY Incremental growth underpinned by strong commercial contracts Comparable EBITDA(1) outlook $Billions Long-term average growth of 2% to 3% Targeting long-term growth rate of 2% to 3% 88% of comparable EBITDA(1) is contracted ~3% CAGR 1.6 96% of contracts with investment-g
Slide 50: Q&A Discussion
TC ENERGY 2023 INV ESTOR DAY Q&A Discussion FRANÇOIS POIRIER STANLEY G. CHAPMAN, III JOEL HUNTER President and Executive Vice-President and Executive Vice-President and Chief Executive Officer Chief Operating Officer, Chief Financial Officer Natural Gas Pipelines PATRICK KEYS ANNESLEY WALLACE BEVIN
Slide 51: 2024 strategic priorities
TC ENERGY 2023 INV ESTOR DAY 2024 strategic priorities PROJECT ENHANCING BALANCE SHEET MAXIMIZING THE VALUE OF OUR EXECUTION ON-TIME STRENGTH AND FLEXIBILITY ASSETS THROUGH SAFETY AND AND ON-BUDGET OPERATIONAL EXCELLENCE Elevated focus and governance on Achieve below 4.75x debt-to-EBITDA(3) Safely,
Slide 52: TC Energy 2023 Investor Day
TC ENERGY 2023 INV ESTOR DAY WELCOME TO TC Energy 2023 Investor Day November 28, 2023
Slide 53: Appendix
TC ENERGY 2023 INV ESTOR DAY Appendix
Slide 54: Appendix A – Non-GAAP reconciliations – Comparable EBITDA to Net Income (loss)
TC ENERGY 2023 INV ESTOR DAY Appendix A – Non-GAAP reconciliations – Comparable EBITDA to Net Income (loss)(1) Year ended (Millions of dollars) December 31 2022 2021 Comparable EBITDA(2) 9,901 9,368 Depreciation and amortization (2,584) (2,522) Interest expense included in comparable earnings (2,588
Slide 55: Appendix B – Non-GAAP reconciliations – Net Income (loss) to Comparable Earnings
TC ENERGY 2023 INV ESTOR DAY Appendix B – Non-GAAP reconciliations – Net Income (loss) to Comparable Earnings(1) (Millions of dollars, except per share amounts) Year ended Dec ember 31 2 0 22 2 0 21 Net income attributable to common shares 641 1,815 Specific items (net of tax): Coastal GasLink LP im
Slide 56: Appendix C – Net cash provided by operations to Comparable funds generated from operations
TC ENERGY 2023 INV ESTOR DAY Appendix C – Non-GAAP reconciliations – Net cash provided by operations to Comparable funds generated from operations(1) (Millions of dollars) Year ended December 31 2022 2021 Net cash provided by operations 6,375 6,890 Increase in operating working capital 639 287 Funds
Slide 57: Appendix D – Adjusted Debt/Adjusted Comparable EBITDA (Debt-to-EBITDA)
TC ENERGY 2023 INV ESTOR DAY Appendix D – Non-GAAP reconciliations – Adjusted Debt/Adjusted Comparable EBITDA (Debt-to-EBITDA) Adjusted debt and adjusted comparable EBITDA are non-GAAP measures used to compute the debt-to-EBITDA multiple. Each of adjusted debt and adjusted comparable EBITDA measures
Slide 58: Appendix D – Adjusted Debt/Adjusted Comparable EBITDA continued
TC ENERGY 2023 INV ESTOR DAY Appendix D – Non-GAAP reconciliations – Adjusted Debt/Adjusted Comparable EBITDA (Debt-to-EBITDA) continued Millions Year ended December 31 2022 2021 Reported total debt 58,300 52,766 Management adjustments: Debt treatment of preferred shares (2) 1,250 1,744 Equity treat
Slide 59: Appendix E – Non-GAAP reconciliations – AFFO Reconciliation
TC ENERGY 2023 INV ESTOR DAY Appendix E – Non-GAAP reconciliations – AFFO Reconciliation AFFO or “adjusted funds from operations” represents comparable FGFO, adjusted to reflect non-controlling interest distributions before capex contributions and debt recapitalization. AFFO is a non-GAAP measure wh
Slide 60: Appendix E – Non-GAAP reconciliations – AFFO Reconciliation continued
TC ENERGY 2023 INV ESTOR DAY Appendix E – Non-GAAP reconciliations – AFFO Reconciliation continued Non-GAAP reconciliation: ($ millions) 2022 2021 Net cash provided by operations 6,375 6,890 Increase in operating working capital 639 287 Funds generated from operations 7,014 7,177 Specific items: Set
Slide 61: Appendix F – Non-GAAP reconciliations – Charts
TC ENERGY 2023 INV ESTOR DAY Appendix F – Non-GAAP reconciliations – Charts Comparable EBITDA(1) outlook $Billions TC Energy including TC Energy South Bow Liquids Pipelines ~7% CAGR ~8% ~3% CAGR 11.2 – 11.5 CAGR 1.6 9.9 1.4 9.2 – 9.3 1.4 8.5 1.1 3.6 2.5 2022 2022 2023E 2022 2022 2023E 2026E 2022 202