TC Energy (TSX:TRP) Q1 2021 Earnings Call

0:00 Thank you for standing by. This is the conference operator. Welcome to the TC Energy First Quarter 2021 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to David Moneta, Vice President, Investor Relations. Please go ahead.

0:38 Thanks very much and good afternoon everyone. I'd like to welcome you to TC Energy's 2021 First Quarter Conference Call. Joining me today are Francois Poirier, President and Chief Executive Officer, Don Marchand, Executive Vice President, Strategy and Corporate Development and Chief Financial Officer, Tracy Robinson, President of our Canadian Natural Gas Pipelines and Coastal Gas Link, Stan Chapman, President, U.S. and Mexico Natural Gas Pipelines, Kevin Worspa, President, Liquids Pipelines, Corey Hessen, President, Power and Storage, and Glenn Manuz, Vice President and Controller. Francois and Dawn will begin today with some opening comments on our financial results and certain other company developments. A copy of the slide presentation that will accompany their remarks is available on our website.

1:29 It can be found in the investor section under the heading events and presentations. Following their prepared remarks, we will take questions from the investment community. If you are a member of the media, please contact Jamie Harding following this call, and she'd be happy to address your questions. In order to provide everyone from the investment community with an equal opportunity to participate, we ask that you limit yourself to two questions. If you have additional questions, please re-enter the queue. Before Francois begins, I'd like to remind you that our remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by TC Energy with Canadian securities regulators and with the U.S. Securities Exchange Commission. And finally, during this presentation, we'll refer to measures such as comparable earnings, comparable earnings per share, comparable EBITDA, and comparable funds generated from operations.

2:25 These and certain other measures are considered to be non-GAAP measures. As a result, they may not be comparable to similar measures presented by other entities. They are used to provide you with additional information on TC Energy's operating performance, liquidity, and its ability to generate funds to finance its operations. With that, I'll turn the call over to Francois.

2:47 Good afternoon, everyone, and thank you for joining us this afternoon. As outlined in our first quarter report to shareholders, our diversified portfolio of high-quality, long-life energy infrastructure assets continued to perform very well in early 2021. Despite energy market volatility, weather events, and the ongoing impacts of COVID-19, flows and utilization levels across our network remained strong. For example, our U.S. natural gas pipeline network moved nearly 29 BCF per day in the first quarter, an increase of 4% over the same period in 2020, while field receipts on the NGTL system in Alberta were more than 12 BCF per day. and in our power and storage business, Bruce Power continued to produce solid operating results while in Alberta, output from our co-generation plants nearly doubled due to the return to service of our Macau River plant and withdrawals from our natural gas storage facilities increased by 75% over the same period last year.

3:55 Once again, this highlights the essential role our infrastructure plays in the functioning of the North American economy and the well-being of people across the continent. And we take this responsibility seriously, and as always, we conducted our business in a safe and reliable manner. Safety is one of our core values and is embedded in the fabric of our organization and evident in our commitment to ongoing pipeline system integrity. We've invested $150 million in pipeline inspection research and development since 2010 and billions in pipeline system integrity using the most sophisticated and advanced data analytics and risk evaluation methodologies in the industry. Our strong operating performance is also reflected in our solid financial performance, with comparable EBITDA, comparable earnings per share, and comparable funds generated from operations in the first quarter of 2021, all similar to last year's record results.

4:55 And this was achieved despite one-time surta Texas fees in the first quarter of 2020, the sale of our Ontario gas-fired generation assets last April, and the loss of interest during construction on Keystone XL. Now on Keystone, we were very disappointed with the decision in January to revoke the presidential permit. As a result of the decision, we subsequently agreed with our partner, the government of Alberta, to formally suspend the project and evaluated our investment for impairment along with certain other projects in development including the Heartland Pipeline, TC Terminals, and the Keystone Hardesty Terminal. This resulted in an after-tax asset impairment charge of $2.2 billion, which was excluded from comparable earnings.

5:45 These costs will be shared with our partner, thereby reducing our net financial exposure at March 31st to approximately $1 billion. I'd like to thank our customers, American and Canadian workers, our partners, the Government of Alberta and Natural Law Energy. Local communities, the pipeline building trade unions, industry, the Government of Canada, and countless others who supported this project over the past decade and would have shared greatly in its benefits. And while we are all disappointed with the outcome, the experience we gained is not lost. Through the process, we identified meaningful indigenous equity opportunities, collaborated with union labor, and developed a robust plan to ensure the pipeline achieved net zero emissions from the moment it would have gone into service in 2023.

6:44 And you can expect to see us continue to apply this innovative approach to projects in the future. Looking forward, we expect our solid operating and financial performance to continue with 2021 comparable earnings per common share anticipated to be generally consistent with the record results we produced in 2020. We also continue to advance $20 billion of secured projects that are expected to enter service by 2024 and help power the North American economy for decades to come. A substantial portion of this growth is related to our natural gas pipeline network. This infrastructure is critical to support the transition to a lower carbon world, as natural gas will play a key role in both displacing higher-emission coal-fired power and providing the necessary backstop to the intermittency of renewable power.

7:36 All of our projects are underpinned by cost-of-service regulation or long-term contracts, giving us visibility to the earnings and cash flow they will generate. In addition, we are progressing $7 billion of projects under development, including the refurbishment of another five reactors at Bruce Power. The refurbishment program will run through 2032 and is underpinned by a long-term contract with the Ontario ISO that extends to 2064, providing us with stable and predictable earnings and cash flow and the province with emissionless power. Over the mid to longer term, we expect numerous other opportunities to come to fruition as the world both consumes more energy and it transitions to a lower carbon energy future.

8:26 Ultimately, our goal is to continue to invest $5 to $6 billion annually to deliver on our long-term growth plans. As you can see on this slide, our starting point is our $20 billion secured capital program. Beyond that, we expect to continue to invest $1.5 to $2 billion annually in maintenance and modernization programs across our extensive pipeline network, approximately 85% of which is recoverable through our rate regulated businesses. We're also developing a significant suite of future growth opportunities. With the ongoing energy transition discussion, It's easy to forget that the world will continue to rely on large quantities of natural gas and oil for the foreseeable future.

9:12 And with 94,000 kilometers or 58,000 miles of existing natural gas pipelines, we are well positioned to continue to meet growing demand through highly executable in-corridor expansions. That said, the energy mix of the future will evolve, with renewables, for example, making up a greater portion of the overall fuel mix. Our goal is to build on our long history of success and be agnostic to which form of energy will ultimately lead to a lower carbon energy future. As a result, you will see our capital allocation shift over time to meet the energy mix of the future, and to me, this is very exciting and represents a tremendous opportunity.

9:59 Whether it's renewables and the firming resources needed to manage their intermittency, Electrifying our fleet or other emerging technologies, our existing asset base, technical capabilities, innovative approach, and financial strength means that we are well positioned to prosper irrespective of the pace or direction energy transition takes. For example, we've been engaging with various stakeholders in Ontario to advance a large pumped storage opportunity. The project is designed to store emission-free electricity and provide a backstop to the intermittency associated with the energy provided by renewables. More recently, through the issuance of a request for information, we've announced that we are seeking to identify potential contract and or investment opportunities in wind energy projects that could generate up to 620 megawatts of zero carbon energy to meet the electricity needs for a portion of our U.S.

10:59 pipeline assets. This is an important step in advancing our plans to leverage the power business as a platform for future growth and diversification while lowering emissions across our North American footprint. In summary, I believe we will be opportunity rich, and our challenge will be to allocate capital to those projects that are best aligned with our capabilities, our risk preferences, and our return requirements. I can assure you we will not compromise our commitment to being thoughtful, deliberate, and disciplined in every investment decision we make. Based on the continued strong performance of our base business and our organic growth plans, we expect to continue to grow our dividend at an average annual rate of 5-7%.

11:46 As always, the growth in dividends is expected to be supported by sustainable growth in earnings and cash flow per share and strong coverage ratios. I'm confident that the future opportunity set, combined with our capabilities, will continue to deliver superior risk-adjusted total shareholder returns well into the future. I'll now pass the call over to Don Marchand, who will provide more details on our first quarter financial results. Don?

12:16 Thanks, Francois. Good afternoon, everyone. As outlined in our results issued earlier today, we've reported a net loss attributable to common shares for the first quarter of $1.1 billion, or $1.11 per share, as compared to net income of $1.1 billion, or $1.22 per share for the same period in 2020. As Francois mentioned, the loss primarily stems from an after-tax asset impairment charge of $2.2 billion related to the formal suspension of the Keystone XL pipeline project The charges met have expected contractual recoveries and other contractual and legal obligations associated with suspension activities. However, it does not reflect offsetting amounts with respect to the Government of Alberta's investment and guarantees, which are expected to be recognized through the Consolidated Statement of Equity in future periods.

13:12 As at March 31, those include a contribution of $394 million for Class A interests reported in redeemable non-controlling interest and $779 million outstanding on the guaranteed credit facility reported in the current portion of long-term debt. After taking these offsets into consideration, our net financial exposure on Keystone XL is approximately $1 billion. First quarter 2020 also included certain specific items outlined on the slide and discussed further in our first quarter 2021 report. These specific items as well as unrealized gains and losses from changes and mismanagement activities are excluded from comparable earnings. Comparable earnings in the first quarter were $1.1 billion or $1.16 per share and generally consistent with the $1.1 billion or $1.18 per share in 2020.

14:05 Turning to our business segment results on slide 11. In the first quarter, CompoBelieva draft my five operating segments of $2.5 billion was essentially in line with 2020. Canadian Gas CompoBelieva draft $686 million was 89 million higher than the same period last year, primarily on account of increased flow through depreciation and financial charges, along with higher rate based earnings on the NGTL system. Coastal GasLink development fee revenue recognized in 2021 and higher flow-through income taxes on the Canadian mainline. This was partially offset by lower flow-through income taxes on the NGTL system and financial charges on the Canadian mainline. NGTL system net income increased $17 million compared to first quarter 2020 as a result of a higher average investment base and continued system expansions and reflects an ROE of 10.1% on 40% deemed common equity.

14:59 may then come for the Canadian mainline increased $12 million year-over-year, largely due to the elimination of a $20 million after-tax annual TC Energy contribution under the mainline 2021-2026 settlement and higher incentive earnings in 2021. U.S. natural gas comparable EBITDA of $833 million U.S. or $1.1 billion Canadian in the quarter rose by $67 million U.S. or $23 million Canadian compared to the same period last year. The improvement was due to increased earnings from Columbia Gas following the application for higher transportation rates effective February 1st, subject to refund upon completion of its rate proceeding, along with incremental earnings resulting from greater capitalized pipeline integrity costs in 2021 compared to 2020, and the contribution from growth projects placed in service, partially offset by higher property taxes associated with new projects.

15:58 In addition, the earnings across our U.S. gas pipeline assets were generally higher due to the cold weather events in first quarter 2021, which had an impact on many of the markets we serve. Mexico gas pipelines, CompoBelieve, have 142 million U.S. or 180 million Canadian assets. was $56 million U.S. or $89 million Canadian below first quarter 2020, largely due to a $55 million U.S. of fees recognized in 2020 associated with the successful completion of the certain Texas pipeline. Liquids pipelines comparable EBITDA declined by $52 million to $393 million in first quarter 2021. primarily due to the net effect of lower volumes on the Keystone Pipeline system and an increased contribution from liquids marketing activities mainly attributable to higher margins and volumes.

16:49 Power and storage comparably dropped by $13 million year-over-year to $181 million on account of decreased boost power results mainly attributable to the net effect of lower volumes resulting from greater outage days partially offset by first quarter 2021 gains on funds invested for post-retirement benefits. For all our businesses with U.S. dollar denominated income, including U.S. natural gas, Mexico gas pipelines, and parts of liquids pipelines, translation of results into Canadian dollars occurred at an average exchange rate of 127 in first quarter 21 compared to 134 in 2020. While the weakening of the U.S. dollar had a negative impact on comparable EBITDA year over year, the corresponding effect on comparable earnings was not significant due to offsetting natural and economic hedges.

17:40 To recap our approach to managing foreign exchange exposure, our U.S. dollar denominated EBITDA streams are partially hedged by U.S. dollar denominated interest, depreciation, and taxes. We then actively manage the residual exposure on the rolling two-year forward basis with realized gains and losses on this program reflected in comparable interest income and other. I'll turn to the other income statement items on slide 12. Depreciation and amortization of $645 million increased up $15 million versus first quarter 2020, largely due to new projects placed in service in Canadian and U.S. natural gas pipelines. As a reminder, depreciation in Canada gas regulated pipelines is fully recoverable in tolls on a flow-through basis.

18:27 Interest expense of $570 million for first quarter 2021 was $8 million lower year over year, Due to the net effect of a weaker U.S. dollar on translation of U.S. dollar denominated interest, long-term debt issuances net of maturities, lower interest rates on reduced levels of short-term borrowings, and lower capitalized interest due to the completion of NAPA NE in first quarter 2020, the change to equity accounting for our coastal gasoline investment in second quarter 2020, and the revocation of the U.S. presidential permit to the Keystone XL pipeline in January 2021. A.F.U.D.C. decreased $32 million compared to the same period in 2020, largely due to NGTL expansion projects placed in service, and the suspension of recording A.F.U.D.C.

19:12 on Villa de Reyes affected January 1 due to ongoing delays on the project. Comfortably Trust Income and Other increased that $44 million in the first quarter versus 2020, primarily due to realized gains in 2021 compared to realized losses in 2020 on derivatives used to manage our structurally long exposure to U.S. dollar-denominated income, partially offset by lower unrealized foreign exchange gains on peso-denominated deferred income tax liabilities net of derivatives used to manage this exposure. Income tax expense included in comparable earnings was $204 million in first quarter 2021, compared to $211 million for the same period last year, with the decrease mainly due to higher foreign tax rate differentials.

20:00 Excluding Canadian regulated pipelines, Thank you for joining us. Offerable net income attributable to non-controlling interests of $69 million in the first quarter decreased by $27 million relative to the same period last year, primarily due to the March 3, 2021 acquisition of all outstanding publicly held common units of TC Pipelines LP, which resulted in it becoming an indirect wholly owned subsidiary of TC Energy. And finally, preferred share dividends were comparable to first quarter 2020.

20:45 Now turning to slide 13, during the first quarter we invested approximately $1.9 billion, mainly towards expansion of the NGTL system, Columbia gas projects, as well as maintenance capital. As previously mentioned, in March we completed the TC Pipelines LP acquisition in exchange for 38 million TC Energy common shares valued at approximately $2.1 billion. As the pipe LP was previously fully consolidated in our accounts, The transaction was largely recorded within the equity component of our balance sheet. Additionally, in March, we issued $500 million of junior subordinated notes at a rate of 4.2%, with the intent to redeem at par all $500 million of issued and outstanding Series 13 preferred shares on May 31st.

21:34 Finally, the fully guaranteed Keystone XL non-recourse project-level credit facility Current remains in place and is expected to fund the majority of residual costs. Now turning to slide 14. This graphic highlights our forecasted sources and uses for funds for 2021 through 2023. Starting in the left column, the total funding requirement over the three years is projected to be approximately $29 billion, comprised of dividends of $11 billion, capital expenditures including maintenance capital of $15.5 billion, two billion attributed to the TC Pipeline's LP acquisition completed in March, and $500 million related to the pending Series 13 preferred share redemptions.

22:20 The second column highlights expected internally generated cash flow of $21 billion, $2 billion of common shares issued pursuant to the pipe LP buy-in, and the $500 million junior subordinated notes often completed in March. That leaves a residual need of approximately $5.5 billion depicted in the far right column that will be funded predominantly through a combination of incremental debt, commercial paper, and Keystone XL project recoveries. The program is consistent with our goal of maintaining debt to EBITDA in the high fours and FFO to debt of 15%. Now turning to slide 15, in closing I offer the following comments. A solid financial and operational results in the first quarter continue to highlight our diversified low risk business strategy and reflect the robust performance of our blue chip legacy portfolio along with the contribution of equally high quality assets from our ongoing capital program.

23:17 While we were very disappointed by the revocation of the presidential permit for Keystone XL and the resulting after tax impairment charge, our irreplaceable footprint Thank you. Thank you. Finally, we will continue to maintain financial strength and flexibility at all points of the economic cycle.

24:02 That's the end of my prepared remarks. I'll now turn the call back over to David for the Q&A.

24:09 Thanks, Don. Just a reminder, before I turn it over to the conference coordinator for questions from the investment community, we ask that you limit yourself to two questions. If you have any additional questions, please re-enter the queue. With that, I'll turn it back to the conference coordinator. Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. We will pause for a moment as callers join the queue. Our first question comes from Linda Ezregelis of TD Securities. Please go ahead.

24:55 Thank you. I'm wondering if you can just elaborate a little bit more on your slide seven and what looks like your vision for the energy evolution that you'll be participating in. And specifically here it talks about new investments, but it does seem that some of your existing assets might be used differently, including... How might this change the attributes of your cash flows, your risk profile, etc., and also potentially create service opportunities, for example, sourcing and delivering renewable natural gas increasingly as market needs evolve?

25:49 Hi, Linda, it's Francois. That's a great question. I'll get started, and I'll ask Stan and then Tracy to offer some color and some proof points on each of Canada and the U.S. First, I'll start with our overall philosophy is that we expect to continue to find plenty of opportunities to allocate our capital, either underpinned by regulation or long-term contracts. So our approach with respect to what we're looking for for commercial sanctioning will continue to be consistent with the way we've allocated funds. Thank you very much.

26:49 Hey Linda, this is Stan, and maybe just to give you some potential of a perspective around your question, about 25% almost of our compression fleet is made up of slow-speed units, and they range in age anywhere between 40 to 70 years old. So electrifying these units, for example, would reduce our Scope 1 emissions by over 1 million tons, and you can think of that as about a 15% reduction of our overall emissions. and then we're going to work closely with Corey's team, obviously, to find a green power solution to address the Scope 2 emissions. With the other part of your question around who's likely to make up our pipeline holders going forward, today when we look at our profile, we have about 40% LDC customers, a little less than 40% producer customers, and about 25% marketers or others. I think that's a pretty well-rounded mix, and I really don't see that changing that much into the future.

27:50 And then I'll come over top for the Canadian system. It's a little bit different perspective. We're looking at, you know, the concept of the federal carbon tax and that growing over time provides a bit of a framework for how we think about, you know, at the first stage, the emissions reductions. You know, we have about just over 10% of our compression right now that's electric. And as we look at the opportunity on that, we've identified kind of the next level of compressors that would be priority candidates based on utilization size, age, and proximity to power. So the next 30-40% of our compression is all good candidates, and we've got a subset of that that they're working on most closely. If you think about the emerging carbon tax, it gives us an opportunity to do that in a manner that offsets those taxes and the impact of tolls on our customers. So that's kind of first level for that, badness of methane reduction.

28:42 Beyond that, there's waste heat opportunities, taking that waste heat off our compression. and providing it for power uses and beyond that we're sitting on top, the NGTL system, sitting on top of the WCSB positions us perfectly for the emerging work that's coming in hydrogen and hydrogen blending and we do see our pipes being big assets when it comes to thinking about the future of how hydrogen is going to move. I'll leave it there for now.

29:11 Thank you. And as a follow-up, recognizing that there's a lot of organic growth and capability to capture that in your existing footprint, I'm wondering if there might be an opportunity around the edges to accelerate your energy transition evolution by considering either acquisitions, divestitures, repurposing. I think you alluded to, especially on the hydrogen front, but also potentially some late-stage development opportunities, maybe some capabilities to round out what you already have in-house, etc. How are you thinking about that as being a lever to accelerate your transformation?

29:57 Linda Esprensois, perhaps I'll ask Corey to comment as a proof point or an example of the RFI we issued to developers of wind assets for about 620 megawatts of load. And then perhaps I'll ask Dawn to just comment generally on our efforts on the M&A side. So, Corey?

30:21 Hi, Linda. Yeah, we recently went to market with an RFI for 620 megawatts of renewable wind energy to power a pipe system as part of our North American footprint. We will be continuing that process with an additional RFI later on in May. for solar energy as well. So we see that as a very interesting opportunity set to leverage our existing load and bring economic opportunity to the company that aligns with our risk and return profile. I'll pass it over to Dawn.

31:07 Hi, Linda. On the M&A front, we don't – We don't see M&A as necessary to meet our growth targets, but that said, we're always assessing the market and we're looking for opportunities to fill in gaps in the portfolio, consolidate ownership, improve connectivity, and add capabilities, which I think is what you're alluding to here. If we look at where we might want to add capabilities, it would still fall into more of the same category in terms of our risk preferences, what we're looking for to contribute to our return profiles, credit profiles. No fundamental change in geographies. Basically long-term annuity streams.

31:52 So we're not looking to move up the risk curve if we do look at new capabilities. We're not particularly interested in highly speculative technologies and the like on any large scale. So more of the same, but would help us progress Things like the RFI, things that where the puck is going to look at a Gretzky quote in terms of new technologies and new businesses.

32:26 Thank you. I'll jump back in the queue. Our next question comes from Robert Cotelier of CIBC Capital Markets. Please go ahead.

32:37 Hi, just to follow up to that question. I'm just curious what you think is necessary in terms of policy support. Obviously the tax credits are something that's being looked at, but in order to really for the industry to get traction both on CCUS type investments, but also separately if you could address that same question with respect to pump storage.

33:06 Perhaps I'll get started, Rob, and I'll ask on the pump storage, I'll ask Corey to backfill. First of all, we feel that the proposed tax incentives in the recent Canadian budget are a positive step in the right direction to have government and the private sector collaborate. We need those tax incentives to collaborate. Thank you very much. Thank you very much.

34:08 and again provide very clear rules for us to follow to be able to invest in the types of equipment and technologies that reduce emissions such that we can put them in a rate base and earn a return on enough capital. Of course, to the extent that it's economically favorable for our customers and reduces their costs. So I think those incentives are very helpful. I think regulation still needs to evolve a little bit. And as to your question around pump storage, I'll pass it over to Corey.

34:51 I would echo Francois' comments. I think the regulatory and incentive framework in the U.S. around mature technologies such as wind and solar and battery storage have set an excellent example and have created a marketplace that is robust and competitive and clear and defined about how to participate and the opportunity set for returns. and we are optimistic that the same framework can be put in place for technologies such as pumped hydro. Pumped hydro is an interesting opportunity as well because the initial capital costs are obviously much higher. The development risk is much higher. And so having a clear framework which we can follow and have a clear view of what the outcomes are will be of a priority to us and will be most important to us as we continue our journey at investing in these types of assets.

35:51 Okay, thank you very much. Our next question comes from Robert Kwan of RBC Capital Markets. Please go ahead.

36:01 Great, good afternoon. Just staying with the energy transition, can you just talk about your approach from a financial setup perspective using and Payout. As well, you mentioned meaningful indigenous investment opportunities as something that came out of the KXL process. So do you see, like what's the role you see for indigenous investment as part of your energy transition? The thing is that since they were looking at KXL, would you ever look at a partial monetization of Keystone to indigenous resources?

36:41 Take on the indigenous question, Robert. I'll ask Bevan to respond, and then for the first part of your question, I'll ask Dawn to take that one, please.

36:51 So I'll lead off, Francois. In terms of energy transition and how we view it and how that fits in the balance sheet, What we're looking at here is more of the same. So no fundamental change of our risk preferences, long-term annuity streams, credit profile, etc., and returns. So we will be quite discerning as to how we progress into that space. So it would be evolution, not revolution, and it would look different. A lot like, from a cash flow perspective, what we have today. We engage with the rating agencies frequently, and we will test these concepts with them, but we think the way our balance sheet is structured right now, with the credit metrics we have and the credit profile that we have, is where we want to be.

37:49 So we want to remain the top credit in the sector, and as we start moving into somewhat different business lines when you actually look at the cash flow streams. They should look very similar to what you've seen for the past several decades here, so no fundamental change there.

38:11 and Robert Devenal will speak to indigenous investment with our First Nation and Tribal Nation partners and communities around our systems. We continue to look for opportunities that will benefit their communities as well as bring them in as an active partner in our developments. and potentially as you say associated I guess with our base assets in that you may have seen our RFI seeking renewable power proposals for our assets in the United States. Part of our screening criteria for working with developers of those resources will have a score related to Thank you very much.

39:20 as involvement in our base businesses, our key partners. We've learned a lot over the last year with our partnership with Natural Law Energy, and we see it as strategic, and we believe that we can create even further strategic relationships alongside our assets with the indigenous communities that we operate in.

39:56 How much aggregate cash do you expect to receive? Over what time frame? And then are there any ongoing positive tax implications associated from having written off these assets?

40:10 Yeah, Robert, it's pretty much straightforward as outlined in the note there. The cash components here would be shipper recoveries of around $700 million. In the fairly near term here, asset monetization proceeds over a measured sale process of a couple hundred million dollars. And against that, we would see wind-down costs on a cash basis probably in the neighborhood of about half a billion dollars. So net positive there. and that would probably be over a 21 and into 22 timeframe. On the tax side, we've reflected the tax benefits here as ordinary income rather than capital.

41:03 So far more usable from our perspective and far more valuable. That would be recognized over several years, and it depends on which jurisdiction those tax losses are related to. Given the amount of capital spend we have in Canada and all the accelerated tax shelter we have here, probably a more elongated period to realize Canadian ordinary income tax benefits. In the U.S., it would be a shorter time horizon on that. I can't give you a specific number of years, but certainly not within two years, but not as long as 10 years in the States. Our next question comes from Praneeth Satish of Wells Fargo.

41:54 Please go ahead.

41:57 Good afternoon. With respect to the RFI that you announced seeking 620 megawatts of wind power, I recognize it might be early, but can you comment just so far on how the bidding process has gone? And based on what you see so far, do you think there will be an opportunity for TRP to invest a meaningful amount of CapEx in this build-out, or do you think it will be mostly handled by third-party renewable companies?

42:24 Hi, this is Corey. It is early days, so I'm going to be measured in my response. I will tell you that today we sent out over 100 NDAs for folks to participate in the process, and we've had well over 50% response, so we feel really good about the number of respondents thus far. and we specifically asked for an RFI because our approach to this process will not be limited to simply price. It will be a combination of very specific qualifications that align with our Our customers' needs with the investment criteria for TC Energy and also for the local communities that we serve.

43:19 So there will be much more to come on this. The actual process closes, the RFI closes on May 10th on Monday, so I'm going to be a bit measured and leave that maybe to come back to you on our next earnings call.

43:36 Okay, got it. And then just switching gears a bit, I wanted to ask about Northern Border and the plan to potentially cap the heat content on the pipeline. I guess first, if you could review the rationale for that, and then second, where does that stand today in the regulatory process, and when could the BTU limit take effect?

43:57 Yeah, this is Stan. We filed second half of last year to impose a safe harbor for a certain BTU limit. And the driver there is really an operational requirement. Once you get too high of a BTU factor, it could do damage to the downstream LDC facility. So this is all about safety and the operational integrity of our assets. Now, where we're at is the problem somewhat solved itself, at least for the short term. Floods on the northern border system quarter over quarter are down about 10%. And what we've seen is that that capacity on the border system was backfilled with gas of a lower BTU quality that came in from Canada. So for the past several months, at least for the foreseeable future, there's not a BTU issue to deal with at the moment.

44:44 Now, to the extent that the situation changes over time and we see the BQ content creep up, we're going to have to circle back with our customers on the producer side as well as the LDC side because, again, the issue here is we're trying to establish a safe harbor limit that says if you go above a certain level, then we would have to cut back production into the pipe given those safety and operational integrity issues. Our next question comes from Jeremy Tonette of J.P. Morgan. Please go ahead.

45:21 Hi, good afternoon. I wanted to touch on Bruce Power a bit here. Given the ambitious carbon reduction goals of the Northeastern U.S. states as well as proposed transmission to bring Canadian power supply into the U.S., do you see the potential to incorporate Bruce refurbishments into creating power supply to feed into the Northeast U.S.? Could there be a transmission opportunity for TRP here? And then separately, is there a green hydrogen opportunity with Bruce Power? We've heard about cost savings using steam in the production process.

46:06 Hi, this is Corey. Yeah, this is Corey. Sorry about that. I'm a little slow on the button. Thanks, Jeremy. As far as the transmission opportunity, I don't know that we're in any position to comment on the viability of that at this stage. I'm not really aware of what steps need to be taken. I do know, though, on your second question that Bruce Power is a partner in the Nuclear Innovation Institute, which is actively evaluating, along with the partners in the Institute, items such as Producing hydrogen along with evaluating small modular reactors as a function of their business going forward.

47:00 So I think there is more to come. The site is using a systematic approach to really evaluate what options are available and then how they can participate in the market.

47:12 Got it. And just to be clear on the first part, don't see any opportunity for Bruce refurbishments feeding supply into the Northeast U.S.?

47:21 Maybe I'll take that one, Jeremy. It's Francois. And just say that, you know, when we look at the integrated resource plan for Ontario, they're calling for a net need for additional power, you know, particularly as Bruce and and the Darlington units are going through their life extension programs and even beyond then in the late 20s and into the early 30s. So given the cost profile of nuclear and its base load nature and its emissionless nature, you know, Our view is, at least for the time being, that there will be a home for that load or for that supply in Ontario, and so that's our base case assumption right now.

48:12 Got it. That makes sense. And then shifting to Mexico, just wondering if you might be able to provide some updated thoughts as far as organic growth overall potential in Mexico, and I guess what do you think of the right size of your Mexican presence within your portfolio overall?

48:33 This is Stan. I think in the context of the question and growth out of Mexico, the first thing we're going to focus on is getting Vietereas built and in service here by the end of the year, consistent with our prior guidance. At the same point in time, we're still hopeful that along that same timeline, we'll have a revised right-of-way path to start construction again on the Tuxpan-Tula line and get that in service again two years or so after we start construction. Post that, I think that there is a potential need for additional demand into the southeast portion of Mexico, into the Yucatan Peninsula, and we are somewhat optimistic are uniquely situated to potentially serve that via an extension of our Cerro de Tejas pipeline, as well as on the West Coast, the potential for West Coast Mexican LNG exports, probably on a little bit longer timeline, however.

49:24 So when I look at the investment opportunity, fits and starts, bite sizes, another couple hundred million dollars a year over the next several years doesn't seem out of line.

49:37 Got it. That's helpful. Thanks. Our next question comes from Michael Lapidus of Goldman Sachs. Please go ahead.

49:49 Hey guys, thank you for taking my question. I actually have a couple of them. First, is there a way to quantify for Coastal GasLink and maybe for the MCR at Unit 6 at Bruce what the potential cost inflation may be, whether

50:14 I can start that on Coastal Gas. Thanks, Tracy, here. We're just, as you know, we're coming out of, in the process of coming out of a construction shutdown. Margie did a spring breakup, and previous to that, the Northern Health in order, there's a Northern Health order coming out of British Columbia that that really reduced the workforce that was in the northern, you know, the major capital projects up there for a period of time, January kind of through to March, April. So that's all had us put us in a position, you know, it's important to us that we can start construction. It's important to us that we do that in a safe manner. So we've implemented some very strict protocols for COVID in conjunction with Northern Health, and we've now got clearance to fully remobilize coming out of spring breakups. So all of that has necessitated us to take another look at the plan, how we optimize construction as we go forward.

51:15 We're in the midst of doing that with LNG Canada to make sure that we meet all of their requirements on schedule and we mitigate whatever costs we can falling from that. So it's early to say on where that will all fall out, but we are in the midst of it now, Michael.

51:33 Got it. And on Bruce 6. Michael, it's Corey. Dusevic is on schedule and on budget. Got it. And then can you remind me, your results at the liquids business, really, Keystone, MarketLink, et cetera, highlighted both a little bit of volumetric as well as pricing differential. Can you just remind me how contracted is Keystone, how contracted is MarketLink, and are those take-or-pay contracts or throughput dependent?

52:09 Yeah, thank you, Michael. This is Bevan. You know, our systems are under strong, strong utilization, particularly our ex-hardesty on our base Keystone asset out of Western Canada. It's been fully utilized, and we actually had our highest utilization through Q1 that we've had in its history in terms of its operational performance as well. With respect to, and of all those volumes, So we're required to leave a certain percentage for spot volumes, but otherwise we're fully contracted take-or-pay on the Keystone-based system. When it comes to our MarketLink asset, that was created as a pre-build for Keystone XL, and we contracted that, again, under a take-or-pay nature with a number of parties, but that That contract profile, we struck contracts on a much shorter tenure in order to ensure that they would kind of wind off by the time we would get to an in-service date of the Excel asset.

53:21 Given that we're not advancing Excel, we're looking to recontract and reuse that spare capacity that we do have on MarketLink. Currently, we're on our MarketLink asset. Thank you very much. Thank you very much. And the remaining 45% of market length that's contracted, when did those contracts roll off?

54:53 Well, they're staggered. Michael, you know, I'm not going to roll up. They're all on a confidential basis with those customers, but you could appreciate that those would trend. Our in-service date was intended to be in January. Thank you guys, much appreciated. Y'all have a good weekend. There are currently no further questions in the queue.

55:42 We do have time for more questions should you have any. To rejoin the question queue, please press star then 1. Ladies and gentlemen, this concludes the question and answer session. If there are any further questions, please contact Investor Relations at TC Energy. I will now turn the call over to Francois Poirier. Please go ahead.

56:08 Thanks very much, and thanks for all of you who joined us this afternoon. I know this is a busy day with a number of companies in your coverage universe announcing results, so we appreciate your interest. And in closing, I'd like to leave you with the following key messages. Looking forward, I expect our assets will continue to provide an essential service to the functioning of the North American economy, and that the demand for our services will remain strong for decades to come. As we advance our $20 billion secured program and various other organic growth opportunities, we expect to build on our long-term track record of growing earnings, cash flow, and dividends per share. With an irreplaceable asset footprint, extensive technical expertise, our strong financial position, and a commitment to innovation, we have the right ingredients to prosper irrespective of the pace or direction of energy transition.

57:01 Looking forward, we will be deliberate and disciplined in every investment decision we make. We will also continue to focus on safety, sustainability, working according to our values and responding quickly to market signals and signposts to ensure we remain a leading North American energy infrastructure company today and in the future. So that concludes my closing remarks. Thanks very much for joining us today, and we appreciate your ongoing interest and support and look forward to talking to you again soon. This concludes today's conference call You may disconnect your lines Thank you for participating and have a pleasant day