TC Energy generates strong results in 2021 while progressing energy transition initiatives
Increases common share dividend for the twenty-second consecutive year
CALGARY, Alberta, Feb. 15, 2022 (GLOBE NEWSWIRE) — TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company) today announced net income attributable to common shares for fourth quarter 2021 of $1.1 billion or $1.14 per share compared to net income of $1.1 billion or $1.20 per share for the same period in 2020. For the year ended December 31, 2021, net income attributable to common shares was $1.8 billion or $1.87 per share compared to net income of $4.5 billion or $4.74 per share for 2020. Comparable earnings1 for fourth quarter 2021 were $1.0 billion or $1.06 per common share compared to $1.1 billion or $1.15 per common share in 2020. Comparable earnings for the year ended December 31, 2021 were $4.2 billion or $4.27 per common share compared to $3.9 billion or $4.20 per common share for the comparable period in 2020. Net cash provided by operations for the year ended December 31, 2021 was $6.9 billion compared to $7.1 billion for 2020. Comparable funds generated from operations1 for the year ended December 31, 2021 were $7.4 billion, in-line with 2020 results. TC Energy's Board of Directors also declared a quarterly dividend of $0.90 per common share for the quarter ending March 31, 2022, equivalent to $3.60 per common share on an annualized basis, an increase of 3.4 per cent. This is the twenty-second consecutive year the Board has raised the dividend.
“Our $100 billion diversified portfolio of high-quality, long-life energy infrastructure assets continued to perform extremely well in 2021 as evidenced by our strong financial results,” said François Poirier, TC Energy’s President and Chief Executive Officer. “Comparable earnings of $4.2 billion or $4.27 per common share and comparable funds generated from operations of $7.4 billion reflect the strong demand for our services, contributions from new assets placed into service and our constant focus on operational excellence.”
During 2021, TC Energy continued to reliably deliver the energy people need. Flows and utilization levels across many of our systems continued to exceed historical norms despite the ongoing impacts of COVID-19 and energy market volatility. We also placed $4.1 billion of assets into service and sanctioned approximately $7.0 billion of new projects including maintenance capital.
"Today we are advancing $24 billion of commercially secured projects including approximately $6.5 billion that are expected to enter service in 2022. These projects will expand and extend our asset footprint across North America and are expected to generate attractive returns for our shareholders in the years ahead,” added Poirier. “Based on the confidence we have in our future outlook, our Board of Directors declared a dividend of $0.90 per common share for first quarter 2022. This equates to $3.60 per common share on an annualized basis, an 3.4 per cent increase over the amount declared in 2021.”
TC Energy's $24 billion of secured capital projects are underpinned by strong industry fundamentals as well as cost-of-service regulation and/or long-term, take-or-pay contracts. This capital program, combined with the strong performance of our existing assets, is expected to result in average annual growth in comparable EBITDA1 of five per cent through 2026. Additional sanctioned projects that enter service by 2026, along with other revenue enhancements and cost savings, would add to the Company’s growth outlook. Based on the confidence we have in our business plans we expect to continue to grow the common share dividend at an annual rate of three to five per cent. This is consistent with our established conservative approach to capital allocation and is expected to provide the capacity to fund our sizable capital program while enhancing our financial strength and flexibility.
“Our vision is to be the premier energy infrastructure company in North America, now and in the future,” continued Poirier. “Looking forward, we expect that our network of critical energy infrastructure will be used for decades to come and continue to generate significant in-corridor growth potential. We also remain committed to the sustainable development of our business. Modernizing our existing systems and assets along with the decarbonization of our own energy consumption are some of the areas we are focused on while also seeking opportunities to invest in low-carbon energy infrastructure. We believe our creativity, technical strength and unparalleled market connectivity will allow us to prosper regardless of the pace and direction of energy transition.”
TC Energy is uniquely positioned to continue advancing projects involving new energy types and technologies emerging through energy transition. The Company is progressing the electrification of our systems including a Request for Information to meet the electricity needs of the U.S. portion of the Keystone Pipeline System assets as well as the Canyon Creek Pumped Hydro Storage Project and the long-term Bruce Power life extension program. Through partnerships both within and outside of our industry, we have identified emerging technology opportunities such as partnering with Pembina on the Alberta Carbon Grid, signing agreements with Nikola Corporation and Hyzon Motors to explore the co-development of hydrogen hubs, working with Irving Oil focused on reducing emissions, reaching an agreement with the Department of National Defence for land access to develop the world-class Ontario Pumped Storage Project and executing a 15-year power purchase agreement for wind energy with EDP Renewables.
In October 2021 we also released our latest Report on Sustainability which includes targets for all our sustainability commitments. Notably, we set Scope 1 and Scope 2 GHG reduction targets, including reducing the emissions intensity from our operations 30 per cent by 2030 and positioning to achieve net zero emissions from our operations by 2050. In all our operations and projects, we will remain focused on managing and reducing our GHG emissions and building constructive, enduring relationships with communities and stakeholders for decades to come.
(All financial figures are unaudited and in Canadian dollars unless otherwise noted)
- Fourth quarter 2021 financial results
- Net income attributable to common shares of $1.1 billion or $1.14 per common share
- Segmented earnings of $1.9 billion
- Net cash provided by operations of $1.8 billion
- Comparable earnings of $1.0 billion or $1.06 per common share
- Comparable EBITDA of $2.4 billion
- Comparable funds generated from operations of $2.1 billion
- For the year ended December 31, 2021
- Net income attributable to common shares of $1.8 billion or $1.87 per common share
- Segmented earnings of $4.1 billion
- Net cash provided by operations of $6.9 billion
- Comparable earnings of $4.2 billion or $4.27 per common share
- Comparable EBITDA of $9.4 billion
- Comparable funds generated from operations of $7.4 billion
- TC Energy's Board of Directors approved a 3.4 per cent increase in the quarterly common share dividend to $0.90 per common share for the quarter ending March 31, 2022
- Continued to advance our $24 billion secured capital program by investing $2.1 billion in the quarter
- Submitted final cost and schedule estimates for the Bruce Power Unit 3 MCR program to the IESO in December 2021.
- Administrative Law Judge recommended the Columbia Gas settlement for approval and certified it as uncontested to FERC for its review and approval
- Filed ANR rate case in January 2022. Uncontested GTN rate settlement was approved by FERC in November 2021
- Continued to develop a 1,000 MW pumped hydro storage project in Meaford, Ontario with Ontario's Minister of Energy instructing the IESO to progress the project to Gate 2 of the Unsolicited Proposals Process in November 2021.
Net income attributable to common shares decreased by $6 million or $0.06 per common share to $1.1 billion or $1.14 per share for the three months ended December 31, 2021 compared to the same period in 2020. Per share results reflect the impact of common shares issued for the acquisition of the remaining ownership interests in TC PipeLines, LP in first quarter 2021. 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" below.
Comparable EBITDA of $2.4 billion increased by $81 million for the three months ended December 31, 2021 compared to the same period in 2020 primarily due to the net effect of the following:
- increased earnings in U.S. Natural Gas Pipelines primarily from higher Columbia Gas transportation rates effective February 1, 2021 as a result of the subsequently uncontested rate case settlement, lower operating costs across a number of pipelines and improved earnings from our mineral rights business
- higher Power and Storage comparable EBITDA resulting from increased Canadian Power earnings mainly due to contributions from trading activities and higher realized margins, as well as increased earnings from Bruce Power due to higher volumes resulting from fewer outage days
- decreased earnings from Liquids Pipelines attributable to lower volumes on the U.S. Gulf Coast section of the Keystone Pipeline System, partially offset by increased contributions from liquids marketing activities reflecting higher margins and volumes
- lower comparable EBITDA from Canadian Natural Gas Pipelines due to the net effect of lower flow-through depreciation and financial charges, partially offset by higher incentive earnings and the elimination of the TC Energy contribution on the Canadian Mainline, offset in part by higher flow-through income taxes as well as increased rate-base earnings on the NGTL System
- foreign exchange impact of a weaker U.S. dollar on the Canadian dollar equivalent segmented earnings in our U.S. dollar-denominated operations. U.S. dollar-denominated comparable EBITDA increased by US$92 million to US$1.2 billion compared to US$1.1 billion in 2020; however, this was translated at a rate of 1.26 in 2021 versus 1.30 in 2020.
While the weakening of the U.S. dollar in fourth quarter 2021 compared to the same period in 2020 had a negative impact on comparable EBITDA for the three months ended December 31, 2021, the corresponding impact on comparable earnings was not significant due to offsetting natural and economic hedges.
In addition, due to the flow-through treatment of certain expenses including income taxes, financial charges and depreciation in our Canadian rate-regulated pipelines, changes in these expenses impact our comparable EBITDA despite having no significant effect on net income.
Comparable earnings of $1.0 billion or $1.06 per common share decreased by $45 million or $0.09 per common share for the three months ended December 31, 2021 compared to the same period in 2020 and was primarily the net effect of:
- changes in comparable EBITDA described above
- higher Income tax expense mainly due to the impact of lower foreign tax rate differentials, Mexico inflationary adjustments, as well as increased flow-through income taxes on Canadian rate-regulated pipelines
- higher Interest expense primarily due to lower capitalized interest as a result of its cessation for the Keystone XL pipeline project following the revocation of the Presidential Permit on January 20, 2021, partially offset by the foreign exchange impact from a weaker U.S. dollar on translation of U.S. dollar-denominated interest
- lower AFUDC, predominantly due to suspension of recording AFUDC on the Villa de Reyes project effective January 1, 2021 resulting from ongoing delays, partially offset by NGTL System expansion projects under construction
- lower Non-controlling interests following the March 3, 2021 acquisition of all outstanding common units of TC PipeLines, LP not beneficially owned by TC Energy
- decreased Depreciation and amortization in our Canadian Natural Gas Pipelines due to one section of the Canadian Mainline being fully depreciated in 2021, partially offset by new projects in U.S. Gas Natural Gas Pipelines placed in service and certain fourth quarter 2021 adjustments related to the Columbia Gas uncontested rate case settlement
- higher Interest income and other mainly attributable to higher realized gains in 2021 compared to 2020 on derivatives used to manage our net exposure to foreign exchange rate fluctuations on U.S. dollar-denominated income.
Comparable earnings per share also reflects the impact of common shares issued for the acquisition of the remaining ownership interests in TC PipeLines, LP in first quarter 2021.
Certain of our businesses generate all or most of their earnings in U.S. dollars and, since we report our financial results in Canadian dollars, changes in the value of the U.S. dollar against the Canadian dollar directly affect our comparable EBITDA and may also impact comparable earnings. As our U.S. dollar-denominated operations continue to grow, this exposure increases. A portion of the U.S. dollar-denominated comparable EBITDA exposure is naturally offset by U.S. dollar-denominated amounts below comparable EBITDA within Depreciation and amortization, Interest expense and other income statement line items. The balance of the exposure is actively managed on a rolling forward basis up to three years using foreign exchange derivatives; however, the natural exposure beyond that period remains. Despite the decrease in the average exchange rate for the three months ended December 31, 2021 compared to 2020, the net impact of U.S. dollar movements on comparable earnings over this period, after considering natural offsets and economic hedges, was not significant.
NOTABLE RECENT DEVELOPMENTS INCLUDE:
Canadian Natural Gas Pipelines
- NGTL System: In the year ended December 31, 2021, the NGTL System placed approximately $1.1 billion of capacity projects in service.
- Coastal GasLink: The project is currently more than 59 per cent complete. The entire route has been cleared, grading is more than 70 per cent complete and more than 240 km (149 miles) of pipeline has been installed, with reclamation activities underway in many areas.
We continue to expect project costs to increase significantly along with a delay to project completion compared to the original project cost and schedule. Coastal GasLink has sought to mitigate cost increases and schedule delays and will continue to do so.
Coastal GasLink is in dispute with LNG Canada with respect to the recognition of certain costs and the impacts on schedule; however, the parties are in active and constructive discussions toward a resolution of this matter. We do not expect any suspension of construction activities while discussions continue. The ultimate level of debt financing and the amounts to be contributed as equity by Coastal GasLink LP partners, including us, will be determined by the substance of a resolution with LNG Canada.
During this time, in addition to using funds from its $6.8 billion project-level credit facility and the recovery of construction carrying costs from LNG Canada, construction is also being funded in part by a subordinated demand revolving facility with TC Energy which has a current capacity of $500 million and provides the project with additional short-term funding and financial flexibility. At December 31, 2021, $1 million was outstanding on this revolving facility.
In fourth quarter 2021, as a further interim measure, TC Energy executed a subordinated loan agreement to provide additional temporary financing to the project, if necessary, of up to $3.3 billion as a bridge to a required increase in the $6.8 billion project-level financing to fund incremental costs. This financing will be provided through a combination of interest-bearing loans and loans that are subject to a return to TC Energy under certain conditions at the time the final cost of the project is determined. At December 31, 2021, $238 million was outstanding on these loans.
U.S. Natural Gas Pipelines
- Columbia Gas Section 4 Rate Case: Columbia Gas filed a Section 4 rate case with FERC in July 2020 requesting an increase to its maximum transportation rates effective February 1, 2021, subject to refund upon completion of the rate proceeding. On July 28, 2021, Columbia Gas notified FERC that it reached a settlement-in-principle with its customers addressing all remaining issues in the case, including but not limited to the resolution of rates and continuation of Columbia Gas's modernization program. On October 29, 2021, Columbia Gas filed its settlement with FERC, and is now awaiting approval, with 2021 revenues expected to be generally consistent with estimates recorded to date. On December 17, 2021, the presiding Administrative Law Judge recommended the settlement for approval and certified it as uncontested to FERC for its review and approval. While there is no timeframe in which FERC must act on the settlement, in-line with other recent rate case settlement approval timelines, we expect to receive approval of the settlement in early 2022.
- Modernization III: Subject to FERC approval as part of the Columbia Gas uncontested rate settlement, Columbia Gas and its customers entered into a settlement arrangement (Modernization III) which provides recovery and return on investment to modernize its system, improve system safety, integrity, compliance and reliability. The Modernization III program includes, among other things, replacement of aging pipeline and compressor facilities, enhancements to system inspection capabilities and improvements in control systems as well as projects designed to increase energy efficiency and reduce emissions. The program was approved for up to US$1.2 billion of work starting in 2021 and is to be completed through 2024. As per the terms of the arrangement, facilities in service by November 30 of each year collect revenues effective April 1 of the following year until the arrangement is terminated. New rates will become effective once Columbia Gas files a subsequent Section 4 rate case under the Natural Gas Act.
- Delivery Market Projects: We are actively developing projects that will replace and upgrade certain facilities while reducing direct carbon dioxide equivalent (CO2e) emissions along portions of our pipeline systems in principal delivery markets. Consistent with this initiative, in November 2021 we sanctioned the WR project on ANR to serve markets in the midwestern U.S. This project has an estimated capital cost of approximately US$0.8 billion and is expected to be placed in service in fourth quarter 2025.
- ANR Section 4 Rate Case: ANR filed a Section 4 rate case with FERC on January 28, 2022 requesting an increase to ANR's maximum transportation rates effective August 1, 2022, subject to refund upon completion of the rate proceeding. As the rate process progresses, we expect to engage in a collaborative process to achieve settlement with our customers, FERC and other stakeholders.
- GTN Rate Case Settlement: On September 29, 2021, GTN filed an uncontested rate settlement which would set new recourse rates for GTN effective January 1, 2022 and institute a rate moratorium through December 31, 2023. The uncontested rate settlement was approved by FERC on November 18, 2021. The revised rates are not expected to have a significant impact on our U.S. Natural Gas Pipelines segment comparable earnings. In addition, GTN must file for new rates no later than April 1, 2024.
- GTN XPress: The GTN XPress expansion project filed its FERC certificate application in fourth quarter 2021 and is expected to be placed in service in the second half of 2023.
- Grand Chenier XPress: Phase II of Grand Chenier XPress, an expansion project on ANR connecting supply directly to U.S. Gulf Coast LNG export facilities, was placed in service in January 2022.
Mexico Natural Gas Pipelines
- Tula and Villa de Reyes: In 2021, we advanced the resolution of disputed contract terms for the Tula and Villa de Reyes projects with the signing of an MOU on July 30, 2021 outlining main settlement principles. Villa de Reyes construction is ongoing but completion has been delayed due to COVID-19 contingency measures and challenges gaining access to land in certain local communities. Management is working closely with state and local governments to complete negotiations and achieve access to land so that construction can be completed. We expect to complete the construction of Villa de Reyes in phases during 2022.
- Northern Courier: On November 30, 2021, we received $35 million in proceeds from the monetization of our remaining 15 per cent equity interest in Northern Courier Pipeline to Astisiy Limited Partnership, a partnership comprised of Suncor Energy Inc. and eight Indigenous communities in the Regional Municipality of Wood Buffalo. As a result, we recorded a pre-tax gain on sale of $13 million ($19 million after tax).
Power and Storage
- Bruce Power Life Extension: The Unit 6 MCR program continues on schedule and on budget; however, COVID-19 may have an impact on cost and schedule contingency. As applicable, Bruce Power will seek recovery of any impacts in accordance with the force majeure provisions of the IESO contract. The program is nearing the end of the Inspection Phase and has entered the Installation Phase. Preparation of the Unit 3 MCR program, which is the next scheduled MCR outage, continues and Bruce Power submitted its final cost and schedule duration estimate to the IESO in December 2021. As well, Bruce Power submitted its initial preliminary cost and schedule duration estimate report for the Unit 4 MCR program, which is the next unit scheduled after Unit 3.
- Renewable Energy Requests for Information (RFI): Through an RFI process in 2021, we announced that we were seeking to identify potential contracts and/or investment opportunities in up to 620 MW of wind energy projects, 300 MW of solar projects and 100 MW of energy storage projects to meet the electricity needs of the U.S. portion of the Keystone Pipeline System assets. We also identified meaningful origination opportunities to supply renewable energy products and services to industrial and oil and gas sectors proximate to our in-corridor demand. We received a significant number of responses to our RFI and are currently evaluating proposals and expect to finalize contracts during the first half of 2022.
- Ontario Pumped Storage Project: As part of our strategy to capture opportunities that capitalize on the transition to a less carbon-intensive energy mix, we continue to progress the development of the Ontario Pumped Storage project, an energy storage facility located near Meaford, Ontario that would provide 1,000 MW of flexible, clean energy to Ontario's electricity system. Two key milestones on the project were reached in 2021. On July 28, 2021, the Federal Minister of National Defence granted long-term land access to the fourth Canadian Division Training Centre for development of the project on this site. On November 11, 2021, Ontario’s Minister of Energy instructed the IESO to progress the project to Gate 2 of the Unsolicited Proposals Process. Once in service, this project will store emission-free energy when available and provide it to Ontario during periods of peak demand, thereby maximizing the value of existing emissions-free generation in the province. We also continue to consult with the Saugeen Ojibway Nation and other Indigenous groups along with other local stakeholders as we continue to advance this project, which remains subject to a number of conditions and approvals, including approval of our Board of Directors.
- Common share dividend: Our Board of Directors declared a quarterly dividend of $0.90 per common share for the quarter ending March 31, 2022. The quarterly amount is equivalent to $3.60 per common share on an annualized basis, an increase of 3.4 per cent.
- Recent management changes: Bevin Wirzba’s role has expanded to Executive Vice-President, Strategy and Corporate Development and Group Executive, Canadian Natural Gas and Liquids Pipelines following the news that Tracy Robinson, former Executive Vice-President and President, Canadian Natural Gas Pipelines and President, Coastal GasLink has decided to pursue a significant leadership role with another organization. Bevin will be supported by Greg Grant, President, Canadian Natural Gas Pipelines and Richard Prior, President, Liquids Pipelines.
Teleconference and Webcast
We will hold a teleconference and webcast on Tuesday, February 15, 2022 to discuss our fourth quarter 2021 financial results. François Poirier, President and Chief Executive Officer; Joel Hunter, Executive Vice-President 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 1.800.319.4610. 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/11706.
A replay of the teleconference will be available two hours after the conclusion of the call until midnight (EST) on February 22, 2022. Please call 1.855.669.9658 and enter pass code 8338.
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 liquids pipelines, along with power generation and storage facilities, wherever life happens – we’re there. Guided by our core values of safety, innovation, responsibility, collaboration and integrity, our 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.
This release contains certain information that is forward-looking, including the sustainability commitments and targets contained in our 2021 Report on Sustainability and our GHG Emissions Reduction Plan, and is subject to important risks and uncertainties (such statements are usually accompanied by words such as "anticipate", "expect", "believe", "may", "will", "should", "estimate", "intend" or other similar words). Forward-looking statements in this document are intended to provide TC Energy security holders and potential investors with information regarding TC Energy and its subsidiaries, including management's assessment of TC Energy's and its subsidiaries' future plans and financial outlook. All forward-looking statements reflect TC Energy's beliefs and assumptions based on information available at the time the statements were made and as such are not guarantees of future performance. As actual results could vary significantly from the forward-looking information, you should not put undue reliance on forward-looking information and should not use future-oriented information or financial outlooks for anything other than their intended purpose. We do not update our forward-looking information due to new information or future events, unless we are required to by law. For additional information on the assumptions made, and the risks and uncertainties which could cause actual results to differ from the anticipated results, refer to the most recent Quarterly Report to Shareholders and Annual Report filed under TC Energy's profile on SEDAR at www.sedar.com and with the U.S. Securities and Exchange Commission at www.sec.gov and the "Forward-looking information" section of our 2021 Report on Sustainability and our GHG Emissions Reduction Plan which are available on our website at www.TCEnergy.com.
This release contains references to non-GAAP measures, including comparable earnings, comparable earnings per common share, comparable EBITDA and comparable funds generated from operations, that do not have any standardized meaning as prescribed by U.S. GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. These non-GAAP measures are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable except as otherwise described in the Annual consolidated financial statements and MD&A. Refer to: (i) each business segment for a reconciliation of comparable EBITDA and comparable EBIT to segmented earnings; (ii) the Consolidated results section for reconciliations of comparable earnings and comparable earnings per common share to Net income attributable to common shares and Net income per common share, respectively; and (iii) the Cash provided by operating activities section for a reconciliation of funds generated from operations and comparable funds generated from operations to Net cash provided by operations. Refer to the About this document – Non-GAAP measures section of the MD&A in our 2021 Annual Report to Shareholders for more information about the non-GAAP measures we use, which section of the MD&A is incorporated by reference herein. The MD&A can be found on SEDAR (www.sedar.com) under TC Energy's profile.
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1 Comparable earnings, comparable earnings per common share, comparable funds generated from operations and comparable EBITDA are non-GAAP measures used throughout this news release. These measures do not have any standardized meaning under U.S. GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. The most directly comparable U.S. GAAP measures are Net income attributable to common shares, Net income per common share, Net cash provided by operations and Segmented earnings, respectively. For more information on non-GAAP measures, refer to the Non-GAAP section of this news release.