Despite challenges stemming from the COVID-19 pandemic, Calgary-based TC Energy Corp. announced Feb. 18 record earnings in 2020.
The company reported net income attributable to common shares for fourth quarter 2020 of $1.1 billion or $1.20 per share compared to net income of $1.1 billion or $1.18 per share for the same period in 2019.
For the year ended Dec. 31, 2020, net income attributable to common shares was $4.5 billion or $4.74 per share compared to net income of $4 billion or $4.28 per share for 2019. Comparable earnings for fourth quarter 2020 were $1.1 billion or $1.15 per common share compared to $970 million or $1.03 per common share in 2019.
For the year ended Dec. 31, 2020, comparable earnings were $3.9 billion or $4.20 per common share compared to $3.9 billion or $4.14 per common share for 2019.
TC Energy’s board of directors also declared a quarterly dividend of $0.87 per common share for the quarter ending March 31, 2021, equivalent to $3.48 per common share on an annualized basis, an increase of 7.4 percent. This is the 21st consecutive year the board has raised the dividend.
“We are very pleased with the performance of our diversified portfolio of regulated and long-term contracted assets which generated record financial results again in 2020,” said François Poirier, TC Energy’s president and CEO. “In the midst of a global pandemic, our people and business remained healthy. Our services were deemed essential given the critical role our infrastructure plays in providing energy to North Americans and our results demonstrate the resiliency of our assets and utility-like business model in these unprecedented times. Comparable earnings per share improved by 1.5 percent compared to what was a record 2019 while comparable funds generated from operations of $7.4 billion were four percent higher. The increases reflect the strong performance of our legacy assets and contributions from approximately $5.9 billion of growth projects that entered service in 2020. Based on these strong results, together with the confidence we have in our future outlook, we are pleased to announce a 7.4 percent increase in our common share dividend for 2021.”
Despite the challenges brought about by COVID-19, TC Energy’s operating assets have been largely unimpacted. Across the company’s extensive North American operations, flows and usage levels generally remain in line with historical and seasonal norms, underscoring the importance of our assets to the North American economy. Given the regulated and/or long-term contracted nature of its portfolio, the company continues to be largely insulated from volatility associated with volume throughput and commodity prices.
“While we were disappointed with the recent action to revoke the Presidential Permit for the Keystone XL pipeline, we have a large and diversified asset base that continues to perform extremely well and are advancing $20 billion of secured capital projects, together with a substantive portfolio of other similarly high quality opportunities under development,” Poirier said. “Our footprint is comprised of irreplaceable corridors of critical energy infrastructure that are expected to contribute to the continuous replenishment of our growth portfolio in the years ahead under all energy mix scenarios. Through prudent financial management, our balance sheet continues to exhibit its historical strength allowing us to self-fund our growth program without the issuance of additional common shares.”
Looking forward, safety remains at the forefront of TC Energy’s operations. In addition, Poirer said the company is committed to sustainably managing its business and reducing or eliminating its environmental impact. As part of its efforts, TC Energy continues to progress the multi-billion dollar Bruce Power life extension program, a source of significant emission-less power in Ontario, and advance other financially, operationally and environmentally attractive initiatives.
Additional growth opportunities are expected to arise as the world both consumes more energy and transitions to a less carbon intensive energy mix and we are well positioned to participate in the substantial investment that will be required.
With a deep understanding of energy markets, strong stakeholder relationships, significant financial capacity and extensive technical expertise across a broad range of energy sources including natural gas, crude oil, nuclear, hydro, wind, solar and other emerging technologies, TC Energy expects to continue to grow its portfolio in a manner that fully aligns with the company’s long-established risk preferences, return expectations and organizational capabilities.
Success in advancing our secured capital program and other organic growth opportunities emanating from our five operating businesses across North America, is expected to support future dividend growth of 5 to 7 percent per year.
Notable recent developments include:
Canadian Natural Gas Pipelines:
- NGTL System: In 2020, the NGTL System placed approximately $3.4 billion of capacity projects in service.
On Feb. 19, 2020, the Canada Energy Regulator issued a report recommending that the GIC approve the 2021 NGTL System Expansion Program, which the GIC approved on Oct. 19, 2020. The NGTL System subsequently progressed construction activities in accordance with the regulatory requirements resulting in compressor station field work beginning in December 2020 and pipeline construction activities in January 2021.
Once facilities are placed in service, the 2021 NGTL System Expansion Program is expected to provide 1.45 billion cubic feet per day (Bcf/d) of incremental system capacity underpinned by long-term receipt and delivery contracts, connecting incremental supply to growing intra-basin and export markets. In-service is expected to commence in late 2021 with remaining program components completed by April 2022.
- Canadian Mainline: During 2020, Canadian Mainline placed approximately $0.2 billion of capacity projects in service.
- Coastal GasLink: Due to COVID-19, on Dec. 29, 2020, the British Columbia Provincial Health Officer issued an order restricting the number of workers on site for industrial projects in the Northern Health Authority region of British Columbia. Industrial projects must submit restart plans to the Provincial Health Officer detailing steps to resume site work. Coastal GasLink is working with the provincial health authorities to safely resume construction activities in accordance with the objectives and timelines defined in the order.
The project is also working with LNG Canada on establishing a revised project plan for Coastal GasLink. We expect that project costs will increase significantly and the schedule will be delayed compared to the previously disclosed estimate due to scope increases, permit delays and the impacts from COVID-19, including the provincial health order, although Coastal GasLink will continue to mitigate these impacts to the extent possible. These incremental costs will be included in the final pipeline tolls, subject to certain conditions. We do not anticipate our future equity contributions will increase significantly following the conclusion of this process.
U.S. Natural Gas Pipelines:
- Wisconsin Access: On Oct. 28, 2020, TC Energy approved the Wisconsin Access Project that will replace, upgrade and modernize certain facilities while reducing emissions along portions of the ANR pipeline system. The enhanced facilities will improve reliability of the ANR pipeline system and also allow for additional contracted transportation services of approximately 72 million cubic feet per day (MMcf/d) to be provided to utilities serving the Midwestern U.S. under long-term contracts. The anticipated in-service date of the combined project is in the second half of 2022 with an estimated cost of $0.2 billion USD.
- BXP: The $0.2 billion USD BXP project, a Columbia Gas project representing an upsizing of existing pipeline replacement, in conjunction with our modernization program, was partially placed into service in October 2020 with full in-service commencing on Jan. 1, 2021.
- Columbia Gas Section 4 Rate Case: Columbia Gas filed a Section 4 Rate Case with FERC on July 31, 2020, requesting an increase to Columbia Gas’ maximum transportation rates effective Feb. 1, 2021, subject to refund. The rate case is progressing as expected as we continue to pursue a collaborative process to find a mutually beneficial outcome with our customers through settlement negotiations.
Mexico Natural Gas Pipelines:
- Villa de Reyes: Villa de Reyes project construction is ongoing. Phased in-service has been delayed due to COVID-19 contingency measures which have impeded our ability to obtain work authorizations as a result of administrative closures. Subject to the timely re-opening of government agencies, we expect to complete construction of Villa de Reyes in 2021.
- Guadalajara: A project to allow bidirectional flows was completed in December 2020 and the TSA with the CFE was renegotiated. The bidirectional flow allows access to either LNG imports from the Manzanillo terminus or access to continental natural gas at the Guadalajara terminus for delivery to regional markets.
- Keystone XL: On Jan. 20, 2021, U.S. President Joe Biden revoked the existing Presidential Permit for the Keystone XL pipeline. As a result, TC Energy suspended the advancement of the Keystone XL pipeline project and ceased capitalizing costs, including interest during construction, and also ceased accruing a return on the Government of Alberta interests as of that date, while we assess our options along with our partner, the Government of Alberta, and other stakeholders. We expect to record a substantive, predominantly non-cash, after-tax charge to our earnings in first quarter 2021, which will be excluded from comparable earnings.
Accounting implications in first quarter 2021 and beyond will depend on the assessment and consideration of options as noted above, including the impacts that this had on contractual arrangements. As a result, the magnitude of the impairment charge and related recoveries cannot be quantified at this time. The determination of the amount of the pre-tax impairment of the Keystone XL assets will consider the then-carrying value of the project and any associated projects, outstanding contractual commitments, the estimated net recoverable value of tangible plant and equipment and specified contractual recoveries, which cannot be reasonably estimated until the options have been assessed and next steps have been determined. The viability of certain projects currently associated with the Keystone XL pipeline is also being reviewed.
- Retirement and appointment of our President and CEO: On Sept. 21, 2020, TC Energy announced the retirement of Russ Girling as president and CEO and from the board of directors effective Dec. 31, 2020. François Poirier, previously chief operating officer and president of power and storage, succeeded Girling and joined the board of directors on Jan. 1, 2021. Girling will assist Poirier with the transition through Feb. 28.
- Acquisition of common units of TC PipeLines, LP: On Dec. 15, 2020, the company announced that it entered into a definitive agreement and plan of merger to acquire all the outstanding common units of TC PipeLines LP not beneficially owned by TC Energy or its affiliates in exchange for TC Energy common shares. Pursuant to the agreement, TC PipeLines common unitholders will receive 0.70 common shares of TC Energy for each issued and outstanding publicly-held TC PipeLines, LP common unit. The exchange ratio reflects a value for all publicly held common units of TC PipeLines of approximately $1.69 billion USD, or 38 million TC Energy common shares based on the closing price of TC Energy’s common shares on the New York Stock Exchange on Jan. 19, 2021. A vote on the plan of merger by the unitholders of the publicly-held common units is scheduled for Feb. 26. The transaction is expected to close in late first quarter 2021 subject to approval by the holders of a majority of outstanding common units of TC PipeLines and customary regulatory approvals. Upon closing, TC PipeLines will be wholly owned by TC Energy and will cease to be a publicly held master limited partnership.