TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company)
today announced a net loss attributable to common shares for first
quarter 2021 of $1.1 billion or $1.11 per share compared to net
income of $1.1 billion or $1.22 per share for the same period in
2020. Excluding an asset impairment charge related to the formal
suspension of Keystone XL and certain other specific items,
comparable earnings for first quarter 2021 were $1.1 billion or
$1.16 per common share compared to $1.1 billion or $1.18 per common
share in 2020. TC Energy's Board of Directors also declared a
quarterly dividend of $0.87 per common share for the quarter ending
June 30, 2021, equivalent to $3.48 per common share on an
annualized basis.
"During the first three months of 2021, our diversified
portfolio of essential energy infrastructure continued to perform
very well," said François Poirier, TC Energy’s President and Chief
Executive Officer. "Robust comparable earnings and cash generation
once again highlight the resiliency of our assets and how
imperative they are to the North American economy as we deliver the
energy and advance projects vital to our way of life in a safe and
reliable manner."
Despite energy market volatility, weather events and the ongoing
impacts of COVID-19, across our extensive operations, flows and
utilization levels remain in line with historical and seasonal
norms. Given the predictable nature of our cash flow streams, the
Company's outlook for full-year 2021 comparable earnings remains
generally consistent with last year's record results.
"While we were very disappointed by the revocation of the
Presidential Permit for Keystone XL and the resulting after-tax
impairment charge, we are well positioned to deliver sustainable,
high-quality growth in the years ahead," continued Poirier. "We are
advancing a $20 billion secured capital program and working on a
substantive portfolio of other similarly high-quality opportunities
under development. Importantly, all of our capital projects are
underpinned by long-term contracts and/or regulated business models
highlighting the fundamental need for this critical new
infrastructure while at the same time giving us visibility to the
earnings and cash flow they will generate as they enter service in
the coming years. Through prudent financial management, our balance
sheet continues to exhibit its historical strength allowing us to
effectively self-fund our growth program."
Looking beyond the current suite of projects, we are well
positioned to capture future growth prospects associated with our
extensive asset footprint and deep organizational capabilities as
well as others that arise as the world both consumes more energy
and transitions to a cleaner energy future. We are exploring
opportunities to electrify and use renewable energy to power
certain of the Company's proprietary energy loads, with the goal of
a net reduction in emissions across our footprint. In all our
operations and projects, we remain focused on managing, reducing or
eliminating our greenhouse gas emissions to the fullest extent
possible. Whether through modernizing and upgrading our expansive
asset network, expanding our capacity to displace higher-emission
fuel sources, or exploring new innovative clean energy
technologies, we believe our creativity, technical strength and
unparalleled market connectivity provide us the ability to prosper
regardless of the pace of energy transition.
Success in advancing our current slate of secured projects and
other organic growth opportunities emanating from our five
operating businesses across North America is expected to support
annual dividend growth of five to seven per cent in this
historically low-interest rate environment.
Highlights (All financial figures are unaudited
and in Canadian dollars unless otherwise noted)
- First quarter 2021 financial results
- Net loss attributable to common shares of $1.1 billion or $1.11
per common share
- Includes $2.2 billion after-tax Keystone XL asset impairment
charge; offsetting amounts with respect to the Government of
Alberta's investment and guarantees expected to be recorded through
equity in future periods
- Comparable earnings of $1.1 billion or $1.16 per common
share
- Comparable EBITDA of $2.5 billion
- Net cash provided by operations of $1.7 billion
- Comparable funds generated from operations of $2.0 billion
- Declared a quarterly dividend of $0.87 per common share for the
quarter ending June 30, 2021
- Continued to advance our $20 billion secured capital program by
investing $1.9 billion in various projects during the first
quarter
- Placed the remainder of BXP in service in January and Phase I
of the Grand Chenier XPress project in April
- Entered a joint venture with Motiva Enterprises (Motiva) to
construct the US$152 million Port Neches Link pipeline system to
connect the Keystone Pipeline System to Motiva's Port Neches
Terminal
- Completed the acquisition of all of
the publicly-held outstanding common units of TC PipeLines, LP in
exchange for 38 million TC Energy common shares.
Net (loss)/income attributable to common shares decreased by
$2.2 billion or $2.33 per common share to a net loss of $1.1
billion or $1.11 per share for the three months ended March 31,
2021 compared to the same period last year. On January 20, 2021,
the Presidential Permit for the Keystone XL pipeline was revoked
and, as a result, we subsequently agreed with the Government of
Alberta to formally suspend the Keystone XL pipeline project and
have evaluated our investment for impairment along with those in
related capital projects in development including Heartland
Pipeline, TC Terminals and Keystone Hardisty Terminal. We
determined that the carrying amount of these assets was no longer
fully recoverable and, as a result, in first quarter 2021 we
recognized an after-tax asset impairment of $2.2 billion, net of
expected contractual recoveries and other contractual and legal
obligations. The Keystone XL pipeline asset impairment does not
reflect offsetting amounts with respect to the Government of
Alberta's investment and guarantees which are expected to be
recorded through the statement of equity in future periods and
would serve to reduce our net financial exposure on the Keystone XL
pipeline project to approximately $1.0 billion as at March 31,
2021. First quarter 2020 included an income tax valuation allowance
release of $281 million following our reassessment of deferred tax
assets that are deemed more likely than not to be realized, and an
incremental after-tax loss of $77 million related to the Ontario
natural-gas fired power plant assets held for sale. These specific
items, as well as unrealized gains and losses from changes in risk
management activities, are excluded from comparable earnings as we
do not consider them to be reflective of our underlying operations.
Per share results also reflect the impact of common shares issued
for the acquisition of TC PipeLines, LP in first quarter 2021.
Comparable EBITDA of $2.5 billion decreased by $43 million for
the three months ended March 31, 2021 compared to the same period
in 2020 primarily due to the net effect of the following:
- lower contribution from Mexico Natural Gas Pipelines mainly due
to US$55 million of fees recognized in 2020 associated with the
successful completion of the Sur de Texas pipeline
- decreased earnings from Liquids Pipelines due to lower volumes
on the Keystone Pipeline System, partially offset by increased
contributions from liquids marketing activities mainly resulting
from higher margins and volumes
- lower Power and Storage results attributable to reduced
earnings in Bruce Power in 2021 primarily due to greater outage
days, partially offset by first quarter gains in 2021 on funds
invested for post-retirement benefits
- higher comparable EBITDA from Canadian Natural Gas Pipelines
largely due to the impact of increased flow-through depreciation
and financial charges along with higher rate-base earnings on the
NGTL System, Coastal GasLink development fees and increased
flow-through income taxes on the Canadian Mainline, partially
offset by lower flow-through financial charges on the Canadian
Mainline
- increased earnings in U.S. Natural Gas Pipelines from Columbia
Gas following the application for higher transportation rates
effective February 1, 2021, subject to refund upon completion of
the current rate proceeding along with incremental earnings
resulting from greater capitalized pipeline integrity costs in 2021
compared to 2020
- foreign exchange impact of a weaker
U.S. dollar on the Canadian dollar equivalent segmented earnings in
our U.S. dollar-denominated operations. While the weakening of the
U.S. dollar in first quarter 2021 compared to the same period in
2020 had a negative impact on first quarter 2021 comparable EBITDA,
the corresponding impact on comparable earnings was not significant
due to offsetting natural and economic hedges.
Due to the flow-through treatment of certain expenses including
income taxes, financial charges and depreciation on our Canadian
rate-regulated pipelines, changes in these expenses impact our
comparable EBITDA despite having no significant effect on net
income.
Comparable earnings of $1.1 billion or $1.16 per common share
decreased by $1 million or $0.02 per common share for the three
months ended March 31, 2021 compared to the same period in
2020 and was primarily the net effect of:
- changes in comparable EBITDA described above
- lower allowance for funds used during construction (AFUDC),
predominantly on account of the suspension of recording AFUDC on
the Villa de Reyes project effective January 1, 2021 due to ongoing
project delays
- higher depreciation and amortization largely in Canadian
Natural Gas Pipelines and U.S. Natural Gas Pipelines reflecting new
assets placed in service
- higher interest income and other mainly attributable to
realized gains in 2021 compared to realized losses in 2020 on
derivatives used to manage our net exposure to foreign exchange
rate fluctuations on 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
- decreased non-controlling interests as a result of the March 3,
2021 acquisition of all outstanding common units of TC PipeLines,
LP not beneficially owned by TC Energy
- lower interest expense as a result
of the foreign exchange impact from a weaker U.S. dollar on
translation of U.S. dollar-denominated interest as well as lower
interest rates on reduced levels of short-term borrowings. This was
partially offset by lower capitalized interest largely related to
the completion of the Napanee power plant in first quarter 2020,
the change to equity accounting for our Coastal GasLink investment
upon the sale of a 65 per cent interest in the project in second
quarter 2020 and the revocation of the Presidential Permit for the
Keystone XL pipeline in January 2021.
Comparable earnings per share reflects the impact of common
shares issued for the acquisition of 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 can affect our comparable EBITDA and net
income. 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 two-year forward basis using foreign exchange
derivatives, however, the natural exposure beyond that period
remains.
NOTABLE RECENT DEVELOPMENTS INCLUDE:
Canadian Natural Gas Pipelines
- Coastal GasLink: In December 2020,
in response to the COVID-19 pandemic, 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. Additional health and safety
measures were implemented by Coastal GasLink to prevent and control
the risk of transmission of COVID-19 among workers at the camps and
at the worksites, enabling the project to proceed with critical
activities. On April 13, 2021, the provincial health order was
lifted allowing the project to finalize the Coastal GasLink
remobilization plans for the summer construction program.As a
result of scope changes, permit delays and the impacts from
COVID-19, including the provincial health order, 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 will continue to mitigate cost increases
and schedule deferrals and is working with LNG Canada on
establishing a revised project plan and budget. 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
- Grand Chenier XPress: Phase I of
Grand Chenier XPress, an expansion project on the ANR pipeline
system connecting supply directly to U.S. Gulf Coast LNG export
facilities, went into service in April 2021. Phase II is expected
to be placed in service in early 2022.
- Columbia Gas Section 4 Rate Case:
Columbia Gas filed a Section 4 Rate Case with FERC in July 2020
requesting an increase to Columbia Gas' maximum transportation
rates effective February 1, 2021, subject to refund upon completion
of the rate proceeding. 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: Construction is
ongoing but has been delayed due to COVID-19 contingency measures
which have impeded our ability to obtain work authorizations as a
result of administrative closures. We expect to complete
construction of Villa de Reyes in 2021.
Liquids Pipelines
- Keystone XL: On January 20, 2021,
the Presidential Permit for the Keystone XL pipeline was revoked
and as a result, we suspended the advancement of the project and
ceased capitalizing costs, including interest during construction,
while we assessed the options available to us and our partner, the
Government of Alberta. We have subsequently agreed with the
Government of Alberta to formally suspend the Keystone XL pipeline
project and have evaluated our investment for impairment along with
those in related capital projects in development including
Heartland Pipeline, TC Terminals and Keystone Hardisty Terminal. We
determined that the carrying amount of these assets was no longer
fully recoverable. As a result, in first quarter 2021, we
recognized an asset impairment charge, net of expected contractual
recoveries and other contractual and legal obligations related to
suspension activities of $2.8 billion ($2.2 billion after tax)
which was excluded from comparable earnings. The asset impairment
charge was based on the excess of the carrying value of $3.3
billion over the estimated fair value of $0.2 billion. Suspension
activities and related costs will continue throughout 2021 and 2022
with any adjustments to the estimated fair value and future
contractual and legal obligations being expensed as incurred and
also excluded from comparable earnings. Although we have recorded a
$2.2 billion after-tax asset impairment charge, net of expected
contractual recoveries and other contractual and legal obligations
related to suspension activities, a significant portion of this
amount is shared with the Government of Alberta, thereby reducing
our net financial exposure. After considering the Government of
Alberta contribution of $0.4 billion for Class A interests reported
in Redeemable non-controlling interest and the $0.8 billion
outstanding on the Government of Alberta guaranteed credit facility
reported in Current portion of long-term debt, our net financial
exposure on the $2.2 billion after-tax asset impairment at March
31, 2021 was approximately $1.0 billion.Shortly after the
Presidential Permit was revoked, construction stand-down activities
were fully implemented, although certain activities are ongoing, to
complete work that commenced in 2020 in order to adhere to our
commitment to safety and the environment. The majority of the
associated continuing costs are expected to be funded through the
existing project-level credit facility which remains fully
guaranteed by the Government of Alberta. On March 26, 2021, we
reduced the total amount available under the credit facility from
US$4.1 billion to US$1.6 billion and as at March 31, 2021, there
was an outstanding balance of $779 million (US$619 million) on this
facility. The formal suspension of the project does not require
immediate repayment of the debt.
- Port Neches: On March 8, 2021, we
entered a joint venture with Motiva to construct the US$152 million
Port Neches Link pipeline system which will connect the Keystone
Pipeline System to Motiva’s Port Neches Terminal, which supplies
630,000 Bbl/d to their Port Arthur refinery. This common carrier
pipeline system will also include facilities to tie in additional
liquids terminals to the Keystone Pipeline System with other
downstream infrastructure, and is expected to be in service in the
second half of 2022.
Corporate
- Common share dividend: Our Board of
Directors declared a quarterly dividend of $0.87 per common share
for the quarter ending June 30, 2021. The quarterly amount is
equivalent to $3.48 per common share on an annualized basis.
- Acquisition of TC PipeLines, LP: On
March 3, 2021, we completed the previously announced acquisition
pursuant to the agreement dated December 14, 2020 which resulted in
TC Energy acquiring all of the outstanding common units of TC
PipeLines, LP not beneficially owned by TC Energy and TC PipeLines,
LP becoming an indirect, wholly-owned subsidiary of TC Energy. Upon
close of the transaction, TC PipeLines, LP common unitholders
received 0.70 common shares of TC Energy for each issued and
outstanding publicly-held TC PipeLines, LP common unit. In
accordance with the acquisition terms, we issued 38 million TC
Energy common shares in exchange for all publicly-held common units
of TC PipeLines, LP valued at approximately $2.1 billion, net of
transaction costs.
- Issuance of junior subordinated
notes and redemption of Series 13 preferred shares: In March 2021,
we issued $500 million of Junior Subordinated Notes through
TransCanada Trust, a wholly-owned financing trust subsidiary of
TCPL. We will use the proceeds from the issuance to redeem all
issued and outstanding TC Energy Series 13 preferred shares on May
31, 2021 pursuant to their terms and, prior to such redemption, to
reduce short-term indebtedness and for general corporate
purposes.
Teleconference and WebcastWe will hold a
teleconference and webcast on Friday, May 7, 2021 to discuss our
first quarter 2021 financial results. François Poirier, President
and Chief Executive Officer, Don Marchand, Executive
Vice-President, Strategy & Corporate Development and Chief
Financial Officer, and other members of the executive leadership
team will discuss TC Energy's financial results and company
developments at 1 p.m. (MDT) / 3 p.m. (EDT).
Members of the investment community and other interested parties
are invited to participate by calling 1.855.327.6838. 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/11059
A replay of the teleconference will be available two hours after
the conclusion of the call until midnight (EDT) on May 14, 2021.
Please call 1.855.669.9658 and enter pass code 6572.
The unaudited interim condensed 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 EnergyWe 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 crude oil pipelines, along with power
generation and storage facilities, wherever life happens – we’re
there. Guided by our core values of safety, responsibility,
collaboration and integrity, our 7,500 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.
Forward-Looking InformationThis release
contains certain information that is forward-looking 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.
Non-GAAP MeasuresThis 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
Condensed consolidated financial statements and MD&A. For more
information on non-GAAP measures, refer to TC Energy's most recent
Quarterly Report to Shareholders.
Media Inquiries:Jaimie Harding / Hejdi
Carlsen403.920.7859 or 800.608.7859
Investor & Analyst
Inquiries: David
Moneta / Hunter Mau 403.920.7911 or 800.361.6522
Download full report here:
https://www.tcenergy.com/siteassets/pdfs/investors/reports-and-filings/annual-and-quarterly-reports/2021/tc-2021-q1-quarterly-report.pdf
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