TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company)
today announced net income attributable to common shares for third
quarter 2019 of $739 million or $0.79 per share compared to net
income of $928 million or $1.02 per share for the same period in
2018. Comparable earnings for third quarter 2019 were $970 million
or $1.04 per common share compared to $902 million or $1.00 per
common share in 2018. TC Energy's Board of Directors also declared
a quarterly dividend of $0.75 per common share for the quarter
ending December 31, 2019, equivalent to $3.00 per common share on
an annualized basis. Commencing with the dividends declared October
31, 2019, the Company discontinued the practice of issuing common
shares from treasury at a discount to satisfy purchases under its
Dividend Reinvestment Plan (DRP).
"During the third quarter of 2019, our diversified portfolio of
regulated and long-term contracted assets continued to perform very
well," said Russ Girling, TC Energy’s President and Chief Executive
Officer. "Despite significant asset sales that have accelerated the
strengthening of our balance sheet, comparable earnings per share
increased four per cent compared to the same period last year while
comparable funds generated from operations of $1.8 billion were 15
per cent higher. The increases reflect the robust performance of
our legacy assets and contributions from the approximately $8.2
billion of growth projects that have entered service to date in
2019. Those increases were partially offset by lower contributions
from approximately $3.4 billion of assets that were monetized
during the first nine months of the year."
The asset sales included the Coolidge gas-fired power plant in
Arizona, certain Columbia Midstream assets and an 85 per cent
equity interest in Northern Courier. In addition, the Company has
entered into an agreement to sell its Ontario gas-fired power
plants including Napanee, Halton Hills and a 50 per cent interest
in Portlands Energy Centre for approximately $2.87 billion.
Including this transaction, which is anticipated to close in first
quarter 2020, proceeds from asset sales are expected to total
approximately $6.3 billion.
"Each of these transactions allowed us to surface significant
value and redeploy the proceeds into our $30 billion secured
capital program, thereby reducing our need for external funding
including common equity," added Girling. "When combined with our
significant internally generated cash flow and access to debt
capital markets, we are well positioned to prudently fund our
capital program in a manner that maximizes earnings and cash flow
per share and is consistent with achieving targeted run-rate credit
metrics including debt-to-EBITDA in the high four times area. As a
result, we do not expect to issue any additional common shares from
treasury under our Dividend Reinvestment Plan commencing with
fourth quarter 2019 dividends."
Looking forward, TC Energy also continues to progress more than
$20 billion of projects under development including Keystone XL and
the Bruce Power life extension program. Success in advancing these
and other growth initiatives that are expected to emanate from our
five operating businesses across North America could extend our
current dividend growth outlook of eight to 10 per cent through
2021.
Highlights(All financial figures are unaudited
and in Canadian dollars unless otherwise noted)
- Third quarter 2019 financial results
- Net income attributable to common shares of $739 million or
$0.79 per common share
- Comparable earnings of $970 million or $1.04 per common
share
- Comparable earnings before interest, taxes, depreciation and
amortization of $2.3 billion
- Net cash provided by operations of $1.6 billion
- Comparable funds generated from operations of $1.8 billion
- Comparable distributable cash flow of $1.7 billion or $1.78 per
common share
- Declared a quarterly dividend of $0.75 per common share for the
quarter ending December 31, 2019
- Discontinued practice of issuing common shares from treasury at
a discount to satisfy purchases under DRP commencing with the
dividends declared October 31
- Announced $1.2 billion West Path Delivery Program, an expansion
of the NGTL and Foothills pipeline systems
- Initiated the US$0.3 billion Gas Transmission Northwest (GTN)
XPress project
- Commenced commercial operations on the Sur de Texas pipeline in
September
- Continued construction activities on the $6.6 billion Coastal
GasLink pipeline project and advanced funding plans for the
project
- Received Nebraska Supreme Court decision in August affirming
the approval of the Keystone XL pipeline route through
Nebraska
- Received Draft Supplemental Environmental Impact Statement
(DSEIS) for the Keystone XL project in October
- Closed the sale of certain Columbia Midstream assets for
approximately US$1.3 billion
- Completed the partial monetization of Northern Courier for
aggregate gross proceeds of approximately $1.15 billion
- Entered into an agreement to sell our interests in three
Ontario natural gas-fired power plants for approximately $2.87
billion
- Issued $1.0 billion of long-term fixed-rate Medium Term Notes
in September 2019
- Issued US$1.1 billion of Junior Subordinated Notes in September
2019.
Net income attributable to common shares decreased by $189
million or $0.23 per common share to $739 million or $0.79 per
share for the three months ended September 30, 2019 compared to the
same period last year. Per share results reflect the dilutive
impact of common shares issued under our DRP in 2018 and 2019 and
our Corporate At-The-Market (ATM) program in 2018. Third quarter
2019 results included an after-tax loss of $133 million at
September 30, 2019 related to the Ontario natural gas-fired power
plants held for sale, an after-tax loss of $133 million related to
the sale of certain Columbia Midstream assets in August 2019 and an
after-tax gain of $115 million related to the partial sale of
Northern Courier in July 2019. Third quarter 2018 results included
after-tax income of $8 million related to our U.S. Northeast power
marketing contracts. These specific items, as well as unrealized
gains and losses from changes in risk management activities, are
excluded from comparable earnings.
Comparable EBITDA increased by $288 million for the three months
ended September 30, 2019 compared to the same period in 2018
primarily due to the net effect of the following:
- higher contribution from Liquids Pipelines primarily due to
higher volumes on the Keystone Pipeline System and increased
earnings from liquids marketing activities, partially offset by the
sale of an 85 per cent equity interest in Northern Courier in July
2019
- higher contribution from U.S. Natural Gas Pipelines mainly due
to increased earnings from Columbia Gas and Columbia Gulf growth
projects placed in service, partially offset by decreased earnings
from Bison (wholly-owned by TC PipeLines, LP) and from the sale of
certain Columbia Midstream assets in August 2019
- higher contribution from Canadian Natural Gas Pipelines mainly
due to the Canadian Mainline recovery of increased depreciation and
higher incentive earnings in 2019
- higher contribution from Power and Storage primarily due to
increased Bruce Power results from a higher realized power price
and higher output, partially offset by the sale of our interests in
the Cartier Wind power facilities in fourth quarter 2018 and the
sale of our Coolidge generating station in May 2019.
Comparable earnings increased by $68 million or $0.04 per common
share for the three months ended September 30, 2019 compared
to the same period in 2018 and was primarily the net effect of:
- changes in comparable EBITDA described above
- higher income tax expense primarily due to higher comparable
earnings before income taxes and lower foreign tax rate
differentials
- higher depreciation, largely in Canadian Natural Gas Pipelines
which is fully recovered in tolls as reflected in the comparable
EBITDA discussion above, therefore having no impact on comparable
earnings. In addition, higher consolidated depreciation reflects
new projects placed in service
- lower AFUDC in U.S. Natural Gas Pipelines primarily due to
Columbia Gas and Columbia Gulf growth projects placed in service,
partially offset by continued investment in our NGTL System
expansion and Mexico projects.
Comparable earnings per common share for the three months ended
September 30, 2019 also reflects the dilutive impact of common
shares issued under our DRP in 2018 and 2019 and our Corporate ATM
program in 2018.
Notable recent developments include:
Canadian Natural Gas Pipelines:
- NGTL System: On October 31, 2019, we announced our West Path
Delivery Program, an expansion of our NGTL System and Foothills
pipeline system for incremental export capacity onto the
GTN system in the Pacific Northwest. The Canadian portion of
the expansion program has an estimated capital cost of $1.2 billion
and consists of approximately 119 km (74 miles) of pipeline and
associated facilities with in-service dates between fourth quarter
2022 and fourth quarter 2023. This Program is underpinned by
approximately 275 TJ/d (258 MMcf/d) of new firm service contracts
with terms that exceed 30 years.In the nine months ended September
30, 2019, the NGTL System placed approximately $0.8 billion of
capacity projects in service. On March 14, 2019, the NGTL System
Rate Design and Services Application was filed with the National
Energy Board (NEB) which included a settlement agreement negotiated
with members of its Tolls, Tariff, Facilities and Procedures (TTFP)
committee which represents stakeholders. The settlement is
supported by the majority of members of the TTFP
committee. The Application addresses rate design, terms and
conditions of service for the NGTL System and a tolling methodology
for the North Montney Mainline (NMML). Given the complexity of the
issues raised in the Application, the NEB decided to hold a public
hearing which is expected to conclude in fourth quarter 2019. On
May 16, 2019, the NEB approved the proposed NMML tolling
methodology including the surcharge, as filed, on an interim basis,
pending the outcome of the above Rate Design and Services
Application.
- Coastal GasLink Pipeline Project: Following the October 2018
positive Final Investment Decision (FID) by LNG Canada,
construction activities continue along the pipeline route including
the area south of Houston, B.C. which required a B.C. Supreme Court
injunction for access. We expect a further decision in fourth
quarter 2019 from the B.C. Supreme Court to extend the injunction
to project completion. On July 26, 2019, the NEB issued its
decision affirming provincial jurisdiction for Coastal GasLink.
Accordingly, construction will continue to proceed as planned under
the permits granted to Coastal GasLink by the B.C. Oil and Gas
Commission. Our estimated project cost has increased from $6.2
billion to $6.6 billion due to increased scope and refinement of
construction estimates for rock work and watercourse crossings. We
expect the incremental cost will be incorporated into the final
tolls. TC Energy continues to advance funding plans for this
pipeline project through a combination of the sale of up to 75 per
cent ownership interest and arrangement of project financing, which
are both proceeding as planned.
U.S. Natural Gas Pipelines:
- GTN XPress: In third quarter 2019, we initiated the GTN XPress
project which is an integrated reliability and expansion project on
the GTN system that will provide for the transport of additional
volumes enabled by the West Path Delivery Program discussed
above. GTN XPress is expected to be fully complete in late 2023
with an estimated total cost of US$0.3 billion.
- Louisiana XPress and Grand Chenier XPress: Combined, the
Louisiana XPress and Grand Chenier XPress projects will connect
nearly 2 Bcf/d of supply to Gulf Coast LNG export facilities. Both
projects have now obtained necessary customer approvals or waivers
of conditions allowing the projects to move to the execution phase.
Interim service for Louisiana XPress shippers will commence on
Columbia Gulf November 1, 2019 with full in-service anticipated in
2022 and total estimated project costs of US$0.4 billion. The
anticipated in-service dates for Grand Chenier XPress are in 2021
and 2022 for Phase I and II, respectively, with total estimated
project costs of US$0.2 billion.
- Sale of Columbia Midstream Assets: On August 1, 2019, we
finalized the sale of certain Columbia Midstream assets to UGI
Energy Services, LLC, a subsidiary of UGI Corporation, for proceeds
of approximately US$1.3 billion, before post-closing adjustments.
The sale resulted in a pre-tax gain of $21 million ($133 million
after-tax loss), which included the release of $595 million of
Columbia's goodwill allocated to these assets that is not
deductible for income tax purposes. This sale does not include any
interest in Columbia Energy Ventures Company, which is our minerals
business in the Appalachian basin.
- Columbia Gulf Rate Settlement: Columbia Gulf and its shippers
have recently agreed to a settlement-in-principle addressing all
rate and service related issues raised during the settlement
discussions. We plan to file an agreement with the Federal Energy
Regulatory Commission (FERC) before the end of the year reflecting
this settlement-in-principle and precluding the need to file a
general rate case as contemplated by Columbia Gulf's previous 2016
settlement. We anticipate that FERC will accept the settlement
agreement and that it will be unopposed.
Mexico Natural Gas Pipelines:
- CFE Arbitration: In June 2019, Comisión Federal de Electricidad
(CFE) filed requests for arbitration under the Sur de Texas, Villa
de Reyes and Tula contracts. CFE requested nullification of clauses
that govern the parties’ responsibilities in instances of force
majeure and requested reimbursement of certain fixed capacity
payments. Regarding Sur de Texas, the parties successfully executed
an amending agreement as described below and CFE has withdrawn its
Sur de Texas arbitration request. Negotiations continue with
respect to the Villa de Reyes and Tula arbitrations with the
expectation of reaching agreements before the end of 2019.
Accordingly, these arbitration proceedings have been temporarily
suspended while negotiations continue.
- Sur de Texas: In September 2019, the Sur de Texas pipeline
began commercial operations following execution of the above
amending agreement with CFE. The original Sur de Texas agreement
had a fluctuating toll profile over a 25-year contract term. As a
result of the amendment, the contract has been extended and CFE
will now receive transportation services for 35 years under a
levelized toll structure based on actual construction costs with an
initial fixed toll applicable for the first 25 years of the
contract term and a higher fixed toll over the last 10 years of the
contract. All other terms and conditions of the contract remain
substantially unchanged. Monthly revenue for this pipeline will be
recognized at a levelized average rate over the 35-year contract
term.
- Villa de Reyes: Construction of the Villa de Reyes project is
ongoing, however the project has experienced force majeure events
that have delayed the schedule. We anticipate a phased in-service
to commence in early 2020 and have received certain capacity
payments under force majeure provisions in the contract, but
have not commenced recording revenues.
- Tula: Construction on the central segment of the Tula project
has been delayed due to a lack of progress by the Secretary of
Energy, the governmental department responsible for Indigenous
consultations. The project in-service date is estimated to be two
years after the Secretary of Energy successfully concludes such
consultations. We have received certain capacity
payments under force majeure provisions in the contract but
have not commenced recording revenues.
Liquids Pipelines:
- Northern Courier: On July 17, 2019, we completed the sale of an
85 per cent equity interest in Northern Courier to Alberta
Investment Management Corporation for gross proceeds of $144
million before post-closing adjustments, resulting in a pre-tax
gain of $69 million after recording our remaining 15 per cent
interest at fair value. On an after-tax basis, the gain of $115
million reflects the utilization of previously unrecognized tax
loss benefits. Preceding the equity sale, Northern Courier issued
$1.0 billion of long-term, non-recourse debt, the proceeds from
which were paid to TC Energy, resulting in aggregate gross proceeds
to TC Energy of $1.15 billion from this asset monetization. We
remain the operator of the Northern Courier pipeline and are using
the equity method to account for our remaining 15 per cent interest
in our Consolidated financial statements.
- Keystone XL: On June 27, 2019, the U.S. Government and TC
Energy filed motions to dismiss the lawsuit brought by two U.S.
Native American communities that have been expanded to challenge
both the 2017 and 2019 Presidential Permits. The U.S. District
Court in Montana heard argument on motions to dismiss the
complaints on September 12, 2019 and a decision is expected by year
end. On June 27, 2019, the U.S. Government filed a motion to
dismiss the challenge to the 2019 Presidential Permit brought by
the Indigenous Environmental Network. TC Energy has intervened and
moved to dismiss this lawsuit. A hearing on the motion to dismiss
and a motion for a preliminary injunction by the Indigenous
Environmental Network was held by the U.S. District Court in
Montana on October 9, 2019. A ruling is expected to be made by year
end. On August 23, 2019, the Nebraska Supreme Court affirmed the
November 2017 decision by the Nebraska Public Service Commission
that approved the Keystone XL Pipeline route through the state. A
motion for re-hearing of the decision has been denied. The U.S.
Department of State issued a DSEIS for the project on October 4,
2019. The DSEIS supplements the 2014 Keystone XL SEIS. It considers
changes in the project since 2014 including routing in Nebraska and
incorporates updated information and new studies. The SEIS is
expected to be issued by the end of 2019. We continue to actively
manage legal and regulatory matters as the project advances.
Power and Storage (previously Energy):
- Ontario Natural Gas-fired Power Plants: On July 30, 2019, we
entered into an agreement to sell our Halton Hills and Napanee
power plants as well as our 50 per cent interest in Portlands
Energy Centre to a subsidiary of Ontario Power Generation Inc. for
proceeds of approximately $2.87 billion, subject to timing of the
close and related adjustments. The sale is expected to close by the
end of first quarter 2020 subject to conditions which include
regulatory approvals and Napanee reaching commercial operations as
outlined in the agreement. We expect this sale to result in a total
pre-tax loss of approximately $330 million ($231 million after
tax). As these assets have been classified as held for sale,
$202 million of this pre-tax loss ($133 million after tax) has been
recorded at September 30, 2019. The remaining loss primarily
reflects the residual costs to be incurred until Napanee is placed
in service, including capitalized interest, and will be recorded on
or before closing of the transaction. In March 2019, Napanee
experienced an equipment failure while progressing commissioning
activities. Steps are being taken to address the situation and
commercial operations are expected to commence in late first
quarter 2020 with an estimated project cost of $1.8 billion.
Corporate:
- Common Share Dividend: Our Board of Directors declared a
quarterly dividend of $0.75 per common share for the quarter ending
December 31, 2019 on TC Energy's outstanding common shares. The
quarterly amount is equivalent to $3.00 per common share on an
annualized basis.
- Issuance of Long-term Debt and Junior Subordinated Notes: In
September 2019, TransCanada PipeLines Limited issued $700 million
of Medium Term Notes, due in September 2029, bearing interest at a
fixed rate of 3.00 per cent, as well as an additional $300 million
of Medium Term Notes, due July 2048, bearing interest at a fixed
rate of 4.18 per cent. In September 2019, TransCanada Trust (the
Trust), a wholly-owned financing trust subsidiary of TCPL, issued
US$1.1 billion of Trust Notes – Series 2019-A to third party
investors at a fixed interest rate of 5.50 per cent for the first
ten years converting to a floating rate thereafter. All of the
proceeds of the issuance by the Trust were loaned to TCPL for
US$1.1 billion of junior subordinated notes of TCPL at an initial
fixed rate of 5.75 per cent. The junior subordinated notes are
callable at TCPL's option at any time on or after September 15,
2029 at 100 per cent of the principal amount plus accrued and
unpaid interest to the date of redemption. The net proceeds of
these issuances were used for general corporate purposes and to
fund our capital program.
- Dividend Reinvestment Plan: In third quarter 2019, the DRP
participation rate amongst common shareholders was approximately 35
per cent resulting in $247 million reinvested in common equity
under the program. Year-to-date in 2019, the participation rate
amongst common shareholders has been approximately 34 per cent
resulting in $711 million of dividends reinvested.Commencing with
the dividends declared October 31, 2019, common shares purchased
with reinvested cash dividends under TC Energy’s DRP will no longer
be satisfied with shares issued from treasury at a discount, but
rather will be acquired on the open market at 100 per cent of the
weighted average purchase price. The DRP is available for dividends
payable on TC Energy’s common and preferred shares.
Teleconference and Webcast:
We will hold a teleconference and webcast on Friday, November 1,
2019 to discuss our third quarter 2019 financial results. Russ
Girling, President and Chief Executive Officer, Don Marchand,
Executive Vice-President and Chief Financial Officer, and members
of the executive leadership team will discuss TC Energy's third
quarter financial results and company developments at 9 a.m. MDT /
11 a.m. EDT.
Members of the investment community and other interested parties
are invited to participate by calling 800.478.9326 or 416.340.2218
(Toronto area). Please dial in 10 minutes prior to the start of the
call. No pass code is required. A live webcast of the
teleconference will be available on TC Energy's website at
www.TCEnergy.com/events or via the following URL:
www.gowebcasting.com/10366.
A replay of the teleconference will be available two hours after
the conclusion of the call until midnight (EST) on November 8,
2019. Please call 800.408.3053 or 905.694.9451 (Toronto area) and
enter pass code 8633180#.
The unaudited interim Condensed consolidated financial
statements and Management’s Discussion and Analysis (MD&A) are
available under TC Energy's profile on SEDAR at
www.sedar.com, with the U.S. Securities and Exchange
Commission on EDGAR at
www.sec.gov/info/edgar.shtml and on our website
at www.TCEnergy.com.
TC Energy and its affiliates deliver the energy millions of
people rely on every day to power their lives and fuel industry.
Focused on what we do and how we do it, we are guided by core
values of safety, responsibility, collaboration and integrity. Our
more than 7,000 people are committed to sustainably developing and
operating pipeline, power generation and energy storage facilities
across Canada, the United States and Mexico. TC Energy's common
shares trade on the Toronto (TSX) and New York (NYSE) stock
exchanges under the symbol TRP. Visit www.TCEnergy.com and
connect with us on social media to learn more.
Forward Looking Information
This 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 Quarterly Report to
Shareholders dated October 31, 2019 and the 2018 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 Measures
This news release contains references to non-GAAP measures,
including comparable earnings, comparable earnings per common
share, comparable EBITDA, comparable distributable cash flow,
comparable distributable cash flow per common share 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 Quarterly
Report to Shareholders dated October 31, 2019.
Media Enquiries:Hejdi Carlsen / Jaimie
Harding403.920.7859 or 800.608.7859
Investor & Analyst
Enquiries: David Moneta / Duane
Alexander403.920.7911 or 800.361.6522
Download full report
here: http://ml.globenewswire.com/Resource/Download/5640d211-8d45-4eb8-8cf4-0e04a346ff49
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