TC Energy Corporation (TRP:CA) Q4 2025 Earnings Call Transcript
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Overview
The earnings call summary and Q&A indicate strong financial performance with a focus on growth and expansion. Management's confident outlook on EBITDA growth, natural gas demand, and strategic projects like Crossroads and Columbia system expansion suggest positive market sentiment. The company's emphasis on maintaining a strong balance sheet and investment-grade credit rating further supports a positive sentiment. While some uncertainties exist, the overall strategic direction and growth potential are promising, leading to a positive stock price prediction.
Key Financial Performance
Comparable EBITDA Increased by 9% year-over-year. This improvement is attributed to strong operational and financial results, including safety performance and the replacement of Liquids business EBITDA with high-quality natural gas and power projects.
Projects Placed into Service $8.3 billion worth of projects were placed into service on schedule and over 15% under budget. This reflects disciplined capital allocation and efficient execution.
Fourth Quarter Comparable EBITDA Increased by 13% year-over-year, reaching almost $3 billion. This growth was driven by record pipeline deliveries, safety focus, and operational excellence.
Canada Gas EBITDA Increased by $110 million year-over-year due to higher incentive earnings and flow-through depreciation on NGTL and Mainline systems.
U.S. EBITDA Increased by $188 million year-over-year, primarily due to the Columbia Gas settlement, additional contract sales, and higher realized earnings from the U.S. natural gas marketing business.
Mexico EBITDA Increased by $163 million year-over-year, representing a 70% increase. This was driven by the completion of Southeast Gateway, partially offset by currency and tax items.
Power and Energy Solutions Business (Bruce Power) Equity income was lower quarter-over-quarter due to Unit 4 and Unit 3 being offline for maintenance and replacement programs. However, this was partially offset by higher contract prices.
Dividend Declared a first-quarter 2026 dividend of $0.8775 per common share, equivalent to $3.51 per share on an annualized basis. This represents a 3.2% year-over-year increase.
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Operating Highlights
EBITDA Replacement: Replaced nearly all of Liquids business EBITDA with high-quality natural gas and power projects within 18 months.
Project Execution: Placed $8.3 billion of projects into service on schedule and over 15% under budget.
Bruce Power Unit 3: Remains on track for return to service in 2026.
North American Natural Gas Demand: Expected to increase by 45 Bcf per day from 2025 to 2035, equivalent to adding the entirety of the European gas market over 10 years.
LNG Facilities: Serving 7 LNG facilities representing 30% of North American LNG feed gas across 3 countries.
Electricity Demand: Expected to grow by 65% through 2050, with Bruce Power positioned to benefit.
Safety Performance: Achieved best safety performance in 5 years.
Pipeline Delivery Records: Set new all-time high delivery records in pipeline businesses.
Bruce Power Availability: Achieved 86% availability in 2025, with expected availability in the low 90% range for 2026.
Capital Allocation: Shifted $0.5 billion of capital forward into 2026 to capture in-year EBITDA and create capacity for higher return growth in later years.
Pending Approval Portfolio: High conviction pending approval portfolio now at $8 billion, with $2 billion of late-stage derisked opportunities moved into this bucket.
Origination Opportunities: $12 billion of projects in origination, supported by oversubscribed Columbia Gas open season.
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Risk or Challenges
Regulatory and Market Risks: The company operates in a highly regulated environment across Canada, the U.S., and Mexico. Regulatory changes or hurdles could impact project approvals, timelines, and costs. Additionally, market conditions such as fluctuating LNG demand and power prices could affect financial performance.
Execution Risks: While the company has a strong track record of delivering projects on time and under budget, there is always a risk of delays or cost overruns in large-scale infrastructure projects, such as the $8 billion in pending approval projects and $12 billion in origination.
Supply Chain and Operational Risks: The company relies on a complex supply chain and operational network. Disruptions in supply chain or operational inefficiencies could impact project timelines and financial outcomes.
Economic and Financial Risks: Economic uncertainties, including currency fluctuations and tax changes, could impact the company's financial performance. Additionally, the ability to maintain a strong balance sheet while pursuing $6 billion in annual capital expenditures through 2030 is critical.
Energy Transition and Competitive Pressures: The shift towards renewable energy and wide-scale electrification presents both opportunities and challenges. Competitive pressures from other energy infrastructure companies and the need to adapt to changing energy demands could impact the company's strategic objectives.
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Guidance & Outlook
North American natural gas demand: Expected to increase by 45 Bcf per day from 2025 to 2035, equivalent to adding the entirety of the European gas market over the next 10 years.
LNG facilities and feed gas: Serving 7 LNG facilities representing 30% of North American LNG feed gas across 3 countries.
Electricity demand growth: Expected to grow by 65% through 2050, with Bruce Power positioned to benefit from this trend.
Projects in service for 2026: Approximately $4 billion worth of projects expected to be placed into service in 2026.
Capital allocation and optimization: Shifting $0.5 billion of capital forward into 2026 to capture in-year EBITDA and creating capacity for higher return growth in later years.
Pending approval portfolio: High conviction pending approval portfolio now sits at about $8 billion, with an additional $12 billion of projects in origination.
Annual capital expenditures: Targeting $6 billion in net annual capital expenditures through 2030, with potential to surpass this level in the latter part of the decade.
Bruce Power availability: Expected availability in the low 90% range for 2026, with every day of availability leading to approximately $1 million in incremental revenue.
Comparable EBITDA outlook: Reaffirmed 2026 outlook of $11.6 billion to $11.8 billion and 2028 outlook of $12.6 billion to $13.1 billion.
Dividend growth: Declared a first quarter 2026 dividend of $0.8775 per common share, representing a 3.2% year-over-year increase and within the 3% to 5% range.
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Shareholder Return Plan
Dividend Declaration: The Board of Directors has declared a first quarter 2026 dividend of $0.8775 per common share, equivalent to $3.51 per share on an annualized basis. This represents a 3.2% year-over-year increase, within the 3% to 5% range, and marks the 26th consecutive year of dividend growth.
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Key Q&A
Q:Based on the recent open season announcement, it seems like average project sizes that you're looking at are getting larger. Can you give us an early sense of what 2031 looks like in terms of balance sheet capacity?
A:Management confirmed that they are seeing a deep pipeline of opportunities ranging from $200 million to over $1 billion. They are focusing on aggregating demand to bring larger-scale projects into service. Some projects have 2031 and 2032 in-service dates, and they are confident in delivering 5%-7% compound annual growth of EBITDA.
Q:Can you talk about the strategic rationale for the Crossroads project and its competitive dynamics?
A:The Crossroads expansion project is driven by power generation requirements, including data center demand, coal-to-gas switching, and electrification. It also supports supply diversity. Management highlighted their strong Midwest footprint and growth opportunities in the region.
Q:What is the expansion capability on the Columbia system, and what are the gating factors to upsizing the original scope?
A:The Columbia open season advertised a 0.5 Bcf opportunity, but demand reached 1.5 Bcf. Management is optimizing capacity to satisfy as much demand as possible while remaining competitive. The project is expected to be sanctioned this year.
Q:What has allowed projects to come under budget by 15%, and is this repeatable with current investments?
A:Management attributed the cost savings to high-quality project planning, looser contractor capacity, and internal initiatives like AI and best practices. They aim to continue excellent execution and are investing more capital upfront for higher-quality estimates.
Q:How do you think about layering on short-duration projects or going above the $6 billion to $7 billion capital range in the outer years?
A:Management is optimizing and smoothing out the portfolio by bringing forward maintenance capital and creating capacity for additional growth projects. They are confident in filling the $6 billion white space and potentially going above that level starting in 2028 or 2029.
Q:Can you compare the characteristics of the $8 billion projects pending approval and the $12 billion in origination?
A:Pending approval projects are 90% or more likely to proceed, requiring only management or Board-level approvals. The $12 billion in origination includes projects like Ohio and Crossroads, which are still in the optimization phase. Most growth is focused in the U.S. Midwest, leveraging existing infrastructure.
Q:What is the company's approach to financing a potential step-up in the spend profile?
A:Management emphasized maintaining an investment-grade credit rating and a 4.75x debt-to-EBITDA ratio. They aim to grow cash flow through cost savings, technological innovation, and commercial strategies before considering external equity or asset recycling.
Q:Can you provide an update on the Canadian Mainline settlement and potential capacity expansion?
A:The current settlement is effective until the end of 2026 and has been successful. Discussions for a post-2026 settlement are ongoing, with optimism for a win-win solution. Capacity expansion is being considered as part of these discussions.
Q:What is the free cash flow outlook for Bruce Power post-2031, and how would Bruce C be financed?
A:Post-2031, Bruce Power is expected to generate over $2 billion in cash flow annually after the MCR program is complete. Bruce C is in early development stages, with funding from the federal government and ISO in Ontario. The project is expected to be self-financed within Bruce Power.
Q:How does the company view the $6 billion to $7 billion annual capital range, particularly for 2030?
A:Management is ready to ramp up the capital program, smoothing out peaks and adding capacity in 2030 if needed. They anticipate sustainably exceeding $6 billion starting in 2029, driven by high-return opportunities.
Q:What is the strategy for the Crossroads pipeline expansion, and what demand is it targeting?
A:The expansion will leverage the existing corridor with looping and compression. It targets demand across the corridor and facilitates capacity between multiple pipelines, including ANR and Northern Border.
Q:How much of the pending approval capital relates to negotiated rate pipeline projects versus regulated investments?
A:Most of the pending approval projects in the U.S. are negotiated rate contracts due to their size and demand components.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact balance sheet capacity for 2031, the competitive dynamics of the Crossroads project, and the exact characteristics of the $8 billion pending approval projects versus the $12 billion in origination. Additionally, they did not clarify the exact financing mechanisms for Bruce C or the specific regulatory factors influencing the Canadian Mainline settlement.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America portfolio
Bruce Unit
Bruce feasibility
CFO Francois
Columbia Gas
Connector Northwoods
Directors dividend
Energy Solutions
Energy chart
Energy dividend
Energy set
Energy shareholder
Enhancement opportunity
Francois business
Francois level
Gas view
Gate Enhancement
MCR program
Power Energy
Unit line
approval bucket
capital allocation
capital plan
conviction
facility
line MCR
maintenance
opportunity set
optimization opportunity
plant
project build
proposition
quality
reliability availability
return service
team service
TRP Transcript
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Unknown2-13
The earnings call presents mixed signals. Financial performance shows improved net earnings and cash flow, but there's a decrease in adjusted net earnings and increased net debt. The Q&A reveals management's reluctance to provide specific guidance and details, causing some uncertainty. However, the company's strategic moves, such as migration to higher-value work and a healthy acquisition pipeline, balance the negatives. Without market cap information, it's challenging to predict strong movements, leading to a neutral sentiment.
TC Energy Corporation (TRP:CA) Q4 2025 Earnings Call Transcript
Positive2-13
The earnings call summary and Q&A indicate strong financial performance with a focus on growth and expansion. Management's confident outlook on EBITDA growth, natural gas demand, and strategic projects like Crossroads and Columbia system expansion suggest positive market sentiment. The company's emphasis on maintaining a strong balance sheet and investment-grade credit rating further supports a positive sentiment. While some uncertainties exist, the overall strategic direction and growth potential are promising, leading to a positive stock price prediction.
TC Energy Corporation (TRP:CA) Q3 2025 Earnings Call Transcript
Positive11-8
The earnings call summary and Q&A session reflect positive sentiment. The company has strong financial metrics, with increased EBITDA outlook and robust project returns. While guidance is cautious, the management is optimistic about sustaining growth and maintaining leverage targets. The focus on strategic partnerships and capital efficiency, along with steady project returns, adds to the positive outlook. Despite some uncertainties, the overall sentiment is positive, with potential for stock price appreciation.
TC Energy Corporation (TRP) Q2 2025 Earnings Call Transcript
Positive7-31
The earnings call highlights strong financial metrics and optimistic guidance, including a reaffirmed EBITDA outlook and significant project developments. The Q&A section indicates confidence in market positioning and strategic expansions, particularly in high-demand areas like data centers and natural gas. No major negative trends or risks were emphasized, and the company is on track with its deleveraging target. While specific details on certain settlements were withheld, overall sentiment remains positive, suggesting a likely stock price increase in the near term.
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