TC Energy gains $billions from sale in Ontario, Keystone XL work continues
- Created: Friday, 01 May 2020 21:29
TC Energy Corporation, formerly known as TransCanada, announced this week that it completed the sale of its interests in three Ontario power plants Ontario Power Generation Inc. for net proceeds of approximately $2.8 billion.
“Completing this transaction further strengthens our financial position, helps fund our industry-leading secured capital program and maximizes value for our shareholders,” said Russ Girling, TC Energy President and Chief Executive Officer. “When combined with the sales of Coolidge, an interest in Northern Courier and certain U.S. Midstream assets in 2019, TC Energy has realized approximately $6.2 billion from portfolio management activities over the last year.”
TC Energy’s portfolio of high-quality, long-life energy infrastructure assets now includes investments in six low-emission natural gas-fired power plants and the Bruce Power nuclear facility, resulting in a combined generating capacity of approximately 4,200 megawatts. Bruce Power, which provides Ontario with over 30 per cent of its electricity, is undertaking a life-extension program that will see TC Energy invest approximately $2.4 billion by 2023 with the potential for another $5.8 billion thereafter under a long-term agreement with the Ontario Independent Electricity System Operator.
Construction work on the Keystone XL pipeline expansion is continuing apace despite a U.S. court ruling last month that invalidated a nationwide permit allowing pipelines to cross waterways, builder TC Energy Corp. said Wednesday.
The Calgary-based company filed a motion earlier this week to stay the order by a U.S. district judge that struck down the U.S. Army Corps of Engineers’ clean water permit, said Bevin Wirzba, senior vice-president of liquids pipelines for TC Energy.
TC Energy also announced positive financial results this week with net income attributable to common shares for first quarter 2020 of $1.15 billion or $1.22 per share compared to net income of $1.0 billion or $1.09 per share for the same period in 2019. Comparable earnings for first quarter 2020 were $1.1 billion or $1.18 per common share compared to $1.0 billion or $1.07 per common share in 2019. TC Energy's Board of Directors also declared a quarterly dividend of $0.81 per common share for the quarter ending June 30, 2020, equivalent to $3.24 per common share on an annualized basis.
“The availability of our infrastructure has remained largely unimpacted by recent events with utilization levels robust and in line with historical norms. With approximately 95 per cent of our comparable EBITDA generated from regulated assets and/or long-term contracts, we are largely insulated from short-term volatility associated with volume throughput and commodity prices,” added Girling. “During the first quarter of 2020, our diversified portfolio continued to perform very well. Comparable earnings per share increased 10 per cent compared to the same period last year while comparable funds generated from operations of $2.1 billion were 17 per cent higher. The increases reflect the robust performance of our legacy assets and contributions from the approximately $1.6 billion of capacity projects that have entered service to date in 2020.”
Despite near-term market uncertainty, we continue to believe that access to abundant, responsibly-produced energy from one of the world’s largest reserves and a country with top ESG performance will be crucial to North America’s economy, energy security and standard of living over the longer term. As a result, at the end of March, the Company announced that it was moving forward with construction of the Keystone XL pipeline project which will require an additional investment of approximately US$8.0 billion. The pipeline is expected to enter service in 2023 and will play a critical role in connecting the world's third largest oil reserves in the Canadian oil sands with the continent's largest refining market in the U.S. Gulf Coast. It is underpinned by new 20-year contracts for 575,000 barrels per day that are expected to generate approximately US$1.3 billion of incremental EBITDA on an annual basis when the pipeline enters service. TC Energy has partnered with the Government of Alberta who will invest approximately US$1.1 billion in equity and fully guarantee a US$4.2 billion project-level credit facility through construction. Once the project is completed and placed into service, the Company expects to acquire the Government of Alberta’s equity interest and refinance the credit facility.
“We appreciate the ongoing backing of landowners, customers, Indigenous groups and numerous partners in the U.S. and Canada who helped us secure project support and key regulatory approvals as this important energy infrastructure project is poised to put thousands of people to work, generate substantial economic benefits and strengthen the continent’s energy security,” said Girling. “In addition, we thank the many government officials across North America for their advocacy without which, individually and collectively, this project could not have advanced.”
While capital markets conditions have been significantly impacted by COVID-19, over the course of April, the Company has enhanced its liquidity by in excess of $9 billion through offerings of $2.0 billion of medium term notes in Canada and US$1.25 billion of senior unsecured notes in the U.S., establishment of an incremental US$2.0 billion of committed credit facilities and completion of the $2.8 billion sale of its Ontario natural gas-fired power plants. This is expected to be further supplemented by funds received from closing the Coastal GasLink joint venture and project financing transactions in the second quarter.
“Our strong financial position and continued access to capital markets will enable us to prudently fund our now $43 billion secured capital program in a manner that is consistent with maintaining our solid credit ratings and targeted credit metrics," added Girling. "Once completed, approximately 98 per cent of the Company’s consolidated EBITDA is expected to come from regulated and/or long-term contracted assets. Success in advancing these and other organic growth opportunities emanating from our five operating businesses across North America is expected to support annual dividend growth of eight to 10 per cent in 2021 and five to seven per cent thereafter."
About TC Energy
TC Energy is a vital part of everyday life – delivering the energy millions of people rely on to power their lives in a sustainable way. They operate a safe, reliable network of natural gas and crude oil pipelines, along with power generation and storage facilities and emply more than 7,000 across Canada, the U.S. and Mexico.