TC Energy(TRP) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Comparable earnings reached a record $3.9 billion or $4.20 per common share in 2020, compared to $3.9 billion or $4.14 in 2019, marking a 1.5% increase on a per share basis [11] - Comparable EBITDA of $9.4 billion was similar to the previous year, while comparable funds generated from operations hit a record high of $7.4 billion, a 4% increase over 2019 [11] - Net income attributable to common shares was $1.1 billion or $1.20 per share in Q4 2020, compared to $1.1 billion or $1.18 per share for the same period in 2019 [25] Business Line Data and Key Metrics Changes - Canadian Natural Gas Pipelines had comparable EBITDA of $682 million, an increase of $64 million compared to Q4 2019, driven by increased rate base earnings and flow-through depreciation [27] - U.S. Natural Gas Pipelines saw comparable EBITDA rise to $706 million, an increase of $58 million compared to the same period in 2019, attributed to strong operating cost management [28] - Liquids Pipelines experienced a decline in comparable EBITDA by $64 million to $408 million in Q4 2020, primarily due to lower contributions from liquids marketing activities [29] - Power and Storage comparable EBITDA fell by $49 million year-over-year to $161 million, mainly due to the removal of Bruce Power Unit 6 for its major component replacement program [29] Market Data and Key Metrics Changes - The U.S. Natural Gas Pipelines business moved record volumes averaging approximately 25 Bcf per day in 2020, a 1% increase over 2019 deliveries [15] - Mexican Natural Gas Pipelines moved approximately 1.8 Bcf per day during 2020, with the Villa de Reyes project construction expected to complete in 2021 [18] Company Strategy and Development Direction - The company is advancing a capital program of $20 billion, with $4.2 billion expected to be completed in 2021, focusing on long-term growth plans [21] - The strategy includes a shift towards electrifying operations and investing in renewable energy sources to reduce GHG emissions [24][70] - The company aims to maintain a dividend growth rate of 5% to 7% supported by sustainable growth in earnings and cash flow per share [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of their infrastructure and the essential services provided to the North American economy, expecting strong demand for their services to continue [24] - The company anticipates comparable earnings in 2021 to be generally consistent with 2020 results, with growth expected in Canadian and U.S. Natural Gas Pipelines [37] - Management acknowledged the challenges posed by the suspension of the Keystone XL project but emphasized the focus on operational excellence and organic growth opportunities [52][70] Other Important Information - The company declared a first quarter 2021 dividend of $0.87 per common share, a 7.4% increase over the amount declared in 2020, marking the 21st consecutive year of dividend increases [11] - The company exited 2020 with a strong balance sheet, with debt-to-EBITDA in line with the high 4s and FFO to debt of approximately 15% [35] Q&A Session Summary Question: What is the outlook for the Keystone XL project? - Management indicated that they are winding down construction activities and evaluating the next steps in a safe and responsible manner, emphasizing the project's complexity [49] Question: How does the company view its Liquids Pipelines business in the current environment? - Management described the Liquids Pipelines as irreplaceable infrastructure with high-quality cash flow streams, while also exploring other growth opportunities in the liquids sector [48] Question: What is the company's approach to M&A? - Management stated that they focus on high-quality assets at distress points in the cycle and prefer to maintain strategic control over their investments, indicating a cautious approach to M&A [52][53] Question: Is there a strategic focus on diversifying the business mix? - Management acknowledged the importance of diversity in the portfolio and indicated a potential shift towards more investments in Power and Storage, as well as electrification initiatives [59][70]