TC Energy(TRP) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - TC Energy reported a 12% year-over-year increase in comparable EBITDA for Q2 2025, raising the 2025 comparable EBITDA outlook to between $10.8 billion and $11 billion, representing a 9% increase over 2024 [8][22] - The company achieved a 26% increase in pre-filed firm transportation rates on the Columbia Gas system due to a settlement with customers [9][32] - The average unlevered after-tax IRR for sanctioned projects increased to approximately 12% year-to-date, up from 8.5% a few years ago [14][15] Business Line Data and Key Metrics Changes - Canada Gas EBITDA increased due to contributions from Coastal GasLink and higher flow-through regulated costs [20] - The U.S. business saw EBITDA growth primarily from the Columbia Gas settlement and new customer contracts [20] - The Power and Energy Solutions business benefited from increased generation output and a higher average realized price of $110 per megawatt hour, up $8 from the previous year [21] Market Data and Key Metrics Changes - North American natural gas demand is now forecasted to grow by 45 Bcf per day by 2035, up from a previous forecast of 40 Bcf per day, driven by LNG exports and industrial demand [10] - The company is engaged in commercial discussions with over 30 counterparties across the data center value chain, indicating strong customer demand for incremental service [11][56] Company Strategy and Development Direction - TC Energy aims to maximize asset value through safety and operational excellence, execute a high-quality capital-efficient growth portfolio, and maintain financial strength for long-term value creation [27] - The company is focused on brownfield expansions and corridor projects, with an average project size of around $450 million, which allows for better capital efficiency [60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution plan for the remainder of the year, expecting to place approximately $8.5 billion of assets into service [22] - The company anticipates a continued upward trend in project returns and a robust pipeline of opportunities driven by increasing customer demand [14][11] Other Important Information - TC Energy's sustainability report highlighted a 12% reduction in absolute methane emissions over the last five years while increasing throughput by 15% [25][26] - The company has a target to reduce methane intensity by 40% to 55% by 2035, based on 2019 levels [26] Q&A Session Summary Question: Details on Columbia Gas settlement rates - Management confirmed a 26% increase in pre-filed firm transportation rates and mentioned that further details on rate steps will be provided in final filings [30][32] Question: Capacity availability for Meta's data center in New Albany - Management indicated strong positioning to serve capacity needs in the New Albany area and ongoing optimization efforts [34][36] Question: 2027 EBITDA guidance considerations - Management expressed confidence in the 2027 EBITDA target range, emphasizing the importance of project execution and backlog management [40][42] Question: Concerns about Canadian pipeline assets and toll revisions - Management reassured that robust subscriptions for services and capacity expansions mitigate concerns about downward pressure on returns [43][46] Question: Project announcements in Pennsylvania - Management highlighted the potential for increased market share and project upsizing in response to growing demand in the region [53][55] Question: Utilization outlook for Northern Mexico assets - Management noted steady increases in utilization rates and the potential for modest capital-efficient expansions [68][70] Question: Canadian energy policy landscape and Bill C5 - Management viewed Bill C5 positively, anticipating benefits for capital deployment and LNG export potential [75][77] Question: Data center project sizes and pipeline consolidation - Management acknowledged trends toward larger projects but clarified that increased capacity does not necessarily imply higher capital costs [83][87] Question: Impacts of U.S. budget reconciliation on project pipeline - Management indicated minimal impact on project execution and cash taxes, emphasizing that growth plans are based on the current regulatory environment [108][110]