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    Canada’s TC Energy Builds on Record Earnings


Expects project costs for Coastal GasLink to increase "significantly" due to Covid-19 measures

by: Dale Lunan

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Canada’s TC Energy Builds on Record Earnings

Canadian pipeline and power developer TC Energy reported record 2020 comparable earnings of C$3.95(US$3.1)bn, improving on its then-record 2019 comparable earnings of C$3.85bn, it said February 18.

Comparable Ebitda slipped to C$9.35bn from C$9.37bn, but net income attributable to common shares rose to C$4.46bn from C$3.98bn in 2019.

“We are very pleased with the performance of our diversified portfolio of regulated and long-term contracted assets which generated record financial results again in 2020,” TC Energy CEO Francois Poirier said. “The increases reflect the strong performance of our legacy assets and contributions from approximately C$5.9bn of growth projects that entered service in 2020.”

Based on the strong results, Poirier said, TC Energy’s board declared a quarterly dividend of C$0.87/share for Q1 2021, equivalent to C$3.48/share on an annualized basis, an increase of 7.4%. It is the 21st consecutive year that TC Energy and its predecessors have increased the dividend.

Net income attributable to common shares in Q4 2020 increased to $1.12bn from C$1.11bn in Q4 2019, while comparable Ebitda for the quarter rose year-over-year to C$2.32bn from C$2.31bn and comparable earnings increased to C$1.08bn from C$970mn.

The strong 2020 financial results were blunted somewhat by US president Joe Biden’s decision January 20 to cancel Keystone XL’s presidential permit, which Poirier said will force TC Energy to record a “substantive” non-cash charge to earnings in Q1 2021.  

“While we were disappointed with the recent action to revoke the presidential permit for the Keystone XL pipeline, we have a large and diversified asset base that continues to perform extremely well and are advancing C$20bn of secured capital projects, together with a substantive portfolio of other similarly high-quality opportunities under development,” he said.

Among those projects under development is the C$2.3bn 2021 NGTL System Expansion Program, which Canada’s federal energy regulator recommended be approved in February 2020 but which was not finally approved by the federal cabinet until October 2020.

Initially intended to be in service by April 2021, only certain components will be operational by the end of this year, largely as a result of the cabinet’s delay in approving the project. The full expansion, providing about 1.45bn ft3/day of incremental system capacity to serve growing intra-Alberta and export markets, is now expected to be in service by April 2022.

Another growth project is the C$6.6bn Coastal GasLink pipeline, which will deliver 2.1bn ft3/day of feed gas to the Anglo-Dutch Shell-led LNG Canada export terminal in Kitimat, on British Columbia’s northern coast.

In 2020, TC Energy sold a 65% equity interest in the project to a partnership of KKR & Co and Alberta Investment Management Corp. It retained a 25% equity interest and set aside the final 10% for potential equity ownership by First Nations.

Late in 2020, the CGL project and other high-profile industrial projects in northern BC – including LNG Canada – were ordered by the province’s health authority to reduce workforce complements in response to the Covid-19 pandemic. CGL is working with BC health authorities to prepare a restart program, and with LNG Canada to establish a revised project plan.

“We expect that project costs will increase significantly and the schedule will be delayed compared to the previously disclosed estimate due to scope increases, permit delays and the impacts from Covid-19, including the provincial health order, although Coastal GasLink will continue to mitigate these impacts to the extent possible,” TC Energy said. “We do not anticipate our future equity contributions will increase significantly following the conclusion of this process.”