TC Energy Corporation

All participants, please stand by. Your conference is ready to begin. Good afternoon, ladies and gentlemen. Welcome to the TC Energy 2020 First Quarter Results Conference Call. I would now like to turn the meeting over to Mr. David Mineta, Vice President, Investor Relations. Please go ahead, Mr. Mineta.

Thank you, and thanks very much, and good afternoon, everyone. I'd like to welcome you to TC Energy's 2020 First Quarter Conference Call. Joining me today are Russ Gerling, President and Chief Executive Officer, Don Marchand, Executive Vice President, Strategy and Corporate Development and Chief Financial Officer, Francois Poirier, Chief Operating Officer and President, Power and Storage and Mexico, Tracy Robinson, President, Canadian Natural Gas Pipelines, Stan Chapman, President, US Natural Gas Pipelines, Paul Miller, President, Liquids Pipelines, Bevan Wurtzbaugh, Senior Vice President, Liquids Pipelines, and Glenn Manoos, Vice President and Controller. Russ and Dawn will begin today with some opening comments on our financial results and certain other company developments. A copy of the slide presentation that will accompany their remarks is available on our website. It can be found in the investor section under the heading events and presentations. Following their prepared remarks, we will take questions from the investment community. If you are a member of the media, please contact Jamie Harding, following this call and should be happy to address your questions. In order to provide everyone from the investment community with an equal opportunity to participate, we ask that you limit yourself to two questions. If you have additional questions, please re-enter the queue. Also, we ask that you focus your questions on our industry, our corporate strategy, recent developments, and key elements of our financial performance. If you have detailed questions relating to some of our smaller operations or your detailed financial models, Hunter and I would be pleased to discuss them with you following the call. Before Russ begins, I'd like to remind you that our remarks today will include forward looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by TC Energy with Canadian Securities Regulators and with the US Securities Exchange Commission. And finally, during this presentation, we'll refer to measures such as comparable earnings, comparable earnings per share, Comparable earnings before interest taxes, depreciation, and amortization are comparable EBITDA and comparable funds generated from operations. These and certain other comparable measures are considered to be non-GAAP measures. As a result, they may not be comparable to similar measures presented by other entities. They are used to provide you with additional information on TC Energy's operating performance, liquidity, and its ability to generate funds to finance its operations. With that, I'll now turn the call over to Russ.

Thank you, David, and good afternoon, everyone, and thank you all very much for joining us today. Clearly, we're living in an unprecedented times with COVID-19, the pandemic having a significant impact on millions of people around the world. On behalf of TC Energy, I'd like to start by expressing my sincere thanks to the frontline healthcare and other essential service workers who are risking their personal safety to ensure the well-being of others. Your selfless acts during this difficult time are truly courageous. At TC Energy, as always, we too are focused on health and safety of our employees, our contractors, and the communities in which we operate. When the World Health Organization declared COVID-19 a global pandemic in early March, Our business continuity plans were put in place across the organization, allowing us to continue to effectively operate our assets and execute on our capital programs. The services we provide are broadly considered essential or critical in Canada, the United States, and Mexico, given the important role our infrastructure plays in delivering energy to people across the continent. As a responsibility we take very seriously, Like many others, thousands of our employees are now working remotely while those that must be physically at our work sites are following rigorous health, hygiene, and distancing protocols. I want to acknowledge and thank our employees and their families for their ongoing efforts to ensure the energy that is vital to the daily lives of so many continues to be delivered seamlessly across North America and your efforts are truly making a difference. Turning now to our first quarter financial results and certain other recent developments across our three core businesses, With approximately 95% of our comparable EBITDA coming from regulated or long-term contracted assets, we are largely insulated from the volatility associated with volume throughput and the commodity prices that are being experienced by many others. Aside from the impact of normal maintenance activities and seasonal factors, to date, we have not seen any meaningful change in the utilization of our assets, which further reinforces their critical nature to North America. As a result, as highlighted in our first quarter report, our $100 billion portfolio, high-quality, long-life energy infrastructure assets continue to produce strong financial results. And we continue to capitalize, or we continue to realize the growth expected from our industry-leading capital program. Today, that program that we're advancing, it's $43 billion of secured capital projects, and it now includes Keystone XL. In addition, we continue to advance more than $10 billion of projects under development, including the refurbishment of another five reactors at Bruce Power as part of their long-term life extension program. Over the last four months, we took significant steps to fund our 2020 capital expenditure program and maintain our strong financial position despite challenging capital market conditions. More specifically, we enhanced our liquidity by more than $9 billion through the issuance of long-term debt in both Canada and the United States at very attractive rates, the establishment of incremental committed credit facilities, and the sale of three Ontario natural gas powered power plants. When combined with our predictable and growing cash flow from operations and the sale of a 65% interest in the Coastal GasLink project, which is scheduled to close in the second quarter, We believe that we're very well positioned to continue to fund our capital program and other obligations through a prolonged period of disruption in capital markets if that was to occur. Looking forward, we expect our solid operating and financial performance to continue, with 2020 comparable earnings per share still anticipated to be similar to the record results that we produced in 2019. While we're proud of our financial performance and the significant returns we've generated for our shareholders, We know that our ongoing success depends on our ability to balance profitability with safety and environmental and social responsibility. We have a 65-year track record of safe and reliable operations, but we recognize that we can always improve. To keep you better informed, we have published several investor-focused ESG documents over the past year. They describe some of the work we're doing to ensure our business remains resilient in an ever-evolving energy landscape. All of this can be found on our website at tcenergy.com. With that as an overview, I'll explain some of the recent developments, beginning with a brief review of our first quarter financial results. Dawn will provide more detail of our results and liquidity in just a few minutes. Excluding certain specific items, comparable earnings were $1.1 billion, or $1.18 per common share for the three months ended March 31st compared to $1 billion or $1.7 per share in 2019, which was an increase of 10% on a per share basis. Comparable EBITDA of $2.5 billion was 6% higher than the amount reported for the same period last year, while comparable funds generated from operations was $2.1 billion, which was 17% higher than the comparable period. Each of these amounts reflects the strong performance of our legacy assets as well as contributions from another $1.6 billion of new long-term contracted and regulated assets placed into service in early 2020. Next, I'll make a few comments on our three core businesses, starting with our natural gas pipeline business. Customer demand for our services remains strong despite the COVID-19 impacts on the broader North American economy. Evidence of this can be seen in the volumes transported across our systems with the NGTL system field receipts averaging about 12.2 BCF a day, the Canadian mainline western receipts averaging 3.2 BCF a day, our broader U.S. pipeline network moving approximately 26 BCF a day, and our Mexican pipelines moving approximately 1.5 BCF a day. Each of these amounts are similar to or greater than the volumes moved over the same period last year. At the same time, we continue to advance more than $27 billion of capital projects associated with our natural gas pipeline businesses. The program includes significant expansion of our NDTL system, capacity additions to our U.S. network, the Via de Rey pipeline, the Tula project, and our Coastal GasLink pipeline project in British Columbia, which will play an important role in delivering Canadian natural gas to Asian markets. Well, it's too early to determine whether the COVID-19 pandemic will have any long-term impacts on our capital programs. What I would say is, directionally, we would expect some slowdown of our construction activities in capital expansion in 2020 because of the global health crisis and the impact that COVID-related safety protocols will have on our construction productivity. Finally, in natural gas pipelines, last week we were pleased to announce a five-year revenue requirement settlement with our customers on the NGTL system. The settlement, which runs from January 2020 through December 2024, set the base equity return of 10.1% on 40% deemed common equity and includes incentive mechanisms for certain operating costs where variances from projected amounts would be shared between TC Energy and our customers. The settlement was a result of a collaborative process between us and our customers and is responsive to their needs during this challenging time while providing us with a stable return as we invest billions of dollars in pipeline infrastructure to enhance their connectivity of natural gas supply to premium markets. Turning now to our liquids pipeline business, which generated solid results during the first quarter despite extraordinary volatility in global crude oil markets, Well, the volatility did have an impact on our market link in liquids marketing businesses. Keystone continues to produce solid results as it serves an important market in the U.S. Midwest and Gulf Coast and is underpinned by long-term take-or-pay contracts with strong counterparties. Also in liquids pipelines, we recently announced that we would commence construction of Keystone XL Pipeline. Keystone XL is the fourth phase of the Keystone system. and continues to be a very important project for both Canada and the United States. It will create thousands of jobs, advance energy security for both nations in an environmentally and sustainable way. The project is underpinned by a new 20-year take-or-pay contracts that are expected to generate approximately 1.3 billion U.S. in incremental EBITDA on an annual basis once the pipeline is placed into service. Keystone XL will require an additional investment of approximately $8 billion U.S. and is expected to enter service in 2023. To advance the project, we have entered into a partnership with the government of Alberta, who will invest approximately $1.1 billion of equity into the project and fully guarantee a $4.2 billion U.S. project-level credit facility. Once the project is completed and placed into service, we expect to acquire the Alberta government's equity investment and refinance the credit facility. We appreciate the ongoing backing of landowners, customers, indigenous groups, and numerous other partners in the US and Canada who have helped us secure project support and key regulatory approvals for this very important energy infrastructure project. In addition, I'd like to thank the many government officials across North America for their support, without which this project could not have advanced. Moving forward, we will continue to carefully manage various legal and regulatory matters as we construct this pipeline which will have the capacity to move about 830,000 barrels a day of responsibly produced energy from the Canadian oil sands to the continent's largest refining market in the U.S. Gulf Coast. Turning now to power and storage, where Bruce Power continued to produce solid results through the first three months of this year. After years of preparation, in January, Bruce Power commenced work on the Unit 6 Major Component Replacement or MCR outage when they took it offline here in January. We expect to invest approximately $2.4 billion in that program as well as the ongoing asset management program through 2023 when the Unit 6 refurbishment is targeted to be done. Unfortunately, because of COVID-19, on March 25, 2020, Bruce Power declared force majeure under its contract with the Independent Electric System Operator. This force majeure notice covers the Unit 6 MCR and certain asset management work. At the time the force majeure was declared, the Unit 6 MCR program was ahead of schedule. Despite the force majeure, Bruce Power has been able to continue limited work on critical path activities as well as training for the MCR contractors. In late April, remobilization of the MCR workforce began with strict COVID-19 measures in place with respect to worker safety. The measures include shift adjustments to reduce headcount, increased personal protective equipment, physical distancing, and a reduction in non-critical work. Operations and planned outages on all other units are expected to continue as normal. Finally, in power, earlier this week we completed the sale of three natural gas-fired power plants in Ontario, Napanee, Halton Hills, and our interest in the Portland Energy Centre. Net proceeds of approximately $2.8 billion will be used to help fund our industry-leading capital program. So, in summary, today we are advancing $43 billion in secured growth projects that are expected to enter service by 2023. We have invested approximately $12 billion into this program to date, with approximately $6 billion of these projects expected to be completed by the end of 2020. Notably, they are all underpinned by cost of service regulation or long-term contracts, giving us visibility to earnings and cash flows they will generate as they enter service. Based on the strength of our recent financial performance and our promising outlook for the future, in February, TC Energy's Board of Directors declared a first quarter 2020 dividend of $0.81 for common share, which is equivalent to $3.24 on an annual basis. This represents an 8% increase over the amount declared for the same period in 2019 and is the 20th consecutive year that our Board of Directors has raised the dividend. Over that same timeframe, we have maintained consistently strong coverage ratios with our dividend on average representing a payout of approximately 80% of comparable earnings and 40% of comparable funds generated from operations, leaving us with significantly internally generated cash flow to invest in our businesses. Based on the continued strong performance of our base business, the organic growth and the organic growth we expect to realize as we advance our $43 billion secure capital program, we expect our dividend to grow at an annual average rate of 8% to 10% through 2021 and 5% to 7% thereafter. So in summary, I'd leave you with the following key messages. Today, we are a leading North American energy infrastructure company with a strong track record of delivering long-term shareholder value. Our assets provide an essential service to the functioning of the North American society and its economy, and the demand for our services remains strong. Looking forward, we have five significant platforms for growth, Canadian, U.S., and Mexican natural gas pipelines, liquids pipelines, and power and storage. As we advance our $43 billion secured capital program, we expect to build on our long track record of growing earnings, cash flow, and dividends per share. We have also more than $10 billion projects in the advanced stages of development and expect numerous other in-corridor organic growth opportunities to emanate from our extensive critical asset footprint. Looking forward to working in accordance with our values and responding quickly to market signals and signposts to ensure we remain industry-leading and resilient as we continue to grow shareholder values. I'll now turn the call over to Dawn to provide more details on our first quarter results and our financial position. So Dawn, over to you.