TC Energy Corporation

Thank you for standing by. This is the conference operator. Welcome to the TC Energy 2020 Third Quarter Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, please press star then 1 on your telephone keypad. Should you need assistance during the conference call, You may signal an operator by pressing star and zero. I would now like to turn the conference over to David Monetta, Vice President of Investor Relations. Please go ahead.

Thanks very much and good morning everyone. I'd like to welcome you to TC Energy's 2020 third 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, Tracy Robinson, President, Canadian Natural Gas Pipelines and Coastal Gas Link, Stan Chapman, President, U.S. and Mexico Natural Gas Pipelines, Bevan Worspa, President, Liquids Pipelines, Corey Heston, Senior Vice President, Power and Storage, and Glenn Manuz, 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 she'd 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 U.S. 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, or 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. With that, I'll now turn the call over to Russ.

Thank you, David, and good morning everyone, and thank you all very much for joining us today. Clearly, the past seven months has been a difficult time for many families and businesses across our North American footprint. When COVID-19 was declared a global pandemic in March of this year, the services we provide in Canada, the United States, and Mexico were all deemed critical given the important role our infrastructure plays in delivering the energy people need across this continent. This essential designation included both our daily operations and our construction projects. We take that responsibility seriously and I'm proud that we've continued to deliver the energy that millions of people rely on every day and at the same time advance capital projects that are vital to the powering of the North American economy for many decades to come. As always, we conducted our business in a safe and reliable manner, employing thousands of workers, fulfilling our obligations to suppliers, and supporting the communities where we operate. Despite the challenges brought by COVID-19, our operations have largely been unimpacted With few exceptions, flows and utilization levels remained in line with the historical and seasonal norms, underscoring the critical nature of our energy infrastructure assets. With approximately 95% of comparable EBITDA coming from regulated and or long-term contracted assets, we continue to be largely insulated from the short-term volatility associated with volume throughput and commodity prices. As a result, as highlighted in our third quarter report, our $100 billion portfolio of high-quality, long-life energy infrastructure assets continue to produce strong financial results. And we continue to realize the growth expected from our industry-leading capital program. Today, we are advancing $37 billion of secured capital projects. In addition, we continue to progress $11 billion of projects under development, including the refurbishment of another five reactors at Bruce Power as part of their long-term life extension program. Earlier this year, we took significant steps to fund our 2020 capital expenditure program and maintain our strong financial position despite the challenging capital market conditions. Specifically, we enhanced our liquidity by more than $11 billion through the issuance of long-term debt in both Canada and the United States. The establishment of incremental committed credit facilities and various portfolio management activities. When combined with our predictable and growing cash flow from operations, we continue to be well positioned to fund our industry leading capital program. Looking forward, we expect our solid operating and financial performance to continue and therefore, despite the pandemic, our outlook for full year 2020 remains essentially unchanged with comparable earnings and cash flow per share anticipated to be similar to the record results we produced in 2019. While we're proud of our financial performance, we know our ongoing success depends on our ability to balance profitability with safety, environmental and social responsibility. We have a 65-year track record of safe and reliable operations, but we recognize that we can always do better. As a result, we remain focused on continuous improvement and understanding shifting long-term fundamentals to ensure our business remains stable, resilient, and in an ever-evolving energy landscape. To keep you better informed, we recently published our 2020 report on sustainability and an ESG data sheet. Together these reports demonstrate our ongoing focus on sustainability and transparency of reporting. They provide a comprehensive look at TC Energy's performance on environmental, social, and governance topics that matter most to all of our stakeholders. Sustainability at TC Energy means meeting today's energy needs while safely, reliably, and economically finding responsible solutions for our energy future. This is a continuous evolution of our principled approach to creating enduring economic and societal value while delivering the energy people rely on today and into the future. We encourage you all to visit our website to access these reports and learn more about what we're doing. With that as an overview, I'll expand on some of the recent developments, beginning with a brief review of our third quarter financial results. Dawn will provide a more detailed review of our financial results and liquidity in just a few moments. So excluding certain items, Comparable earnings were $893 million or $0.95 per common share for the three months ended September 30th compared to $970 million or $1.04 per share in 2019. Comparable EBITDA was $2.3 billion while comparable funds generated from operations were $1.7 billion. For the nine months ended September 30th, comparable earnings were $2.9 billion or $3.05 per common share compared to $2.9 billion or $3.11 for the same period in 2019. Comparable EBITDA of $7 billion and comparable funds generated from operations of $5.3 billion were also similar to the amounts reported last year. Each of these amounts reflects solid operating performance of our legacy assets as well as contributions from $3.1 billion of new long-term contracted and rate-regulated assets placed into service in 2020 so far. This was partially offset by a low contribution from our liquids marketing business, lower equity income from Bruce Power due to the Unit 6 major component replacement program, and the effect of certain asset sales that helped fund our secured capital program. Next, I'll make a few comments about our three core businesses. Firstly, in natural gas pipelines, customer demand for our services remains strong despite the impact of COVID-19 on the broader North American economy. This can be seen in the volumes transported across our network with the NGTL system field receipts averaging 12.1 billion cubic feet a day, Canadian mainline western receipts averaging 3 billion cubic feet a day, our broader U.S. pipeline network moving approximately 24 billion cubic feet a day, and our Mexican pipelines moving approximately 1.8 BCF a day through the first nine months of this year. Each of these amounts are similar to or greater than the volumes we moved over the same period last year. At the same time, we continue to advance $22 billion of capital projects associated with our natural gas business. The program includes significant expansions of our NGTL system, capacity additions across our U.S. network, The Villa de Rey project and the Tula project in Mexico and our Coastal GasLink project in British Columbia, which will play an important role in delivering clean Canadian natural gas to Asian markets to displace coal. As part of this program, we're pleased to have recently received approval from the Government of Canada for our 2021 NGTL system expansion project. The approval will allow us to commence construction activities of this $2.9 billion program that will provide a total of 1.5 billion cubic feet a day of incremental capacity by April of 2022. Turning to our U.S. natural gas pipelines, where our expansion plans now include the incremental investment of approximately $200 million U.S. for the Wisconsin Access Project that will replace, upgrade, and modernize certain facilities while reducing emissions along portions of the ANR system. The enhanced facilities, which are expected to be placed into service in the second half of 2022, will also improve reliability of the ANR system and allow us to serve the needs of utilities in the Midwestern United States under long-term contracts. Like the Elwood Power ANR horsepower replacement project announced in July, this is another great example of an in-corridor expansion that will allow us to meet the growing demand by utilizing existing facilities and our existing right-of-ways. Also in U.S. pipelines, in later July, our Colombian gas transmission system filed a Section 4 rate case with FERC requesting an increase in its maximum transportation rate effective February 21, 2021. It's Colombia's first rate case filing in over 20 years and seeks to recover our currently incurred operating costs as well as a fair return on and of our historical and future investments in this expansive system that provides customers with reliable access to low-cost natural gas. At the same time, we continue to pursue a collaborative process to find a mutually beneficial outcome with the Columbia Gas Transmission customers through settlement negotiations. Finally, in natural gas pipelines, construction activities continue on the 2.1 billion cubic feet a day Coastal GasLink project that will connect abundant Western Canadian sedimentary basin natural gas reserves to the LNG Canada Export Facility in Kitimat, British Columbia. With more than 3,000 workers along the right-of-way this summer, we have been installing pipe and advancing work on compressor and meter station facilities. Although the project continues to review costs and schedule due to scope increases, permit delays, and COVID-19 impacts, we do not expect the results to have a significant impact on our future equity contributions to the project. Finally, we continue to work with 21st Nations that have executed agreements with Coastal GasLink to provide them with an opportunity to invest in the pipeline through an option to acquire a 10% equity interest in that project. Turning to our liquids business, which generated solid results during the first quarter, or during the first nine months of 2020, despite the extraordinary volatility in global crude oil markets. While the volatility has had a significant impact on our MarketLink and liquids marketing business, Keystone has continued to produce solid results as it serves important markets in the U.S. Midwest and Gulf Coast and is underpinned by long-term take-or-pay contracts for 555,000 barrels a day with very strong counterparties. Also in the liquids pipeline business, we continue to advance construction on Keystone XL during the third quarter while managing the various legal and regulatory matters. In Canada, construction activities at our pump stations and along more than 180 kilometers of mainline right-of-way continue to advance. In the U.S., we continue to make progress under our revised 2020 construction plan with over 1,500 union workers building 12 pump stations and completing the Canada-U.S. border crossing. At the same time, we continue to seek authorizations from the U.S. Army Corps of Engineers for necessary permits and approvals to reconvene U.S. mainline pipeline construction into 2021. Keystone XL continues to be a very important project for both Canada and the United States. It will create thousands of high-paying union jobs and Advanced Energy Security for both nations in an environmentally sustainable and responsible way. In late September, we are pleased to announce the signing of a historic agreement with Natural Law Energy that will facilitate the largest indigenous equity investment of its kind in North American energy infrastructure. A final agreement, which is expected to be completed in the fourth quarter, would formalize Natural Law Energy's participation in Keystone XL, providing with an opportunity to share in the benefits of pipeline over the long term as a very valued partner. The project will require an additional investment of approximately $8 billion. It is underpinned by 20-year take-or-pay contracts that are expected to generate $1.3 billion U.S. of incremental EBITDA on an annual basis once placed into service in 2023. To advance the project, we partnered with the Alberta government who will invest approximately $1.1 billion U.S. of equity into the project and fully guarantee a U.S. $4.2 billion project level credit facility. Once the project is completed and placed into service, we expect to acquire the government of Alberta's equity investment and refinance the credit facility. Moving forward, we'll continue to carefully manage the various legal and regulatory matters as we construct the pipeline, which will have the capacity to move 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, where Bruce Power continued to produce solid results through the first nine months of this year. In January, Bruce Power also commenced work on the a Unit 6 major component replacement or MCR program which took that unit offline. We expect to invest approximately $2.4 billion into that program as well as the ongoing asset management program through 2023 when the Unit 6 refurbishment is targeted for completion. In late March, Bruce Power declared a force majeure under its contract with the Independent Electric System Operator because of COVID-19. The force majeure covered the Unit 6 MCR and certain asset management work. That said, early in May, work on the Unit 6 MCR resumed with additional prevention measures in place for worker safety. While the impact of the force majeure will ultimately depend on the extent and duration of the global pandemic, on October 1st, the Unit 6 MCR project achieved a major milestone with the commencement of the fuel channel and feeder replacement program. At the same time, operations and planned outage activities on all other units continued as expected through the third quarter. So in summary, today we are advancing $37 billion of secured growth projects that are largely expected to enter service by 2023. We've invested approximately $13.5 billion into that program to date, with approximately $5 billion of those 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 the earnings and cash flow they will generate as they enter service. Based on the strength of our financial performance and promising outlook for the future, earlier this year, PC Energy's Board of Directors increased the quarterly dividend to $0.81 per common share, which is equivalent to $3.24 per common share on an annual basis. This represents an 8% increase over the amount declared 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 significant internally generated cash flow to invest in our core businesses. Based on the continued strong performance of our base business and the growth in earnings and cash flow we expect to realize as we advance our $37 billion capital program, we expect to continue to grow our dividend at an average annual rate of 8% to 10% through 2021 and 5% to 7% thereafter. Before I close, I'd like to offer a few words on my pending retirement. As we previously announced, our Chief Operating Officer, Francois Poirier, will succeed me as President and Chief Executive Officer and will join the board effective January 1st, 2021. Francois has been part of our ELT for five years now and has been a significant contributor to our thinking, our strategy, and the execution of our plans. He has always been committed to our values and displayed consistent integrity, vision, and persistence. I'm confident that he, along with the entire executive team here at TC and our 7,500 dedicated employees, they will continue to navigate the challenges and capture the growth opportunities that lie ahead with the same discipline that you've come to enjoy at our company over the last number of decades. Looking forward, I expect our assets will continue to provide an essential service to the functioning of the North American society and to the economy, and the demand for our services will remain strong. We have five significant platforms for growth, Canada, U.S., and Mexico natural gas pipelines, Our Liquids Pipelines business, and Power and Storage. As we advance our $37 billion secured capital program, we expect to build on our long track record of growing earnings, cash flow, and dividends per share. We also have $11 billion of projects in the advanced stages of development and expect numerous other in-corridor organic opportunities like the $200 million Wisconsin Access Project that we announced today to emanate from our extensive and critical asset footprint. Looking forward, we'll continue to focus on safety, sustainability, working according to our values, and responding quickly to market signals and signposts to ensure we remain industry leading and resilient as we grow shareholder value. With that, I'll turn it back to Dawn, who will provide you with some more details on our third quarter financial results and our financial position.