TC Energy Corporation

Thank you for standing by. This is the conference operator. Welcome to the TC Energy second quarter 2023 financial 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, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then 0. I would now like to turn the conference over to Gavin Wiley, Vice President, Investor Relations. Please go ahead.

Thank you very much and good morning, everyone. I'd like to welcome you to TC Energy's 2023 second quarter conference call. Joining me are Francois Poirier, President and Chief Executive Officer, Joel Hunter, Executive Vice President and Chief Financial Officer, along with other members of our executive team. Francois will begin with comments around the announcement we've made this week. Bevan will provide additional details around the spin-off of our Liquids Pipelines business, and Joel with our financial and operational results. A copy of the slide presentation that will accompany the remarks and additional presentation materials on the announced spin-off are available on our website under the Investors section. Following the remarks, we'll take questions from the investment community. We ask that you limit yourself to two questions, and if you are a member of the media, please contact our media team. I'd like to remind you that remarks today will include forward-looking statements that are subject to important risks and uncertainties. For more information, please see the reports filed by TC Energy with Canadian securities regulators and with the U.S. Securities Exchange Commission. Finally, during the presentation, we'll refer to certain non-GAAP measures that may not be comparable to similar measures presented by other entities. These measures are used to provide additional information on TC Energy's operating performance, liquidity, and its ability to generate funds to finance its operations. A reconciliation of various gap and non-gap measures is contained in the appendix of the presentation. With that, I'll now turn over to Francois.

Thanks, Gavin, and good morning, everyone. Well, it's been a busy week, but an extremely transformative one that sets out our company's path for the next decade. TC Energy's long-term strategy is focused on unlocking disciplined growth, having financial strength, and operating safely and efficiently. And the announcements we've made this week all align to that vision. As we've said all along, energy fundamentals drive our strategy and our decisions. And what we're seeing is that all forms of energy will be required to meet demand. And we are very fortunate to have incumbency across a wide range of energy infrastructure platforms. We're an incumbent in transporting natural gas from the Western Canadian Basin. We're an incumbent transporting natural gas from the Appalachian Basin. We are an incumbent with the shortest transit time for crude oil to Gulf Coast refineries. We're building incumbency in importing natural gas into Mexico. And, of course, we have incumbency in nuclear generation in Ontario. That incumbency brings growth opportunities and superior returns, and we need to protect it by continually investing capital and pursuing that growth. Simply put, the number of attractive opportunities we are seeing is accelerating. In fact, it's exceeded our financial and human capacity to pursue them as a single company. And with our renewed commitment to an annual limit on net capital spend to $6 to $7 billion per year, this left us with a simple conclusion. Separating into two businesses with separate mind and management, each with a strong balance sheet and their own currency, will allow us to pursue more growth for the benefit of our shareholders than we could today. So why now? Global events have reminded us of the need to balance reliability, affordability, and sustainability, and that all forms of energy will be required. Long-term fundamentals have shifted, and that has created significant opportunities for our liquids business that we've had to turn down. And that value should be captured. This spinoff allows Bevan and his team the opportunity to fully leverage the growth opportunities that we are seeing and doing so in a tax-efficient manner. The second value proposition comes from greater efficiencies we can capture that are catalyzed by separation. As a premier North American energy company, TC Energy will leverage the complementary synergies across our natural gas industry and power and energy solutions businesses. Now, earlier this week, we announced a first step with the sale of a 40% interest in our Columbia pipelines to GIP. This sets up the new TC Energy for success. Both businesses have enormous growth opportunities, and the beauty of that is that we see ourselves migrating to a more regulated business model. Our operational results continue to demonstrate that decarbonization and increasing reliance on renewables requires greater firming and natural gas will play a key role for decades to come. We see this in Europe, which has been a driver behind the growth in LNG exports. Our power and energy solutions business is expected to derive more than 75% of its 2030 comparable EBITDA from nuclear and firming resources, likely to be underpinned by rate regulation. We're also advancing the development of CCS projects in Canada and the U.S. with projects like the Alberta Carbon Grid and Project Tundra in North Dakota. Beyond this, we see extended capabilities to leverage the complementary nature of our gas assets in areas like hydrogen. Critical to the adoption of any new technology will be expertise and relationships with regulators, stakeholders and customers and this is a deep skill set and competitive advantage for us. TC Energy will continue to optimize our capital allocation processes to leverage the mutual benefits across our businesses. Our value proposition and low risk preferences are unchanged and we are increasingly utility-weighted in our business. At close of the spinoff transaction, we expect that 96% of our adjusted EBITDA will be either rate-regulated or long-term contracts. Post-transaction, our 2022 comparable EBITDA is expected to grow at a 7% compound annual growth rate through 2026. And with the transaction with GIP and then with the spinoff, We believe that only an incremental $3 billion of additional divestitures over the course of the next 18 months will be required for us to get below 4.75 debt to EBITDA by the end of 2024. Separately, our liquids business has an unrivaled commercial construct. We have the longest tenured contracts among its peer group. the lowest cost path to market with the fastest transit times. It delivers the highest quality crude for our customers to the refining market. And that is what drives the opportunity to create more value as separate entities. Now let's come back to our 2023 priorities that we stated at the onset of the year. These announcements this week are in direct service of those commitments. And we've made significant progress. First, we are safely delivering on our major projects, such as Coastal GasLink and Southeast Gateway, on the planned cost and schedule. Second, we've significantly accelerated our deleveraging goal with the announced sale of a 40% equity interest in the Columbia pipeline systems for total cash proceeds of $5.2 billion which will go directly to reducing our debt to the tune of 0.4 times debt to EBITDA. And third, we continue to safely and reliably operate our assets and provide essential services across North America. Now, we also realize that the spinoff of our liquids businesses creates an opportunity to simplify our gas organization. That's the second value proposition with the SPIN. and allows us to operate our systems in an integrated natural gas network across North America. We've promoted Stan Chapman to Executive Vice President and Chief Operating Officer of our natural gas pipelines to integrate our geographically dispersed natural gas businesses into a single, unified structure. This is something that we have been working on for many months with our consultants and we have a credible and detailed plan that we are already implementing. So as our spin-off transaction proceeds, we will remain focused on safety, operational excellence and business continuity for all of our valued customers and stakeholders. Now, we're firmly moving towards our desired future state. We'll have two separate entities with strong management Pursue incremental growth, and both companies will be free to pursue their own distinct opportunity sets. One will be increasingly utility-weighted growth vehicle that's natural gas, nuclear, hydro storage, and new technologies. It will have a stable balance sheet, above average per share growth that supports growth a stable dividend growth rate of 3% to 5% at attractive and conservative payout ratios. The other, our liquids pipeline company, led by Bevan, will be a highly contracted business with stable and robust cash flows supported by long-term customers. To me, this is how we create incremental value for our shareholders. Now with that, I'll turn it over to Bevan to speak a bit more about the Liquids Pipeline Company.