TC Energy Corp

TSX:TRP

Welcome to the TC Energy First Quarter 2025 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Gavin Wylie, Vice President, Investor Relations. Please go ahead.

Thanks very much, and good morning. I'd like to welcome you to TC Energy's 2025 First Quarter Conference Call. Joining me are Francois Poirier, President and Chief Executive Officer; Sean O'Donnell, Executive Vice President and Chief Financial Officer, along with other members of our senior leadership team.

Francois and Sean will begin today with some comments on our financial results and operational highlights. A copy of the slide presentation that will accompany their remarks is available on our website under the Investors section. Following their remarks, we'll take questions from the investment community. [Operator Instructions] And if you're a member of the media, please contact our media team.

Today's remarks 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 and Exchange Commission.

Finally, during the presentation, we'll refer to certain non-GAAP measures that provide additional information on TC Energy's operational and financial performance. However, these measures may not be comparable to similar measures presented by other entities. A reconciliation of various GAAP and non-GAAP measures is contained in the appendix of the presentation.

With that, I'll turn it over to Francois.

Thanks, Gavin, and good morning. Before we begin the formal presentation, on behalf of TC Energy, I offer my congratulations to the newly elected Prime Minister of Canada, Mark Carney. Canadians have never been more united in the belief that its abundant energy is key to economic sovereignty and prosperity. As matters of top priority, we urge the new government to grow the energy sector and establish a clear, predictable regulatory framework for timely infrastructure development approvals.

The energy sector stands ready to collaborate with the new government on critical infrastructure projects that will benefit all Canadians. These investments will position Canada as a reliable global energy supplier while creating substantial economic benefits nationwide. By leveraging our continental expertise in natural gas and power generation, TC Energy stands ready to support North America's role as a trusted energy partner.

Now turning to our first quarter results, and we are off to a strong start. We are proud to report that our safety incident rates continue to trend at 5-year lows. Our resilient business model has continued to deliver strong results despite the volatility in the broader market, and we continue to see multiple drivers for future growth. In April, we filed Section 4 rate cases with FERC on both ANR and Great Lakes to increase their respective maximum transportation rates. Additionally, we approved the USD 0.9 billion Northwoods project to expand our ANR system.

We continue to expect net capital expenditures for 2025 to be between $5.5 billion and $6 billion, and we remain on track to place $8.5 billion of assets into service this year. In aggregate, those projects are currently tracking to approximately 15% below budget. With ongoing strong EBITDA and capital expenditure performance, we are reaffirming our overall 2025 outlook that continues to enhance our financial strength and flexibility.

The Southeast Gateway project is complete and ready for service. The project was completed in under 3 years from a final investment decision and was delivered 13% below our original budget, a monumental achievement. I would once again like to thank the ministry of energy, our customer, the CFE, and our dedicated teams for their unwavering commitment to this project. The project is contracted until 2055 and once placed into service will represent a significant inflection point in our long-term cash flow profile. Our partner and customer, the CFE, has agreed to the contracted rate and accepted all requirements for in-service. We are just waiting on approval for our regulated rates from the National Energy Commission, or CNE, which only applies to interruptible service.

Now while 100% of our capacity is contracted with the CFE, and we have no requests for interruptible service, approval of the regulated rate is in normal course prior to commencing service. The CNE has not expressed any material concerns or questions. And based on our conversations with the ministry of energy and the CNE, our expectation is to receive CNE approval by the end of May. Receipt of this approval is the final step to achieving in-service on Southeast Gateway.

We continue to have strong alignment with President Scheinbaum's plan Mexico 2030 that aims to attract over USD 270 billion in investments through public-private partnerships with a substantial focus on energy infrastructure. The Southeast Gateway Pipeline is a critical component of this plan. Looking at the map on the left, this plan includes 8.5 gigawatts of capacity from 14 new natural gas plants proposed by the CFE, of which 10 sit within our strategic corridors.

Shifting to the U.S. We have been working towards a meaningful announcement relating to data centers for some time. And today, we have sanctioned our Northwoods project, a USD 900 million expansion of our ANR pipeline system. This 0.4 Bcf per day expansion is expected to enter service in 2029 and will serve new gas-fired electric generation to support demand from data centers and economic development in the U.S. Midwest.

Importantly, the Northwoods project is backed by a 20-year take-or-pay contract with an investment-grade utility and achieves an estimated EBITDA build multiple of approximately 6x. The map on the right highlights the repeatability of these Northwoods-type projects, which are low risk and in-corridor growth as seen on our ANR system. And I would extend this opportunity to other areas where we are seeing on Columbia and other assets across several different customer groups. This exemplifies the value of our footprint and our incumbency.

The Bruce Power major component replacement program is the cornerstone of our strategy to enhance the reliability and availability of our nuclear assets. In April, we sanctioned the Unit 5 MCR following approval of its cost and schedule estimate from the ISO. This $1.1 billion investment in emission-less nuclear energy adds significant long-term value by extending the life of Unit 5 by over 35 years.

And alongside the MCR program, our Project 2030 at Bruce aims to substantially boost its net peak output through the end of the decade and nearly double our equity income by 2035. Project 2030 is projected to increase Bruce Power's capacity from its 2019 base of 6.4 gigawatts to over 7 gigawatts through 3 stages in a cost-effective manner. And together, these programs are integral to our strategy of delivering long-lived value through disciplined investment.

On this next chart, which you've seen before, illustrating our growth visibility through the end of the decade. Over the past 6 months and including the Bruce Unit 5 MCR and the Northwoods project announcements today, we've successfully added approximately $4 billion of long-term contracted projects with compelling build multiples in the 5 to 7x range with no commodity price or volumetric risk.

Given the strength of our origination pipeline, we have line of sight to an increased cadence of project announcements in the second half of this year and into 2026. These projects will predominantly have capital spend and in-service dates toward the end of the decade, which aligns with our financial capacity and further extends the duration of our growth portfolio. I will also add that of the recently sanctioned projects, a portion of the spend is in 2025 and 2026, which is expected to enhance our 2027 comparable EBITDA outlook, highlighting our ability to bring forward short cycle to cash projects. We are well positioned to deliver on our value proposition of solid growth, low risk and repeatable performance.

And now I'll turn the call over to Sean.

Thanks, Francois, and good morning, everybody. From an operational standpoint, TC continued to see strong demand in the first quarter. On the left-hand side, we highlight a number of volume increases and new records set across our 3 pipeline business units this quarter. TC has actually set 13 all-time delivery records since early 2024. On a TC-wide basis, throughput increased 6% in the quarter, which underscores the exceptional safety and operational performance from all of our teams in the field.

The key themes I'd like for you to take away from this slide are: First, our teams are continuously finding ways to improve system efficiency; and second, those capacity increases are being immediately taken up by the robust customer demand we're seeing across our footprint.

In our Power and Energy Solutions business, Bruce achieved 87% availability in line with our Q1 plan, which included the planned outage on Unit 5. We continue to expect availability to be in the low 90% range for full year 2025. The MCR execution has been outstanding as the Bruce team returned Unit 6 on time and on budget and is similarly tracking to plan on Unit 3. With that exceptional MCR track record, Bruce is now upgrading 2 units per year for the next 5 years, which will accelerate the station's operating efficiency and capacity increases that Francois mentioned earlier.

Shifting to the EBITDA bridge on the right, I'll discuss some of the variances versus the first quarter of 2024. First, Canada Gas EBITDA increased due to higher depreciation and taxes on NGTL, offset by lower interest expense from our successful refinancings earlier this year. I'd like to highlight that our regulated cost of service framework ensures that all of these costs are fully recovered through tolls. Additionally, Coastal GasLink saw higher contributions following the pipeline's commercial in-service date last October.

In the U.S., we saw incremental growth and modernization investments go into service this quarter in addition to a stronger U.S. dollar. These increases were partially offset by the divestiture of Portland Natural in 2024.

Our Mexico business remained largely in line with the first quarter of 2024, but did benefit from a stronger U.S. dollar exchange rate in the quarter.

Lastly, our Power and Energy Solutions business experienced lower contributions from Bruce, given we now have Units 3 and 4 undergoing their MCR and the planned outage on Unit 5. This decrease was partially offset by a higher average realized price of $106 per megawatt hour, which is up $12 per megawatt hour relative to the first quarter of 2024.

Our Alberta co-gen fleet continued to deliver exceptional performance with 98% availability, which maximizes our capacity payments, although EBITDA was partially offset by lower Alberta power prices that averaged approximately $40 per megawatt hour in the quarter. Finally, natural gas storage contributions were lower relative to the exceptional quarter that business had in early 2024.

On this slide, we have a refreshed view of our funding plan that remains largely unchanged from what we showed at Investor Day. Given the high probability of the Bruce MCRs proceeding, we had included the Unit 5 MCR in our funding plan prior to sanctioning. In addition, the majority of the capital spend on Northwoods is weighted to the back end of the decade.

Our updated plan requires about $31 billion in funding over the next 3 years that will be largely funded by $24 billion of internally generated cash flow. We continue to expect the remaining $7 billion in funding to come from capital markets without the need to issue equity. As we continue to optimize our capital expenditures, we expect to deliver approximately $1.3 billion of total capital reductions in 2026 and 2027. It is this ongoing capital optimization and strong operational performance that allow us the flexibility to fund our incremental growth.

Turning to our financial outlook. We are reaffirming our 2025 through 2027 EBITDA outlook that we provided last quarter. Our guidance continues to reflect the effectiveness of our long-term contracting strategy in the face of the commodity volatility that we're all seeing. Our 2025 comparable EBITDA outlook remains at $10.7 billion to $10.9 billion, which represents a 7% to 9% increase over our 2024 results. Looking out to 2027, we continue to target $11.7 billion to $11.9 billion, which implies a 5% to 7% 3-year growth rate. That again highlights the predictability of our base business and our underlying demand for capacity on our systems.

I'll remind you that our base case outlook uses an average USD-CAD exchange rate of $1.35, which is lower than the spot exchange rates we've seen year-to-date. We have provided sensitivities on the slide showing potential for incremental EBITDA of approximately $200 million if exchange rates were achieved, a full year average of $1.40. I'll reiterate that we systematically hedge our U.S. dollar net income to insulate our comparable earnings from FX volatility. So we do not expect a material impact related to foreign exchange on our 2025 comparable earnings. Longer term, on an unhedged basis, a $0.01 change in USD-CAD corresponds to roughly $0.01 change in comparable EPS.

Moving to the right side of the page, we summarize several other factors that could impact our EBITDA outlook. For the purposes of our base case outlook, we tend to build in conservative assumptions on rate case settlements, such as the active cases on Columbia, ANR and Great Lakes that Francois mentioned. We also have ongoing revenue enhancement and cost optimization initiatives across the organization that have the potential to drive additional upside. We continue to target availability improvements on our power generating assets, particularly Bruce, where the refurbishments are already paying dividends and operating performance.

Continuing to place projects into service on schedule and under budget remains a top priority and value driver, which provides a tailwind to capital efficiency and EBITDA performance. I'll note that under our current expectation of receiving approval from CNE by the end of May, we do not expect an impact on our 2025 outlook.

With our 97% EBITDA underpinned by rate regulated or take-or-pay contracts, we remain insulated from increased price and volume risk that we're currently seeing in the market. This resilience has enabled us to grow our dividend for 25 consecutive years, which remains a core component of our shareholder value proposition.

With that, I will pass the call back to Francois.

Thanks, Sean. As I mentioned before, our focus remains on the key factors that have brought us success: Number one, maximizing the value of our assets through safety and operational excellence; secondly, executing on our selective portfolio of growth projects, including bringing $8.5 billion of assets into service in 2025; and third, ensuring financial strength and flexibility. It's by adhering to these priorities that we'll continue to deliver solid growth, low risk and repeatable performance year after year.

Operator, we will now take questions from the conference call.

[Operator Instructions] The first question comes from Praneeth Satish with Wells Fargo.

First question here, just given your -- what looks like a very strong origination pipeline for U.S. gas projects and good returns. How are you thinking about CapEx and potentially going to the high end of your $6 billion to $7 billion annual range? Is that something you'd consider if it could be done in a leverage-neutral manner and staying below the 4.75x?

Great. This is Francois. What's got us here in the really solid place we're in is the value of our footprint. It's a strategic advantage. It's -- and we are definitely seeing accelerated set of opportunities for low-risk, higher return opportunities.

What I'd say, though, is that the focus firstly would be on our human capital and our ability to continue to deliver the project execution performance that has provided us with delivering projects for 2025 on all $8.5 billion at about 15% below the original plan. So that's going to be if and when we want to contemplate going above the $6 billion annual number, we're going to be focusing first on making sure that we've got the human capital and the bench to execute well on our projects. I don't expect that to occur for the '25 or the 2026 year.

I think the 4.75x debt-to-EBITDA is a firm commitment on our part. And right now, all of the growth that we see is in the next half of the year and into 2026, is still filling out the white space below the $6 billion number in our chart on Slide 9, given the fact that it's for in-service dates that are near the end of the decade. But to the extent we have the opportunity to consider later in the decade, projects that deliver very attractive returns, we will consider those, but first from a human capital standpoint and then secondly, living within our means and consider what all the funding alternatives are at that point.

Got it. That's helpful. And then just maybe a few kind of clarifying questions here on Southeast Gateway. So it looks like CFE has signed off, you're waiting for CNE approval. Can you just clarify what the payment mechanics could look like once the project is operational? What would the effective date of the project be? Would it be end of May as it stands now? And when would you actually receive payments where it would start to show up in EBITDA? Is that also end of May? Or would that take another month or so?

And then finally, can you move forward with in-service of the pipeline without CNE approval? Or is that a gating item for service to start?

Praneeth, this is Tina. We're really excited to have the project completed and to have CFE support on that project. As mentioned in our release, we are waiting on just one final regulatory approval and expect to have that no later than the end of the month. Once we get that approval, then we will roll into our normal invoicing cycle, and that is just per our agreement with CFE. So typically, you're in a 30-day lag on invoicing and looking forward to getting that project fully commercialized.

And what I might add, Praneeth, to that is that we have a tollage adjustment mechanism that preserves the NPV of payments, which is a big reason why we don't expect an impact on our 2025 outlook irrespective of when the in-service date occurs. And then to your part B of that second question, we do need the CNE certificate for regulated rates in order to go into service.

The next question comes from Jeremy Tonet with JPMorgan.

In the States, we hear a lot about data centers across different regions. I was wondering, we don't quite hear as much on the Alberta outlook there. And it seems with the cheap resource, the policy focus, there would be a lot of opportunity there, particularly as it relates to behind the meter. And just wondering your thoughts there, what that could mean for TC given the NGTL footprint that really dominates.

Thanks, Jeremy. I'll start, and I'll pass it over to Tina. If you look at our strategy, just contrasting the U.S. and Canada, as you alluded to, in the U.S., we're really focusing predominantly in front of the meter. We connect to 8 of the 10 largest LDCs in the U.S. We're starting to see a significant inbound flow of requests for service. So there's really no need for us to focus behind the meter in the U.S. other than perhaps strictly from a pipeline perspective.

It's a little bit different in Canada, a little bit more of a if you build it, they will come kind of approach. So we are working with producers, developers as well to see what the solution set might look like. And perhaps Tina and Greg can provide a little bit of additional color on how we would be looking to more of a full-service approach.

I'll start with the gas pipeline side. In Canada, as Francois mentioned, we are in various conversations with several different entities, including data center developers and producers. And as you know, our systems transport about 80% of the WCSB production and the TC -- serves about 70% of Ontario and 98% of the Quebec demand. So we are really well positioned to capture data center load as it materializes.

And from a pipeline perspective, we are working with our counterparties to determine where the optimal locations are to -- from a siding perspective. And in some of these locations, power is necessary, and I'll turn it over to Greg to talk about kind of how we're thinking about it from that perspective.

Sure. Thanks. It's Greg Grant here. I mean as we've seen globally, there's been unprecedented need for electricity and the AI data center front is continuing to enhance that. We've been operating gas transmission, storage, power in Alberta for decades. So I think that uniquely positions us on how we can quickly bring some of these services to fruition here to help alleviate that need.

And then just a point of current fact, just in Alberta here, we have about a queue of about 12 gigawatts just on data centers. So when you think about the size of the existing grid of Alberta, which is about 12, that could double it just in and of itself. So we are looking at opportunities, as Tina mentioned, where we can leverage our experience on the gas and power side in a complementary solution. But I just want to be clear, Francois did mention in the last quarter, we are not looking to start an IPP. We're going to be very thoughtful in our approach, and of course, we must compete for capital amongst all the other great opportunities that we've already talked about. So we'll continue to look at ways we can offer that support to our customers, but we'll be very selective in doing that.

Got it. Very helpful. And just trying to reconcile, I guess, the CapEx outlook for '25 here. I think you're trending really under budget there. And just wondering if this means you're looking at the low end of the range? Or is it not the low end of the range because you're able to fill in, I guess, these new incremental attractive projects as you just outlined?

Jeremy, it's Sean. We were clear. 2025, bringing $8.5 billion into service this year, we're going to be elevated relative to our 4.75x target. We were pretty clear about that at Investor Day. So we are above 4.75x in 2025 and then you start to see really the full effect of $8.5 billion of capital in full year '26, really and SGP being the biggest driver, though. So it's '26 where we start to see the deleveraging, not in '25.

And in terms, Jeremy, of where we fall inside the range, when we put our plan together in late 2024 for the 2025 year, we already have some of those savings or coming in under budget baked in. So you should not infer because we're planning on bringing projects in well under the original Board sanctioned capital amounts that, that will necessarily on its own drive us to the lower end of that range.

And as your -- as you can surmise, if we have opportunities for short-cycle projects to add cash flow, to the extent we can do so and stay within our budget, we'll always consider those. So we're confident in the $5.5 billion to $6 billion, where we'll fall within that range. We'll have to see as the year unfolds and any other short-cycle opportunities that present themselves.

The next question comes from Rob Hope with Scotiabank.

Regarding the increased line of sight to higher project announcements over the next year, is this just a function of potential projects moving further down the contracting path, and you have now visibility on contracts being signed? And when you take a look at these projects, are they mainly data center related? Or is there a good mix of coal-to-gas and LNG as well?

This is Tina. And yes, we've been really working to understand the pipeline as it's been developing. And where we're focused right now is progressing projects that although not limited to just one demand element of overall growth, power generation has really become a bright spot for us and where we're quite active. And that's just taken a bit of time to progress and determine how we're going to best serve that load. And so that's why we're seeing some of this pick up quite a bit.

So across our broader suite of that opportunity set, we see the coal-to-gas conversions, data center demand and then incremental just power generation for increased electrification. So right now, we are working with counterparties in the amount of about 25 gigawatts of new opportunities. That translates to almost 6 Bcf per day in various stages of development. And as those projects progress, they all look and feel like our previous projects, highly creditworthy counterparties, long-term take-or-pay commitments and in the 5 to 7x build multiple.

So Rob, these are not -- our guidance to you around the cadence of additional projects is not just based on a macro backdrop. It's based on a series of specific projects in which we are in late stage of negotiations and development.

I appreciate that color. And then maybe as a follow-up, in terms of data center or power-related projects, can we use Northwoods as a template, meaning looping compression, maybe a little bit of a lateral with, we'll call it, CAD 1 billion to CAD 2 billion as the sweet spot?

Yes. When we think about our strategy, particularly in the U.S., as we've mentioned before, we are focused on serving the data center load through our existing utility systems and leveraging our footprint to do that. So brownfield, in-corridor, permittable, constructible projects are where we're focused. And I think when we roll out further projects in the future, you're going to see a repeatable view of that.

The next question comes from Theresa Chen with Barclays.

I'd like to go back to the increased cadence of project announcements through the remainder of 2025 and understand better what is driving this momentum. Have there been any salient learnings coming out of your commercial discussions since you've been involved in more of them. As time goes on that better positions TC Energy to win in a competitive environment, which would hopefully translate to filling the backlog beyond 2025. Or is this -- these projects always going to be yours based on your -- I think, Francois, the word you used was incumbency of your asset positions. I would love to understand the thoughts behind that.

Theresa, it's Francois. I'll take this one. As we connect to 8 of the 10 largest LDCs in the United States, and our strategy in the U.S. is predominantly focused on in front-of-the-meter business. A lot of these utilities have to have a competitive process. So in many of these instances, even when you have incumbency, they have to make sure that they ensure competitive tension.

Having said that, utilities have to be very careful also and mindful of making sure that they're considering the rate impact across all customer classes as they think about adding significant data center load, for example. And so it's taken them a bit more time to sort through that. And what we've seen since the early part of this year is they have now sorted through quite a bit of that, and we're ready to put their plans into place and coming to us, and I'm sure others and talking about getting capacity on our system.

So that's the dynamic that has unfolded. And again, our footprint is strategic, and it allows for repeatable growth because we're located in parts of the country and have incumbency in the Midwest and also in places like Virginia, where there are large clusters of data centers under development.

Got it. And turning to the nuclear side of things beyond the near-to-medium term, would you be able to provide an update on the status of Bruce C and the environmental assessment that's happening there?

Yes, I'd be happy to. It's Greg, Theresa. Bruce C continues with the development work that we had talked about last quarter through the impact and environmental assessment. We're engaging with local and indigenous communities, including our partners on OPS, the Saugeen Ojibway Nation. Just there's very strong alignment in this expansion. This fits with the Ontario government's goals of adding almost 18 gigawatts of nuclear power to the grid that supports their 75% increase in power demand here by the end of 2050.

And I also just want to remind everybody that we actually have federal support as well. We did receive the $50 million from NRCan in helping expand this. So it's good to see the alignment across multiple jurisdictions.

And lastly, I would just add, we do believe we have a great existing locational advantage on Bruce C. We have a phenomenal management team that continues to be able to invest billions of dollars on time and on budget. So we think Bruce C is the next best option for expansion in Ontario.

The next question comes from Aaron MacNeil with TD Cowen.

Can you speak to the commitment for $6 billion to $7 billion in net capital expenditures and what role selling down your interest in Mexico might play down the road in order to maintain that guidance just given the robust opportunity set? Or is that not a factor in your view?

Maybe I'll start, Aaron. It's Francois. And pass it over to Sean to give you a little bit more in terms of specifics. And what I'll just touch on in Mexico is our goals have not changed. Our first objective is to make sure all of our projects are flowing gas and then secondly, are cash flowing. We expect that to happen for all of the pipes that we have in construction by the end of 2025 or thereabouts, depending on timing of -- on VdR south, some of the land acquisition we're waiting for.

And so this is really a first half of 2026 type of effort. We're going to be patient. We see a lot of value in our business in Mexico. North America is an intercontinental system, and we're the only gas transmission company that's in all 3 countries. We want to make sure that if we contemplate a divestiture of a portion of Mexico, it is at a value that is fair value and matches up with our view of the intrinsic value of the asset.

So we're going to be patient. We're not going to rush that. We are focused on heading towards a 10% of consolidated EBITDA over time for Mexico. I view Mexico as less of a source of deleveraging and more in terms of optimizing the portfolio. So I want to give you that color before I hand it over to Sean.

Yes. Thanks, Aaron. As Francois said, we have -- there's multiple paths that we have to both fund the growth and achieve leverage targets and capital rotation, as you would expect, is always one of those. And inside of capital rotation, more partnerships probably than rotation is kind of our view of the world now, just given the value of assets and incumbency. But it's -- we've got a couple of years on this, and we've got a couple of levers. So it's one of several.

But we're also waiting, as Francois said, we've got projects coming online ahead of plan, ahead of budget this year. We've got cost and capital initiatives internally. And all those ingredients over the next 12 to 24 months are going to form how exactly we fund and how much growth we fund with each of those different levers, but thank you.

Makes sense. Switching to Canada. Francois, you've been a public advocate for more Canadian LNG projects, including LNG Canada Phase 2. You also signed the Build Canada Now open letter to Mark Carney yesterday. So now that we have clarity in terms of the election outcome, what regulatory obstacles do you think the Canadian industry needs to overcome to get a positive LNG Canada Phase 2 FID and further Canadian LNG development more broadly?

Thanks for that question, Aaron. First, I'd underscore that between the Liberal and Conservative members of Parliament, we have over 300 members who supported infrastructure growth and acceleration of access to our coast to diversify our customer base, reducing our dependence on the United States, et cetera, et cetera. I've been very clear on the need for acceleration of time lines. The letter from industry, which was reiterated yesterday, is also very clear on the needs in order to do that. And we look forward to collaborating with the federal government and the Cabinet ministers to make that happen.

For us, in terms of LNG to the West Coast, we are optimistic about the prospects for Phase 2 of LNG Canada. But let's -- I'll be clear that, that is LNG Canada's decision. Our obligation is to deliver a bonafide Class 3 estimate on the expansion that they will factor into their FID decision, which I believe will be coming at some point in 2026.

In terms of prospects for additional pipelines to the West Coast, there are a number of other projects in development and construction. The Ksi Lisims project, we sold them our PRGT project, is in early stages of construction. I expect that, that one has very strong prospects for moving forward.

There are a number of other projects that are in construction. Cedar LNG is proceeding very, very well in terms of our contribution, which is the lateral and the meter station in order to -- for the Haisla and Pembina to proceed with their projects.

So it's just political will and leadership and clarity of regulations with clear and enforceable time lines is what we're going to need as an industry to make sure we prosecute this opportunity successfully.

The next question comes from Maurice Choy with RBC.

Just following up on those comments about permitting reform. If I could just zoom in specifically to TC Energy, is this reform a gating factor to help unlock new gas infrastructure projects for you in Canada? And if so, is this merely CGL? Or are there other ones being contemplated? Or is it more of a broad call to action that will spur more activity in the basin, motivating better volumes on NGTL and the mainline?

Maurice, it's broader, I would say it's the latter characterization. We see an opportunity for the basin's productivity to grow, healthy producer customers are good for the industry and actually, TC Energy benefits from that. And whether we are expanding CGL or we are expanding NGTL to serve other pipelines that are going to the coast, that benefits us and benefits the industry.

I did mention on the prior call that based on the opportunity set we have today, that the lion's share of our discretionary capital wants to flow to the U.S. That's where we see the highest risk-adjusted returns. But having said that, having more competition from customers for service and capacity on our systems in all 3 countries just enhances our opportunity set and allows us to deliver the greatest value for our shareholders by having more competition for our capacity.

Makes sense. And just to finish off with another comment you made. It sounds like there is upside to the 2027 comparable EBITDA guidance from new projects, not just from FX. If that's a fair statement, do you see that as being reinforcing the 5% to 7% CAGR and moving you to the upper end of that range? Or is it more about moving above that range?

Maurice, it's Sean. I'll take that question to start. Look, you heard in Francois's comment that the execution success we had in 2024 is continuing into 2025 on time, under budget. It's a little early in the year. So bear with us, we're being cautious as to how we reflect that in our estimates. But yes, we're confident that, that trend and capabilities Francois talked about, the team is getting it and has gotten it for the last 2 years, and that needs to carry through to '25 and '26. But we need to show you the proof before we're willing to kind of reflect any changes in guidance on that.

The next question comes from Ben Pham with BMO.

Just going back to the Canadian election. Is there anything beyond policy reform that you could be expecting on that front that could potentially benefit your Canadian business? And is there anything else beyond the Western Canadian footprint in terms of growth opportunities like in East-to-West expansions or anything on the East Coast?

So Ben, our focus has been more westbound than eastbound. We have an important customer base through our mainline in Ontario and Quebec, where we do see increased energy demand, increased electricity demand, which does translate into increased natural gas demand. You've seen throughputs on our mainline increase quarter 1 of 2025 compared to the first quarter of last year. So it does present growth opportunities for us across the entire country.

In terms of in addition to policy change, what needs to happen, if I understood your question correctly, we are going to need to go out and compete for the business. So it's a bit of a cultural change where we're going to need to see more collaboration between governments, the private sector and indigenous leaders to make sure that we're providing policy stability and certainty to attract capital from LNG customers. So we're optimistic that can happen. As I said, both the Liberal and Conservative parties were advocating for accelerated development of pipeline infrastructure, which we think is a great macro backdrop for a company like TC.

Okay. Got it. Second question on Mexico and maybe more specifically on PEMEX in third quarter. Are you effectively quite insulated from what's happening there, whether it's your existing assets or timing on the south project?

Ben, it's Sean. Yes, we're -- our contracts, just to be clear in Mexico, are 100% with CFE. That is our customer, that is an investment-grade national utility. We have no commercial arrangements whatsoever with PEMEX. So I'd probably just clarify that and leave the question unless there's something I missed for you.

Yes. I was just thinking more indirect impact than anything in Mexico. There has nothing -- what's happening in PEMEX has nothing to do with just the timing implications to solve for just broader the Mexican government and credit and everything, just thinking more indirect impact and direct.

Okay. I'll offer you a little bit of a follow-up. The growth plan that CFE very recently laid out is not about PEMEX. It's about providing electricity and upgrading fuel oil plants throughout the entire country. It's not about PEMEX. It's about modernizing grid and plant and bringing power to various parts of the country, and that's independent of PEMEX entirely. So we'd be happy to follow up offline on that. But we are an entirely CFE kind of focused customer, partner and customer in that regard, not PEMEX.

The next question comes from John MacKay with Goldman Sachs.

I just want to go back to the 6 Bcf a day of potential projects being talked about. Any way to frame that as effectively kind of in basin in the Marcellus and Utica versus out of basin, either Virginia or Midwest? And for that latter group, how do you'd be thinking about effectively getting incremental supply to those new demand sources?

Thanks, John. This is Tina. As I mentioned before, although we have focus across multiple growth areas right now, where we're very active is in the power generation space related to serving natural gas demand for those sectors, including incremental generation, data centers and coal-to-gas. They're across multiple systems. We're seeing interest in Ohio, Virginia, Kansas, Indiana, Illinois, Louisiana, Nevada. It's really the power of our footprint is really showing up here related to where these opportunities are progressing.

We will see likely more activity on some of our larger assets, which are ANR and Columbia and Columbia Gulf, given the corridor of where this power is -- generation activity is occurring, whether that be coal-to-gas, new electrification or data center load. Also, if you look at some of where our large utilities are centered across our assets, you can expect that as their loads increase, we would be able to also provide service to them from that perspective.

Also, from a basin perspective, where this gas would be coming from, you may be familiar that we're attached to some very large basins, whether that's the WCSB, Appalachia and Haynesville. And so many of our projects would be sourcing from those basins that we're already connected to and that in some cases, we have a very large incumbency with.

I appreciate that. And second question for me, maybe just, Sean, going to your comments on, I guess, partnering on new projects to kind of manage the capital needs and keep watching the leverage level. Can you just talk a little bit more about what that means? Is that kind of like what we saw in Columbia, where you effectively sell down an interest but maintain operational control? Is it selling a stake in a project specifically? Or is it, I don't know, maybe what you're doing with Williams on Socrates, right, kind of indirectly partnering with someone using your assets and something else they're going to build.

Yes, John, good question. Look, I think candidly, the bias is probably shifting a little bit to partnerships, right? We don't like selling assets that have all this kind of embedded optionality and growth of finding partners that are willing to value that and help us grow it and help us not pressure the balance sheet to capture this growth. That's likely the avenue, especially with some of the larger projects kind of towards the end of the decade that you heard Greg talk about.

And what I might add to that, John, is in Canada, if we're looking at pursuing data center opportunities where it's more of a discrete greenfield project or a set of assets, that does lend itself well to partnership, particularly with indigenous communities. We have a very clear road map for greenfield infrastructure development in Canada now. We feel it's very important to involve indigenous communities from day 1 in that and not only in terms of consultation and design, but as partners. So in a circumstance where we're looking at a new system or a new project that can be ring-fenced, that would be, I think, a different approach.

The next question comes from Keith Stanley with Wolfe Research.

I wanted to follow up on the data center strategy and the Williams project in Ohio is obviously right by Columbia and presumably sources gas from Columbia. Recognize you're more focused on front of the meter for the U.S., but can you maybe give any thoughts on why that wasn't a fit for you as a project? And then when you're looking at potential integrated solutions in Canada, inclusive of power, what criteria are you looking at in terms of contract duration and returns to get into that business?

Yes. Thanks, Keith, for that question. We have a great corridor through Ohio, where a lot of that data center load is appearing. And certainly, we will participate where it makes sense for us from a capacity perspective and/or perhaps short laterals as necessary but keeping the focus as well on the larger connections that would be through our utility-based customers. So it's really a risk preference for us. We want to see long-term contracts at a 5 to 7x build multiple, and we have a very long runway of those types of projects. I'll turn it over to Greg for questions on the...

Sure. Happy to add a little bit on to that, Keith. We talked a bit about the demand we're seeing, obviously, on the power side. And as you think about return and contracting, we already have an amazing pipeline. That low-risk, high-return opportunities. So I'd just say as we think about branching into those complementary solutions, we're going to continue to test it against the existing footprint.

Okay. And on Northwoods, I'm just curious on any more details you can share on the project. Are you debottlenecking a particular area on ANR? Are you building a lateral for new power? Just new pipe, compression? Just any more specifics on the project?

Yes. Thanks. So we're really excited that we announced that project today on our ANR system, 400 million cubic feet a day, $900 million, 5 to 7x build multiple. As I mentioned before, it's just right in our fairway of how we like to progress projects. So expanding our existing infrastructure. This is focused on Midwest demand and will be likely just a combination of looping and compression activities to increase capacity into that region. And we have a really strong record of progressing those types of projects on time and on budget.

The next question comes from Robert Catellier with CIBC Capital Markets.

I have 2 questions here. First, there was an attempt to improve permitting in the U.S. through alternative arrangements for NEPA compliance. What's TC Energy's take on this? And specifically, do you have an appetite to elect to have projects reviewed under these alternative arrangements?

Robert, this is Tina. With respect to general permitting reform, at the macro level, we're seeing a number of executive orders that focus on streamlining and simplifying regulation of overall permitting process. So we're firmly in favor of anything that achieves this in a pragmatic and durable way.

Right now, what we really need to see is Congressional action that puts these orders into law. And so we're really focused as an industry in clarifying that timing and certainty of progress through legislative action. And without that, we will have to just follow our current regulations as we progress the projects.

Yes. That makes a lot of sense. And then just maybe to summarize a lot of what we've heard today. Just can you summarize how the volatility caused by trade policy and the Canadian election results impact where you're finding the best risk-adjusted returns? And maybe as a follow-up, do you think tariffs have any implications for growth in Mexico and your plans for an eventual sell-down there?

Yes, Robert, it's Francois. I'll address that question. As we've said before, we don't take volumetric or commodity price risk on our pipeline projects. And so in the near term, there's no impact, and I think as demonstrated today by our strong and very predictable financial results with the volatility that we've seen over the last few months.

Longer term, we're focused on our ability to deliver our projects on time and on budget or better. And some of these tariffs that have been applied could apply some inflationary pressure on raw materials and things of that nature. Right now, when we look at our capital spend in Canada, it's predominantly at Bruce, and we have a 95% Canadian domiciled supply chain for our projects that are underway in the United States, it's almost exclusively certainly in terms of major components of supply, a U.S. domestic supply chain.

And in Mexico, we've front-end loaded several years of capital into the SGP project. So while we are looking at with our partner and customer, the CFE, a long-term planning scenario where there will be a need for additional capacity on a number of their systems, I don't see that happening in the immediate future. And so it should not have an impact on the composition of our portfolio, and it should not create pressure for us to look for a partner or some other way of monetizing Mexico before we feel we're going to get fair value.

Right. So if I take this all in, it doesn't sound like the risk-adjusted returns have really changed. So you're still finding good opportunities pretty much across the portfolio, but maybe with the best opportunities still in the U.S. Is that the way to look at it?

Yes, that's exactly right, Robert. We look at our discretionary capital. And as I said, it wants to flow to the highest risk-adjusted returns. That's definitely the U.S. I expect it to continue to be the U.S. for the next several quarters until and if we see progress on permitting and other matters in Canada to compete for capital. But even then, it's going to have to compete for capital internally with projects in other jurisdictions.

Ladies and gentlemen, this concludes the question-and-answer session. If there are any further questions, please contact Investor Relations at TC Energy. I will now turn the call over to Gavin Wylie for any closing remarks. Please go ahead.

Yes. Once again, thank you, everyone, for your participation this morning and your interest in TC Energy. As the operator stated, if we didn't get to your question today, please feel free to reach out this morning to either myself or the Investor Relations team, we'll be happy to get back to you first thing. So thanks again for your interest. Thanks again for the time this morning, and we look forward to our next update in late July.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.