TC Energy says U.S. offers best returns as it considers spending commitments

TC Energy headquarters in Calgary on July 30, 2024. THE CANADIAN PRESS/Todd Korol

CALGARY — TC Energy Corp. says it plans to keep its discretionary spending focused on the U.S. as it downplayed the chances of reviving an eastern energy export route from Canada.

“Right now we see the highest risk-adjusted returns being in the United States,” said chief executive François Poirier on an earnings call Friday.

“The vast majority of our discretionary capital is going, and we expect that it will continue to go, into the United States.”

TC Energy was behind the proposed Energy East pipeline, which would have involved converting its Mainline natural gas pipeline to crude exports, but it shelved the proposal in 2017.

Since then, there have been calls to either revive the project, or use the pipeline to export natural gas eastward to Europe using liquefied natural gas, but the company said the pipeline is already being fully used.

“Given the strong demand that we’ve seen for natural gas, the amount of spare capacity we have is very different today than it was 10 years ago,” said Stanley Chapman, TC’s executive vice-president.

When TC proposed the Energy East pipeline in 2013, the Mainline was operating at less than a quarter capacity, but Chapman said that since it completed restoration work in recent years it has fully contracted all available Mainline capacity.

However, he said the company does have a mothballed line that it will keep evaluating whether it’s worth spending to restore it, said Chapman.

“We do have one line that we refer to as line two that is currently not available for service, and as market demand for this capacity continues to mature, we’re going to re-evaluate things like the timing, the cost, and the potential capacity that could be optimized and perhaps restored.”

Poirier said there was absolutely demand for more LNG exports, and that the company is bullish about an expanded Coastal GasLink to supply more gas to LNG Canada, which should start shipments from Kitimat, B.C., later this year.

On the potential for expanded crude exports, he pointed questions to South Bow Corp., the liquids pipeline business TC Energy spun off on Oct. 1.

But other projects in Canada will have to prove they’re a better use of funds than the U.S. where TC sees the most promise, he said.

“Looking at other infrastructure in Canada, it’s going to have to compete for capital in our company as it has for the last few years with projects in other jurisdictions.”

The company is eyeing potential deals to help supply energy for data centres in Alberta, has signed a deal to explore a pumped energy storage project in Ontario, and also sees extensive demand for nuclear power ahead in the province.

The question of where the company is investing has taken a higher profile as the U.S. looks to increase trade barriers and becomes more hostile to its closest allies.

Poirier said the company continues to assess the ongoing trade negotiations between the U.S., Canada, and Mexico and the potential impact of 25 per cent tariffs on goods going into the U.S. and 10 per cent tariff on energy.

“There is significant energy flow between the three countries, making our energy markets highly interdependent,” he said.

“We believe the 30-day pause on potential tariffs will support increased engagement with North America’s leaders in order to reach an agreement that will benefit consumers across the continent.”

The company said it had limited exposure to tariffs in the short-term as its regulated natural gas pipeline business that exports to the U.S. is protected against higher costs or loss of volumes.

TC has also already sourced pipe at firm pricing for all of its sanctioned projects, while it expects a modest impact on its Canadian and U.S. projects from parts like fittings and flanges.

Looking forward, the focus on U.S. spending would also limit the effects of tariffs, but the company will be ready to respond as the situation changes, said Poirier.

“We recognize that prolonged tariffs could impact capital allocation decisions. However, our diverse portfolio across three jurisdictions enables us to continue allocating capital to markets with sustained energy demand,” said Poirier.

His comments came as TC reported $971 million in net income attributable to its common shares for the fourth quarter, down from $1.46 billion a year earlier.

Factoring in the spin-out of its liquids business, TC said it had comparable earnings from continued operations of $1.1 billion compared with $1.2 billion last year.

The company said it will now pay a quarterly dividend of 85 cents per share, up from 82.25 cents per share.

TC Energy says its profit amounted to 94 cents per share for the quarter ended Dec. 31 compared with a profit of $1.41 per share in the last three months of 2023.

The company says its comparable earnings totalled $1.05 per share in its latest quarter, down from $1.35 a year earlier.

Revenue for the quarter totalled $3.58 billion, up from $3.50 billion in the fourth quarter of 2023.

This report by The Canadian Press was first published Feb. 14, 2025.

Ian Bickis, The Canadian Press