TC Energy Corporation (TRP:CA) Q3 2025 Earnings Call Transcript
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Overview
The earnings call summary and Q&A session reflect positive sentiment. The company has strong financial metrics, with increased EBITDA outlook and robust project returns. While guidance is cautious, the management is optimistic about sustaining growth and maintaining leverage targets. The focus on strategic partnerships and capital efficiency, along with steady project returns, adds to the positive outlook. Despite some uncertainties, the overall sentiment is positive, with potential for stock price appreciation.
Key Financial Performance
Comparable EBITDA Increased 8% year-over-year through the first 9 months of the year. This growth is attributed to exceptional project execution and capital optimization.
Assets Placed into Service $8 billion worth of assets placed into service on schedule, tracking approximately 15% under budget for projects with 2025 in-service dates. This reflects strong project execution and cost management.
New Growth Projects $700 million in new growth projects announced, with a weighted average build multiple of 5.9x. This is part of $5.1 billion in sanctioned projects over the last 12 months, driven by demand for power generation and data centers.
Net Capital Expenditures Expected to be at the low end of the $5.5 billion to $6 billion range for 2025, due to capital optimization and project execution.
Natural Gas Pipeline Flow Records 14 new natural gas pipeline flow records set in 2025, driven by operational excellence and increased demand for natural gas.
Bruce Power Availability Achieved 94% availability in the Power and Energy Solutions business, including planned outages on Units 3 and 4. This aligns with the expected annual availability in the low 90% range for 2025.
Comparable EBITDA for Q3 2025 Generated $2.7 billion, a 10% increase year-over-year. Growth was driven by a 13% increase in the natural gas pipelines network, partially offset by an 18% reduction in the Power and Energy Solutions segment.
U.S. Natural Gas Business LNG flows increased 15% in Q3 2025, with a new peak delivery record of 4 Bcf per day. This reflects growing demand and operational efficiency.
Mexico Gas Network Tracking towards 100% availability year-to-date, with daily gas imports averaging 4% higher in 2025 compared to 2024. A peak import day of over 8 Bcf was recorded in August.
Southeast Gateway Contribution First full quarter of EBITDA contribution, driving a 57% increase in Mexico business EBITDA for the quarter.
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Operating Highlights
New Growth Projects: Announced $700 million in new growth projects, bringing total sanctioned projects to $5.1 billion over the last 12 months. These projects focus on power generation and data centers.
Natural Gas Pipeline Flow Records: Set 14 new natural gas pipeline flow records in 2025, reflecting operational excellence.
Nuclear Power Generation: Bruce Power's Major Component Replacement program is extending reactor life and increasing availability, with equity income expected to double by 2035.
North American Policy Environment: Supportive policies in Canada, U.S., and Mexico are enabling timely and cost-effective project delivery. Examples include LNG Canada Phase 2 and U.S. permitting reforms.
Mexican Market Expansion: Mexico plans to bring 8 GW of new natural gas capacity online by 2030, supported by TC Energy's assets.
Global LNG Demand: TC Energy moves 30% of all feed gas for LNG export, with North American LNG export capacity expected to grow significantly.
Safety and Operational Excellence: Safety incident rates at 5-year lows, and projects with 2025 in-service dates are tracking 15% under budget.
AI and Technology Integration: Implemented AI for pipeline integrity, emissions reduction, and commercial intelligence, enhancing safety, compliance, and operational efficiency.
Capital Allocation and Financial Strength: Focused on low-risk, high-return growth with disciplined capital allocation. No equity issuance required for the 3-year plan.
Energy Transition and Long-Term Growth: Positioned to capture growth in natural gas and electricity demand, with investments in nuclear and low-carbon technologies.
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Risk or Challenges
Regulatory Environment: While the regulatory environment in North America is becoming more supportive, there are still risks associated with regulatory approvals and potential delays in project timelines, especially for large-scale infrastructure projects.
Economic Uncertainty: Economic conditions in Mexico, Canada, and the U.S. could impact investment plans and demand for natural gas and power infrastructure. For example, Mexico's economic expansion plans rely heavily on public-private partnerships, which could face challenges.
Supply Chain and Cost Management: Although the company has improved capital efficiency and cost management, supply chain disruptions or unexpected cost increases could impact project execution and financial performance.
Market Competition: The company faces competitive pressures in the natural gas and power sectors, particularly as it seeks to capitalize on growing demand for LNG exports, data centers, and electrification.
Technological and Operational Risks: While the company is leveraging AI and other technologies to improve efficiency, there are inherent risks in adopting new technologies, including potential implementation challenges and cybersecurity threats.
Debt and Financial Leverage: The company has a long-term target of 4.75x debt-to-EBITDA. Any deviation from this target due to unforeseen circumstances could impact financial flexibility and growth plans.
Environmental and Sustainability Risks: The company is focused on reducing emissions and meeting environmental standards, but any failure to meet these commitments could result in regulatory penalties or reputational damage.
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Guidance & Outlook
Revenue and EBITDA Growth: The company expects 2025 net capital expenditures to be at the low end of the $5.5 billion to $6 billion range. It anticipates 7% to 9% growth in comparable EBITDA from 2024 to 2025 and 6% to 8% growth in 2026. By 2028, the company projects comparable EBITDA of $12.6 billion to $13.1 billion, reflecting a 5% to 7% annual growth rate.
Natural Gas Demand and Infrastructure: Natural gas demand is forecasted to increase by 45 Bcf per day by 2035, driven by electrification, LNG exports, and data center expansion. The company has set 14 new natural gas pipeline flow records in 2025 and expects continued growth in demand across North America, supported by policy tailwinds in Canada, the U.S., and Mexico.
Capital Allocation and Project Sanctioning: The company has sanctioned $5.1 billion in new projects over the past year, with a focus on brownfield, in-corridor expansions. It plans to sanction an additional $6 billion in projects by the end of 2026, maintaining build multiples in the 5x to 7x range. The company is targeting a long-term leverage ratio of 4.75x debt-to-EBITDA.
Nuclear Power and Energy Solutions: Bruce Power's capacity is expected to grow to over 7 gigawatts by 2033, with equity income projected to double to $1.6 billion by 2035. The company is exploring a potential 4,800-megawatt Bruce C Project, with a decision years away. Nuclear capacity in Ontario is expected to nearly triple by 2050.
Technological and Operational Enhancements: The company is leveraging AI and automation to improve safety, reliability, and operational efficiency. Innovations include pipeline blowdown emissions reduction and advanced algorithms for capacity optimization, which are expected to enhance EBITDA contributions and reduce risks.
Market Trends and Policy Support: Policy developments in Canada, the U.S., and Mexico are expected to streamline project delivery and support growth. In Mexico, the government plans to bring 8 gigawatts of new natural gas capacity online by 2030, with TC Energy assets positioned to support this expansion.
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Shareholder Return Plan
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Key Q&A
Q:Can you walk us through the puts and takes that shape your long-term EBITDA growth trajectory and how long that 5% to 7% CAGR can be maintained?
A:Sean O'Donnell explained that the sustainability of the 5% to 7% CAGR depends on maintaining high return levels (currently at 12.5% IRRs). While small to midsized projects are being executed quickly, larger and more complex projects require more time for clarity. If returns remain strong, the growth trajectory could potentially improve.
Q:Is there room to scale towards $7 billion or even $8 billion of CapEx over the next few years?
A:Francois Poirier stated that while the current goal is to fill the $6 billion project backlog through 2030, there is potential to exceed this level. However, considerations like human capital and maintaining a 4.75 leverage cap are critical. Realistically, scaling above $6 billion might occur around 2028 or 2029 due to project lead times.
Q:Can you add more color on the size and complexity of projects you are now seeing and why they are more complex?
A:Tina Faraca noted that projects range from 0.5 Bcf to over 1 Bcf in scale, driven by growth in the power generation sector. Larger projects take more time due to supply chain constraints. Francois Poirier added that while projects are larger, they remain in-corridor expansions with straightforward execution, averaging $0.5 billion to $1 billion in size.
Q:How do you expect the $17 billion project backlog to progress over the next year?
A:Francois Poirier clarified that no projects have been turned down due to balance sheet or capital constraints. The backlog is expected to grow, with $3.5 billion of room under the $6 billion level. By 2026, the company may consider increasing the $6 billion annual capital spend.
Q:What drove the strategic decision to focus on transmission rather than competing in power generation for data centers?
A:Tina Faraca explained that the U.S. data center growth is being captured through interconnections with utility customers, offering low-risk and compelling returns. Behind-the-meter projects are less attractive due to limiting factors like contract terms and long lead times.
Q:What is the current status and next steps for Bruce C, and how will cost and execution risks be managed?
A:Greg Grant stated that Bruce C is progressing, with the notice of commencement received in August. The next step involves securing additional funding. Lessons from the NCR program, including robotics and operational efficiencies, will be applied to manage costs and risks.
Q:Have toll increases or rate cases been contemplated in the 2028 guide?
A:Tina Faraca confirmed that projections for rate cases and settlements include conservative estimates in the 2028 guide. Each rate case is different, but proposed uplifts are already embedded in the forecast.
Q:Are there challenges or bottlenecks with contractors, and can the current level of outperformance on capital cost savings be sustained?
A:Tina Faraca noted that while market pressures are being monitored, long-term relationships and contracting strategies help retain top-tier suppliers and contractors. Francois Poirier added that smaller, straightforward projects reduce risk, and the company is optimistic about sustaining execution excellence.
Q:What are the tailwinds and headwinds for the 3-year guidance period?
A:Sean O'Donnell highlighted more tailwinds than headwinds, including regulatory reforms, strong customer demand, and higher project IRRs. However, the company is cautious about extending guidance beyond 2028 to ensure these tailwinds remain durable.
Q:What are the updated thoughts on potential monetization in Mexico?
A:Sean O'Donnell stated that Mexico remains a strong business, with updates on monetization expected by mid to fall of 2026. Progress on CFE's power and transmission build-out and clarity on USMCA will influence decisions.
Q:How does the company view active capital rotation programs for mature or derisked projects?
A:Francois Poirier emphasized improving ROIC on existing assets through commercial and technological innovations before considering capital rotation. If equity is needed, the bias will be towards capital rotation first.
Q:Are project returns evolving, or have they been steady over the past 12 months?
A:Sean O'Donnell confirmed that project returns have been steady, with the 5% to 7% guidance range holding firm. Francois Poirier added that the company expects build multiples to remain consistent.
Q:What are the drivers of improved project returns, and how are customer willingness and competition influencing this?
A:Tina Faraca attributed improved returns to better project execution, high market capacity utilization, and strategic footprint advantages. Customers value new capacity and security of supply, allowing for stronger returns.
Q:How much cushion under the 4.75 leverage target is needed before annual CapEx can trend higher?
A:Sean O'Donnell stated that the focus is on capital efficiency and maintaining per-share metrics at or below 4.75 leverage. The company is giving the balance sheet time to breathe before considering higher CapEx levels.
Q:What are the top reasons for recent project execution success?
A:Tina Faraca credited human capital, early stakeholder engagement, and strong contractor relationships. Francois Poirier added that a strong culture and psychological safety contribute to high-quality execution.
Q:What are the highest likelihood opportunities for complementary services in high-demand power and energy solution markets?
A:Greg Grant identified Alberta as a key area due to its energy supply chain footprint. The company is selective, focusing on low-risk projects with strong returns, particularly in data center growth.
Q:Are there opportunities for brownfield expansions to send more Canadian gas south?
A:Tina Faraca confirmed opportunities for LNG-related expansions, particularly on the West Coast and through the ANR pipeline system to the Gulf Coast. Coastal GasLink expansion is being evaluated with LNG Canada.
Q:What are the building blocks of the 5% to 7% EBITDA growth guidance?
A:Sean O'Donnell outlined capital coming into service, rate cases, and efficiencies from asset availability, commercial strategies, and technology as key drivers. The company is optimistic about sustaining growth.
Q:Is the dividend growth range still expected to be consistent?
A:Sean O'Donnell confirmed the 3% to 5% dividend growth range, with a focus on directing capital to high-return projects, keeping growth at the low end of the range.
Q:What are the specific drivers of improved project IRRs across the footprint?
A:Tina Faraca highlighted project execution capabilities, market capacity utilization, and strategic footprint advantages. Customer demand for new capacity and security of supply also contribute to higher returns.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about moving towards the higher end of the $6 billion to $7 billion CapEx range or exceeding it. They emphasized conditions like project returns, balance sheet strength, and leverage targets but did not commit to specific plans or timelines.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Bcf day
Energy Solutions
Executive VP
LNG export
MCR
Ontario
Power Energy
Today
Units
ability
approach
capability
capital allocation
compliance
core
customer relationship
decision
demand electrification
efficiency
fundamental
funding
gas LNG
gas demand
gas power
gas storage
gigawatts
increase gas
innovation
network
peer
period
pipeline
project month
quality project
reactor
review
segment
source
storage project
technology
TRP Transcript
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Unknown5-1
The earnings call presents a mixed picture with positive financial performance, including revenue and net income growth, but significant risks such as market conditions, regulatory hurdles, and supply chain disruptions. The financial improvements are offset by these risks, leading to a neutral sentiment. The lack of strategic initiatives, operational updates, and unclear management responses in the Q&A further contribute to the neutral rating. Without additional context on market cap and strategic updates, the stock is expected to remain stable in the near term.
Alithya Group Inc. (ALYA:CA) Q3 2026 Earnings Call Transcript
Unknown2-13
The earnings call presents mixed signals. Financial performance shows improved net earnings and cash flow, but there's a decrease in adjusted net earnings and increased net debt. The Q&A reveals management's reluctance to provide specific guidance and details, causing some uncertainty. However, the company's strategic moves, such as migration to higher-value work and a healthy acquisition pipeline, balance the negatives. Without market cap information, it's challenging to predict strong movements, leading to a neutral sentiment.
TC Energy Corporation (TRP:CA) Q4 2025 Earnings Call Transcript
Positive2-13
The earnings call summary and Q&A indicate strong financial performance with a focus on growth and expansion. Management's confident outlook on EBITDA growth, natural gas demand, and strategic projects like Crossroads and Columbia system expansion suggest positive market sentiment. The company's emphasis on maintaining a strong balance sheet and investment-grade credit rating further supports a positive sentiment. While some uncertainties exist, the overall strategic direction and growth potential are promising, leading to a positive stock price prediction.
TC Energy Corporation (TRP:CA) Q3 2025 Earnings Call Transcript
Positive11-8
The earnings call summary and Q&A session reflect positive sentiment. The company has strong financial metrics, with increased EBITDA outlook and robust project returns. While guidance is cautious, the management is optimistic about sustaining growth and maintaining leverage targets. The focus on strategic partnerships and capital efficiency, along with steady project returns, adds to the positive outlook. Despite some uncertainties, the overall sentiment is positive, with potential for stock price appreciation.
TRP Slides
TRP Report
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