Olivia Halferty

Olivia Halferty Foster inquired about the specific drivers behind the improved project returns observed this decade compared to earlier periods, customer willingness to accept rates supporting these returns, and any balancing factors from project competition. She also asked about the desired cushion under the 4.75x leverage target before increasing annual CapEx and whether TC Energy is considering moving above the $6 billion-$7 billion CapEx range over time.

Answer

Tina Faraca, Executive Vice President and Chief Operating Officer, Natural Gas Pipelines, cited enhanced project execution capabilities, improved governance, early stakeholder engagement, strong contractor negotiations, and increased market capacity utilization as key drivers for higher returns. She noted that customers highly value new capacity and supply security, allowing for stronger negotiations. Sean O’Donnell, Executive Vice President and Chief Financial Officer, stated that the objective is capital efficiency rather than a specific leverage cushion, prioritizing projects that deliver high returns (12.5% or better) while maintaining balance sheet strength. He indicated that if project returns, execution, and leverage targets hold, growth above the current CapEx range is possible.

Olivia Halferty Foster asked about the specific drivers of improved project IRRs compared to earlier this decade, insights into customer willingness to sign up for rates supporting these returns, and any balancing factors from project competition. She also asked how much cushion TC Energy aims to build under the 4.75x leverage target before trending annual CapEx towards the higher end of the range, and if the company contemplates moving above the upper end of the $6 billion-$7 billion range over time.

Answer

Tina Faraca (EVP and COO of Natural Gas Pipelines) identified key drivers for higher returns as advanced project execution capabilities, increased utilization of pipeline capacity in the market, and customers valuing new capacity and supply security, allowing for stronger negotiations. She also cited the broad growth landscape in North America enabling selection of high-return projects. Sean O’Donnell (EVP and CFO) stated that the objective is capital efficiency and maintaining per-share metrics at or below 4.75x leverage, rather than a specific cushion. He clarified that TC Energy is not chasing lower-return projects and is giving the balance sheet time to breathe by staying below $6 billion for the next couple of years. He reiterated that if project returns remain strong (12.5% or better) and execution is on time/budget, and it works at 4.75x leverage or lower, then growth beyond the current range is possible.

Olivia Halferty from Goldman Sachs asked about the cadence of the NGTL growth plan and how capital is allocated between it and higher-return U.S. projects. She also inquired about the company's willingness to use partnerships for future growth.

Answer

President & CEO François Poirier explained that while TC Energy will honor its NGTL commitments, discretionary capital will be allocated to the highest risk-adjusted returns, which are currently in the U.S. EVP & CFO Sean O’Donnell stated that partners are not needed for their current brownfield strategy but are always considered if they add strategic or financial value, a point echoed by EVP Greg Grant for the Power segment.

Olivia Halferty asked about the drivers behind the significant step-up in water services in Q4 and the outlook for 2025. She also inquired about capital allocation priorities, specifically how the company weighs M&A against buybacks and deleveraging, and what the expected run rate for share repurchases might be.

Answer

Brendan Krueger, CFO of Antero Midstream, attributed the Q4 water volume increase to the completion of a DUC pad. He projected that 2025 water volumes would be similar to 2024, as an increase in the number of wells is offset by shorter laterals. On capital allocation, Krueger noted that M&A is evaluated against the returns from buybacks and debt reduction, and suggested that free cash flow after dividends would likely be split 50/50 between share repurchases and further debt paydown.