TRP Q2 2025: 26% Rate Hike Pending FERC Approval to Boost Cash Flow
- Enhanced Revenue Through Rate Increases: The settlement in principle with Columbia Gas has resulted in a 26% increase in pre-filed firm transportation rates, which supports a stronger cash flow outlook and improved margins.
- Disciplined, Under-Budget Project Execution: With approximately $8.5 billion of projects planned for 2025 being delivered on schedule and largely under budget, TRP is positioned to improve its cash flow, help achieve its deleveraging target, and maintain capital efficiency.
- Strong Position in High-Growth Markets: Ongoing conversations and capacity expansions related to growing demand in U.S. data centers and power generation provide TRP with diversified opportunities to capture long-term secular growth.
- Columbia Gas Settlement Uncertainty: The settlement in principle for Columbia Gas established interim rates reflecting a 26% rate increase, but final step-up details remain uncertain until final filings are approved by FERC. This uncertainty could result in a downside if the final outcomes are less favorable.
- Execution and Capacity Constraints: The call highlighted that while current project execution is strong, there are concerns around scaling due to limited human and financial capacity. Post-2025, with many approvals taking two to three years, a slower deployment of capital may delay projects and impair growth.
- Reliance on Small-Scale, Brownfield Projects: The company’s future growth relies on executing numerous smaller-scale brownfield projects (~$450 million average size). This strategy, while capital efficient, increases exposure to execution risks and potential regulatory delays in a tight schedule environment.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
2025 Comparable EBITDA | FY 2025 | $10.7B to $10.9B | $10.8B to $11.0B | raised |
2027 Comparable EBITDA | 2027 | $11.7B to $11.9B | $11.7B to $11.9B | no change |
Leverage Metrics (Debt-to-EBITDA) | 2026 | no prior guidance | 4.75 times | no prior guidance |
2025 Projects in Service | FY 2025 | $8.5B | $8.5B | no change |
Future Capital Spending | After 2025 | no prior guidance | $6B to $7B annually | no prior guidance |
Bruce Power Availability | FY 2025 | low 90% range | low 90% range | no change |
Bruce Power Realized Power Price | 2025 | no prior guidance | $110 per MWh | no prior guidance |
IRR for Sanctioned Projects | 2025 | no prior guidance | 12% | no prior guidance |
EBITDA Build Multiples for New Projects | New Projects | no prior guidance | 5 to 7 times | no prior guidance |
North American Natural Gas Demand Forecast | 2035 | no prior guidance | 45 Bcf per day (up from prior forecast of 40 Bcf per day) | no prior guidance |
Mexico Business Utilization and Growth | FY 2025 | no prior guidance | Utilization expected strong; capacity largely spoken for | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Project Execution | Emphasized strong cost efficiency and asset value with projects like Southeast Gateway and Bruce Power MCR delivered on time and under budget in Q1 2025 and Q4 2024 ( ). | Highlighted improved returns (from 11% to 12% IRR), a focus on brownfield in‐corridor projects, and consistent under-budget completions in Q2 2025 ( ). | Consistent emphasis with an improved return profile and continued focus on disciplined execution ( ). |
Capital Discipline | Focused on maintaining capital expenditures within a defined $6–7 billion range and adherence to a 4.75x debt-to-EBITDA target in Q1 2025 and Q4 2024, with budget-conscious deployment of projects ( ). | Emphasized peak capital deployment in 2025 with $8.5 billion in projects and a plan to deleverage to 4.75x by 2026, while maintaining capital efficiency measures in Q2 2025 ( ). | Continues focus with nuanced emphasis on peak deployment and efficiency, aligning with long-term financial discipline ( ). |
Regulatory Uncertainty | Detailed discussions in Q1 2025 on approvals needed for projects (e.g. Southeast Gateway and LNG projects) and in Q4 2024 on rate case processes and environmental assessments for projects ( ). | Briefly mentioned regulatory approval timelines affecting project start-up without extensive detail in Q2 2025 ( ). | Reduced emphasis in Q2 compared to the more detailed discussion in prior periods ( ). |
Rate Increases and Rate Case Settlements | Discussed filing rate cases with FERC for pipelines (e.g. ANR, Columbia) and maintained conservative assumptions around settlements in both Q1 2025 and Q4 2024, with negotiations expected after receiving FERC top sheets ( ). | Outlined a settlement in principle for Columbia Gas, including a 26% increase in rates and its positive impact on EBITDA, with clearer settlement dynamics in Q2 2025 ( ). | Consistent focus with clearer and more defined settlement outcomes in Q2 ( ). |
Data Center and Power Generation Growth Opportunities | In Q1 2025, the focus was on front-of-the-meter and behind-the-meter strategies for data center loads, such as the Northwoods project, while Q4 2024 emphasized Ontario projects and pumped storage in response to growing energy demand ( ). | Highlighted strong commercial conversations with over 30 counterparties, upsizing of projects like Pulaski and Maysville, and a robust pipeline that includes coal-to-gas conversions in Q2 2025 ( ). | Increased focus and expansion with upsizing of projects reflecting strong market demand ( ). |
Financial Leverage and Capital Expenditure Risks | Q1 2025 noted temporary elevated leverage due to heightened CapEx with strategies such as partnerships, while Q4 2024 showed progress in reducing the debt-to-EBITDA ratio to around 4.8x and maintained capital discipline ( ). | Q2 2025 outlined expected peak leverage in 2025 with a plan to reduce to 4.75x by 2026, emphasizing disciplined project execution and a concentrated focus on higher return U.S. projects ( ). | Ongoing vigilance across periods with a balanced approach to risk management and disciplined capital allocation ( ). |
Execution and Capacity Constraints | Q1 2025 emphasized strong execution records (e.g. Southeast Gateway under budget, record delivery metrics) and addressed capacity through projects such as Northwoods, while Q4 2024 noted full Mainline capacity and restoration efforts ( ). | Q2 2025 stressed disciplined execution excellence, managing finite brownfield capacity and addressing growing demand from data centers through incremental service improvements ( ). | Continued strategic management with an increasing emphasis on capacity optimization amid rising market demand ( ). |
Small-Scale Brownfield Projects | Q1 2025 focused on brownfield, in-corridor, permittable projects to serve data center loads, and Q4 2024 highlighted the reliance on numerous small, low-risk projects to extend the capital program ( ). | Reiterated in Q2 2025 with a clear focus on brownfield projects averaging around $450 million, which deliver improved returns and reduced execution risks ( ). | Consistent reliance with positive sentiment on enhanced efficiency and risk mitigation across periods ( ). |
Tariff and Inflation Risks | In Q1 2025, minimal near-term impact was noted due to reliance on domestic supply chains, and Q4 2024 detailed proactive mitigation strategies such as firm pricing and supplier diversification ( ). | Not mentioned in Q2 2025 ([N/A]). | Reduced emphasis in Q2, suggesting lower immediate concerns about tariffs and inflation compared to previous periods ([N/A]). |
Nuclear Expansion | Q1 2025 discussed the Major Component Replacement program, Project 2030 to boost capacity, and initial steps in Bruce C development with federal support; Q4 2024 focused on potential expansion at Bruce C and the vital role of nuclear in meeting Ontario’s future demand ( ). | In Q2 2025, there was continued focus on Bruce Power performance improvements and progress on Bruce C, supported by federal funding and a long-term view on increasing equity income from nuclear assets ( ). | Stable long-term strategy maintained with consistent investment and robust support across periods ( ). |
Dependency on External Parties for LNG Projects | Q1 2025 provided extensive discussion on reliance on LNG Canada, regulatory bodies, and partnerships (including indigenous community involvement) for LNG project decisions; Q4 2024 noted similar dependencies for both Canadian (e.g. Coastal GasLink) and U.S. LNG export terminals ( ). | Q2 2025 did not specifically address dependency on external parties for LNG projects ( ). | Reduced emphasis in Q2 relative to previous periods, suggesting a lower prioritization or a streamlined process for LNG partnerships ( ). |
-
EBITDA Guidance
Q: How do you view 2027 EBITDA guidance?
A: Management expressed strong confidence in hitting an 11.7%–11.9% EBITDA range, noting that current performance reflects assets sanctioned years ago and a proven project delivery track record. -
Deleveraging Path
Q: How will you reach a 4.75x leverage target?
A: They explained that after a peak deployment of $8.5B in projects this year, full-year 2026 cash flows will drive leverage down to about 4.75x, underpinned by disciplined capital deployment. -
Columbia Settlement
Q: What are the new Columbia Gas rate terms?
A: Management confirmed the settlement delivers an interim increase of 26% over pre-filed rates with rates structured over three defined periods, though final step-up details await FERC filings. -
Pipeline Capacity
Q: Can you support higher demand from Meta expansion?
A: They noted robust pipeline capacity in New Albany, strengthened by recent open seasons, ensuring ample supply to support significant demand growth. -
NGTL Growth Plan
Q: What’s the cadence for NGTL growth projects?
A: They described the multiyear NGTL program as back-end loaded with modest initial waves, while capital allocation remains focused on higher-return U.S. gas projects. -
Partnership Strategy
Q: How are you handling project partnerships?
A: Management prefers executing brownfield projects independently but is open to strategic joint ventures in areas like power and energy solutions when scale or specialized expertise can boost returns. -
Pennsylvania Market
Q: Can you secure greater market share in Pennsylvania?
A: They highlighted strong positioning in the region, with customer demand prompting project upsizing and improved negotiation leverage to capture long-term value. -
Behind-the-Meter Focus
Q: What’s the plan for behind‐the‐meter power projects?
A: The team emphasized prioritizing utility-driven data center solutions, while remaining open to select behind-the-meter opportunities that meet their risk–return profile. -
Rating Outlook
Q: Have rating agencies’ views changed recently?
A: Management stated they maintain regular, constructive contact with agencies, and disciplined execution has kept the outlook positive despite ongoing review cycles. -
Budget Reconciliation Impact
Q: How does U.S. budget reconciliation affect capital plans?
A: They clarified it has minimal direct impact on their regulated business, providing a neutral backdrop that benefits capacity expansion without altering core capital strategies.
Research analysts covering TC ENERGY.