TC Energy Q1 earnings up $150 million, Keystone XL in-service 2023

TC Energy Corp. had net income for first-quarter 2020 of $1.15 billion, compared with net income of $1 billion for the same period in 2019. The company is moving forward with construction of its Keystone XL pipeline, which will require an additional investment of about $8 billion, and expects the pipeline to enter service in 2023.

Keystone XL is underpinned by new 20-year contracts for 575,000 b/d. TC Energy has partnered with the Government of Alberta which will invest roughly $1.1 billion in equity and fully guarantee a $4.2 billion project-level credit facility through construction. Once the project is completed and placed into service, the company expects to acquire the Government of Alberta’s equity interest and refinance the credit facility.

In December 2019, TC Energy entered into an equity purchase agreement to sell 65% equity interest in its Coastal GasLink pipeline to KKR-Keats Pipeline Investors II (Canada) Ltd. and a subsidiary of Alberta Investment Management Corp., which is expected to close second-quarter 2020 subject to customary regulatory approvals and consents. As part of the transaction, TC Energy will be contracted by Coastal GasLink Pipeline LP to construct and operate the pipeline.

Construction continues along the pipeline route with about 75% of clearing completed and roughly 35% of pipe stockpiled. Major work is now complete for the winter season with crews waiting to remobilize following spring breakup.

While the project has been designated an essential service by the British Columbia provincial government, TC Energy anticipates that changes in work practices and other restrictions put in place by government and health authorities in response to COVID-19 may have an impact on its progress.

On Feb. 19, 2020, the Canada Energy Regulator (CER) issued a report recommending that the Governor in Council (GIC) approve TC Energy’s 2021 Nova Gas Transmission Ltd. (NGTL) system expansion program and the company is awaiting a final decision from the GIC. The 349 km (217 miles) of new pipeline and three compressor units are required to connect incremental firm-receipt supply commencing April 2021 and expand Western Canadian Sedimentary basin (WCSB) export capacity by 1 bcfd.

On Jan. 31, 2020, TC Energy placed the $1.1 billion Aitken Creek section of its North Montney project in service. The final section of the project went into service Apr. 18, 2020. The total project added 206 km (128 miles) of new pipeline along with three compressor units and 13 meter stations.

On Feb. 12, 2020, the company approved its Alberta XPress project, an expansion project on the ANR Pipeline system that will use existing capacity on the Great Lakes and Canadian Mainline systems to connect growing supply from the WCSB to US Gulf Coast LNG export markets. The anticipated in-service date is 2022 with estimated project costs of $300 million.

TC Energy’s Buckeye XPress project is an upsizing of an existing pipeline replacement project in conjunction with the company’s Columbia Gas modernization program. The $200 million to upsize the replacement pipe and install compressor upgrades will add 275 MMcfd of incremental pipeline capacity to accommodate growing Appalachian production. The US Federal Energy Regulatory Commission certificate for Buckeye XPress was received Jan. 23, 2020, and TC Energy expects the project to be placed in service late-2020.

The arbitration process Mexico’s Comisión Federal de Electricidad (CFE) initiated in June 2019 regarding the Villa de Reyes and Tula pipelines, and their fixed capacity payments under force majeure, have been suspended while it and TC Energy negotiate transportation services agreements. Similar to the successful amending agreement reached for Sur de Texas pipeline that resulted in CFE’s withdrawal of its arbitration request, TC Energy anticipates agreements for Tula and Villa de Reyes will be reached before end-2020. Construction on the Villa de Reyes-Tula project is ongoing with phased in-service anticipated to begin third-quarter 2020 and full service by end-2020.