TC Energy net income up 18%, boosted by Coastal GasLink sale
TC Energy Corp. had second-quarter 2020 net income of $1.3 billion, compared with net income of $1.1 billion for the same period in 2019. The company continued to advance $37 billion in capital projects, placing about $3 billion of assets into service during first-half 2020: $2.9 billion of Nova Gas Transmission Ltd. (NGTL) system and $100 million of Canadian Mainline capacity.
TC Energy also continued construction activities on the 670-km (420-mile), 2.1-bcfd Coastal GasLink natural gas pipeline while selling a 65% equity interest in the project to KKR-Keats Pipeline Investors II (Canada) Ltd. and a subsidiary of Alberta Investment Management Corp. (AIMCo) and entering secured long-term project financing credit to fund most of the construction costs, resulting in combined net proceeds of $2.1 billion. As part of the transaction, TC Energy was contracted by Coastal GasLink Pipeline LP to construct and operate the pipeline.
Field activity increased across the project following spring thaw, with crews remobilizing while incorporating COVID-19 guidelines for construction safety, according to TC Energy. Ongoing work includes construction of roads, bridges, worker accommodation, and right of way grading. Pipe delivery continues, with more than 50% of required pipe supply delivered to site, and mainline mechanical construction will start this summer. The project is conducting a review of baseline cost and schedule to incorporate scope increases, permit delays, and COVID-19 impacts.
Coastal GasLink will deliver gas from the Dawson Creek, Alta., area to the LNG Canada liquefaction plant near Kitimat, BC, being developed by a joint venture of Royal Dutch Shell PLC, Petronas, PetroChina Co. Ltd., Mitsubishi Corp., and Korea Gas Corp. The pipeline’s capacity is expandable to 5 bcfd.
In addition to the $2.9 billion of NGTL capacity put in service, on Feb. 19, 2020, the Canada Energy Regulator issued a report recommending that the Governor in Council approve the 2021 NGTL System Expansion Program and TC Energy is awaiting a final decision. The 344 km (214 miles) of new pipeline and three compressor units are required to connect incremental firm-receipt supply beginning April 2021 and expand basin export capacity 1 bcfd.
On July 29, 2020, TC Energy approved the Elwood Power Project-ANR Horsepower Replacement that will replace, upgrade, and modernize certain infrastructure while reducing emissions along a high-section of the ANR pipeline system. The enhancements will improve reliability of the ANR system and add 123 MMcfd of capacity for delivery to an existing power plant near Joliet, Ill. The anticipated in-service date of the combined project is second-half 2022, with estimated costs of $400 million.
Mexico’s Federal Electricity Commission initiated arbitration in June 2019 regarding TC Energy’s Villa de Reyes and Tula gas pipeline projects, disputing fixed capacity payments due to force majeure events. Arbitration proceedings are suspended until fourth-quarter 2020 while TC Energy management advances settlement discussions with the CFE.
Villa de Reyes construction is ongoing. Phased-in service on the 420-km (261-mile), 886-MMcfd pipeline, expected to start third-quarter 2020, will be delayed due to COVID-19 contingency measures, which have impeded TC Energy’s ability to obtain work authorizations as a result of administrative closures. Subject to the timely re-opening of government agencies, TC Energy expects to complete construction of Villa de Reyes in first-half 2021.
Christopher E. Smith | Editor in Chief
Christopher brings 27 years of experience in a variety of oil and gas industry analysis and reporting roles to his work as Editor-in-Chief, specializing for the last 15 of them in midstream and transportation sectors.