François Poirier walked into a hotel ballroom last week ready to talk about the future of TC Energy Corp. TRP-T But the institutional investors gathered there were far more interested in what the chief executive of one of North America’s largest energy infrastructure companies had to say about the present.
Calgary-based TC Energy had drawn a capacity crowd of about 140 portfolio managers and analysts to Toronto’s King Edward Hotel for its first in-person investor day since the start of the pandemic. Mr. Poirier – named CEO in 2021 – and his team took the audience through a 160-slide presentation detailing how a business founded on oil and gas pipelines will stay resilient and relevant over the next three decades, as it moves into a low-carbon economy.
Investors, however, zoomed in on TC Energy’s disclosure of “a material increase in project costs” on the Coastal GasLink pipeline, a 670-kilometre link between B.C. natural gas fields and an LNG terminal on the West Coast. The news came just four months after the company boosted the estimated cost of the project by 70 per cent, to $11.2-billion. In a report, analyst Robert Kwan at RBC Capital Markets said: “News of another material cost increase for the Coastal GasLink pipeline project caught the investment community by surprise.”
The problems plaguing the pipeline – scheduled for completion by the end of 2023 – reflect the issues facing every construction project these days. TC Energy is dealing with rising labour costs, a shortage of skilled tradespeople and poor performance from contractors. The company promised to put a new price tag on the pipeline early in the new year – analysts project a $2-billion hike. Mr. Kwan said the delay in announcing the extra costs reflects TC Energy’s ongoing attempt to recover a portion of the bill from contractors and partners.
Moving mountains: Is the Coastal GasLink pipeline a saviour or scourge?
As Mr. Poirier sees it, his job as CEO involves balancing the priorities of current fossil fuel-focused projects and a 30-year plan to become a low-carbon company. So his investor presentation highlighted delivering Coastal GasLink, plus an aggressive expansion of natural gas networks in the U.S. and Mexico, where TC Energy recently signed the first-ever private-sector partnership with state-owned utility Comisión Federal de Electricidad.
At the same time, fund managers heard about how TC Energy will become an “energy-agnostic infrastructure company,” as Mr. Poirier put it in an interview during the investor session. By 2050, the company will triple its renewable-energy facilities – to roughly 20 per cent of its portfolio – continue to invest in the Bruce Power nuclear plant and back hydrogen production hubs, along with carbon capture and storage businesses, while scaling back its exposure to oil.
TC Energy plans to sell as much as $5-billion in assets this year to help fund its industry-leading $34-billion in growth plans. Mr. Poirier said there are “no sacred cows” at a business that traces its roots to 1951, when predecessor Trans-Canada Pipeline linked Alberta gas fields to customers in Eastern Canada.
In laying out his transformation strategy, Mr. Poirier stressed that there is nothing revolutionary in what TC Energy is contemplating. He said it builds on the company’s competitive advantage “in our engineering skills and in our deep relationships with all stakeholders, with our customers, Indigenous groups and regulators.”
Hydrogen, for example, is transported through TC Energy’s existing natural gas network. And the company is tapping external experience in the nascent sector, striking a partnership last year with Rochester, N.Y.-based fuel-cell maker Hyzon Motors Inc. to develop as many as 10 hydrogen production hubs across North America to power heavy-duty vehicles.
TC Energy is also striking partnerships to share the risks that come with developing carbon-capture technology, linking up with Calgary-based Pembina Pipeline Corp. in 2021 on the planned Alberta Carbon Grid. The province approved the concept this year, and the two companies expect to make a decision on building the grid in the next 24 months. The facility would store as much as 10 million tonnes of CO2 annually under fields north of Edmonton.
Shifting from oil and gas to lower-carbon infrastructure mirrors the goals of TC Energy’s biggest clients, the utilities that power the economy, Mr. Poirier said. The former investment banker, who joined the company in 2014, said: “If we fall behind our customers, we lose relevance.”
After the hotel ballroom session last week, analysts said cost overruns at Coastal GasLink will loom over TC Energy’s stock price until the final price tag becomes clear. Looking further down the road, the company’s “ESG-friendly growth” is expected to resonate with investors, Mr. Kwan said, adding: “We expect TC Energy to outperform other energy infrastructure companies.”
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