Stan Chapman: And maybe one last thing I would add, Theresa, is even though we’re going to compete for and win our fair share of the data center load. There’s another way to serve it indirectly, which is by getting increased deliveries to the power generators. And do keep in mind that there’s about 10 gigawatts of coal-fired power generating facilities that are scheduled to retire here by the end of 2030. That is within 15 miles of our assets. So I think we’re well positioned to capture that part as well.
Theresa Chen: Thank you.
Operator: Our next question comes from Robert Kwan of RBC Capital Markets. Please go ahead.
Robert Kwan: Great, good morning. If I can start with Southeast Gateway, you had some updates on that, but I’m just wondering if you can compare where you are versus certain [indiscernible] just in terms of some of the productivity. And then if you can also just comment on some of the major remaining critical path items or basically what keeps you up at night on the rest of the project.
Stan Chapman: Yes, Robert, this is Stan. Thanks for the question. We’re in a really good place with respect to the project right now. As we noted earlier, 70% of the offshore pipeline is completed, which includes 100% of the northern segment. We recently brought the vessel into port for some scheduled maintenance. It’s going to be going back out to complete the about 189 kilometers of the southern portion of the deepwater pipeline here shortly. We’re also progressing on the near shore work, as well as the facilities work, which is adding compressor stations at three landfalls. And the fact that we have all three of our drills completed is a big deal for the team. So we’re excited with respect to where the project is right now.
In terms of challenges for the future, really it boils down to weather risk and maintaining the productivity that we’ve seen both with the vessel offshore and the work that the team is doing onshore. When I think back to some of the lessons learned against [indiscernible] that we’re going to be implementing here is, we’re going to do the subsea tie-ins below the waterline rather than on the waterline. And that takes a lot of this weather risk out of play. So the team is well engaged. We’re in a good position. And I’m excited that we’re remaining on track, both with respect to scheduling costs for the project.
Robert Kwan: That’s great. Thank you. If I can just finish on the asset sale program, you’ve noted you’ve got multiple processes ongoing, but just due to the butterfly divestiture limits co-spin, does that cause you to focus a little bit more on the processes that you can close quickly and/or are you thinking about trying to monetize a little bit more than $3 billion just to take out or de-risk of the 2025 program?
Francois Poirier: Thanks Rob, it’s Francois and appreciate the question. Based on the timelines we have on our various processes, we see us being able to close a sufficient amount of additional transactions prior to the spin such that the 10% limit that’s included in the CRA order, if you will, is not going to impair our ability to complete our deleveraging program, whether it’s all in 2024 or some of it leaks into 2025. So we’re very comfortable with our ability to achieve that below our upper limit of 4.75 in 2024 and then remain there as we go forward. And I will also point out that not only is 2024 an anomaly with us retaining a portion of the Liquids EBITDA for a part of the year, so is 2025. We’re putting $9 billion of assets into service in 2025, but only have a partial year benefit there.
Starting in 2026, we’re going to have the full year benefit for all of those assets. And that in itself is going to continue to accelerate our deleveraging below the 4.75 upper limit.
Robert Kwan: That’s great, thank you very much. And Joel, all the best [indiscernible].
Joel Hunter: Thanks, Robert.
Operator: Our next question comes from Robert Catellier of CIBC Capital Markets. Please go ahead.
Robert Catellier: Thank you, and good morning, everybody and congratulations on the strong operating results. I wanted to go back to the capital structure questions starting with South Bow. Right now TC Energy has the benefit of an enviable maturity profile. I wonder what you see as the average maturity profile for South Bow. What’s your vision for that?
Francois Poirier: Yeah, Rob, we’ll access the full stack, but on average you should use 10 years as a good rough guideline of the maturity profile that we’ll be seeking. But we’ll be putting from 3s, 5s, 10s, 30s, all in the stack as we go out.
Robert Catellier: Okay, that’s helpful. And then I have sort of the same question for TC Energy. Basically when that capital stack has stood up at South Bow and that $7.9 billion makes its way back to TC Energy. It sounds like you’re very determined to stay at the 4.75 leverage or below, but do you have any thoughts on the term? Can you afford to shorten that term of 17 years, 18 years as you redeem debt to manage your interest rate exposure there?
Francois Poirier: I’ll start here, and then Sean, if you want to chime in. Great question Rob. A couple of reminders here. The weighted average term of our debt is 17 years. Over 90% of our debt is at fixed rate. So when we think about $7.9 billion coming back to TC as it relates to South Bow, part of those funds will be used to just fund our capital program for this year. Part of the funds will be used to reduce some of our long-term debt. In the grand scheme of things, it’s not going to really change the weighted average. We’d rather have a longer term to maturity with our debt and have a very manageable maturity profile. It’s the way we’ve always managed the capital structure within TC Energy such that we average about $2.5 billion per year of debt maturities and that will continue going forward.
So when we look at the money coming back here, again, part of it will be for the funding of this year’s capital program, part of it will be to reduce our debt, and it should have a negligible impact on our weighted average term to maturity for debt.
Robert Catellier: Okay, great. And then last one for me, I just wanted to go back to the NCTL potential sale there. My understanding was that, the amount you could sell there is practically limited by the indigenous loan guarantee programs. And I just wonder whether or not that’s changed with the federal budget announcement for more loan guarantees.
Francois Poirier: Robert, it’s Francois. To the extent we can avail ourselves of indigenous loan guarantees beyond the one that the AIOC is generously providing. We would certainly consider that, but I would highlight that we have a number of processes competing with one another at this time. And I think given the commercial sensitivities of our discussions, I won’t comment further.
Robert Catellier: Okay, that’s fair enough. Thank you.
Operator: Our next question comes from Keith Stanley of Wolf Research. Please go ahead.
Keith Stanley: Hi, good morning. The South Bow results another really strong quarter. Just curious how much of this you view as sustainable as a run rate, and how much is some of the spread-oriented upside on Keystone that’s a little harder to predict in the future?
Bevin Wirzba: Keith, it’s Bevin. Yes, we — first thing is operational excellence. We achieved 96% of system operating factor in the first quarter. Having our systems available to capture the [ARBs] (ph), our strategic franchise connecting northern Alberta down to the Gulf Coast, making that corridor available can attract barrels and having a system operating factor that high allows us to track more barrels. So the first quarter we had outstanding results both on Keystone but also on Marketlink where we were able to add some additional contracts this year. So year-over-year on Marketlink, we’ve strengthened our contract profile on Marketlink, adding around 200,000 barrels. So when you think about our system and our corridor, just strengthening that franchise is just attracting barrels, because that’s where the barrels want to go is the Gulf Coast.
We want to temper our outlook though we have — we do have TMX line fill coming it’s starting right now and so we already have seen some narrowing of that ARB on the Keystone system, but I want to remind everyone that our Keystone contracts are effectively — are 94% contracted with an eight plus year term, so only 6% of that volume on Keystone is subject to spot or variable tolls, but our ability to continue to move spot barrels on our system is what we anticipate, but I don’t anticipate us being as strong as the first quarter.
Keith Stanley: That’s helpful. Second question, just a follow-up on Southeast Gateway. It sounds like it’s going very well. If it did come on early in 2025, would you expect to start collecting the contract fee early as well, or is that not necessarily the case? I’m just curious how that would work under the contract if you are early.
Stan Chapman: Yes, this is Stan. Under the contractual terms with CFDR counterparty, they will pay us upon in-service date in summer of 2025 and not necessarily earlier.
Keith Stanley: Thank you.
Operator: Our next question comes from John Mackay of Goldman Sachs. Please go ahead.
John Mackay: Hey, good morning. Thanks for the time. I wanted to circle on just some of the leverage comments around 2025. Certainly understand the amount of EBITDA coming online mid-year, but I guess are you guys still targeting necessarily hitting 4.75 by the end of 2025 as well? And if so, last call you talked about needing some incremental EBITDA or maybe some incremental asset sales, just how we should frame that up. Thanks.
Francois Poirier: The short answer, John, is yes. With respect to filling any gap, because of the partial year in 2025 is about 0.2. There are three sources of deleveraging that can fill that gap. The first is outperformance from an EBITDA perspective. You’ve seen us here in the first quarter deliver results that were above plan. That’s come from excellence in operations, our focus initiatives where we’re reducing cost. FX has provided a nice tailwind for us here in the first quarter. Secondly, to the extent we’re able to deliver on our projects below plan, that will also have positive impact on our credit metrics. And then if and only if the gap is not filled by the first two, we would consider additional asset sales to remain below that 4.75.
And we’re going to let the year play out a little bit before we make that kind of decision. Because again, I think we’re performing very well right now. And we see line of sight to being able to address that gap from all three of those different levers.
John Mackay: All right, that’s very clear. Appreciate that. Maybe just one more from me. On the $6 billion to $7 billion of outer-year capital that you’re committing to, and more recently your language has been holding to that lower end, I guess just how much of that if we’re looking forward a couple of years is already spoken for existing projects and then how much would be in there for some of these incremental opportunities, data centers, et cetera, that you could still add to the backlog without going above that level?
Francois Poirier: Appreciate the question. Look, a bias to the lower end of that $6 billion to $7 billion is really important to us. We value the option value of performing the plan. So if we stay to the lower end of the $6 billion to $7 billion in terms of the planned capital, if we perform the plan on time and on budget, that gives us up to an incremental $1 billion every year to either accelerate debt repayment or eventually perhaps even undertake some share buybacks. One of the beauties of our business is, we have very predictable line of sight to allocating our capital in the future. I can tell you that in terms of our internal plans, I have visibility of where the capital is going to go down to specific projects with specific returns virtually till the end of the decade.
That’s the beauty of the predictability of our business. We do have an opportunity to add incremental projects at attractive returns going forward with some of the positive dynamics we’re seeing in data centers and other demand growth. But that’s more middle of the decade and beyond. I will point out that it took us a couple of years to respond to the Wisconsin request to harden the infrastructure from extreme cold that came from winter storm Uri. And so the data center and other electricity and natural gas demand increases we’re seeing across the board are going to take a couple of years to materialize. So we do see an opportunity for us to crystallize some of those, but more in 2026, 2027, and beyond.
John Mackay: Thanks very much for the time.
Francois Poirier: You bet.
Operator: Our next question comes from Patrick Kenny of National Bank Financial. Please go ahead.
Patrick Kenny: Thank you. Good morning, everybody. Just on Coastal GasLink, can you remind us the scope of work to be done to support Cedar LNG and what sort of EBITDA build multiple you might be able to achieve there? And then any thoughts on any work that might be needed to prepare for a potential Phase 2 from LNG Canada or perhaps any other floating LNG projects that might come down the road into next year and beyond.
Francois Poirier: Thanks, Patrick. It’s Francois. I’ll take this one. Look, on Cedar, first of all, we’re having a very close relationship with the Heisla Nation. We’re very excited and very happy for them to be making positive progress on the project. It’s going to create wealth for the nation and advance their socioeconomic goals. This is a project that we are contractually committed to proceeding with. We are in the process of advancing our development of the project cost and execution plan. So we’re not at this time able to share a bill multiple. But I will tell you that the allocation of risk between parties commercially is considerably different from what we experienced on Phase 1. We’re very comfortable with the quality of our estimate and the allocation of risk between parties, such that if we do allocate capital, and it would be modest capital from our perspective, given that we own 35% of CGL, and there will be project financing to fund a significant component of the project cost.
We’re very comfortable in our ability to fit that equity capital within our $6 billion plan.
Patrick Kenny: Okay, got it. Thanks for that. And then maybe just back to your asset sale process. Just in light of the recent rule changes here announced to the Alberta power market, I know it’s not a huge part of the portfolio, but any thoughts around, A, how you think your gas-fired power assets are positioned to perform once these new rules take effect. And then, B, your overall desire to remain a key participant in the Alberta power market going forward just in light of these changes. A – Annesley Wallace Thanks very much. It’s Annesley and I’ll take the question. So with respect to the changes to the Alberta electricity market that have been announced, we do not anticipate any direct impact to our co-gen fleet in Alberta.
