Executive Summary / Key Takeaways

• Strategic Focus and Resilient Business Model: TC Energy has sharpened its focus as a natural gas and power infrastructure leader, underpinned by 97% rate-regulated or long-term take-or-pay contracts. This model consistently delivers predictable cash flows and supports 25 consecutive years of dividend growth.
• Robust Growth Pipeline and Capital Efficiency: The company is executing a high-quality, capital-efficient growth portfolio, expecting to place $8.5 billion of assets into service in 2025, tracking approximately 15% below budget. This includes significant projects like the Southeast Gateway pipeline and the Northwoods expansion, driving future EBITDA growth.
• Deleveraging on Track with Organic Strength: TC Energy is on target to achieve its 4.75x debt-to-EBITDA leverage goal by the end of 2026, primarily through organic deleveraging driven by strong EBITDA performance and substantial capital expenditure reductions, reducing reliance on asset sales.
• Leveraging Incumbency in High-Demand Markets: With North American natural gas demand projected to grow by 45 Bcf per day by 2035 and significant electricity shortfalls forecast in Ontario, TC Energy's strategically located brownfield assets are poised to capture growth from LNG exports, data centers, coal-to-gas conversions, and nuclear power.
• Technological Edge in Infrastructure and Nuclear: TC Energy's core strength lies in its expertise in large-scale, complex infrastructure development and its significant investment in nuclear power through the Bruce Power Major Component Replacement (MCR) program, which enhances reliability and extends asset life, providing a stable, low-emission baseload.

Powering North America's Energy Future with Resilient Growth and Strategic Incumbency

TC Energy Corporation ($TRP) stands as a foundational pillar of North America's energy infrastructure, strategically positioned to capitalize on the continent's evolving energy demands. The company, which transformed from TransCanada Corporation in 2019, has honed its focus as a pure-play natural gas and power infrastructure leader. This strategic clarity was underscored by the successful spin-off of its liquids pipelines business into South Bow in October 2024, marking a new era centered on low-risk, repeatable growth, maximizing asset value through operational excellence, and maintaining robust financial strength.

The industry landscape is characterized by surging demand for reliable energy. North American natural gas demand is now forecast to grow by 45 Bcf per day by 2035, an increase from a prior forecast of 40 Bcf per day. This growth is structurally driven by a confluence of factors: burgeoning LNG exports, significant power generation needs (including coal-to-gas conversions and the accelerating demands of AI and data centers), and expanding industrial requirements. In Ontario, the Independent Electricity System Operator (IESO) projects a staggering 75% increase in electricity demand by 2050, highlighting the critical role of stable, low-emission baseload power. TC Energy's extensive footprint across Canada, the U.S., and Mexico, coupled with its incumbent position in key markets, provides a distinct advantage in capturing these opportunities.

Technological Differentiators and Operational Excellence

TC Energy's competitive edge is deeply rooted in its technological and operational expertise across its diverse asset base. The company's core technology lies in its vast network of natural gas pipelines, which are continuously optimized and expanded through brownfield, in-corridor projects. These expansions leverage existing infrastructure, reducing permitting complexities and capital intensity. For instance, increasing pipeline capacity often involves upgrading from a 30-inch to a 36-inch pipe, a change that does not dramatically increase project complexity and can deliver a 25% capacity increase without a proportional 25% rise in capital cost. This approach translates directly into higher returns and more efficient capital deployment.

In the power sector, TC Energy's investment in Bruce Power's Major Component Replacement (MCR) program is a critical technological differentiator. This program involves extensive refurbishment of nuclear units, enhancing their reliability and extending their operational life by over 35 years per unit. Bruce Power's availability has steadily improved from the mid-80s percent range in prior years to an expected average in the low 90s for 2025. The realized power price from Bruce Power also trends higher, as the contract price is adjusted annually to reflect capital investments, inflation, and other factors. The ongoing Project 2030 at Bruce aims to substantially boost net peak output, projected to increase capacity from its 2019 base of 6.4 gigawatts to over 7 gigawatts through three stages. This program is expected to nearly double equity income from Bruce Power by 2035, showcasing the long-term, quantifiable benefits of these technological investments.

Furthermore, TC Energy is actively engaged in the development of the Bruce C Project and the Ontario Pumped Storage Project, both supported by government funding. The Ontario Pumped Storage Project, a 1,000-megawatt, 12-hour battery equivalent, is particularly attractive given Ontario's recent ban on Chinese parts, making it a more viable option for firming resources compared to battery alternatives reliant on Chinese supply chains. These initiatives underscore TC Energy's commitment to low-emission, reliable power generation, leveraging its deep experience in large-scale energy projects.

Competitive Landscape and Strategic Positioning

TC Energy operates in a highly competitive North American energy infrastructure market, contending with major players like Enbridge Inc. (ENB), Kinder Morgan Inc. (KMI), and Williams Companies Inc. (WMB). Each competitor brings distinct strengths, but TC Energy's strategic positioning, reinforced by its technological and operational advantages, allows it to maintain a strong foothold.

Enbridge, with its broader diversification into renewables, offers a strategic edge in emerging green energy markets. However, TC Energy's extensive natural gas pipeline network and regulatory licenses provide a stable platform for cross-border operations, particularly in Canada and the U.S., where it serves as an incumbent system for transporting Western Canadian Sedimentary Basin (WCSB) natural gas. This incumbency, coupled with long-term take-or-pay contracts, provides a robust revenue stream and reduces volumetric and commodity price risk.

Against Kinder Morgan's U.S.-centric midstream focus and cost efficiency, TC Energy's international presence in Mexico and its integrated power and storage segments offer a broader geographic footprint and comprehensive energy solutions. While Kinder Morgan may excel in pure midstream efficiency, TC Energy's diversified energy sources, including nuclear, enhance its profitability in mixed-energy markets. Similarly, while Williams Companies specializes in U.S. natural gas transmission, TC Energy's network scale and integrated storage capabilities provide a more comprehensive solution for energy delivery, particularly for large utility customers.

The company's strategy in the U.S. is to primarily work with utility companies to support power generation behind their systems, encompassing coal-to-gas conversions, general electrification, and data centers. This approach allows TC Energy to develop sizable projects that are not specific to an individual data center, but rather cater to broader power generation demand, ensuring compelling returns in the 5x to 7x build multiple range with long-term contracted cash flows. The increasing competition for capacity on its systems across all three countries enhances TC Energy's opportunity set and negotiating leverage, leading to higher risk-adjusted returns on sanctioned projects.

A History of Strategic Evolution and Growth

Founded in 1951 as TransCanada Corporation, the company's journey has been one of continuous adaptation and strategic refinement. The decision to spin off its liquids pipelines business into South Bow in October 2024 was a pivotal moment, allowing TC Energy to sharpen its focus on its core natural gas and power segments. This move, alongside other asset divestitures like Portland Natural Gas in 2024 and a 40% interest in Columbia in late 2023, was instrumental in strengthening the balance sheet and streamlining operations. These actions contributed to a 0.6x reduction in debt to EBITDA since 2022, aligning with the company's commitment to a 4.75x target.

The 2020s have been marked by significant project execution and an upward trend in returns. The Coastal GasLink (CGL) pipeline achieved mechanical completion in Q4 2023. In 2024, TC Energy placed $7 billion of assets into service, and it anticipates placing approximately $8.5 billion of assets into service in 2025, tracking roughly 15% below budget. This disciplined execution is a testament to the company's focus on project execution excellence, involving better preparation and deploying more development capital at risk prior to sanctioning.

Financial Performance and Operational Momentum

TC Energy has consistently demonstrated strong financial performance, reflecting its resilient business model and operational effectiveness. In the second quarter of 2025, the company delivered a 12% year-over-year increase in comparable EBITDA. This growth was broad-based across segments. Canada Gas EBITDA increased due to higher contributions from Coastal GasLink and flow-through regulated costs. U.S. Gas EBITDA benefited from a settlement in principle and higher transportation rates on Columbia Gas, effective April 1, along with new customer contracts and projects. Mexico's business saw higher earnings from the Southeast Gateway pipeline, though partially offset by a strengthening peso and higher income tax. The Power and Energy Solutions segment, particularly Bruce Power, contributed significantly with increased generation output and a higher average realized price of $110 per megawatt hour.

The company's comparable EBITDA from continuing operations reached a record over $10 billion in 2024, representing a 6% increase over 2023. For 2025, TC Energy has increased its comparable EBITDA outlook to $10.8 billion to $11 billion, an approximately 9% increase over 2024. Looking further out, the company targets an EBITDA of $11.7 billion to $11.9 billion by 2027, implying a 5% to 7% three-year growth rate. This predictability is a hallmark of TC Energy's business, with 97% of its EBITDA underpinned by rate-regulated or long-term take-or-pay contracts.

Project returns are also on an upward trajectory. The average unlevered after-tax IRR of sanctioned capital programs has steadily increased from 8.5% a few years ago to approximately 11% in 2024, with year-to-date 2025 sanctioned projects achieving an expected average of approximately 12%. This improvement is driven by increased competition for TC Energy's capacity and a focus on high-grade, brownfield expansions.

Strategic Growth Initiatives and Outlook

TC Energy's growth outlook is robust, supported by a substantial project backlog and a disciplined capital program. The company expects to place approximately $8.5 billion of assets into service in 2025, including the Southeast Gateway pipeline, which commenced commercial in-service on May 1, 2025, and the East Lateral XPress Project. The Southeast Gateway project was notably delivered 13% below its original budget, now estimated between $3.9 billion and $4.1 billion, a significant achievement that contributes to overall capital reductions.

The company has sanctioned several key projects, including the Northwoods project, a US$900 million expansion of the ANR pipeline system, expected to enter service in 2029. This 0.4 Bcf per day expansion will serve new gas-fired electric generation for data centers and economic development in the U.S. Midwest, backed by a 20-year take-or-pay contract with an investment-grade utility and an estimated EBITDA build multiple of approximately six times. The Pulaski and Maysville projects have also been upsized to meet growing needs, demonstrating the flexibility and demand for TC Energy's infrastructure.

TC Energy is actively engaged in commercial conversations with over 30 counterparties across the data center value chain, with several indicating potential for greater capacity needs than originally planned. The company sees a robust pipeline of approximately 5.5 Bcf per day and $8 billion of opportunities, including coal-to-gas conversions and data center-driven demand. This strong origination pipeline provides line of sight to an increased cadence of project announcements through the second half of 2025 and into 2026, predominantly with capital spend and in-service dates towards the end of the decade.

The company's capital expenditure program is expected to be in the $6 billion to $7 billion range annually beyond 2025. This disciplined approach, combined with approximately $2.5 billion in capital reductions identified over the next few years, allows TC Energy to fund its growth organically without the need for equity issuance.

Financial Strength and Deleveraging Path

Maintaining financial strength and agility is a core priority for TC Energy. The company is committed to achieving its 4.75x debt-to-EBITDA target by the end of 2026. This deleveraging is primarily driven by the full-year contributions of major projects like Southeast Gateway and seven other projects expected to be in service by the end of 2025. While 2025 is anticipated to be a peak leverage year, around 4.9x, due to the partial-year cash flow from Southeast Gateway, the organic deleveraging is expected to accelerate in 2026.

TC Energy's funding plan for the next three years requires about $31 billion, largely covered by $24 billion of internally generated cash flow, with the remaining $7 billion sourced from capital markets without new equity. The company's systematic hedging of U.S. dollar net income insulates comparable earnings from FX volatility, ensuring stability in its financial outlook. The Board of Directors' declaration of a Q1 2025 dividend of $0.85 per common share, marking 25 consecutive years of dividend growth, underscores the company's commitment to shareholder returns, underpinned by its predictable and resilient cash flows.

Risks and Challenges

Despite its strong positioning, TC Energy faces several risks. Regulatory hurdles, particularly regarding permitting reform in both the U.S. and Canada, could impact project timelines, though the company's current growth plan is not reliant on prospective reforms. Geopolitical risks, including ongoing trade negotiations and potential tariffs between the U.S., Canada, and Mexico, are being monitored. However, with 97% of its comparable EBITDA under rate-regulated or take-or-pay contracts and a largely North American-based supply chain, the direct financial impact is expected to be minimal. Prolonged tariffs could, however, influence future capital allocation decisions.

Managing its Mexico exposure is another strategic consideration. While the company sees significant growth opportunities in Mexico, it aims to reduce its overall exposure, potentially through partnerships or asset-level financing in late 2025 or early 2026, to manage customer concentration risk and bring Mexico's contribution below 15% of consolidated EBITDA. The company is also navigating the evolving policy landscape in Canada, including Bill C-5, which is seen as positive for infrastructure development, but competition for capital remains fierce, with the U.S. currently offering higher risk-adjusted returns for discretionary capital.

Conclusion

TC Energy Corporation is executing a compelling investment thesis centered on its strategic evolution into a focused natural gas and power infrastructure leader. Its robust asset base, underpinned by a low-risk, contract-backed business model, positions it to capture significant growth opportunities driven by North America's increasing energy demand. The company's commitment to operational excellence and capital efficiency is evident in its project execution, delivering assets under budget and on schedule, which directly contributes to its organic deleveraging path.

With a clear outlook for substantial EBITDA growth through 2027 and a disciplined capital allocation strategy, TC Energy is poised to continue its long track record of delivering predictable performance and consistent dividend growth. The company's technological advantages in optimizing pipeline networks and extending the life of nuclear assets, coupled with its strategic incumbency in high-demand corridors, provide a strong competitive moat. While regulatory and geopolitical dynamics warrant attention, TC Energy's proactive management of these risks and its focus on high-quality, brownfield expansions reinforce its resilient value proposition for discerning investors seeking stable income and long-term growth in the evolving energy landscape.