Analyst Note| Stephen Ellis |
TC Energy's first-quarter results were flat against last year's numbers, excluding Keystone XL impacts. Adjusted EBITDA, excluding Keystone XL impacts, was CAD 2.5 billion, which was the same as last year. The firm took a CAD 2.2 billion impairment charge to reflect the cancelation of the project, which will be reduced to a net impact of CAD 1 billion when including offsetting amounts relating to the Government of Alberta's investment. There also remains CAD 779 million in debt on the project-level credit facility. Otherwise, results were generally flat as weakness in liquids volumes were offset by higher natural gas tariffs. We will maintain our fair value estimate and narrow moat ratings while we incorporate these results into our model. TC Energy noted that its 2021 guidance and capital spending outlook remained unchanged, as did the dividend at CAD 0.87, which was flat sequentially but up 9% from last year.
Despite the loss of Keystone XL with the resulting financial implications and loss of management focus, TC Energy still has a backlog of CAD 20 billion in projects and another CAD 7 billion in projects under development that will provide future earnings growth. These projects offer diverse opportunities among natural gas, liquids, and power projects. The company also closed the acquisition of TC Pipelines for CAD 2.1 billion in TC Energy shares during the quarter. We think the transaction was useful to simplify the overall TC Energy structure while eliminating a partnership that no longer provided an attractive vehicle for asset dropdowns.