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ESG ProfileJune 2020
Forward looking information and non-GAAP measures
This presentation includes certain forward looking information, including future oriented financial information or financial outlook, which is intended to help current and potential investors understand management’s assessment of our future plans and financial outlook, and our future prospects overall. Statements that are forward-looking are based on certain assumptions and on what we know and expect today and generally include words like anticipate, expect, believe, may, will, should, estimate, intend or other similar words.
Forward-looking statements do not guarantee future performance. Actual events and results could be significantly different because of assumptions, risks or uncertainties related to our business or events that happen after the date of this presentation. Our forward-looking information in this presentation includes statements related to future dividend and earnings growth and the future growth of our core businesses, among other things.
Our forward looking information is based on certain key assumptions and is subject to risks and uncertainties, including but not limited to: our ability to successfully implement our strategic priorities and whether they will yield the expected benefits, our ability to implement a capital allocation strategy aligned with maximizing shareholder value, the operating performance of our pipeline and power and storage assets, amount of capacity sold and rates achieved in our pipeline businesses, the amount of capacity payments and revenues from our power generation assets due to plant availability, production levels within supply basins, construction and completion of capital projects, cost and availability of labour, equipment and materials, the availability and market prices of commodities, access to capital markets on competitive terms, interest, tax and foreign exchange rates, performance and credit risk of our counterparties, regulatory decisions and outcomes of legal proceedings, including arbitration and insurance claims, our ability to effectively anticipate and assess changes to government policies and regulations, including those related to the environment and COVID-19, competition in the businesses in which we operate, unexpected or unusual weather, acts of civil disobedience, cyber security and technological developments, economic conditions in North America as well as globally, and global health crises, such as pandemics and epidemics, including the recent outbreak of COVID-19 and the unexpected impacts related thereto. You can read more about these factors and others in the MD&A and in other reports we have filed with Canadian securities regulators and the SEC, including the MD&A in our 2019 Annual Report and in our First Quarter 2020 Quarterly Report.
As actual results could vary significantly from the forward-looking information, you should not put undue reliance on forward-looking information and should not use future-oriented information or financial outlooks for anything other than their intended purpose. We do not update our forward-looking statements due to new information or future events, unless we are required to by law.
This presentation contains reference to certain financial measures (non-GAAP measures) that do not have any standardized meaning as prescribed by U.S. generally accepted accounting principles (GAAP) and therefore may not be comparable to similar measures presented by other entities. These non-GAAP measures may include Comparable Earnings, Comparable Earnings per Common Share, Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (Comparable EBITDA), Funds Generated from Operations, and Comparable Funds Generated from Operations. Reconciliations to the most directly comparable GAAP measures are included in this presentation and in our First Quarter 2020 Quarterly Report to Shareholders filed with Canadian securities regulators and the SEC and available at www.tcenergy.com.
Delivering the energy people need, every day
Safely. Responsibly. Collaboratively. With integrity.
Our purpose
Capturing opportunities for responsible, sustainable growth
• Long-term global demand forecast to grow through 2040
• North American energy is in the world’s best interest
• Corporate commitment to ESG principles a long-time business fundamental
Excellence in leadership and governance
• Rigorous Board oversight of risk management, including health, safety, sustainability and environment
• Corporate governance includes diversity targets and practices
• Business model resilience tested under scenario analysis
• History of adaptability to disruptive changes in energy technology and policy
• Holistic safety culture and zero-incident target
Track record of robust environmental management and social engagement
• Focus on carbon-emission management and reporting
• World-class construction, reclamation and biodiversity practices
• Investing in technology and innovation
• Best-in-class, principles-based approaches to Indigenous, community, landowner and workforce engagement
Key Environmental, Social, Governance (ESG) themes SE G
Source: IEA World Energy Outlook 2019, Stated Policies Scenario *million tonnes of oil equivalent (mtoe)
*mtoe
Global energy demand forecast to grow through 2040 SE G
Oil Natural Gas Coal Renewables Biomass
Over half of global energy demand fulfilled by natural gas and oil
Nuclear
’18 ’30 ’40 0
1000
2000
3000
4000
5000
6000
’18 ’30 ’40 ’18 ’30 ’40 ’18 ’30 ’40 ’18 ’30 ’40 ’18 ’30 ’40
Accessing energy improves social outcomes
Safe, reliable and economic energy is critical for improving standards-of-living to OECD country levels for projected global population growth
Energy abundanceEnergy scarcity
SE G
53% world energy demand will be fulfilled by oil and natural gas
North America 15%
Rest of World 85%
Well positioned to capture demand growth
54% world energy demand fulfilled by oil and natural gas
North America 19%
Rest of World 81%
14,301 mtoe* total energy demand
Where are we today?
17,723 mtoe* total energy demandBy 2040 global
demand increases by 20%, with highest growth in export
markets
Looking to 2040…
Source: IEA World Energy Outlook 2019, Stated Policies Scenario *million tonnes of oil equivalent (mtoe)
8
North American energy is in the world’s best interest
85
80
66
60
5654
47
41
3735
0
25
50
75
100
Canada United States UAE Kuwait Saudi Arabia Russia Iran Venezuela Iraq Libya
High ESG-ranked energy can displace lower-ranked sources
SE G
ESG score*
10
4 6 6 69
17 18
9
3
% Proven global oil reserves % Aggregated ESG scores
Source: Reserves: BP Statistical Review of World Energy 2019 based on government and published dataESG scores: Aggregated using equal weighting 1/3 for each of World Bank Governance Index, Social Progress Index and Yale Environmental Performance Index
Per cent
1192%
236%
224%
Total Shareholder Return – 2000 to 2019
✓ Robust governance, enterprise risk management, business aptitude and Board oversight✓ Excellence in environmental stewardship and Indigenous and landowner relations✓ Meaningful and ongoing socioeconomic benefits and community involvement
ESG-risk management contributes to outperformance
Long-term focus on high ESG standards
SE G
Source: FactSet data from December 31, 1999 to December 31, 2019
‘Sustainability’ added to mandate of Health, Safety and Environment (now HSSE) Committee of the Board
Chief Sustainability Officer and Chief Risk Officer roles established
Guiding principles adopted for consistent engagement with Indigenous groups, landowners and environment
Inaugural Report on Sustainability and Climate Change informed by TCFD; 2018 ESG Data Sheet informed by SASB
Implemented formalized Enterprise Risk Management framework
Analyzed portfolio resilience under three long-term energy-demand scenarios, and 2◦ alternate case
Recent ESG highlights SE G
GovernanceTC Energy’s long-standing and evolving governance structure has provided
rigorous oversight across the company throughout our 65+ year history.
Governance structure SE G
Strong oversight and collaboration related to risk management and
ESG issues
Board of Directors
• Oversees long-term performance, strategy and sustainability of TC Energy
• 14 directors, 29% women with 30% diversity policy target by end of 2020
• Robust assessment, succession and education program
Board Committees
• HSSE Committee reports to Board on health, safety, sustainability and environment (including climate-related risks)
• Governance Committee oversees management approach to strategy and risk management
Management
• CEO and Executive Leadership Team (ELT) develop and implement strategy
• Chief Risk Officer oversees Enterprise Risk Management framework
• Chief Sustainability Officer reports to CEO, ELT and HSSE Committee and directs management, coordination and communication of sustainability risks
Board
ManagementBoard
Committees
Business Unit & function risks
Transition risk
Technology risk
Market risk
Physical risk
Reputation risk
Enterprise Risk Management (ERM) framework
Informed by: SASB Leadership and Governance Dimension, SASB Critical Incident Risk Management General Issue Category and TCFD Recommendations (for more detail see TC Energy 2019 Report on Sustainability and Climate Change)
Monitoring and mitigation
SE G
Enterprise risks
Executive Leadership, Board, Board Committees
Audit HSSE ELT Governance HR
ERM Group
Chief Risk Officer (CRO)Head of ERMERM CoordinatorManagement Risk Committee (MRC)ERM Supporting Network (ERM SN)
Top-down active dialogue- Risk management
framework- Risk lenses and matrix- Evaluation tools- Enterprise risk register
Bottom-up active dialogue- Functional risk registers- Input to enterprise risk
prioritization- Transparency
Business unitsCorporate functions
Technical centres
Risk management activities
Agg
rega
tio
n o
f ri
sks
Vertigo profile:• A volatile future with frequent economic and
financial tremors cause political and social dislocations and instability
• Undermined confidence perpetuates risk-aversion
• Time lags in capital investment and mismatches in demand and supply
• Adjustments to technological innovation are slow
Implications:• Our portfolio is resilient due to sustained
energy demand and fossil fuel dominance in the energy mix
• Investment opportunities exist in core businesses while our ability and preference to fund growth internally insulates us from economic volatility
• The long-term contracted nature of our assets limits exposure
Rivalry profile:• Increased competition for political and
economic power • World becomes more multipolar with broader
distribution of wealth and influence• Energy industry competition grows as rivalry
among energy sources drives shifts in fuels and technologies used in transportation and power generation
Implications:• Energy fundamentals under IHS Markit’s
Rivalry scenario support growth in our core business segments
• The long-term contracted nature of our assets limits exposure
Base business model resilience – scenario analysis
Autonomy profile:• A powerful combination of market and
social forces pushes technology and consumer behavior, transforming the global energy system
• Transition from centralized, traditional sources of energy to energy production that meets local energy needs, which are also changing in fundamental ways
Implications:• Our portfolio withstands threats posed
by accelerated transition to less carbon-intensive energy sources and increased country-level energy independence
• TC Energy’s resilience requires being competitively positioned in North America’s lowest-cost basins
• The long-term contracted nature of our assets limits exposure
Rivalry Vertigo Autonomy
SE G
Informed by: TCFD The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities, IHS Markit Global Scenarios and IHS Markit Climate and Carbon 2018(for more detail see TC Energy 2019 Report on Sustainability and Climate Change)
Base business model resilience – 2° alternate case
2° alternate case profile:• Describes potential pathway to meet Paris Agreement goal limiting average global
temperature increase to well below 2°Celsius above preindustrial levels by 2100• Underlying data less detailed than full scenarios
Implications:• Decreases in long-term fossil fuel demand due to energy efficiency gains and
technological breakthroughs in electrification and energy storage introduce uncertainty about the long-term resilience of traditional energy markets and subsequent implications for energy infrastructure companies
• TC Energy’s assets are largely insulated from fossil fuel demand destruction to 2030, with only modest exposure for our liquids and natural gas pipeline assets
• Post-2030 is an inflection point for hydrocarbons as policy aspirations materially reduce demand for fossil fuels
• In such a situation we may adopt measures to preserve value such as accelerating depreciation or abandonment surcharges to ensure return of capital
SE G
Beyond base-business resilience, we have a demonstrated ability to monitor sign-posts, leverage core competencies and profitably respond to a constantly evolving world
Informed by: TCFD The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities, IHS Markit Global Scenarios and IHS Markit Climate and Carbon 2018(for more detail see TC Energy 2019 Report on Sustainability and Climate Change)
Track record of turning disruption into opportunity
Corporate0
25
50
75
100
$ Billions
$20B Total Assets
$100B Total Assets
Agile and adaptable to policy and technology shifts
Canadian Natural Gas Pipelines
U.S. Natural Gas Pipelines
Mexico Natural Gas Pipelines
Liquids Pipelines
Power and Storage
Power development and acquisitions (2000-2008)
Why? Policy changes created independent power producer opportunity
Re-entry into Mexico (2003-2004)
Why? Identified change of power fleet fuel to imported LNG
ANR acquisition(2007)
Why? Provided access to a new basin and storage business
Converted portion of Mainline to Keystone (2007)
Why? Mainline under-utilization created repurposing opportunity
Coastal GasLink announced (2012)
Why? Capitalizing on LNG export opportunity to Asia
NGTL expansions (2010 to 2019+)
Why? Leverage existing footprint to capture WCSB shale gas production growth
Reversed flow of ANR (2014)
Why? Disruptive emergence of shale gas in USNE
Mexico expansion (2014)
Why? Energy reform creates opportunity
CPG acquisition (2016)
Why? Further diversifying natural gas pipeline business in emergent Appalachian shale basins
2000 2019
SE G
We embed a culture of safety and emergency preparedness throughout our value chain and project lifecycles. We manage risks through our TC Energy Operating Management System.
Safety is, and always will be, a critical core value.
Critical incident risk management approach
Informed by: SASB Leadership and Governance Dimension; SASB Critical Incident Risk Management General Issue Category; SASB Operational Safety, Emergency Preparedness & Response Disclosure Topic; SASB Accounting Metric EM-MD-540a.4 (for more detail see TC Energy 2018 ESG Data Sheet)
SE G
Investing over $1B annually in pipeline integrity, including $1.3B in 2019
Monitoring pipelines 24/7/365 from operations control centres
Performing aerial patrols using low-flying aircraft, sensitive detection equipment and geotechnical monitoring
Conducting emergency preparedness exercises across our system annually
Safety highlights
Innovating with ~1,000 kilometre(621 mile) natural gas pipeline inspection gauge run – a North
American record-setting distance
Testing new fibre-optic, leak-detection technology on
segments of Keystone Pipeline to complement and enhance
existing monitoring systems
Integrating disciplined set of nine Life Saving Rules to ensure the
public, employees and the environment remain safe and
energy supply is uninterrupted
Examples demonstrating SASB Leadership and Governance Dimension; SASB Critical Incident Risk Management General Issue Category; SASB Operational Safety, Emergency Preparedness & Response Disclosure Topic; SASB Accounting Metric EM-MD-540a.4 (for more detail see TC Energy 2018 ESG Data Sheet)
SE G
EnvironmentWe are committed to protecting the environment throughout the complete life cycle of our assets – from business development, project planning, design and
operation, through to remediation and final decommissioning.
Stew
ard
ship
We believe success comes from joint efforts to address interactions with the environment and providing sustainable benefits to the environment in the context of developing and operating important energy infrastructure P
rote
ctio
n We are dedicated to developing innovative solutions to manage TC Energy’s environmental footprint while providing responsible, safe and affordable energy to the North American economy.
We believe evidence-based assessments that consider science and Indigenous and stakeholder knowledge provide an objective and knowledge-based foundation to develop and apply mitigation and adaptive-management measures
Pe
rfo
rman
ce
We monitor, measure, assess and communicate our environmental performance and recognize the importance of learning from our experiences to continuously improve our efforts to protect the environment
Environment principles SE G
Mobile compressors used during maintenance reduced 1M+ tonnes (~225,000 cars) CO2e emissions in 2018
Signatory to the United Nations (UN) Methane Guiding Principles
Have publicly reported GHG emissions since 1995
Voluntary contributor to CDP Climate Change survey
First Canadian company to use hand-held leak-detection technology
Managing and reporting our emissions
We are committed to managing our GHG emission intensity and continuing to integrate climate considerations into our overall business strategy, risk management and business development.
Informed by: SASB Environment Dimension; SASB GHG Emissions and Air Quality General Issue Categories; SASB Greenhouse Gas Emissions Disclosure Topic; SASB Accounting Metric EM-MD-110a.2 (for more detail see TC Energy 2018 ESG Data Sheet)
SE G
Emissions management highlights
Partnering with Siemens on world’s first super-critical carbon dioxide, waste-
heat-capturing power facility at one of our compressor stations. This has the
potential to power 10,000+ homes and reduce GHG emissions by 44,000 tonnes
(9,000 vehicles) per year
Member of the U.S.’s ONE Future Coalition – using uniform, EPA-approved
reporting protocols, the 16 member coalition registered a 2017 methane
intensity number of 0.552%, well ahead of it goal to reach 1% by 2025
Gas supply from Sur de Texas to the Tula Power Plant will displace previous use of diesel and fuel oil, reducing the equivalent of 33x the SO2 production
of Mexico City*
Examples demonstrating SASB Environment Dimension; SASB GHG Emissions and Air Quality General Issue Categories; SASB Greenhouse Gas Emissions Disclosure Topic; SASB Accounting Metric EM-MD-110a.2 (for more detail see TC Energy 2018 ESG Data Sheet) *UNAM (2014). The influence of the Tula, Hidalgo complex on the air quality of the Mexico City Metropolitan Area. Atmosfera vol. 27 no. 2 Mexico April 2014
SE G
Ensuring essential biophysical characteristics are proactively managed to maintain equivalent biodiversity and land capability post-construction
Proactively engaging with regulatory agencies and Indigenous communities to understand and mitigate potential project effects
Working actively and collaboratively on species at risk habitat restoration, including Boreal Woodland Caribou, and funding ongoing research on numerous species at risk
Extensive environmental management programs ensure ongoing, day-to-day protection of the land, including extensive training, inspections and audits
Following existing rights-of-way when possible and proactively introducing unique innovations to avoid or protect biologically sensitive areas beyond regulatory requirements
Maintaining biodiversity and land reclamation
We have over 65 years of experience in North American land reclamation across hundreds of thousands of acres of varied ecological conditions. We’ve developed innovative techniques and strongly collaborated with key stakeholders in maintaining and monitoring biodiversity.
Informed by: SASB Environment Dimension; SASB Ecological Impact Issue Category and Disclosure Topic; SASB Accounting Metric EM-MD-160a.1 (for more detail see TC Energy 2018 ESG Data Sheet)
SE G
Biodiversity highlights
Included US$150M investment in micro-tunnel near Altamira, MX to protect environmentally sensitive
mangroves in area
8,000+ acres of pollinator friendly habitat planted to date with local
communities and schools on donated rights-of-way along North American
monarch butterfly corridors
Worked with Monongahela National Forest in West Virginia during construction to transplant 455
existing and plant 2,193 new red spruce - critical habitat for indigenous
salamander and squirrel species’
Examples demonstrating SASB Environment Dimension; SASB Ecological Impact Issue Category and Disclosure Topic; SASB Accounting Metric EM-MD-160a.1 (for more detail see TC Energy 2018 ESG Data Sheet)
SE G
Since 2014, TC Energy has restored over 200 hectares of Boreal Woodland Caribou habitat, including planting over 85,000 trees in 2019
SE G
SocialOur four core values of safety, responsibility, collaboration and integrity are at the heart
of our commitment to engaging with all those impacted by our business activities.
Stakeholder commitment statement
Identifying and considering our stakeholders’ perspectives
Being visible, present and approachable in the community
Recognizing diverse thoughts, opinions and experiences contribute to better decisions and outcomes
Taking ownership and accountability for our decisions and outcomes
Tracking, measuring and reporting on our performance to learn and improve
Stakeholders are the people and groups who significantly affect, or may be affected by, our business activities. Our principles include:
In 2019 we:
• Paid over $1.4M in income and property taxes
• Invested $28M in communities
• Awarded over 900 post-secondary scholarships
• Treated our nearly 100,000 landowners across North America fairly and equitably
Informed by SASB Social Capital Dimension (for more detail see TC Energy 2018 ESG Data Sheet)
SE G
Community benefits highlights
Partnering with State of Chihuahua to provide US$2.2M to 92 communities for services to support rainwater harvesting
initiatives
Supporting pipeline training program at Southwest
Louisiana Technical Institute Pipeline Academy’s giving hands-on experience to
students
Medical-grade Cobalt-60 isotopes produced at Bruce
Power* now used worldwide for cancer and other complex
medical treatments
Informed by SASB Social Capital Dimension (for more detail see 2018 TC Energy ESG Data Sheet)*48.4% ownership in Bruce Power
SE G
Indigenous Relations guiding principles
Recognize their unique connection with the land and their community governance
Have meaningful, principled and respectful engagement as early as possible
Achieve regulatory certainty using a pragmatic approach in the jurisdiction where we are operating
Build innovative project strategies, reflecting engagement and regulatory outcomes that are defensible, commercially reasonable and community-led
TC Energy has engaged with Indigenous groups for 30+ years. We recognize Indigenous groups as rightsholders with a distinct relationship to the land. We understand our business activities have the potential to affect these groups in tangible ways. Through collaboration and open communication, we aim to earn their respect and trust to establish and grow positive long-term relationships. We strive to:
In 2019 we:
• Engaged with 122 groups
• Supported $380M in Indigenous business
• Donated $7M+ community investment and scholarships
Informed by SASB Social Capital Dimension, SASB Human Rights and Community Relations General Issue Category, Rights of Indigenous Peoples Accounting Metric; (for more detail see TC Energy 2018 Data Sheet) SASB Accounting Metric EM-CO-210a.2
SE G
Indigenous engagement highlights
Coastal GasLink has agreements with elected leaders of all 20 Indigenous
communities along the route, has had 15,000+ project-related interactions
with communities and will put $620M+ into local Indigenous businesses
Indigenous Legacy scholarships program supports Indigenous students (First Nation, Métis, Inuit or Non Status)
pursuing any full-time, post-secondary program at a registered education
institute
Decade-long partnership with the Osage Nation supported by Indigenous
Relations Policy and Guiding Principles. Collaboration began in 2008 with engagement related to Keystone
Pipeline System
Examples demonstrating SASB Social Capital Dimension, SASB Human Rights and Community Relations General Issue Category, Rights of Indigenous Peoples Accounting Metric; (for more detail see TC Energy 2018 ESG Data Sheet) SASB Accounting Metric EM-CO-210a.2
SE G
Fostering a diverse workforce
Health and safety
Offering competitive compensation packages and benefits programs
Flexible employment practices and programs
Reward and recognition programs
Adhering to a Code of Business Ethics
Employment equity and non-discrimination
Workforce engagement
Informed by SASB Human Capital Dimension (for more detail see TC Energy 2018 ESG Data Sheet)
SE G
Our 7,300+ employees contribute to the success of our company and have a positive social and economic impact on the places they call home. As their employer, TC Energy is committed to:
Workforce engagement highlights
Encouraging veterans in the workforce by offering flexibility to
employees who serve military duty and providing support to
numerous charitable organizations and local programs
Supporting employee-led giving and volunteering programs for
causes that are meaningful to our workforce. $3M raised and 35,000
hours volunteered for causes supported by employees and
contractors in 2019
Offering work to students and new grads to grow real-world
skills, gain industry insight, build professional networks and be part of diverse, tight-knit and
supportive teams
SE G
Informed by SASB Human Capital Dimension (for more detail see TC Energy 2018 ESG Data Sheet)