TC Energy Corporation (TRP) Earnings Call Transcript & Summary

All right. I think we'll get started here. So thank you, everyone, and good morning. Welcome to TC Energy's 2023 Investor Day. My name is Gavin Wylie, Vice President of Investor Relations. In the spirit of reconciliation, I'd like to open with an acknowledgment of the land on which TC Energy operates contains the histories, cultures and rich traditions of indigenous peoples across North America. We thank the original keepers of these lands, generations past, present and future for sharing their homelands with us. Today, I'm speaking to you from Toronto, the traditional territory of multiple nations, and now home to many First Nations Métis and Inuit peoples, who make their home here in Treaty 13 and the Williams Treaties region of Toronto. To learn more about TC Energy's commitment and efforts to advance indigenous reconciliation, please see our Reconciliation Action Plan on our website. I'll start by reminding you that this morning, remarks will contain forward-looking information and reference to non-GAAP measures that may not be comparable to measures presented by other companies. Please review our disclosures regarding forward-looking statements and non-GAAP measures that are contained in this presentation and as well with our regulatory filings. Second, in the event of an emergency alarm, we ask that you please remain seated and await announcement from the venue. Should we be required to evacuate, the exits are located -- 2 at the front and 2 at the back. The venue's fire wardens will direct us to the appropriate muster point. So for today, as we do with every meeting at TC Energy, we'll begin with the safety moment. After that, we have a brief video, and then Francois and Joel will begin with our strategic and financial update for TC Energy. Devin will provide the same for South Bow. We'll wrap up the formal webcast with Q&A. And for those in the room, we have several business unit booths set up at the back, and we welcome you to continue the conversation with our senior leadership team at that time. With that, I'm going to pass it over to Annesley Wallace, our Executive Vice President, Strategy and Corporate Development and President, Power and Energy Solutions for our safety moment.

Thanks, Gavin, and good morning. My safety moment today recognizes the extraordinary efforts of our teams who keep people and communities safe, as we reliably and responsibly deliver energy across the continent every day. I'll start by sharing an exceptional safety achievement at Bruce Power, where the team just completed the safe return of Unit 6 on time and ahead of schedule. Beginning in 2020, Unit 6 was the first in Bruce Power's major component replacement program. The MCRs are complex work, requiring the highest standards in safety. Each project involves the removal and replacement of large nuclear components like steam generators, vault pipe work and every part of the internal reactor. In any strong safety culture, it remains critical to focus on continuous improvement. The Institute of Nuclear Power Operations refers to Staying on Top, an overarching belief in ongoing improvement in the pursuit of excellence, whatever gains in performance are achieved must then be sustained. On MCR 6, there were over 12 million hours of work executed within the top decile of safety performance for the industry. This is a significant achievement for Bruce Power and the province of Ontario. At TC, we are also taking meaningful steps on our journey of continuous safety improvement. We're doing this by rolling out new hazard identification tools and safety leadership training and by significantly simplifying our operational management system by reducing over 1,400 requirements to less than 100. I want to recognize and thank everyone working on TC Energy's projects and operations, as well as partners across our network, including Bruce Power. Turning now to Coastal GasLink. Consider that each of the 55 million hours spent to reach mechanical completion on this project required discipline and focus to ensure that everyone went home safely every day. Thank you, and congratulations to the CGL team. We now have a short video to celebrate this significant milestone. [Presentation]

Good morning, everybody. Jay, thank you for sitting in the front row. It's wide open for anybody else who wants to join him. Watching that video, most of us in the room here from TC, we sit in offices, and we have -- we do important work. But that's what gets 95% of our people up in the morning every day. And the purpose we serve is really what drives this company forward. And what a difference a year makes. A year ago, we were here with a very difficult message. Watching this video fills me with immense pride. The team has accomplished so much in the last year. From early completion of CGL to exceeding our $5 billion divestiture target, to delivering record operational and financial results. In 2023, we are delivering on our commitments. And from my perspective, it demonstrates that we are on the right track. So let's provide a little bit more detail on our progress since last year. I'll start with project execution, which -- it should be no surprise to you, will remain a core area of focus and of continuous improvement for us going forward. With achieving mechanical completion on CGL, we've applied learnings to both our capital allocation processes as well as our project preparation and execution. And we're seeing strong results. Southeast Gateway in Mexico was the first major project that was sanctioned under our revised process, and it continues to track cost and schedule. So far in 2023, we've put $5 billion of assets into service on budget, and we expect a total of $5.5 billion to be in service by the end of the year. Next, we are firmly on the path of deleveraging. We've monetized $5.3 billion in assets, while retaining strategic and operational control of those assets, and we're evaluating another potential $3 billion of smaller divestitures by the end of next year. And as I said on the third quarter call, it could include discrete assets in the U.S. We're also contemplating joint ventures in our Canadian and Mexico natural gas businesses. Now turning to our third commitment. Thanks to strong October financial results and the continued strength of the U.S. dollar, we are raising our guidance for year-end EBITDA for 2023 to now be 8% higher than last year. What this shows, if you think back to our financial performance during the pandemic and you look at our financial performance in 2023, at every stage of the economic cycle, our asset base continues to generate excellent operational and financial results, and we'll have record performance again this year. So what's our goal today? It's to demonstrate how our strategic vision maximizes the value of our 5 leadership positions. What are those? Well, in 3 distinct jurisdictions, we're leaders in natural gas transportation and storage. In fact, we transport about 30% of the natural gas across the entire continent every day. We have power assets and opportunities in both Canada and the U.S., and it's anchored by our investment in Bruce Power. We are big fans of nuclear. It is safe, it is reliable, it is affordable and it is emissions-free. And our liquids pipeline system offers the lowest transit time and the most cost competitive path from the WCSB down to the Gulf Coast. And we have to protect that leadership position by investing prudently and demonstrating to our customers that we are focused on delivering their incremental demand, because we are all observing greater demand across the entire energy mix. And we also want to respond to our competitors' offerings. So over the past few years, we've been strategically pivoting our capital allocation towards capturing the long-term growth in our natural gas business and our complementary Power and Energy Solutions business. During that time, we also conducted a 2-year review -- strategic review of our liquids business, along with our Board of Directors. In addition to the spin, we contemplated a number of other alternatives, including the status quo as well as a cash sale. We weighed various considerations, including growth, access to capital markets, the competitive positioning of our Keystone System, the tax basis of our assets, the upside potential, in particular, how do we protect our competitive and advantageous positioning, going into the recontracting of those assets at the end of the decade. And we determined that a renewed global focus on energy security has opened up a new door for our liquids business. They are seeing customer demand growth and immediate opportunities that require them to be nimble and flexible, to maintain that business' notable competitive advantage. Focusing on the value that could be delivered as 2 distinct strategies, we developed the spin-off to unlock the incremental value we see from that company's unique opportunity set. TC Energy, post-spin, will continue to cultivate a highly regulated, low-risk and utility-like portfolio in our natural gas and power businesses with a balance of income and growth. South Bow will become a low-risk, pure-play liquids transportation and storage business. And as a smaller entity, they can be lean, they can be nimble and opportunistic. And with the investment-grade ratings, they will maintain, they can respond quickly in a market where they currently hold the most competitive path to market. Now as we progress into 2 premium infrastructure companies, TC Energy and South Bow can flexibly execute tailored strategies with distinct customer sets and distinct shareholder value propositions. TC Energy will have one of the most highly differentiated natural gas and Power and Energy Solutions portfolio, and we expect it will command a premium valuation relative to its peers. Joel will show you some data on that a little bit later on. We will look increasingly utility-like, as our strategy and our portfolio mix further capture the low-risk benefits shared by -- with our utility peers, while benefiting from very strong demand growth in the markets we serve. Adhering to our $6 to $7 billion net capital expenditure limit post 2024, will allow us to continue to deliver an attractive and sustainable dividend growth rate, but also enhancing our financial strength and flexibility. South Bow will be a low-risk vehicle with a strong, sustainable base common share dividend. It will increase -- it will have increased access to capital to fund opportunistic growth, building out its strategic corridor to enhance its ability to recontract its long-term full path service from Canada to the U.S. Gulf Coast. It must have the ability to access capital to defend its competitive position and respond to evolving offerings from competitors, especially with the upside potential that will come at the time of recontracting at the end of the decade. And with the potential to develop a distinct capital strategy aligned to its customer needs, the spin-off announcement received positive feedback from the liquids business' customers. They need us to be deploying capital in order for them to prosper. So pairing its attractive dividend -- base dividend and unrivaled path to key demand markets, we also expect the company's highly contracted take-or-pay low-risk cash flow profile to offer a premium valuation relative to its peer group. So what are the next steps? We're expecting tax rulings from the CRA and the IRS in the first half of 2024, and our proxy circular will be filed shortly thereafter. We remain on track to advance a shareholder vote by middle of next year and expect the spin-off to be completed in the second half of 2024. Importantly, following the spin-off, the shareholder dividend will remain whole, in that the sum of the dividends of the 2 companies will equal the pre-spin dividend. So I'll now turn to the future vision for TC Energy post-spin. While our business has continually evolved, our value proposition really hasn't changed over the last few decades. We take a long-term view. We want to allocate capital with discipline. We strive to maintain financial strength and flexibility and adhering to our conservative risk preferences, with a particularly stronger focus going forward on project execution, not just at the individual project level, but at the portfolio level as well. We're leveraging our core competencies while simultaneously building capabilities by making small strategic investments in low carbon energy solutions. These will help us prepare ourselves to the extent there's an opportunity to become an incumbent in an emerging form of energy, and also perpetuate that value proposition of above-average growth with below average risk. We're being disciplined in our allocation of capital while aligning future spending to our 4.75x debt-to-EBITDA upper limit by the end of 2024. We're also continuing to derisk our portfolio by migrating towards opportunities that grow rate-regulated and long-term take-or-pay contracted profiles of our utility-like businesses. This is a proven formula, one that over the last 23 years has delivered 23 consecutive increases in annual dividends, and an 11% total shareholder return over that same period of time. By remaining aligned with that value proposition, we expect to continue to grow the dividend at a rate of 3% to 5% annually, because we'll be growing cash flow and earnings at a rate at or above our dividend growth rate. So as we continue to leverage our 4 leadership positions in TC Energy, our low-risk utility-like asset base is expected to deliver an above-average EBITDA growth rate of approximately 7% through 2026. I'll walk through the drivers of that growth, and Joel will provide further details shortly in terms of the business unit breakdown. In terms of how we allocate capital, what do we think about? Long-term energy fundamentals, the commercial frameworks and increasingly, policy alignment. These will continue to inform our capital allocation strategy. Global policies mandating new energy solutions to meet climate targets are driving the need for more of everything, all of our services. Electrification in Europe and around the world is translating into incremental demand for LNG exports from North America. This demand is forecasted to grow by an additional 230% by 2050, to almost 40 Bcf a day. We're well positioned to capture that next wave of LNG opportunities because we have access to coastlines in all 3 countries. Within North America, we're seeing coal retirements. We're seeing strong LDC demand and we're seeing a shift towards renewables that requires firm backup. This is resulting in record high utilization rates of our assets. Now keep in mind that while strong utilization demonstrates the health of our system, I will remind you that we have take-or-pay contracts, with creditworthy counterparties that fundamentally underpin all of our gas transmission assets, meaning that customers pay us to ensure the capacity is available to them, whether it's used or not. This is a different composition from many of our midstream peers. As I mentioned before, we transport about 30% of the natural gas around the continent. And we are the only infrastructure company with strategic natural gas pipeline corridors connecting low-cost basins to premium value markets in all 3 countries of Canada, U.S. and Mexico. And the North American natural gas market is forecast to grow by 22% by 2050. We've also seen that increasing power demand, as I said before, requires an all-of-the-above approach. The forecasted growth in renewable power generation by 2050 will also require a reliable backstop to firm their intermittency. And in our power business, for example, supplying reliable, affordable and sustainable energy directly complements our core competencies. We're strategically focusing on baseload and firming opportunities with high barriers to entry where we already have a competitive advantage. For instance, we have a leadership position in the Ontario power market with Bruce Power. That provides a competitive advantage that we can leverage to capitalize on large-scale opportunities that aren't accessible to others, such as nuclear and pumped hydro; technologies that I will remind you today are affordable, they're firm and they're sustainable. And they have a risk return profile that can successfully compete for capital within TC Energy, unlike other forms of power generation. In natural gas, as coal generation drops off and renewable power's market share grows, so has our system's natural gas power deliveries, which are essential to supporting baseload and peak requirements. The chart on the lower left of this slide shows the average and peak deliveries in our U.S. gas business from 2018 to 2022. And the light blue line represents the growth of wind and solar generation in states adjacent to our corridors over the same time frame. By more closely aligning our natural gas and power businesses, we can further leverage the organic synergies that we see between those 2 businesses. Excuse me. So how do we make our capital allocation decisions when you have such a vast opportunity set? That opportunity set by the way, allows us to high-grade where we choose to allocate capital. The first criteria is ensuring that every project we fund and support will strengthen one or more of our 4 leadership positions, in order to protect and enhance the incumbency of those 4 businesses. We've also introduced, as you'll hear repeatedly today, more rigor into the process, incorporating key learnings about how to reduce project execution risk. And if and when we take on large projects or where the technology is new to us, we will be undergoing a far more rigorous Class 3 estimate, which takes longer, and you have to spend more money during the development. But this is an important decision that we've made to improve the quality of our estimates, approve our preparation and reduce risk. And that includes independent third-party assessments, a fulsome survey of 100% of the right of way on the projects, binding bids and locked down contracts at the time of Board approval, and of course, commercial arrangements that appropriately allocate risk among the parties in order to derive a successful outcome. And as I said, we're already seeing the benefits of this approach with Southeast Gateway. New projects will also be assessed against thresholds like internal rate of return, what's the regulatory construct and what are the ESG considerations? That means we will pursue projects that have low execution risk and maximize the spread between our expected rate of return and our cost of capital. We need to do this in a disciplined manner, which is reflected in our firm commitment to limit our capital expenditures to $6 billion to $7 billion annually, starting in 2025, with a bias to the lower end. Adding all this up, we expect to grow our comparable EBITDA and cash flow per share at or above our dividend growth rate. Now this slide shows a comparison of the unlevered after-tax IRR of our projects that are sanctioned between 2020 and today versus the 10-year government bond yields. And we've seen an upward trend in the IRRs. In 2020, we averaged about 8%, and more recently in the low double digits with projects like Bison Xpress, Southeast Gateway, and the Bruce Power Unit 3 MCR. By maximizing that spread, we can deliver at or above the high end of our dividend growth rate, but also maintain a steady payout ratio and undertake some organic -- further organic deleveraging. Furthermore, our Canadian and U.S. regulated natural gas businesses, which, by the way, make up 80% of our EBITDA, offer additional embedded protections that allow us to recover the cost of debt. In Canada, interest is a direct flow-through to tolls. In the United States, interest expense is factored into rate cases. And we have some flexibility to increase the cadence of our rate cases, as you've seen us do over the last few years, to optimize the timing of cost recoveries not only on interest, but also on plant maintenance. These utility-like protections support year-after-year financial performance. Another key point of differentiation where we've delivered strong operational and financial performance at all points in the economic cycle. Now this slide shows the expected capital expenditures through 2026. But I can tell you that in our natural gas and power businesses, we have visibility to our capital spend through the end of the decade. And it's nearly double the opportunity set that we could feasibly execute on, given our financial and human capital constraints. The volume of prospects we are seeing in our portfolios gives us the opportunity to be selective and high grade. I'm going to pause here momentarily because sometimes we hear the question, why now about the spin? As you can see, we're already at or near our targeted capital expenditure range in 2025 and 2026 in just our natural gas and power businesses. That is what Bevin and his team are competing against, and that's what's driving our decision behind the spin. Projects in development must be contemplated years in advance. The liquids team must have the flexibility to make capital allocation decisions now that will strengthen their industry-leading corridor before recontracting at the end of the decade. Separating in 2024 gives South Bow the time to identify and advance the opportunities that will make them the most successful in the long run. Now returning to TC Energy post-spin. Looking ahead, we're going to manage not only individual project risk, but the aggregate risk of the capital program. Our goal is to limit the number of multibillion-dollar projects and our equity contribution to these large projects at any given time. And if we must bring in a high-quality partner for a large project so that our contribution fits into our $6 billion to $7 billion a year, we will do that. As we've highlighted in our power business, by the end of the decade, about 75% of the EBITDA -- the comparable EBITDA will come from Bruce Power. Beyond that, we will prioritize meaningful opportunities with rate-regulated commercial constructs. And we can do this and also have very modest equity investments strategically in areas like hydrogen and carbon capture. And this is what's going to provide some optionality around ensuring that we can perpetuate our above-average growth and below average risk value proposition well into the next decade. Now we're fortunate, as I said, to have more opportunity than we have capital. How do we see future capital allocation unfolding? Well, we expect $3 billion to be focused on investing in our leadership positions in natural gas across the continent. This includes regulated maintenance projects where we earn a return on and of that capital, as well as projects like the NGTL system capacity expansion and an assortment of U.S. capital projects that maintain and enhance our market share positions in the U.S. and Canada. The other half supports diversification and discretionary growth projects. The Virginia Electrification Project and the Virginia Reliability Project are great examples of growth capital that also helps us advance our objectives around reducing our emissions intensity. We've got about $900 million a year on average annually set aside to support our commitments to Bruce Power. And the last $1-plus billion gives us optionality. We will carefully weigh what gives us the strongest return between debt reduction, share buybacks or capturing additional high-value growth opportunities, with a bias in the near term to the former of those 3 alternatives. Of course, delivering on time and on budget is critical. In 2023, we have demonstrated that very well. Critical to our value proposition going forward is ensuring that the commercial constructs include an appropriate allocation of risk between parties. This means sharing cost, schedule and regulatory risk with our customers wherever possible. So let's look at our portfolio. In Canada, we are rate regulated, which means that we earn a return on and of all of the capital incurred subject to a prudency test. In our U.S. natural gas business, where possible, we pursue cost-sharing mechanisms. And we also focus on low-risk in-corridor opportunities, where we know the stakeholders, we know the ground, we know the assets. On Southeast Gateway, we have 2 mitigants. We have cost sharing, but we also have an off-ramp built in to the extent capital costs are forecasted to increase more than 20%. I want to reassure everybody, we are doing extremely well on Southeast Gateway. Investments we're making in Bruce Power's life extension program are supported by long-term contracts out to 2064 with a AA counterparty, with no commodity price or volumetric risk, with the highest quality Class 2 estimates that are refreshed at the time of sanctioning. So the growth we are seeing in major supply and demand markets is allowing us to shift our portfolio mix in a manner that captures the best of both the midstream and utility worlds. Our expected EBITDA growth trajectory is at the top end of our peer group across both industry classes. Our business risk profile rating is excellent, with little to no price or volumetric risk. And we are also at the top end of a rate regulated and/or take-or-pay contracted EBITDA amongst our peers, both in the utility and midstream space. So in several critical ways, this slide exemplifies what we mean when we say our portfolio and our profile is utility-like, unlike most of our peers. So to wrap things up from my section, I want to look at our nearer-term priorities. We had great success in 2023, focusing on a short, straightforward set of priorities that directly align to our strategy and our value proposition. And we will remain focused on these 3 key areas in 2024. First, by executing on our high-quality secured capital program. And in doing so, we expect to deliver comparable EBITDA growth in the 5% to 7% range. Second, we'll continue on our path to achieving and sustaining our 4.75 debt-to-EBITDA upper limit by the end of 2024 by completing our divestiture program. And as there are 2 ways to delever, one is paying down debt, the other is growing EBITDA. We're going to continue to streamline our business and look for efficiencies. And third, we will continue to be excellence-driven in our daily operations in terms of safety and in terms of maximizing the availability and reliability of our assets. By doing these things, we expect to continue to prudently grow the dividend in that 3% to 5% range annually. And as you saw from the video at the beginning of the presentations, what gets people up every morning in our company is doing our job safely and reliably delivering the energy people need every day. It's a responsibility we take very seriously. And what comes with that, with our strong execution is delivering superior returns to our shareholders. The link between the 2 is undeniable. So I'll now pass the mic over to Joel. Thank you very much.

So thanks, Francois, and good morning, everyone. So as a reminder today, unless otherwise noted, I'm going to be speaking from the lens of TC Energy, post Liquids' spin-off. And I'll also note that the outline slides that I'll be providing here, referencing to -- do not include the impact of further asset sales. So my goal today here is to further demonstrate how our vision, our strategy, if you will, aligns with our long-standing value proposition. So building off of Francois's comments, what I'm going to do here for you today is I'm going to provide you with additional examples of how we're adhering to our conservative risk preferences. I'm going to walk you through the steps we're taking to restore our balance sheet strength and flexibility. I'm going to elaborate on our 2024 outlook with details from each of our business units. And lastly, I'm going to highlight how we continue to deliver long-term shareholder value. So looking at the composition of TC Energy post-spin approximately 97% of our comparable EBITDA is underpinned by rate regulation or long-term contracts. Of that, 80% of our business is rate regulated, which ensures that we earn an appropriate return on and of capital invested. Our Natural Gas Pipelines business, which represents almost 90% of our comparable EBITDA, does not contain any material volumetric or commodity price risk. Power and Energy Solutions, which represents the remaining 10% of our comparable EBITDA, is prominently Bruce Power, where we have a long-term contract with the Ontario ISO out to 2064. So the key takeaway here for all of you is that the utility-like attributes of our business will continue to deliver stable, predictable growth for our shareholders for years to come. Now this chart truly showcases the predictability and longevity of our asset base as we have clear visibility in our comparable EBITDA out to 2030. As my predecessor Don Marchand would say, this was our Saskatchewan earnings cliff, as we would demonstrate the stability of our cash flow. So as you can see, by executing on our sanctioned $32 billion capital program, along with ongoing maintenance capital spend on our rate regulated businesses, we'll deliver solid growth through the end of the decade. Now going forward, I want to emphasize that we will be extremely selective and sanction only high-value projects that fit within our conservative risk preferences, while ensuring we maintain balance sheet strength and flexibility. So driven by our fully sanctioned, commercially secured capital program, we expect to deliver approximately 7% comparable EBITDA growth and 4% to 5% comparable AFFO growth out to 2026. This underpins our expectation to deliver growth at the upper end of our 3% to 5% dividend growth outlook. So turning to the business units. Our NGTL and Mainline Systems earned a base return of 10.1% ROE on 40% deemed common equity, and interest costs are captured in our annual revenue requirement. This business also has a unique incentive mechanism to share the upside with our customers that ultimately deliver the most competitive tolls. And we've already started discussions with customers on the next NGTL settlement negotiations, with the goal of defining a clear path towards another settlement mid-2024. And we will look to optimize return on and of capital, while continuing to maintain our competitive toll and service offerings for all of our customers. After several years of significant growth, reflecting the various expansion programs, growth in our Canadian Natural Gas business is expected to moderate. As a reminder, due to the regulated nature of this business, every dollar invested earns a return on and of capital, and this makes it the most insulated, low-risk piece of our portfolio. Within our U.S. Natural Gas Pipelines business, strong fundamentals for natural gas, our best-in-class asset footprint, underpins approximately 5% comparable EBITDA growth out to 2026. This highly competitive pipeline network comprised of 13 pipes, offers attractive growth opportunities as the world demands more energy. For example, last month, the FERC approved our GTN Xpress expansion project, and this will provide for incremental contracted export capacity, facilitated by our Canadian Natural Gas Pipelines, an attractive average build multiple of approximately 9x. As we continue to grow, we'll not deviate from our low-risk utility-like business model, where over 90% of our revenues are underpinned by long-term contracts, which insulates them from market volatility. Now turning to Mexico, comparable EBITDA growth is approximately 30%, and this is largely driven by assets that we placed into service between now and 2025. This includes the Southeast Gateway Pipeline project, which is expected to be placed into service in mid-2025 and will add approximately $800 million in annual comparable EBITDA and an average build multiple of approximately 7x. Now as we've said before, we will monitor and manage our net exposure in Mexico toward approximately 10% of our total comparable EBITDA. And this is important for us as this aligns with our long-standing value proposition of conservative risk preferences. And we've already started to explore various alternatives and have a number of options to manage this exposure. Importantly, we do have time to determine the optimal strategy that will continue to maximize shareholder value. To further manage this exposure, over the last year, we raised over USD 4 billion of nonrecourse in-country debt financing to fund approximately 2/3 of the Southeast Gateway project, in addition to implementing various forms of risk insurance. So growth within the Power and Energy Solutions business is largely driven by progressing the Bruce Power MCR program. The Unit 6 MCR is completed ahead of schedule and within budget, and the Unit 3 MCR began in March. Investments in the MCR program in Project 2030 are expected to grow our share of Bruce Power equity income to over $1 billion by 2030. And in addition, we have visible incremental growth beyond the currently sanctioned projects. For example, you've heard us talk about the Ontario Pumped Storage Project. This is a real exciting opportunity for us and it has policy support, and we anticipate making an FID sometime in 2025, subject to pending feedback from the government on the commercial construct. For us to move forward with this project, a fundamental requirement would have to -- would have to include a rate-regulated commercial construct at the time of FID. And we're also evaluating investment in Bruce C, which could take place sometime next decade. So as Francois highlighted, by -- we continue to focus on opportunities to -- on our baseload and firming power sources, and we always favor rate-regulated or long-term contracted commercial constructs. So I want to emphasize our commitment to limit our net capital spending beyond 2024 that this will not waver. Capital will not be allocated to projects that do not fit within this limit and we'll continuously review our capital forecast going forward. So as you can see here, our capital spend profile is front-end loaded. And beyond next year, we will limit our net capital spending to the low end of $6 billion to $7 billion. The capital outlook here contains secured projects, maintenance capital as well as projects pending approval, capitalized interest and debt AFUDC. So this chart breaks out our funding plan in terms of sources and uses out to 2026. Our robust cash flow of approximately $32 billion provides the majority of our funding. And we've demonstrated competitive access to the debt capital markets in both Canada and the U.S., as evidenced by us issuing $7 billion earlier this year. In October, we successfully closed the 40% sale of minority interest in our Columbia Gas and Columbia Gulf systems for total cash proceeds of approximately $5.3 billion. So summing it all up, this leaves us approximately $4 billion of funding required over this time period. And I will note, again, that this number excludes the impact of $3 billion of asset divestitures that we are evaluating, which could serve to reduce net new issuances in helping us reach our 4.75x debt-to-EBITDA target by the end of next year. So we have a clearly defined path to achieve our 4.75x debt-to-EBITDA target by the end of next year and beyond. And this represents, as Francois mentioned, the upper limit of what we will manage to. We ended last year at 5.4x. So we've made significant progress to date this year in reducing our leverage. Contributing to this is the strong execution of our capital program and our expectation to place approximately $5.5 billion of assets into service this year, supporting an increase in our year-over-year comparable EBITDA of approximately 8%. We also used the cash proceeds from the $5.3 billion Columbia asset monetization to further reduce our debt. So now as we look into 2024, in addition to continued project execution and growth in EBITDA, we're continuing to evaluate an incremental $3 billion of capital rotation opportunities to further progress our deleveraging. And you'll hear more about this as we're able to share. And finally, we anticipate liability management opportunities related to the spin-off, in addition to the partial year comparable EBITDA contribution from Liquids Pipelines, will provide a onetime leverage metric benefit next year. Now beyond 2024, I see a material step-up in comparable EBITDA as a result of $9 billion of assets being placed in the service in 2025 that will further support our deleveraging efforts. And we'll also progress on our cost savings initiatives, find further ways to -- more opportunities to enhance our return on invested capital, and manage our net capital spending to the lower end of that $6 billion to $7 billion to ensure that we remain at or below our leverage target. So I won't spend a lot of time here in the below items here. It's a takeaway for all of you. However, I do want to point out that our normalized tax rate has increased slightly, as a result of the 2023 transactions. So we now expect to be approximately 20%, and historically, we've been in the high teens. In terms of foreign exchange, our U.S. dollar-denominated EBITDA streams are partially naturally hedged with interest expense on our U.S. dollar debt portfolio, along with depreciation expense that's associated with these assets. After factoring these natural hedges, we are structuring long, approximately $2 billion per year after tax. And we actively manage this residual exposure of a rolling 36-month period, with real focus on in the first 12 months. So as a reminder, we only have the ability to hedge our net income, we can't hedge EBITDA. Our U.S. dollar net income for next year is approximately 80% hedged at an average rate of 1.35x. So any movement in exchange rates will only have an minimal impact on the unhedged portion of our net income for next year. So given broader [ marketality ], I wanted to remind you that TC Energy's low-risk business profile provides stability of our comparable EBITDA and our cash flow. Approximately 89% of our long-term debt is fixed rate, with an average term to maturity of 18 years at a weighted average pretax coupon of just over 5%. Now this, along with our rate regulated nature of our Canadian and U.S. natural gas businesses means that we are largely insulated from the impact of rising interest rates. Cash proceeds from the Columbia asset sale earlier this year helped drive down our floating rate interest exposure from 22% to 11% today. And as I mentioned previously, we'll continue to optimize the use of asset sale proceeds to repay debt and accelerate our deleveraging going forward. Now we do get asked a lot around the current interest rate environment and how this is going to impact the spin-off. So we've been working with Bevin's team, and we have multiple levers available that we can manage the interest rate expense -- or interest rate risk -- sorry -- in this very dynamic interest rate environment that we're in. First, South Bow has the ability to optimize both the timing and the amount of debt that it issues. And we'll look to issue debt in the most constructive debt capital market environment as well as adjusting the amount of debt issued while ensuring an investment-grade rating for South Bow. And what we're talking about here is really just several hundred millions of dollars of potential debt optimization. So while this is really significant for South Bow, the expected range of debt issued and the subsequent proceeds to repay debt here at TC Energy, will have a very minimal impact on our ability to meet our 4.75x debt-to-EBITDA target next year. Second, any dyssynergies due to interest rates are expected to be minimal. So let me illustrate here. South Bow expects to issue $7.9 billion of debt in the range of 30 to 50 basis points higher than the cost of debt based on today's rates, or about $35 million of additional interest costs when we add it all up. However, we, at TC Energy can largely offset the incremental interest costs by using the proceeds to tender debt at TC Energy at a discount to par, and looking at today's rates, we could expect to see an incremental leverage reduction that would apply interest expense savings of about the same $35 million amount. So at last year's Investor Day, I told you I felt optimistic about the year ahead. Despite some challenges, 2023 is shaping up to be a record-setting year for us. We had a very strong October, as Francois mentioned, and based on the foreign exchange tailwind, we are pleased to tell you again that the comparable EBITDA is going to be approximately 8% higher when compared to last year's record results. And I have great expectations for the year ahead for us. Driven by continued demand for our assets and services, we expect 2024 comparable EBITDA to be approximately 5% to 7% higher than this year's record amount. And as Francois discussed, the 4 pillars of our long-standing value proposition set the foundation for continued operational and financial strength, insulating us from the volatility that we see in the broader market. Our stable, low-risk business model, high utilization of our assets, our largely fixed rate debt portfolio gives me confidence in this outlook. And I also have confidence in Bevin and his team's ability to maximize the South Bow value proposition in a manner that will benefit its shareholders for years to come. So with that, I'm going to pass the mic over to Bevin.

Thank you, Joel. Good morning, everyone. I'm really excited to be here. It's so good to see so many friendly faces, and Richard and I will be at our back little booth. It's -- we don't have popcorn, but we have a pretty cool business to talk about. So I look forward to seeing you there. I'm really proud to be here this morning to share more detail on our vision for South Bow and plans to maximize the commercial potential of our highly competitive footprint. As you might have heard from our third quarter call, the South Bow name symbolizes the historical roots of the company. We established it near the Bow River in the city of Calgary. The name also acknowledges that our system strategic corridor, which enables us to deliver a premium resource southward to the strongest refining markets and demand markets in the U.S. Gulf Coast and the Midwest. You'll hear more soon about additional senior leadership and Board roles announced at South Bow. I've been busy interviewing and getting to know some new team members, and it's been exciting to see the excitement around the business model that we have. But we also have a tremendous liquids team in place. This includes our Board Chair, [ Hal Quisley ] which many of you know, a distinguished leader with extensive energy industry and board experience. So my focus today, the key takeaway today is that South Bow offers our customers a competitive business and a premium value proposition for our investors. We have a clear vision on the value created by spinning off this business, and I'm looking forward to walking you through it today. I also hope by the end of today, you will understand why progressing the spin-off of South Bow now is what is needed to fully leverage the competitive advantages of this business as its own entity. South Bow's strong cash flow generation and expected long-term comparable EBITDA growth rate of 2% to 3%, paired with an attractive base dividend, is expected to generate a low-risk, sustainable double-digit total shareholder return. Further, we can expect -- further, we can support an expected 2% to 3% long-term annual dividend growth rate, while accelerating deleveraging by 1/4 to 1/2 turn over the next 3 years. The rationale for South Bow is compelling. As Francois illustrated, we need to be planning now to enable greater flexibility and optionality for future growth. There are a few reasons for this. First, what I talk to our team about all the time is that it takes not only operational excellence, but it takes commercial excellence to deliver our value proposition safely. We will always prioritize the safety of our workforce, our stakeholders and our assets. The Keystone System's operational reliability continues to increase year-over-year. And now we've reached approximately 94% year-to-date. That's a historical high on our system, and we continue to optimize it through reliability initiatives, engineering enhancements and technology applications. This enables us to safely increase throughput while reducing unitized operating costs. And we won't stop here. Using the latest inspection technology, our team is on track to reinspect the entirety of the Keystone System by the first half of 2024, ahead of the spin. This reflects our steadfast commitment to best-in-class operations. Second, our unparalleled assets are critical to meeting the existing and growing demand of our customers. Our systems serve the strongest markets in North America, with both producer supply push and refinery demand pull customers. Following our spin-off announcement, many of our customers reached out to congratulate us and provide positive feedback on our ability to invest in our system, and provide new expansion and extension opportunities for them. Finally, our commercial framework is unique and attractive for the business and our customers. We consider our long-term committed contract structure to be the lowest risk in our peer group, offering little volumetric and commodity price risk, with competitive transportation tariffs. So our Keystone System serves as a direct link from the Canadian oil sands, the third largest oil reserves in the world, to the 2 strongest market demand markets in North America. Looking at supply fundamentals, the Western Canadian Sedimentary Basin is projected to grow approximately 600,000 barrels a day, and it has been growing over the past decade. These are low declining, low-cost reserves with over 50 years of economically producible supply that requires minimal sustaining capital. And recall that approximately 95% of Canadian oil sands production is committed to net zero by 2050. Further, the low carbon intensity of our assets is supportive of our commitment to ESG. On the demand side, we serve the 2 most resilient markets at PADDs 2 and 3, representing approximately 80% of the North American refining market share today. And that's forecast to grow to over 90% by 2050. Further, PADD 3 crude exports are set to grow 43% by 2030, and our competitive path to the Gulf Coast is well positioned to serve that growth, including tidewater access. Additionally, in Alberta, our Grand Rapids and White Spruce assets, provide market diversification to serve global markets off Canada's West Coast. As you can see, WCSB supply available for export is forecast to exceed pipeline capacity, supporting continued strong demand for our systems. With the prospect of new WCSB egress capacity coming online, producers have begun to increase output and capitalize their assets, and we're seeing this happen in real time. The basin has proven itself to be dynamic and adaptive. We have line of sight to capital-light opportunities that will increase connectivity to key markets, building the fingers and toes of our system to further augment competitive receipt and delivery points for our customers. We are able to offer committed transportation with approved contract renewal terms with competitive tolls to the Mid-Continent and the Gulf Coast. This means increasing access to flexible delivery points for our customers into PADD 2 and PADD 3 refining markets and connectivity to those global export markets. As a stand-alone entity, we will have greater flexibility to pursue these opportunities to capture additional market share and offer a premium service to key markets. The customers we serve all have a common objective, maximizing the value of their product. As I said at the top, our South Bow team and our strategy, driven at the core by operational and commercial excellence. So how do we offer a competitive product to our customers? Our system offers committed contracts, which enables predictable, ratable service that both producers and refiners value. Our system also offers unique and flexible delivery optionality, where customers can move barrels to different markets on any given month, to ensure that they can optimize the value for their commodity. We have a top-tier reputation in the markets that we serve, preserving the highest segregation quality that results from our batch direct path connections. Our system offers the shortest transit time from Hardisty to the Gulf Coast and to the Midwest. This is valuable for our customers and results in less exposure to market volatility, which in -- is particularly important in a [ backward dated ] commodity market, creating time value for our customers. Keystone has a proven track record, month in and month out of being a valued path for Canadian and U.S. domestic crude oil to key markets, as our system has continued to run at very near its capacity since its inception. The reason for this is that we can continually offer one of the best netbacks. A differentiation of our value proposition for our investors is our low-risk business model. We have stable, robust cash flows supported by 96% investment-grade counterparties. Our comparable EBITDA is contracted approximately 88%, with a remaining weighted average contract tenor on our system -- on our Keystone System of 8 years. We have the longest contract tenor amongst our peers, and our customers have an option for renewal for an additional 10 years that has been approved by both the Canadian and U.S. regulators. Our commercial model also has our operating costs recovered through tolls, which reduces earnings volatility in all market cycles. With minimal volumetric or price risk, we have an unrivaled low-risk business model that further differentiates us and is expected to offer a premium value relative to our peers. In our new form, South Bow will leverage our competitive advantages and continue to be one of the continent's most competitive liquids platforms. So by creating a stand-alone entity, we will have greater future optionality to evaluate accretive investment opportunities to respond to both the supply push and demand pull business that we're seeing. We expect to develop and sanction capital at attractive build multiples in the 6 to 8x range. We see strengthening demand to increase volumes for our Grand Rapids and our White Spruce assets, driven by the continued WCSB growth. On Keystone, we see organic potential for modest expansions on the southern part of our system and see attractive recontracting opportunities. Looking to our Gulf Coast access at Houston and Port Arthur, we have opportunities to make last-mile connections, expand storage capability and provide greater market capability. An example of this is Port Neches Link, which we brought into service in March under budget. This 3.5-mile common carrier pipeline system was constructed in partnership with Motiva to deliver crude oil to their facilities, which is North America's largest refinery. Port Neches Link has attracted strong interest, enhancing the value of our Keystone System. On Marketlink, we also closed 2 open seasons this past year and continue to develop customer-focused solutions such as innovative tools, increasing the competitiveness of our systems. We have line of sight to a number of these types of investments and opportunities that underpin our 2% to 3% growth with low execution risk. So I'm going to turn over to the cash flows. So walking through the cash flow profile here on the chart. We showed you this back in July when we announced the intention to spin off in July. What you see here is the significant cash flow that South Bow will generate and the uses of that cash. The bar on the right shows available cash flow for capital allocation or further deleveraging, after financial charges, cash taxes, dividends and other. If we issued in today's market without any optimization, our available capital will be approximately $50 million less than what we announced -- when we announced the spin in July. As Joel highlighted, South Bow has some flexibility to increase or decrease the amount of debt issuance that will be partially determined by prevailing interest rates at the time of our spin. This will be done while ensuring we achieve a maintainable investment-grade rating at the time of spin and thereafter. As you can see, by adjusting the amount of debt that we issue, we can maintain our ability to return significant cash to shareholders in the form of dividends, while still having modest capital for capturing incremental growth opportunities, further balance sheet strengthening or share buybacks. As a stand-alone company, we can exercise greater discretion in capital allocation, originating accretive projects that I mentioned can be built at 6 to 8x multiple range, lowering our leverage or buying back shares. In the near term, we are focused on optimizing latent capacity to increase free cash flow. We will achieve this by continuing to focus on system operations, pursuing open seasons to capture demand and low risk in-corridor and last-mile connectivity growth projects. Equally important, South Bow sets us up for greater success in the medium and longer term by showing our customers we are committed to investing to deliver on their incremental demands. We will make the necessary strategic investments to expand, extend and enhance our corridor in order to secure long-term recontracting for the most competitive, full path service from the WCSB to the U.S. Gulf Coast. So if you've asked why proceed with South Bow now? We have a weighted average of 8 years remaining on our Keystone System contracts. We must stand up the full capital structure today. This will support making the strategic investments necessary to mitigate any risks and ensure we capture the system's full potential and deliver that value back to our shareholders. As you have heard, our near-term focus will be on latent capacity optimization. That does not require a significant investment over the next 2, 3 years. This enables us to direct free cash flow to -- toward reducing leverage. As I said, fundamental to our decision is that South Bow will be an investment-grade entity at the time of spin and maintain this rating going forward. This expectation remains in the current interest rate environment. As Joel noted, we will look to optimize timing and establish the capital structure in a constructive capital markets environment. We fully expect to have the capital structure in place prior to the spin. But to the extent we have not stood up the capital structure in its entirety, we have various tools available, including access to the bank term loan markets and utilizing hedging instruments, if appropriate. This gives us flexibility to optimally implement the long-term capital structure at the new company. So I hope you can see why I'm so confident about the future of South Bow as a differentiated company. With a long-term premium value proposition, organic EBITDA growth offers significant deleveraging potential and future optionality as how we return capital to shareholders. We see a long-term comparable EBITDA growth average of 2% to 3% with low execution risk. So our assets are in place. They're there. The production is there. The refining demand is there. More importantly, what we've seen is the growing demand for energy is there. And we offer a very compelling competitive path connecting the stable supply reserves to this demand. We also have the levers to add incremental upside to this, commercial optimization, in-corridor opportunities, sanctioning projects with attractive build multiples. Our core value proposition is based on the 2% to 3% long-term growth outlook, delivering a low-risk, double-digit total shareholder return. We will take a disciplined approach to any incremental levers on top of this. To close, I want to reiterate that South Bow needs to make strategic investments today to capture the full potential of this business. As a stand-alone entity with a distinct capital allocation strategy, we will have greater flexibility to invest where we need to, in order to protect the value of our corridor and deliver that value back to our shareholders in the form of a compelling base dividend. With that, I'll welcome our executive team to come up to the stage, and we'll begin the Q&A.

All right. Well, thank you for that, Bevin, and thank you, everyone, for listening in as well on the webcast. We're going to go to our Q&A here in the room. We have 2 mics floating around. So we just ask that you raise your hand and ask the question in the mic for the benefit of those that are listening in on the webcast. Limit yourself to 2 questions and then if you want to raise your hand to ask another one, we'll try to get through as much as we can today. Just as a reminder, too, once we've finished the formal Q&A here, we will have the business unit presidents and some additional representation at the back of the room at the business unit booth [ CLC ] along the edge there and a chance for you to continue that conversation, ask a little bit more detailed questions and deeper dive there as well. But with that, we'll open up to questions. It looks like we have a couple down in the middle aisle here. We'll start maybe with Praneeth.

Praneeth, Wells Fargo. So I guess when I look at the slide for committed projects in 2026, it's in the $5 billion range. If you add no new projects at this point, at least on our math, you'd be pretty close to being free cash flow positive. So I guess, how do you think about the desire to be free cash flow positive, fully self-funding at a philosophical level? And is this something that you would consider down the road in the '26 time frame?

Thanks, Praneeth. I'll take this one. What underpins our approach here is to deliver a value proposition of above-average growth and below average risk over the next decade and then some. And so that requires us to deploy capital to defend and enhance our 5 leadership positions, as well as maintaining a strong balance sheet and a stable payout ratio. Admittedly, in doing so, we have to balance some competing objectives. And so our approach -- and all of the work that went into devising a $6 billion to $7 billion range, with a bias to the downside to the down -- the bottom of that range at $6 billion, is to make sure that we can balance growth, a stable payout ratio as well as the strong balance sheet. And by adhering to the lower end of that range, it does give us some free cash flow year in and year out to organically deleverage, as well as look at some share buybacks in the future. And we do, from time to time, get -- identify the opportunity to spend modest amounts of capital with a very quick payback, 12 to 18 months, let's say, for example, and that's deleveraging because the conversion of cash flow is so rapid. So having that optionality is really important. The traditional definition in upstream and midstream space of being free cash flow positive, we'd like to think of ourselves as having a very utility-like structure, we have no commodity price risk. We're 97% contracted. So as we think about our sustainable level of capital spend going forward, we think about it as not only free cash flow minus the dividends that are paid, but also the debt capacity that is brought forward with the assets that we're putting into service in the very near term. So it's really about optimizing a set of competing objectives and leaving ourselves very importantly, going forward, some optionality to be able to organically accelerate deleveraging or doing share buybacks to get that dividend payout actually down over time.

Sense. And maybe one follow-up, if I could. There's a lot of focus on 2024 leverage, but maybe if I could kind of push beyond that to '25 leverage. On the one hand, you lose that onetime benefit of the Liquids EBITDA. But on the other hand, you have $9 billion of projects coming into service at an 8x multiple, maybe potential settlements on NGTL in Colombia. So would you expect leverage to continue trending lower in 2025?

Yes, Praneeth, I'll take that one, and you've kind of -- you've hit the nail on the head there. We have $9 billion of assets entering commercial in-service in 2025. And as we think about what's the real drivers here to bring the leverage down, its EBITDA as Francois mentioned. So the $9 billion in very attractive multiples is going to be a key driver there. And the other one, more importantly, is capital discipline going forward. So to be at that lower end of the $6 billion to $7 billion range, that is critical to this as well. So you've heard us talk about the upper limit is 4.75x. So over time, we want to bring that down. And the sensitivity that we showed you in the slides today is we find an additional $200 million of EBITDA, that's a 0.1 toward debt-to-EBITDA metric. And similarly, if we have a reduction in our debt or lower capital spending by approximately $1 billion, that's another 0.1. So it really is a combination of growing EBITDA that we showed you, along with that capital discipline going forward to -- maintained at the lower end of the range, which is critical to us keeping our leverage below the 4.75x as we exit 2024.

Rob Catellier, CIBC Capital Markets. Thanks for the presentation today. It's great to see the continued focus on capital discipline, especially on the risk management part. And on that note, I just wanted to talk about Coastal GasLink and the eventuality, if LNG Canada goes to Phase 2 and an expansion is required. How are you looking at the risk reward of that proposition? And specifically, is there an opportunity to readdress the risk-return profile there for Phase 2 as you expand? And I'm thinking risk transfer in particular, but not just with LNG Canada, but also with your limited partners.

Stan, will you take that one?

Sure. I appreciate the question, Rob. we've obviously been very diligently focusing on CGL Phase 1, but at the same time, have an eye on Phase 2 and what it could look like. Very early days. Very early days in those discussions. We're working on engineering assessments. We're looking at potential for electric compression as well as maybe addressing some other commercial terms, to your point, to potentially derisk the project that -- should it be sanctioned. But again, FID is probably slated for sometime first half 2025. There's a lot of discussions that need to go on. So I would just ask that you give us the time to have those discussions and make sure that -- to the extent that we do sanction something, it will only be done consistent with the principles that Francois and Joel have set forward, has to compete for capital against the other alternatives that we have within the company. It has to stay within the $6 billion to $7 billion. And equally as important, you have to have the human capital to make sure that we could progress the project.

Yes. And what I'll add to that, Robert, is the learnings the execution of Phase 1 will definitely be factored into those discussions around allocation of risk in Phase 2, within the confines of the commercial agreements that are in existence.

My follow-up is just for Bevin. I think you had a note in your presentation about you've received approvals for renegotiating Keystone tolls and market-based rates. Can you just expand on that, please?

Yes. Thanks, Robert. With our Keystone System has -- is regulated under the CER as well as FERC in the United States. And so we have pre-agreed approvals from both regulators for the terms under which we operate today. That doesn't mean that we won't consider changing those, say, the tolls, for example, because we're under market-based rates on those assets, which gives us an opportunity and why I'm so focused and the team is focused on preparing for that recontracting opportunity, which could create some value for our shareholders.

I think we've got John upfront here, then we'll go to Brian after that.

John Mackay, Goldman Sachs. I just wanted to maybe start on Mexico. It's been a big focus recently. It was a big focus on kind of conversations last night. I guess we'll get to it more of the breakouts, too, but I would just love to hear an update on Coastal GasLink and then I'll just say it. Now second question is going to be on Mexico mix over time and how that's kind of progressing.

So John, I assume your first -- the first part of your question was an update on Southeast Gateway?

And also Coastal GasLink.

So Stan, if you could take that one and then I'll address the overall portfolio question.

I think you heard Francois say in his remarks this morning that we're actually in a really good place, touch wood with respect to the Southeast Gateway project. When you think about the major milestones going forward, we are very close to starting our subsea pipeline. The deepwater portion of that will last until about the early portion of summer 2024. The shallow water portion will last till about the end of summer 2024, and we also have a micro tunnel that we're drilling onshore as well. So those are the next key milestones that we're looking for. But again, things are progressing very well. All the pipe from our Europe pipe facility has been completed and is being delivered right now. Pipe from the Tubacero facility in Mexico was 85% complete about a month or so ago and is tracking towards 100% completion. We have much more than 50% of the pipe concrete coated, which was a key milestone for us in order to start the subsea pipelay. So things are progressing extremely well. We're very, very happy with our partnership with CFE. And if you recall, part of derisking the project was making sure that they had responsibility for things like land and permits. And the fact that we've been able to advance the project as close to our schedule as we have is a testament to their ability to come through as well.

John, thanks for laying out the second question in advance around our Mexico exposure as it relates to the totality of the portfolio. I want to be clear that we have made a commitment, and we will be abiding by our commitment to reduce our exposure in Mexico as a percentage of the total portfolio. I think we gave some indications that we were thinking about what the right metrics might be for us to do -- be to do that going forward. We studied a number of alternatives and then I've reverted back to a percentage of consolidated EBITDA. It's easy for you all to understand. There's no translation required from our financial statements. And our goal is to gravitate towards that 10% over time. But I think as Joel mentioned in his comments, we're not in a hurry. What's at debate right now is how do we do that? Is it via capital markets? Is it via the divestitures in the private market? Is it to occur at the whole portfolio level or at a subset of the portfolio or even at the individual asset level? We're doing that analysis right now. And then thirdly is the timing. As Stan mentioned, the project is going very well. We want to make sure that we are rewarded and that our shareholders are rewarded for the strong execution that we're delivering. And so whether it's 2024 or 2025 or later, we're going to pace it appropriately not to give away value. But I want to reiterate, we remain committed to gravitating to that 10% of consolidated EBITDA over time.

Brian and then Theresa.

Brian Reynolds from UBS. Maybe to start out on asset sales. How should we think about the time line at this point? You've talked about $3 billion. Clearly, interest rates may be peaking at this point. How are you thinking about kind of timing in the market? Is your end '24 kind of a hard deadline? And then maybe second part of that question is, how are you thinking about asset sales as we head into 2025? Is there kind of an annual capital rotation target that you guys are looking at?

So thanks for that question, Brian. We are steadfast in our goal to achieve below 4.75x debt-to-EBITDA by the end of '24. We have to do that. So if it doesn't come from divestitures, it's going to come from EBITDA improvement. So we are pursuing a number of different transaction alternatives to make sure that on the reduction of debt side of the ledger, that we're in good stead. And we are not bound by any particular asset. So we have multiple different alternatives we're pursuing simultaneously because we want to see some competition among the processes, not just among the potential buyers for a particular process. As I said on the third quarter call, think of this as 2 or 3 transactions that would, in totality, make up the $3 billion number. So that means smaller dollar amounts, which, by definition, broadens the buyer universe. We're still in the same interest rate environment as we were 6 months ago. But having said that, as you pointed out, expectations around interest rate trajectories are different. I think we are either at or near the top of interest rates. And also in terms of the economic outlook, even 6 months ago or certainly a year ago when we got started on the initial wave of divestitures, there was some question around whether or not we'd be in a recession at some point in 2023 or 2024. It's becoming more clear that monetary policy is delivering a softer landing and maybe a more constructive economic environment. And I think that brings more confidence to the buyer universe. But again, having said that, we are in an elevated interest rate environment relative to what we were a couple of years ago. And from a timing standpoint, we're not in a hurry. We don't have a deadline in terms of a month in 2024. And again, if we have an opportunity to grow EBITDA and not compromise value and divestitures and have those extend into 2025, as long as we meet our upper limit of 4.75 by the end of '24.

Great. And maybe as a follow-up for Bevin, just on access to Tidewater for South Bow. A couple of VLC capable terminals out there today. Clearly, South Bow would like to have access to some new terminals coming online. So kind of curious how you'd like to participate, would it be a JV, acquisition or maybe a build of your own? And then kind of beyond that, given maybe some capital intensity post the spin, how do you think about a good run rate for the company going forward, just given I think you outlaid 300 to 350 of capital allocation available for deleveraging or other opportunities?

Great. Thanks, Brian. I'll start with Tidewater, and then I'll go to kind of capital allocation. So on Tidewater today, without having access to capital, the team's already established for our customers, the ability to get to 5 terminals that hit Tidewater, and we brought on the organizational capability and our marketing affiliate to manage those movements. So we can already provide that to our customers as a solution. What we don't have, as you say, is a proprietary project. We've got a number of alternatives identified on that front. I mentioned earlier that we partnered with Motiva on Port Neches Link. That demonstration of working with very sophisticated large partner in Motiva is what we're also pursuing with some other parties. So I can't provide the details, but we are looking at proprietary solutions there to augment what we're already providing for our customers on that front. With respect to the types of capital opportunities that we see, as I've -- our first focus is the commercial and operational system performance that we can leverage right out of the gate. So for those that don't recall, pre the cancellation of Keystone XL, we had extended our Gulf Coast system from Cushing to the Gulf Coast, that has latent capacity. So we already have capitalized assets in the ground that we can optimize through the open seasons and otherwise. However, at our Steele City assets, some of our Hardisty assets, there are capital opportunities that we'd like to start to pursue today. That would require in that $100 million to $300 million zone of dollars to commit in order to advance not only the regulatory and permitting side, but work with our customers to ensure that we're providing the right solutions. So we have a nice tiered set of opportunities already identified by the team. We've been -- as you can appreciate in a capital-starved environment as we were contributing our free cash flow to grow the balance of the portfolio, we didn't commit or overcommit to capital opportunities at this point. But we have some irons in the fire that we're really happy about. And again, the build multiples of that 6 to 8x are right in the range. The return expectations are also high and the counterparties and the tenor of those types of contracts are well within the risk preferences that we already have.

So we'll go to Theresa -- and if I saw Ben, you had your hand up.

Theresa Chen from Barclays. I'd like to first ask about the medium-term look for some of the larger projects, given the focus on increasing capital discipline and living within your leverage targets. So as we think about the potential out there between Alberta Carbon Grid, Ontario Pump Hydro, Phase 2 of CGL, additional expansion on Bruce Power and such. There's a lot going on in your backlog, right? So given that these projects tend to be larger CapEx in nature and longer dated, are you strategically going to time them or FID them with the cadence to not have too much going on at one time within your execution? And if so, or if not, how should we think about your framework around these chunkier projects?

Yes, I'll take that one. You're exactly right. When we talked about managing and optimizing the risk of individual projects. We also talked about managing the risk and reducing the risk of the overall portfolio. So we'd like to not have more than one large project going on at a time, firstly. Secondly, that $6 billion annual capital -- net capital spend limit is a very -- now well understood number within the company, within our business development teams. And so if we want to pursue a project because it has strategic value and owning 30% or 40% of it as opposed to earning 100% of it, we still see value, we'll find a partner. We'll allocate capital. And the best governor of all is that we are not going to exceed that $6 billion to $7 billion a year annually. Secondly, I would say that the commercial constructs under which we take on a large project. There's -- there are material differences going forward with the way Phase 1 of CGL was approached. So if you look at Ontario Pumped Storage, we would be looking to rate regulation and having a full pass-through of costs subject to a prudency test. If we look at Phase 2 of CGL, and we talked about, as Stan talked about it before, there's an opportunity for us here to incorporate our learnings in terms not only of the allocation of risk between parties, but also the estimate will have reflected the OpEx that we've developed on Phase 1. So it's also recognizing that we have limited human capacity as well as financial capacity. So a run rate capital program of $6 billion to $7 billion a year, when you also think about things like governance, it just feels much more manageable, and we are resolute in our desire to stand by that.

Second question is for Bevin on the liquid side. So as we get closer to TMX mechanical completion and given that your cash flows, your volumes are primarily contracted, you're not moving a huge amount of spot today. So just thinking like longer term as you recontract these volumes, it's very interesting that some of your largest shippers on Keystone have chosen not to ship on TMX, even though they have Pacific Northwest facilities. But as we think about the flow of crude and given the restrictions at the terminus of TMX, whether it be Tidewater or [ reverse lightering ] versus going to the Gulf Coast, and that final barrel, ultimately ending up at Asia. How do you think about the flow -- the movement of the product over time and which market wins out and what that means for your system?

Yes. Thank you, Theresa. First off, I'm a proud energy guy, and I'm very happy that we have TMX coming online for our basin. It's a critical project for our country. But it is a very unique asset, as you mentioned. For us, in the near term, we do anticipate some headwinds to our spot barrels as the TMX gets filled up. So you'll recall, our base Keystone asset has 94% fully contracted. We have to reserve 6% for spot. That doesn't mean that we won't be flowing that 6% volume. We have an ability to adjust our tolls to attract those barrels, and we believe we can to mitigate some of that near-term choppiness. Long term, to your question, it's all about netbacks. So if you look at what our strategy is as South Bow, to us, the most important thing is that strategic corridor. We'll remain focused on that because we have our customers, many of which participate both on that supply and demand side of our asset, they can capture such a significant netback advantage by utilizing our systems. If we then add the fingers and toes, as I mentioned, it gives them additional flexibility to move barrels as they need to amongst those refining markets. So if you look competitively going out west or going out east out of the province, going out west, you don't get to a strong demand market in Burnaby, you have to go seek another market, a disadvantaged market. Some of which those barrels, we anticipate to show up in the Gulf Coast, which is a pretty long travel time. So I think we can be pretty competitive against that solution or I know we can. And then with respect to out east, there is tremendous capacity on mainline and coming through the United States through the Midwest. Our focus on having the shortest transit times, the batch nature, that is such a competitive advantage that when refiners are trying to maximize the value of that heavy barrel, we believe that we'll be the premier choice for maximizing that netback on that heavy barrel. So we do see the basin growing. We see egress growing. But the reason why we're so resolute in focusing and getting this strategic corridor locked, is that we have such a high barrier to entry to compete against us that we don't want to lose that. And over the last couple of years, we've seen some of our competitors establish additional businesses in the Gulf Coast to try to stitch together that pathway or provide a solution that could compete. And that's why as a mother bear, I'm trying to get that capital to ensure that we can protect this system.

We'll go to Ben, and I think there was perhaps a question on the left-hand side.

Ben Pham, BMO Capital Markets. Maybe first question on guidance. You have EBITDA guidance, robust outlook. You've introduced AFFO guidance and you've always had a soft EPS guidance metric as well. Out of the 3, what do you think is the most relevant metric for your team and how you allocate capital going forward?

Yes. So Ben, so earnings still do matter for us. And we've traditionally not provided any type of earnings guidance on an EPS basis. We do provide guidance on EBITDA, as you've seen. We introduced AFFO because we thought it was important because of noncontrolling interest with our transaction with GIP, where we sold the 40% minority interest in Columbia Gas and Colombia Gulf this year. That NCI as we come in -- it's a bigger number than it has been historically. And so by introducing AFFO -- and the way we calculate that very simply is just taking our funds generated from operations, less gross in CI. And so we'll provide more color for you in our disclosure going forward on that so that you're able to calculate that and find it within our financial statements. But we felt that was an important measure for us going forward here, given, again in CI. What's key in all this, though, is -- both Francois and I mentioned, is to be able to grow the company at the upper end of our dividend growth guidance. And you think about that in that 3% to 5%. So what we've shown you is 7% growth in our EBITDA and kind of in the 4% to 5% of AFFO going forward. But earnings obviously still do matter for us. But EBITDA and AFFO are kind of the key measures that we're referencing to here.

Okay. And then maybe to you, Bevin, you touched upon recontracting potential. Can you walk through the process a bit more in terms of maybe your urgency around that with and 8-year contract left. Do you think there's new shippers that could be part of the mix? Is it regulator involved in that? And then is there a full path opportunity for you of Cushing as part of that?

Ben, so all good points. So first off, there's not an immediate gun to our head to be recontracting today. We've got 8 years. That is more than double what any of our peers have in most cases. So we've got a good pathway to create the right strategy. But what we want to have on offer for our customers are the demonstration of those capital investments, the fingers and toes that they can then optimize. Many of our customers are optimizing the refining networks in the Gulf Coast. Most -- many of our customers don't just have one refinery, they have 3, 4, and they're looking at how they maximize their refining networks. And so we're in those conversations today to understand what do they need for connectivity, so that when we come for recontracting, we'll be in a position to do so. To your second question around long haul, that is a tremendous opportunity for us. Right now, we provided to attract -- when we were contracting Keystone Excel and we built the Gulf Coast extension, we provided diversion rights for our customers that were taking barrels into the Midwest. Well, and if you're tracking value of barrels in the Midwest versus the Gulf Coast, the Gulf Coast has attracted a more premium value for the barrel. So we see many of our customers take advantage of those diversion rights. So when we look to recontract, there is upside for us in attracting and committing those barrels permanently long haul. One of the types of capital opportunities that we're looking at in the near term, Ben, is at our Steele City, right now, you'll see that many of our barrels go straight south to the Gulf Coast. And then when we need to go to the Midwest, we stop flow going south at that point and divert off Midwest. We can optimize how that's working and then optimize both systems in the near term. That's another one of those capital-light opportunities that we see that can optimize that latent capacity in our system.

Robert Kwan, RBC. If I can just start on CapEx. And so the message is very clear that you want to keep that at $6 billion to $7 billion max. Can you just -- but you're pretty much there for 2025. So you talked about what measures you put in place, and you've talked about Class 3 estimate to give you that certainty. But how are you protecting yourself against other macro factors like capital cost inflation or FX rates? And then as you think about large projects going forward, do you have a max as to what percentage of your capital plan you want those bigger, chunkier projects to take up?

Perhaps I'll start. For the larger, chunkier projects, our goal will be to have executable contracts at the time of FID, right? So you have certainty on what the price is going to be for either the steel or the pipe or the equipment, as well as the EPC contract, depending on what the structure is. So that's the first thing. Secondly, in terms of allocation of risk among the parties, again, if you look at 80% of our EBITDA comes from our U.S. and Canada gas businesses. In Canada, we're subject to a prudency test. So it's a full flow-through of those capital costs subject to prudency. And then in the U.S., we'll manage that through more frequent rate cases where we have the ability to accelerate that cadence. So it's those -- it's that mechanism of increasing the cadence of our rate cases that will allow us to include recovery of things like maintenance capital, which is substantial for us. It's about $2 billion a year and earn a return on and of that. For projects in Mexico, Southeast Gateway being an example, again, the key learning was how do we allocate risk and how do we build safeguards for ourselves, so that we don't have to pursue projects if they come outside of the case that we presented to our shareholders that we presented to the Board. And an example of that on Southeast Gateway is not only do we have cost sharing, but we have an off ramp built into the commercial contract, should costs exceed 20% of the initial estimate. I'd ask Stan to offer any examples on the U.S. side as well as well as on the Canadian side and then Annesley with respect to Bruce Power.

Maybe just as a general proposition, I expect us to be doing less of these big projects going forward in doing more singles and doubles in all 3 jurisdictions. If you look at Canada, for example, we just finished a period of hyper growth on the NGTL system. I expect to get back to a more normal historical run rate. If you look in the U.S., kind of the same thing, there are a lot of opportunities for us to do in-corridor constructible, permittable projects that in and of itself takes a lot of that risk out of play. And then similarly, in Mexico, once Southeast Gateway project is in service in summer 2025, the opportunity set for us is really to do short laterals over to the port in Tabasco, for example, or into the CENAGAS system to provide them with operating flexibility. So I think the nature of the projects themselves is going to change to be more in-corridor, permittable, constructible projects in and of themselves.

Maybe I'd just share on Bruce Power. The majority of capital commitment -- vast majority of capital commitment in the Powered Energy Solutions business is to Bruce Power for the refurbishment program. We feel we've significantly derisked the go-forward program, having now completed and returned to service Unit 6. So the remaining refurbishment projects are effectively repeating what we have now accomplished on Unit 6. And further to that, again, to the sort of mechanics of the commercial construct, we have the opportunity, as we do each of the refurbishments, to reset what the price is that we are to deliver to. And so that provides us with ongoing protection around what we're seeing in terms of inflation and any other sort of macro factors. So for a capital commitment on Bruce Power perspective, we feel good in terms of the commercial construct that exists and our ability to protect against those risks.

Robert, I'll just add one thing because I think you asked a question, too, just around FX. And so this is one of the reasons why we want to be biased toward the lower end of the range that if there is an FX move that, you could absorb some of that. But we also have tools in the toolkit that we can use. We can -- if we had a bigger project in U.S. dollars, we could look to using derivatives if we needed to manage that exposure. But I would remind you that you are kind of naturally hedged, because the cash flow streams are in U.S. dollars as well. So if the cost goes up, you'd expect over -- because of FX that the cash flow streams over time would offset that. But we do have tools in place on that on the FX side as well.

Are you running any higher contingency percentages? Or are there buffers on the capital plan as you've laid it out as well?

Yes. I think our OpEx on small in-corridor projects is very strong. And so we're applying normal levels of contingencies on those smaller and more straightforward projects. On larger projects where there's more complexity or where you've got a tornado that shows sort of a wider array of potential outcomes, we are ascribing more conservative levels of contingency at the project level and also at the portfolio level, we're introducing reserve margins, if you will, into our capital allocation process.

I can just finish. Francois at the beginning, you talked -- you laid out some comparisons on the utility side. I think you were trying to the comparison in there. A number of those are favorable, but can you talk about some of the other things that you think you need to do from a financial setup point of view? And you did mention something around earnings payout. So whether it's that or other factors, what do you think you need to do to draw a greater comparison in the market to regulated utilities? And how do you expect to get there?

Good question, Robert. I would say, execute well and execute well consistently over time. My view is our value proposition is above average growth but below average risk. We talk extensively of our commercial underpinnings being rate regulated or take-or-pay contracts. That deals with cash flow upon achieving in service. The other part of that equation though is delivering on your projects at or better than the cost schedule and quality that you committed to our Board of Directors and therefore, to our shareholders. So it's that execution excellence side of the equation that we are continually working on and laser-focused. We're investing in senior leadership, in our major project leadership team as well. You'll be hearing more about that in the next few months. And so from my perspective, if we're executing on plan, we demonstrate that all points in the economic cycle, we're delivering strong and steady cash flow. I'd like to see our payout ratio go down over time. So from my perspective, the near-term priority in terms of any excess free cash flow after our capital program, I would expect to see that initially go to accelerating debt repayment, like to build some room or some cushion below the 4.75 level, but eventually looking to share buybacks as a way to lower the dividends that are going out sort of on an annual basis. This is going to take time. But again, as per Praneeth's question, we have to balance a set of conflicting objectives, balancing growth, stability as well as a stable payout ratio. And that's the approach we're going to take.

Next one on the left there.

Rob Hope, Scotiabank. Appreciate the Slide 17, where you're showing that the returns on your sanctioned projects in 2023 have a healthy spread relative to the 10-year. I would imagine that 2023 has a bit of a bias, just given Southeast Gateway and Bruce. So maybe, can you speak about the U.S. pipeline business and whether or not shippers are willing to wear or pay for a higher return? And then secondly, in Canada on the early days on the NGTL discussions, whether or not we could see some ROE expansion there to reflect the higher rate environment.

Thank you, Rob. I'll make one minor point and then pass it on to Stan. Southeast Gateway was sanctioned in 2022. And so the IRR that's demonstrated in our 2023 stack of sanction projects does not include Southeast Gateway, which would have been well above that 10.1% average IRR for the sanctioning. But you're quite right. In the case of Bruce Unit 3, that was included in that number. And so I just wanted to make that clarification and then pass it on to Stan.

Yes. And Rob, I would say, it all starts with our best-in-class pipeline footprint across all 3 geographies, to be honest with you. And you match that up with really strong fundamentals, particularly around power generation growth in LNG, predominantly in the U.S., but we're also seeing the same in Canada and the U.S. and Mexico as well, rather. So when I think about growth opportunities generically in the U.S. and go back to Joel's slide, 2025 forward on a net basis, we have about $1 billion allocated to the U.S. right now. But I think, again, that there's upward bias there as we compete for and win our fair share of projects, and doing so within our capital allocation principles. I don't see anything changing with respect to how we have historically shared risk with our customers, with respect to cost sharing, and virtually all of our projects in the U.S. have some element of cost sharing. Nor do I see any change going forward with respect to our build multiples. Many of our projects in the U.S. basically come in at somewhere between a 5 to 7 build multiple, which is very attractive. And most recently is our GTN XPress project, which finally was approved by FERC, I think, is coming in just outside that, it may be a 7.5 build multiple. So still see opportunities to allocate capital to off-redjurisdictions. You mentioned the NGTL settlement. Early days with respect to it. And I would just say that our job is to maximize our return on and of capital holistically, and we look over to discussions with our customers to see how we can improve upon that going forward.

And then I just want to circle back on Mexico. So could you maybe add a little bit more color on how you think about getting to that 10% governor, whether it's on or later. If you do it sooner, we'll call it in 2024, you could accelerate some delevering on the balance sheet but potentially leave some, we'll call it, value on those pipelines on the table. So how do you -- how do you manage those kind of conflicting results of near-term balance sheet improvement versus a reasonable or appropriate valuation for the Mexico business?

Yes. Thanks, Rob. The facetious answer would be very carefully. But to provide you a little bit more detail there, we have to think about things like the tax basis of the assets. Each of the individual assets in the portfolio, the outside tax basis for the portfolio as a whole. What's the repatriation of capital look like from Mexico back into Canada? What are the opportunities for nonrecourse financing to fund growth on a go-forward basis? What is the viability of a public market alternative to compete with the private market? And so we're in the midst of that assessment right now. As I said, we're not in a hurry to get something announced in the first quarter of 2024. We're going to take our time. We're consulting with potential counterparties across the full spectrum of those alternatives, public or private. And we'll maintain competitive tension, not only within a buyer universe for one branch on the tree of potential solutions, but competition among the different solutions. So I don't want to say too much more than that at this time because I want to make sure that we maximize that competitive tension. But we're certainly not in a rush. And we do believe that making positive progress and executing well on the project in 2024 as we pursue these different alternatives, is going to improve the odds of a positive outcome.

Thanks, Rob. Any other questions? I'd like 2 there and then 1 in the back there as well.

Keith Stanley with Wolfe Research. Wanted to ask on the financial outlook. So 2024 growth of 5% to 7% on EBITDA. I think most investors think of stronger growth in '25 and beyond. So can you talk to some of the inputs that are driving a better-than-expected growth outlook for '24 by segment or key things you'd highlight? And then likewise, the '26 outlook is a little better than what you presented in July with the spin, within the range for the ongoing company. Can you just talk about what you're seeing is improving in the business over the past few months and the long-term outlook?

So Keith, I'll start here, if anybody wants to chime in. So when you think about next year, we had $5.5 billion of assets to go into service this year. So we're going to see the full year benefit from those assets next year in our EBITDA, along with -- we have about another $7 billion of assets going into service next year. And that's predominantly CGL, which won't have a huge benefit for us. And one of the reasons why we've had to impair the -- our investment in CGL. But it is a combination of assets going into service this year. Along with just continuing -- just finding ways to optimize our portfolio and having our assets available at peak times. So just think about the availability of our power assets, for example, in Annesley's business, that's been a driver as well. So it's a combination of everything that's driving our EBITDA higher for next year. And then as we look out into 2025, there's $9 billion of assets going into service. So that is a big driver on that year-over-year growth. And then when you go out even further into 2026, as you're seeing, again, the full year benefit of the $9 billion that's going in, in 2025 that's driving us to that 11.2% to 11.5% range that we pointed you to and the 7% growth over that period of time.

I guess, few things would come to mind, particularly with respect to 2024. And at the risk of being competitive, I'd go back to my prior comment around our best-in-class footprint and the record demand that we're seeing in all 3 geographies. More than 14 Bcf a day of receipts on the NGTL system, record peak day power load sendouts in the U.S., and when you look at some of our Mexico pipes, particularly on the West Coast, we're seeing record demand approaching 100% load factor. We're seeing record demands over the past couple of months on [indiscernible]. Record reliability rates. We spend a lot of money on maintenance capital, but that maintenance capital is what makes us reliable and keeps that high demand up. I'd also point to our focus project. Again, we've identified $750 million of run rate synergies by 2025. A significant portion of that is going to come in place in '24. Over time, as we file rate cases in our various jurisdictions, we may have to give some of that back. But that is a big part of the increased earnings you're seeing in '24 forward as well.

Linda back there as well.

Wondering if you could help us understand beyond 2024, assuming you get the $3 billion of asset sales and everything progresses as planned, which in some past years has been a big assumption given some of the exogenous shocks we've seen. Can you help us understand what your base case scenario and plan is to stay below 4.75x EBITDA in 2025? And then can you also help us understand kind of what incremental levers you might have to stay below plan if some of your $9 billion of assets are delayed coming into service? And also, if you could help us understand net sensitivities of debt-to-EBITDA on foreign exchange, if FX moves around as well.

Good question, Linda. First of all, you've kind of hit on for 2025 -- in my prepared remarks, I was saying that the 2 key drivers here are obviously EBITDA growth and then a capital discipline at the $6 billion to $7 billion at the lower end going forward. Those are the 2 key factors here in order for us to be below the 4.75 as we exit 2024 and beyond. And so those are the drivers. To the extent -- and we're not managing rate to 4.75 either going forward. We're going to be below that. We're building in some cushion as we think about our base case plan going forward such that potentially, if there's maybe a slight delay in a project going into service that our expectation is, hopefully, we can absorb that, and we don't reach that 4.75 target that we've been upright into that range. As far as the sensitivities go, a couple of things. One, when you look at about $200 million of additional EBITDA, that's about 0.1, $1.1 billion reduction in debt is about 0.1. The interesting thing on FX is that our -- when you look at the mix of our EBITDA and you look at the mix of our debt, they're about the same. It's around 60% of the portfolio. So, so long as you have -- where you get caught is where the average rate of your EBITDA for the year is higher or lower than the spot rate at December 31, because there are calculations out there that look at the spot rate of your FX -- of your debt at year-end. So, so long is, in the way we look at it, they are the same because they kind of move together when you look further out. But that is one where you have to watch for here. It's at a point in time where you could have -- where the spot rate on your debt is higher or even lower than your average rate of EBITDA throughout the year.

And what I will add, Linda, because I appreciate the question. We will have visibility mid-'24 in terms of how Southeast Gateway is going, because in order to achieve commercial and service in early summer -- late spring, early summer, you have to effectively be mechanically complete sometime around either the end of 2024 or very, very early in 2025. Joel talked about some of the levers around increasing EBITDA to address the incremental deleveraging that needs to come in 2025 on top of just putting the assets into service. If we need to consider additional divestitures in order to maintain below the 4.75 in 2025, and we'll have visibility to that well in advance of that, we would consider that. Very important for us to maintain our leverage in -- below that upper limit of 4.75 and stay there. It's fundamental to our value proposition. And then it's on a go-forward basis, having that run rate of $6 billion to slightly above that and with some cushion to execute up to 7 for us to maintain at that level.

Just as a follow-up question. When you talk about net $6 billion to $7 billion spend, is that just net of noncontrolling interest and partner interest? Or is that net of maybe further capital rotation and asset sales to stay below that level?

Yes, Linda, it's net of partner contributions. So think of that -- our deal that we just did with GIP, for example. So they're in for their pro rata share, call it, 40% of the capital spend going forward on Columbia Gas and Columbia Gulf. So when we talk about that net number, that's what we're referring to is the NCI, the contributions coming from our partners at GIP.

So what I might add to that, Linda, is to the extent we bring in a joint venture partner on other parts of our business, there may be an additional netting to the extent they take on the obligation to fund their pro rata share of the capital program that we've laid out on the slides.

So I think we probably have time for maybe 1 or 2 more questions here. Actually, there's one at the back right.

Yes. [ Rohith ] Reddy, JPMorgan. From my first one, I just want to follow up on a previous question asked. Is there any reason to think that EPS growth trajectory differs materially from the AFFO growth laid out in the slides?

Yes. So one of the things when you're largely rate regulated is you book AFUDC, which is reflected in your earnings. It's not reflect in your EBITDA, but it's reflected in your earnings. Once the asset goes into service, you no longer book AFUDC, but the earnings are already part of your earnings, but you're now cash flowing. So for example, we had, on one of our charts for NGTL where you saw our net income in the 2 years, 2023 out to 2026 about $1.1 billion. You didn't see really any movement in net income. But what you saw there was actually EBITDA going up by about $300 million. And that's really reflective of what I've just mentioned, which is you are booking the AFUDC during while you're expanding, but then that converts into cash flow going forward. But our objective here is earnings still do matter for us. And what we want to do is ensure that our payout ratios remain in line as a payout ratio relative to both AFFO, to FGFO and also to our earnings going forward.

Great. And then for the second one, just wanted to ask on cost of capital and given the changes across the group, where do you see your cost of capital at this point? And what are the types of spreads you're seeing when you try to sanction a project or you're looking for when you sanction a project?

I appreciate the question. I would, with great respect, consider that commercially sensitive information. We keep our hurdle rates. We do have specific hurdle rates that are adjusted for the risk of each of our different businesses. What I would tell you is that, in aggregate, we've seen an ability for us to maintain that spread. We have not seen pressure in 2023 and for what we expect to be sanctioning in the near future, we've not seen any compression in the weighted average IRR of the projects we are looking to sanction. If anything, we've seen those continue to increase. And so we expect we'll be able to maintain that spread between expected IRR and cost of capital over the next couple of years anyways.

Well, I think with that, we may just remind you that we will have our business unit representatives at the back. You'll see the booth with banners. We ask that you please grab a coffee, continue the discussion but perhaps we'll end there, and I'll hand it over to Francois for some closing remarks.

Great. Thank you. Well, we want to thank you very much for your time today. Our goal, as I said at the outset, was to demonstrate how we're maximizing the value of all 5 of our leadership positions, and why we must execute the spin to realize the value that can be generated with strategies that are tailored for Bevin in the South Bow business and for TC Energy post spin. At TC Energy, we'll continue to prudently focus on project execution, disciplined capital allocation, enhancing our balance sheet strength and maximizing the value of our assets by improving the return on invested capital. And at South Bow, the team will be focused on a capital strategy that's aligned to its customer needs, adding those fingers and toes, as Bevin mentioned. It's a highly contracted, low-risk business with a strong base dividend, and we expect it will also garner a premium value relative to its peer group. And it's 2 distinct infrastructure companies, the long-term shareholder value we expect to garner is in excess of what we believe is replicable as a single entity. So that concludes our Investor Day this morning. Thank you for everyone who participated in the room as well as virtually. And for those with us, we'll look forward to speaking with you at the back of the room. Have a great day, everyone.