TC Energy (TRP) Q4 2025 earnings review
Gas Pipelines Surge, Power Segment Stumbles
TC Energy delivered a strong Q4 to cap off a transformational year following the South Bow spinoff. Comparable EBITDA from continuing operations rose 13% YoY to $2.96B, driven by record flows in U.S. and Canadian natural gas pipelines and a massive 70% jump in Mexico segment earnings. However, the Power & Energy Solutions segment was a significant drag, with EBITDA falling 36% due to outages at Bruce Power. Management issued bullish 2026 guidance, projecting EBITDA acceleration to $11.6–$11.8B, underpinned by the imminent in-service of the Southeast Gateway pipeline.
🐂 Bull Case
Mexico Natural Gas Pipelines EBITDA surged 70% YoY in Q4 ($397M vs $234M). With the Southeast Gateway pipeline achieving mechanical completion and targeting a May 1, 2026 in-service date, this segment is poised to become a massive cash flow contributor in FY26.
U.S. Natural Gas Pipelines EBITDA grew 16% YoY to $1.39B. Management highlighted a ~$2B opportunity pipeline related to data centers and coal-to-gas switching, positioning the asset base for long-term structural demand growth.
🐻 Bear Case
Power and Energy Solutions EBITDA collapsed 36% YoY ($217M vs $341M) due to planned outages and the commencement of the Unit 4 MCR at Bruce Power. This drag will persist as Unit 4 remains offline until 2028, though Unit 3's return will partially offset.
Interest expense on continuing operations jumped 29% YoY to $873M in Q4. While part of this reflects debt extinguishment activities, the absolute burden of servicing debt remains high despite deleveraging efforts.
⚖️ Verdict: 🟢
Bullish. The core natural gas business is firing on all cylinders, masking the weakness in Power. The successful mechanical completion of Southeast Gateway removes a major project overhang, and 2026 guidance suggests the growth thesis is intact post-spinoff.
Key Themes
Mexico Segment Breakout
Mexico Natural Gas Pipelines has shifted from a steady contributor to a high-growth engine. Q4 EBITDA reached $397M, up from $234M a year ago. The Southeast Gateway pipeline is 13% under budget and targeting May 1, 2026 in-service. This single project is a primary driver for the FY26 EBITDA acceleration.
Power Segment Drag
Power and Energy Solutions results deteriorated significantly. EBITDA fell to $217M from $341M in 24Q4. The decline was driven by lower generation at Bruce Power (Unit 4 MCR, Unit 2 outage) and lower realized prices in Canadian Power. Additionally, a $110M impairment charge was taken on certain projects where development was discontinued.
Data Center & Electrification Opportunity
Management quantified the AI/Data Center opportunity: a ~$2 billion pipeline of opportunities is being actively pursued. With ~10 GW of service requests and 60% of 350+ data centers in development located within 15 miles of TC's footprint, this is shifting from a thematic concept to a tangible capex driver (e.g., $900M ANR Heartland project).
Capital Discipline & Deleveraging
TC Energy is adhering to its net capital expenditure limit of $6-7 billion annually. Management noted the Debt-to-EBITDA ratio was 4.8x (slightly above the 4.75x target), attributing the miss to FX volatility at year-end. Adjusted for average FX rates, leverage would be ~4.65x. The focus remains on organic deleveraging through EBITDA growth.
Trade Policy Uncertainty
While 97% of EBITDA is regulated or take-or-pay, management acknowledged that prolonged trade tariffs between the U.S., Canada, and Mexico could impact future capital allocation. They emphasized that for sanctioned U.S. projects, pipe has already been procured from U.S. mills, mitigating immediate tariff risks.
Other KPIs
Decelerating. Down from $1.05 in 24Q4. Despite higher EBITDA, EPS was pressured by higher interest expense ($873M vs $679M), higher depreciation from new assets, and increased income tax expense.
Accelerating. Up significantly from $1.67 billion in 24Q4 (+38%). This metric strips out working capital noise and highlights the strong cash conversion of the underlying regulated assets, particularly following the Liquids spinoff.
Accelerating. Up 16% YoY from $1.20B. Driven by higher transportation rates (Columbia Gas settlement), new projects placed in service, and strong marketing results. This segment remains the largest contributor to total earnings.
Guidance
Accelerating. The midpoint ($11.7B) implies ~7% growth over 2025's $11.0B. Drivers include the full-year impact of 2025 placed-in-service assets, the Southeast Gateway in-service (May 2026), and higher Columbia Gas rates.
Stable. Consistent with the company's long-term target of $6-7 billion annually. This discipline is required to maintain the credit rating and support the dividend.
Reversing. After a decline in 2025 EPS (vs 2024), management guides for growth in 2026. This is expected to be driven by EBITDA growth outpacing higher depreciation and financial charges.
Key Questions
Power Segment Recovery
With Unit 4 MCR lasting until 2028, what is the specific bridge for Power segment EBITDA in 2026? How much will Unit 3's return to service offset the drag from Unit 4 and Unit 5's upcoming outage?
Mexico Political Risk
Given the 'monumental' reliance on the Southeast Gateway for 2026 growth, are there any remaining political or regulatory hurdles with the new Mexican administration regarding the May 1st in-service date?
Data Center Capital Allocation
You mentioned a $2B opportunity pipeline for data centers. Will pursuing these require raising the $6-7B annual CapEx lid, or will these displace other planned sustaining capital projects?