Calgary-based TC Energy sees data center development as a potential opportunity

TC Energy Corp. sees the rapid growth of data centers in North America as a business opportunity.

The Calgary-based pipeline company said Thursday it is uniquely positioned to benefit from the rapid expansion of energy-intensive data centres being built by companies like Microsoft, Google and Amazon as they drive the artificial intelligence revolution.

Executive vice president and chief operating officer Stan Chapman told analysts on a conference call that of the more than 300 data centers currently under construction or planned in the U.S., more than 60 percent are within 50 miles of TC Energy’s existing natural gas pipeline system.

“We’re seeing a shift in (data center) location preferences from regions where there’s a lot of telecommunications infrastructure to regions where there’s a lot of energy and delivery infrastructure,” Chapman said, adding that a growing number of data center operators are interested in building and owning their own on-site electricity sources to meet their high electricity demand.

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He added that these operators have huge potential to connect to TC Energy’s pipeline system, not only in the U.S. but also in Mexico and Canada.

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“Our best-in-class presence does not limit our capability set to just the United States,” Chapman added.

“There are about 300 data centers in Canada right now. We could see that load (of energy demand) grow by one to two gigawatts by the end of the decade.”

TC Energy, which reported second-quarter net income of $963 million, up from $250 million in the same quarter last year, is optimistic about the future of the natural gas market.

Company CEO François Poirier said demand for the commodity is expected to increase due to the growth of the liquefied natural gas (LNG) industry in North America, as well as due to increased demand for electricity due to mass electrification, retirement of coal-fired power plants and rising energy demand.

“I have never seen such good prospects for growth in demand for natural gas in North America,” Poirier said.

“We are seeing demand for natural gas at record highs. It is expected to grow by almost 40 billion cubic feet per day by 2035.”

Earlier this week, TC Energy announced an agreement to sell a minority stake in Western Canada’s NGTL and Foothills natural gas transmission network to a consortium of Indigenous communities for $1 billion.

Including debt, the deal is valued at $1.65 billion, making it the largest Indigenous equity deal in Canadian history.

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TC Energy has been looking to sell assets to pay down its debt, and Poirier said Thursday that more deals could be announced soon.

“We still have some deals in the market,” he said. “To the extent we see attractive valuations, we may consider announcing additional deals in the second half of 2024.”

In the second quarter, TC Energy shareholders voted in favor of the company’s proposed spin-off of its oil pipeline business. The plan will allow TC Energy to focus on natural gas infrastructure, as well as nuclear storage, hydroelectric power and new low-emission opportunities. The spin-off, to be called South Bow, will manage oil pipelines, including the critical Keystone pipeline system.

Poirier said Thursday that the spin-off should be completed early in the fourth quarter.

TC Energy’s adjusted profit was $978 million, down slightly from $981 million in the year-ago quarter.

Revenue was $4.09 billion, up from $3.83 billion in the same quarter last year.

The company declared a dividend of 96 cents per common share, up from 93 cents declared last year.

© 2024 The Canadian Press