SEC Filing | TC Energy Corporation

View:

Download DOC

Download PDF

Download XLS

Document

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of July 2023

TC Energy Corporation

(Commission File No. 1-31690)

TransCanada PipeLines Limited

(Commission File No. 1-8887)

(Translation of Registrants’ Names into English)

450 - 1 Street S.W., Calgary, Alberta, T2P 5H1, Canada

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F o Form 40-F þ

Exhibits 13.1 and 13.2 to this report, furnished on Form 6-K, shall be incorporated by reference into each of the following Registration Statements under the Securities Act of 1933, as amended: Form S-8 (File Nos. 333-5916, 333-8470, 333-9130, 333-151736, 333-184074, 333-227114 and 333-237979), Form F-3 (File Nos. 33-13564 and 333-6132) and Form F-10 (File Nos. 333-151781, 333-161929, 333-208585, 333-250988, 333-252123, 333-261533 and 333-267323).

Exhibits 31.1, 31.2, 32.1, 32.2 and 99.1 to this report, furnished on Form 6-K, are furnished, not filed, and will not be incorporated by reference into any registration statement filed by the registrants under the Securities Act of 1933, as amended.

Explanatory Note

TransCanada PipeLines Limited (“TransCanada PipeLines”) is a wholly owned subsidiary of TC Energy Corporation (“TC Energy”). TransCanada PipeLines is relying on the continuous disclosure documents filed by TC Energy pursuant to an exemption from the requirements of National Instrument 51-102 - Continuous Disclosure Obligations and as provided in the decision of the Alberta Securities Commission and Ontario Securities Commission in Re TransCanada Corporation, 2019 ABASC 1, issued on January 3, 2019. Consistent with the exemptive relief, information contained in this Form 6-K is that provided by TC Energy.

EXHIBIT INDEX


13.1			Management’s Discussion and Analysis of Financial Condition and Results of Operations of TC Energy Corporation as at and for the period ended June 30 , 2023.

13.2			Consolidated comparative interim unaudited financial statements of TC Energy Corporation for the period ended June 30 , 2023 (included in TC Energy Corporation's Secon d Quarter 2023 Quarterly Report to Shareholders).

31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1			A copy of the registrant's news release of July 27 , 2023.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: July 27, 2023	TC ENERGY CORPORATION TRANSCANADA PIPELINES LIMITED

	By:	/s/ Joel E. Hunter
		Joel E. Hunter
		Executive Vice-President and Chief Financial Officer


	By:	/s/ Yvonne Frame-Zawalykut
		Yvonne Frame-Zawalykut
		Vice-President and Corporate Controller

Document

EXHIBIT 13.1

Quarterly report to shareholders

Second quarter 2023

Financial highlights


	three months ended June 30		six months ended June 30
(millions of $, except per share amounts)	2023	2022	2023	2022

Income
Revenues	3,830	3,637	7,758	7,137
Net income attributable to common shares	250	889	1,563	1,247
per common share – basic	$0.24	$0.90	$1.53	$1.27

Comparable EBITDA1	2,474	2,369	5,249	4,757
Comparable earnings	981	979	2,214	2,082
per common share	$0.96	$1.00	$2.16	$2.12

Cash flows
Net cash provided by operations	1,510	942	3,584	2,649
Comparable funds generated from operations	1,754	1,566	3,820	3,431
Capital spending2	2,991	1,491	6,024	3,228

Dividends declared
per common share	$0.93	$0.90	$1.86	$1.80

Basic common shares outstanding (millions)
– weighted average for the period	1,027	983	1,024	982
– issued and outstanding at end of period	1,029	984	1,029	984

1Additional information on Segmented earnings (losses), the most directly comparable GAAP measure, can be found in the Consolidated results section.

2Includes Capital expenditures, Capital projects in development and Contributions to equity investments. Refer to the Financial condition – Cash (used in) provided by investing activities section for additional information.

Management’s discussion and analysis

July 27, 2023

This management’s discussion and analysis (MD&A) contains information to help the reader make investment decisions about TC Energy Corporation (TC Energy). It discusses our business, operations, financial position, risks and other factors for the three and six months ended June 30, 2023 and should be read with the accompanying unaudited Condensed consolidated financial statements for the three and six months ended June 30, 2023, which have been prepared in accordance with U.S. GAAP.

This MD&A should also be read in conjunction with our December 31, 2022 audited Consolidated financial statements and notes and the MD&A in our 2022 Annual Report. Capitalized and abbreviated terms that are used but not otherwise defined herein are defined in our 2022 Annual Report. Certain comparative figures have been adjusted to reflect the current period's presentation.

FORWARD-LOOKING INFORMATION

We disclose forward-looking information to help the reader understand management's assessment of our future plans and financial outlook and our future prospects overall.

Statements that are forward looking are based on certain assumptions and on what we know and expect today and generally include words like anticipate, expect, believe, may, will, should, estimate or other similar words.

Forward-looking statements in this MD&A include information about the following, among other things:

•our financial and operational performance, including the performance of our subsidiaries

•expectations about strategies and goals for growth and expansion, including acquisitions

•expected cash flows and future financing options available along with portfolio management

•expectations about the new Liquids Pipelines Company following the completion of the spinoff transaction, including the management and credit ratings thereof

•expectations regarding the size, structure, timing, conditions and outcome of ongoing and future transactions, including the monetization of certain pipelines, the spinoff transaction and our asset divestiture program

•statements regarding the establishment of a partnership with Global Infrastructure Partners and the expected timing of closing

•expected dividend growth

•expected access to and cost of capital

•expected energy demand levels

•expected costs and schedules for planned projects, including projects under construction and in development

•expected capital expenditures, contractual obligations, commitments and contingent liabilities, including environmental remediation costs

•expected regulatory processes and outcomes

•statements related to our GHG emissions reduction goals

•expected outcomes with respect to legal proceedings, including arbitration and insurance claims

•the expected impact of future tax and accounting changes

•the commitments and targets contained in our Report on Sustainability and GHG Emissions Reduction Plan

•expected industry, market and economic conditions, including their impact on our customers and suppliers.

Forward-looking statements do not guarantee future performance. Actual events and results could be significantly different because of assumptions, risks or uncertainties related to our business or events that happen after the date of this MD&A.

2 | TC Energy Second Quarter 2023

Our forward-looking information is based on the following key assumptions and subject to the following risks and uncertainties:

Assumptions

•realization of expected benefits from acquisitions, divestitures, the spinoff transaction and energy transition

•regulatory decisions and outcomes

•planned and unplanned outages and the use of our pipelines, power and storage assets

•integrity and reliability of our assets

•anticipated construction costs, schedules and completion dates

•access to capital markets, including portfolio management

•expected industry, market and economic conditions, including the impact of these on our customers and suppliers

•inflation rates, commodity and labour prices

•interest, tax and foreign exchange rates

•nature and scope of hedging.

Risks and uncertainties

•realization of expected benefits from acquisitions, divestitures, the spinoff transaction and energy transition

•the terms, timing and completion of the spinoff transaction, including the timely receipt of all necessary approvals and tax rulings

•our ability to successfully implement our strategic priorities, including Focus Project, and whether they will yield the expected benefits

•our ability to implement a capital allocation strategy aligned with maximizing shareholder value

•the operating performance of our pipelines, power generation and storage assets

•amount of capacity sold and rates achieved in our pipeline businesses

•the amount of capacity payments and revenues from power generation assets due to plant availability

•production levels within supply basins

•construction and completion of capital projects

•cost and availability of, and inflationary pressures on, labour, equipment and materials

•the availability and market prices of commodities

•access to capital markets on competitive terms

•interest, tax and foreign exchange rates

•performance and credit risk of our counterparties

•regulatory decisions and outcomes of legal proceedings, including arbitration and insurance claims

•our ability to effectively anticipate and assess changes to government policies and regulations, including those related to the environment

•our ability to realize the value of tangible assets and contractual recoveries

•competition in the businesses in which we operate

•unexpected or unusual weather

•acts of civil disobedience

•cyber security and technological developments

•ESG-related risks

•impact of energy transition on our business

•economic conditions in North America as well as globally

•global health crises, such as pandemics and epidemics and the impacts related thereto.

You can read more about these factors and others in this MD&A and in other reports we have filed with Canadian securities regulators and the SEC, including the MD&A in our 2022 Annual Report.

TC Energy Second Quarter 2023 | 3

As actual results could vary significantly from the forward-looking information, you should not put undue reliance on forward-looking information and should not use future-oriented information or financial outlooks for anything other than their intended purpose. We do not update our forward-looking statements due to new information or future events unless we are required to by law.

FOR MORE INFORMATION

You can find more information about TC Energy in our Annual Information Form and other disclosure documents, which are available on SEDAR+ (www.sedarplus.ca).

NON-GAAP MEASURES

This MD&A references the following non-GAAP measures:

•comparable EBITDA

•comparable EBIT

•comparable earnings

•comparable earnings per common share

•funds generated from operations

•comparable funds generated from operations.

These measures do not have any standardized meaning as prescribed by GAAP and therefore may not be comparable to similar measures presented by other entities. Discussions throughout this MD&A on the factors impacting comparable earnings are consistent with the factors that impact net income attributable to common shares, except where noted otherwise. Discussions throughout this MD&A on the factors impacting comparable earnings before interest, taxes, depreciation and amortization (comparable EBITDA) and comparable earnings before interest and taxes (comparable EBIT) are consistent with the factors that impact segmented earnings, except where noted otherwise.

Comparable measures

We calculate comparable measures by adjusting certain GAAP measures for specific items we believe are significant but not reflective of our underlying operations in the period. Except as otherwise described herein, these comparable measures are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable.

Our decision not to adjust for a specific item in reporting comparable measures is subjective and made after careful consideration. Specific items may include:

•gains or losses on sales of assets or assets held for sale

•income tax refunds, valuation allowances and adjustments resulting from changes in legislation and enacted tax rates

•expected credit loss provisions on net investment in leases and certain contract assets in Mexico

•legal, contractual, bankruptcy and other settlements

•impairment of goodwill, plant, property and equipment, equity investments and other assets

•acquisition and integration costs

•restructuring costs

•unrealized fair value adjustments related to risk management activities of Bruce Power's funds invested for post-retirement benefits

•unrealized gains and losses from changes in the fair value of derivatives related to financial and commodity price risk management activities.

We exclude from comparable measures the unrealized gains and losses from changes in the fair value of derivatives related to financial and commodity price risk management activities. These derivatives generally provide effective economic hedges but do not meet the criteria for hedge accounting. The changes in fair value, including our proportionate share of changes in fair value related to Bruce Power are recorded in net income. As these amounts do not accurately reflect the gains and losses that will be realized at settlement, we do not consider them reflective of our underlying operations.

4 | TC Energy Second Quarter 2023

Prior to full repayment in first quarter 2022, we excluded from comparable measures the unrealized foreign exchange gains and losses on the peso-denominated loan receivable from an affiliate as well as the corresponding proportionate share of Sur de Texas foreign exchange gains and losses, as the amounts did not accurately reflect the gains and losses that would be realized at settlement. These amounts offset within each reporting period, resulting in no impact on net income.

In 2023, TransCanada PipeLines Limited (TCPL) entered into an unsecured revolving credit facility with Transportadora de Gas Natural de la Huasteca (TGNH). The loan receivable and loan payable are eliminated upon consolidation; however, due to the differences in the currency that each entity reports its financial results, there is an impact to net income reflecting the translation of the loan receivable and payable to TC Energy's reporting currency. As the amounts do not accurately reflect what will be realized at settlement, beginning in second quarter 2023, we excluded from comparable measures the unrealized foreign exchange gains and losses on the loan receivable as well as the corresponding unrealized foreign exchange gains and losses on the loan payable.

In second quarter 2023, we accrued an additional amount for environmental remediation costs related to the Milepost 14 incident. We have appropriate insurance policies in place and we believe that it remains probable that the majority of environmental remediation costs will be eligible for recovery under our existing insurance coverage. We expect to receive a portion of these insurance proceeds from our wholly-owned captive insurance subsidiary, which resulted in an impact to net income in the consolidated financial results of TC Energy in second quarter 2023. This amount has been excluded from comparable measures as it is not reflective of our ongoing underlying operations.

In late 2022, we launched the Focus Project to identify opportunities to improve safety, productivity and cost-effectiveness and to date have identified a broad set of opportunities expected to improve safety and financial performance over the long term. Certain initiatives have been implemented and we expect to continue designing and implementing additional initiatives beyond 2023, with benefits in the form of enhanced productivity and cost-effectiveness expected to be realized in the future. Beginning in second quarter 2023, we recognized expenses in Plant operating costs and other, primarily related to Focus Project costs for external consulting and severance which are not recoverable through regulatory and commercial tolling structures. These amounts have been excluded from comparable measures as they are not reflective of our ongoing underlying operations.

The following table identifies our non-GAAP measures against their most directly comparable GAAP measures:


Comparable measure			GAAP measure

comparable EBITDA			segmented earnings (losses)
comparable EBIT			segmented earnings (losses)
comparable earnings			net income attributable to common shares
comparable earnings per common share			net income per common share
funds generated from operations			net cash provided by operations
comparable funds generated from operations			net cash provided by operations

Comparable EBITDA and comparable EBIT

Comparable EBITDA represents segmented earnings (losses) adjusted for certain specific items, excluding charges for depreciation and amortization. We use comparable EBITDA as a measure of our earnings from ongoing operations as it is a useful indicator of our performance and is also presented on a consolidated basis. Comparable EBIT represents segmented earnings (losses) adjusted for specific items and is an effective tool for evaluating trends in each segment. Refer to each business segment for a reconciliation to segmented earnings (losses).

TC Energy Second Quarter 2023 | 5

Comparable earnings and comparable earnings per common share

Comparable earnings represents earnings attributable to common shareholders on a consolidated basis, adjusted for specific items. Comparable earnings is comprised of segmented earnings (losses), Interest expense, AFUDC, Foreign exchange gains (losses), net, Interest income and other, Income tax (expense) recovery, Non-controlling interests and Preferred share dividends, adjusted for specific items. Refer to the Consolidated results section for reconciliations to Net income attributable to common shares and Net income per common share.

Funds generated from operations and comparable funds generated from operations

Funds generated from operations reflects net cash provided by operations before changes in operating working capital. The components of changes in working capital are disclosed in our 2022 Consolidated financial statements. We believe funds generated from operations is a useful measure of our consolidated operating cash flows because it excludes fluctuations from working capital balances, which do not necessarily reflect underlying operations in the same period, and is used to provide a consistent measure of the cash generating ability of our businesses. Comparable funds generated from operations is adjusted for the cash impact of specific items noted above. Refer to the Financial condition section for a reconciliation to Net cash provided by operations.

6 | TC Energy Second Quarter 2023

Consolidated results


	three months ended June 30		six months ended June 30
(millions of $, except per share amounts)	2023	2022	2023	2022

Canadian Natural Gas Pipelines	(394)	385	17	743
U.S. Natural Gas Pipelines	715	711	1,794	1,021
Mexico Natural Gas Pipelines	182	162	436	282
Liquids Pipelines	273	261	449	533
Power and Energy Solutions	255	170	507	246
Corporate	(36)	(10)	(38)	21
Total segmented earnings (losses)	995	1,679	3,165	2,846
Interest expense	(791)	(620)	(1,553)	(1,200)
Allowance for funds used during construction	148	63	279	138
Foreign exchange gains (losses), net	169	(66)	276	(40)
Interest income and other	16	23	58	58
Income before income taxes	537	1,079	2,225	1,802
Income tax (expense) recovery	(258)	(148)	(599)	(471)
Net income	279	931	1,626	1,331
Net income attributable to non-controlling interests	(6)	(9)	(17)	(20)
Net income attributable to controlling interests	273	922	1,609	1,311
Preferred share dividends	(23)	(33)	(46)	(64)
Net income attributable to common shares	250	889	1,563	1,247
Net income per common share – basic	$0.24	$0.90	$1.53	$1.27

Net income attributable to common shares decreased by $639 million or $0.66 per common share and increased by $316 million or $0.26 per common share for the three and six months ended June 30, 2023 compared to the same periods in 2022. The following specific items were recognized in Net income attributable to common shares and were excluded from comparable earnings:

2023 results

•an after-tax impairment charge of $809 million and $838 million for the three and six months ended June 30, 2023 related to our equity investment in Coastal GasLink Pipeline Limited Partnership (Coastal GasLink LP). Refer to Note 5, Coastal GasLink, of our Condensed consolidated financial statements for additional information

•a $48 million after-tax charge as a result of the FERC Administrative Law Judge initial decision on Keystone issued in February 2023 in respect of a tolling-related complaint pertaining to amounts recognized from 2018 to 2022, which consists of a one-time pre-tax charge of $57 million and included accrued pre-tax carrying charges of $5 million recognized in first quarter 2023

•a $36 million after-tax accrued insurance expense recorded in second quarter 2023 related to the Milepost 14 incident. Refer to the Recent developments – Liquids section for additional information

•a $25 million after-tax expense related to Focus Project costs in second quarter 2023. Refer to the Recent developments – Corporate section for additional information

•an after-tax unrealized foreign exchange loss of $9 million on the peso-denominated intercompany loan between TCPL and TGNH in second quarter 2023. Refer to the Corporate section for additional information

•after-tax preservation and other costs for Keystone XL pipeline project assets of $4 million and $8 million for the three and six months ended June 30, 2023, which could not be accrued as part of the Keystone XL asset impairment charge

•an $8 million and $80 million after-tax recovery for the three and six months ended June 30, 2023 on the expected credit loss provision related to the TGNH net investment in leases and certain contract assets in Mexico.

TC Energy Second Quarter 2023 | 7

2022 results

•an after-tax goodwill impairment charge of $531 million in first quarter 2022 related to Great Lakes

•a $2 million and $195 million income tax expense for the three and six months ended June 30, 2022 for the settlement related to prior years' income tax assessments in Mexico paid in second quarter 2022

•after-tax preservation and other costs for Keystone XL pipeline project assets of $3 million and $8 million for the three and six months ended June 30, 2022, which could not be accrued as part of the Keystone XL asset impairment charge.

Net income in each period included unrealized gains and losses on our proportionate share of Bruce Power's fair value adjustment on funds invested for post-retirement benefits and derivatives related to its risk management activities, as well as unrealized gains and losses from changes in our risk management activities, all of which we exclude along with the above noted items, to arrive at comparable earnings. A reconciliation of Net income attributable to common shares to comparable earnings is shown in the following table.

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHARES TO COMPARABLE EARNINGS


	three months ended June 30		six months ended June 30
(millions of $, except per share amounts)	2023	2022	2023	2022

Net income attributable to common shares	250	889	1,563	1,247
Specific items (net of tax):
Coastal GasLink LP impairment charge	809	—	838	—
Keystone FERC decision	—	—	48	—
Milepost 14 insurance expense	36	—	36	—
Focus Project costs	25	—	25	—
Foreign exchange (gains) losses, net – intercompany loan	9	—	9	—
Keystone XL preservation and other	4	3	8	8
Expected credit loss provision on net investment in leases and certain contract assets in Mexico	(8)	—	(80)	—

Great Lakes goodwill impairment charge	—	—	—	531




Settlement of Mexico prior years' income tax assessments	—	2	—	195
Bruce Power unrealized fair value adjustments	—	9	(6)	24
Risk management activities1	(144)	76	(227)	77
Comparable earnings	981	979	2,214	2,082
Net income per common share	$0.24	$0.90	$1.53	$1.27
Specific items (net of tax):
Coastal GasLink LP impairment charge	0.79	—	0.82	—
Keystone FERC decision	—	—	0.05	—
Milepost 14 insurance expense	0.03	—	0.03	—
Focus Project costs	0.02	—	0.02	—
Foreign exchange (gains) losses, net – intercompany loan	0.01	—	0.01	—
Keystone XL preservation and other	0.01	0.01	0.01	0.01
Expected credit loss provision on net investment in leases and certain contract assets in Mexico	(0.01)	—	(0.08)	—
Great Lakes goodwill impairment charge	—	—	—	0.54
Settlement of Mexico prior years' income tax assessments	—	—	—	0.20
Bruce Power unrealized fair value adjustments	—	0.01	(0.01)	0.02





Risk management activities	(0.13)	0.08	(0.22)	0.08
Comparable earnings per common share	$0.96	$1.00	$2.16	$2.12

8 | TC Energy Second Quarter 2023


1	Risk management activities	three months ended June 30		six months ended June 30
	(millions of $)	2023	2022	2023	2022
	U.S. Natural Gas Pipelines	24	13	73	(2)
	Liquids Pipelines	—	5	5	35
	Canadian Power	(13)	3	(21)	(28)
	U.S. Power	—	(4)	1	(4)
	Natural Gas Storage	73	(58)	61	(65)
	Foreign exchange	108	(60)	182	(38)
	Income tax attributable to risk management activities	(48)	25	(74)	25
	Total unrealized gains (losses) from risk management activities	144	(76)	227	(77)

COMPARABLE EBITDA TO COMPARABLE EARNINGS

Comparable EBITDA represents segmented earnings (losses) adjusted for the specific items described above and excludes charges for depreciation and amortization. For further information on our reconciliation of comparable EBITDA to segmented earnings (losses) refer to the business segment financial results sections.


	three months ended June 30		six months ended June 30
(millions of $, except per share amounts)	2023	2022	2023	2022

Comparable EBITDA
Canadian Natural Gas Pipelines	780	681	1,520	1,325
U.S. Natural Gas Pipelines	925	915	2,192	2,022
Mexico Natural Gas Pipelines	193	190	365	338
Liquids Pipelines	363	341	680	670
Power and Energy Solutions	217	252	498	409
Corporate	(4)	(10)	(6)	(7)
Comparable EBITDA	2,474	2,369	5,249	4,757
Depreciation and amortization	(694)	(635)	(1,371)	(1,261)
Interest expense included in comparable earnings	(791)	(620)	(1,548)	(1,200)
Allowance for funds used during construction	148	63	279	138
Foreign exchange gains (losses), net included in comparable earnings	70	(6)	103	26
Interest income and other included in comparable earnings	52	23	94	58
Income tax (expense) recovery included in comparable earnings	(249)	(173)	(529)	(352)
Net income attributable to non-controlling interests	(6)	(9)	(17)	(20)
Preferred share dividends	(23)	(33)	(46)	(64)
Comparable earnings	981	979	2,214	2,082
Comparable earnings per common share	$0.96	$1.00	$2.16	$2.12

TC Energy Second Quarter 2023 | 9

Comparable EBITDA – 2023 versus 2022

Comparable EBITDA increased by $105 million for the three months ended June 30, 2023 compared to the same period in 2022 primarily due to the net effect of the following:

•increased EBITDA in Canadian Natural Gas Pipelines mainly due to the impact of higher flow-through costs on our Canadian rate-regulated pipelines and increased rate-base earnings on the NGTL System

•increased EBITDA from Liquids Pipelines primarily due to the foreign exchange impact from a stronger U.S. dollar on the translation of our U.S. dollar-denominated operations, higher volumes on the U.S. Gulf Coast section of the Keystone Pipeline System and higher long-haul contracted volumes from the 2019 Open Season that were commercialized in 2022, partially offset by lower margins from liquids marketing activities and lower uncontracted volumes on the Keystone Pipeline System in relation to the Milepost 14 incident

•decreased U.S. dollar-denominated EBITDA from Mexico Natural Gas Pipelines as a result of lower equity earnings from Sur de Texas primarily due to peso-denominated financial exposure and higher interest expense, partially offset by increased earnings from TGNH related to the north section of the Villa de Reyes pipeline (VdR North) and the east section of the Tula pipeline (Tula East) that were placed into commercial service in third quarter 2022

•decreased U.S. dollar-denominated EBITDA from U.S. Natural Gas Pipelines as a result of lower net contributions from ANR due to the sale of natural gas from certain gas storage facilities in 2022, partially offset by an increase in earnings following the FERC-approved settlement for higher transportation rates effective August 2022 and contributions from growth projects placed in service. Lower realized earnings related to our U.S. natural gas marketing business and higher operational costs, reflective of increased system utilization, also contributed to the decrease in EBITDA

•decreased Power and Energy Solutions EBITDA attributable to Natural Gas Storage and other results from lower realized Alberta natural gas storage spreads, partially offset by increased contributions from Bruce Power due to fewer planned outage days and a higher contract price as well as increased earnings from Canadian Power due to higher realized power prices

•the positive foreign exchange impact of a stronger U.S. dollar on the Canadian dollar equivalent segmented earnings (losses) in our U.S. dollar-denominated operations. U.S. dollar-denominated comparable EBITDA decreased by US$29 million compared to 2022 which was translated at a rate of 1.34 in 2023 versus 1.28 in 2022. Refer to the Foreign exchange section for additional information.

Comparable EBITDA increased by $492 million for the six months ended June 30, 2023 compared to the same period in 2022 primarily due to the net effect of the following:

•higher Power and Energy Solutions EBITDA attributable to increased contributions from Bruce Power due to a higher contract price and fewer planned outage days and increased earnings from Canadian Power due to higher realized power prices, partially offset by decreased Natural Gas Storage and other results from lower realized Alberta natural gas storage spreads and increased business development costs across the segment

•increased U.S. dollar-denominated EBITDA from U.S. Natural Gas Pipelines due to higher earnings from ANR following the FERC-approved settlement for an increase in transportation rates effective August 2022, incremental earnings from growth projects placed in service and higher realized earnings related to our U.S. natural gas marketing business, partially offset by higher operational costs

•increased EBITDA from Liquids Pipelines primarily due to the foreign exchange impact from a stronger U.S. dollar on the translation of our U.S. dollar-denominated operations, higher long-haul contracted volumes from the 2019 Open Season that were commercialized in 2022 and higher uncontracted volumes on the U.S. Gulf Coast section of the pipeline, partially offset by lower uncontracted volumes on the Keystone Pipeline System in relation to the Milepost 14 incident as well as lower rates and contracted volumes on the U.S. Gulf Coast section of the pipeline

10 | TC Energy Second Quarter 2023

•higher U.S. dollar-denominated EBITDA from Mexico Natural Gas Pipelines primarily related to VdR North and Tula East that were placed into commercial service in third quarter 2022, partially offset by lower equity earnings from Sur de Texas primarily due to peso-denominated financial exposure and increased interest expense

•the positive foreign exchange impact of a stronger U.S. dollar on the Canadian dollar equivalent segmented earnings (losses) in our U.S. dollar-denominated operations. U.S. dollar-denominated comparable EBITDA increased by US$12 million compared to 2022 which was translated at a rate of 1.35 in 2023 versus 1.27 in 2022. Refer to the Foreign exchange section for additional information.

Due to the flow-through treatment of certain costs including income taxes, financial charges and depreciation in our Canadian rate-regulated pipelines, changes in these costs impact our comparable EBITDA despite having no significant effect on net income.

Comparable earnings – 2023 versus 2022

Comparable earnings increased by $2 million and decreased by $0.04 per common share for the three months ended June 30, 2023 compared to the same period in 2022 and was primarily the net effect of:

•changes in comparable EBITDA described above

•higher interest expense primarily due to long-term debt issuances, net of maturities, the foreign exchange impact of a stronger U.S. dollar in second quarter 2023 compared to the same period in 2022 and higher interest rates on decreased levels of short-term borrowings

•increased income tax expense due to the impact of Mexico's foreign exchange exposure, lower foreign tax rate differentials and higher comparable earnings subject to income tax

•higher depreciation and amortization on the NGTL System from expansion facilities that were placed in service

•higher AFUDC primarily due to the reactivation of AFUDC on the TGNH assets under construction following the new TSA with the CFE in third quarter 2022, including capital expenditures on the Southeast Gateway pipeline project, partially offset by lower AFUDC resulting from NGTL System expansion projects being placed in service

•higher realized gains in second quarter 2023 compared to the same period in 2022 on derivatives used to manage our exposure to net liabilities in Mexico that give rise to foreign exchange gains and losses

•higher interest income and other due to higher interest earned on short-term investments.

Comparable earnings increased by $132 million or $0.04 per common share for the six months ended June 30, 2023 compared to the same period in 2022 primarily due to the net effect of the following:

•changes in comparable EBITDA described above

•higher interest expense primarily due to long-term debt issuances, net of maturities, the foreign exchange impact of a stronger U.S. dollar in the first six months of 2023 compared to the same period in 2022 and higher interest rates on decreased levels of short-term borrowings, partially offset by higher capitalized interest, largely due to funding related to our investment in Coastal GasLink LP

•increased income tax expense due to the impact of Mexico's foreign exchange exposure, lower foreign tax rate differentials and higher comparable earnings subject to income tax

•higher depreciation and amortization due to incremental depreciation for the NGTL System and in U.S. Natural Gas Pipelines due to expansion facilities and new projects placed in service, partially offset by the discontinuance of depreciation expense on TGNH assets in Mexico accounted for as leases

TC Energy Second Quarter 2023 | 11

•higher realized gains in 2023 compared to 2022 on derivatives used to manage our exposure to net liabilities in Mexico that give rise to foreign exchange gains and losses, partially offset by net realized losses in the six months ended June 30, 2023 compared to net realized gains in 2022 on derivatives used to manage our net exposure to foreign exchange rate fluctuation on U.S. dollar-denominated income and foreign exchange losses on the revaluation of our peso-denominated net monetary liabilities to U.S. dollars

•higher interest income and other due to higher interest earned on short-term investments.

Comparable earnings per common share for the three and six months ended June 30, 2023 reflect the dilutive effect of common shares issued.

12 | TC Energy Second Quarter 2023

Outlook

Comparable EBITDA and comparable earnings

Following the sale of a 40 per cent equity interest in Columbia Gas Transmission, LLC (Columbia Gas) and Columbia Gulf Transmission, LLC (Columbia Gulf), which is expected to close in fourth quarter 2023, our overall comparable EBITDA outlook for 2023 remains unchanged from the 2022 Annual Report; however, our comparable earnings per common share outlook for 2023 has decreased primarily due to higher expected net income attributable to non-controlling interests, partially offset by lower interest expense. As such, we now expect our 2023 comparable earnings per common share outlook to be generally consistent with 2022. Refer to the Recent Developments – U.S. Natural Gas Pipelines and Corporate sections for further information on asset divestitures.

Consolidated capital spending and equity investments

Subsequent to the sale of a 40 per cent equity interest in Columbia Gas and Columbia Gulf, we reaffirm that our expected total capital expenditures for 2023 as outlined in our 2022 Annual Report remain materially unchanged. We continue to work on cost mitigation strategies and assess developments in our construction projects and market conditions for changes to our overall 2023 capital program. Refer to the Recent Developments – U.S. Natural Gas Pipelines and Corporate sections for further information on asset divestitures.

TC Energy Second Quarter 2023 | 13

Capital program

We are developing quality projects under our capital program. These long-life infrastructure assets are supported by long-term commercial arrangements with creditworthy counterparties and/or regulated business models and are expected to generate significant growth in earnings and cash flows. In addition, many of these projects are expected to advance our goals to reduce our own carbon footprint as well as that of our customers.

Our capital program consists of approximately $34 billion of secured projects that represent commercially supported, committed projects that are either under construction or are in, or preparing to commence, the permitting stage.

Three years of maintenance capital expenditures for our businesses are included in the Secured projects table. Maintenance capital expenditures on our regulated Canadian and U.S. natural gas pipelines are added to rate base on which we have the opportunity to earn a return and recover these expenditures through current or future tolls, which is similar to our capacity capital projects on these pipelines. Tolling arrangements in our liquids pipelines business provide for the recovery of maintenance capital expenditures.

During the six months ended June 30, 2023, we placed approximately $2.1 billion of Canadian natural gas, U.S. natural gas as well as liquids pipeline capacity capital projects into service. In addition, approximately $0.9 billion of maintenance capital expenditures were incurred.

All projects are subject to cost and timing adjustments due to factors including weather, market conditions, route refinement, land acquisition, permitting conditions, scheduling and timing of regulatory permits, as well as other potential restrictions and uncertainties including inflationary pressures on labour and materials. Amounts exclude capitalized interest and AFUDC, where applicable.

In addition to our secured projects, we are pursuing an extensive portfolio of quality projects in various stages of development across each of our business units as discussed in our 2022 Annual Report. Projects under development have greater uncertainty with respect to timing and estimated project costs and are subject to corporate and regulatory approvals, unless otherwise noted. While each business segment also has additional areas of focus for further ongoing business development activities and growth opportunities, new opportunities will be assessed within our capital allocation framework in order to fit within our annual capital expenditure parameters. As these projects advance and reach necessary milestones they will be included in the Secured projects table below. Refer to the Recent developments section for updates to our secured projects and projects under development.

14 | TC Energy Second Quarter 2023

Secured projects

Estimated and incurred project costs referred to in the following table include 100 per cent of the capital expenditures related to our wholly-owned projects and our share of equity contributions to fund projects within our equity investments, primarily Coastal GasLink and Bruce Power.


	Expected in-service date	Estimated project cost	Project costs incurred as at June 30, 2023
(billions of $)

Canadian Natural Gas Pipelines
NGTL System1	2023	3.1	2.2
	2024	0.6	0.3
	2025+	0.8	—
Coastal GasLink2	2023	5.4	3.1
Regulated maintenance capital expenditures	2023-2025	2.3	0.3
U.S. Natural Gas Pipelines
Modernization III (Columbia Gas)	2023-2024	US 1.2	US 0.7
Delivery market projects	2025	US 1.5	US 0.1
Other capital	2024-2028	US 1.4	US 0.2
Regulated maintenance capital expenditures	2023-2025	US 2.4	US 0.4
Mexico Natural Gas Pipelines
Villa de Reyes – lateral and south sections3	2023	US 0.6	US 0.6
Tula – central and west sections4	—	US 0.5	US 0.4
Southeast Gateway	2025	US 4.5	US 1.6
Liquids Pipelines
Recoverable maintenance capital expenditures	2023-2025	0.2	—
Power and Energy Solutions
Bruce Power – life extension5	2023-2027	4.3	2.5
Other capacity capital	2023	0.1	0.1
Other
Non-recoverable maintenance capital expenditures6	2023-2025	0.8	0.1
		29.7	12.6
Foreign exchange impact on secured projects7		3.9	1.3
Total secured projects (Cdn$)		33.6	13.9

1 Estimated project costs for 2023 include $0.8 billion for the Foothills portion of the West Path Delivery Program.

2 Subsequent to revised project agreements executed between Coastal GasLink LP and LNG Canada and amended agreements with our partners in Coastal GasLink LP, the estimated project cost noted above represents our share of anticipated partner equity contributions to the project. Mechanical completion is targeted for the end of 2023 and commercial in-service of the Coastal GasLink pipeline will occur after completion of commissioning the pipeline. Refer to the Recent developments – Canadian Natural Gas Pipelines section for additional information.

3 The lateral section of the Villa de Reyes pipeline is mechanically complete. We are working with the CFE to complete the south section of the Villa de Reyes pipeline. Refer to the Recent developments – Mexico Natural Gas Pipelines section for additional information.

4 With the CFE, we are assessing the completion of the central section of the Tula pipeline, subject to an FID. We are also working together to advance the completion of the west section. Refer to the Recent developments – Mexico Natural Gas Pipelines section for additional information.

5 Reflects our expected share of cash contributions for the Bruce Power Unit 6 Major Component Replacement (MCR) program, expected to be in service in fourth quarter 2023, and the Unit 3 MCR, expected to be in service in 2026, as well as amounts to be invested under the Asset Management program through 2027 and the incremental uprate initiative. Refer to the Recent developments – Power and Energy Solutions section for additional information.

6 Includes non-recoverable maintenance capital expenditures from all segments and is primarily comprised of our proportionate share of maintenance capital expenditures for Bruce Power and other Power and Energy Solutions assets.

7 Reflects U.S./Canada foreign exchange rate of 1.32 at June 30, 2023.

TC Energy Second Quarter 2023 | 15

Canadian Natural Gas Pipelines

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to segmented earnings (losses) (the most directly comparable GAAP measure).


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

NGTL System	553	452	1,075	878
Canadian Mainline	194	188	379	358
Other Canadian pipelines1	33	41	66	89
Comparable EBITDA	780	681	1,520	1,325
Depreciation and amortization	(331)	(296)	(647)	(582)
Comparable EBIT	449	385	873	743
Specific item:
Coastal GasLink LP impairment charge	(843)	—	(856)	—
Segmented earnings (losses)	(394)	385	17	743

1Includes results from Foothills, Ventures LP, Great Lakes Canada, our investment in TQM, Coastal GasLink development fee revenue as well as general and administrative and business development costs related to our Canadian Natural Gas Pipelines.

Canadian Natural Gas Pipelines segmented earnings (losses) of $394 million for the three months ended June 30, 2023 decreased by $779 million compared to the same period in 2022. Canadian Natural Gas Pipelines segmented earnings (losses) decreased by $726 million for the six months ended June 30, 2023 compared to the same period in 2022. These amounts included a pre-tax impairment charge of $843 million and $856 million for the three and six months ended June 30, 2023, respectively (2022 – nil), related to our equity investment in Coastal GasLink LP, which has been excluded from our calculation of comparable EBITDA and comparable EBIT. Refer to Note 5, Coastal GasLink, of our Condensed consolidated financial statements for additional information.

Net income and comparable EBITDA for our rate-regulated Canadian natural gas pipelines are primarily affected by our approved ROE, our investment base, the level of deemed common equity and incentive earnings. Changes in depreciation, financial charges and income taxes also impact comparable EBITDA, but do not have a significant impact on net income as they are almost entirely recovered in revenues on a flow-through basis.

NET INCOME AND AVERAGE INVESTMENT BASE


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Net income
NGTL System	191	176	381	346
Canadian Mainline	57	55	111	104
Average investment base
NGTL System			18,714	17,110
Canadian Mainline			3,666	3,698

16 | TC Energy Second Quarter 2023

Net income for the NGTL System increased by $15 million and $35 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 mainly due to a higher average investment base resulting from continued system expansions. The NGTL System is operating under the 2020-2024 Revenue Requirement Settlement which includes an approved ROE of 10.1 per cent on 40 per cent deemed common equity. This settlement provides the NGTL System the opportunity to increase depreciation rates if tolls fall below specified levels and an incentive mechanism for certain operating costs where variances from projected amounts are shared with our customers.

Net income for the Canadian Mainline increased by $2 million and $7 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 mainly due to higher incentive earnings. The Canadian Mainline is operating under the 2021-2026 Mainline Settlement which includes an approved ROE of 10.1 per cent on 40 per cent deemed common equity and an incentive to decrease costs and increase revenues on the pipeline under a beneficial sharing mechanism with our customers.

COMPARABLE EBITDA

Comparable EBITDA for Canadian Natural Gas Pipelines increased by $99 million and $195 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 due to the net effect of:

•higher flow-through financial charges, depreciation and income taxes as well as higher rate-base earnings on the NGTL System

•higher flow-through depreciation and higher incentive earnings, partially offset by lower flow-through income taxes on the Canadian Mainline

•lower Coastal GasLink development fee revenue due to timing of revenue recognition.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased by $35 million and $65 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 reflecting incremental depreciation on the NGTL System from expansion facilities that were placed in service.

TC Energy Second Quarter 2023 | 17

U.S. Natural Gas Pipelines

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to segmented earnings (losses) (the most directly comparable GAAP measure).


	three months ended June 30		six months ended June 30
(millions of US$, unless otherwise noted)	2023	2022	2023	2022

Columbia Gas	359	350	754	766
ANR	134	141	326	312
Columbia Gulf	49	46	108	105
Great Lakes	31	35	85	92
GTN	47	43	100	94
Other U.S. pipelines1	58	92	232	202

Non-controlling interests2	10	9	21	20
Comparable EBITDA	688	716	1,626	1,591
Depreciation and amortization	(174)	(169)	(349)	(336)
Comparable EBIT	514	547	1,277	1,255
Foreign exchange impact	177	151	444	339
Comparable EBIT (Cdn$)	691	698	1,721	1,594
Specific items:
Great Lakes goodwill impairment charge	—	—	—	(571)
Risk management activities	24	13	73	(2)
Segmented earnings (losses) (Cdn$)	715	711	1,794	1,021

1Reflects comparable EBITDA from our ownership in our mineral rights business (CEVCO), North Baja, Tuscarora, Bison, 61.7 per cent of Portland, Crossroads and our share of equity income from Northern Border, Iroquois, Millennium and Hardy Storage, our U.S. natural gas marketing business as well as general and administrative and business development costs related to our U.S. natural gas pipelines.

2Reflects comparable EBITDA attributable to the 38.3 per cent interest in Portland that we do not own.

U.S. Natural Gas Pipelines segmented earnings increased by $4 million and $773 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 and included the following specific items which have been excluded from our calculation of comparable EBITDA and comparable EBIT:

•a pre-tax goodwill impairment charge of $571 million related to Great Lakes in first quarter 2022

•unrealized gains and losses from changes in the fair value of derivatives related to our U.S. natural gas marketing business.

A stronger U.S. dollar for the three and six months ended June 30, 2023 had a positive impact on the Canadian dollar equivalent segmented earnings from our U.S. operations compared to the same periods in 2022. Refer to the Foreign exchange section for additional information.

Comparable EBITDA for U.S. Natural Gas Pipelines decreased by US$28 million for the three months ended June 30, 2023 compared to the same period in 2022 and was primarily due to the net effect of:

•decreased earnings from ANR due to the sale of natural gas from certain gas storage facilities in 2022, partially offset by an increase in earnings following the FERC-approved settlement for higher transportation rates effective August 2022, as well as contributions from growth projects placed in service

•decreased earnings due to higher operational costs, reflective of increased system utilization across our footprint, as well as higher property taxes related to projects in service

•lower realized earnings related to our U.S. natural gas marketing business primarily due to lower margins.

18 | TC Energy Second Quarter 2023

Comparable EBITDA for U.S. Natural Gas Pipelines increased by US$35 million for the six months ended June 30, 2023 compared to the same period in 2022 and was primarily due to the net effect of:

•higher realized earnings related to our U.S. natural gas marketing business primarily due to higher margins

•incremental earnings from growth projects placed in service

•a net increase in earnings from ANR following the FERC-approved settlement for higher transportation rates effective August 2022, partially offset by decreased earnings due to the sale of natural gas from certain gas storage facilities in 2022

•increased equity earnings from Iroquois and Northern Border

•decreased earnings from higher operational costs, reflective of increased system utilization across our footprint, as well as higher property taxes related to projects in service.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased by US$5 million and US$13 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 mainly due to new projects placed in service.

TC Energy Second Quarter 2023 | 19

Mexico Natural Gas Pipelines

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to segmented earnings (losses) (the most directly comparable GAAP measure).


	three months ended June 30		six months ended June 30
(millions of US$, unless otherwise noted)	2023	2022	2023	2022









TGNH1	57	31	113	60
Topolobampo	39	39	79	80
Guadalajara	16	19	33	37
Mazatlán	18	17	33	35
Sur de Texas2	14	43	12	54
Comparable EBITDA	144	149	270	266
Depreciation and amortization	(17)	(22)	(33)	(44)
Comparable EBIT	127	127	237	222
Foreign exchange impact	44	35	84	60
Comparable EBIT (Cdn$)	171	162	321	282
Specific item:
Expected credit loss provision on net investment in leases and certain contract assets in Mexico	11	—	115	—
Segmented earnings (losses) (Cdn$)	182	162	436	282

1TGNH includes the operating sections of the Tamazunchale, Villa de Reyes and Tula pipelines.

2Represents equity income from our 60 per cent interest and fees earned from the construction and operation of the pipeline.

Mexico Natural Gas Pipelines segmented earnings increased by $20 million and $154 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 and included a recovery of $11 million and $115 million for the three and six months ended June 30, 2023, respectively (2022 – nil), related to the expected credit loss provision on the TGNH net investment in leases and certain contract assets in Mexico which has been excluded from our calculation of comparable EBITDA and comparable EBIT. Refer to our 2022 Consolidated financial statements for additional information on expected credit loss provisions and Note 12, Risk management and financial instruments, for additional information on the expected credit loss provision recognized in 2023.

A stronger U.S. dollar for the three and six months ended June 30, 2023 had a positive impact on the Canadian dollar equivalent segmented earnings compared to the same periods in 2022. Refer to the Foreign exchange section for additional information, including the foreign exchange impacts of the Mexican peso against the U.S. dollar.

Comparable EBITDA for Mexico Natural Gas Pipelines decreased by US$5 million and increased by US$4 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 due to the net effect of:

•higher revenues in TGNH primarily related to the commercial in-service of VdR North and Tula East

•lower equity earnings in Sur de Texas primarily due to foreign exchange impacts on the revaluation of peso-denominated liabilities as a result of a stronger Mexican peso and increased interest expense due to higher interest rates. We use foreign exchange derivatives to manage this exposure, the impact of which is recognized in Foreign exchange (gains) losses, net in the Condensed consolidated statement of income. Refer to the Foreign exchange section for additional information.

20 | TC Energy Second Quarter 2023

DEPRECIATION AND AMORTIZATION

Depreciation and amortization decreased by US$5 million and US$11 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 due to the change in accounting for Tamazunchale subsequent to execution of the new TGNH TSA with the CFE in third quarter 2022. Under sales-type lease accounting, our in-service TGNH pipeline assets are reflected on our Condensed consolidated balance sheet within net investment in leases with no depreciation expense being recognized.

TC Energy Second Quarter 2023 | 21

Liquids Pipelines

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to segmented earnings (losses) (the most directly comparable GAAP measure).


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Keystone Pipeline System1	347	324	649	641
Intra-Alberta pipelines2	17	18	35	36
Other1	(1)	(1)	(4)	(7)
Comparable EBITDA	363	341	680	670
Depreciation and amortization	(85)	(80)	(169)	(161)
Comparable EBIT	278	261	511	509
Specific items:

Keystone FERC decision	—	—	(57)	—
Keystone XL preservation and other	(5)	(5)	(10)	(11)
Risk management activities	—	5	5	35
Segmented earnings (losses)	273	261	449	533
Comparable EBITDA denominated as follows:
Canadian dollars	94	100	185	198
U.S. dollars	199	188	366	371
Foreign exchange impact	70	53	129	101
Comparable EBITDA	363	341	680	670

1Liquids marketing results were previously disclosed separately, but almost fully relate to marketing activities with respect to the Keystone Pipeline System. For comparative periods, liquids marketing results have been reclassified within Keystone Pipeline System.

2Intra-Alberta pipelines include Grand Rapids and White Spruce.

Liquids Pipelines segmented earnings increased by $12 million and decreased by $84 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 and included the following specific items which have been excluded from our calculation of comparable EBITDA and comparable EBIT:

•a $57 million pre-tax charge in first quarter 2023 as a result of the FERC Administrative Law Judge initial decision issued in February 2023 in respect of a tolling-related complaint pertaining to amounts recognized from 2018 to 2022. Refer to the Recent developments – Liquids Pipelines section for additional information

•pre-tax preservation and other costs for Keystone XL pipeline project assets of $5 million and $10 million for the three and six months ended June 30, 2023 ($5 million and $11 million for the three and six months ended June 30, 2022), which could not be accrued as part of the Keystone XL asset impairment charge

•unrealized gains and losses from changes in the fair value of derivatives related to our liquids marketing business.

A stronger U.S. dollar in 2023 relative to 2022 had a positive impact on the Canadian dollar equivalent segmented earnings from our U.S. operations for the three and six months ended June 30, 2023. Refer to the Foreign exchange section for additional information.

22 | TC Energy Second Quarter 2023

Comparable EBITDA for Liquids Pipelines increased by $22 million and $10 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 primarily due to the net effect of:

•higher uncontracted volumes on the U.S. Gulf Coast section of the Keystone Pipeline System, partially offset by lower rates and contracted volumes in first quarter 2023

•higher long-haul contracted volumes on the Keystone Pipeline System from the 2019 Open Season; 20,000 Bbl/d commercialized in April 2022 and an additional 10,000 Bbl/d in September 2022

•lower uncontracted volumes on the Keystone Pipeline System for the three and six months ended June 30, 2023 as a result of the pressure de-rate per the terms of the Corrective Action Order (CAO) and Amended Corrective Action Order (ACAO) due to the Milepost 14 incident, which occurred in December 2022

•lower margins from liquids marketing activities

•a stronger U.S. dollar as described above.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased by $5 million and $8 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 primarily as a result of a stronger U.S. dollar.

TC Energy Second Quarter 2023 | 23

Power and Energy Solutions

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to segmented earnings (losses) (the most directly comparable GAAP measure).


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Bruce Power1	159	120	334	213
Canadian Power	80	75	182	135
Natural Gas Storage and other	(22)	57	(18)	61
Comparable EBITDA	217	252	498	409
Depreciation and amortization	(22)	(14)	(40)	(34)
Comparable EBIT	195	238	458	375
Specific items:

Bruce Power unrealized fair value adjustments	—	(9)	8	(32)
Risk management activities	60	(59)	41	(97)
Segmented earnings (losses)	255	170	507	246

1Represents our share of equity income from Bruce Power.

Power and Energy Solutions segmented earnings increased by $85 million and $261 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 and included the following specific items which have been excluded from our calculations of comparable EBITDA and comparable EBIT:

•our proportionate share of Bruce Power's unrealized gains and losses on funds invested for post-retirement benefits and risk management activities

•unrealized gains and losses from changes in the fair value of derivatives used to reduce commodity exposures.

Comparable EBITDA for Power and Energy Solutions decreased by $35 million and increased by $89 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 primarily due to the net effect of:

•higher contributions from Bruce Power primarily due to a higher contract price and fewer planned outage days, partially offset by lower realized gains on funds invested for post-retirement benefits and increased operating expenses, including the net impact of the Unit 3 Major Component Replacement (MCR) which commenced on March 1, 2023

•increased Canadian Power financial results primarily from higher realized power prices and lower natural gas fuel costs

•decreased Natural Gas Storage and other results from lower realized Alberta natural gas storage spreads primarily in second quarter 2023 and increased business development costs across the segment.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased by $8 million and $6 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 primarily due to the acquisition of the Fluvanna Wind Farm on March 15, 2023.

24 | TC Energy Second Quarter 2023

BRUCE POWER

The following is our proportionate share of the components of comparable EBITDA and comparable EBIT.


	three months ended June 30				six months ended June 30
(millions of $, unless otherwise noted)	2023		2022		2023		2022

Items included in comparable EBITDA and comparable EBIT comprised of:
Revenues1	473		438		979		847
Operating expenses	(239)		(226)		(475)		(457)
Depreciation and other	(75)		(92)		(170)		(177)
Comparable EBITDA and comparable EBIT2	159		120		334		213
Bruce Power – other information
Plant availability3,4	94	%	79	%	95	%	82	%
Planned outage days4	13		127		13		204
Unplanned outage days	13		3		38		17
Sales volumes (GWh)5	4,841		4,702		10,241		9,677
Realized power price per MWh6	$98		$92		$95		$87

1Net of amounts recorded to reflect operating cost efficiencies shared with the IESO, if applicable.

2Represents our 48.3 per cent ownership interest and internal costs supporting our investment in Bruce Power. Excludes unrealized gains and losses on funds invested for post-retirement benefits and risk management activities.

3The percentage of time the plant was available to generate power, regardless of whether it was running.

4Excludes Unit 6 and Unit 3 MCR outage days.

5Sales volumes include deemed generation.

6Calculation based on actual and deemed generation. Realized power price per MWh includes realized gains and losses from contracting activities and cost flow-through items. Excludes unrealized gains and losses on contracting activities and non-electricity revenues.

The Unit 3 MCR commenced on March 1, 2023 with a return to service expected in 2026. The Unit 6 MCR, which began in 2020, is in the final Lead-Out phase (fuel load and heat transport system testing have been completed) with bulkhead removal and final commissioning currently in progress. Unit 6 is expected to return to service in fourth quarter 2023.

A planned outage on Unit 4 was completed in second quarter 2023 and is scheduled on Unit 8 in late-third quarter 2023. The average 2023 plant availability, excluding the Unit 6 and Unit 3 MCR programs, is expected to be in the low-90 per cent range.

TC Energy Second Quarter 2023 | 25

Corporate

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to Corporate segmented earnings (losses) (the most directly comparable GAAP measure).


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Comparable EBITDA and comparable EBIT	(4)	(10)	(6)	(7)
Specific items:

Focus Project costs	(32)	—	(32)	—
Foreign exchange gains – inter-affiliate loans1	—	—	—	28
Segmented earnings (losses)	(36)	(10)	(38)	21

1Reported in Income from equity investments in the Condensed consolidated statement of income.

Corporate segmented losses increased by $26 million for the three months ended June 30, 2023 compared to the same period in 2022. Corporate segmented losses of $38 million for the six months ended June 30, 2023 increased by $59 million from segmented earnings of $21 million compared to the same period in 2022.

Corporate segmented earnings (losses) included the following specific items which have been excluded from our calculation of comparable EBITDA and comparable EBIT:

•a pre-tax charge of $32 million recorded in second quarter 2023 related to Focus Project costs. Refer to the Recent developments – Corporate section for additional information

•foreign exchange gains in 2022 on our proportionate share of peso-denominated inter-affiliate loans to the Sur de Texas joint venture from its partners up to March 15, 2022 when the peso-denominated inter-affiliate loans were fully repaid upon maturity. These foreign exchange gains were recorded in Income from equity investments in the Corporate segment and were excluded from our calculation of comparable EBITDA and comparable EBIT as they were fully offset by corresponding foreign exchange losses on the inter-affiliate loan receivable included in Foreign exchange gains (losses), net. Refer to the Financial risks and financial instruments – Related party transactions section for additional information.

INTEREST EXPENSE


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Interest expense on long-term debt and junior subordinated notes
Canadian dollar-denominated	(231)	(190)	(441)	(367)
U.S. dollar-denominated	(397)	(318)	(761)	(623)
Foreign exchange impact	(136)	(88)	(264)	(169)
	(764)	(596)	(1,466)	(1,159)
Other interest and amortization expense	(69)	(28)	(154)	(47)
Capitalized interest	42	4	72	6
Interest expense included in comparable earnings	(791)	(620)	(1,548)	(1,200)
Specific item:
Keystone FERC decision	—	—	(5)	—
Interest expense	(791)	(620)	(1,553)	(1,200)

26 | TC Energy Second Quarter 2023

Interest expense increased by $171 million and $353 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 and included accrued carrying charges of $5 million for the six months ended June 30, 2023, as a result of a pre-tax charge related to the FERC Administrative Law Judge initial decision on Keystone. This decision was issued in February 2023 in respect of a tolling-related complaint pertaining to amounts recognized from 2018 to 2022 which has been removed from our calculation of Interest expense included in comparable earnings. Refer to the Recent developments – Liquids Pipelines section for additional information.

Interest expense included in comparable earnings increased by $171 million and $348 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 primarily due to the net effect of:

•long-term debt issuances, net of maturities. Refer to the Financial Condition section for additional information

•the foreign exchange impact from a stronger U.S. dollar on translation of U.S. dollar-denominated interest expense

•higher interest rates on decreased levels of short-term borrowings

•higher capitalized interest, largely due to funding related to our investment in Coastal GasLink LP. Refer to Note 5, Coastal GasLink, of our Condensed consolidated financial statements for additional information.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Canadian dollar-denominated	20	35	53	77
U.S. dollar-denominated	95	22	167	48
Foreign exchange impact	33	6	59	13
Allowance for funds used during construction	148	63	279	138

AFUDC increased by $85 million and $141 million for the three and six months ended June 30, 2023 compared to the same periods in 2022. The decrease in Canadian dollar-denominated AFUDC is primarily related to NGTL System expansion projects placed in service. The increase in U.S. dollar-denominated AFUDC is mainly the result of the reactivation of AFUDC on the TGNH assets under construction following the new TSA with the CFE, including capital expenditures on the Southeast Gateway pipeline project in 2023, partially offset by projects placed in service on our U.S. natural gas pipelines.

FOREIGN EXCHANGE GAINS (LOSSES), NET


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Foreign exchange gains (losses), net included in comparable earnings	70	(6)	103	26
Specific items:
Foreign exchange gains (losses), net – intercompany loan	(9)	—	(9)	—
Foreign exchange losses – inter-affiliate loan	—	—	—	(28)
Risk management activities	108	(60)	182	(38)

Foreign exchange gains (losses), net	169	(66)	276	(40)

TC Energy Second Quarter 2023 | 27

Foreign exchange gains were $169 million and $276 million in the three and six months ended June 30, 2023 compared to foreign exchange losses of $66 million and $40 million for the same periods in 2022. The following specific items have been removed from our calculation of Foreign exchange gains (losses), net included in comparable earnings:

•unrealized foreign exchange gains and losses on the peso-denominated intercompany loan between TCPL and TGNH beginning in second quarter 2023. Refer to the Non-GAAP measures section for additional information

•unrealized gains and losses from changes in the fair value of derivatives used to manage our foreign exchange risk

•foreign exchange losses on the peso-denominated inter-affiliate loan receivable from the Sur de Texas joint venture until March 15, 2022, when it was fully repaid upon maturity. The interest income and interest expense on the peso-denominated inter-affiliate loan was included in comparable earnings with all amounts offsetting and resulting in no impact on consolidated net income.

Refer to the Financial risks and financial instruments section for additional information on related party transactions and derivatives.

Foreign exchange gains included in comparable earnings were $70 million in the three months ended June 30, 2023 compared to foreign exchange losses of $6 million in the same period in 2022. Foreign exchange gains included in comparable earnings were $103 million in the six months ended June 30, 2023 compared to $26 million in the same period in 2022. The changes were primarily due to the net effect of:

•higher realized gains on derivatives used to manage our exposure to net liabilities in Mexico that give rise to foreign exchange gains and losses

•net realized losses in the six months ended June 30, 2023 compared to net realized gains in 2022 on derivatives used to manage our net exposure to foreign exchange rate fluctuation on U.S. dollar-denominated income

•foreign exchange losses on the revaluation of our peso-denominated net monetary liabilities to U.S. dollars.

INTEREST INCOME AND OTHER


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Interest income and other included in comparable earnings	52	23	94	58
Specific item:
Milepost 14 insurance expense	(36)	—	(36)	—
Interest income and other	16	23	58	58

Interest income and other decreased by $7 million for the three months ended June 30, 2023 and remained consistent for the six months ended June 30, 2023 compared to the same periods in 2022. This included a $36 million accrued insurance expense related to the Milepost 14 incident, which is an estimate of the insurance proceeds for environmental remediation that we expect to receive from our wholly-owned captive insurance subsidiary. This expense has been removed from our calculation of Interest income and other included in comparable earnings. Refer to the Non-GAAP measures section for additional information.

Interest income and other included in comparable earnings increased by $29 million and $36 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 due to higher interest earned on short-term investments and the change in fair value of other restricted investments, partially offset by lower interest income in 2023 due to the repayment of the inter-affiliate loan receivable from the Sur de Texas joint venture in July 2022.

28 | TC Energy Second Quarter 2023

INCOME TAX (EXPENSE) RECOVERY


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Income tax (expense) recovery included in comparable earnings	(249)	(173)	(529)	(352)
Specific items:
Coastal GasLink LP impairment charge	34	—	18	—
Keystone FERC decision	—	—	14	—
Focus Project costs	7	—	7	—

Keystone XL preservation and other	1	2	2	3
Expected credit loss provision on net investment in leases and certain contract assets in Mexico	(3)	—	(35)	—

Great Lakes goodwill impairment charge	—	—	—	40
Settlement of Mexico prior years' income tax assessments	—	(2)	—	(195)





Bruce Power unrealized fair value adjustments	—	—	(2)	8
Risk management activities	(48)	25	(74)	25
Income tax (expense) recovery	(258)	(148)	(599)	(471)

Income tax expense increased by $110 million and $128 million for the three and six months ended June 30, 2023 compared to the same periods in 2022, which included the settlement of prior years' income tax assessments related to our operations in Mexico paid in second quarter 2022. This has been removed from our calculation of Income tax expense included in comparable earnings, in addition to the income tax impacts on specified items referenced elsewhere in this MD&A.

Income tax expense included in comparable earnings increased by $76 million and $177 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 primarily due to Mexico foreign exchange exposure, higher earnings and lower foreign income tax rate differentials. Refer to the Foreign exchange section for additional information regarding our Mexico foreign exchange exposure.

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Net income attributable to non-controlling interests	(6)	(9)	(17)	(20)

Net income attributable to non-controlling interests decreased by $3 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 primarily due to the acquisition of the wind farms in Texas. Refer to the Recent developments – Power and Energy Solutions section for additional information.

PREFERRED SHARE DIVIDENDS


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Preferred share dividends	(23)	(33)	(46)	(64)

Preferred share dividends decreased by $10 million and $18 million for the three and six months ended June 30, 2023 compared to the same periods in 2022 primarily due to the redemption of all issued and outstanding Series 15 preferred shares on May 31, 2022.

TC Energy Second Quarter 2023 | 29

Foreign exchange

FOREIGN EXCHANGE RELATED TO U.S. DOLLAR-DENOMINATED OPERATIONS

Certain of our businesses generate all or most of their earnings in U.S. dollars and, since we report our financial results in Canadian dollars, changes in the value of the U.S. dollar against the Canadian dollar directly affect our comparable EBITDA and may also impact comparable earnings. As our U.S. dollar-denominated operations continue to grow, this exposure increases. A portion of the U.S. dollar-denominated comparable EBITDA exposure is naturally offset by U.S. dollar-denominated amounts below comparable EBITDA within Depreciation and amortization, Interest expense and other income statement line items. A portion of the remaining exposure is actively managed on a rolling forward basis up to three years using foreign exchange derivatives; however, the natural exposure beyond that period remains. The net impact of the U.S. dollar movements on comparable earnings during the three and six months ended June 30, 2023 after considering natural offsets and economic hedges was not significant.

The components of our financial results denominated in U.S. dollars are set out in the table below, including our U.S. and Mexico Natural Gas Pipelines operations along with the majority of our Liquids Pipelines business. Comparable EBITDA is a non-GAAP measure.

PRE-TAX U.S. DOLLAR-DENOMINATED INCOME AND EXPENSE ITEMS


	three months ended June 30		six months ended June 30
(millions of US$)	2023	2022	2023	2022

Comparable EBITDA
U.S. Natural Gas Pipelines	688	716	1,626	1,591
Mexico Natural Gas Pipelines1	144	156	270	288
Liquids Pipelines	199	188	366	371
	1,031	1,060	2,262	2,250
Depreciation and amortization	(240)	(239)	(480)	(477)
Interest expense on long-term debt and junior subordinated notes	(397)	(318)	(761)	(623)

Allowance for funds used during construction	95	22	167	48
Non-controlling interests and other	(13)	(16)	(44)	(28)
	476	509	1,144	1,170
Average exchange rate - U.S. to Canadian dollars	1.34	1.28	1.35	1.27

1Excludes interest expense on our inter-affiliate loans with the Sur de Texas joint venture which was fully offset in Interest income and other. These inter-affiliate loans were fully repaid in 2022.

FOREIGN EXCHANGE RELATED TO MEXICO NATURAL GAS PIPELINES

Changes in the value of the Mexican peso against the U.S. dollar can affect our comparable earnings as a portion of our Mexico Natural Gas Pipelines monetary assets and liabilities are peso-denominated, while our financial results are denominated in U.S. dollars for our Mexico operations. These peso-denominated balances are revalued to U.S. dollars, creating foreign exchange gains and losses that are included in Income from equity investments and Foreign exchange (gains) losses, net in the Condensed consolidated statement of income.

In addition, foreign exchange gains or losses calculated for Mexico income tax purposes on the revaluation of U.S. dollar-denominated monetary assets and liabilities result in a peso-denominated income tax exposure for these entities, leading to fluctuations in Income from equity investments and Income tax expense. This exposure increases as our U.S. dollar-denominated net monetary liabilities grow. On January 17, 2023, a wholly-owned Mexican subsidiary entered into a US$1.8 billion senior unsecured term loan and a US$500 million senior unsecured revolving credit facility, which resulted in an additional peso-denominated income tax expense compared to 2022.

30 | TC Energy Second Quarter 2023

The above exposures are managed using foreign exchange derivatives, although some unhedged exposure remains. The impacts of the foreign exchange derivatives are recorded in Foreign exchange (gains) losses, net in the Condensed consolidated statement of income. Refer to the Financial risks and financial instruments section for additional information.

The period end exchange rates for one U.S. dollar to Mexican pesos were as follows:


June 30, 2023						17.15
June 30, 2022						20.11

December 31, 2022						19.50
December 31, 2021						20.48

A summary of the impacts of transactional foreign exchange gains and losses from changes in the value of the Mexican peso against the U.S. dollar and associated derivatives is set out in the table below:


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Comparable EBITDA - Mexico Natural Gas Pipelines1	(29)	4	(74)	(17)
Foreign exchange gains (losses), net included in comparable earnings	99	13	172	17
Income tax (expense) recovery included in comparable earnings	(62)	(2)	(113)	(4)
	8	15	(15)	(4)

1Includes the foreign exchange impacts from the Sur de Texas joint venture recorded in Income from equity investments in the Condensed consolidated statement of income.

TC Energy Second Quarter 2023 | 31

Recent developments

CANADIAN NATURAL GAS PIPELINES

Coastal GasLink

The Coastal GasLink project is approximately 91 per cent complete. The entire route has been cleared, welding is 98 per cent complete and over 639 km of pipeline has been installed and backfilled with restoration activities underway in many areas. The Wilde Lake compressor and meter stations are complete, with commissioning work nearing completion.

Project costs are funded by existing project-level credit facilities and equity contributions from the Coastal GasLink LP partners, including us. Beginning in 2023, the equity financing required to fund construction of the pipeline to completion will initially be provided through a subordinated loan agreement between TC Energy and Coastal GasLink LP. Draws by Coastal GasLink LP on this loan will be repaid with funds from equity contributions to the partnership by the Coastal GasLink LP partners, including us, subsequent to the in-service date of the Coastal GasLink pipeline when final project costs are known. We expect that in accordance with contractual terms, the additional equity contributions required will be predominantly funded by us, except under certain conditions, but will not result in a change to our 35 per cent ownership. At June 30, 2023, committed capacity under this subordinated loan agreement was $3.3 billion, on which $1,035 million was drawn.

The expectation that additional equity contributions will predominantly be funded by us continues to be an indicator at June 30, 2023 that a decrease in the value of our equity investment had occurred. As a result, we completed a valuation assessment and concluded that there was an other-than-temporary impairment of our investment, resulting in a pre-tax impairment charge of the full value of our investment in Coastal GasLink LP of $843 million ($809 million after tax) and $856 million ($838 million after tax) for the three and six months ended June 30, 2023, respectively. The impairment charge reflected the net impact of $1,035 million drawn and $250 million repaid on the subordinated loan for the six months ended June 30, 2023, along with TC Energy’s proportionate share of unrealized gains and losses on interest rate derivatives in Coastal GasLink LP and other changes to the equity investment. The impairment of the subordinated loan resulted in unrealized non-taxable capital losses that are not recognized. The cumulative pre-tax impairment charge recognized to date at June 30, 2023 is $3,904 million ($3,481 million after tax). Refer to Note 5, Coastal GasLink, of our Condensed consolidated financial statements for additional information.

TC Energy expects that a portion of our estimated $2.3 billion future investment will be impaired; however, the majority of our total expected impairment charge has been recognized as at June 30, 2023. We will continue to assess for other-than-temporary declines in the fair value of our investment in Coastal GasLink LP, and the extent of any future impairment charges will depend on the outcome of the valuation assessment performed at the respective reporting date.

NGTL System and Foothills

In the six months ended June 30, 2023, the NGTL System and Foothills placed approximately $1.3 billion and $0.2 billion, respectively, of capacity projects in service. The details of the significant capacity programs are listed below.

2021 NGTL System Expansion Program

The 2021 NGTL System Expansion Program consists of new pipeline and compression facilities to add incremental capacity to the NGTL System. In the six months ended June 30, 2023, an additional $0.3 billion of the program and the facilities required to declare all contracts, were placed in service.

2022 NGTL System Expansion Program

The 2022 NGTL System Expansion Program consists of new pipeline and compression facilities to meet firm-receipt and intra-basin delivery requirements. In the six months ended June 30, 2023, the program's remaining facilities of $0.8 billion were placed in service.

32 | TC Energy Second Quarter 2023

NGTL System/Foothills West Path Delivery Program

The NGTL System/Foothills West Path Delivery Program is a multi-year expansion of the NGTL System and Foothills to facilitate incremental contracted export capacity connecting to GTN. In the six months ended June 30, 2023, an additional $0.2 billion of the program’s facilities were placed in service. Construction of remaining facilities is underway with anticipated in-service throughout 2023. Weather delays, terrain complexity and inflationary pressures are factors we will continue to mitigate where possible.

U.S. NATURAL GAS PIPELINES

Columbia Gas and Columbia Gulf Monetization

On July 24, 2023, we announced that we have entered into an agreement to sell a 40 per cent equity interest in Columbia Gas and Columbia Gulf to Global Infrastructure Partners (GIP) for proceeds of $5.2 billion (US$3.9 billion). Columbia Gas and Columbia Gulf will be held by a newly formed entity with GIP and the transaction is expected to close in fourth quarter 2023, subject to customary closing conditions.

We will continue to operate Columbia Gas and Columbia Gulf. TC Energy and GIP will each fund their proportionate share of annual maintenance, modernization and sanctioned growth capital expenditures through internally generated cash flows or from proportionate contributions from TC Energy and GIP.

North Baja XPress

In June 2023, the North Baja XPress project, an expansion project designed to expand capacity and meet increased customer demand on our North Baja pipeline, was placed in service.

Virginia Electrification Project

In March 2023, the FERC provided a certificate order approving our Virginia Electrification project. The Virginia Electrification project will replace and upgrade certain facilities through conversion to electric compression and is expected to reduce emissions along portions of our Columbia Gas system. The anticipated in-service date is early 2024 with an estimated project cost of US$0.1 billion.

ANR Section 4 Rate Case

ANR reached a settlement with its customers effective August 2022 and received FERC approval on April 11, 2023. As part of the settlement, there is a moratorium on any further rate changes until November 1, 2025. ANR must file for new rates with an effective date no later than August 1, 2028. The settlement also included an additional rate step up effective August 2024 related to certain modernization projects. In second quarter 2023, previously accrued rate refund liabilities, including interest, were refunded to customers.

Columbia Gulf Rate Settlement

On July 7, 2023, Columbia Gulf filed an uncontested rate settlement which would set new recourse rates for Columbia Gulf effective March 1, 2024 and institute a rate moratorium through February 28, 2027. The revised rates are not expected to have a significant impact on our U.S. Natural Gas Pipelines segment comparable earnings. Columbia Gulf must file for new rates no later than March 1, 2029.

TC Energy Second Quarter 2023 | 33

MEXICO NATURAL GAS PIPELINES

TGNH Strategic Alliance with the CFE

In August 2022, we announced a strategic alliance with Mexico’s state-owned electric utility, the CFE, for the development of new natural gas infrastructure in central and southeast Mexico. In connection with the strategic alliance, we reached an FID to develop and construct the Southeast Gateway pipeline, a 1.3 Bcf/d, 715 km (444 mile) offshore natural gas pipeline to serve the southeast region of Mexico with an expected in-service by mid-2025 and an estimated project cost of US$4.5 billion. The Southeast Gateway pipeline project is progressing according to planned milestones and we have begun construction on all facilities and installations in Veracruz and Tabasco. We expect to begin offshore pipe laying at the end of 2023.

The lateral section of the Villa de Reyes pipeline is mechanically complete and ready for commercial service. Construction of the south section of the Villa de Reyes pipeline is targeted for mechanical completion by the end of 2023, subject to successful resolution of stakeholder issues. Additionally, we continue to evaluate the development and completion of the central segment of the Tula pipeline with the CFE, subject to an FID anticipated in the second half of 2023. Finally, we are working with the CFE on the Tula pipeline’s west section to procure necessary land access and resolve legal claims.

Subject to regulatory approvals from Mexico’s Federal Economic Competition Commission (COFECE) and the Regulatory Energy Commission, the strategic alliance provides the CFE with the ability to hold an equity interest in TGNH, which is conditional upon the CFE contributing capital, acquiring land and supporting permitting on the TGNH projects. Upon in-service of the Southeast Gateway pipeline, the CFE’s equity interest in TGNH will equal 15 per cent and will increase to approximately 35 per cent upon expiry of the contract in 2055. On March 30, 2023, the initial submission was made to the COFECE to start the regulatory approval process, which is currently under review. Regulatory approvals related to the CFE's equity participation in TGNH could take up to 24 months.

LIQUIDS PIPELINES

Milepost 14 Incident

In December 2022, a pipeline incident occurred in Washington County, Kansas on the Keystone Pipeline System, releasing 12,937 barrels of crude oil. In June 2023, we completed the recovery of all released volumes. Restoration activities along the Mill Creek shoreline are ongoing and are expected to continue through third quarter 2023. In December 2022, PHMSA released a CAO and subsequently released an ACAO in March 2023 that included an operating pressure restriction for the Keystone segments that deliver into Wood River and Patoka, Illinois and Cushing, Oklahoma. Under these corrective orders, we expect to continue to fulfill our Keystone Pipeline System contract commitments.

As outlined by PHMSA's ACAO, a Root Cause Failure Analysis (RCFA) was conducted by an independent third party, which was released on April 21, 2023. The RCFA revealed that a unique set of circumstances occurred at the rupture location, which likely originated during the construction of the pipeline segment, with the primary cause of the rupture being a fatigue crack. We are in the process of implementing a comprehensive remedial work plan, including the RCFA’s recommendations, to enhance our pipeline integrity program and safety performance.

We have revised our environmental remediation cost estimate before insurance recoveries, fines and penalties, subject to certain assumptions and have increased our accrual from $650 million to $794 million as a result of revised cost estimates to meet the required restoration endpoints in alignment with our regulators. It is reasonably possible that we may incur additional costs beyond the amounts accrued at June 30, 2023. We have appropriate insurance policies in place and we believe that it remains probable that the majority of environmental remediation costs will be eligible for recovery under our existing insurance coverage. For the six months ended June 30, 2023, we have received $194 million from insurance proceeds related to the environmental remediation. The additional environmental remediation costs recognized in second quarter 2023 included $36 million that we estimate to be recoverable from our wholly-owned captive insurance subsidiary, which was recorded in Interest income and other in the Condensed consolidated statement of income. This amount has been excluded from comparable measures.

34 | TC Energy Second Quarter 2023

CER and FERC Decisions

In 2019 and 2020, certain Keystone customers initiated complaints before the FERC and the CER regarding certain costs within the variable toll calculation. In December 2022, the CER issued a decision in respect of the complaint that resulted in an adjustment to previously charged tolls of $38 million. In January 2023, Keystone filed a Review and Variance application with the CER challenging the correctness of the original decision. We are awaiting further process from the CER.

In February 2023, the FERC released its initial decision in respect of the complaint. As a result, we have recorded a one-time adjustment of $57 million reflective of previously charged tolls between 2018 and 2022.

Port Neches

In March 2023, the Port Neches Link Pipeline System was placed in service, connecting the Keystone Pipeline System to Motiva’s Port Neches Terminal, enabling last-mile connectivity to Motiva’s 630,000 Bbl/d refinery.

POWER AND ENERGY SOLUTIONS

Bruce Power Life Extension

On March 1, 2023, Unit 3 was removed from service and began its MCR outage with a return to service expected in 2026.

The Unit 6 MCR, which began in 2020, is in the final Lead-Out phase (fuel load and heat transport system testing have been completed) with bulkhead removal and final commissioning currently in progress. Unit 6 is expected to return to service in fourth quarter 2023.

Texas Wind Farms Acquisitions

On March 15, 2023, we acquired 100 per cent of the Class B Membership Interests in the 155 MW Fluvanna Wind Farm located in Scurry County, Texas for US$99 million, before post-closing adjustments. Additionally, on June 14, 2023, we acquired 100 per cent of the Class B Membership Interests in the 148 MW Blue Cloud Wind Farm located in Bailey County, Texas for US$125 million, before post-closing adjustments.

Each of these operating assets has a tax equity investor which owns 100 per cent of the Class A Membership Interests, to which a percentage of earnings, tax attributes and cash flows are allocated under the provisions of each tax equity agreement and are recorded in Net income attributable to non-controlling interests in the Condensed consolidated statement of income.

Ontario Pumped Storage Project

On July 10, 2023, the Government of Ontario announced that the Minister of Energy will commence the final evaluation of our Ontario Pumped Storage Project (OPSP) with a decision expected by the end of 2023.

The OPSP remains subject to approval by our Board of Directors and a successful partnership agreement with the Saugeen Ojibway Nation. We are targeting an FID in 2024 with OPSP expected to be in-service in the early 2030s, subject to receipt of regulatory and corporate approvals.

Renewable Energy Contracts and/or Investment Opportunities

In first quarter 2023, we secured approximately 300 MW from wind farms in Texas. To date, we have secured approximately 900 MW in the U.S. from solar and wind projects to meet the electricity needs of internal and external customers in the industrial and oil and gas sectors.

In second quarter 2023, we finalized contracts to sell 50 MW under our 24-by-7 carbon-free power offering in the Province of Alberta. Contract terms range from 15 to 20 years and are expected to commence in 2025.

TC Energy Second Quarter 2023 | 35

OTHER ENERGY SOLUTIONS

Alberta Carbon Grid

In June 2021, we announced a partnership with Pembina Pipeline Corporation to jointly develop a world-scale carbon transportation and sequestration system which, when fully constructed, is expected to be capable of transporting up to 20 million tonnes of carbon dioxide annually. Alberta Carbon Grid continues to evaluate the suitability of our Areas Of Interest, including the advancement of well drilling and testing activities to support the development of a detailed Measurement, Monitoring and Verification plan required to apply for a sequestration permit.

CORPORATE

Spinoff of Liquids Pipelines Business

On July 27, 2023, TC Energy announced plans to separate into two independent, investment-grade, publicly listed companies through the spinoff of its Liquids Pipelines business (the Transaction). The Transaction is expected to be tax free to TC Energy’s Canadian and U.S. shareholders. In addition to TC Energy shareholder and court approvals, the Transaction is subject to receipt of favourable tax rulings from Canadian and U.S. tax authorities, receipt of necessary regulatory approvals, and satisfaction of other customary closing conditions. François Poirier will remain as President and CEO of TC Energy while the new Liquids Pipelines Company will be led by Bevin Wirzba as President and CEO. TC Energy expects that the Transaction will be completed in the second half of 2024.

Under the proposed Transaction, TC Energy shareholders will retain their current ownership in TC Energy’s common shares and receive a pro-rata allocation of common shares in the new Liquids Pipelines Company. The determination of the number of common shares in the new Liquids Pipelines Company to be distributed to TC Energy shareholders will be determined prior to the closing of the proposed Transaction.

2016 Columbia Pipeline Acquisition Lawsuit

On June 30, 2023, the Delaware Chancery Court (the Court) issued a ruling against TC Energy and other named defendants in a class action lawsuit brought on behalf of the former shareholders of Columbia Pipeline Group Inc. (Columbia) related to the acquisition of Columbia by TC Energy in July 2016. The Court determined that Columbia's then CEO and CFO breached their fiduciary duties and made material disclosure omissions and that TC Energy was aware and took advantage of those breaches. The Court awarded shareholders damages in the amount of US$1 per share. The final award is yet to be determined but is expected to be in the range of US$400 million, plus interest at the statutory rate. Liability for this award will be allocated between Columbia’s former executives and TC Energy in a subsequent proceeding before the Court that will determine proportionate responsibility and account for the prior settlement. Until this allocation is known, the amount that TC Energy is liable for cannot be reasonably estimated, therefore, we have not accrued a provision for this claim as at June 30, 2023.

TC Energy will not be responsible for the full amount of the award, but its proportionate share will not be known until the allocation hearing is completed. We strongly disagree with the ruling and intend to appeal once the final judgment is entered and the allocation is determined. The same Court had previously confirmed, after trial in an appraisal rights action filed in 2016, that the US$25.50 per share that TC Energy paid Columbia shareholders was fair value.

36 | TC Energy Second Quarter 2023

Focus Project

At June 30, 2023, we have incurred pre-tax costs of $69 million for the Focus Project primarily related to external consulting and severance costs of which $32 million was recorded in Plant operating costs and other in the Condensed consolidated statement of income and was removed from comparable amounts. Furthermore, $15 million was recorded in Plant operating costs and other with offsetting revenues in the Condensed consolidated statement of income related to costs recoverable through regulatory and commercial tolling structures, the net effect of which had no impact on net income. An additional $22 million was allocated to capital projects.

Asset Divestiture Program

With our announced sale of a 40 per cent equity interest in Columbia Gas and Columbia Gulf, we have raised $5.2 billion in total proceeds. This has significantly accelerated our deleveraging goal and we will continue to look at future capital rotation opportunities to further strengthen our financial position.

2023 Canada Federal Budget

On March 28, 2023, the Canadian Federal Government delivered its 2023 Budget. As part of this budget, several changes were announced to interest deductibility rules, global minimum tax proposals and other tax measures. We do not expect a material impact on our financial performance and cash flows in the near term, but we will continue to monitor any developments.

TC Energy Second Quarter 2023 | 37

Financial condition

We strive to maintain financial strength and flexibility in all parts of the economic cycle. We rely on our operating cash flows to sustain our business, pay dividends and fund a portion of our growth. In addition, we access capital markets and engage in portfolio management activities to meet our financing needs and to manage our capital structure and credit ratings.

We have the financial capacity to fund our existing capital program through predictable and growing cash flows from operations, access to capital markets, portfolio management activities, joint ventures, asset-level financing, cash on hand and substantial committed credit facilities. Annually, in the fourth quarter, we renew and extend our credit facilities as required.

At June 30, 2023, our current assets totaled $7.6 billion and current liabilities amounted to $12.6 billion, leaving us with a working capital deficit of $5.0 billion compared to $9.6 billion at December 31, 2022. Our working capital deficiency is considered to be in the normal course of business and is managed through:

•our ability to generate predictable and growing cash flows from operations

•a total of $10.3 billion of committed revolving credit facilities of which $9.2 billion of short-term borrowing capacity remains available, net of $1.1 billion backstopping outstanding commercial paper balances. We also have arrangements in place for a further $2.0 billion of demand credit facilities of which $0.9 billion remained available as at June 30, 2023

•our access to capital markets, including through securities issuances, incremental credit facilities, portfolio management activities and the DRP, if deemed appropriate.

CASH PROVIDED BY OPERATING ACTIVITIES


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Net cash provided by operations	1,510	942	3,584	2,649
Increase (decrease) in operating working capital	177	618	117	578
Funds generated from operations	1,687	1,560	3,701	3,227
Specific items:
Keystone FERC decision, net of current income tax	—	—	48	—
Milepost 14 insurance expense	36	—	36	—
Focus Project costs, net of current income tax	27	—	27	—
Keystone XL preservation and other, net of current income tax	4	4	8	9
Settlement of Mexico prior years' income tax assessments	—	2	—	195





Comparable funds generated from operations	1,754	1,566	3,820	3,431

Net cash provided by operations

Net cash provided by operations increased by $568 million and $935 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 primarily due to higher funds generated from operations and the amount and timing of working capital changes.

Comparable funds generated from operations

Comparable funds generated from operations, a non-GAAP measure, helps us assess the cash generating ability of our businesses by excluding the timing effects of working capital changes as well as the cash impact of our specific items.

Comparable funds generated from operations increased by $188 million and $389 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 primarily due to increased comparable EBITDA, higher distributions from operating activities of our equity investments and realized gains on derivatives used to manage our exposure to net liabilities in Mexico that give rise to foreign exchange gains and losses, partially offset by higher interest expense.

38 | TC Energy Second Quarter 2023

CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Capital spending
Capital expenditures	(2,018)	(1,263)	(3,903)	(2,771)
Capital projects in development	(26)	(9)	(104)	(22)
Contributions to equity investments	(947)	(219)	(2,017)	(435)
	(2,991)	(1,491)	(6,024)	(3,228)

Loans to affiliate (issued) repaid, net	—	51	250	(112)
Acquisitions, net of cash acquired	(164)	—	(302)	—
Other distributions from equity investments	—	32	16	32
Deferred amounts and other	(120)	(98)	9	(31)
Keystone XL contractual recoveries	5	473	5	473
Net cash (used in) provided by investing activities	(3,270)	(1,033)	(6,046)	(2,866)

Capital expenditures in 2023 were incurred primarily for the expansion of the NGTL System, Columbia Gas and ANR projects, and the development of the Southeast Gateway pipeline, as well as maintenance capital expenditures. Higher capital expenditures in 2023 compared to 2022 reflect increased spending for the development of the Southeast Gateway pipeline and Columbia Gas projects, partially offset by reduced spending on expansion of the NGTL System.

Contributions to equity investments increased in 2023 compared to 2022 mainly due to the $1,035 million draws on the subordinated loan by Coastal GasLink LP in 2023 which are accounted for as in-substance equity contributions, as well as funding the remaining $537 million of the $1.9 billion contractual equity contribution to Coastal GasLink LP in accordance with the July 2022 amended agreements.

Loans to affiliate (issued) repaid, net represent issuances prior to amended agreements in 2022 and repayments on the subordinated demand revolving credit facility and the subordinated loan agreement that we entered with Coastal GasLink LP. Refer to the Financial risks and financial instruments – Related party transactions section for additional information.

As part of refinancing activities with the Sur de Texas joint venture, on March 15, 2022, our peso-denominated inter-affiliate loan was fully repaid upon maturity in the amount of $1.2 billion and was subsequently replaced with a new U.S. dollar-denominated inter-affiliate loan of an equivalent $1.2 billion. The Contributions to equity investments and Other distributions from equity investments with respect to these refinancing activities are presented above on a net basis, although they are reported on a gross basis in our Condensed consolidated statement of cash flows. Refer to the Financial risks and financial instruments – Related party transactions section for additional information.

On March 15, 2023, we acquired 100 per cent of the Class B Membership Interests in the Fluvanna Wind Farm located in Scurry County, Texas for US$99 million, before post-closing adjustments. On June 14, 2023, we acquired 100 per cent of the Class B Membership Interests in the Blue Cloud Wind Farm located in Bailey County, Texas for US$125 million, before post-closing adjustments. Refer to the Recent developments – Power and Energy Solutions section for additional information.

TC Energy Second Quarter 2023 | 39

CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Notes payable issued (repaid), net	(1,429)	(116)	(3,654)	214
Long-term debt issued, net of issue costs	1,442	2,510	8,453	2,510
Long-term debt repaid	(350)	—	(460)	(26)
Junior subordinated notes issued, net of issue costs	—	(3)	—	1,008


Dividends and distributions paid	(628)	(932)	(1,363)	(1,847)
Common shares issued, net of issue costs	1	29	4	158
Preferred shares redeemed	—	(1,000)	—	(1,000)
Other	—	12	—	17



Net cash (used in) provided by financing activities	(964)	500	2,980	1,034

Long-term debt issued

The following table outlines significant long-term debt issuances in the six months ended June 30, 2023:

(millions of Canadian $, unless otherwise noted)

Company

Issue date

Type

Maturity date

Amount

Interest rate

TransCanada PipeLines Limited

May 2023

Senior Unsecured Term Loan

May 2026

US 1,024

Floating

March 2023

Senior Unsecured Notes

March 20261

US 850

6.20

March 2023

Senior Unsecured Notes

March 20261

US 400

Floating

March 2023

Medium Term Notes

July 2030

1,250

5.28

March 2023

Medium Term Notes

March 20261

600

5.42

March 2023

Medium Term Notes

March 20261

400

Floating

TC Energía Mexicana, S. de R.L. de C.V.

January 2023

Senior Unsecured Term Loan

January 2028

US 1,800

Floating

January 2023

Senior Unsecured Revolving
Credit Facility

January 2028

US 500

Floating

Gas Transmission Northwest LLC

June 2023

Senior Unsecured Notes

June 2030

US 50

4.92

1 Callable at par in March 2024 or at any time thereafter.

Long-term debt repaid/retired

The following table outlines significant long-term debt repaid in the six months ended June 30, 2023:

(millions of Canadian $, unless otherwise noted)

Company

Repayment date

Type

Amount

Interest rate

Nova Gas Transmission Ltd.

April 2023

Debentures

US 200

7.875

TC Energía Mexicana, S. de R.L. de C.V.

Various

Senior Unsecured Revolving Credit Facility

US 120

Floating

On July 19, 2023, TransCanada PipeLines Limited retired $750 million of Medium Term Notes bearing interest at a fixed rate of 3.69 per cent.

40 | TC Energy Second Quarter 2023

DIVIDENDS

On July 27, 2023, we declared quarterly dividends on our common shares of $0.93 per share payable on October 31, 2023 to shareholders of record at the close of business on September 29, 2023.

DIVIDEND REINVESTMENT PLAN

With respect to the common share dividends declared on April 27, 2023, the participation rate by common shareholders was approximately 39 per cent, resulting in $374 million to be reinvested in common equity under the program. On dividends declared in 2023 to date, the participation rate by common shareholders was approximately 39 per cent, which will result in $737 million reinvestment in common equity under the program. As disclosed in our 2022 Annual Report, commencing with the common share dividends declared on July 27, 2023, we discontinued the issuance of common shares from treasury at a discount to satisfy purchases under the DRP.

SHARE INFORMATION

At July 24, 2023, we had approximately 1.0 billion issued and outstanding common shares and approximately 8 million outstanding options to buy common shares of which 5 million were exercisable.

CREDIT FACILITIES

At July 24, 2023, we had a total of $10.2 billion of committed revolving credit facilities of which $6.2 billion of short-term borrowing capacity remains available, net of $4.0 billion backstopping outstanding commercial paper balances. We also have arrangements in place for a further $2.0 billion of demand credit facilities of which $0.9 billion remains available.

CONTRACTUAL OBLIGATIONS

Capital expenditure commitments at June 30, 2023 have increased by approximately $0.5 billion from those reported at December 31, 2022, reflecting new contractual commitments entered into for the construction of the Southeast Gateway pipeline and other capital projects, partially offset by normal course fulfillment of construction contracts.

There were no material changes to our contractual obligations in second quarter 2023 or to payments due in the next five years or thereafter. Refer to our 2022 Annual Report for additional information about our contractual obligations.

TC Energy Second Quarter 2023 | 41

Financial risks and financial instruments

We are exposed to various financial risks and have strategies, policies and limits in place to manage the impact of these risks on our earnings, cash flows and, ultimately, shareholder value.

Risk management strategies, policies and limits are designed to ensure our risks and related exposures are in line with our business objectives and risk tolerance.

Refer to our 2022 Annual Report for additional information about the risks we face in our business which have not changed materially since December 31, 2022, other than as noted within this MD&A.

INTEREST RATE RISK

We utilize both short- and long-term debt to finance our operations which exposes us to interest rate risk. We typically pay fixed rates of interest on our long-term debt and floating rates on short-term debt including our commercial paper programs and amounts drawn on our credit facilities. A small portion of our long-term debt bears interest at floating rates. In addition, we are exposed to interest rate risk on financial instruments and contractual obligations containing variable interest rate components. We actively manage our interest rate risk using interest rate derivatives. For eligible hedging relationships affected by the expected cessation of certain reference interest rates, we have applied the optional expedient permissible under U.S. GAAP allowing an entity to assume that the hedged forecasted transaction in a cash flow hedge is probable of occurring and, therefore, we expect no material impact on our consolidated financial statements.

FOREIGN EXCHANGE RISK

A portion of our Mexico Natural Gas Pipelines monetary assets and liabilities are peso-denominated, while our Mexico operations' financial results are denominated in U.S. dollars. Therefore, changes in the value of the Mexican peso against the U.S. dollar can affect our comparable earnings. In addition, foreign exchange gains or losses calculated for Mexico income tax purposes on the revaluation of U.S. dollar-denominated monetary assets and liabilities result in a peso-denominated income tax exposure for these entities, leading to fluctuations in Income from equity investments and Income tax expense.

We manage a portion of our foreign exchange risk using foreign exchange derivatives. Refer to the Foreign Exchange section for additional information on our foreign currency exposure.

We hedge a portion of our net investment in foreign operations (on an after-tax basis) with U.S. dollar-denominated debt, cross-currency interest rate swaps, foreign exchange forwards and foreign exchange options, as appropriate.

COUNTERPARTY CREDIT RISK

We have exposure to counterparty credit risk in a number of areas including:

•cash and cash equivalents

•accounts receivable and certain contractual recoveries

•available-for-sale assets

•fair value of derivative assets

•net investment in leases and certain contract assets in Mexico.

42 | TC Energy Second Quarter 2023

Market events causing disruptions in global energy demand and supply may contribute to economic uncertainties impacting a number of our customers. While the majority of our credit exposure is to large creditworthy entities, we maintain close monitoring and communication with those counterparties experiencing greater financial pressures. Refer to our 2022 Annual Report for more information about the factors that mitigate our counterparty credit risk exposure.

We review financial assets carried at amortized cost for impairment using the lifetime expected loss of the financial asset at initial recognition and throughout the life of the financial asset. We use historical credit loss and recovery data, adjusted for our judgment regarding current economic and credit conditions, along with reasonable and supportable forecasts to determine any impairment, which is recognized in Plant operating costs and other. At June 30, 2023, we had no significant credit risk concentrations and no significant amounts past due or impaired. We recorded a recovery of $11 million and $115 million on the expected credit loss provision before tax on the TGNH net investment in leases and certain contract assets in Mexico for the three and six months ended June 30, 2023, respectively (2022 - nil). Refer to our 2022 Consolidated financial statements for additional information on expected credit loss provisions and Note 12, Risk management and financial instruments, for additional information on the expected credit loss provision recognized in 2023.

We have significant credit and performance exposure to financial institutions that hold cash deposits and provide committed credit lines and letters of credit that help manage our exposure to counterparties and provide liquidity in commodity, foreign exchange and interest rate derivative markets. Our portfolio of financial sector exposure consists primarily of highly-rated investment grade, systemically important financial institutions. We had no direct exposure to the U.S. regional bank failures in early 2023; however, we continue to monitor potential impacts on our portfolio of financial sector counterparties.

LIQUIDITY RISK

Liquidity risk is the risk that we will not be able to meet our financial obligations as they come due. We manage our liquidity risk by continuously forecasting our cash flows and ensuring we have adequate cash balances, cash flows from operations, committed and demand credit facilities and access to capital markets to meet our operating, financing and capital expenditure obligations under both normal and stressed economic conditions.

RELATED PARTY TRANSACTIONS

Related party transactions are conducted in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Coastal GasLink LP

We hold a 35 per cent equity interest in Coastal GasLink LP and have been contracted to develop, construct and operate the Coastal GasLink pipeline.

TC Energy Subordinated Loan Agreement

TC Energy has a subordinated loan agreement with Coastal GasLink LP under which draws by Coastal GasLink LP will fund the remaining $2.3 billion equity requirement related to the estimated capital cost to complete the Coastal GasLink pipeline. As at June 30, 2023, the total capacity committed by TC Energy under this subordinated loan agreement was $3.3 billion. Any amounts outstanding on this loan will be repaid by Coastal GasLink LP to TC Energy, once final project costs are known, which will be determined after the pipeline is placed in service. Coastal GasLink LP partners, including TC Energy, will contribute equity to Coastal GasLink LP to ultimately fund Coastal GasLink LP’s repayment of this subordinated loan to TC Energy. We expect that, in accordance with contractual terms, these additional equity contributions will be predominantly funded by TC Energy but will not result in a change to our 35 per cent ownership. The total amount drawn on this loan at June 30, 2023 was $1,035 million (December 31, 2022 – $250 million). The carrying value of this loan was reduced to nil at June 30, 2023 and December 31, 2022 as part of the impairment charges recognized to date.

TC Energy Second Quarter 2023 | 43

Subordinated Demand Revolving Credit Facility

We have a subordinated demand revolving credit facility with Coastal GasLink LP to provide additional short-term liquidity and funding flexibility to the project. The facility bears interest at a floating market-based rate and has a capacity of $100 million with an outstanding balance of nil at June 30, 2023 (December 31, 2022 – nil). This revolver was not impacted by the impairment charges recognized to date.

Sur de Texas

We hold a 60 per cent equity interest in a joint venture with IEnova to own the Sur de Texas pipeline, for which we are the operator. In 2017, we entered into a MXN$21.3 billion unsecured revolving credit facility with the joint venture, which bore interest at a floating rate. On March 15, 2022, as part of refinancing activities with the Sur de Texas joint venture, the peso-denominated inter-affiliate loan was replaced with a new U.S. dollar-denominated inter-affiliate loan from us for an equivalent $1.2 billion (US$938 million) with a floating interest rate. On July 29, 2022, the Sur de Texas joint venture entered into an unsecured term loan agreement with third parties, the proceeds of which were used to fully repay the U.S. dollar-denominated inter-affiliate loan with TC Energy.

FINANCIAL INSTRUMENTS

With the exception of Long-term debt and Junior subordinated notes, our derivative and non-derivative financial

instruments are recorded on the balance sheet at fair value unless they were entered into and continue to be held for the purpose of receipt or delivery in accordance with our normal purchase and sales exemptions and are documented as such. In addition, fair value accounting is not required for other financial instruments that qualify for certain accounting exemptions.

Derivative instruments

We use derivative instruments to reduce volatility associated with fluctuations in commodity prices, interest rates and foreign exchange rates. Derivative instruments, including those that qualify and are designated for hedge accounting treatment, are recorded at fair value.

The majority of derivative instruments that are not designated or do not qualify for hedge accounting treatment have been entered into as economic hedges to manage our exposure to market risk and are classified as held-for-trading. Changes in the fair value of held-for-trading derivative instruments are recorded in net income in the period of change. This may expose us to increased variability in reported operating results since the fair value of the held-for-trading derivative instruments can fluctuate significantly from period to period.

The recognition of gains and losses on derivatives for Canadian natural gas regulated pipeline exposures is determined through the regulatory process. Gains and losses arising from changes in the fair value of derivatives accounted for as part of RRA, including those that qualify for hedge accounting treatment, are expected to be refunded or recovered through the tolls charged by us. As a result, these gains and losses are deferred as regulatory liabilities or regulatory assets and are refunded to or collected from the ratepayers in subsequent years when the derivative settles.

Balance sheet presentation of derivative instruments

The balance sheet presentation of the fair value of derivative instruments is as follows:


(millions of $)	June 30, 2023	December 31, 2022

Other current assets	615	614
Other long-term assets	150	91
Accounts payable and other	(579)	(871)
Other long-term liabilities	(152)	(151)
	34	(317)

44 | TC Energy Second Quarter 2023

Unrealized and realized gains (losses) on derivative instruments

The following summary does not include hedges of our net investment in foreign operations.


	three months ended June 30		six months ended June 30
(millions of $)	2023	2022	2023	2022

Derivative Instruments Held for Trading1
Unrealized gains (losses) in the period
Commodities	72	(20)	130	(58)
Foreign exchange	108	(60)	182	(38)

Realized gains (losses) in the period
Commodities	142	255	330	396
Foreign exchange	82	(13)	139	28

Derivative Instruments in Hedging Relationships
Realized gains (losses) in the period
Commodities	(23)	(15)	(12)	(18)

Interest rate	(10)	1	(16)	(2)

1Realized and unrealized gains (losses) on held-for-trading derivative instruments used to purchase and sell commodities are included on a net basis in Revenues. Realized and unrealized gains (losses) on foreign exchange held-for-trading derivative instruments are included on a net basis in Foreign exchange (gains) losses, net in the Condensed consolidated statement of income.

For further details on our non-derivative and derivative financial instruments, including classification assumptions made in the calculation of fair value and additional discussion of exposure to risks and mitigation activities, refer to Note 12, Risk management and financial instruments, of our Condensed consolidated financial statements.

TC Energy Second Quarter 2023 | 45

Other information

CONTROLS AND PROCEDURES

Management, including our President and CEO and our CFO, evaluated the effectiveness of our disclosure controls and procedures as at June 30, 2023, as required by the Canadian securities regulatory authorities and by the SEC and concluded that our disclosure controls and procedures are effective at a reasonable assurance level.

There were no changes in second quarter 2023 that had or are likely to have a material impact on our internal control over financial reporting.

CRITICAL ACCOUNTING ESTIMATES AND ACCOUNTING POLICY CHANGES

When we prepare financial statements that conform with U.S. GAAP, we are required to make estimates and assumptions that affect the timing and amounts we record for our assets, liabilities, revenues and expenses because these items may be affected by future events. We base the estimates and assumptions on the most current information available, using our best judgment. We also regularly assess the assets and liabilities themselves. In addition to the items discussed below, refer to our 2022 Annual Report for a listing of critical accounting estimates.

Equity Investment in Coastal GasLink LP

Impairment and Maximum Exposure to Loss

On February 1, 2023, TC Energy announced that the revised capital cost of the Coastal GasLink pipeline project was expected to be approximately $14.5 billion. While this estimate includes contingencies for certain factors that may be outside the control of Coastal GasLink LP, as with any complex construction project, the final capital cost is subject to certain risks and uncertainties. The revised estimate of total project costs and our corresponding future funding requirements were indicators that a decrease in the value of our equity investment had occurred. We completed a valuation assessment and concluded that the fair value of TC Energy’s investment was below its carrying value at December 31, 2022. We determined that this was an other-than-temporary impairment of our equity investment in Coastal GasLink LP, which resulted in a pre-tax impairment charge of $3.0 billion ($2.6 billion after tax) at December 31, 2022 and we disclosed that a significant portion of our future funding was expected to be impaired. Our valuation assessments in the first and second quarters of 2023 concluded that the carrying value of our investment was impaired and we recognized a pre-tax impairment charge of $843 million ($809 million after tax) and $856 million ($838 million after tax) for the three and six months ending June 30, 2023, respectively, in Impairment of equity investment in the Condensed consolidated statement of income in the Canadian Natural Gas Pipelines segment. The impairment charge reflected the net impact of $1,035 million drawn and $250 million repaid on the subordinated loan for the six months ended June 30, 2023, along with TC Energy’s proportionate share of unrealized gains and losses on interest rate derivatives in Coastal GasLink LP and other changes to the equity investment. The impairment of the subordinated loan resulted in unrealized non-taxable capital losses that are not recognized. Refer to Note 5, Coastal GasLink, of our Condensed consolidated financial statements for additional information.

TC Energy expects that a portion of our estimated $2.3 billion future investment will be impaired; however, the majority of our total expected impairment charge has been recognized as at June 30, 2023. We will continue to assess for other-than-temporary declines in the fair value of this investment and the extent of any future impairment charges will depend on the outcome of the valuation assessment performed at the respective reporting date.

The fair value of TC Energy’s investment in Coastal GasLink LP at June 30, 2023 was estimated using a 40-year discounted cash flow model consistent with our fair value assessment at December 31, 2022. Refer to our 2022 Consolidated financial statements for additional information.

46 | TC Energy Second Quarter 2023

The maximum exposure to loss as a result of our involvement with Coastal GasLink LP, a variable interest entity (VIE), as at June 30, 2023 was $2.3 billion. Our maximum exposure to loss is the maximum loss that could potentially be recorded through net income in future periods as a result of our variable interest in a VIE. TC Energy is contractually obligated to fund the capital costs to complete the Coastal GasLink pipeline, which is estimated to be $2.3 billion subsequent to June 30, 2023, through additional equity contributions in Coastal GasLink LP, subject to any final cost sharing between the Coastal GasLink LP partners. The determination of our maximum exposure to loss involves an estimate of capital costs to complete.

Impairment of long-lived assets and goodwill

Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate it might be impaired. We can initially make this assessment based on qualitative factors. If we conclude that it is not more likely than not that the fair value of the reporting unit is greater than its carrying value, we will then perform a quantitative goodwill impairment test.

In conjunction with the process leading up to the sale of a 40 per cent equity interest in Columbia Gas and Columbia Gulf, management performed a quantitative goodwill impairment test for the Columbia Pipeline Group, Inc. (Columbia) reporting unit as at June 30, 2023. Refer to the Recent Developments – U.S. Natural Gas Pipelines section for additional information on this sale transaction.

In the determination of the fair value utilized in the quantitative goodwill impairment test for the Columbia reporting unit, we performed a discounted cash flow analysis using projections of future cash flows and applied a risk-adjusted discount rate and terminal value multiple which involved significant estimates and judgments. It was determined that the fair value of the Columbia reporting unit exceeded its carrying value, including goodwill. Although goodwill was not impaired, the estimated fair value in excess of the carrying value was reduced to less than 10 per cent. There is a risk that reductions in future cash flow forecasts and adverse changes in other key assumptions could result in a future impairment of a portion of the goodwill balance relating to Columbia.

Accounting changes

Our significant accounting policies have remained unchanged since December 31, 2022 other than as described in Note 2, Accounting changes, of our Condensed consolidated financial statements. A summary of our significant accounting policies is included in our 2022 Annual Report.

TC Energy Second Quarter 2023 | 47

Quarterly results

SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA


	2023		2022				2021
(millions of $, except per share amounts)	Second	First	Fourth	Third	Second	First	Fourth	Third

Revenues	3,830	3,928	4,041	3,799	3,637	3,500	3,584	3,240
Net income (loss) attributable to common shares	250	1,313	(1,447)	841	889	358	1,118	779
Comparable earnings	981	1,233	1,129	1,068	979	1,103	1,028	970
Per share statistics:
Net income (loss) per common share – basic	$0.24	$1.29	($1.42)	$0.84	$0.90	$0.36	$1.14	$0.80
Comparable earnings per common share	$0.96	$1.21	$1.11	$1.07	$1.00	$1.12	$1.05	$0.99
Dividends declared per common share	$0.93	$0.93	$0.90	$0.90	$0.90	$0.90	$0.87	$0.87

FACTORS AFFECTING QUARTERLY FINANCIAL INFORMATION BY BUSINESS SEGMENT

Quarter-over-quarter revenues and net income fluctuate for reasons that vary across our business segments. In addition to the factors below, our revenues and segmented earnings (losses) are impacted by fluctuations in foreign exchange rates, mainly related to our U.S. dollar-denominated operations and our peso-denominated exposure. Refer to the Foreign exchange section for additional information.

In our Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines and Mexico Natural Gas Pipelines segments, except for seasonal fluctuations in short-term throughput volumes on U.S. pipelines, quarter-over-quarter revenues and segmented earnings (losses) generally remain relatively stable during any fiscal year. Over the long term, however, they fluctuate because of:

•regulatory decisions

•negotiated settlements with customers

•newly constructed assets being placed in service

•acquisitions and divestitures

•natural gas marketing activities and commodity prices

•developments outside of the normal course of operations

•certain fair value adjustments and provisions for expected credit losses on net investment in leases and certain contract assets in Mexico.

In Liquids Pipelines, quarter-over-quarter revenues and segmented earnings (losses) are affected by:

•regulatory decisions

•newly constructed assets being placed in service

•acquisitions and divestitures

•demand for uncontracted transportation services

•liquids marketing activities and commodity prices

•developments outside of the normal course of operations

•contracted and uncontracted spot transportation

•certain fair value adjustments.

48 | TC Energy Second Quarter 2023

In Power and Energy Solutions, quarter-over-quarter revenues and segmented earnings (losses) are affected by:

•weather

•customer demand

•newly constructed assets being placed in service

•acquisitions and divestitures

•market prices for natural gas and power

•capacity prices and payments

•power marketing and trading activities

•planned and unplanned plant outages

•developments outside of the normal course of operations

•certain fair value adjustments.

FACTORS AFFECTING FINANCIAL INFORMATION BY QUARTER

We exclude from comparable measures the unrealized gains and losses from changes in the fair value of derivatives related to financial and commodity price risk management activities. These derivatives generally provide effective economic hedges but do not meet the criteria for hedge accounting. We also exclude from comparable measures our proportionate share of the unrealized gains and losses from changes in the fair value of Bruce Power's funds invested for post-retirement benefits and derivatives related to its risk management activities. These changes in fair value are recorded in net income. As these amounts do not accurately reflect the gains and losses that will be realized at settlement, we do not consider them reflective of our underlying operations.

In second quarter 2023, comparable earnings also excluded:

•an after-tax impairment charge of $809 million related to our equity investment in Coastal GasLink LP

•a $36 million after-tax accrued insurance expense related to the Milepost 14 incident

•a $25 million after-tax expense related to Focus Project costs

•an after-tax net unrealized foreign exchange loss of $9 million on the peso-denominated intercompany loan between TCPL and TGNH

•after-tax preservation and other costs for Keystone XL pipeline project assets of $4 million which could not be accrued as part of the Keystone XL asset impairment charge

•an $8 million after-tax recovery on the expected credit loss provision related to the TGNH net investment in leases and certain contract assets in Mexico.

In first quarter 2023, comparable earnings also excluded:

•a $72 million after-tax recovery on the expected credit loss provision related to the TGNH net investment in leases and certain contract assets in Mexico

•$48 million after-tax charge as a result of the FERC Administrative Law Judge initial decision on Keystone issued in February 2023 in respect of a tolling-related complaint pertaining to amounts recognized from 2018 to 2022 which consists of a one-time pre-tax charge of $57 million and accrued pre-tax carrying charges of $5 million

•an after-tax impairment charge of $29 million related to our equity investment in Coastal GasLink LP

•after-tax preservation and other costs for Keystone XL pipeline project assets of $4 million, which could not be accrued as part of the Keystone XL asset impairment charge.

TC Energy Second Quarter 2023 | 49

In fourth quarter 2022, comparable earnings also excluded:

•an after-tax impairment charge of $2.6 billion related to our equity investment in Coastal GasLink LP

•a $64 million after-tax expected credit loss provision related to the TGNH net investment in leases and certain contract assets in Mexico

•$20 million after-tax charge due to the CER decision on Keystone issued in December 2022 in respect of a tolling-related complaint pertaining to amounts reflected in 2021 and 2020

•preservation and other costs for Keystone XL pipeline project assets of $8 million after tax, which could not be accrued as part of the Keystone XL asset impairment charge

•a $5 million after-tax net expense related to the 2021 Keystone XL asset impairment charge and other due to a U.S. minimum tax, partially offset by the gain on the sale of Keystone XL project assets and reduction to the estimate for contractual and legal obligations related to termination activities

•a $1 million income tax expense for the settlement related to prior years' income tax assessments in Mexico.

In third quarter 2022, comparable earnings also excluded:

•preservation and other costs for Keystone XL pipeline project assets of $3 million after tax, which could not be accrued as part of the Keystone XL asset impairment charge.

In second quarter 2022, comparable earnings also excluded:

•preservation and other costs for Keystone XL pipeline project assets of $3 million after tax, which could not be accrued as part of the Keystone XL asset impairment charge

•a $2 million income tax expense for the settlement related to prior years' income tax assessments in Mexico.

In first quarter 2022, comparable earnings also excluded:

•an after-tax goodwill impairment charge of $531 million related to Great Lakes

•a $193 million income tax expense for the settlement-in-principle of matters related to prior years' income tax assessments in Mexico

•preservation and other costs for Keystone XL pipeline project assets of $5 million after tax, which could not be accrued as part of the Keystone XL asset impairment charge.

In fourth quarter 2021, comparable earnings also excluded:

•an incremental $60 million after-tax reduction to the Keystone XL asset impairment charge, net of expected contractual recoveries and other contractual and legal obligations, related to the termination of the Keystone XL pipeline project

•an after-tax gain of $19 million related to the sale of the remaining interest in Northern Courier

•preservation and other costs for Keystone XL pipeline project assets of $10 million after tax, which could not be accrued as part of the Keystone XL asset impairment charge

•a $7 million after-tax gain related to pension adjustments as part of the Voluntary Retirement Program

•an incremental $6 million income tax expense related to the sale of our Ontario natural gas-fired power plants sold in 2020.

In third quarter 2021, comparable earnings also excluded:

•a $55 million after-tax expense with respect to transition payments incurred as part of the Voluntary Retirement Program

•preservation and other costs of $11 million after tax, which could not be accrued as part of the Keystone XL asset impairment charge.

50 | TC Energy Second Quarter 2023

Document

EXHIBIT 13.2

Condensed consolidated statement of income


	three months ended June 30		six months ended June 30
(unaudited - millions of Canadian $, except per share amounts)	2023	2022	2023	2022

Revenues
Canadian Natural Gas Pipelines	1,297	1,175	2,526	2,263
U.S. Natural Gas Pipelines	1,376	1,397	3,085	2,846
Mexico Natural Gas Pipelines	207	156	412	308
Liquids Pipelines	682	692	1,220	1,360
Power and Energy Solutions	268	217	515	360
	3,830	3,637	7,758	7,137
Income from Equity Investments	248	236	551	441
Impairment of Equity Investment	(843)	—	(856)	—
Operating and Other Expenses
Plant operating costs and other	1,216	1,173	2,273	2,179
Commodity purchases resold	108	173	195	301
Property taxes	222	213	449	420
Depreciation and amortization	694	635	1,371	1,261
Goodwill impairment charge	—	—	—	571
	2,240	2,194	4,288	4,732

Financial Charges
Interest expense	791	620	1,553	1,200
Allowance for funds used during construction	(148)	(63)	(279)	(138)
Foreign exchange (gains) losses, net	(169)	66	(276)	40
Interest income and other	(16)	(23)	(58)	(58)
	458	600	940	1,044
Income before Income Taxes	537	1,079	2,225	1,802
Income Tax Expense (Recovery)
Current	115	94	227	369
Deferred	143	54	372	102
	258	148	599	471
Net Income	279	931	1,626	1,331
Net income attributable to non-controlling interests	6	9	17	20
Net Income Attributable to Controlling Interests	273	922	1,609	1,311
Preferred share dividends	23	33	46	64
Net Income Attributable to Common Shares	250	889	1,563	1,247
Net Income per Common Share
Basic and diluted	$0.24	$0.90	$1.53	$1.27

Weighted Average Number of Common Shares (millions)
Basic	1,027	983	1,024	982
Diluted	1,027	984	1,024	983

See accompanying Notes to the Condensed consolidated financial statements.

TC Energy Second Quarter 2023 | 51

Condensed consolidated statement of comprehensive income


	three months ended June 30		six months ended June 30
(unaudited - millions of Canadian $)	2023	2022	2023	2022

Net Income	279	931	1,626	1,331
Other Comprehensive Income (Loss), Net of Income Taxes
Foreign currency translation adjustments	(469)	663	(493)	362
Change in fair value of net investment hedges	15	(27)	25	(8)
Change in fair value of cash flow hedges	(17)	(6)	(18)	12
Reclassification to net income of (gains) losses on cash flow hedges	7	7	41	15

Reclassification to net income of actuarial (gains) losses on pension and other post-retirement benefit plans	—	3	—	4
Other comprehensive income (loss) on equity investments	64	165	(7)	345
	(400)	805	(452)	730
Comprehensive Income (Loss)	(121)	1,736	1,174	2,061
Comprehensive income attributable to non-controlling interests	1	13	12	22
Comprehensive Income (Loss) Attributable to Controlling Interests	(122)	1,723	1,162	2,039
Preferred share dividends	23	33	46	64
Comprehensive Income (Loss) Attributable to Common Shares	(145)	1,690	1,116	1,975

See accompanying Notes to the Condensed consolidated financial statements.

52 | TC Energy Second Quarter 2023

Condensed consolidated statement of cash flows


	three months ended June 30		six months ended June 30
(unaudited - millions of Canadian $)	2023	2022	2023	2022

Cash Generated from Operations
Net income	279	931	1,626	1,331
Depreciation and amortization	694	635	1,371	1,261
Goodwill impairment charge	—	—	—	571
Deferred income taxes	143	54	372	102
Income from equity investments	(248)	(236)	(551)	(441)
Impairment of equity investment	843	—	856	—
Distributions received from operating activities of equity investments	293	208	598	442
Employee post-retirement benefits funding, net of expense	(9)	(5)	(22)	(11)

Equity allowance for funds used during construction	(96)	(45)	(180)	(98)
Unrealized (gains) losses on financial instruments	(180)	80	(312)	96
Expected credit loss provision	(9)	—	(115)	—

Other	(23)	(62)	58	(26)
(Increase) decrease in operating working capital	(177)	(618)	(117)	(578)
Net cash provided by operations	1,510	942	3,584	2,649
Investing Activities
Capital expenditures	(2,018)	(1,263)	(3,903)	(2,771)
Capital projects in development	(26)	(9)	(104)	(22)
Contributions to equity investments	(947)	(219)	(2,017)	(1,634)
Keystone XL contractual recoveries	5	473	5	473
Loans to affiliate (issued) repaid, net	—	51	250	(112)
Acquisitions, net of cash acquired	(164)	—	(302)	—
Other distributions from equity investments	—	32	16	1,231
Deferred amounts and other	(120)	(98)	9	(31)
Net cash (used in) provided by investing activities	(3,270)	(1,033)	(6,046)	(2,866)
Financing Activities
Notes payable issued (repaid), net	(1,429)	(116)	(3,654)	214
Long-term debt issued, net of issue costs	1,442	2,510	8,453	2,510
Long-term debt repaid	(350)	—	(460)	(26)
Junior subordinated notes issued, net of issue costs	—	(3)	—	1,008


Dividends on common shares	(588)	(885)	(1,239)	(1,738)
Dividends on preferred shares	(24)	(32)	(46)	(63)
Distributions to non-controlling interests	(15)	(13)	(36)	(23)
Distributions on Class C Interests	(1)	(2)	(42)	(23)
Common shares issued, net of issue costs	1	29	4	158
Preferred shares redeemed	—	(1,000)	—	(1,000)
Other	—	12	—	17
Net cash (used in) provided by financing activities	(964)	500	2,980	1,034
Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents	(36)	22	(47)	14
Increase (Decrease) in Cash and Cash Equivalents	(2,760)	431	471	831
Cash and Cash Equivalents
Beginning of period	3,851	1,073	620	673
Cash and Cash Equivalents
End of period	1,091	1,504	1,091	1,504

See accompanying Notes to the Condensed consolidated financial statements.

TC Energy Second Quarter 2023 | 53

Condensed consolidated balance sheet


(unaudited - millions of Canadian $)		June 30, 2023	December 31, 2022

ASSETS
Current Assets
Cash and cash equivalents		1,091	620
Accounts receivable		3,129	3,624

Inventories		1,046	936
Other current assets		2,357	2,152
		7,623	7,332
Plant, Property and Equipment	net of accumulated depreciation of $35,545 and $34,629, respectively	77,998	75,940
Net Investment in Leases		1,941	1,895
Equity Investments		9,784	9,535

Restricted Investments		2,380	2,108
Regulatory Assets		2,104	1,910
Goodwill		12,562	12,843
Other Long-Term Assets		2,641	2,785
		117,033	114,348
LIABILITIES
Current Liabilities
Notes payable		2,578	6,262
Accounts payable and other		5,585	7,149
Dividends payable		970	930
Accrued interest		722	668
Current portion of long-term debt		2,735	1,898
		12,590	16,907
Regulatory Liabilities		4,729	4,520
Other Long-Term Liabilities		1,031	1,017
Deferred Income Tax Liabilities		8,140	7,648
Long-Term Debt		46,074	39,645
Junior Subordinated Notes		10,307	10,495
		82,871	80,232
EQUITY
Common shares, no par value		29,627	28,995
Issued and outstanding:	June 30, 2023 – 1,029 million shares December 31, 2022 – 1,018 million shares
Preferred shares		2,499	2,499
Additional paid-in capital		728	722
Retained earnings		476	819
Accumulated other comprehensive income (loss)		508	955
Controlling Interests		33,838	33,990
Non-Controlling Interests		324	126
		34,162	34,116
		117,033	114,348

Commitments, Contingencies and Guarantees (Note 14)

Variable Interest Entities (Note 15)

Subsequent Events (Note 16)

See accompanying Notes to the Condensed consolidated financial statements.

54 | TC Energy Second Quarter 2023

Condensed consolidated statement of equity


	three months ended June 30		six months ended June 30
(unaudited - millions of Canadian $)	2023	2022	2023	2022

Common Shares
Balance at beginning of period	29,264	26,860	28,995	26,716
Shares issued:

Dividend reinvestment and share purchase plan	362	—	628	—
Exercise of stock options	1	31	4	175

Balance at end of period	29,627	26,891	29,627	26,891
Preferred Shares
Balance at beginning of period	2,499	3,487	2,499	3,487
Redemption of shares	—	(988)	—	(988)
Balance at end of period	2,499	2,499	2,499	2,499
Additional Paid-In Capital
Balance at beginning of period	725	717	722	729



Issuance of stock options, net of exercises	3	—	6	(12)

Balance at end of period	728	717	728	717
Retained Earnings
Balance at beginning of period	1,182	3,261	819	3,773
Net income attributable to controlling interests	273	922	1,609	1,311
Common share dividends	(956)	(885)	(1,908)	(1,769)
Preferred share dividends	(23)	(32)	(44)	(49)
Redemption of preferred shares	—	(12)	—	(12)

Balance at end of period	476	3,254	476	3,254
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period	903	(1,507)	955	(1,434)
Other comprehensive income (loss) attributable to controlling interests	(395)	801	(447)	728

Balance at end of period	508	(706)	508	(706)
Equity Attributable to Controlling Interests	33,838	32,655	33,838	32,655
Equity Attributable to Non-Controlling Interests
Balance at beginning of period	222	124	126	125
Non-controlling interests on acquisition of Texas Wind Farms	116	—	222	—
Net income attributable to non-controlling interests	6	9	17	20
Other comprehensive income (loss) attributable to non-controlling interests	(5)	4	(5)	2
Distributions declared to non-controlling interests	(15)	(14)	(36)	(24)
Balance at end of period	324	123	324	123
Total Equity	34,162	32,778	34,162	32,778

See accompanying Notes to the Condensed consolidated financial statements.

TC Energy Second Quarter 2023 | 55

Notes to Condensed consolidated financial statements

(unaudited)

1. BASIS OF PRESENTATION

These Condensed consolidated financial statements of TC Energy Corporation (TC Energy or the Company) have been prepared by management in accordance with U.S. GAAP. The accounting policies applied are consistent with those outlined in TC Energy’s annual audited Consolidated financial statements for the year ended December 31, 2022, except as described in Note 2, Accounting changes. Capitalized and abbreviated terms that are used but not otherwise defined herein are identified in the 2022 audited Consolidated financial statements included in TC Energy’s 2022 Annual Report.

These Condensed consolidated financial statements reflect adjustments, all of which are normal recurring adjustments that are, in the opinion of management, necessary to reflect fairly the financial position and results of operations for the respective periods. These Condensed consolidated financial statements do not include all disclosures required in the annual financial statements and should be read in conjunction with the 2022 audited Consolidated financial statements included in TC Energy’s 2022 Annual Report. Certain comparative figures have been adjusted to reflect the current period's presentation.

Earnings for interim periods may not be indicative of results for the fiscal year in certain of the Company’s segments primarily due to:

•Natural gas pipelines segments – the timing of regulatory decisions and negotiated rate case settlements as well as seasonal fluctuations in short-term throughput volumes on U.S. pipelines and marketing activities

•Liquids Pipelines – fluctuations in throughput volumes on the Keystone Pipeline System and marketing activities

•Power and Energy Solutions – the impacts of seasonal weather conditions on customer demand, market supply and prices of natural gas and power as well as maintenance outages in certain of the Company’s investments in electrical power generation plants and Canadian non-regulated natural gas storage facilities.

In addition to the factors mentioned above, revenues and segmented earnings are impacted by fluctuations in foreign exchange rates, mainly related to the Company's U.S. dollar-denominated operations and Mexican peso-denominated exposure.

Use of Estimates and Judgments

In preparing these Condensed consolidated financial statements, TC Energy is required to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. The Company uses the most current information available and exercises careful judgment in making these estimates and assumptions. In the opinion of management, these Condensed consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies included in the annual audited Consolidated financial statements for the year ended December 31, 2022, except as described in Note 2, Accounting changes.

56 | TC Energy Second Quarter 2023

Asset divestiture program

As part of the $5+ billion asset divestiture program announced in 2022, subsequent to June 30, 2023, TC Energy reached an agreement to sell a 40 per cent equity interest in Columbia Gas Transmission, LLC (Columbia Gas) and Columbia Gulf Transmission, LLC (Columbia Gulf). In conjunction with the process leading up to the sale, the Company performed a quantitative goodwill impairment test as at June 30, 2023. Refer to Note 16, Subsequent events, for additional information on this sale transaction.

The estimated fair value measurements used in the Company's goodwill impairment analysis are classified as Level III. In the determination of the fair value utilized in the quantitative goodwill impairment test for the Columbia reporting unit, the Company performed a discounted cash flow analysis using projections of future cash flows and applied a risk-adjusted discount rate and terminal value multiple which involved significant estimates and judgments. It was determined that the fair value of the Columbia reporting unit exceeded its carrying value, including goodwill. Although goodwill was not impaired, the estimated fair value in excess of the carrying value was reduced to less than 10 per cent. There is a risk that reductions in future cash flow forecasts and adverse changes in other key assumptions could result in a future impairment of a portion of the goodwill balance relating to Columbia.

2. ACCOUNTING CHANGES

Future Accounting Changes

Leases

In March 2023, the FASB issued new guidance that clarified the accounting for leasehold improvements associated with common control leases. This new guidance is effective January 1, 2024 and can be applied either prospectively or retrospectively, with early application permitted. The Company will adopt the guidance on a prospective basis starting January 1, 2024.

TC Energy Second Quarter 2023 | 57

3. SEGMENTED INFORMATION


three months ended June 30, 2023	Canadian Natural Gas Pipelines	U.S. Natural Gas Pipelines	Mexico Natural Gas Pipelines	Liquids Pipelines	Power and Energy Solutions
(unaudited - millions of Canadian $)						Corporate1		Total

Revenues	1,297	1,376	207	682	268	—		3,830
Intersegment revenues	—	25	—	—	22	(47)	2	—
	1,297	1,401	207	682	290	(47)		3,830
Income (loss) from equity investments	5	56	13	18	156	—		248
Impairment of equity investment	(843)	—	—	—	—	—		(843)
Plant operating costs and other3	(446)	(392)	(16)	(211)	(162)	11	2	(1,216)
Commodity purchase resold	—	—	—	(102)	(6)	—		(108)
Property taxes	(76)	(116)	—	(29)	(1)	—		(222)
Depreciation and amortization	(331)	(234)	(22)	(85)	(22)	—		(694)


Segmented Earnings (Losses)	(394)	715	182	273	255	(36)		995
Interest expense								(791)
Allowance for funds used during construction								148
Foreign exchange gains (losses), net								169
Interest income and other								16
Income before Income Taxes								537
Income tax (expense) recovery								(258)
Net Income								279
Net income attributable to non-controlling interests								(6)
Net Income Attributable to Controlling Interests								273
Preferred share dividends								(23)
Net Income Attributable to Common Shares								250

1Includes intersegment eliminations.

2The Company records intersegment sales at contracted rates. For segmented reporting, these transactions are included as Intersegment revenues in the segment providing the service and Plant operating costs and other in the segment receiving the service. These transactions are eliminated on consolidation. Intersegment profit is recognized when the product or service has been provided to third parties or otherwise realized.

3The Mexico Natural Gas Pipelines segment includes a recovery of $8 million on the ECL provision with respect to the net investment in leases associated with the in-service TGNH pipelines and a recovery of $1 million on the ECL provision for contract assets related to certain other Mexico natural gas pipelines.

58 | TC Energy Second Quarter 2023


three months ended June 30, 2022	Canadian Natural Gas Pipelines	U.S. Natural Gas Pipelines	Mexico Natural Gas Pipelines	Liquids Pipelines	Power and Energy Solutions
(unaudited - millions of Canadian $)						Corporate1		Total

Revenues	1,175	1,397	156	692	217	—		3,637
Intersegment revenues	—	34	—	—	12	(46)	2	—
	1,175	1,431	156	692	229	(46)		3,637
Income (loss) from equity investments	5	59	48	13	111	—		236
Plant operating costs and other	(423)	(456)	(14)	(171)	(145)	36	2	(1,173)
Commodity purchase resold	—	—	—	(163)	(10)	—		(173)
Property taxes	(76)	(106)	—	(30)	(1)	—		(213)
Depreciation and amortization	(296)	(217)	(28)	(80)	(14)	—		(635)


Segmented Earnings (Losses)	385	711	162	261	170	(10)		1,679
Interest expense								(620)
Allowance for funds used during construction								63
Foreign exchange gains (losses), net								(66)
Interest income and other								23
Income before Income Taxes								1,079
Income tax (expense) recovery								(148)
Net Income								931
Net income attributable to non-controlling interests								(9)
Net Income Attributable to Controlling Interests								922
Preferred share dividends								(33)
Net Income Attributable to Common Shares								889

1Includes intersegment eliminations.

TC Energy Second Quarter 2023 | 59


six months ended June 30, 2023	Canadian Natural Gas Pipelines	U.S. Natural Gas Pipelines	Mexico Natural Gas Pipelines	Liquids Pipelines	Power and Energy Solutions
(unaudited - millions of Canadian $)						Corporate1		Total

Revenues	2,526	3,085	412	1,220	515	—		7,758
Intersegment revenues	—	51	—	—	22	(73)	2	—
	2,526	3,136	412	1,220	537	(73)		7,758
Income (loss) from equity investments	10	164	4	32	341	—		551
Impairment of equity investment	(856)	—	—	—	—	—		(856)
Plant operating costs and other3	(863)	(801)	64	(388)	(320)	35	2	(2,273)
Commodity purchase resold	—	—	—	(186)	(9)	—		(195)
Property taxes	(153)	(234)	—	(60)	(2)	—		(449)
Depreciation and amortization	(647)	(471)	(44)	(169)	(40)	—		(1,371)


Segmented Earnings (Losses)	17	1,794	436	449	507	(38)		3,165
Interest expense								(1,553)
Allowance for funds used during construction								279
Foreign exchange gains (losses), net								276
Interest income and other								58
Income before Income Taxes								2,225
Income tax (expense) recovery								(599)
Net Income								1,626
Net income attributable to non-controlling interests								(17)
Net Income Attributable to Controlling Interests								1,609
Preferred share dividends								(46)
Net Income Attributable to Common Shares								1,563

1Includes intersegment eliminations.

3The Mexico Natural Gas Pipelines segment includes a recovery of $103 million on the ECL provision with respect to the net investment in leases associated with the in-service TGNH pipelines and a recovery of $12 million on the ECL provision for contract assets related to certain other Mexico natural gas pipelines.

60 | TC Energy Second Quarter 2023


six months ended June 30, 2022	Canadian Natural Gas Pipelines	U.S. Natural Gas Pipelines	Mexico Natural Gas Pipelines	Liquids Pipelines	Power and Energy Solutions
(unaudited - millions of Canadian $)						Corporate1		Total

Revenues	2,263	2,846	308	1,360	360	—		7,137
Intersegment revenues	—	68	—	—	12	(80)	2	—
	2,263	2,914	308	1,360	372	(80)		7,137
Income (loss) from equity investments	9	138	57	27	182	28	3	441
Plant operating costs and other	(796)	(823)	(27)	(344)	(262)	73	2	(2,179)
Commodity purchase resold	—	—	—	(291)	(10)	—		(301)
Property taxes	(151)	(209)	—	(58)	(2)	—		(420)
Depreciation and amortization	(582)	(428)	(56)	(161)	(34)	—		(1,261)
Goodwill impairment charge	—	(571)	—	—	—	—		(571)

Segmented Earnings (Losses)	743	1,021	282	533	246	21		2,846
Interest expense								(1,200)
Allowance for funds used during construction								138
Foreign exchange gains (losses), net3								(40)
Interest income and other								58
Income before Income Taxes								1,802
Income tax (expense) recovery								(471)
Net Income								1,331
Net income attributable to non-controlling interests								(20)
Net Income Attributable to Controlling Interests								1,311
Preferred share dividends								(64)
Net Income Attributable to Common Shares								1,247

1Includes intersegment eliminations.

3Income (loss) from equity investments includes the Company's proportionate share of Sur de Texas foreign exchange gains (losses) on the peso-denominated loans from affiliates which are fully offset in Foreign exchange gains (losses), net by the corresponding foreign exchange gains (losses) on an affiliate receivable balance until March 15, 2022, when it was fully repaid upon maturity.

Total Assets by Segment


(unaudited - millions of Canadian $)	June 30, 2023	December 31, 2022

Canadian Natural Gas Pipelines	28,462	27,456
U.S. Natural Gas Pipelines	49,181	50,038
Mexico Natural Gas Pipelines	10,471	9,231
Liquids Pipelines	15,147	15,587
Power and Energy Solutions	9,314	8,272
Corporate	4,458	3,764
	117,033	114,348

TC Energy Second Quarter 2023 | 61

4. REVENUES

Disaggregation of Revenues

The following tables summarize total Revenues for the three and six months ended June 30, 2023 and 2022:


three months ended June 30, 2023	Canadian Natural Gas Pipelines	U.S. Natural Gas Pipelines	Mexico Natural Gas Pipelines	Liquids Pipelines	Power and Energy Solutions	Total
(unaudited - millions of Canadian $)

Revenues from contracts with customers
Capacity arrangements and transportation	1,289	1,153	109	536	—	3,087
Power generation	—	—	—	—	117	117
Natural gas storage and other1,2	8	203	29	—	105	345
	1,297	1,356	138	536	222	3,549
Sales-type lease income	—	—	69	—	—	69
Other revenues3	—	20	—	146	46	212
	1,297	1,376	207	682	268	3,830

1The Canadian Natural Gas Pipelines segment includes $8 million of fee revenues from an affiliate related to development and construction of the Coastal GasLink pipeline project which is 35 per cent owned by TC Energy.

2The Mexico Natural Gas Pipelines segment includes $22 million of revenues generated from non-lease components for the provision of operating and maintenance services with respect to sales-type leases on the in-service TGNH pipelines.

3Other revenues include income from the Company's marketing activities and financial instruments. Refer to Note 12, Risk management and financial instruments, for additional information on financial instruments. Additionally, other revenues include $30 million of operating lease income.


three months ended June 30, 2022	Canadian Natural Gas Pipelines	U.S. Natural Gas Pipelines	Mexico Natural Gas Pipelines	Liquids Pipelines	Power and Energy Solutions	Total
(unaudited - millions of Canadian $)

Revenues from contracts with customers
Capacity arrangements and transportation	1,157	1,034	148	464	—	2,803
Power generation	—	—	—	—	103	103
Natural gas storage and other1	18	366	8	2	139	533
	1,175	1,400	156	466	242	3,439
Other revenues2	—	(3)	—	226	(25)	198
	1,175	1,397	156	692	217	3,637

1The Canadian Natural Gas Pipelines segment includes $18 million of fee revenues from an affiliate related to development and construction of the Coastal GasLink pipeline project which is 35 per cent owned by TC Energy.

2Other revenues include income from the Company's marketing activities and financial instruments. Refer to Note 12, Risk management and financial instruments, for additional information on financial instruments. Additionally, other revenues include $30 million of operating lease income.

62 | TC Energy Second Quarter 2023



six months ended June 30, 2023	Canadian Natural Gas Pipelines	U.S. Natural Gas Pipelines	Mexico Natural Gas Pipelines	Liquids Pipelines	Power and Energy Solutions	Total
(unaudited - millions of Canadian $)

Revenues from contracts with customers
Capacity arrangements and transportation	2,510	2,503	218	974	—	6,205
Power generation	—	—	—	—	233	233
Natural gas storage and other1,2	16	448	62	1	214	741
	2,526	2,951	280	975	447	7,179
Sales-type lease income	—	—	132	—	—	132
Other revenues3	—	134	—	245	68	447
	2,526	3,085	412	1,220	515	7,758

1The Canadian Natural Gas Pipelines segment includes $16 million of fee revenues from an affiliate related to development and construction of the Coastal GasLink pipeline project which is 35 per cent owned by TC Energy.

2The Mexico Natural Gas Pipelines segment includes $49 million of revenues generated from non-lease components for the provision of operating and maintenance services with respect to sales-type leases on the in-service TGNH pipelines.



six months ended June 30, 2022	Canadian Natural Gas Pipelines	U.S. Natural Gas Pipelines	Mexico Natural Gas Pipelines	Liquids Pipelines	Power and Energy Solutions	Total
(unaudited - millions of Canadian $)

Revenues from contracts with customers
Capacity arrangements and transportation	2,224	2,231	293	973	—	5,721
Power generation	—	—	—	—	190	190
Natural gas storage and other1	39	623	15	3	205	885
	2,263	2,854	308	976	395	6,796
Other revenues2	—	(8)	—	384	(35)	341
	2,263	2,846	308	1,360	360	7,137

1The Canadian Natural Gas Pipelines segment includes $39 million of fee revenues from an affiliate related to development and construction of the Coastal GasLink pipeline project which is 35 per cent owned by TC Energy.

TC Energy Second Quarter 2023 | 63

Contract Balances


(unaudited - millions of Canadian $)	June 30, 2023	December 31, 2022	Affected line item on the Condensed consolidated balance sheet


Receivables from contracts with customers	1,483	1,907	Accounts receivable
Contract assets	206	155	Other current assets
Long-term contract assets	409	355	Other long-term assets
Contract liabilities1	110	62	Accounts payable and other
Long-term contract liabilities	10	32	Other long-term liabilities

1During the six months ended June 30, 2023, $37 million (2022 – $32 million) of revenues were recognized that were included in contract liabilities at the beginning of the period.

Contract assets and long-term contract assets primarily relate to the Company’s right to revenues for services completed but not invoiced at the reporting date on long-term committed capacity natural gas pipelines contracts. The change in contract assets is primarily related to the transfer to Accounts receivable when these rights become unconditional and the customer is invoiced, as well as the recognition of additional revenues that remain to be invoiced. Contract liabilities and long-term contract liabilities primarily represent unearned revenue for contracted services.

Future Revenues from Remaining Performance Obligations

As at June 30, 2023, future revenues from long-term pipeline capacity arrangements and transportation as well as natural gas storage and other contracts extending through 2055 are approximately $23.6 billion, of which approximately $3.7 billion is expected to be recognized during the remainder of 2023.

64 | TC Energy Second Quarter 2023

5. COASTAL GASLINK

Subordinated Loan Agreement

Committed capacity under the subordinated loan agreement between TC Energy and Coastal GasLink LP was $1.3 billion at December 31, 2022 and increased to $3.3 billion at June 30, 2023 to align with the Company's expected funding requirements.

Any amounts outstanding on the loan will be repaid by Coastal GasLink LP to TC Energy, once final project costs are known, which will be determined after the pipeline is placed in service. Coastal GasLink LP partners, including TC Energy, will contribute equity to Coastal GasLink LP to ultimately fund Coastal GasLink LP’s repayment of this subordinated loan to TC Energy. The Company expects that these additional equity contributions will be predominantly funded by TC Energy.

Amounts drawn on this loan subsequent to the amended agreements executed in July 2022 are accounted for as in-substance equity contributions and are presented as Contributions to equity investments on the Company’s Condensed consolidated statement of cash flows. Interest and principal repayments on this loan, which are expected to be predominantly funded by TC Energy, will be accounted for as an equity investment distribution to the Company once received.

In the six months ended June 30, 2023, $1,035 million was drawn on the loan and $250 million was repaid.

In July 2023, an additional $400 million was drawn on the subordinated loan and will be subject to impairment in future reporting periods along with future draws on this loan.

Impairment of Equity Investment in Coastal GasLink LP

With the expectation that additional equity contributions under the subordinated loan agreement will be predominantly funded by TC Energy, the Company completed a valuation assessment and concluded that the fair value of its investment in Coastal GasLink LP was below its carrying value at June 30, 2023 and that this was an other-than-temporary impairment. As a result, a pre-tax impairment charge of $843 million ($809 million after tax) and $856 million ($838 million after tax) was recognized for the three and six months ended June 30, 2023, respectively, in Impairment of equity investment in the Condensed consolidated statement of income in the Canadian Natural Gas Pipelines segment, which reduced the carrying values of the investment in Coastal GasLink LP and the loan receivable from affiliate to nil at June 30, 2023. The impairment charge reflected the net impact of the $1,035 million draw and the $250 million repayment on the subordinated loan for the six months ended June 30, 2023, along with TC Energy’s proportionate share of unrealized gains and losses on interest rate derivatives in Coastal GasLink LP and other changes to the equity investment. The impairment of the subordinated loan resulted in unrealized non-taxable capital losses that are not recognized.

The fair value of TC Energy’s investment in Coastal GasLink LP at June 30, 2023 was estimated using a 40-year discounted cash flow model consistent with the Company's fair value assessment at December 31, 2022. Refer to TC Energy's 2022 Consolidated financial statements for additional information.

TC Energy expects that a portion of its future investment will be impaired; however, the majority of its total expected impairment charge has been recognized as at June 30, 2023. The Company will continue to assess for other-than-temporary declines in the fair value of its investment in Coastal GasLink LP, and the extent of any future impairment charges will depend on the outcome of the valuation assessment performed at the respective reporting date.

TC Energy Second Quarter 2023 | 65

6. INCOME TAXES

Effective Tax Rates

The effective income tax rates were 27 per cent and 26 per cent for the six months ended June 30, 2023 and 2022, respectively. The slight increase in effective income tax rate was due to unrealized non-taxable capital losses from the Coastal GasLink impairment and Mexico foreign exchange exposure in 2023, mostly offset by the 2022 settlement of Mexico income tax assessments and the non-tax deductible portion of the Great Lakes goodwill impairment.

7. KEYSTONE ENVIRONMENTAL PROVISION

In December 2022, a pipeline incident occurred in Washington County, Kansas on the Keystone Pipeline System. At December 31, 2022, the Company accrued an environmental remediation liability of $650 million, before expected insurance recoveries and not including potential fines and penalties which continue to be indeterminable. At June 30, 2023, the cost estimate for the incident has been adjusted to $794 million based on a review of costs and commitments incurred. The accrual reflects certain assumptions and, therefore, it is reasonably possible that the Company will incur additional costs beyond the amounts accrued. To the extent costs beyond the amounts accrued are incurred, they will be evaluated under the Company's existing insurance policies. For the six months ended June 30, 2023, amounts paid for the environmental remediation liability were $433 million (2022 – nil). The remaining balance reflected in Accounts payable and other and Other long-term liabilities on the Company’s Condensed consolidated balance sheet was $361 million and $8 million, respectively at June 30, 2023 (December 31, 2022 – $650 million and nil, respectively).

At June 30, 2023, the expected recovery of the remaining estimated environmental remediation costs recorded in Other current assets and Other long-term assets was $528 million and $32 million, respectively (December 31, 2022 – $410 million and $240 million, respectively). For the six months ended June 30, 2023, the Company received $194 million (2022 – nil) from its insurance policies related to the costs for environmental remediation. The additional amounts accrued at June 30, 2023 for environmental remediation costs related to this incident included $36 million that TC Energy estimates to be recoverable from its wholly-owned captive insurance subsidiary, which was recorded in Interest income and other in the Condensed consolidated statement of income. The Company expects remediation activities to be substantially completed in 2023.

66 | TC Energy Second Quarter 2023

8. LONG-TERM DEBT

Long-Term Debt Issued

Long-term debt issued by the Company in the six months ended June 30, 2023 included the following:

(unaudited - millions of Canadian $, unless otherwise noted)

Company

Issue date

Type

Maturity date

Amount

Interest rate

TransCanada PipeLines Limited

May 2023

Senior Unsecured Term Loan

May 2026

US 1,024

Floating

March 2023

Senior Unsecured Notes

March 20261

US 850

6.20

March 2023

Senior Unsecured Notes

March 20261

US 400

Floating

March 2023

Medium Term Notes

July 2030

1,250

5.28

March 2023

Medium Term Notes

March 20261

600

5.42

March 2023

Medium Term Notes

March 20261

400

Floating

TC Energía Mexicana, S. de R.L. de C.V.

January 2023

Senior Unsecured Term Loan

January 2028

US 1,800

Floating

January 2023

Senior Unsecured Revolving
Credit Facility

January 2028

US 500

Floating

Gas Transmission Northwest LLC

June 2023

Senior Unsecured Notes

June 2030

US 50

4.92

1 Callable at par in March 2024 or at any time thereafter.

Long-Term Debt Repaid/Retired

Long-term debt repaid by the Company in the six months ended June 30, 2023 included the following:

(unaudited - millions of Canadian $, unless otherwise noted)

Company

Repayment date

Type

Amount

Interest rate

Nova Gas Transmission Ltd.

April 2023

Debentures

US 200

7.875

TC Energía Mexicana, S. de R.L. de C.V.

Various

Senior Unsecured Revolving Credit Facility

US 120

Floating

On July 19, 2023, TransCanada PipeLines Limited retired $750 million of Medium Term Notes bearing interest at a fixed rate of 3.69 per cent.

Capitalized Interest

In the three and six months ended June 30, 2023, TC Energy capitalized interest related to capital projects of $42 million and $72 million, respectively (2022 – $4 million and $6 million, respectively).

TC Energy Second Quarter 2023 | 67

9. COMMON SHARES AND PREFERRED SHARES

The Board of Directors of TC Energy declared quarterly dividends as follows:


	three months ended June 30		six months ended June 30
(unaudited - Canadian $, rounded to two decimals)	2023	2022	2023	2022

per common share	0.93	0.90	1.86	1.80

per Series 1 preferred share	0.22	0.22	0.43	0.43
per Series 2 preferred share	0.40	0.16	0.78	0.28
per Series 3 preferred share	0.11	0.11	0.21	0.21
per Series 4 preferred share	0.36	0.12	0.70	0.20
per Series 5 preferred share	0.12	0.12	0.24	0.24
per Series 6 preferred share	0.37	0.14	0.73	0.25
per Series 7 preferred share	0.24	0.24	0.49	0.49
per Series 9 preferred share	0.24	0.24	0.47	0.47
per Series 11 preferred share	0.21	0.21	0.21	0.21

per Series 15 preferred share	—	0.31	—	0.31

10. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Components of other comprehensive income (loss), including the portion attributable to non-controlling interests and related tax effects, are as follows:


three months ended June 30, 2023	Before tax amount	Income tax (expense) recovery	Net of tax amount
(unaudited - millions of Canadian $)

Foreign currency translation adjustments	(461)	(8)	(469)
Change in fair value of net investment hedges	20	(5)	15
Change in fair value of cash flow hedges	(22)	5	(17)
Reclassification to net income of (gains) losses on cash flow hedges	10	(3)	7

Other comprehensive income (loss) on equity investments	86	(22)	64
Other Comprehensive Income (Loss)	(367)	(33)	(400)


three months ended June 30, 2022	Before tax amount	Income tax (expense) recovery	Net of tax amount
(unaudited - millions of Canadian $)

Foreign currency translation adjustments	633	30	663
Change in fair value of net investment hedges	(36)	9	(27)
Change in fair value of cash flow hedges	(7)	1	(6)
Reclassification to net income of (gains) losses on cash flow hedges	9	(2)	7
Reclassification to net income of actuarial (gains) losses on pension and other post-retirement benefit plans	3	—	3
Other comprehensive income (loss) on equity investments	219	(54)	165
Other Comprehensive Income (Loss)	821	(16)	805

68 | TC Energy Second Quarter 2023


six months ended June 30, 2023	Before tax amount	Income tax (expense) recovery	Net of tax amount
(unaudited - millions of Canadian $)

Foreign currency translation adjustments	(484)	(9)	(493)
Change in fair value of net investment hedges	33	(8)	25
Change in fair value of cash flow hedges	(23)	5	(18)
Reclassification to net income of (gains) losses on cash flow hedges	54	(13)	41

Other comprehensive income (loss) on equity investments	(9)	2	(7)
Other Comprehensive Income (Loss)	(429)	(23)	(452)


six months ended June 30, 2022	Before tax amount	Income tax (expense) recovery	Net of tax amount
(unaudited - millions of Canadian $)

Foreign currency translation adjustments	340	22	362
Change in fair value of net investment hedges	(11)	3	(8)
Change in fair value of cash flow hedges	17	(5)	12
Reclassification to net income of (gains) losses on cash flow hedges	24	(9)	15
Reclassification to net income of actuarial (gains) losses on pension and other post-retirement benefit plans	5	(1)	4
Other comprehensive income (loss) on equity investments	459	(114)	345
Other Comprehensive Income (Loss)	834	(104)	730

The changes in AOCI by component, net of tax, are as follows:


three months ended June 30, 2023	Currency translation adjustments	Cash flow hedges	Pension and other post-retirement benefit plans adjustments	Equity investments	Total
(unaudited - millions of Canadian $)

AOCI balance at April 1, 2023	427	(76)	(44)	596	903
Other comprehensive income (loss) before reclassifications1	(449)	(17)	—	68	(398)
Amounts reclassified from AOCI	—	7	—	(4)	3
Net current period other comprehensive income (loss)	(449)	(10)	—	64	(395)
AOCI balance at June 30, 2023	(22)	(86)	(44)	660	508

1 Other comprehensive income (loss) before reclassifications on currency translation adjustments is net of non-controlling interest losses of $5 million.


six months ended June 30, 2023	Currency translation adjustments	Cash flow hedges	Pension and other post-retirement benefit plans adjustments	Equity investments	Total
(unaudited - millions of Canadian $)

AOCI balance at January 1, 2023	441	(109)	(44)	667	955
Other comprehensive income (loss) before reclassifications1	(463)	(18)	—	1	(480)
Amounts reclassified from AOCI2	—	41	—	(8)	33
Net current period other comprehensive income (loss)	(463)	23	—	(7)	(447)
AOCI balance at June 30, 2023	(22)	(86)	(44)	660	508

1 Other comprehensive income (loss) before reclassifications on currency translation adjustments is net of non-controlling interest losses of $5 million.

2 Losses related to cash flow hedges reported in AOCI and expected to be reclassified to net income in the next 12 months are estimated to be $64 million ($49 million after tax) at June 30, 2023. These estimates assume constant commodity prices, interest rates and foreign exchange rates over time; however, the amounts reclassified will vary based on the actual value of these factors at the date of settlement.

TC Energy Second Quarter 2023 | 69

Details about reclassifications out of AOCI into the Condensed consolidated statement of income are as follows:


	three months ended June 30		six months ended June 30		Affected line item in the Condensed consolidated statement of income1
(unaudited - millions of Canadian $)	2023	2022	2023	2022

Cash flow hedges
Commodities	(7)	(5)	(48)	(14)	Revenues (Power and Energy Solutions)
Interest rate	(3)	(4)	(6)	(10)	Interest expense
	(10)	(9)	(54)	(24)	Total before tax
	3	2	13	9	Income tax (expense) recovery
	(7)	(7)	(41)	(15)	Net of tax
Pension and other post-retirement benefit plans
Amortization of actuarial gains (losses)	—	(3)	—	(5)	Plant operating costs and other2
	—	—	—	1	Income tax (expense) recovery
	—	(3)	—	(4)	Net of tax
Equity investments
Equity income (loss)	5	1	11	2	Income from equity investments
	(1)	—	(3)	—	Income tax (expense) recovery
	4	1	8	2	Net of tax

1All amounts in parentheses indicate expenses to the Condensed consolidated statement of income.

2 These AOCI components are included in the computation of net benefit cost. Refer to Note 11, Employee post-retirement benefits, for additional information.

11. EMPLOYEE POST-RETIREMENT BENEFITS

The net benefit cost recognized for the Company’s pension benefit plans and other post-retirement benefit plans is as follows:


	three months ended June 30				six months ended June 30
	Pension benefit plans		Other post-retirement benefit plans		Pension benefit plans		Other post-retirement benefit plans
(unaudited - millions of Canadian $)	2023	2022	2023	2022	2023	2022	2023	2022

Service cost1	23	36	—	1	46	72	1	2
Other components of net benefit cost1
Interest cost	40	31	4	3	79	62	8	6
Expected return on plan assets	(58)	(60)	(4)	(4)	(117)	(119)	(8)	(7)
Amortization of actuarial (gains) losses	—	2	—	1	—	5	—	1
Amortization of regulatory asset	—	3	—	1	—	6	—	1
	(18)	(24)	—	1	(38)	(46)	—	1
Net Benefit Cost	5	12	—	2	8	26	1	3

1Service cost and other components of net benefit cost are included in Plant operating costs and other in the Condensed consolidated statement of income.

70 | TC Energy Second Quarter 2023

12. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

Risk Management Overview

TC Energy has exposure to market risk and counterparty credit risk and has strategies, policies and limits in place to manage the impact of these risks on its earnings, cash flows and, ultimately, shareholder value.

Counterparty Credit Risk

TC Energy’s exposure to counterparty credit risk includes its cash and cash equivalents, accounts receivable and certain contractual recoveries, available-for-sale assets, the fair value of derivative assets, net investment in leases and contract assets.

Market events causing disruptions in global energy demand and supply may contribute to economic uncertainties impacting a number of TC Energy's customers. While the majority of the Company's credit exposure is to large creditworthy entities, TC Energy maintains close monitoring and communication with those counterparties experiencing greater financial pressures. Refer to TC Energy's 2022 Annual Report for more information about the factors that mitigate the Company's counterparty credit risk exposure.

The Company reviews financial assets carried at amortized cost for impairment using the lifetime expected loss of the financial asset at initial recognition and throughout the life of the financial asset. TC Energy uses historical credit loss and recovery data, adjusted for management's judgment regarding current economic and credit conditions, along with reasonable and supportable forecasts to determine any impairment, which is recognized in Plant operating costs and other.

For the three and six months ended June 30, 2023, the Company recorded a recovery of $8 million and $103 million, respectively (2022 – nil) on the ECL provision before tax with respect to the net investment in leases associated with the in-service TGNH pipelines and a recovery of $1 million and $12 million, respectively (2022 – nil) on the ECL provision for contract assets related to certain other Mexico natural gas pipelines. At June 30, 2023, the balance of the ECL provision was $46 million (December 31, 2022 – $149 million) with respect to the net investment in leases associated with the in-service TGNH pipelines and $2 million (December 31, 2022 – $14 million) related to certain other Mexico natural gas pipelines. The ECL provision is driven primarily by a probability of default measure for the counterparty that is published by an external third party. There was significant volatility in the probability of default during first quarter 2023 which, when combined with the size and contract term of the Company's net investment in leases, resulted in a significant change in the provision in the six months ended June 30, 2023.

At June 30, 2023, the Company had no significant credit losses, other than the ECL provisions noted above, and there were no significant credit risk concentrations or amounts past due or impaired.

TC Energy has significant credit and performance exposure to financial institutions that hold cash deposits and provide committed credit lines and letters of credit that help manage the Company's exposure to counterparties and provide liquidity in commodity, foreign exchange and interest rate derivative markets. TC Energy's portfolio of financial sector exposure consists primarily of highly-rated investment grade, systemically important financial institutions. The Company had no direct exposure to the U.S. regional bank failures in early 2023; however, it continues to monitor potential impacts on its portfolio of financial sector counterparties.

TC Energy Second Quarter 2023 | 71

Net Investment in Foreign Operations

The Company hedges a portion of its net investment in foreign operations (on an after-tax basis) with U.S. dollar-denominated debt, cross-currency interest rate swaps and foreign exchange options as appropriate.

The fair values and notional amounts for the derivatives designated as a net investment hedge were as follows:

June 30, 2023

December 31, 2022

(unaudited - millions of Canadian $, unless otherwise noted)

Fair value1,2

Notional amount

Fair value1,2

Notional amount

U.S. dollar foreign exchange options (maturing 2023 to 2024)

US 1,800

(22)

US 3,600

U.S. dollar cross-currency interest rate swaps (maturing 2023 to 2025)

US 300

(5)

US 300

US 2,100

(27)

US 3,900

1Fair value equals carrying value.

2No amounts have been excluded from the assessment of hedge effectiveness.

The notional amounts and fair values of U.S. dollar-denominated debt designated as a net investment hedge were as follows:

(unaudited - millions of Canadian $, unless otherwise noted)

June 30, 2023

December 31, 2022

Notional amount

32,400 (US 24,500)

32,500 (US 24,000)

Fair value

30,700 (US 23,200)

30,800 (US 22,700)

Non-Derivative Financial Instruments

Fair value of non-derivative financial instruments

Available-for-sale assets are recorded at fair value which is calculated using quoted market prices where available. Certain non-derivative financial instruments included in Cash and cash equivalents, Accounts receivable, Other current assets, Restricted investments, Net investment in leases, Other long-term assets, Notes payable, Accounts payable and other, Dividends payable, Accrued interest and Other long-term liabilities have carrying amounts that approximate their fair value due to the nature of the item or the short time to maturity. Each of these instruments are classified in Level II of the fair value hierarchy, except for the Company's LMCI equity securities which are classified in Level I.

Credit risk has been taken into consideration when calculating the fair value of non-derivative financial instruments.

Balance sheet presentation of non-derivative financial instruments

The following table details the fair value of non-derivative financial instruments, excluding those where carrying amounts approximate fair value and would be classified in Level II of the fair value hierarchy:


	June 30, 2023		December 31, 2022
(unaudited - millions of Canadian $)	Carrying amount	Fair value	Carrying amount	Fair value

Long-term debt, including current portion1,2	(48,809)	(46,977)	(41,543)	(39,505)
Junior subordinated notes	(10,307)	(9,161)	(10,495)	(9,415)
	(59,116)	(56,138)	(52,038)	(48,920)

1Long-term debt is recorded at amortized cost, except for US$1.6 billion (December 31, 2022 – US$1.6 billion) that is attributed to hedged risk and recorded at fair value.

2Net income for the three and six months ended June 30, 2023 included unrealized gains of $68 million and $13 million, respectively (2022 – unrealized losses of $2 million and $2 million, respectively) for fair value adjustments attributable to the hedged interest rate risk associated with interest rate swap fair value hedging relationships on US$1.6 billion of long-term debt at June 30, 2023 (December 31, 2022 – US$1.6 billion). There were no other unrealized gains or losses from fair value adjustments to the non-derivative financial instruments.

72 | TC Energy Second Quarter 2023

Available-for-sale assets summary

The following tables summarize additional information about the Company's restricted investments that were classified as available-for-sale assets:


	June 30, 2023		December 31, 2022
(unaudited - millions of Canadian $)	LMCI restricted investments	Other restricted investments1	LMCI restricted investments	Other restricted investments1

Fair values of fixed income securities2,3
Maturing within 1 year	—	67	—	54
Maturing within 1-5 years	15	182	—	106
Maturing within 5-10 years	1,246	—	1,153	—
Maturing after 10 years	90	—	77	—
Fair value of equity securities2,4	830	—	749	—
	2,181	249	1,979	160

1Other restricted investments have been set aside to fund insurance claim losses to be paid by the Company's wholly-owned captive insurance subsidiary.

2Available-for-sale assets are recorded at fair value and included in Other current assets and Restricted investments on the Company's Condensed consolidated balance sheet.

3Classified in Level II of the fair value hierarchy.

4Classified in Level I of the fair value hierarchy.


	June 30, 2023		June 30, 2022
(unaudited - millions of Canadian $)	LMCI restricted investments1	Other restricted investments2	LMCI restricted investments1	Other restricted investments2

Net unrealized gains (losses) in the period
three months ended	(8)	2	(151)	(2)
six months ended	95	4	(300)	(6)
Net realized gains (losses) in the period3
three months ended	(10)	—	(14)	—
six months ended	(17)	—	(16)	—

1Unrealized and realized gains (losses) arising from changes in the fair value of LMCI restricted investments impact the subsequent amounts to be collected through tolls to cover future pipeline abandonment costs. As a result, the Company records these gains and losses as regulatory liabilities or regulatory assets.

2Unrealized and realized gains (losses) on other restricted investments are included in Interest income and other in the Condensed consolidated statement of income.

3Realized gains (losses) on the sale of LMCI restricted investments are determined using the average cost basis.

Derivative Instruments

Fair value of derivative instruments

The fair value of foreign exchange and interest rate derivatives has been calculated using the income approach which uses period-end market rates and applies a discounted cash flow valuation model. The fair value of commodity derivatives has been calculated using quoted market prices where available. In the absence of quoted market prices, third-party broker quotes or other valuation techniques have been used. The fair value of options has been calculated using the Black-Scholes pricing model. Credit risk has been taken into consideration when calculating the fair value of derivative instruments. Unrealized gains and losses on derivative instruments are not necessarily representative of the amounts that will be realized on settlement.

TC Energy Second Quarter 2023 | 73

In some cases, even though the derivatives are considered to be effective economic hedges, they do not meet the specific criteria for hedge accounting treatment or are not designated as a hedge and are accounted for at fair value with changes in fair value recorded in net income in the period of change. This may expose the Company to increased variability in reported earnings because the fair value of the derivative instruments can fluctuate significantly from period to period.

The recognition of gains and losses on derivatives for Canadian natural gas regulated pipeline exposures is determined through the regulatory process. Gains and losses arising from changes in the fair value of derivatives accounted for as part of rate-regulated accounting, including those that qualify for hedge accounting treatment, are expected to be refunded or recovered through the tolls charged by the Company. As a result, these gains and losses are deferred as regulatory liabilities or regulatory assets and are refunded to or collected from the rate payers in subsequent years when the derivative settles.

Balance sheet presentation of derivative instruments

The balance sheet classification of the fair value of derivative instruments was as follows:


at June 30, 2023	Cash flow hedges	Fair value hedges	Net investment hedges	Held for trading	Total fair value of derivative instruments1
(unaudited - millions of Canadian $)

Other current assets
Commodities2	1	—	—	565	566
Foreign exchange	—	—	11	38	49

	1	—	11	603	615
Other long-term assets
Commodities2	3	—	—	107	110
Foreign exchange	—	—	—	31	31
Interest rate	—	9	—	—	9
	3	9	—	138	150
Total Derivative Assets	4	9	11	741	765
Accounts payable and other
Commodities2	(52)	—	—	(447)	(499)
Foreign exchange	—	—	(3)	(43)	(46)
Interest rate	—	(34)	—	—	(34)
	(52)	(34)	(3)	(490)	(579)
Other long-term liabilities
Commodities2	(1)	—	—	(96)	(97)
Foreign exchange	—	—	—	(3)	(3)
Interest rate	—	(52)	—	—	(52)
	(1)	(52)	—	(99)	(152)
Total Derivative Liabilities	(53)	(86)	(3)	(589)	(731)
Total Derivatives	(49)	(77)	8	152	34

1Fair value equals carrying value.

2Includes purchases and sales of power, natural gas, liquids and emission credits.

74 | TC Energy Second Quarter 2023


at December 31, 2022	Cash flow hedges	Fair value hedges	Net investment hedges	Held for trading	Total fair value of derivative instruments1
(unaudited - millions of Canadian $)

Other current assets
Commodities2	—	—	—	597	597
Foreign exchange	—	—	6	11	17

	—	—	6	608	614
Other long-term assets
Commodities2	—	—	—	62	62
Foreign exchange	—	—	2	15	17
Interest rate	—	12	—	—	12
	—	12	2	77	91
Total Derivative Assets	—	12	8	685	705
Accounts payable and other
Commodities2	(72)	—	—	(584)	(656)
Foreign exchange	—	—	(31)	(158)	(189)
Interest rate	—	(26)	—	—	(26)
	(72)	(26)	(31)	(742)	(871)
Other long-term liabilities
Commodities2	(2)	—	—	(75)	(77)
Foreign exchange	—	—	(4)	(20)	(24)
Interest rate	—	(50)	—	—	(50)
	(2)	(50)	(4)	(95)	(151)
Total Derivative Liabilities	(74)	(76)	(35)	(837)	(1,022)
Total Derivatives	(74)	(64)	(27)	(152)	(317)

1Fair value equals carrying value.

2Includes purchases and sales of power, natural gas and liquids.

The majority of derivative instruments held for trading have been entered into for risk management purposes and all are subject to the Company's risk management strategies, policies and limits. These include derivatives that have not been designated as hedges or do not qualify for hedge accounting treatment but have been entered into as economic hedges to manage the Company's exposures to market risk.

Derivatives in fair value hedging relationships

The following table details amounts recorded on the Condensed consolidated balance sheet in relation to cumulative adjustments for fair value hedges included in the carrying amount of the hedged liabilities:

Carrying amount

Fair value hedging adjustments1

(unaudited - millions of Canadian $)

June 30, 2023

December 31, 2022

June 30, 2023

December 31, 2022

Long-term debt

(2,041)

(2,101)

1At June 30, 2023 and December 31, 2022, adjustments for discontinued hedging relationships included in these balances were nil.

TC Energy Second Quarter 2023 | 75

Notional and maturity summary

The maturity and notional amount or quantity outstanding related to the Company's derivative instruments excluding hedges of the net investment in foreign operations was as follows:


at June 30, 2023	Power	Natural gas	Liquids	Emission credits	Foreign exchange	Interest rate
(unaudited)

Net sales (purchases)1,2	9,227	147	5	125	—	—
Millions of U.S. dollars	—	—	—	—	6,126	1,600
Millions of Mexican pesos	—	—	—	—	18,250	—
Maturity dates	2023-2044	2023-2029	2023-2024	2023	2023-2026	2030-2032

1Volumes for power, natural gas, liquids and emission credit derivatives are in GWh, Bcf, MMBbls and thousand metric tonnes CO2, respectively.

2In 2023, the Company entered into contracts to sell 50 MW of power commencing in 2025 with terms ranging from 15 to 20 years and provided from specified renewable sources in the Province of Alberta.


at December 31, 2022	Power	Natural gas	Liquids	Foreign exchange	Interest rate
(unaudited)

Net sales (purchases)1	673	(96)	11	—	—
Millions of U.S. dollars	—	—	—	5,997	1,600
Millions of Mexican pesos	—	—	—	9,747	—
Maturity dates	2023-2026	2023-2027	2023-2024	2023-2026	2030-2032

1Volumes for power, natural gas and liquids derivatives are in GWh, Bcf and MMBbls, respectively.

Unrealized and Realized Gains (Losses) on Derivative Instruments

The following summary does not include hedges of the net investment in foreign operations:


	three months ended June 30		six months ended June 30
(unaudited - millions of Canadian $)	2023	2022	2023	2022

Derivative Instruments Held for Trading1
Unrealized gains (losses) in the period
Commodities	72	(20)	130	(58)
Foreign exchange	108	(60)	182	(38)
Realized gains (losses) in the period
Commodities	142	255	330	396
Foreign exchange	82	(13)	139	28
Derivative Instruments in Hedging Relationships
Realized gains (losses) in the period
Commodities	(23)	(15)	(12)	(18)
Interest rate	(10)	1	(16)	(2)

76 | TC Energy Second Quarter 2023

Derivatives in cash flow hedging relationships

The components of OCI (Note 10) related to the change in fair value of derivatives in cash flow hedging relationships before tax and including the portion attributable to non-controlling interests were as follows:


	three months ended June 30		six months ended June 30
(unaudited - millions of Canadian $, pre-tax)	2023	2022	2023	2022

Gains (losses) in fair value of derivative instruments recognized in OCI1
Commodities	(22)	(14)	(23)	(19)
Interest rate	—	7	—	36
	(22)	(7)	(23)	17

1No amounts have been excluded from the assessment of hedge effectiveness.

Effect of fair value and cash flow hedging relationships

The following table details amounts presented in the Condensed consolidated statement of income in which the effects of fair value or cash flow hedging relationships were recorded:


	three months ended June 30		six months ended June 30
(unaudited - millions of Canadian $)	2023	2022	2023	2022

Fair Value Hedges
Interest rate contracts1
Hedged items	(23)	(2)	(46)	(2)
Derivatives designated as hedging instruments	(10)	1	(16)	1
Cash Flow Hedges
Reclassification of gains (losses) on derivative instruments from AOCI to Net income2,3
Commodities4	(7)	(5)	(48)	(14)
Interest rate1	(3)	(4)	(6)	(10)

1Presented within Interest expense in the Condensed consolidated statement of income.

2Refer to Note 10, Other comprehensive income (loss) and Accumulated other comprehensive income (loss), for the components of OCI related to derivatives in cash flow hedging relationships.

3There are no amounts recognized in earnings that were excluded from effectiveness testing.

4Presented within Revenues (Power and Energy Solutions) in the Condensed consolidated statement of income.

TC Energy Second Quarter 2023 | 77

Offsetting of derivative instruments

The Company enters into derivative contracts with the right to offset in the normal course of business as well as in the event of default. TC Energy has no master netting agreements; however, similar contracts are entered into containing rights to offset. The Company has elected to present the fair value of derivative instruments with the right to offset on a gross basis on the Condensed consolidated balance sheet. The following tables show the impact on the presentation of the fair value of derivative instrument assets and liabilities had the Company elected to present these contracts on a net basis:


at June 30, 2023	Gross derivative instruments	Amounts available for offset1	Net amounts
(unaudited - millions of Canadian $)

Derivative instrument assets
Commodities	676	(500)	176
Foreign exchange	80	(36)	44
Interest rate	9	(5)	4
	765	(541)	224
Derivative instrument liabilities
Commodities	(596)	500	(96)
Foreign exchange	(49)	36	(13)
Interest rate	(86)	5	(81)
	(731)	541	(190)

1Amounts available for offset do not include cash collateral pledged or received.


at December 31, 2022	Gross derivative instruments	Amounts available for offset1	Net amounts
(unaudited - millions of Canadian $)

Derivative instrument assets
Commodities	659	(591)	68
Foreign exchange	34	(33)	1
Interest rate	12	(4)	8
	705	(628)	77
Derivative instrument liabilities
Commodities	(733)	591	(142)
Foreign exchange	(213)	33	(180)
Interest rate	(76)	4	(72)
	(1,022)	628	(394)

1Amounts available for offset do not include cash collateral pledged or received.

With respect to the derivative instruments presented above, the Company provided cash collateral of $92 million and letters of credit of $80 million at June 30, 2023 (December 31, 2022 – $138 million and $68 million, respectively) to its counterparties. At June 30, 2023, the Company held cash collateral of less than $1 million and $155 million letters of credit (December 31, 2022 – less than $1 million and $10 million, respectively) from counterparties on asset exposures.

Credit-risk-related contingent features of derivative instruments

Derivative contracts entered into to manage market risk often contain financial assurance provisions that allow parties to the contracts to manage credit risk. These provisions may require collateral to be provided if a credit-risk-related contingent event occurs, such as a downgrade in the Company’s credit rating to non-investment grade. The Company may also need to provide collateral if the fair value of its derivative financial instruments exceeds pre-defined exposure limits.

78 | TC Energy Second Quarter 2023

Based on contracts in place and market prices at June 30, 2023, the aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position was $11 million (December 31, 2022 – $19 million), for which the Company has provided no collateral in the normal course of business. If the credit-risk-related contingent features in these agreements were triggered on June 30, 2023, the Company would have been required to provide collateral equal to the fair value of the related derivative instruments discussed above. Collateral may also need to be provided should the fair value of derivative instruments exceed pre-defined contractual exposure limit thresholds.

The Company has sufficient liquidity in the form of cash and undrawn committed revolving credit facilities to meet these contingent obligations should they arise.

Fair Value Hierarchy

The Company’s financial assets and liabilities recorded at fair value have been categorized into three categories based on a fair value hierarchy.


Levels			How fair value has been determined

Level I			Quoted prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. An active market is a market in which frequency and volume of transactions provides pricing information on an ongoing basis.
Level II			This category includes interest rate and foreign exchange derivative assets and liabilities where fair value is determined using the income approach and commodity derivatives where fair value is determined using the market approach. Inputs include published exchange rates, interest rates, interest rate swap curves, yield curves and broker quotes from external data service providers.
Level III			This category includes long-dated commodity transactions in certain markets where liquidity is low. The Company uses the most observable inputs available or alternatively long-term broker quotes or negotiated commodity prices that have been contracted for under similar terms in determining an appropriate estimate of these transactions. Where appropriate, these long-dated prices are discounted to reflect the expected pricing from the applicable markets. There is uncertainty caused by using unobservable market data which may not accurately reflect possible future changes in fair value.

The fair value of the Company’s derivative assets and liabilities measured on a recurring basis, including both current and non-current portions, were categorized as follows:


at June 30, 2023	Quoted prices in active markets (Level I)	Significant other observable inputs (Level II)1	Significant unobservable inputs (Level III)1
(unaudited - millions of Canadian $)				Total

Derivative instrument assets
Commodities	453	210	13	676
Foreign exchange	—	80	—	80
Interest rate	—	9	—	9
Derivative instrument liabilities
Commodities	(339)	(228)	(29)	(596)
Foreign exchange	—	(49)	—	(49)
Interest rate	—	(86)	—	(86)
	114	(64)	(16)	34

1There were no transfers from Level II to Level III for the six months ended June 30, 2023.

In 2023, the Company entered into contracts to sell 50 MW of power commencing in 2025 with terms ranging from 15 to 20 years and provided from specified renewable sources in the Province of Alberta. The fair value of these contracts is classified in Level III of the fair value hierarchy and is based on the assumption that the contract volumes will be sourced approximately 80 per cent from wind generation, 10 per cent from solar generation and 10 per cent from the market.

TC Energy Second Quarter 2023 | 79


at December 31, 2022	Quoted prices in active markets (Level I)	Significant other observable inputs (Level II)1	Significant unobservable inputs (Level III)1
(unaudited - millions of Canadian $)				Total

Derivative instrument assets
Commodities	515	142	2	659
Foreign exchange	—	34	—	34
Interest rate	—	12	—	12
Derivative instrument liabilities
Commodities	(478)	(242)	(13)	(733)
Foreign exchange	—	(213)	—	(213)
Interest rate	—	(76)	—	(76)
	37	(343)	(11)	(317)

1There were no transfers from Level II to Level III for the year ended December 31, 2022.

The following table presents the net change in fair value of derivative assets and liabilities classified as Level III of the fair value hierarchy:


	three months ended June 30		six months ended June 30
(unaudited - millions of Canadian $)	2023	2022	2023	2022

Balance at beginning of period	(9)	(12)	(11)	(6)
Net gains (losses) included in Net income	(6)	(2)	(5)	(8)
Net losses included in OCI	(1)	(1)	(1)	(1)
Transfers to Level II	—	—	1	—

Balance at End of Period1	(16)	(15)	(16)	(15)

1For the three and six months ended June 30, 2023, there were unrealized losses of $6 million and $5 million, respectively, recognized in Revenues attributed to derivatives in the Level III category that were held at June 30, 2023 (2022 – unrealized losses of $2 million and $8 million, respectively).

80 | TC Energy Second Quarter 2023

13. ACQUISITIONS

Texas Wind Farms

On March 15, 2023, TC Energy closed the acquisition of 100 per cent of the Class B Membership Interests in the 155 MW Fluvanna Wind Farm (Fluvanna) located in Scurry County, Texas for US$99 million, before post-closing adjustments. On June 14, 2023, the Company closed the acquisition of 100 per cent of the Class B Membership Interests in the 148 MW Blue Cloud Wind Farm (Blue Cloud) located in Bailey County, Texas for US$125 million, before post-closing adjustments. The Fluvanna and Blue Cloud assets have tax equity investors that own 100 per cent of the Class A Membership Interests, to which a percentage of earnings, tax attributes and cash flows are allocated.

TC Energy determined it has a controlling financial interest in both projects and has consolidated the acquired entities as voting interest entities. The tax equity investors’ interests were recorded as non-controlling interests at their estimated fair values of $106 million (US$80 million) for Fluvanna and $116 million (US$87 million) for Blue Cloud. These transactions are accounted for as asset acquisitions and therefore did not result in the recognition of goodwill.

TC Energy has determined that the use of the Hypothetical Liquidation at Book Value (HLBV) method of allocating earnings between the Company and the tax equity investors is appropriate as the earnings, tax attributes and cash flows from Fluvanna and Blue Cloud are allocated to its Class A and Class B Membership Interest owners on a basis other than ownership percentages. Using the HLBV method, the Company's earnings from the projects is calculated based on how the projects would allocate and distribute cash if the net assets were sold at their carrying amounts on the reporting date under the provisions of the tax equity agreements.

TC Energy Second Quarter 2023 | 81

14. COMMITMENTS, CONTINGENCIES AND GUARANTEES

Commitments

Contingencies

TC Energy and its subsidiaries are subject to various legal proceedings, arbitrations and actions arising in the normal course of business. While the final outcome of such legal proceedings and actions cannot be predicted with certainty, it is the opinion of management that the resolution of such normal course proceedings and actions will not have a material impact on the Company’s consolidated financial position or results of operations.

2016 Columbia Pipeline Acquisition Lawsuit

On June 30, 2023, the Delaware Chancery Court (the Court) issued a ruling against TC Energy and other named defendants in a class action lawsuit brought on behalf of the former shareholders of Columbia Pipeline Group Inc. (Columbia) related to the acquisition of Columbia by TC Energy in July 2016. The Court determined that Columbia's then CEO and CFO breached their fiduciary duties and made material disclosure omissions and that TC Energy was aware and took advantage of those breaches. The Court awarded shareholders damages in the amount of US$1 per share. The final award is yet to be determined but is expected to be in the range of US$400 million, plus interest at the statutory rate. Liability for this award will be allocated between Columbia’s former executives and TC Energy in a subsequent proceeding before the Court that will determine proportionate responsibility and account for the prior settlement. Until this allocation is known, the amount that TC Energy is liable for cannot be reasonably estimated, therefore, the Company has not accrued a provision for this claim as at June 30, 2023.

TC Energy will not be responsible for the full amount of the award, but its proportionate share will not be known until the allocation hearing is completed. The Company strongly disagrees with the ruling and intends to appeal once the final judgment is entered and the allocation is determined. The same Court had previously confirmed, after trial in an appraisal rights action filed in 2016, that the US$25.50 per share that TC Energy paid Columbia shareholders was fair value.

Guarantees

TC Energy and its partner on the Sur de Texas pipeline, IEnova, have jointly guaranteed the financial performance of the entity which owns the pipeline. Such agreements include a guarantee and a letter of credit which are primarily related to the delivery of natural gas.

TC Energy and its joint venture partner on Bruce Power, BPC Generation Infrastructure Trust, have each severally guaranteed certain contingent financial obligations of Bruce Power related to a lease agreement and contractor and supplier services.

The Company and its partners in certain other jointly-owned entities have either (i) jointly and severally, (ii) jointly or (iii) severally guaranteed the financial performance of these entities. Such agreements include guarantees and letters of credit which are primarily related to construction services and the payment of liabilities. For certain of these entities, any payments made by TC Energy under these guarantees in excess of its ownership interest are to be reimbursed by its partners.

82 | TC Energy Second Quarter 2023

The carrying value of these guarantees has been included in Other long-term liabilities on the Condensed consolidated balance sheet. Information regarding the Company’s guarantees is as follows:


		June 30, 2023		December 31, 2022
(unaudited - millions of Canadian $)	Term	Potential exposure1	Carrying value	Potential exposure1	Carrying value

Sur de Texas	Renewable to 2053	98	—	100	—
Bruce Power	Renewable to 2065	88	—	88	—
Other jointly-owned entities	to 2043	80	3	81	3
		266	3	269	3

1TC Energy's share of the potential estimated current or contingent exposure.

15. VARIABLE INTEREST ENTITIES

Consolidated VIEs

A significant portion of the Company’s assets are held through VIEs in which the Company holds a 100 per cent voting interest, the VIE meets the definition of a business and the VIE’s assets can be used for general corporate purposes. The consolidated VIEs whose assets cannot be used for purposes other than for the settlement of the VIE’s obligations, or are not considered a business, were as follows:


(unaudited - millions of Canadian $)	June 30, 2023	December 31, 2022

ASSETS
Current Assets
Cash and cash equivalents	38	60
Accounts receivable	79	98
Inventories	31	32
Other current assets	8	14
	156	204
Plant, Property and Equipment	4,058	3,997
Equity Investments	709	748
Goodwill	440	449

	5,363	5,398
LIABILITIES
Current Liabilities
Accounts payable and other	224	234
Accrued interest	18	18
Current portion of long-term debt	30	31
	272	283
Regulatory Liabilities	80	78
Other Long-Term Liabilities	9	1
Deferred Income Tax Liabilities	16	16
Long-Term Debt	2,128	2,136
	2,505	2,514

TC Energy Second Quarter 2023 | 83

Non-Consolidated VIEs

The carrying value of these VIEs and the maximum exposure to loss as a result of the Company's involvement with these VIEs are as follows:


(unaudited - millions of Canadian $)	June 30, 2023	December 31, 2022

Balance Sheet Exposure

Equity investments
Bruce Power	6,116	5,783

Other pipeline equity investments	1,129	1,148

Off-Balance Sheet Exposure1
Bruce Power	1,798	2,025
Coastal GasLink2	2,265	3,300
Other pipeline equity investments	59	58
Maximum Exposure to Loss	11,367	12,314

1 Includes maximum potential exposure to guarantees and future funding commitments.

2 TC Energy is contractually obligated to fund the capital costs to complete the Coastal GasLink pipeline by funding the remaining equity requirements of Coastal GasLink LP through capacity on the subordinated loan agreement with Coastal GasLink LP until final project costs are determined. At June 30, 2023, the total capacity committed by TC Energy under this subordinated loan agreement was $3,300 million (December 31, 2022 – $1,262 million). In the six months ended June 30, 2023, $1,035 million was drawn on the subordinated loan, reducing the Company's funding commitment under the subordinated loan agreement to $2,265 million. Refer to Note 5, Coastal GasLink, for further information.

16. SUBSEQUENT EVENTS

Columbia Gas and Columbia Gulf Monetization

On July 24, 2023, TC Energy announced that it has entered into an agreement to sell a 40 per cent equity interest in Columbia Gas and Columbia Gulf to Global Infrastructure Partners (GIP) for proceeds of $5.2 billion (US$3.9 billion). Columbia Gas and Columbia Gulf will be held by a newly formed entity with GIP and the transaction is expected to close in fourth quarter 2023, subject to customary closing conditions.

The Company will continue to operate Columbia Gas and Columbia Gulf. TC Energy and GIP will each fund their proportionate share of annual maintenance, modernization and sanctioned growth capital expenditures through internally generated cash flows or from proportionate contributions from TC Energy and GIP.

Spinoff of Liquids Pipelines Business

On July 27, 2023, TC Energy announced plans to separate into two independent, investment-grade, publicly listed companies through the spinoff of its Liquids Pipelines business (the Transaction). The Transaction is expected to be tax free to TC Energy’s Canadian and U.S. shareholders. In addition to TC Energy shareholder and court approvals, the Transaction is subject to receipt of favourable tax rulings from Canadian and U.S. tax authorities, receipt of necessary regulatory approvals, and satisfaction of other customary closing conditions. TC Energy expects that the Transaction will be completed in the second half of 2024.

84 | TC Energy Second Quarter 2023

Document

EXHIBIT 31.1

Certifications

I, François L. Poirier, certify that:

1.I have reviewed this quarterly report on Form 6-K of TC Energy Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4.The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5.The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.


Dated: July 27, 2023			/s/ François L. Poirier
			François L. Poirier
			President and Chief Executive Officer

1 of 2

Certifications

I, François L. Poirier, certify that:

1.I have reviewed this quarterly report on Form 6-K of TransCanada PipeLines Limited;

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.


Dated: July 27, 2023			/s/ François L. Poirier
			François L. Poirier
			President and Chief Executive Officer

2 of 2

Document

EXHIBIT 31.2

Certifications

I, Joel E. Hunter, certify that:

1.I have reviewed this quarterly report on Form 6-K of TC Energy Corporation;

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.


Dated: July 27, 2023			/s/ Joel E. Hunter
			Joel E. Hunter
			Executive Vice-President and Chief Financial Officer

1 of 2

Certifications

I, Joel E. Hunter, certify that:

1.I have reviewed this quarterly report on Form 6-K of TransCanada PipeLines Limited;

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.


Dated: July 27, 2023			/s/ Joel E. Hunter
			Joel E. Hunter
			Executive Vice-President and Chief Financial Officer

2 of 2

Document

EXHIBIT 32.1

TC ENERGY CORPORATION

450 – 1st Street S.W.

Calgary, Alberta, Canada

T2P 5H1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

REGARDING PERIODIC REPORT CONTAINING

FINANCIAL STATEMENTS

I, François L. Poirier, the Chief Executive Officer of TC Energy Corporation (the "Company"), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, in connection with the Company’s Quarterly Report as filed on Form 6-K for the period ended June 30, 2023 with the Securities and Exchange Commission (the "Report"), that:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


			/s/ François L. Poirier
			François L. Poirier
			Chief Executive Officer
			July 27, 2023

1 of 2

TRANSCANADA PIPELINES LIMITED

450 – 1st Street S.W.

Calgary, Alberta, Canada

T2P 5H1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

REGARDING PERIODIC REPORT CONTAINING

FINANCIAL STATEMENTS

I, François L. Poirier, the Chief Executive Officer of TransCanada PipeLines Limited (the "Company"), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, in connection with the Company's Quarterly Report as filed on Form 6-K for the period ended June 30, 2023 with the Securities and Exchange Commission (the "Report"), that:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


			/s/ François L. Poirier
			François L. Poirier
			Chief Executive Officer
			July 27, 2023

2 of 2

Document

EXHIBIT 32.2

TC ENERGY CORPORATION

450 – 1st Street S.W.

Calgary, Alberta, Canada

T2P 5H1

CERTIFICATION OF CHIEF FINANCIAL OFFICER

REGARDING PERIODIC REPORT CONTAINING

FINANCIAL STATEMENTS

I, Joel E. Hunter, the Chief Financial Officer of TC Energy Corporation (the "Company"), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, in connection with the Company’s Quarterly Report as filed on Form 6-K for the period ended June 30, 2023 with the Securities and Exchange Commission (the "Report"), that:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


			/s/ Joel E. Hunter
			Joel E. Hunter
			Chief Financial Officer
			July 27, 2023

1 of 2

TRANSCANADA PIPELINES LIMITED

450 – 1st Street S.W.

Calgary, Alberta, Canada

T2P 5H1

CERTIFICATION OF CHIEF FINANCIAL OFFICER

REGARDING PERIODIC REPORT CONTAINING

FINANCIAL STATEMENTS

I, Joel E. Hunter, the Chief Financial Officer of TransCanada PipeLines Limited (the "Company"), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, in connection with the Company's Quarterly Report as filed on Form 6-K for the period ended June 30, 2023 with the Securities and Exchange Commission (the "Report"), that:

1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


			/s/ Joel E. Hunter
			Joel E. Hunter
			Chief Financial Officer
			July 27, 2023

2 of 2

Document

EXHIBIT 99.1


Quarterly Report to Shareholders

TC Energy reports solid second quarter 2023 results, while significantly advancing Coastal GasLink and Southeast Gateway projects to planned cost and schedule

Unlocking incremental shareholder value through spinning off Liquids Pipelines, integrating our Natural Gas Pipelines business units and utilizing strategic partnerships to enable energy transition and drive energy security

CALGARY, Alberta – July 27, 2023 – TC Energy Corporation (TSX, NYSE: TRP) (TC Energy or the Company) released its second quarter results today. François Poirier, TC Energy’s President and Chief Executive Officer commented, “Today’s announcement to separate our Natural Gas Pipelines and Power and Energy Solutions businesses from our Liquids Pipelines business will maximize the value of our assets. The separated industry-leading companies will have greater strategic focus to execute major projects, drive efficiencies and operational excellence, and enhanced flexibility to pursue disciplined growth." Poirier continued, “In addition, we have made significant progress on our 2023 strategic priorities. First, we continue to safely execute our secured capital program, including Coastal GasLink and Southeast Gateway which remain on planned cost and schedule. Second, we have significantly accelerated our deleveraging goal ahead of our year-end target with the sale of a 40 per cent equity interest in the Columbia Gulf and Columbia Gas systems for total cash proceeds of $5.2 billion. And third, we are safely and reliably operating our assets that provide essential services across North America, which is a testament to the dedication and hard work of our people.”

Highlights

(All financial figures are unaudited and in Canadian dollars unless otherwise noted)

•Strong performance during the first six months of 2023 delivered 10 per cent comparable EBITDA1 growth and 11 per cent segmented earnings growth year-over-year

•Second quarter 2023 results were underpinned by solid utilization and reliability across our assets

◦Total NGTL System receipts were 13.5 Bcf/d, up 0.1 Bcf/d from second quarter 2022

◦NGTL System achieved record single-day receipts of 14.6 Bcf on April 21, 2023

◦U.S. Natural Gas Pipelines flows averaged 25.4 Bcf/d, consistent with second quarter 2022

◦Achieved record LNG feedgas deliveries of 3.8 Bcf on April 21, 2023

◦Keystone Pipeline System operational reliability of 94.6 per cent, ensuring the continued delivery of all contracted volumes

◦Marketlink throughput increased over 150,000 Bbl/d year-over-year

◦Bruce Power achieved 94 per cent availability while successfully completing a planned outage on Unit 4 on time and within budget

◦Strong cogeneration fleet performance with 93 per cent availability

•Second quarter 2023 financial results:

◦Net income attributable to common shares of $0.3 billion or $0.24 per common share compared to $0.9 billion or $0.90 per common share in second quarter 2022. Comparable earnings1 of $1.0 billion or $0.96 per common share compared to $1.0 billion or $1.00 per common share in 2022

◦Segmented earnings of $1.0 billion compared to $1.7 billion in 2022 and comparable EBITDA of $2.5 billion compared to $2.4 billion in 2022

1 Comparable EBITDA, comparable earnings, comparable earnings per common share and comparable funds generated from operations are non-GAAP measures used throughout this news release. These measures do not have any standardized meaning under GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. The most directly comparable GAAP measures are Segmented earnings, Net income attributable to common shares, Net income per common share and Net cash provided by operations, respectively. For more information on non-GAAP measures, refer to the Non-GAAP Measures section of this news release.

•TC Energy’s Board of Directors approved plans to spin off the Liquids Pipelines business and separate into two industry-leading, investment-grade companies. The separation is expected to be achieved on a tax-free basis to TC Energy shareholders, anticipated to be complete in the second half of 2024

•Announced the sale of a 40 per cent equity interest in Columbia Gas Transmission, LLC (Columbia Gas) and Columbia Gulf Transmission, LLC (Columbia Gulf) to Global Infrastructure Partners (GIP) for proceeds of $5.2 billion. Closing of the transaction is anticipated during fourth quarter 2023, subject to customary closing conditions

•Following the partial sale of a 40 per cent equity interest in Columbia Gas and Columbia Gulf, we continue to expect 2023 comparable EBITDA to be five to seven per cent higher than 2022; however, comparable earnings per common share for 2023 is now expected to be generally consistent with 2022

•Placed approximately $2.1 billion of natural gas and liquids capacity capital projects in service during the first six months of 2023, progressing to our expected $6 billion of assets placed into service in 2023

•The Coastal GasLink project is approximately 91 per cent complete overall and continues to track cost and schedule with mechanical completion expected by year end

◦As previously communicated, based on the expectation that additional equity contributions will predominantly be funded by TC Energy, there is a pre-tax impairment charge of the full value of our investment in Coastal GasLink LP of $843 million ($809 million after tax) in second quarter 2023

•Southeast Gateway Pipeline project progressing according to planned milestones; commenced onshore pipe installation and facilities construction this summer and expect offshore pipe installation to begin by year end

•Placed North Baja XPress into service

•Filed uncontested Columbia Gulf rate settlement on July 7, 2023

•Government of Ontario announced the proposed Ontario Pumped Storage Project moving to final evaluation from the Minister of Energy with a decision expected by the end of the year, subject to Board approval

•Finalized contracts to sell 50 MW under TC Energy’s 24-by-7 carbon-free power offering in Alberta. Contract terms range from 15 to 20 years and are expected to commence in 2025

•Declared a quarterly dividend of $0.93 per common share for the quarter ending September 30, 2023

•Dividend Reinvestment and Share Purchase Plan (DRP) participation rate amongst common shareholders was approximately 39 per cent, resulting in $374 million to be reinvested in common equity from the dividends declared on April 27, 2023

•Subsequent to the dividends declared for the quarter ended June 30, 2023, which are being paid on July 31, 2023, TC Energy has discontinued the discounted DRP as outlined in our 2022 Annual Report.

2023 Report on Sustainability highlights progress across the business

•Reduced absolute methane emissions by 14 per cent between 2019 and 2022, while increasing natural gas throughput 11 per cent and natural gas comparable EBITDA 20 per cent

•Increased weighting of environmental, social and governance (ESG) from 25 per cent in 2022 to 30 per cent in 2023 corporate scorecard

•Greater transparency with Report on Sustainability and ESG Data Sheet combined and published earlier in year, and publication of new Methane Emissions Disclosure Report and Climate-related Lobbying Report

•Advanced safety culture with third-party safety assessment results being applied in 2023

•Became a pilot member for the Task Force on Nature-based Financial Disclosures

•Commitment to supporting human rights in our Code of Business Ethics Policy and through the adoption of UN Global Compact principles into strategy, culture and day-to-day activities.


	three months ended June 30		six months ended June 30
(millions of $, except per share amounts)	2023	2022	2023	2022

Income
Net income attributable to common shares	250	889	1,563	1,247
per common share – basic	$0.24	$0.90	$1.53	$1.27

Segmented earnings (losses)
Canadian Natural Gas Pipelines	(394)	385	17	743
U.S. Natural Gas Pipelines	715	711	1,794	1,021
Mexico Natural Gas Pipelines	182	162	436	282
Liquids Pipelines	273	261	449	533
Power and Energy Solutions	255	170	507	246
Corporate	(36)	(10)	(38)	21
Total segmented earnings (losses)	995	1,679	3,165	2,846

Comparable EBITDA
Canadian Natural Gas Pipelines	780	681	1,520	1,325
U.S. Natural Gas Pipelines	925	915	2,192	2,022
Mexico Natural Gas Pipelines	193	190	365	338
Liquids Pipelines	363	341	680	670
Power and Energy Solutions	217	252	498	409
Corporate	(4)	(10)	(6)	(7)
Comparable EBITDA	2,474	2,369	5,249	4,757
Depreciation and amortization	(694)	(635)	(1,371)	(1,261)
Interest expense included in comparable earnings	(791)	(620)	(1,548)	(1,200)
Allowance for funds used during construction	148	63	279	138
Foreign exchange gains (losses), net included in comparable earnings	70	(6)	103	26
Interest income and other included in comparable earnings	52	23	94	58
Income tax (expense) recovery included in comparable earnings	(249)	(173)	(529)	(352)
Net income attributable to non-controlling interests	(6)	(9)	(17)	(20)
Preferred share dividends	(23)	(33)	(46)	(64)
Comparable earnings	981	979	2,214	2,082
Comparable earnings per common share	$0.96	$1.00	$2.16	$2.12

Net cash provided by operations	1,510	942	3,584	2,649
Comparable funds generated from operations	1,754	1,566	3,820	3,431
Capital spending1	2,991	1,491	6,024	3,228

Dividends declared
per common share	$0.93	$0.90	$1.86	$1.80

Basic common shares outstanding (millions)
– weighted average for the period	1,027	983	1,024	982
– issued and outstanding at end of period	1,029	984	1,029	984

1 Includes Capital expenditures, Capital projects in development and Contributions to equity investments. Refer to the Financial condition – Cash (used in) provided by investing activities section for additional information.

CEO Message

Delivering on our 2023 priorities

We remain laser focused on our 2023 priorities and have achieved significant milestones during the first half of the year. We continue to safely execute major projects like Coastal GasLink and Southeast Gateway that continue to track cost and schedule. We have accelerated our deleveraging by advancing our $5+ billion asset divestiture program, and we continue to maximize the value and performance of our assets through safe operations and reliability of service. In late 2022, we initiated our Focus Project, which is fundamentally about re-thinking the way we do our work. We have recently completed our Wave 1 initiative design and identified $750 million of annual run-rate opportunities to be realized by end of 2025, with approximately $150 million of that complete this year. These opportunities are predominantly in the form of capital reductions and other efficiencies, which primarily will flow back to our customers and enhance the competitiveness of our services, and are included in our $6 billion to $7 billion net capital expenditure outlook. Our Wave 2 analysis, which recently commenced, indicates the potential for an additional $250 million of opportunities that in part represent an upside to our plan, and will be partially flowed back to our customers consistent with regulatory and commercial agreements.

In conjunction with the spinoff of our Liquids business and the combining of our highly integrated North American Natural Gas Pipelines business into a single, unified business, our Focus Project will enable us to unlock synergies to create value for our customers and our shareholders. As a result, Stanley (Stan) G. Chapman, III has been promoted to Executive Vice-President and Chief Operating Officer, Natural Gas Pipelines. His deep industry experience across North America will drive further integration and strengthen our business model through alignment and simplification, leading to safety, operational, commercial and project execution excellence.

Unlocking shareholder value through the creation of two premium energy infrastructure companies

On July 27, 2023, we announced our Board of Directors has approved plans to spin off our Liquids Pipelines business that follows a comprehensive two-year review to unlock incremental shareholder value. The separation of our Natural Gas Pipelines and Power and Energy Solutions businesses from our Liquids Pipelines business will maximize the value of our assets. Led by dedicated and highly experienced teams, both companies can pursue growth through disciplined capital allocation and a continued commitment to finding efficiencies and operational excellence.

•TC Energy will focus on natural gas, driven by strong long-term fundamentals and power and energy solutions, driven by nuclear, pumped hydro energy storage and new energy opportunities.

•The Liquids Pipelines Company will focus on enhancing the value of our asset base by increasing capacity on underutilized portions of the system and increasing connectivity between critical Canadian supply and the largest, most resilient demand markets.

Leading the spinoff entity, Bevin Wirzba, our Executive Vice-President and Group Executive, Canadian Natural Gas Pipelines and Liquids Pipelines, and President, Coastal GasLink, will assume the role of President and CEO of the new Liquids Pipelines Company. His expertise and leadership capabilities will capture the opportunities ahead as this world-class company provides critical infrastructure, with an unrivalled market position to connect resilient, safe, and secure supply to the highest-demand markets.

The separation is expected to be achieved on a tax-free basis to our shareholders and is anticipated to be complete in the second half of 2024. Additional information will be provided as we continue to advance this transformational initiative.

Delivering on our $5+ billion asset divestiture program that significantly advances deleveraging target

On July 24, 2023, we announced an agreement to monetize a 40 per cent equity interest in Columbia Gas and Columbia Gulf with Global Infrastructure Partners for proceeds of $5.2 billion (US$3.9 billion), subject to certain customary adjustments. With this sizeable transaction, we will deliver on our $5+ billion asset divestiture program ahead of our year-end target and significantly advance toward our deleveraging target. Long-term fundamentals continue to underscore the role of natural gas in a sustainable energy future. Our strategic partnership with GIP and future partnerships across our portfolio will provide additional investment capacity to originate and execute on projects that will allow us to extend TC Energy’s impact in enabling the energy transition. Closing of the transaction is anticipated in the fourth quarter of 2023, subject to customary closing conditions.

2023 outlook and dividend declaration

Following the sale of a 40 per cent equity interest in Columbia Gas and Columbia Gulf we continue to expect 2023 comparable EBITDA to be five to seven per cent higher than 2022; however, comparable earnings per common share for 2023 has decreased primarily due to higher expected net income attributable to non-controlling interests, partially offset by lower interest expense. As a result, comparable earnings per common share is now expected to be generally consistent with 2022. We expect capital spending in 2023 to continue to be $11.5 billion to $12.0 billion.

Beyond 2024, we remain committed to limiting annual sanctioned net capital expenditures to $6 billion to $7 billion. At this level, we can continue to grow our business at a commensurate rate with our dividend growth outlook of three to five per cent, while also providing the optionality to further reduce leverage and/or return incremental capital to shareholders. Showcasing our commitment to delivering superior shareholder returns, TC Energy’s Board of Directors declared a quarterly dividend of $0.93 per common share for the quarter ending September 30, 2023, equating to $3.72 on an annualized basis. As outlined in our 2022 Annual Report, subsequent to the dividends declared for the quarter ended June 30, 2023, which will be paid on July 31, 2023, TC Energy has discontinued the discounted DRP.

Exceptional year-to-date operational results drive a 10 per cent year-over-year increase in comparable EBITDA

During the first six months of the year, our diversified portfolio of critical energy infrastructure assets continued to safely and reliably meet North America’s growing demand for energy. As a result, year-to-date, we have delivered 10 per cent comparable EBITDA growth year-over-year and segmented earnings growth of 11 per cent. Our base business also remains robust. During the second quarter of 2023, we saw continued strong demand for our critical energy assets. We achieved record LNG feedgas deliveries of 3.8 Bcf on April 21, 2023, representing more than 30 per cent of current U.S. LNG exports while overall flows on our U.S. Natural Gas pipelines averaged 25.4 Bcf/d. Within our Canadian Natural Gas Pipelines business, total average NGTL System receipts were 13.5 Bcf/d, up 0.1 Bcf/d from second quarter 2022. The NGTL System also achieved its highest record single day receipts of 14.6 Bcf on April 21, 2023. Looking to our Liquids Pipelines business, operational reliability on the Keystone Pipeline System was approximately 94.6 per cent. Marketlink throughput increased over 150,000 Bbl/d year-over-year. During the quarter, Bruce Power achieved 94 per cent availability and we continued to make significant progress on our Major Component Replacement (MCR) program. We also saw strong cogeneration fleet performance during the quarter with 93 per cent availability.

Project execution: Coastal GasLink and Southeast Gateway remain on track with planned cost and schedule

We continue to advance our industry-leading secured capital program. So far this year, we have placed approximately $2.1 billion of natural gas and liquids pipeline capacity capital projects into service, progressing to the $6 billion of projects we expect to place into service this year.

As we work through the summer construction season, the Coastal GasLink project has reached approximately 91 per cent overall completion. The team has made tremendous progress throughout the year. We remain on track with our capital cost estimate and continue to expect mechanical completion by year end. To date, nearly 98 per cent of pipe has been welded and 92 per cent of all classified water crossings on the project are now complete. In addition, 639 km of the 670 km pipe has been installed and backfilled, with Section 6 being our third of eight sections achieving 100 per cent pipe installation in June.

We continue to advance our projects in Mexico. The Southeast Gateway Pipeline project is progressing according to planned milestones, and we have begun onshore installation and facilities construction in Veracruz and Tabasco. We expect to begin offshore pipe installation in late 2023. The north section of the Villa de Reyes (VdR) pipeline was put into commercial operation in September 2022, while the lateral section is mechanically complete with an expected commercial in-service date in the third quarter of 2023. Construction on the south section of VdR is targeted for mechanical completion by the end of the year.

Recent progress and developments

In early July, the Government of Ontario announced the Ministry of Energy will commence the final evaluation of the proposed Ontario Pumped Storage Project (OPSP) with an expected decision by the end of 2023. OPSP is a critical component to Ontario’s growing clean economy and would be the province’s largest energy storage project, storing enough clean electricity to power one million homes while providing significant benefits and savings to consumers. We will continue to build our relationship with our prospective partner, the Saugeen Ojibway Nation, rooted on the basis of trust and collaboration.

Following the December 2022 Milepost 14 incident, we have completed the recovery and clean-up of all released product. We continue to make significant progress on restoration activities, including revegetation of the impacted area, and expect the majority of these activities to be completed this year. We have revised our environmental remediation cost estimate from $650 million to $794 million to meet the required restoration endpoints in alignment with our regulators. As previously announced, it is probable that the majority of the estimated costs will be eligible for insurance recovery, including cost increases as a result of increased reclamation costs. We continue to abide by the Amended Corrective Action Order (ACAO) and are implementing a comprehensive remedial work plan to enhance our pipeline integrity program and overall safety performance. As we progress this work, we continue to deliver all of our contract commitments while operating under pressure restrictions. I’m proud of the team that has safely worked over 1.2 million hours on-site to support our ongoing response.

Collectively, recent announcements represent meaningful progress toward our 2023 strategic priorities and position us exceptionally well for the long term, allowing us to unlock incremental shareholder value. As part of our ongoing capital rotation program, we will continue to evaluate opportunities to further our deleveraging objectives and optimally fund our secured capital program. Our commitment to strong balance sheet fundamentals and disciplined sanctioned net capital spending of $6 billion to $7 billion annually beyond 2024 will continue to provide the foundation for a long-term sustainable annual dividend growth rate of three to five per cent. Our continued success is underpinned by the strength and stability of our utility-like business model and our ability to further leverage our competitive strengths to move, generate and store the energy North America relies on in a secure and sustainable way.

Teleconference and Webcast

We will hold a teleconference and webcast on Friday, July 28, 2023 at 6:30 a.m. (MDT) / 8:30 a.m. (EDT) to discuss our second quarter 2023 financial results and company developments. Presenters will include François Poirier, President and Chief Executive Officer; Joel Hunter, Executive Vice-President and Chief Financial Officer; and other members of the executive leadership team.

Members of the investment community and other interested parties are invited to participate by calling 1.800.319.4610. No passcode is required. Please dial in 15 minutes prior to the start of the call. A live webcast of the teleconference will be available on TC Energy's website at www.TCEnergy.com/events or via the following URL: https://www.gowebcasting.com/12631.

A replay of the teleconference will be available two hours after the conclusion of the call until midnight EDT on August 4, 2023. Please call 1.855.669.9658 and enter pass code 0282.

The unaudited interim Condensed consolidated financial statements and Management’s Discussion and Analysis (MD&A) are available on our website at www.TCEnergy.com and will be filed today under TC Energy's profile on SEDAR+ at www.sedarplus.ca and with the U.S. Securities and Exchange Commission on EDGAR at www.sec.gov.

About TC Energy

We’re a team of 7,000+ energy problem solvers working to move, generate and store the energy North America relies on. Today, we’re taking action to make that energy more sustainable and more secure. We’re innovating and modernizing to reduce emissions from our business. And, we’re delivering new energy solutions – from natural gas and renewables to carbon capture and hydrogen – to help other businesses and industries decarbonize too. Along the way, we invest in communities and partner with our neighbours, customers and governments to build the energy system of the future.

TC Energy's common shares trade on the Toronto (TSX) and New York (NYSE) stock exchanges under the symbol TRP. To learn more, visit us at www.TCEnergy.com.

Forward-Looking Information

This release contains certain information that is forward-looking, including statements regarding the monetization of certain pipelines and the establishment of a partnership with Global Infrastructure Partners; statements related to the Transaction, including the structure, conditions, timing and tax effect thereof; the expected attributes of TC Energy and the Liquids Pipelines Company following completion of the Transaction, including the management and credit ratings thereof; statements regarding the value of the benefits we expect to realize from the Focus Project and the timing in which we will realize those benefits; and the sustainability commitments and targets contained in our Report on Sustainability and our GHG Emissions Reduction Plan. Forward-looking statements are usually accompanied by words such as "anticipate", "expect", "believe", "may", "will", "should", "estimate" or other similar words. Our forward-looking information is subject to important risks and uncertainties and is based on certain key assumptions. Forward-looking statements in this document are intended to provide TC Energy security holders and potential investors with information regarding TC Energy and its subsidiaries, including management's assessment of TC Energy's and its subsidiaries' future plans and financial outlook. All forward-looking statements reflect TC Energy's beliefs and assumptions based on information available at the time the statements were made and as such are not guarantees of future performance. As actual results could vary significantly from the forward-looking information, you should not put undue reliance on forward-looking information and should not use future-oriented information or financial outlooks for anything other than their intended purpose. We do not update our forward-looking information due to new information or future events, unless we are required to by law. For additional information on the assumptions made, and the risks and uncertainties which could cause actual results to differ from the anticipated results, refer to the most recent Quarterly Report to Shareholders and the 2022 Annual Report filed under TC Energy's profile on SEDAR+ at www.sedarplus.ca and with the U.S. Securities and Exchange Commission at www.sec.gov and the "Forward-looking information" section of our Report on Sustainability and our GHG Emissions Reduction Plan which are available on our website at www.TCEnergy.com.

Non-GAAP Measures

This release contains references to the following non-GAAP measures: comparable EBITDA, comparable earnings, comparable earnings per common share and comparable funds generated from operations. These non-GAAP measures do not have any standardized meaning as prescribed by GAAP and therefore may not be comparable to similar measures presented by other entities. These non-GAAP measures are calculated by adjusting certain GAAP measures for specific items we believe are significant but not reflective of our underlying operations in the period. These comparable measures are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable except as otherwise described in the Condensed consolidated financial statements and MD&A. Refer to: (i) each business segment for a reconciliation of comparable EBITDA to segmented earnings (losses); (ii) Consolidated results section for reconciliations of comparable earnings and comparable earnings per common share to Net income attributable to common shares and Net income per common share, respectively; and (iii) Financial condition section for a reconciliation of comparable funds generated from operations to Net cash provided by operations. Refer to the Non-GAAP measures section of the MD&A in our most recent quarterly report for more information about the non-GAAP measures we use, the MD&A is included in this release. The MD&A can be found on SEDAR+ (www.sedarplus.ca) under TC Energy's profile.

Media Inquiries:

Media Relations

media@tcenergy.com

403.920.7859 or 800.608.7859

Investor & Analyst Inquiries:

Gavin Wylie / Hunter Mau

investor_relations@tcenergy.com

403.920.7911 or 800.361.6522