# EDGAR Filing Document

**Accession Number:** 0000099070
**File Stem:** 0001232384-23-000021
**Filing Date:** 2023-2
**Character Count:** 1072851
**Document Hash:** 7322bd76abf131b5ad94473de463afe9
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001232384-23-000021.hdr.sgml**: 20230214

**ACCESSION NUMBER**: 0001232384-23-000021

**CONFORMED SUBMISSION TYPE**: 40-F

**PUBLIC DOCUMENT COUNT**: 247

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230214

**DATE AS OF CHANGE**: 20230214

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** TC ENERGY CORP
- **CENTRAL INDEX KEY:** 0001232384
- **STANDARD INDUSTRIAL CLASSIFICATION:** NATURAL GAS TRANSMISSION [4922]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** A0
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 40-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-31690
- **FILM NUMBER:** 23622248

**BUSINESS ADDRESS:**
- **STREET 1:** 450 - 1ST STREET S.W.
- **CITY:** CALGARY ALBERTA
- **STATE:** A0
- **ZIP:** T2P 5H1
- **BUSINESS PHONE:** 4039202000

**MAIL ADDRESS:**
- **STREET 1:** 450 - 1ST STREET S.W.
- **CITY:** CALGARY ALBERTA
- **STATE:** A0
- **ZIP:** T2P 5H1

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** TRANSCANADA CORP
- **DATE OF NAME CHANGE:** 20030513
**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** TRANSCANADA PIPELINES LTD
- **CENTRAL INDEX KEY:** 0000099070
- **STANDARD INDUSTRIAL CLASSIFICATION:** NATURAL GAS TRANSMISSION [4922]
- **IRS NUMBER:** 980055953
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 40-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-08887
- **FILM NUMBER:** 23622249

**BUSINESS ADDRESS:**
- **STREET 1:** 450 - 1ST STREET SW
- **STREET 2:** PO BOX 1000 STATION M
- **CITY:** CALGARY ALBERTA
- **STATE:** A0
- **ZIP:** T2P 5H1
- **BUSINESS PHONE:** 4039206411

**MAIL ADDRESS:**
- **STREET 1:** 450 - 1ST STREET SW
- **CITY:** CALGARY ALBERTA
- **STATE:** A0
- **ZIP:** T2P 5H1

?xml version="1.0" ? trp-20221231

**U.S. Securities and Exchange Commission**

**Washington, D.C. 20549**

**Form 40-F** 

---

| | |
|:---|:---|
| ☐ | **REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934** |
| **OR** | **OR** |
| ☒ | **ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

---

For the fiscal year ended December 31, 2022

**TC ENERGY CORPORATION** 

(Commission File Number **1-31690**)

**TRANSCANADA PIPELINES LIMITED** 

(Commission File Number **1-8887**)

(Exact name of Registrant as specified in its charter)

**Canada** 

(Province or other jurisdiction of incorporation or organization)

**4922, 4923, 4924, 5172** 

(Primary Standard Industrial Classification Code Number (if applicable))

**Not Applicable**

**(TC Energy Corporation)**

(I.R.S. Employer Identification Number (if applicable))

**52-2179728** 

**(TransCanada PipeLines Limited)**

(I.R.S. Employer Identification Number (if applicable))

**TC Energy Tower, 450 - 1 Street S.W.** 

**Calgary, Alberta, Canada, T2P 5H1** 

**(403) 920-2000** 

(Address and telephone number of Registrant's principal executive offices)

**TransCanada PipeLine USA Ltd., 700 Louisiana Street, Suite 700** 

**Houston, Texas, 77002-2700; (832) 320-5201** 

(Name, address (including zip code) and telephone number (including area code)

of agent for service in the United States)

**Securities registered or to be registered pursuant to Section 12(b) of the Act:**

---

| | | |
|:---|:---|:---|
| **<u>Title of each class</u>** | **<u>Trading Symbol(s)</u>** | **<u>Name of each exchange on which registered</u>** |
| **Common Shares (including Rights under Shareholder Rights Plan) of TC Energy Corporation** | **TRP** | **New York Stock Exchange** |

---

**Securities registered or to be registered pursuant to Section 12(g) of the Act: None**

**Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:**

**Debt Securities of TransCanada PipeLines Limited**

For annual reports, indicate by check mark the information filed with this Form:

☒ Annual information form ☒ Audited annual financial statements

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the Annual report.

**At December 31, 2022, 1,017,961,583 common shares;**

**14,577,184 Cumulative Redeemable First Preferred Shares, Series 1;**

**7,422,816 Cumulative Redeemable First Preferred Shares, Series 2;**

**9,997,177 Cumulative Redeemable First Preferred Shares, Series 3;**

**4,002,823 Cumulative Redeemable First Preferred Shares, Series 4;**

**12,070,593 Cumulative Redeemable First Preferred Shares, Series 5;**

**1,929,407 Cumulative Redeemable First Preferred Shares Series 6;**

**24,000,000 Cumulative Redeemable First Preferred Shares Series 7;**

**18,000,000 Cumulative Redeemable First Preferred Shares Series 9; and**

**10,000,000 Cumulative Redeemable First Preferred Shares, Series 11**

**of TC Energy Corporation were issued and outstanding.**

**At December 31, 2022, 973,199,666 common shares of TransCanada PipeLines Limited, which were all owned by TC Energy Corporation, were issued and outstanding.**

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;No ☐

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

†The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

------

The documents (or portions thereof) forming part of this Form 40-F are incorporated by reference into the following registration statements under the Securities Act of 1933, as amended:

---

| | |
|:---|:---|
| **<u>Form</u>** | **<u>Registration No.</u>** |
| S-8 | 333-5916 |
| S-8 | 333-8470 |
| S-8 | 333-9130 |
| S-8 | 333-151736 |
| S-8 | 333-184074 |
| S-8 | 333-227114 |
| S-8 | 333-237979 |
| F-3 | 33-13564 |
| F-3 | 333-6132 |
| F-10 | 333-151781 |
| F-10 | 333-161929 |
| F-10 | 333-208585 |
| F-10 | 333-250988 |
| F-10 | 333-252123 |
| F-10 | 333-261533 |
| F-10 | 333-267323 |

---

**EXPLANATORY NOTE**

TransCanada PipeLines Limited ("TransCanada PipeLines") is a wholly owned subsidiary of TC Energy Corporation ("TC Energy"). As of the date of filing of this Form 40-F, 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 the 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 40-F is that provided by TC Energy except as indicated below.

------

**AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS AND**

**MANAGEMENT'S DISCUSSION & ANALYSIS**

Except sections specifically referenced below which shall be deemed incorporated by reference herein and filed, no other portion of the TC Energy 2022 Management's discussion and analysis and audited consolidated financial statements to shareholders, except as otherwise specifically incorporated by reference in the TC Energy Annual information form, shall be deemed filed with the U.S. Securities and Exchange Commission (the "Commission") as part of this report under the Exchange Act*.*

**A.&nbsp;&nbsp;&nbsp;&nbsp;Audited Annual Financial Statements**

For audited consolidated financial statements, including the auditors' report, see pages 135 through 225 of the TC Energy 2022 Management's discussion and analysis and audited consolidated financial statements included herein.

**B.&nbsp;&nbsp;&nbsp;&nbsp;Management's Discussion and Analysis**

For management's discussion and analysis, see pages 9 through 134 of the TC Energy 2022 Management's discussion and analysis and audited consolidated financial statements included herein under the heading "Management's discussion and analysis".

**C.&nbsp;&nbsp;&nbsp;&nbsp;Management's Report on Internal Control Over Financial Reporting**

For management's report on internal control over financial reporting, see "Management's Report on Internal Control over Financial Reporting" that accompanies the audited consolidated financial statements on page 135 of the TC Energy 2022 Management's discussion and analysis and audited consolidated financial statements included herein.

**UNDERTAKING**

Each Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

**DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING**

For information on disclosure controls and procedures and management's annual report on internal control over financial reporting, see "Other information - Controls and Procedures" on page 114 of the TC Energy 2022 Management's discussion and analysis and audited consolidated financial statements.

**AUDIT COMMITTEE FINANCIAL EXPERT**

Each Registrant's Board of Directors has determined that it has at least one audit committee financial expert serving on its Audit committee. Ms. Una Power and Mr. Thierry Vandal have been designated audit committee financial experts and are independent, as that term is defined by the New York Stock Exchange's listing standards applicable to each Registrant. The Commission has indicated that the designation of Ms. Power and Mr. Vandal as audit committee financial experts does not make Ms. Power or Mr. Vandal "experts" for any purpose, impose any duties, obligations or liability on Ms. Power or Mr. Vandal that are greater than those imposed on members of the Audit committee and Board of Directors who do not carry this designation or affect the duties, obligations or liability of any other member of the Audit committee.

**CODE OF ETHICS**

The Registrants have adopted a code of business ethics ("Code") for their directors, officers, employees and contractors. In 2022, the Code was updated with an amendment referencing the Contractor Code of Business Ethics Handbook which was included to acknowledge that a substantially similar document is available for the external contractor audience. Other minor amendments included the addition of innovation as one of TC Energy's values and language concerning human rights and TC Energy's participation in the UN Global Compact, as well as updated reporting and non-retaliation language.

The Registrants' Code is available on TC Energy's website at www.tcenergy.com and any person can obtain the Code without charge upon request from the Corporate Secretary of TC Energy. No waivers have been granted from any provision of the Code during the 2022 fiscal year.

**PRINCIPAL ACCOUNTANT FEES AND SERVICES**

Our independent registered public accounting firm is KPMG LLP, Calgary, AB, Canada, Auditor Firm ID: 85. For information on principal accountant fees and services, see "Audit committee - Pre-approval Policies and Procedures" and "Audit committee - External Auditor Service Fees" on page 41 of the TC Energy Annual information form.

------

**OFF-BALANCE SHEET ARRANGEMENTS**

The Registrants have no off-balance sheet arrangements, as defined in this Form, other than the guarantees and commitments described in Note 31 of the Notes to the audited consolidated financial statements attached to this Form 40-F and incorporated herein by reference.

**DISCLOSURE OF CONTRACTUAL OBLIGATIONS**

For information on disclosure of contractual obligations, see "Financial Condition - Contractual obligations" in Management's discussion and analysis on page 96 of the TC Energy 2022 Management's discussion and analysis and audited consolidated financial statements.

**IDENTIFICATION OF THE AUDIT COMMITTEE**

Each Registrant has a separately-designated standing Audit committee. The members of each Audit committee as of February 13, 2023 (unless otherwise indicated) are:

---

| | |
|:---|:---|
| **Chair:<br>Members:** | **U. Power**<br>**C.F. Campbell**<sup>(1)</sup><br>**M.R. Culbert**<br>**W.D. Johnson**<br>**S.C. Jones**<br>**T. Vandal**<br>**D. Verma**<sup>(2)</sup> |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> Ms.Campbell was appointed as a member of the Audit Committee on June 7, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(2)</sup> Mr. Verma was appointed as a member of the Audit Committee on April 29, 2022.

**DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS**

Not Applicable.

**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 included or incorporated by reference in this document 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, including our expectations regarding the size, timing and outcome of the asset divestiture program

• expected dividend growth

• expected duration of discounted DRP

• 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 2022 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 document.

------

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 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 and divestitures

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

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

• the operating performance of our 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 reports we have filed with Canadian securities regulators and the Commission.

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.

------

**DOCUMENTS FILED AS PART OF THIS REPORT**

---

| | |
|:---|:---|
| **EXHIBITS** | **EXHIBITS** |
| 13.1 | <u>[TC Energy Corporation Annual information form for the year ended December 31, 202](a12312022tceaifenglish.htm)[2](a12312022tceaifenglish.htm)[.](a12312022tceaifenglish.htm)</u> |
| 13.2 | <u>[Management's discussion and analysis (included on pages](trp-12312022xmda.htm)[9](trp-12312022xmda.htm)[through](trp-12312022xmda.htm)[134](trp-12312022xmda.htm)[of the TC Energy Corporation 202](trp-12312022xmda.htm)[2](trp-12312022xmda.htm)[Management's discussion and analysis and audited consolidated financial statements to shareholders).](trp-12312022xmda.htm)</u> |
| 13.3 | <u>[202](trp-20221231_d2.htm)[2](trp-20221231_d2.htm)[Audited consolidated financial statements (included on pages](trp-20221231_d2.htm)[135](trp-20221231_d2.htm)[through](trp-20221231_d2.htm)[225](trp-20221231_d2.htm)[of the TC Energy Corporation 202](trp-20221231_d2.htm)[2](trp-20221231_d2.htm)[Management's discussion and analysis and audited consolidated financial statements to shareholders), including the Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm on the effectiveness of TC Energy's internal control over financial reporting as of December 31, 202](trp-20221231_d2.htm)[2](trp-20221231_d2.htm)[.](trp-20221231_d2.htm)</u> |
| 23.1 | <u>[Consent of KPMG LLP, Chartered Professional Accountants, Independent Registered Public Accounting Firm.](trp-12312022xexx231.htm)</u> |
| 31.1 | <u>[Certification of Chief Executive Officer regarding Periodic Report containing Financial Statements.](trp-12312022xexx311tcetcpl.htm)</u> |
| 31.2 | <u>[Certification of Chief Financial Officer regarding Periodic Report containing Financial Statements.](trp-12312022xexx312tcetcpl.htm)</u> |
| 32.1 | <u>[Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](trp-12312022xexx321tcetcpl.htm)</u> |
| 32.2 | <u>[Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](trp-12312022xexx322tcetcpl.htm)</u> |
| 99.1 | <u>[A copy of TC Energy Corporation's Code of Business Ethics Policy, as amended and filed with the Securities and Exchange Commission as part of a Form 6-K report on November 7, 2022, and incorporated by reference herein.](tce_tcpl-2022xcobexpolic.htm)</u> |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | Inline XBRL Taxonomy Definition Linkbase Document. |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

---

------

**SIGNATURES**

Pursuant to the requirements of the Exchange Act, each Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Calgary, Province of Alberta, Canada.

---

| | |
|:---|:---|
| **TC ENERGY CORPORATION** | **TC ENERGY CORPORATION** |
| **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** |
| (Registrants) | (Registrants) |
| By: | /s/ JOEL E. HUNTER |
|  | JOEL E. HUNTER<br>*Executive Vice-President and Chief Financial Officer* |
|  | Date: February 14, 2023 |

---

## Exhibit 13.1

EXHIBIT 13.1

**TC Energy Corporation**

2022 Annual information form

February 13, 2023

![tcenergyblackenga03.jpg](tcenergyblackenga03.jpg)

------

------

Contents

---

| | |
|:---|:---|
| **[PRESENTATION OF INFORMATION](#i85332b2253904784b2308e435ff3f5ce_10)** | **[2](#i85332b2253904784b2308e435ff3f5ce_10)** |
| **[FORWARD-LOOKING INFORMATION](#i85332b2253904784b2308e435ff3f5ce_13)** | **[2](#i85332b2253904784b2308e435ff3f5ce_13)** |
| **TC ENERGY[CORPORATION](#i85332b2253904784b2308e435ff3f5ce_16)** | **[4](#i85332b2253904784b2308e435ff3f5ce_16)** |
| &nbsp;&nbsp;&nbsp;&nbsp;[Corporate structure](#i85332b2253904784b2308e435ff3f5ce_19) | [4](#i85332b2253904784b2308e435ff3f5ce_19) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Intercorporate relationships](#i85332b2253904784b2308e435ff3f5ce_22) | [4](#i85332b2253904784b2308e435ff3f5ce_22) |
| **[GENERAL DEVELOPMENT OF THE BUSINESS](#i85332b2253904784b2308e435ff3f5ce_25)** | **[5](#i85332b2253904784b2308e435ff3f5ce_25)** |
| &nbsp;&nbsp;&nbsp;&nbsp;[Natural Gas Pipelines](#i85332b2253904784b2308e435ff3f5ce_28) | [6](#i85332b2253904784b2308e435ff3f5ce_28) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Liquids Pipelines](#i85332b2253904784b2308e435ff3f5ce_31) | [13](#i85332b2253904784b2308e435ff3f5ce_31) |
| &nbsp;&nbsp;&nbsp;&nbsp;Power and Energy Solutions | [15](#i85332b2253904784b2308e435ff3f5ce_34) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other Energy Solutions | [18](#i85332b2253904784b2308e435ff3f5ce_37) |
| **BUSINESS OF TC ENERGY** | **[19](#i85332b2253904784b2308e435ff3f5ce_40)** |
| &nbsp;&nbsp;&nbsp;&nbsp;[Natural Gas Pipelines](#i85332b2253904784b2308e435ff3f5ce_43) | [19](#i85332b2253904784b2308e435ff3f5ce_43) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Liquids Pipelines](#i85332b2253904784b2308e435ff3f5ce_46) | [19](#i85332b2253904784b2308e435ff3f5ce_46) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Regulation of Natural Gas Pipelines and Liquids Pipelines](#i85332b2253904784b2308e435ff3f5ce_49) | [20](#i85332b2253904784b2308e435ff3f5ce_49) |
| &nbsp;&nbsp;&nbsp;&nbsp;Power and Energy Solutions | [21](#i85332b2253904784b2308e435ff3f5ce_52) |
| **[GENERAL](#i85332b2253904784b2308e435ff3f5ce_55)** | **[22](#i85332b2253904784b2308e435ff3f5ce_55)** |
| &nbsp;&nbsp;&nbsp;&nbsp;[Employees](#i85332b2253904784b2308e435ff3f5ce_58) | [22](#i85332b2253904784b2308e435ff3f5ce_58) |
| &nbsp;&nbsp;&nbsp;&nbsp;Health, safety, sustainability and environmental protection and social policies | [22](#i85332b2253904784b2308e435ff3f5ce_61) |
| **[RISK FACTORS](#i85332b2253904784b2308e435ff3f5ce_67)** | **[26](#i85332b2253904784b2308e435ff3f5ce_67)** |
| **[DIVIDENDS](#i85332b2253904784b2308e435ff3f5ce_70)** | **[26](#i85332b2253904784b2308e435ff3f5ce_70)** |
| **[DESCRIPTION OF CAPITAL STRUCTURE](#i85332b2253904784b2308e435ff3f5ce_73)** | **[26](#i85332b2253904784b2308e435ff3f5ce_73)** |
| &nbsp;&nbsp;&nbsp;&nbsp;[Share capital](#i85332b2253904784b2308e435ff3f5ce_76) | [26](#i85332b2253904784b2308e435ff3f5ce_76) |
| **[CREDIT RATINGS](#i85332b2253904784b2308e435ff3f5ce_79)** | **[29](#i85332b2253904784b2308e435ff3f5ce_79)** |
| &nbsp;&nbsp;&nbsp;&nbsp;[Moody's](#i85332b2253904784b2308e435ff3f5ce_82) | [29](#i85332b2253904784b2308e435ff3f5ce_82) |
| &nbsp;&nbsp;&nbsp;&nbsp;[S&P](#i85332b2253904784b2308e435ff3f5ce_85) | [30](#i85332b2253904784b2308e435ff3f5ce_85) |
| &nbsp;&nbsp;&nbsp;&nbsp;Fitch | [30](#i85332b2253904784b2308e435ff3f5ce_88) |
| &nbsp;&nbsp;&nbsp;&nbsp;DBRS | [31](#i85332b2253904784b2308e435ff3f5ce_91) |
| **[MARKET FOR SECURITIES](#i85332b2253904784b2308e435ff3f5ce_94)** | **[32](#i85332b2253904784b2308e435ff3f5ce_94)** |
| &nbsp;&nbsp;&nbsp;&nbsp;[Common shares](#i85332b2253904784b2308e435ff3f5ce_97) | [32](#i85332b2253904784b2308e435ff3f5ce_97) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Preferred shares](#i85332b2253904784b2308e435ff3f5ce_100) | [33](#i85332b2253904784b2308e435ff3f5ce_100) |
| **[DIRECTORS AND OFFICERS](#i85332b2253904784b2308e435ff3f5ce_103)** | **[34](#i85332b2253904784b2308e435ff3f5ce_103)** |
| &nbsp;&nbsp;&nbsp;&nbsp;[Directors](#i85332b2253904784b2308e435ff3f5ce_106) | [34](#i85332b2253904784b2308e435ff3f5ce_106) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Board committees](#i85332b2253904784b2308e435ff3f5ce_109) | [36](#i85332b2253904784b2308e435ff3f5ce_109) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Officers](#i85332b2253904784b2308e435ff3f5ce_112) | [37](#i85332b2253904784b2308e435ff3f5ce_112) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Conflicts of interest](#i85332b2253904784b2308e435ff3f5ce_115) | [38](#i85332b2253904784b2308e435ff3f5ce_115) |
| **[CORPORATE GOVERNANCE](#i85332b2253904784b2308e435ff3f5ce_118)** | **[39](#i85332b2253904784b2308e435ff3f5ce_118)** |
| **[AUDIT COMMITTEE](#i85332b2253904784b2308e435ff3f5ce_121)** | **[40](#i85332b2253904784b2308e435ff3f5ce_121)** |
| &nbsp;&nbsp;&nbsp;&nbsp;[Relevant education and experience of members](#i85332b2253904784b2308e435ff3f5ce_124) | [40](#i85332b2253904784b2308e435ff3f5ce_124) |
| &nbsp;&nbsp;&nbsp;&nbsp;[Pre-approval policies and procedures](#i85332b2253904784b2308e435ff3f5ce_127) | [41](#i85332b2253904784b2308e435ff3f5ce_127) |
| &nbsp;&nbsp;&nbsp;&nbsp;[External auditor service fees](#i85332b2253904784b2308e435ff3f5ce_130) | [41](#i85332b2253904784b2308e435ff3f5ce_130) |
| **[LEGAL PROCEEDINGS AND REGULATORY ACTIONS](#i85332b2253904784b2308e435ff3f5ce_133)** | **[42](#i85332b2253904784b2308e435ff3f5ce_133)** |
| **[TRANSFER AGENT AND REGISTRAR](#i85332b2253904784b2308e435ff3f5ce_136)** | **[42](#i85332b2253904784b2308e435ff3f5ce_136)** |
| **[MATERIAL CONTRACTS](#i85332b2253904784b2308e435ff3f5ce_139)** | **[42](#i85332b2253904784b2308e435ff3f5ce_139)** |
| **[INTEREST OF EXPERTS](#i85332b2253904784b2308e435ff3f5ce_142)** | **[42](#i85332b2253904784b2308e435ff3f5ce_142)** |
| **[ADDITIONAL INFORMATION](#i85332b2253904784b2308e435ff3f5ce_145)** | **[42](#i85332b2253904784b2308e435ff3f5ce_145)** |
| **[GLOSSARY](#i85332b2253904784b2308e435ff3f5ce_148)** | **[43](#i85332b2253904784b2308e435ff3f5ce_148)** |
| **[SCHEDULE A](#i85332b2253904784b2308e435ff3f5ce_151)** | **[44](#i85332b2253904784b2308e435ff3f5ce_151)** |
| **[SCHEDULE B](#i85332b2253904784b2308e435ff3f5ce_154)** | **[45](#i85332b2253904784b2308e435ff3f5ce_154)** |

---

TC Energy **Annual information form 2022** \| 1

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Presentation of information

Throughout this Annual information form (AIF), the terms, we, us, our, the Company and TC Energy mean TC Energy Corporation and its subsidiaries. In particular, TC Energy includes references to TransCanada PipeLines Limited (TCPL). The term subsidiary, when referred to in this AIF, with reference to TC Energy means direct and indirect wholly-owned subsidiaries of, and legal entities controlled by, TC Energy or TCPL, as applicable.

Unless otherwise noted, the information contained in this AIF is given at or for the year ended December 31, 2022 (Year End). Amounts are expressed in Canadian dollars, unless otherwise indicated. Information in relation to metric conversion can be found at *Schedule A* to this AIF. The *Glossary* found at the end of this AIF contains certain terms defined throughout this AIF and abbreviations and acronyms that may not otherwise be defined in this document.

Certain portions of TC Energy's management's discussion and analysis dated February 13, 2023 (MD&A) are incorporated by reference into this AIF as stated below. The MD&A can be found on SEDAR (www.sedar.com) under TC Energy's profile.

Financial information is presented in accordance with United States (U.S.) generally accepted accounting principles (GAAP). We use certain financial measures that do not have any standardized meaning under GAAP and therefore they may not be comparable to similar measures presented by other entities. Refer to the *About this document – Non-GAAP measures* section of the MD&A for more information about the non-GAAP measures we use and a reconciliation to their GAAP equivalents, which section of the MD&A is incorporated by reference herein.

Forward-looking information

This AIF, including the MD&A disclosure incorporated by reference herein, contains certain information that is forward looking and is subject to important risks and uncertainties. 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 included or incorporated by reference in this AIF 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, including our expectations regarding the size, timing and outcome of the asset divestiture program

• expected dividend growth

• expected duration of discounted DRP

• 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 2022 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 AIF.

2 \| TC Energy **Annual information form 2022**

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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 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 and divestitures

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

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

• the operating performance of our 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 the MD&A and in other reports we have filed with Canadian securities regulators and the SEC.

As actual results could vary significantly from the forward-looking information, you should not put undue reliance on <br>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.

TC Energy **Annual information form 2022** \| 3

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TC Energy Corporation

**CORPORATE STRUCTURE**

Our head office and registered office are located at 450 – 1 Street S.W., Calgary, Alberta, T2P 5H1. TC Energy was incorporated pursuant to the provisions of the *Canada Business Corporations Act* (CBCA) on February 25, 2003 in connection with a plan of arrangement with TCPL (Arrangement), which established TC Energy as the parent company of TCPL. The Arrangement was approved by TCPL common shareholders on April 25, 2003 and, following court approval and the filing of Articles of Arrangement, the Arrangement became effective on May 15, 2003. TCPL continues to carry on business as the principal operating subsidiary of TC Energy. TC Energy does not hold any material assets directly other than the common shares of TCPL and receivables from certain of TC Energy's subsidiaries.

**INTERCORPORATE RELATIONSHIPS**

The following diagram presents the name and jurisdiction of incorporation, continuance or formation of TC Energy's principal subsidiaries as at Year End. Each of the subsidiaries shown has total assets that exceeded 10 per cent of the consolidated assets of TC Energy as at Year End or revenues that exceeded 10 per cent of the consolidated revenues of TC Energy as at Year End. TC Energy beneficially owns, controls or directs, directly or indirectly, 100 per cent of the voting shares or units in each of these subsidiaries.

![tce_arx2022xaifenglishxv1-.jpg](tce_arx2022xaifenglishxv1-.jpg)

TC Energy Corporation Canada TransCanada PipeLines Limited Canada TransCanada PipeLine USA Ltd. Nevada TransCanada American Investments Ltd. Delaware TransCanada Oil Pipelines Inc. Delaware Columbia Pipeline Group, Inc. Delaware Columbia Gas Transmission, LLC Delaware NOVA Gas Transmission Ltd. Alberta 701671 Alberta Ltd.<sup>1</sup> Alberta TransCanada Mexican Investments Ltd.<sup>1</sup> Alberta TransCanada PipeLines Services Ltd.1 Alberta<br>

The above diagram does not include all of the subsidiaries of TC Energy. The total assets and revenues of excluded subsidiaries in the aggregate did not exceed 20 per cent of the consolidated assets of TC Energy as at Year End or consolidated revenues of TC Energy as at Year End.

<sup>1</sup> 701671 Alberta Ltd., TransCanada Mexican Investments Ltd. and TransCanada PipeLines Services Ltd. assets and revenues do not exceed 10 per cent of the total consolidated assets or revenues of TC Energy but have been included to meet the total consolidated revenues and assets criteria of excluded subsidiaries threshold of less than 20 per cent.<br>

4 \| TC Energy **Annual information form 2022**

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General development of the business

We operate in three core businesses – Natural Gas Pipelines, Liquids Pipelines and Power and Energy Solutions. In order to provide information that is aligned with how management decisions about our businesses are made and how performance of our businesses is assessed, our results are reflected in five operating segments: Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines and Power and Energy Solutions. We also have a Corporate segment consisting of corporate and administrative functions that provide governance, financing and other support to TC Energy's business segments.

Natural Gas Pipelines and Liquids Pipelines are principally comprised of our respective natural gas and liquids pipelines in Canada, the U.S. and Mexico, as well as our regulated natural gas storage operations in the U.S.

Power and Energy Solutions includes our power operations and our unregulated natural gas storage business in Canada.

Summarized below are significant developments that have occurred in our Natural Gas Pipelines, Liquids Pipelines and Power and Energy Solutions businesses, respectively, and certain acquisitions, dispositions, events or conditions which have had an influence on those developments, during the last three financial years and year to date in 2023. Further information about developments in our business, including changes that we expect will occur in 2023, can be found in the *Natural Gas Pipelines Business, Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines,* and *Power and Energy Solutions* sections of the MD&A, which sections of the MD&A are incorporated by reference herein.

TC Energy **Annual information form 2022** \| 5

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**NATURAL GAS PIPELINES**

**Developments in the Canadian Natural Gas Pipelines Segment** 

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **CANADIAN REGULATED PIPELINES** | **CANADIAN REGULATED PIPELINES** |
| **NGTL System - 2021 Expansion Program** | **NGTL System - 2021 Expansion Program** |
| 2020 | In 2020, we received regulatory approval for an expansion program (2021 Expansion Program) within our natural gas gathering and transportation system for the WCSB (NGTL System) and began progressing construction activities. |
| 2021 | In 2021, construction activities on the 2021 Expansion Program continued to progress with approximately $0.9 billion in facilities placed in service as of December 31, 2021. |
| 2022 | The 2021 Expansion Program consists of 344 km (214 miles) of new pipeline, three new compressor units and associated facilities and is expected to add 1.59 PJ/d (1.45 Bcf/d) of incremental capacity to the NGTL System. Construction of the expansion program is nearing completion with an estimated capital cost of the program of $3.5 billion due to regulatory and weather delays, along with inflationary pressures throughout construction. As of December 31, 2022, $3.0 billion of the program's facilities have been placed in service, adding 1.4 PJ/d (1.3 Bcf/d) of incremental capacity to the NGTL System. The facilities required to declare the remaining capacity are expected to be placed in service in first quarter 2023. |
| **NGTL System - 2022 Expansion Program** | **NGTL System - 2022 Expansion Program** |
| 2021 | In 2021, we received regulatory approval for an expansion program (2022 Expansion Program). Construction activities began in September 2021 with anticipated in-service dates commencing in fourth quarter 2022. |
| 2022 | The 2022 Expansion Program consists of approximately 166 km (103 miles) of new pipeline, one compressor unit and associated facilities and is expected to provide incremental capacity of approximately 773 TJ/d (722 MMcf/d) to meet firm-receipt and intra-basin delivery requirements with eight-year minimum terms. Inflationary pressures and regulatory delays have contributed to an increased estimated program cost of $1.5 billion. As of December 31, 2022, $0.6 billion of facilities have been placed in service, with the remaining facilities expected to be placed in service in the first half of 2023.  |
| **2023 NGTL System Intra-Basin Expansion** | **2023 NGTL System Intra-Basin Expansion** |
| 2020 | In 2020, we approved the NGTL System Intra-Basin Expansion, subject to required regulatory approval, for a contracted incremental intra-basin delivery capacity of 331 TJ/d (309 MMcf/d) for 15-year terms at an estimated capital cost of $0.9 billion. |
| 2021 | In 2021, we received regulatory approval to construct and operate the NGTL System Intra-Basin Expansion. Based on the outcome of the 2021 Capacity Optimization Open Season, changes in expected supply reduced the scope of the program to 23 km (14 miles) of new pipeline and two new compressor stations and is underpinned by approximately 255 TJ/d (238 MMcf/d) of new firm-service contracts with 15-year terms, with an estimated capital cost of $0.6 billion. |
| 2022 | Construction activities commenced in 2022 with anticipated in-service dates commencing in late 2023. |
| **NGTL System/Foothills West Path Delivery Program** | **NGTL System/Foothills West Path Delivery Program** |
| 2020 | In 2020, we filed applications to construct and operate certain facilities under the NGTL System/Foothills West Path Delivery Program with an estimated capital cost of $0.8 billion and received regulatory approvals related to $0.2 billion of such facilities. |
| 2021 | In 2021, we received additional regulatory approvals on pending applications to construct and operate $0.4 billion of the facilities and submitted regulatory applications for the remaining facilities under the NGTL System/Foothills West Path Delivery Program. |
| 2022 | The NGTL System/Foothills West Path Delivery Program is a multi-year expansion of the NGTL System and Foothills system to facilitate incremental contracted export capacity connecting to the Gas Transmission Northwest pipeline system (GTN System). The combined NGTL and Foothills program consists of approximately 107 km (66 miles) of pipeline and associated facilities and is underpinned by 275 TJ/d (258 MMcf/d) of new firm-service contracts with terms that exceed 30 years. In 2022, construction was initiated on three of the six pipeline segments with one pipeline segment being placed in service in fourth quarter 2022 and construction continuing into 2023 on the other two segments. The primary regulatory approvals have been received with certain required ancillary permits still outstanding and are anticipated in the first half of 2023. Terrain complexity, inflationary pressures, permitting delays and additional permitting conditions have contributed to an estimated program cost of $1.6 billion. As of December 31, 2022, $0.3 billion of facilities have been placed in service, with all remaining facilities forecasted to be placed in service throughout 2023, subject to receiving timely approval of outstanding ancillary permits. |

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6 \| TC Energy **Annual information form 2022**

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **Valhalla North and Berland River (VNBR) Project**  | **Valhalla North and Berland River (VNBR) Project**  |
| 2022 | In November 2022, we sanctioned the VNBR project which will serve aggregate system requirements and connect migrating supply to key demand markets, providing incremental capacity on the NGTL System of approximately 527 TJ/d (500 MMcf/d) and is expected to contribute to lower GHG emission intensity for the overall system. With an estimated capital cost of $0.6 billion, the project consists of approximately 33 km (21 miles) of new pipeline, one new non-emitting electric compressor unit and associated facilities. An application for the project is expected to be submitted to the CER in third quarter 2023, with an anticipated in-service date in 2026 subject to regulatory approval. |
| **NGTL System - North Montney Mainline (NMML)** | **NGTL System - North Montney Mainline (NMML)** |
| 2020 | In March 2020, the CER issued a decision approving all elements of the NGTL System Rate Design and Services Application as filed. In January 2020, the $1.1 billion Aitken Creek section of the North Montney project was placed in service with the final section of the project, Kahta South, placed in service May 2020. All compressor stations, pipeline sections and 11 of the 13 meter stations were complete and operational as of December 31, 2020. |
| 2021 | In 2021, the final two meter stations were placed in service. |
| **NGTL System - Revenue Requirement Settlements** | **NGTL System - Revenue Requirement Settlements** |
| 2020 | Following the expiration of the 2018-2019 Settlement, the NGTL System operated under interim tolls until, in August 2020, the CER approved the NGTL System's 2020-2024 Revenue Requirement Settlement Application. Effective January 1, 2020, the NGTL System is operating under the 2020-2024 Revenue Requirement Settlement (2020-2024 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.  |
| **Canadian Mainline Settlement** | **Canadian Mainline Settlement** |
| 2020 | In 2020, the Canadian Mainline operated under the terms of the 2015-2030 Tolls Application, which was approved in 2014 and expired on December 31, 2020. The terms of the 2015-2030 Tolls Application included an ROE of 10.1 per cent on deemed common equity of 40 per cent. In April 2020, the CER approved a six-year unanimously supported negotiated settlement (2021-2026 Mainline Settlement) between the Canadian Mainline, its customers and other stakeholders. |
| 2021 | In 2021, the Canadian Mainline began operating under the 2021-2026 Mainline Settlement. |
| 2022 | The Canadian Mainline continues to operate 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. |
| **LNG PIPELINE PROJECTS** | **LNG PIPELINE PROJECTS** |
| **Coastal GasLink**  | **Coastal GasLink**  |
| 2020 | In May 2020, we completed the sale of a 65 per cent equity interest in Coastal GasLink Pipeline Limited Partnership (Coastal GasLink LP). As part of the transaction, we were contracted by Coastal GasLink LP to construct and operate the pipeline. Effective with closing, we commenced recognition of development fee revenue earned during the construction of the pipeline for management and financial services provided and began accounting for our remaining 35 per cent investment using equity accounting. In conjunction with the equity sale, Coastal GasLink LP entered into project-level credit facilities which will fund the majority of the construction costs of Coastal GasLink. |
| 2021 | As a result of scope changes, previous permit delays compared to the original construction schedule and the impacts from COVID-19, including a health order issued by the British Columbia Provincial Health Officer restricting the number of workers on site from late December 2020 until mid-April 2021, project costs increased significantly along with a delay to project completion compared to the original project cost and schedule. Coastal GasLink entered into a dispute with LNG Canada with respect to the recognition of certain costs and the impacts on schedule, the resolution of which will determine the ultimate level of debt financing required to fund the project and the amounts to be contributed as equity by Coastal GasLink LP partners, including TC Energy. As an interim measure, TC Energy executed a subordinated loan agreement to provide additional temporary financing to the project, if necessary, of up to $3.3 billion as a bridge to a required increase in the $6.8 billion project-level financing to fund incremental costs. As of December 31, 2021, the project was more than 59 per cent complete. |

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TC Energy **Annual information form 2022** \| 7

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| | |
|:---|:---|
| **Date** | **Description of development** |
| 2022 | The 670 km (416 mile) Coastal GasLink pipeline project is currently under construction and will have an initial capacity of approximately 2.2 PJ/d (2.1 Bcf/d). Once complete, the pipeline will transport natural gas from a receipt point in the Dawson Creek area of British Columbia to a natural gas liquefaction facility near Kitimat, British Columbia. The LNG facility, which is owned by LNG Canada, is also currently under construction. Transportation service on the pipeline is underpinned by 25-year TSAs (with renewal provisions) with each of the five LNG Canada participants. We hold a 35 per cent ownership interest in Coastal GasLink LP, the partnership entity that owns the pipeline and that has been contracted to develop, construct and operate the pipeline.<br>The Coastal GasLink pipeline project is approximately 84 per cent complete. The entire route has been cleared, grading is more than 96 per cent complete and more than 510 km of pipeline has been welded, lowered and backfilled with restoration activities underway in many areas.<br>In March 2022, we announced the signing of option agreements to sell up to a 10 per cent equity interest in Coastal GasLink LP to Indigenous communities across the project corridor. The equity option is exercisable after commercial in-service of the pipeline, subject to customary regulatory approvals and consents, including the consent of LNG Canada.<br>In July 2022, Coastal GasLink LP executed definitive agreements with LNG Canada, TC Energy and the other Coastal GasLink LP partners (collectively, the July 2022 agreements) that amended existing project agreements to address and resolve disputes over certain incurred and anticipated costs of the Coastal GasLink pipeline project. The revised agreements incorporated a target date for mechanical completion of December 31, 2023 and a new capital cost for the project to reflect, among other changes, scope increases and the impacts of COVID-19, weather and other events outside the control of Coastal GasLink LP. <br>Subsequent to execution of the July 2022 agreements, the project has faced material cost pressures that reflect challenging conditions in the Western Canadian labour market, shortages of skilled labour, impacts of contractor underperformance and disputes, as well as other unexpected events, including drought conditions and erosion and sediment control challenges. A comprehensive cost and schedule risk analysis (CSRA) was conducted to assess current market conditions and potential risks and uncertainties facing the remaining project scope. As a result of the CSRA, the estimate of the cost to complete the pipeline has increased to approximately $14.5 billion. This estimate excludes potential cost recoveries and incorporates contingencies for certain factors that may be outside the control of Coastal GasLink LP, such as labour conditions, contractor underperformance and weather-related events. The work plan continues to target mechanical completion by year-end 2023, with commissioning and restoration work continuing into 2024 and 2025. TC Energy expects to fund the incremental project costs and is actively pursuing cost mitigants and recoveries that may partially offset a portion of these costs, some of which may not be conclusively determined until after the pipeline is in service. The CSRA review also considered the potential impact of an extension of construction well into 2024. In that event, costs would increase further by up to $1.2 billion.<br>As a result, we completed a valuation assessment and concluded that the fair value of our 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 and, as a result, we recognized a pre-tax impairment of $3.0 billion ($2.6 billion after tax) in fourth quarter 2022. Due to the funding provisions of the July 2022 agreements, we expect to fund an additional $3.3 billion related to the revised estimated capital cost to complete the Coastal GasLink pipeline, and a significant portion of this future investment in Coastal GasLink LP is expected to be impaired. We will continue to assess for other-than-temporary declines in the fair value of our investment and the extent of any additional impairment charges will depend on our valuation assessment performed at the respective reporting date. <br>Going forward, project costs will be funded in part by existing project-level credit facilities with a revised total capacity of $8.4 billion. Additional equity financing required to fund construction of the pipeline 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 as a result of the increase in capital costs will be predominantly funded by us, except under certain conditions, but will not result in a change to our 35 per cent ownership. We currently estimate our portion of the equity contributions to Coastal GasLink LP over the project life to be approximately $5.4 billion, including contributions recognized to the end of 2022. |

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8 \| TC Energy **Annual information form 2022**

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**Developments in the U.S. Natural Gas Pipelines Segment** 

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **U.S. NATURAL GAS PIPELINES - COLUMBIA PIPELINE GROUP** | **U.S. NATURAL GAS PIPELINES - COLUMBIA PIPELINE GROUP** |
| **Columbia Gas Section 4 Rate Case** | **Columbia Gas Section 4 Rate Case** |
| 2020 - 2022 | Columbia Gas filed a Section 4 rate case with FERC in July 2020 requesting an increase to its maximum transportation rates effective February 1, 2021. In July 2021, Columbia Gas notified FERC that it reached a settlement-in-principle with its customers addressing all remaining issues in the case, including but not limited to, the resolution of rates and continuation of Columbia Gas's modernization program. Columbia Gas reached a settlement with its customers effective February 2021 and received FERC approval in February 2022. As part of the settlement, there is a moratorium on any further rate changes until April 1, 2025 and Columbia Gas must file for new rates with an effective date no later than April 1, 2026. Previously accrued rate refund liabilities were refunded to customers, including interest, in second quarter 2022. |
| **Columbia Gas - VR Project** | **Columbia Gas - VR Project** |
| 2021 | In July 2021, we approved the VR Project, a delivery market project on Columbia Gas that will replace and upgrade certain facilities while reducing emissions along portions of the Columbia Gas pipeline system in principal delivery markets. The enhanced facilities are expected to improve reliability of the system and allow for additional transportation services to address growing demand under long-term contracts while reducing direct carbon dioxide (CO2e) emissions.  |
| 2022 | The VR Project filed its FERC certificate application in third quarter 2022 with expected in-service in 2025. The project has an estimated capital cost of US$0.7 billion and is subject to customary conditions precedent and normal-course regulatory approvals. |
| **Columbia Gas - Modernization II** | **Columbia Gas - Modernization II** |
| 2018 - 2020 | Columbia Gas and its customers entered into a settlement arrangement (Modernization II), approved by FERC, which provides recovery and return on investment to modernize its system, improve system integrity, and enhance service reliability and flexibility. The Modernization II program includes, among other things, replacement of aging pipeline and compressor facilities, enhancements to system inspection capabilities, and improvements in control systems. The Modernization II program was approved for up to US$1.1 billion of work starting in 2018 and to be completed through 2020. As per the terms of the arrangement, facilities in service by October 31 of each year collect revenues effective February 1 of the following year until the arrangement is terminated upon new rates becoming effective once Columbia Gas files a Section 4 rate case under the *Natural Gas Act*. Capital spend on the Modernization II program was completed in fourth quarter 2020. |
| **Columbia Gas - Modernization III** | **Columbia Gas - Modernization III** |
| 2021 - 2022 | Columbia Gas and its customers entered into a settlement arrangement (Modernization III) which provides recovery and return on investment to modernize its system, improve system safety, integrity, compliance and reliability. The Modernization III program includes, among other things, replacement of aging pipeline and compressor facilities, enhancements to system inspection capabilities, and improvements in control systems as well as projects designed to increase energy efficiency and reduce emissions. The program was approved for up to US$1.2 billion of work starting in 2021 and is to be completed through 2024. As per the terms of the arrangement, facilities in service by November 30 of each year collect revenues effective April 1 of the following year until the arrangement is terminated. New rates will become effective once Columbia Gas files a subsequent Section 4 rate case under the *Natural Gas Act*. |
| **Columbia Gas - KO Transmission Enhancement Acquisition** | **Columbia Gas - KO Transmission Enhancement Acquisition** |
| 2022 | In April 2022, we approved the approximately US$80 million acquisition of KO Transmission assets to be integrated into the Columbia Gas pipeline. The expanded footprint is expected to provide additional last-mile connectivity of Columbia Gas into northern Kentucky and southern Ohio to growing liquid distribution company markets and a platform for future capital investments including future conversions of coal-fueled power plants in the region. FERC approval for the acquisition was received in November 2022 and the transaction closed in February 2023. |
| **Columbia Gulf - Louisiana XPress Project** | **Columbia Gulf - Louisiana XPress Project** |
| 2022 | The Louisiana XPress project was phased into service over the course of third quarter 2022. The US$0.4 billion project connects natural gas supply directly to U.S. Gulf Coast LNG export markets with the addition of three greenfield mid-point compressor stations along Columbia Gulf.  |

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TC Energy **Annual information form 2022** \| 9

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **OTHER U.S. NATURAL GAS PIPELINES** | **OTHER U.S. NATURAL GAS PIPELINES** |
| **ANR Pipeline Company (ANR Pipeline) - Grand Chenier XPress** | **ANR Pipeline Company (ANR Pipeline) - Grand Chenier XPress** |
| 2021 | The Grand Chenier XPress project will connect supply directly to Gulf Coast LNG export markets with auxiliary enhancements at its existing Eunice Compressor Station, the addition of a mid-point compressor station and a new point of delivery interconnection, meter and associated facilities along ANR Pipeline. Phase I of Grand Chenier XPress, an expansion project on ANR went into service April 2021. Phase II was placed in service January 2022.  |
| **ANR Pipeline - Alberta XPress Project** | **ANR Pipeline - Alberta XPress Project** |
| 2020 | In February 2020, we approved the Alberta XPress project. |
| 2023 | The Alberta XPress project was placed in service January 2023. The US$0.2 billion expansion project on ANR utilizes existing capacity on the Great Lakes and Canadian Mainline systems to connect growing supply from the WCSB to U.S. Gulf Coast LNG export markets.  |
| **ANR Pipeline - Elwood Power Project/ANR Horsepower Replacement** | **ANR Pipeline - Elwood Power Project/ANR Horsepower Replacement** |
| 2020 | In July 2020, we approved the Elwood Power Project/ANR Horsepower Replacement. |
| 2022 | The Elwood Power Project/ANR Horsepower Replacement, an US$0.3 billion expansion project that is expected to replace, upgrade and modernize certain facilities while reducing GHG emissions along a highly utilized section of the ANR pipeline system was placed in service November 2022. The enhanced facilities are expected to improve reliability of the ANR pipeline system and also allow for additional contracted transportation services of approximately 132 TJ/d (123 MMcf/d) to be provided to an existing power plant near Joliet, Illinois.  |
| **ANR Pipeline - Wisconsin Access Project** | **ANR Pipeline - Wisconsin Access Project** |
| 2020 | In October 2020, we approved the Wisconsin Access project. |
| 2022 | The Wisconsin Access project, an US$0.2 billion project that is expected to replace, upgrade and modernize certain facilities while reducing GHG emissions along portions of the ANR pipeline system was placed in service November 2022. The enhanced facilities are expected to improve reliability of the ANR pipeline system and also allow for additional contracted transportation services of approximately 77 TJ/d (72 MMcf/d) to be provided to utilities serving the midwestern U.S. under long-term contracts.  |
| **ANR Pipeline - WR Project** | **ANR Pipeline - WR Project** |
| 2021 | In November 2021, we approved the WR Project, a delivery market project on ANR that will replace and upgrade certain facilities while reducing emissions along portions of the ANR pipeline system in principal delivery markets. The enhanced facilities are expected to improve reliability of the system and allow for additional transportation services to address growing demand in the midwestern U.S. under long-term contracts while also reducing CO2e emissions. The estimated US$0.8 billion project is expected to be placed in service in fourth quarter 2025. |
| 2022 | The WR Project filed its FERC certificate application in fourth quarter 2022. |
| **ANR Pipeline - Ventura XPress Project** | **ANR Pipeline - Ventura XPress Project** |
| 2022 | In December 2022, we approved the Ventura XPress Project, a set of ANR projects designed to improve base system reliability and allow for additional long-term contracted transportation services to a point of delivery on the Northern Border pipeline at Ventura, Iowa. The estimated US$0.2 billion project is expected to be placed in service in 2025. |
| **ANR Section 4 Rate Case** | **ANR Section 4 Rate Case** |
| 2022 | ANR filed a Section 4 rate case with FERC in January 2022 requesting an increase to ANR's maximum transportation rates effective August 2022, subject to refund upon completion of the rate proceeding. In November 2022, ANR notified FERC that it reached a settlement-in-principle with its customers. In January 2023, the presiding Administrative Law Judge certified the settlement as uncontested and recommended it for approval by FERC. While there is no timeframe in which FERC must act on the settlement, in line with other recent rate case settlement approval timelines, we expect to receive FERC approval of the settlement in early 2023. |
| **Gas Transmission Northwest LLC (GTN) - GTN XPress** | **Gas Transmission Northwest LLC (GTN) - GTN XPress** |
| 2019-2022 | In October 2019, TC PipeLines, LP (TCLP) approved the GTN Reliability and XPress projects which is a set of reliability and expansion projects on the GTN System that will support the existing system and provide for the transport of additional volumes enabled by the NGTL System's West Path Delivery Program. The expansion project filed its FERC certificate application for the US$75 million expansion project in fourth quarter 2021, and is expected to be placed in service in 2023. (see the *Developments in the Canadian Natural Gas Pipelines Segment – Canadian Regulated Pipelines – NGTL System/Foothills West Path Delivery Program* section above).  |

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10 \| TC Energy **Annual information form 2022**

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **GTN Rate Case Settlement** | **GTN Rate Case Settlement** |
| 2021 | In September 2021, GTN filed an uncontested rate settlement which would set new recourse rates for GTN effective January 1, 2022 and institute a rate moratorium through December 31, 2023. The uncontested rate settlement was approved by FERC in November 2021. The revised rates are not expected to have a significant impact on our U.S. Natural Gas Pipelines segment comparable earnings. In addition, GTN must file for new rates no later than April 1, 2024. |
| **Gillis Access Project** | **Gillis Access Project** |
| 2022 | In November 2022, we sanctioned the development of the Gillis Access project, a 1.5 Bcf/d greenfield pipeline system that will connect supplies from the Haynesville basin at Gillis to markets elsewhere in Louisiana. The 68 km (42 mile) Louisiana header system will also enable the rapidly growing Louisiana LNG export market to access Haynesville-sourced gas production as well as create a platform for further growth into the southeast Louisiana markets. The estimated US$0.4 billion project is expected to be placed in service in 2024. <br>In February 2023, we approved a 63 km (39 mile), 1.4 Bcf/d extension of the Gillis Access project to further connect supplies from the Haynesville basin at Gillis. Subject to customer FID, the estimated US$0.3 billion project is expected to be placed in service in 2025. |
| **TC PipeLines, LP** | **TC PipeLines, LP** |
| 2021 | In March 2021, we completed the acquisition of all of the outstanding common units of TCLP not beneficially owned by TC Energy, resulting in TCLP becoming an indirect, wholly-owned subsidiary of TC Energy. Upon close of the transaction and in accordance with the acquisition terms, TCLP common unitholders received 0.70 common shares of TC Energy for each issued and outstanding publicly-held TCLP common unit resulting in the issuance of 38 million TC Energy common shares valued at approximately $2.1 billion, net of transaction costs. |

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TC Energy **Annual information form 2022** \| 11

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**Developments in the Mexico Natural Gas Pipelines Segment**

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **MEXICO NATURAL GAS PIPELINES** | **MEXICO NATURAL GAS PIPELINES** |
| **Southeast Gateway Pipeline and Alliance with the CFE** | **Southeast Gateway Pipeline and Alliance with the CFE** |
| 2022 | 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. This alliance consolidates previous Transportation Service Agreements (TSA) executed between TC Energy's Mexico-based subsidiary Transportadora de Gas Natural de la Huasteca (TGNH) and the CFE in connection with our natural gas pipeline assets in central Mexico (including the Tamazunchale, Villa de Reyes and Tula pipelines) under a single, U.S. dollar-denominated, take-or-pay contract that extends through 2055. This agreement also resolved and terminated previous international arbitrations with the CFE related to the Villa de Reyes and Tula pipelines. <br>In connection with the strategic alliance, we reached a Final Investment Decision (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.<br>Subject to regulatory approvals from Mexico's economic competition commission 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. Regulatory approvals related to the CFE's equity participation in TGNH are expected to take up to 24 months. |
| **Tula** | **Tula** |
| 2021 | In 2021, we worked to procure necessary land access on the west section of the Tula pipeline to finalize its construction. The central segment construction was delayed due to pending Indigenous consultation processes under the responsibility of the Secretary of Energy. In 2021, we advanced the resolution of disputed contract terms with the signing of a Memorandum of Understanding (MOU) in July 2021 outlining main settlement principles. Feasibility assessments commenced with the CFE under the MOU to jointly evaluate potential alternatives to complete the Tula pipeline. |
| 2022 | We placed the east section of the Tula pipeline into commercial service in third quarter 2022. Additionally, TC Energy and the CFE agreed to jointly develop and complete the central segment of the Tula pipeline, subject to an FID in the first half of 2023. We are working with the CFE on the Tula pipeline's west section to procure necessary land access and resolve legal claims. |
| **Villa de Reyes** | **Villa de Reyes** |
| 2021 | In 2021, we advanced the resolution of disputed contract terms with the signing of an MOU in July 2021 outlining main settlement principles. Villa de Reyes construction is ongoing but completion was delayed due to COVID-19 contingency measures and challenges gaining access to land in certain local communities.  |
| 2022 | We achieved the mechanical completion of the Villa de Reyes pipeline's lateral section in second quarter 2022, while the Villa de Reyes pipeline's north section was placed in commercial service in third quarter 2022. We are working with the CFE, and expect the lateral and south sections of the Villa de Reyes pipeline to begin commercial service in 2023. |
| **Sur de Texas** | **Sur de Texas** |
| 2020 | In March 2020, we recorded US$55 million of revenue related to fees associated with the successful completion of the Sur de Texas pipeline.  |

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Further information about developments in the Natural Gas Pipelines business, including changes that we expect will occur in 2022, can be found in the MD&A in the *Natural Gas Pipelines Business* section; *Canadian Natural Gas Pipelines – Understanding our Canadian Natural Gas Pipelines Segment*, *Significant events*, *Financial results* and *Outlook* sections; *U.S. Natural Gas Pipelines – Understanding our U.S. Natural Gas Pipelines Segment*, *Significant events*, *Financial results* and *Outlook* sections; and *Mexico Natural Gas Pipelines – Understanding our Mexico Natural Gas Pipelines Segment*, *Significant events*, *Financial results* and *Outlook* sections, which sections of the MD&A are incorporated by reference herein.

12 \| TC Energy **Annual information form 2022**

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**LIQUIDS PIPELINES** 

**Developments in the Liquids Pipelines Segment**

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **Keystone Pipeline System** | **Keystone Pipeline System** |
| 2022 | Approximately 20,000 Bbl/d of long-term contracts from the 2019 Open Season were commercialized in April 2022 with an additional 10,000 Bbl/d in September 2022. In 2019 and 2020, certain Keystone customers initiated complaints before FERC and the CER. The complaints indicated that Keystone had provided insufficient information to support its 2020 and 2021 estimated variable rates and challenged the just and reasonableness of Keystone's committed rates charged dating back to 2018 and 2020 at FERC and the CER, respectively. CER proceedings concluded in September 2022 and in December 2022, the CER issued a decision which has resulted in a one-time adjustment related 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. The FERC hearing commenced in June 2022 and concluded in August, with a judiciary recommendation expected to be issued in early 2023. In December 2022, a pipeline rupture occurred in Washington County, Kansas on the Cushing Extension section of the Keystone Pipeline System. Recovery and remediation efforts are underway and we are committed to fully remediating the site. To date, our oil recovery efforts continue to progress successfully with 90 per cent of the 12,937 barrel measured release volume recovered. The affected segment was restarted following approval of the repair and restart plan by PHMSA. Per the terms of a Corrective Action Order, the pipeline is required to operate under a pressure de-rate until the conditions are satisfied. The cause of the release remains the subject of an investigation. At December 31, 2022, we accrued an environmental remediation liability of $650 million, before expected insurance recoveries and not including potential fines and penalties which are currently indeterminable. This amount represents our estimate, based on certain assumptions, of costs relating to emergency response, environmental remediation and cleanup activities required to fully remediate the site. Although it is reasonably possible that we will incur additional costs beyond such amount, we are currently unable to estimate the range of possible additional costs. We have appropriate insurance policies in place and it is probable that the majority of estimated environmental remediation costs will be eligible for recovery under our existing insurance coverage. We expect remediation activities to be substantially completed within a year. |
| **Keystone XL** | **Keystone XL** |
| 2020 | In April, 2020 we proceeded with construction of the Keystone XL pipeline. We advanced construction of 180 km (112 miles) of pipeline and five pump stations in Canada, 12 pump stations in the United States, and completed the U.S./Canada border crossing in June 2020. As part of the Keystone XL pipeline funding plan, the Government of Alberta invested approximately US$0.8 billion in equity as of December 31, 2020 which substantially funded construction costs through the end of 2020. In August 2020, we announced that the Keystone XL pipeline had committed to construct the project using all union labour in the U.S. along with committing in excess of $10 million to create a Green Jobs Training Fund to help train union workers on renewable energy projects. In November 2020, we signed an agreement with Natural Law Energy, which included a potential investment by five First Nations in Alberta and Saskatchewan, of up to $1.0 billion in Keystone XL and future liquids projects. |
| 2021 | Following the revocation of the 2019 Presidential Permit for the Keystone XL pipeline project in January 2021, and after a comprehensive review of options in consultation with our partner, the Government of Alberta, in June 2021, we terminated the Keystone XL pipeline project. We determined that the carrying amount of these assets was no longer fully recoverable. We recognized an asset impairment charge, net of expected contractual recoveries and other contractual and legal obligations related to termination activities, of $2.8 billion ($2.1 billion after tax) for the year ended December 31, 2021 which was excluded from comparable earnings. Although we recorded a $2.1 billion after-tax asset impairment charge, net of expected contractual recoveries and other contractual and legal obligations related to the Keystone XL pipeline project termination activities, a significant portion of this amount was shared with the Government of Alberta, thereby reducing the net financial impact to us. After the 2019 Presidential Permit was revoked, construction activities ceased except for certain activities required to clean up and reclaim worksites in adherence to our commitment to safety, the environment and our regulatory requirements. Right-of-way clean up and restoration is substantially complete while termination activities continued through 2022. In November 2021, we filed a Request for Arbitration to formally initiate a legacy NAFTA claim to recover economic damages resulting from the revocation of the 2019 Presidential Permit for the Keystone XL pipeline project. |
| 2022 | In September 2022, the International Centre for Settlement of Investment Disputes formally constituted a tribunal to hear our Request for Arbitration under NAFTA where we are seeking to recover more than US$15 billion in economic damages resulting from the revocation of the Presidential Permit for the Keystone XL pipeline project. This claim is in an early stage and the timing and outcome is unknown at present. Keystone XL termination activities undertaken in 2022, including asset dispositions and preservation, will continue throughout 2023. We will continue to coordinate with regulators, stakeholders and Indigenous groups to meet our environmental and regulatory commitments.  |

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TC Energy **Annual information form 2022** \| 13

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **Northern Courier** | **Northern Courier** |
| 2021 | In November 2021, we sold our remaining 15 per cent equity interest in Northern Courier for $35 million in proceeds. |
| **Port Neches** | **Port Neches** |
| 2021 | In March 2021, we entered a joint venture with Motiva Enterprises (Motiva) to construct the US$152 million Port Neches Link pipeline system which will connect the Keystone Pipeline System to Motiva's Port Neches Terminal, which supplies 630,000 Bbl/d to their Port Arthur refinery. This common carrier pipeline system will also include facilities to tie in additional liquids terminals to the Keystone Pipeline System with other downstream infrastructure. |
| 2022 | Construction of the Port Neches Link Pipeline System is nearly complete. Supply chain induced material shipment delays resulted in delayed completion from the second half of 2022 to first quarter 2023. |

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Further information about developments in the Liquids Pipelines business, including changes that we expect will occur in 2023, can be found in the MD&A in the *Liquids Pipelines – Understanding our Liquids Pipelines business*, *Significant events*, *Financial results* and *Outlook* sections, which sections of the MD&A are incorporated by reference herein.

14 \| TC Energy **Annual information form 2022**

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**POWER AND ENERGY SOLUTIONS** 

**Developments in the Power and Energy Solutions Segment**

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **CANADIAN POWER** | **CANADIAN POWER** |
| **Saddlebrook Solar Project** | **Saddlebrook Solar Project** |
| 2022 | In October 2022, we announced that we have commenced pre-construction activities on the 81 MW Saddlebrook Solar project located near Aldersyde, Alberta. The expected capital cost is $146 million, with the project partially supported by $10 million from Emissions Reduction Alberta. Construction is expected to be completed in 2023. |
| **Ontario Natural Gas-Fired Power Plants** | **Ontario Natural Gas-Fired Power Plants** |
| 2020 - 2021 | In March 2020, we placed the Napanee power plant into service. In April 2020, we completed the sale of our Halton Hills and Napanee power plants as well as our 50 per cent interest in Portlands Energy Centre to a subsidiary of Ontario Power Generation for net proceeds of approximately $2.8 billion before post-closing adjustments. The total pre-tax loss of $676 million ($470 million after tax) on this transaction includes losses accrued during 2019 while classified as an asset held for sale and a 2021 post-close adjustment and also reflected utilization of previously unrecognized tax loss benefits. This loss may be amended in the future upon the settlement of existing insurance claims. |
| **Sharp Hills Wind Power Purchase Agreement (PPA)** | **Sharp Hills Wind Power Purchase Agreement (PPA)** |
| 2021 | In September 2021, we executed a 15-year PPA for 100 per cent of the power produced and the rights to all environmental attributes from the 297 MW Sharp Hills Wind Farm located in eastern Alberta. The Sharp Hills Wind Farm is anticipated to be operational in 2023, subject to customary regulatory approvals and conditions. |
| **Bruce Power** | **Bruce Power** |
| 2020 | Bruce Power's Unit 6 MCR outage commenced in January 2020 and is expected to be completed in 2023. In late March 2020, as a result of COVID-19 impacts, Bruce Power declared force majeure under its contract with the IESO. This force majeure notice covered the Unit 6 MCR and certain Asset Management work. In May 2020, work on the Unit 6 MCR and Asset Management programs were restarted with additional prevention measures in place for worker safety related to COVID-19. The impact of the force majeure will ultimately depend on the recovery of any impacts in accordance with the force majeure provisions of the IESO contract. In October 2020, the Unit 6 MCR project achieved a major milestone with the completion of the preparation phase and commencement of the Fuel Channel and Feeder Replacement Program. Operations on the remaining units continued as normal with the scheduled outages successfully completed on Unit 3, 4 and 5 in second quarter of 2020 and on Unit 8 in fourth quarter 2020.  |
| 2021 | In mid-2021, as part of the planned inspections, testing, analysis and maintenance activities at Bruce Power during the current Unit 6 MCR outage and the Unit 3 planned outage, higher than anticipated readings of hydrogen concentration in pressure tubes were detected. These readings were limited to a very small area of the respective pressure tubes and did not impact safety nor pressure tube integrity as concluded following an assessment of all of the Bruce Power units. In October 2021, Unit 3 returned to service after the Canadian Nuclear Safety Commission approved Bruce Power's restart request following extensive inspections which demonstrated that safety and pressure tube integrity continued to meet regulatory requirements. Bruce Power now incorporates additional inspections as part of their normal surveillance programs to address the new findings while progressing further programs that demonstrate fitness for service at elevated hydrogen concentration levels. These inspections were added to the Unit 7 planned outage which returned to service in January 2022. The Unit 6 MCR program continues on schedule and on budget. As applicable, Bruce Power will seek recovery of any impacts in accordance with the force majeure provisions of the IESO contract. The program is nearing the end of the Inspection Phase and has entered the Installation Phase. Preparation of the Unit 3 MCR program, which is the next scheduled MCR outage, continues and Bruce Power submitted its final cost and schedule duration estimate to the IESO in December 2021. As well, Bruce Power submitted its initial preliminary cost and schedule duration estimate for the Unit 4 MCR program, which is the next unit scheduled after Unit 3. In 2021, Bruce Power launched Project 2030 with the goal of achieving a site peak output of 7,000 MW by 2033 in support of climate change targets and future clean energy needs. Project 2030 will focus on continued asset optimization, innovation and leveraging new technology, which could include integration with storage and other forms of energy, to increase the site peak output at Bruce Power. |

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TC Energy **Annual information form 2022** \| 15

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| | |
|:---|:---|
| **Date** | **Description of development** |
| 2022 | In March 2022, the IESO verified Bruce Power's Unit 3 MCR program final cost and schedule duration estimate submitted in December 2021. The Unit 3 MCR program is scheduled to begin in March 2023 with expected completion in 2026. The Unit 6 MCR is moving to the last part of the installation phase and remains on time and on budget with an expected return to service in fourth quarter 2023. Bruce Power's contract price increased in April 2022, in accordance with contract terms, reflecting capital to be invested under the Unit 3 MCR program and the 2022 to 2027 Asset Management program plus normal annual inflation adjustments. Bruce Power's Unit 4, the third unit in the Bruce Power MCR program, completed its definition phase in June 2022 and is now in the preparation phase leading up to an FID, expected in fourth quarter 2023. A preliminary basis of estimate (including an initial cost and schedule duration estimate) was submitted to the IESO in fourth quarter 2022. Future MCR investments will be subject to discrete decisions for each unit with specified off-ramps available for Bruce Power and the IESO. |
| **Ontario Pumped Storage Project** | **Ontario Pumped Storage Project** |
| 2021-2022 | As part of our strategy to capture opportunities that capitalize on the transition to a less carbon-intensive energy mix, we continue to progress the development of the Ontario Pumped Storage project, an energy storage facility located near Meaford, Ontario that is designated to provide 1,000 MW of flexible, clean energy to Ontario's electricity system using a process known as pumped hydro storage. Two key milestones on the Ontario Pumped Storage project were reached in 2021. In July 2021, the Federal Minister of National Defence granted long-term land access to the fourth Canadian Division Training Centre for development of the project on this site. In November 2021, Ontario's Minister of Energy instructed the IESO to progress the project to Gate 2 of the Unsolicited Proposals Process. Once in service, this project would store emission-free energy when available and provide that energy to Ontario during periods of peak demand, thereby maximizing the value of existing emissions-free generation in the province. We also continue to consult with the Saugeen Ojibway Nation and other Indigenous groups along with other local stakeholders as we continue to advance this project, which remains subject to a number of conditions and approvals, including approval of our Board of Directors. |
| **TransCanada Turbines Ltd.** | **TransCanada Turbines Ltd.** |
| 2020 | In November 2020, we acquired the remaining 50 per cent ownership interest in TransCanada Turbines Ltd. for cash consideration of US$67 million.  |
| **U.S. POWER** | **U.S. POWER** |
| 2021 | Through a request for information (RFI) process in 2021, we announced that we were seeking to identify potential contracts and/or investment opportunities in up to 620 MW of wind energy projects, 300 MW of solar projects and 100 MW of energy storage projects to meet the electricity needs of the U.S. portion of the Keystone Pipeline System assets. We also identified meaningful origination opportunities to supply renewable energy products and services to industrial and oil and gas sectors proximate to our in-corridor demand. We received a significant number of responses to our RFI. |
| 2022 | As of December 31, 2022, we have contracted approximately 600 MW from wind and solar projects. |
| **OTHER ENERGY SOLUTIONS** | **OTHER ENERGY SOLUTIONS** |
| **Lynchburg Renewable Fuels** | **Lynchburg Renewable Fuels** |
| 2022 | In October 2022, we announced a US$29 million investment for a 30 per cent ownership interest in the Lynchburg Renewable Fuels project, a renewable natural gas (RNG) production facility in Lynchburg, Tennessee being developed by 3 Rivers Energy Partners, LLC (3 Rivers Energy). Along with our ownership interest, we will market all RNG and environmental attributes generated from the facility once operational, which we expect in 2024. We also have the option to jointly develop future RNG projects with 3 Rivers Energy. |

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16 \| TC Energy **Annual information form 2022**

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| | |
|:---|:---|
| **Date** | **Description of development** |
| **Hydrogen Hubs** | **Hydrogen Hubs** |
| 2021-2022 | We have entered into individual Joint Development Agreements (JDAs) with Nikola Corporation (Nikola) and Hyzon Motors Inc. (Hyzon) to support customer-driven hydrogen production for long-haul transportation, power generation, large industrials and heating customers across the U.S. and Canada. Under their JDA, Nikola will be a long-term anchor customer for hydrogen production infrastructure supporting hydrogen-fueled, zero-emission, heavy-duty trucks and the co-development of large-scale green and blue hydrogen production hubs. The Hyzon JDA is expected to support the development of hydrogen production facilities focused on zero-to-negative carbon intensity hydrogen from RNG, biogas and other sustainable sources. These facilities are expected to be located close to demand, supporting Hyzon's back-to-base vehicle deployments. Our significant pipeline, storage and power assets can potentially be leveraged to lower the cost and increase the speed of development of these hubs. This may include exploring the integration of pipeline assets to enable hydrogen distribution and storage via pipeline and/or to deliver carbon dioxide to permanent sequestration sites to decarbonize the hydrogen production process. In April 2022, we announced a plan to evaluate a hydrogen production hub that would produce an estimated 60 tonnes of hydrogen per day, with the capacity to increase to 150 tonnes of hydrogen per day in the future, on 140 acres in Crossfield, Alberta, where we currently operate a natural gas storage facility. We expect an FID in 2024, subject to customary regulatory approvals. |

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Further information about developments in the Power and Energy Solutions business, including changes that we expect will occur in 2023, can be found in the MD&A in the *Power and Energy Solutions – Understanding our Power and Energy Solutions Business*, *Significant events*, *Financial results* and *Outlook* sections, which sections of the MD&A are incorporated by reference herein.

TC Energy **Annual information form 2022** \| 17

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**OTHER ENERGY SOLUTIONS**

Our vision is to be the premier energy infrastructure company in North America today and in the future. That future includes embracing the energy transition that is underway and contributing to a lower-carbon energy world. As energy transition continues to evolve, we recognize a significant opportunity to reduce our emissions footprint, in addition to being a partner to our customers and other industries which are also looking for low-carbon solutions. Currently, it is uncertain how the energy mix will evolve and at what pace. We continue to observe a reliance on the existing sources of natural gas, crude oil and electricity, which we currently provide services to our customers.

We are targeting five focus areas to reduce the emissions intensity of our operations, while also capturing growth

opportunities that meet the energy needs of the future:

• modernize our existing system and assets

• decarbonize our energy consumption

• drive digital solutions and technologies

• leverage carbon credits and offsets

• invest in low-carbon energy and infrastructure such as renewables, along with emerging fuels and technology.

Further information about developments in our business, including changes that we expect will occur in 2023 around these developments, can be found in the *Power and Energy Solutions* - *Understanding Our Power and Energy Solutions Business* - *Significant Events - Other Energy Solutions* section of the MD&A, which section of the MD&A is incorporated by reference herein.

18 \| TC Energy **Annual information form 2022**

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Business of TC Energy

Our business consists of natural gas and crude oil transportation, storage and delivery systems and power generation assets that produce electricity to support businesses and communities across the continent.

Our vision is to be the premier energy infrastructure company in North America today and in the future by safely generating, storing and delivering the energy people need every day. Our goal is to develop, build and operate a portfolio of infrastructure assets that enable us to prosper irrespective of the pace and direction of energy transition. Refer to the *About our business – 2022 Financial highlights* - *Consolidated results* section of the MD&A for our revenues from operations by segment, for the years ended December 31, 2022 and 2021, which section of the MD&A is incorporated by reference herein.

The following is a description of each of TC Energy's three core businesses.

**NATURAL GAS PIPELINES**

Our natural gas pipeline network transports natural gas from supply basins to local distribution companies, power generation plants, industrial facilities, interconnecting pipelines, LNG export terminals and other businesses across Canada, the U.S. and Mexico.

In addition to our natural gas pipelines, we have regulated natural gas storage facilities in the U.S. with a total working gas capacity of 532 Bcf, making us one of the largest providers of natural gas storage and related services to key markets in North America.

Our Natural Gas Pipelines business is split into three operating segments representing its geographic diversity: Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines and Mexico Natural Gas Pipelines.

A description of the natural gas pipelines and regulated natural gas storage assets we operate in addition to further information about our pipeline holdings, developments and opportunities, significant regulatory developments and competitive position which relate to our Natural Gas Pipelines business can be found in the *Natural Gas Pipelines Business*, *Canadian Natural Gas Pipelines*, *U.S. Natural Gas Pipelines* and *Mexico Natural Gas Pipelines* sections of the MD&A, which sections of the MD&A are incorporated by reference herein*.*

**LIQUIDS PIPELINES**

Our Liquids Pipelines infrastructure provides transportation of Canadian crude oil from Hardisty, Alberta to key refining and export markets in the U.S. Midwest and the U.S. Gulf Coast, as well as U.S. domestic service from Cushing, Oklahoma to the U.S. Gulf Coast. Our Liquids Pipelines assets in Alberta also transport oil from the Fort McMurray area to the Edmonton/Heartland areas.

A description of pipelines and properties we operate, in addition to further information about our pipeline holdings, developments and opportunities, significant regulatory developments and competitive position which relate to our Liquids Pipelines business can be found in the MD&A in the *Liquids Pipelines* section, which section of the MD&A is incorporated by reference herein.

TC Energy **Annual information form 2022** \| 19

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**REGULATION OF NATURAL GAS PIPELINES AND LIQUIDS PIPELINES**

**Canada**

**Natural Gas Pipelines**

With the exception of Coastal GasLink (which is currently under construction), all of our major Canadian natural gas pipeline systems are regulated by the CER (formerly, the NEB) under the *Canadian Energy Regulator Act*.

The CER regulates the construction and operation of facilities for these systems. TC Energy project applications are assessed by the CER, and depending on the project scope, may also require approval of the federal government. Should TC Energy propose a major project that is designated under the *Impact Assessment Act*, it would require assessment by an integrated review panel of the Impact Assessment Agency of Canada and the CER, as well as federal government approval.

The CER also regulates the terms and conditions of services, including rates, for these systems. The CER approves tolls and services that provide TC Energy the opportunity to recover costs of transporting natural gas, including the return of capital (depreciation) and return on the average investment base for our Canadian natural gas pipeline systems. Generally, Canadian natural gas pipelines request the CER to approve the pipeline's cost of service and tolls once a year, and recover or refund the variance between actual and expected revenues and costs in future years. Net earnings may be affected by changes in investment base, ROE and regulated capital structure as well as by the terms of toll settlements approved by the CER.

The NGTL System is operating under a five-year revenue requirement settlement for 2020-2024 which includes an incentive mechanism for certain operating costs and the opportunity to increase depreciation rates if tolls fall below specified levels. Further information relating to the 2020-2024 Settlement can be found in the *General development of the business* - *Natural Gas Pipelines* – *Developments in the Canadian Natural Gas Pipelines Segment* - *Canadian Regulated Pipelines - NGTL System - Revenue Requirement Settlements* section above and in the *Canadian Natural Gas Pipelines* - *Financial Results* and *Other information* - *Fourth Quarter 2022 Highlights - Highlights by business segment - Canadian Natural Gas Pipelines* sections of the MD&A, which section of the MD&A is incorporated by reference herein.

The Canadian Mainline is operating under a six-year toll settlement for 2021-2026 which includes an incentive to decrease costs and increase revenues. Further information relating to the Canadian Mainline Settlement can be found in the *General development of the business - Natural Gas Pipelines* – *Developments in the Canadian Natural Gas Pipelines Segment* - *Canadian Regulated Pipelines - Canadian Mainline Settlement* section above and in the *Canadian Natural Gas Pipelines* – *Financial Results* and *Other information* - *Fourth Quarter 2022 Highlights - Highlights by business segment - Canadian Natural Gas Pipelines* sections of the MD&A, which section of the MD&A is incorporated by reference herein.

**Coastal GasLink Pipeline Project**

The Coastal GasLink natural gas pipeline project is being developed primarily under the regulatory regime administered by the OGC and the BCEAO. The OGC is responsible for overseeing oil and gas operations in B.C., including exploration, development, pipeline transportation and reclamation. The BCEAO is an agency that manages the review of proposed major projects in B.C., as required by the *Environmental Assessment Act* (British Columbia)*.*

**Liquids Pipelines**

The CER regulates the terms and conditions of service, including rates, construction and operation of the Canadian portion of the Keystone Pipeline System. The rates for transportation service on the Keystone Pipeline System are calculated in accordance with a methodology agreed to in transportation service agreements between Keystone pipeline and its customers, and approved by the CER. The White Spruce and Grand Rapids pipelines are regulated by the AER. The AER regulates the construction and operation of pipelines and associated facilities in Alberta.

20 \| TC Energy **Annual information form 2022**

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**United States**

**Natural Gas Pipelines** 

TC Energy is subject to regulation by various federal, state and local governmental agencies, including those specifically described below.

The Company's wholly-owned and partially-owned U.S. pipelines and natural gas storage facilities are considered *natural gas companies* subject to the jurisdiction of FERC. The *Natural Gas Act of 1938* grants FERC authority over the construction, acquisition and operation of pipelines and related facilities utilized in the transportation and sale of natural gas in interstate commerce, including the extension, enlargement or abandonment of service using such facilities. FERC also has authority to regulate rates and charges for transportation and storage of natural gas in interstate commerce. Pipeline safety is regulated by PHMSA. Natural gas pipelines that cross the international border between Canada and the U.S., such as the Great Lakes Gas Transmission Limited Partnership (Great Lakes), GTN System and Portland Natural Gas Transmission System pipelines, require a Presidential Permit.

**Liquids Pipelines**

FERC regulates the terms and conditions of service, including transportation rates, of interstate liquids pipelines, including the U.S. portion of the Keystone Pipeline System and Marketlink. The siting and construction of pipeline facilities are regulated by the specific state regulator in which the pipeline facilities are located. Pipeline safety is regulated by PHMSA. Liquids pipelines that cross the international border between Canada and the U.S., such as the Keystone pipeline, require a Presidential Permit. Liquids pipeline projects that cross federal lands or waters of the U.S. require additional federal permits.

**Mexico**

**Natural Gas Pipelines** 

TC Energy's pipelines in Mexico are regulated by the Comisión Reguladora de Energía (CRE) who authorizes the transmission services of all gas pipeline infrastructure. Accordingly, our Mexican pipelines have CRE-approved tariffs, services and related rates; however, the contracts underpinning the construction and operation of these facilities are long-term negotiated fixed-rate contracts. Our contractual rates are only subject to change under specific circumstances such as changes in law.

**POWER AND ENERGY SOLUTIONS**

The previously described Power and Storage segment has been renamed Power and Energy Solutions. This business consists of power generation, non-regulated natural gas storage assets as well as new technologies which reduce our emissions footprint, in addition to being a partner to our customers and other industries that are also looking for low-carbon solutions.

Our Power and Energy Solutions business includes approximately 4,300 MW of generation capacity located in Alberta, Ontario, Québec and New Brunswick, using natural gas and nuclear fuel sources and is generally supported by long-term contracts. Additionally, we have secured 600 MW in the U.S. and 416 MW in Canada of PPAs from wind and solar facilities. We continue to pursue generation assets and PPA opportunities in Canada and the U.S.

We also own and operate approximately 118 Bcf of non-regulated natural gas storage capacity in Alberta.

Further information about the Power and Energy Solutions assets we operate and those currently under construction, along with our Power and Energy Solutions holdings, significant developments, and opportunities in relation to our Power and Energy Solutions business, can be found in the MD&A in the *Power and Energy Solutions* section, which section of the MD&A is incorporated by reference herein.

TC Energy **Annual information form 2022** \| 21

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General

**EMPLOYEES**

At Year End, TC Energy's principal operating subsidiary, TCPL, had 7,477 employees, substantially all of whom were employed in Canada and the U.S., as set forth in the following table.

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| | |
|:---|:---|
| Calgary | 2859 |
| Western Canada (excluding Calgary) | 632 |
| Eastern Canada | 262 |
| Houston | 897 |
| U.S. Midwest | 799 |
| U.S. Northeast | 203 |
| U.S. Southeast/Gulf Coast (excluding Houston) | 1186 |
| U.S. West Coast | 91 |
| Mexico | 548 |
| **Total** | **7477** |

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**HEALTH, SAFETY, SUSTAINABILITY AND ENVIRONMENTAL PROTECTION AND SOCIAL POLICIES** 

The Board of Directors' (the Board) Health, Safety, Sustainability and Environment (HSSE) Committee oversees operational risk, major project execution risk, occupational and process safety, sustainability, security of personnel, environmental and climate change-related risks, as well as monitoring development and implementation of systems, programs and policies relating to HSSE matters through regular reporting from management. We use an integrated management system that establishes a framework for managing these risks and is used to capture, organize, document, monitor and improve our related policies, programs and procedures.

Our management system, TC Energy's Operational Management System (TOMS), is modeled after international standards, including the International Organization for Standardization (ISO) standard for environmental management systems, ISO 14001, and the Occupational Health and Safety Assessment Series for occupational health and safety. TOMS also conforms to applicable industry standards and complies with applicable regulatory requirements. Periodic audits of TOMS, as they apply to our Canadian assets, are conducted by the CER and lessons learned from these audits are shared and applied across our system where applicable. TOMS covers the lifecycle of our assets and follows a continuous improvement cycle organized into four key areas:

• Plan – risk and regulatory assessment as well as objective and target setting, while striving for zero incidents plus defining roles and responsibilities

• Do – development and implementation of programs, procedures and standards to manage operational risk

• Check – incident reporting, investigation, assurance activities, including internal and external audits and performance monitoring

• Act – non-conformance, non-compliance and opportunities for improvement are managed and assessed by management.

The HSSE Committee reviews performance and operational risk management. It receives updates and reports on:

• overall HSSE corporate governance

• operational performance and preventive maintenance metrics

• asset integrity programs

• significant occupational safety and process safety incidents

• occupational and process safety performance metrics

• our Occupational Health and Hygiene Program, which includes physical and mental health and psychological safety

• emergency preparedness, incident response and evaluation

• environment programs

• biodiversity and land reclamation

• developments in and compliance with applicable legislation and regulations, including those related to the environment

• prevention, mitigation and management of risks related to HSSE matters, including climate change or business interruption risks, such as pandemics, that may adversely impact TC Energy

22 \| TC Energy **Annual information form 2022**

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• sustainability matters, including social, environmental and climate change related risks and opportunities as well as related voluntary public disclosure such as our Report on Sustainability, Reconciliation Action Plan, ESG Data Sheet and GHG Emissions Reduction Plan.

The HSSE Committee also maintains oversight of significant or complex capital projects, including the monitoring of prescribed performance criteria. Starting in late 2022, the HSSE Committee began holding regular sessions, outside formal committee meetings, with members of senior management to receive status, cost and notable updates on certain of these capital projects.

The HSSE Committee also receives updates on any specific areas of operational and construction risk management review being conducted by management and the results and corrective action plans flowing from internal and third party audits. Information about the financial and operational effects of environmental protection requirements on the capital expenditures, profit or loss and competitive position of TC Energy can be found in the MD&A in the *Other information – Enterprise risk management – Health, safety, sustainability and environment* section, which section of the MD&A is incorporated by reference herein. Generally, each year the HSSE Committee or the HSSE Committee Chair tours one of our existing assets or projects under development as part of its responsibility to monitor and review our HSSE practices. All Board members are invited to attend our site tours. In 2022, a majority of Board members attended the site tour.

**Health and Safety**

As one of our corporate values, safety is an integral part of the way our employees work. Each year we develop goals predicated on achieving year over year sustainable improvement in our safety performance, and meeting or exceeding industry benchmarks.

The safety of our employees, contractors and the public, the integrity of our pipelines and our power and energy solutions infrastructure, are a top priority. All assets are designed, constructed and commissioned with full consideration given to safety and integrity, and are placed into service only after all necessary requirements, both regulatory and internal, have been satisfied.

We annually conduct emergency response exercises to practice effective coordination between the Company, local emergency responders, regulatory agencies and government officials in the event of an emergency. TC Energy uses the Incident Command System (ICS), a standardized approach to command, control and coordinate emergency responses. The ICS model supports a unified approach to emergency response with these community members. We also provide annual training to all field staff in the form of table top exercises, online and vendor lead training.

**Environmental risk, compliance and liabilities** 

TOMS provides requirements for our day-to-day work to protect employees, contractors, our workplace and assets, the communities in which we work and the environment. It conforms to external industry consensus standards and voluntary programs in addition to complying with applicable legislative requirements. Under TOMS, mandated programs set requirements to manage specific risk areas for TC Energy, including the Environment Program, which is a documented set of processes and procedures that identifies our requirements to proactively and systematically manage environmental hazards and risks throughout the lifecycle of our assets. The program outlines environmental training requirements for applicable roles in the organization to raise awareness of environmental protection commitments and requirements plus sets environment performance goals that are monitored regularly.

As part of our Environment Program, we complete environmental assessments for our projects, which include field studies that examine existing natural resources, biodiversity and land use along our proposed project footprint such as vegetation, soils, wildlife, water resources, wetland and protected areas. We consider the information collected during environmental assessments, and where sensitive habitats or areas of high biodiversity value are identified, we apply the biodiversity protection hierarchy and avoid those areas, as practicable. Where those areas cannot be avoided, we minimize our disturbance, restore and reclaim the disturbed area and provide offset where required. To conserve and protect the environment during construction, information gathered for an environmental impact assessment is used to develop project-specific environmental protection plans. Whenever the potential exists for a proposed facility or pipeline to interact with water resources, we conduct evaluations to understand the full nature and extent of the interactions.

TC Energy **Annual information form 2022** \| 23

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When we temporarily use water to test the integrity of our pipelines, we adhere to strict regulatory requirements and ensure water meets applicable water quality standards before it is discharged or disposed of, and when our construction activities involve crossing waterbodies, we implement protection measures to avoid or minimize potential adverse effects. Project plans are communicated with stakeholders and Indigenous communities, as applicable, and engagement with these groups informs the environmental assessments and protection plans. Additionally, the Environment Program, which applies to all of our operations, includes practices and procedures to manage potential adverse environmental effects to these resources during the full lifecycle of our facilities.

Our primary sources of risk related to the environment include:

• changing regulations and requirements coupled with increased costs related to impacts on the environment

• product releases, including crude oil, diluent and natural gas, that may cause harm to the environment (land, water and air)

• use, storage and disposal of chemicals and hazardous materials

• natural disasters and other catastrophic events, including those related to climate change, that may impact our operations.

Our assets are subject to federal, state, provincial and local environmental statutes and regulations governing environmental protection, including air and GHG emissions, water quality, species at risk, wastewater discharges and waste management. Operating our assets requires obtaining and complying with a wide variety of environmental registrations, licenses, permits and other approvals and requirements. Failure to comply could result in administrative, civil or criminal penalties, remedial requirements, or orders affecting future operations.

Through the implementation of our Environment Program, we continually monitor our facilities for compliance with all material legal and regulatory environmental requirements across all jurisdictions where we operate. We also comply with all material legal and regulatory permitting requirements in our project routing and development. We routinely monitor proposed changes to environmental policy, legislation and regulation. Where the risks are uncertain or have the potential to affect our ability to effectively operate our business, we comment on proposals independently or through industry associations.

**Social Policies**

We have a number of corporate governance documents including a commitment statement, policies and standards to help guide our teams' behavior and actions, so they understand their responsibility and extend respect, courtesy and the opportunity to respond to Indigenous groups and stakeholders. We have a Code of Business Ethics (COBE) Policy which applies to all employees, officers and directors, and contingent workforce contractors of TC Energy and its wholly-owned subsidiaries and operated entities in countries where we conduct business, with the exception of independently operated entities whose corporate governance documents meet or exceed TC Energy's requirements. All employees (including executive officers) and directors must certify their compliance with COBE.

We also have an Avoiding Bribery and Corruption Program which includes an Avoiding Bribery and Corruption Policy, annual online training provided to all personnel, instructor-led training provided to personnel in higher risk areas of our business, a supplier and contractor due diligence review process, and auditing of certain types of transactions. Our approach to Indigenous and stakeholder engagement is based on building and sustaining support through early and honest communication, mitigating impacts, and mutually beneficial partnerships. Our Commitment Statement provides the structure to guide our teams' behavior and actions, so they understand their responsibility and the opportunity to empower Indigenous groups and stakeholders through partnerships and enhanced relationships.

Our Indigenous Relations Policy is informed by our guiding principles and corporate values to ensure we build and sustain support through early and honest communication, by mitigating impacts, and through mutually beneficial partnerships. We seek to listen to Indigenous people and incorporate their traditional and local knowledge in project design and planning. We strive to work with Indigenous communities to mitigate negative impacts and maximize benefits through hiring and buying locally. We aim to build mutually beneficial partnership-oriented relationships with Nations where benefits significantly outweigh the impacts, and our legacy is positive for those most impacted by our activities. In Canada, we will seek to expand benefits for equity participation in our projects and assets because the best way to align interests is to sit at the table together as partners/owners. Through all these efforts, we strive to be considered as a partner of choice for Indigenous groups and play a meaningful role in reconciliation.

24 \| TC Energy **Annual information form 2022**

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We work to understand and mitigate the complexity of ESG issues, and the interconnectivity of these issues as they relate to our business. These issues are of great importance to Indigenous groups and stakeholders and have an impact on our ability to build and operate energy infrastructure.

Consistent with our five core values of safety, innovation, responsibility, collaboration and integrity, TC Energy does not tolerate human rights abuses. In our business activities, including engaging with Indigenous groups and stakeholders across Canada, the United States and Mexico, we support access to basic human rights such as rights to fresh water and will not be complicit with or engage in any activity that solicits or encourages abuse of human rights such as forced labour, child labour, or physical or mental abuses.

TC Energy **Annual information form 2022** \| 25

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Risk factors

A discussion of our risk factors can be found in the MD&A in the *Natural Gas Pipelines Business, Natural Gas Pipelines - Business risks, Liquids Pipelines – Business risks, Power and Energy Solutions – Business risks* and *Other information – Enterprise risk management* sections, which sections of the MD&A are incorporated by reference herein.

Dividends

Our Board has not adopted a formal dividend policy. The Board reviews the financial performance of TC Energy quarterly and makes a determination of the appropriate level of dividends to be declared in the following quarter. Currently, our payment of dividends is primarily funded from dividends TC Energy receives as the sole common shareholder of TCPL.

Provisions of various trust indentures and credit arrangements with certain of our subsidiaries can restrict those subsidiaries' ability and, in certain cases, our ability to declare and pay dividends or make distributions under certain circumstances. In the opinion of management, these provisions do not currently restrict our ability to declare or pay dividends.

Additionally, pursuant to the terms of the trust notes issued by TransCanada Trust (a financing trust subsidiary wholly-owned by TCPL) and related agreements, in certain circumstances, including where holders of the trust notes receive deferral preferred shares of TCPL in lieu of cash interest payments and where exchange preferred shares of TCPL are issued to holders of the trust notes as a result of certain bankruptcy related events, TC Energy and TCPL would be prohibited from declaring or paying dividends on or redeeming their outstanding preferred shares (or, if none are outstanding, their respective common shares) until all such exchange or deferral preferred shares are redeemed by TCPL. No deferral preferred shares or exchange preferred shares of TCPL have ever been issued.

Dividends on our preferred shares are payable quarterly, as and when declared by the Board. The dividends declared on our common and preferred shares during the past three completed financial years, and the increase to the quarterly dividend per common share on our outstanding common shares for the quarter ending March 31, 2023, are set out in the MD&A under the heading *About our business – 2022 Financial highlights – Dividends* section, which section of the MD&A is incorporated by reference herein.

Description of capital structure

**SHARE CAPITAL**

TC Energy's authorized share capital consists of an unlimited number of common shares and an unlimited number of first preferred shares and second preferred shares, issuable in series. The number of common shares and preferred shares issued and outstanding as at Year End are set out in the MD&A in the *Financial Condition – Share information* section, which section of the MD&A is incorporated by reference herein. The following is a description of the material characteristics of each of these classes of shares.

**Common shares**

The common shares entitle the holders thereof to one vote per share at all meetings of shareholders, except meetings at which only holders of another specified class of shares are entitled to vote, and, subject to the rights, privileges, restrictions and conditions attaching to the first preferred shares and the second preferred shares, whether as a class or a series, and to any other class or series of shares of TC Energy which rank prior to the common shares, entitle the holders thereof to receive (i) dividends if, as and when declared by the Board out of the assets of TC Energy properly applicable to the payment of the dividends in such amount and payable at such times and at such place or places as the Board may from time to time determine, and (ii) the remaining property of TC Energy upon a liquidation, dissolution or winding up of the Company.

We have a shareholder rights plan (the Plan) that is designed to protect the rights of our shareholders, ensure they are treated fairly and provide the Board with adequate time to identify, develop and negotiate alternative value maximizing transactions if there is a take-over bid for TC Energy. The Plan creates a right attaching to each common share outstanding and to each common share subsequently issued. Each right becomes exercisable 10 trading days after a person has acquired (an acquiring person), or commences a take-over bid to acquire, 20 per cent or more of the common shares, other than by an acquisition

26 \| TC Energy **Annual information form 2022**

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pursuant to a take-over bid permitted under the terms of the Plan (a permitted bid). Prior to a flip-in event (as described below), each right permits registered holders to purchase from the Company common shares of TC Energy at an exercise price equal to three times the market price of such shares, subject to adjustments and anti-dilution provisions (the exercise price). The beneficial acquisition by any person of 20 per cent or more of the common shares, other than by way of a permitted bid, is referred to as a flip-in event. Ten trading days after a flip-in event, each right will permit registered holders other than an acquiring person to receive, upon payment of the exercise price, the number of common shares with an aggregate market price equal to twice the exercise price. The Plan was reconfirmed at the 2022 annual meeting of TC Energy shareholders and must be reconfirmed at every third annual meeting thereafter. Reconfirmation of the Plan will be voted on at the 2025 annual meeting of TC Energy shareholders.

Under TC Energy's DRP, eligible holders of common and preferred shares of TC Energy can reinvest their dividends and make optional cash payments to obtain additional TC Energy common shares. To prudently fund our growth program that includes increased project costs on the NGTL System and following our July 2022 obligation to make an equity contribution of $1.9 billion to Coastal GasLink LP, we reinstated the issuance of common shares from treasury at a two per cent discount under our DRP, commencing with the dividends declared on July 27, 2022. The discounted DRP is expected to be in place through the dividend declarations for the quarter ending June 30, 2023. Refer to the *About our business* - *2022 Financial highlights* – *Dividends* – *Dividend reinvestment and share purchase plan* and the *Corporate* - *Significant Events* - *Dividend reinvestment and share purchase plan* sections of the MD&A, which section of the MD&A is incorporated by reference herein.

TC Energy also has a stock based compensation plan that allows some employees to acquire common shares of TC Energy upon exercise of options granted thereunder. Option exercise prices are equal to the closing market price on the TSX on the last trading day immediately preceding the grant date. Options granted under the plan are generally fully exercisable after three years and expire seven years after the date of grant.

**First preferred shares**

Subject to certain limitations, the Board may, from time to time, issue first preferred shares in one or more series and determine for any such series, its designation, number of shares and respective rights, privileges, restrictions and conditions. The first preferred shares as a class have, among others, the provisions described below.

The first preferred shares of each series rank on a parity with the first preferred shares of every other series, and are entitled to preference over the common shares, the second preferred shares and any other shares ranking junior to the first preferred shares with respect to the payment of dividends, the repayment of capital and the distribution of assets of TC Energy in the event of its liquidation, dissolution or winding up.

Except as provided by the CBCA, the holders of the first preferred shares will not have any voting rights nor will they be entitled to receive notice of or to attend shareholders' meetings. The holders of any particular series of first preferred shares will, if the directors so determine prior to the issuance of such series, be entitled to such voting rights as may be determined by the Board if TC Energy fails to pay dividends on that series of preferred shares for any period as may be so determined by the Board. TC Energy currently does not intend to issue any first preferred shares with voting rights, and any issuances of first preferred shares are expected to be made only in connection with corporate financings.

The provisions attaching to the first preferred shares as a class may be modified, amended or varied only with the approval of the holders of the first preferred shares as a class. Any such approval to be given by the holders of the first preferred shares may be given by the affirmative vote of the holders of not less than 66 <sup>2/3</sup> per cent of the first preferred shares represented and voted at a meeting or adjourned meeting of such holders.

The holders of Series 1, 3, 5, 7, 9 and 11 preferred shares will be entitled to receive quarterly fixed rate cumulative preferential cash dividends, as and when declared by the Board, to be reset periodically on prescribed dates to an annualized rate equal to the sum of the then five-year Government of Canada bond yield, calculated at the start of the applicable five-year period, and a spread as set forth in the table below and have the right to convert their shares into cumulative redeemable Series 2, 4, 6, 8, 10 and 12 preferred shares, respectively, subject to certain conditions, on such conversion dates as set forth in the table below. The Series 1, 3, 5, 7, 9 and 11 preferred shares are redeemable by TC Energy in whole or in part on such redemption dates as set forth in the table below, by the payment of an amount in cash for each share to be redeemed equal to $25.00 plus all accrued and unpaid dividends thereon.

TC Energy **Annual information form 2022** \| 27

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The holders of Series 2, 4, 6, 8, 10 and 12 preferred shares will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board, at an annualized rate equal to the sum of the then 90-day Government of Canada treasury bill rate, recalculated quarterly, and a spread as set forth in the table below and have the right to convert their shares into Series 1, 3, 5, 7, 9 and 11 preferred shares, respectively, subject to certain conditions, on such conversion dates as set forth in the table below. The Series 2, 4, 6, 8, 10 and 12 preferred shares are redeemable by TC Energy in whole or in part after their respective initial redemption date as set forth in the table below, by the payment of an amount in cash for each share to be redeemed equal to (i) $25.00 in the case of redemptions on such redemption dates as set out in the table below, or (ii) $25.50 in the case of redemptions on any other date, in each case plus all accrued and unpaid dividends thereon.

In the event of liquidation, dissolution or winding up of TC Energy, the holders of Series 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 preferred shares shall be entitled to receive $25.00 per preferred share plus all accrued and unpaid dividends thereon in preference over the common shares or any other shares ranking junior to the first preferred shares.

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| | | | |
|:---|:---|:---|:---|
| **Series of first preferred shares** | **Initial redemption/conversion date** | **Redemption/conversion dates** | **Spread (%)** |
| Series 1 preferred shares | December 31, 2014 | December 31, 2024 and every fifth year thereafter | 1.92 |
| Series 2 preferred shares |  | December 31, 2024 and every fifth year thereafter | 1.92 |
| Series 3 preferred shares | June 30, 2015 | June 30, 2025 and every fifth year thereafter | 1.28 |
| Series 4 preferred shares |  | June 30, 2025 and every fifth year thereafter | 1.28 |
| Series 5 preferred shares | January 30, 2016 | January 30, 2026 and every fifth year thereafter | 1.54 |
| Series 6 preferred shares |  | January 30, 2026 and every fifth year thereafter | 1.54 |
| Series 7 preferred shares | April 30, 2019 | April 30, 2024 and every fifth year thereafter | 2.38 |
| Series 8 preferred shares |  | April 30, 2024 and every fifth year thereafter | 2.38 |
| Series 9 preferred shares | October 30, 2019 | October 30, 2024 and every fifth year thereafter | 2.35 |
| Series 10 preferred shares |  | October 30, 2024 and every fifth year thereafter | 2.35 |
| Series 11 preferred shares | November 30, 2020 | November 28, 2025 and every fifth year thereafter | 2.96 |
| Series 12 preferred shares |  | November 28, 2025 and every fifth year thereafter | 2.96 |
| Series 15 preferred shares<sup>1</sup> | May 31, 2022 | May 31, 2022 |  |
| Series 16 Preferred shares<sup>2</sup> |  |  |  |

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Except as provided by the CBCA, the respective holders of the first preferred shares of each outstanding series are not entitled to receive notice of, attend at, nor vote at any meeting of shareholders unless and until TC Energy shall have failed to pay eight quarterly dividends on such series of preferred shares, whether or not consecutive, in which case the holders of the first preferred shares of such series shall have the right to receive notice of and to attend each meeting of shareholders at which directors are to be elected and which take place more than 60 days after the date on which the failure first occurs, and to one vote with respect to resolutions to elect directors for each of the first preferred share of such series, until all arrears of dividends have been paid. Subject to the CBCA, the series provisions attaching to the first preferred shares may be amended with the written approval of all the holders of such series of shares outstanding or by at least two thirds of the votes cast at a meeting of the holders of such shares duly called for that purpose and at which a quorum is present.

**Second preferred shares**

The rights, privileges, restrictions and conditions attaching to the second preferred shares are substantially identical to those attaching to the first preferred shares, except that the second preferred shares rank junior to the first preferred shares with respect to the payment of dividends, repayment of capital and the distribution of assets of TC Energy in the event of a liquidation, dissolution or winding up of TC Energy.

<sup>1</sup> On May 31, 2022, TC Energy redeemed all of its issued and outstanding Series 15 preferred shares. Subsequent to the redemption, the Series 15 preferred shares ceased to be listed on the TSX and were cancelled. <br><sup>2</sup> Prior to the redemption of the Series 15 preferred shares, Series 16 preferred shares were issuable upon conversion of the Series 15 preferred shares, subject to certain conditions, on previously set conversion dates. At the time of the redemption and cancellation of the Series 15 preferred shares, there were no Series 16 preferred shares outstanding.<br>

28 \| TC Energy **Annual information form 2022**

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Credit ratings

Although TC Energy has not issued debt to the public, it has been assigned credit ratings by Moody's Investors Service, Inc. (Moody's), S&P Global Ratings (S&P) and Fitch Ratings Inc. (Fitch), and its outstanding preferred shares have also been assigned credit ratings by S&P, Fitch and DBRS Limited (DBRS). Moody's has assigned TC Energy an issuer rating of Baa2 with a negative outlook, S&P has assigned an issuer credit rating of BBB+ with a negative outlook, and Fitch has assigned a long-term issuer default rating of A- with a negative outlook. TC Energy does not presently intend to issue debt securities to the public in its own name and any future debt financing requirements are expected to continue to be funded primarily through its subsidiary, TCPL, and TransCanada Trust, a wholly-owned financing trust subsidiary of TCPL. The following table sets out the current credit ratings assigned to those outstanding classes of securities of the Company, TCPL and TransCanada Trust and certain related subsidiaries which have been rated by Moody's, S&P, Fitch and DBRS:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Moody's** | **S&P** | **Fitch** | **DBRS** |
| TCPL - Senior unsecured debt | Baa1 | BBB+ | A- | A (low) |
| TCPL - Junior subordinated notes | Baa2 | BBB- | Not rated | BBB |
| TransCanada Trust - Subordinated trust notes | Baa3 | BBB- | BBB | Not rated |
| TC Energy Corporation - Preferred shares | Not rated | P-2 (Low) | BBB | Pfd-2 (low) |
| Commercial paper (TCPL and TCPL guaranteed) | P-2 | A-2 | F2 | R-1 (low) |
| Rating outlook/status | Negative | Negative | Negative | Under Review (Negative Implications) |

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Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities. Credit ratings are not recommendations to purchase, hold or sell securities and do not address the market price or suitability of a specific security for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future if, in its judgment, circumstances so warrant.

Each of the Company, TCPL, TransCanada Trust and certain of our other subsidiaries paid fees to each of Moody's, S&P, Fitch and DBRS for the credit ratings rendered in respect of their outstanding classes of securities noted above. In addition to annual monitoring fees for the Company and TCPL and their rated securities, additional payments are made in respect of other services provided in connection with various rating advisory services.

The information concerning our credit ratings relates to our financing costs, liquidity and operations. The availability and cost of our funding options may be affected by certain factors, including the global capital markets environment and outlook as well as our financial performance. Our access to capital markets for required capital at competitive rates is influenced by our credit rating and rating outlook, as determined by credit rating agencies such as Moody's, S&P, Fitch and DBRS. If our ratings were downgraded, TC Energy's financing costs and future debt issuances could be unfavourably impacted. A description of the rating agencies' credit ratings listed in the table above is set out below.

**MOODY'S**

Moody's has different rating scales for short- and long-term obligations. Numerical modifiers 1, 2 and 3 are appended to each rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and a modifier 3 indicates a ranking in the lower end of that generic rating category. The Baa1 rating assigned to TCPL's senior unsecured debt is in the fourth highest of nine rating categories for long-term obligations. Obligations rated Baa are judged to be medium-grade and are subject to moderate credit risk, and as such, may possess certain speculative characteristics. The Baa2 rating assigned to TCPL's junior subordinated notes and the Baa3 rating assigned to the TransCanada Trust subordinated trust notes, are in the fourth highest of nine rating categories for long-term obligations, with the junior subordinated notes ranking higher within the Baa rating category with a modifier of 2 as opposed to the modifier of 3 on the subordinated trust notes. The P-2 rating assigned to TCPL's and TCPL guaranteed U.S. commercial paper programs is the second highest of four rating categories for short-term debt issuers. Issuers rated P-2 have a strong ability to repay short-term debt obligations. Outlooks may be assigned at the issuer level or at the rating level. A Moody's rating outlook is an opinion regarding the likely rating direction over the medium term. A stable outlook indicates a low likelihood of a rating change over the medium term. A negative, positive or developing outlook indicates a higher likelihood of a

TC Energy **Annual information form 2022** \| 29

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rating change over the medium term. Moody's has assigned a negative outlook to the Company, meaning that there is a higher likelihood of a rating change over the medium term.

**S&P**

S&P has different rating scales for short- and long-term obligations and Canadian preferred shares. Ratings from AA through CCC may be modified by the addition of a plus (+) or minus (-) sign to show the relative standing within a particular rating category. The BBB+ rating assigned to TCPL's senior unsecured debt is in the fourth highest of 10 rating categories for long-term obligations. A BBB rating indicates the obligor's capacity to meet its financial commitment is adequate; however, the obligation is more subject to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. The BBB- rating assigned to TCPL's junior subordinated notes and to the TransCanada Trust subordinated trust notes, is in the fourth highest of 10 rating categories for long-term debt obligations and the P-2 (Low) rating assigned to TC Energy's preferred shares is the second highest of eight rating categories for Canadian preferred shares. The BBB- and P-2 (Low) ratings assigned to TCPL's junior subordinated notes, the TransCanada Trust subordinated trust notes and TC Energy's preferred shares indicate these obligations exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. TCPL's and TCPL guaranteed U.S. commercial paper programs are each rated A-2 which is the second highest of six rating categories for short-term debt issuers. Short-term debt issuers rated A-2 have satisfactory capacity to meet their financial commitments, however they are somewhat more susceptible to adverse effects of changes in circumstances and economic conditions than obligors in the highest rating category. S&P assigns outlooks to issuers and not to individual debt securities. An S&P outlook assesses the potential direction of a long-term credit rating over the intermediate term, which is generally up to two years for investment grade issuers. S&P has assigned a negative outlook to the Company, meaning that a rating may be lowered by S&P.

**FITCH**

Fitch has different rating scales for short- and long-term obligations. Ratings from AA through CCC may be modified by the addition of a plus (+) or minus (-) sign to show the relative standing within a particular rating category. The A- rating assigned to TCPL's senior unsecured debt is in the third highest of 11 rating categories for long-term obligations. An A rating indicates that expectations of default risk are low and that the capacity for payment of financial commitments is considered strong; however, this capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. The BBB rating assigned to the TransCanada Trust subordinated trust notes and TC Energy's preferred shares is in the fourth highest of 11 rating categories for long-term obligations. A BBB rating indicates that expectations of default risk are currently low and that the capacity for payment of financial commitments is considered adequate; however, adverse business or economic conditions are more likely to impair this capacity. The F2 rating assigned to TCPL's and TCPL guaranteed U.S. commercial paper program is the second highest of seven rating categories for short-term debt issuers. Issuers rated F2 have good intrinsic capacity for timely payment of financial commitments. Ratings outlooks by Fitch indicate the direction a rating is likely to move over a one-to-two year period and reflect financial or other trends that have not yet reached or been sustained to the level that would cause a rating action, but which may do so if such trends continue.

30 \| TC Energy **Annual information form 2022**

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**DBRS**

DBRS has different rating scales for short- and long-term obligations and Canadian preferred shares. High or low grades are used to indicate the relative standing within all rating categories other than AAA and D and other than in respect of DBRS' ratings of commercial paper and short-term debt, which utilize high, middle and low subcategories for its R-1 and R-2 rating categories. In respect of long-term debt and preferred share ratings, the absence of either a high or low designation indicates the rating is in the middle of the category. The A (low) rating assigned to TCPL's senior unsecured debt is in the third highest of 10 categories for long-term debt and indicates good credit quality. The capacity for the payment of financial obligations is substantial, but of lesser credit quality than that of higher rating categories. Long-term debt rated A may be vulnerable to future events but qualifying negative factors are considered manageable. The BBB rating assigned to TCPL's junior subordinated notes is in the fourth highest of the 10 categories for long-term debt and indicates adequate credit quality. The capacity for the payment of financial obligations is considered acceptable, but may be vulnerable to future events. The Pfd-2 (low) rating assigned to TC Energy's preferred shares is in the second highest of six rating categories for preferred shares. Preferred shares rated Pfd-2 are generally of good credit quality. Protection of dividends and principal is still substantial; however, earnings, the balance sheet and coverage ratios are not as strong as Pfd-1 rated companies. In general, Pfd-2 ratings correspond with companies whose long-term debt is rated in the A category. The R-1 (low) rating assigned to TCPL's Canadian commercial paper program is in the third highest of 10 rating categories for short-term debt issuers and indicates good credit quality. The capacity for payment of short-term financial obligations as they fall due is substantial, although the overall strength is not as favourable as higher rating categories. Short-term debt rated R-1 (low) may be vulnerable to future events, but qualifying negative factors are considered manageable. Rating trends provide guidance in respect of DBRS' opinion regarding the outlook for a credit rating. The rating trend indicates the direction in which DBRS considers the credit rating may move if present circumstances continue. In cases when a significant event occurs that directly impacts the credit quality of a particular entity or group of entities and there is uncertainty regarding the outcome, and DBRS is unable to provide an objective, forward-looking opinion in a timely fashion, then the credit ratings of the issuer are typically placed "Under Review" with the appropriate Implications designation of Positive, Negative or Developing.

TC Energy **Annual information form 2022** \| 31

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Market for securities

TC Energy's common shares are listed on the TSX and the NYSE under the symbol TRP. The following table sets out our preferred shares listed on the TSX.

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| | | |
|:---|:---|:---|
| **Type** | **Issue Date** | **Stock Symbol** |
| Series 1 preferred shares | September 30, 2009 | TRP.PR.A |
| Series 2 preferred shares | December 31, 2014 | TRP.PR.F |
| Series 3 preferred shares | March 11, 2010 | TRP.PR.B |
| Series 4 preferred shares | June 30, 2015 | TRP.PR.H |
| Series 5 preferred shares | June 29, 2010 | TRP.PR.C |
| Series 6 preferred shares | February 1, 2016 | TRP.PR.I |
| Series 7 preferred shares | March 4, 2013 | TRP.PR.D |
| Series 9 preferred shares | January 20, 2014 | TRP.PR.E |
| Series 11 preferred shares | March 2, 2015 | TRP.PR.G |

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The following tables set out the reported monthly high, low, and month end closing trading prices and monthly trading volumes of the common shares of TC Energy on the TSX and the NYSE, and the respective Series 1, 2, 3, 4, 5, 6, 7, 9, 11 and 15 preferred shares on the TSX, for the periods indicated:

**COMMON SHARES**

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Month** | **TSX (TRP)** | **TSX (TRP)** | **TSX (TRP)** | **TSX (TRP)** | **NYSE (TRP)** | **NYSE (TRP)** | **NYSE (TRP)** | **NYSE (TRP)** |
| **Month** | **High<br>($)** | **Low<br>($)** | **Close<br>($)** | **Volume traded** | **High<br>(US$)** | **Low<br>(US$)** | **Close<br>(US$)** | **Volume traded** |
| December 2022 | $60.13 | $53.36 | $53.98 | 161429717 | $44.82 | $39.12 | $39.86 | 54296019 |
| November 2022 | $66.19 | $59.48 | $59.60 | 81735884 | $49.51 | $43.13 | $44.48 | 39189840 |
| October 2022 | $60.57 | $54.60 | $59.84 | 113963672 | $44.84 | $39.11 | $43.92 | 41669495 |
| September 2022 | $64.39 | $55.60 | $55.64 | 156451228 | $49.57 | $40.26 | $40.29 | 41880217 |
| August 2022 | $68.08 | $62.18 | $63.29 | 72071828 | $53.00 | $48.16 | $48.20 | 45143524 |
| July 2022 | $71.44 | $64.30 | $68.27 | 92121859 | $55.50 | $48.79 | $53.32 | 31236366 |
| June 2022 | $74.44 | $63.88 | $66.68 | 136278839 | $59.38 | $48.91 | $51.81 | 40207893 |
| May 2022 | $74.24 | $67.59 | $73.21 | 59558112 | $58.36 | $52.36 | $57.84 | 36261542 |
| April 2022 | $74.39 | $67.69 | $67.95 | 114240625 | $59.06 | $52.67 | $52.90 | 30440478 |
| March 2022 | $73.17 | $67.54 | $70.51 | 159706278 | $58.31 | $52.66 | $56.42 | 44343281 |
| February 2022 | $68.11 | $64.12 | $68.10 | 65362746 | $53.73 | $50.38 | $53.71 | 38893702 |
| January 2022 | $66.05 | $59.26 | $65.64 | 95894814 | $52.01 | $46.44 | $51.65 | 43219516 |

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**TC Energy Corporate ATM program**

In December 2020, we established a new ATM program that allowed us to issue common shares from treasury having an aggregate gross sales price of up to $1.0 billion, or the U.S. dollar equivalent, to the public from time to time, at our discretion, at the prevailing market price when sold through the TSX, the NYSE, or any other applicable existing trading market for TC Energy common shares in Canada or the U.S. While not a component of our base funding plan, the ATM program, which was effective for a 25-month period, provided additional financial flexibility in support of our consolidated credit metrics and capital program. The ATM program was not activated and in January 2023, the ATM program expired with no common shares issued under this program thereunder. Further information about our ATM program can be found in the *Financial Condition - TC Energy Corporate ATM program* section of the MD&A, which section of the MD&A is incorporated by reference herein.

32 \| TC Energy **Annual information form 2022**

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**PREFERRED SHARES**

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Month** | **Series 1** | **Series 2** | **Series 3** | **Series 4** | **Series 5** | **Series 6** | **Series 7** | **Series 9** | **Series 11** | **Series 15**<sup>1</sup> |
| **December 2022** | | | | | | | | | | |
| High | $14.50 | $15.89 | $11.50 | $14.00 | $13.03 | $15.95 | $16.50 | $15.92 | $17.48 |  |
| Low | $13.40 | $14.46 | $10.65 | $12.57 | $11.07 | $14.00 | $15.11 | $14.60 | $16.13 |  |
| Close | $13.61 | $14.80 | $11.05 | $13.24 | $11.41 | $14.21 | $15.34 | $15.00 | $16.13 |  |
| Volume Traded | 383149 | 82841 | 129766 | 35324 | 99653 | 34448 | 440544 | 272396 | 194084 |  |
| **November 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $14.77 | $16.45 | $12.17 | $14.90 | $12.89 | $15.95 | $16.50 | $19.40 | $17.52 |  |
| Low | $14.04 | $15.63 | $10.80 | $13.61 | $11.65 | $14.67 | $15.52 | $14.20 | $16.16 |  |
| Close | $14.38 | $15.75 | $11.35 | $13.61 | $12.41 | $15.11 | $16.20 | $15.75 | $16.96 |  |
| Volume Traded | 530810 | 75155 | 509684 | 62666 | 186928 | 15322 | 648748 | 264758 | 92231 |  |
| **October 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $15.40 | $16.54 | $12.01 | $14.90 | $12.47 | $15.95 | $16.79 | $16.55 | $18.70 |  |
| Low | 14.04 | $15.36 | $10.80 | $13.60 | $11.70 | $14.50 | $15.48 | $15.16 | $16.91 |  |
| Close | $14.68 | $15.95 | $11.15 | $14.02 | $12.05 | $15.15 | $16.19 | $15.99 | $17.36 |  |
| Volume Traded | 205472 | 77128 | 1043786 | 25360 | 161155 | 24757 | 305542 | 179795 | 59125 |  |
| **September 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $16.52 | $17.77 | $13.05 | $15.00 | $13.70 | $15.95 | $18.25 | $17.83 | $20.43 |  |
| Low | $14.48 | $15.73 | $11.80 | $13.81 | $12.37 | $14.90 | $16.30 | $16.20 | $18.50 |  |
| Close | $14.86 | $16.00 | $11.90 | $14.41 | $12.42 | $14.90 | $16.50 | $16.30 | $18.53 |  |
| Volume Traded | 207895 | 41126 | 52932 | 53712 | 86185 | 8500 | 101858 | 151442 | 63423 |  |
| **August 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $16.54 | $17.00 | $14.15 | $14.88 | $14.47 | $16.60 | $18.48 | $18.18 | $20.32 |  |
| Low | $15.35 | $16.33 | $12.40 | $13.80 | $12.95 | $14.60 | $17.19 | $16.90 | $19.00 |  |
| Close | $16.17 | $16.90 | $12.93 | $14.64 | $13.66 | $15.80 | $18.20 | $17.79 | $19.88 |  |
| Volume Traded | 285154 | 55867 | 86547 | 23420 | 68714 | 17700 | 204528 | 99235 | 56441 |  |
| **July 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $16.50 | $16.85 | $13.55 | $14.88 | $13.57 | $15.50 | $19.00 | $19.50 | $20.50 |  |
| Low | $14.64 | $15.52 | $11.77 | $13.15 | $12.23 | $14.00 | $16.50 | $16.05 | $17.90 |  |
| Close | $15.37 | $16.38 | $12.36 | $13.76 | $12.95 | $14.75 | $17.47 | $16.98 | $18.71 |  |
| Volume Traded | 187027 | 54075 | 82644 | 28968 | 108548 | 9267 | 156120 | 77294 | 56388 |  |
| **June 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $18.21 | $17.56 | $14.41 | $15.00 | $14.95 | $17.50 | $20.92 | $20.77 | $22.82 |  |
| Low | $15.65 | $16.00 | $12.60 | $13.25 | $13.25 | $14.71 | $18.37 | $18.08 | $20.25 |  |
| Close | $16.05 | $16.70 | $12.77 | $14.52 | $13.51 | $15.11 | $18.61 | $18.19 | $20.35 |  |
| Volume Traded | 156275 | 148825 | 200041 | 35685 | 199900 | 10998 | 142855 | 95831 | 156406 |  |
| **May 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $17.75 | $17.45 | $13.75 | $14.52 | $14.84 | $16.00 | $20.35 | $20.20 | $22.10 | $25.28 |
| Low | $15.97 | $16.23 | $12.52 | $13.45 | $13.08 | $14.60 | $18.08 | $18.05 | $20.01 | $24.97 |
| Close | $17.58 | $17.45 | $13.75 | $14.45 | $14.84 | $15.45 | $20.29 | $20.15 | $22.10 | $25.00 |
| Volume Traded | 158954 | 42973 | 296458 | 19559 | 571442 | 23961 | 168866 | 317773 | 59184 | 593496 |
| **April 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $18.10 | $17.91 | $13.90 | $15.50 | $15.15 | $16.00 | $21.34 | $20.80 | $23.07 | $25.25 |
| Low | $16.19 | $15.96 | $12.69 | $14.00 | $13.61 | $14.26 | $17.76 | $17.52 | $20.06 | $25.22 |
| Close | $17.37 | $16.82 | $13.29 | $14.15 | $14.32 | $15.25 | $18.76 | $19.12 | $20.76 | $25.24 |
| Volume Traded | 216420 | 174180 | 242464 | 42222 | 124215 | 20825 | 301117 | 194334 | 132898 | 1716543 |
| **March 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $18.39 | $18.11 | $13.91 | $15.15 | $15.32 | $16.00 | $20.76 | $20.60 | $23.50 | $25.29 |
| Low | $17.24 | $16.78 | $12.95 | $13.30 | $14.27 | $14.50 | $19.40 | $19.17 | $21.89 | $25.02 |
| Close | $18.05 | $17.97 | $13.85 | $14.46 | $15.12 | $15.98 | $20.70 | $20.47 | $22.83 | $25.29 |
| Volume Traded | 519906 | 64032 | 486986 | 90750 | 145520 | 26314 | 468137 | 290661 | 133083 | 1124918 |
| **February 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $19.76 | $19.00 | $14.72 | $15.45 | $16.80 | $16.80 | $21.80 | $22.02 | $24.37 | $25.20 |
| Low | $18.10 | $17.65 | $13.30 | $13.82 | $14.98 | $15.25 | $20.40 | $20.28 | $23.27 | $25.02 |
| Close | $18.10 | $17.65 | $13.75 | $13.88 | $14.99 | $15.50 | $20.40 | $20.28 | $23.79 | $25.06 |
| Volume Traded | 248331 | 64267 | 177481 | 97650 | 166192 | 8447 | 267882 | 96231 | 73554 | 411889 |
| **January 2022** |  |  |  |  |  |  |  |  |  |  |
| High | $19.72 | $18.50 | $14.99 | $15.15 | $17.14 | $16.84 | $21.97 | $21.80 | $24.61 | $25.59 |
| Low | $18.70 | $17.41 | $14.02 | $13.25 | $15.70 | $14.95 | $21.20 | $21.09 | $23.90 | $25.15 |
| Close | $19.39 | $18.32 | $14.63 | $15.05 | $16.52 | $16.13 | $21.52 | $21.41 | $24.20 | $25.16 |
| Volume Traded | 268506 | 103102 | 226295 | 63900 | 204873 | 11594 | 296205 | 132063 | 62719 | 307535 |
| <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. | <sup>1</sup> TC Energy's cumulative redeemable first preferred shares, Series 15, were listed on the TSX under the symbol TRP.PR.K until their redemption on May 31, 2022. |

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TC Energy **Annual information form 2022** \| 33

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Directors and officers

As of February 13, 2023, the directors and executive officers of TC Energy as a group beneficially owned, or exercised control or direction over, directly or indirectly, an aggregate of 339,077 common shares, constituting 0.03 per cent of the common shares of TC Energy. The Company collects this information from our directors and executive officers but otherwise we have no direct knowledge of individual holdings of TC Energy's securities.

**DIRECTORS**

The following table sets forth the names of the directors who serve on the Board as of February 13, 2023, together with their jurisdictions of residence, all positions and offices held by them with TC Energy, unless otherwise stated, their principal occupations or employment during the past five years and the year from which each director has continually served as a director of TC Energy. Positions and offices held with TC Energy are also held by such person at TCPL. Each director holds office until the next annual meeting or until his or her successor is earlier elected or appointed.

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| | | |
|:---|:---|:---|
| **Name and place of residence**  | **Principal occupation during the five preceding years**  | **Director since** |
| Cheryl F. Campbell<br>Monument, Colorado<br>U.S.A. | Corporate director. Director, Pacific Gas & Electric Corporation (PGE) (utilities) since April 2019, Summit Utilities (natural gas distribution) since September 2020, JANA Corporation (JANA) (engineering) since January 2020 and National Underground Group (infrastructure service provider) since March 2018. Senior Vice-President, Gas, Xcel Energy, Inc. (Xcel) (utility supplier) from September 2004 to June 2018. | 2022 |
| Michael R. Culbert<br>Calgary, Alberta<br>Canada | Corporate director. Director, Komfort IQ (Canada) Inc. (technology) since June 2022 and Precision Drilling Corporation (Precision) (oil and gas services) since December 2017. Director, Reserve Royalty Income Trust (private oil and gas royalty trust) from May 2017 to June 2021. Director, Enerplus Corporation (Enerplus) (oil and gas, exploration and production) from March 2014 to August 2020. Vice-Chair (Non-Executive) and Director, PETRONAS Canada Ltd. (PETRONAS) (oil and natural gas) from November 2016 to March 2020. Director and President, Pacific NorthWest LNG LP (PNW LNG LP) (liquified natural gas liquefaction and export facilities) from June 2012 to May 2017. | 2020 |
| William D. JohnsonKnoxville, Tennessee <br>U.S.A. | Corporate director. President and CEO, PGE (utilities) from May 2019 to June 2020. President and CEO, Tennessee Valley Authority (Tennessee Valley) (electricity) from January 2013 to May 2019. | 2021 |
| Susan C. Jones<br>Calgary, Alberta<br>Canada | Corporate director. Director, Canadian National Railway Limited (freight railway) since May 2022, Piedmont Lithium Inc. (Piedmont) (emerging lithium company) since June 2021 and ARC Resources Ltd. (ARC) (previously Seven Generations Energy Ltd.) (oil and gas, exploration and production) since May 2020. Director, Gibson Energy Inc. (Gibson) (mid-stream oil-focused infrastructure company) from December 2018 to February 2020. Director, Canpotex Limited (Canpotex) (Canadian exporter of potash) from June 2018 to December 2019 (Chair of the Board from June 2019 to December 2019). Executive Vice-President and CEO of the Potash Business Unit, Nutrien Ltd. (Nutrien) (largest global underground soft-rock miner) from June 2018 to September 2019. Executive Advisor to the CEO, Nutrien, from October 2019 to December 2019. Executive Vice-President and CEO, Potash Unit, Nutrien, from June 2018 to September 2019. Executive Vice-President and President, Phosphate Unit, Nutrien, from January 2018 to May 2018. Chief Legal Officer, Agrium Inc. (agriculture) from March 2015 to December 2017. | 2020 |
| John E. Lowe<br>Houston, Texas<br>U.S.A. | Corporate director. Director, Phillips 66 Company (energy infrastructure) since May 2012. Non-executive Chair of the Board, Apache Corporation (Apache) (oil and gas) from May 2015 to September 2022. Senior Executive Adviser at Tudor, Pickering, Holt & Co. LLC (energy investment and merchant banking) from September 2012 to August 2021. | 2015 |
| David MacNaughton<br>Toronto, Ontario<br>Canada | President, Palantir Canada (data integration and analytics software) since September 2019. Canada's Ambassador to the United States from March 2016 to August 2019. | 2020 |

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34 \| TC Energy **Annual information form 2022**

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| | | |
|:---|:---|:---|
| **Name and place of residence**  | **Principal occupation during the five preceding years**  | **Director since** |
| François L. Poirier<br>Calgary, Alberta<br>Canada<sup>1</sup> | President and CEO since January 2021. Chief Operating Officer (COO) and President, Power and Storage from September 2020 to December 2020. COO and President, Power and Storage and Mexico from January 2020 to September 2020. Executive Vice-President, Corporate Development and Strategy, and President, Power & Storage and Mexico from May 2019 to January 2020. Executive Vice-President, Corporate Development and Strategy and President, Mexico Natural Gas Pipelines and Energy from January 2019 to May 2019. Executive Vice-President, Strategy and Corporate Development from February 2017 to December 2018. | 2021 |
| Una Power<br>Vancouver, British Columbia<br>Canada | Corporate director. Director, Teck Resources Limited (Teck) (diversified mining) since April 2017 and The Bank of Nova Scotia (Scotiabank) (chartered bank) since April 2016. Director, Kinross Gold Corporation (gold producer) from April 2013 to May 2019. | 2019 |
| Mary Pat Salomone<br>Naples, Florida<br>U.S.A. | Corporate director. Director, Intertape Polymer Group (manufacturing) from November 2015 to June 2022. Director, Herc Rentals (equipment rental) from July 2016 to December 2021. | 2013 |
| Indira Samarasekera<br>Vancouver, British Columbia<br>Canada | Senior Advisor, Bennett Jones LLP (law firm) since September 2015. Director, Intact Financial Corporation (property and casualty insurance) since May 2021, Stelco Holdings Inc. (manufacturing) since May 2018 and Magna International Inc. (automotive manufacturing) since May 2014. Member, selection panel for Canada's outstanding CEO since 2013. Director, Scotiabank (chartered bank) from May 2008 to April 2021. | 2016 |
| Siim A. Vanaselja<br>Toronto, Ontario<br>Canada | Corporate director. Chair of the Board, TC Energy since May 2017. Director, Power Corporation (financial services) since May 2020, Power Financial Corporation (financial services) since May 2018, RioCan Real Estate Investment Trust (real estate) since May 2017 and Great-West Lifeco Inc. (financial services) since May 2014. Director, Maple Leaf Sports and Entertainment Ltd. (sports, property management) from August 2012 to June 2017. | 2014 |
| Thierry Vandal<br>Mamaroneck, New York<br>U.S.A. | President, Axium Infrastructure U.S., Inc. (Axium U.S.) (independent infrastructure fund management firm) and Director, Axium Infrastructure Inc. (Axium) since 2015. Director, Royal Bank of Canada (RBC) (chartered bank) since 2015.  | 2017 |
| Dheeraj "D" Verma<br>Houston, Texas<br>U.S.A. | Senior Advisor, Quantum Energy Partners (Quantum) (private equity firm) since November 2021. President, Quantum Energy Partners from November 2016 to November 2021. Director, Jagged Peak Energy Inc. (oil and gas) from January 2017 to January 2020. | 2022 |

---

**Cease Trade Orders, Bankruptcies, Penalties or Sanctions**

As of the date hereof, except as indicated below, no other director or executive officer of the Company is or was a director or officer of another company in the past 10 years that:

• was the subject of a cease trade or similar order, or an order denying that company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days.

• was involved in an event that resulted in the company being subject to one of the above orders after the director or executive officer no longer held that role with the company, which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

• while acting in that capacity, or within a year of ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that company.

In January 2019, PGE filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code as a result of claims arising from fires caused by PGE's electrical equipment. Following discussions initiated by the PGE board of directors, Mr. Johnson agreed to serve as President and CEO throughout PGE's bankruptcy process, beginning May 2, 2019, with the understanding that upon PGE's emergence from bankruptcy he would resign from PGE. On July 1, 2020, PGE emerged from Chapter 11 bankruptcy, upon completing a restructuring process that was confirmed by the United States Bankruptcy Court on June 20, 2020. Mr. Johnson resigned as President and CEO of PGE on June 30, 2020.

Ms. Campbell joined the board of directors of PGE in April 2019, after PGE filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code in January 2019 and prior to its emergence from Chapter 11 bankruptcy in July 2020. Ms. Campbell continues to be a director of PGE.

<sup>1</sup> As President and CEO of TC Energy, Mr. Poirier is not a member of any Board committees, but is invited to attend committee meetings as required.

TC Energy **Annual information form 2022** \| 35

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No director or executive officer of the Company has within the past 10 years:

• become bankrupt

• made a proposal under any legislation relating to bankruptcy or insolvency

• become subject to or launched any proceedings, arrangement or compromise with any creditors, or

• had a receiver, receiver manager or trustee appointed to hold any of their assets.

No director or executive officer of the Company has been subject to:

• any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or

• any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

**BOARD COMMITTEES**

TC Energy has four committees of the Board: the Audit Committee, the Governance Committee, the Health, Safety, Sustainability and Environment Committee and the Human Resources Committee. As President and CEO of TC Energy, Mr. Poirier is not a member of any Board committees, but is invited to attend committee meetings as required.

The voting members of each of these committees, as of February 13, 2023, are identified below. Information about the Audit Committee can be found in this AIF under the heading *Audit Committee*.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Director** | **Audit** <br>**Committee** | **Governance**<br>**Committee** | **Health, Safety, Sustainability and**<br>**Environment Committee** | **Human Resources**<br>**Committee** |
| Cheryl F. Campbell | ✔ | | ✔ | |
| Michael R. Culbert | ✔ | | ✔ | |
| William D. Johnson | ✔ | | | ✔ |
| Susan C. Jones | ✔ | | | ✔ |
| John E. Lowe | | Chair | ✔ | |
| David MacNaughton | | ✔ | ✔ | |
| Una Power | Chair | | ✔ | |
| Mary Pat Salomone | | ✔ | Chair | |
| Indira Samarasekera | | ✔ | | ✔ |
| Siim A. Vanaselja (Chair) | | ✔ | | ✔ |
| Thierry Vandal | ✔ | | | Chair |
| Dheeraj "D" Verma | ✔ | | | ✔ |

---

36 \| TC Energy **Annual information form 2022**

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**OFFICERS**

With the exception of Stanley G. Chapman, III, Corey N. Hessen and Patrick C. Muttart, all of the executive officers and corporate officers of TC Energy reside in Alberta, Canada. Positions and offices held with TC Energy are also held by such person at TCPL. As of the date hereof, the officers of TC Energy, their present positions within TC Energy, unless otherwise stated, and their principal occupations during the five preceding years are as follows:

**Executive officers**

---

| | | |
|:---|:---|:---|
| **Name** | **Present position held** | **Principal occupation during the five preceding years** |
| François L. Poirier | President and Chief Executive Officer | Prior to January 2021, COO and President, Power and Storage. Prior to September 2020, COO and President, Power and Storage and Mexico. Prior to January 2020, Executive Vice-President, Corporate Development and Strategy, and President, Power & Storage and Mexico. Prior to May 2019, Executive Vice-President, Corporate Development and Strategy and President, Mexico Natural Gas Pipelines and Energy. Prior to January 2019, Executive Vice-President, Strategy and Corporate Development. |
| Stanley G. Chapman, III<br>Texas, U.S.A. | Executive Vice-President and Group Executive, U.S. and Mexico Natural Gas Pipelines | Prior to September 2022, Executive Vice-President and President, U.S. and Mexico Natural Gas Pipelines. Prior to September 2020, Executive Vice-President and President, U.S. Natural Gas Pipelines. Prior to April 2017, Senior Vice-President and General Manager, U.S. Natural Gas Pipelines (Natural Gas Pipelines Division). |
| Dawn E. de Lima | Executive Vice-President, Corporate Services | Prior to December 2020, Chief Shared Services Officer, TransAlta Corporation (TransAlta) (electricity service provider). Prior to February 2019, Chief Officer, Business and Operational Services, TransAlta. Prior to July 2018, Chief Administrative Officer, TransAlta. |
| Corey N. Hessen<br>Maryland, U.S.A. | Executive Vice-President and President, Power & Energy Solutions | Prior to July 2022, Executive Vice-President and President, Power, Storage and Origination. Prior to January 2022, Senior Vice-President and President, Power and Storage. Prior to January 2021, Senior Vice-President, Power & Storage (Power and Storage Division). Prior to September 2020, Senior Vice-President, Fuels, Exelon Corporation (utilities).  |
| Joel E. Hunter | Executive Vice-President and Chief Financial Officer | Prior to August 2021, Senior Vice-President, Capital Markets. Prior to December 2017, Vice-President, Finance and Treasurer.  |
| Patrick M. Keys | Executive Vice-President and General Counsel | Prior to September 2021, Executive Vice-President, Stakeholder Relations and General Counsel. Prior to May 2019, Senior Vice-President, Legal (Corporate Services Division). Prior to February 2019, Vice-President, Commercial West (Natural Gas Pipelines Division (Canada)). Prior to April 2017, Vice-President, Commercial West (Natural Gas Pipelines Division).  |
| Jawad A. Masud | Senior Vice-President, Technical Centre | Prior to January 2022, Senior Vice-President, Operations and Project Execution (Natural Gas Pipelines Division (Canada)). Prior to April 2020, Vice-President, Commercial Services, Optimization & Design (Natural Gas Pipelines Division (Canada)). Prior to February 2018, Director, Commercial West Markets, Industry Collaboration and Rates. |
| Patrick C. Muttart<br>Texas, U.S.A. | Senior Vice-President, External Relations | Prior to December 2022, Senior Vice-President, Stakeholder Relations. Prior to September 2021, Director External Affairs, PMI Global Services (tobacco manufacturing). |
| Bevin M. Wirzba | Executive Vice-President, Strategy and Corporate Development and Group Executive, Canadian Natural Gas and Liquids Pipelines | Prior to January 2022, Executive Vice-President, Strategy and Corporate Development and President, Liquids Pipelines. Prior to June 2021, Executive Vice-President and President, Liquids Pipelines. Prior to August 2020, Senior Vice-President, Liquids Pipelines. Prior to January 2020, Senior Vice-President, Liquids Operations and Commercial (Liquids Pipelines Division). Prior to July 2019, Senior Vice-President, Business Development and Capital Markets, ARC. |

---

TC Energy **Annual information form 2022** \| 37

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**Corporate officers**

---

| | | |
|:---|:---|:---|
| **Name** | **Present position held** | **Principal occupation during the five preceding years** |
| Gloria L. Hartl | Vice-President, Risk Management | Prior to February 2019, Director, Corporate Planning. |
| Dennis P. Hebert | Vice-President, Taxation | Vice-President, Taxation. |
| Jonathan E. Wrathall | Vice-President, Finance and Evaluations | Prior to July 2021, Director, Capital Markets. Prior to December 2020, Director, Corporate Planning. Prior to March 2019, Senior Manager, Capital Markets. |
| Nancy A. Johnson | Vice-President and Treasurer | Prior to January 2020, Vice-President, Strategy, Regulatory and Business Planning (Natural Gas Pipelines Division (Canada)). Prior to February 2019, Vice-President, Risk Management. Prior to June 2018, Director, Financial Reporting and Corporate Accounting. |
| Christine R. Johnston | Vice-President, Law and Corporate Secretary | Vice-President, Law and Corporate Secretary. |
| G. Glenn Menuz | Vice-President and Controller | Vice-President and Controller. |

---

**CONFLICTS OF INTEREST** 

Directors and officers of TC Energy and its subsidiaries are required to disclose any existing or potential conflicts in accordance with TC Energy's policies governing directors and officers and in accordance with the CBCA.

COBE covers potential conflicts of interest and requires that all employees, officers, directors and contract workers of TC Energy avoid situations that may result in a potential conflict.

In the event an employee, officer, director or contract worker finds themselves in a potential conflict situation, COBE stipulates that:

• the conflict should be reported; and

• the person should refrain from participation in any decision or action where there is a real or perceived conflict.

COBE also notes that employees and officers of TC Energy may not engage in outside business activities that are in conflict with or detrimental to the interests of TC Energy. The CEO and the executive leadership team must receive consent from the Chair of the Governance Committee for all outside business activities.

Under COBE, directors must also declare any material interest that they may have in a material contract or transaction and recuse himself or herself from related deliberations and approvals.

In addition to COBE, the directors and corporate officers of TC Energy are required to disclose any related parties and related party transactions in their annual directors and officers questionnaires. These questionnaires assist TC Energy in identifying and monitoring material related party transactions.

The Governance Committee reviews and approves any material related party transactions prior to the transaction occurring, and maintains oversight over material related party transactions following such approval.

There were no material conflicts of interests or related party transactions reported by the Board, CEO or the corporate officers, including the executive leadership team, in 2022.

38 \| TC Energy **Annual information form 2022**

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**Serving on other boards**

The Board believes that it is important for it to be composed of qualified and knowledgeable directors. As a result, due to the specialized nature of the energy infrastructure business, some of the directors are associated with or sit on the boards of companies that ship natural gas or liquids through our pipeline systems. Transmission services on most of TC Energy's pipeline systems in Canada and the U.S. are subject to regulation and, accordingly, we generally cannot deny transportation services to a creditworthy shipper. The Governance Committee monitors relationships among directors to ensure that business associations do not affect the Board's performance.

The Board considers whether directors serving on the boards of, or acting as officers or in another similar capacity, for other entities including public and private companies, Crown corporations and other state-owned entities, and non-profit organizations pose any potential conflict. The Board reviews these relationships annually to determine that they do not interfere with any of our director's ability to act in our best interests. If a director declares a material interest in any material contract or material transaction being considered at a meeting, the director is not present during the discussion and does not vote on the matter.

COBE requires employees to receive consent before accepting a directorship with an entity that is not an affiliate. The CEO and executive vice-presidents must receive the consent of the Chair of the Governance Committee. All other employees must receive the consent of the Corporate Secretary or their delegate.

**Affiliates**

The Board oversees relationships between TC Energy and any affiliates to avoid any potential conflicts of interest.

Corporate governance

Our Board and management are committed to the highest standards of ethical conduct and corporate governance.

TC Energy is a public company listed on the TSX and the NYSE, and we recognize and respect rules and regulations in both Canada and the U.S.

Our corporate governance practices comply with the Canadian governance guidelines, which include the governance rules of the CBCA, TSX and Canadian Securities Administrators, including:

• National Instrument 52-110, *Audit Committees* 

• National Policy 58-201, *Corporate Governance Guidelines*, and

• National Instrument 58-101, *Disclosure of Corporate Governance Practices*.

We also comply with the governance listing standards of the NYSE and the governance rules of the SEC that apply, in each case, to foreign private issuers.

Our governance practices comply with the NYSE standards for U.S. companies in all significant respects. As a non-U.S. company, we are not required to comply with most of the governance listing standards of the NYSE. As a foreign private issuer, however, we must disclose how our governance practices differ from those followed by U.S. companies that are subject to the NYSE standards. Our corporate governance practices do not significantly differ from those required to be followed by U.S. domestic issuers under the NYSE's listing standards. A summary of our governance practices compared to U.S. standards can be found on our website (www.tcenergy.com).

We benchmark our policies and procedures against major North American companies to assess our standards and we adopt best practices as appropriate. Some of our best practices are derived from the NYSE rules and comply with applicable rules adopted by the SEC to meet the requirements of the *Sarbanes-Oxley Act of 2002* and the *Dodd-Frank Wall Street Reform and Consumer Protection Act.*

TC Energy **Annual information form 2022** \| 39

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Audit Committee

The Audit Committee is responsible for assisting the Board in overseeing the integrity of our financial statements and our compliance with legal and regulatory requirements. It is also responsible for overseeing and monitoring the accounting and reporting process and the process, performance and independence of our internal and external auditors. The charter of the Audit Committee can be found in *Schedule B* of this AIF.

**RELEVANT EDUCATION AND EXPERIENCE OF MEMBERS**

The members of the Audit Committee as of February 13, 2023 are Una Power (Chair), Cheryl F. Campbell, Michael R. Culbert, William D. Johnson, Susan C. Jones, Thierry Vandal and Dheeraj "D" Verma.

The Board believes that the composition of the Audit Committee reflects a high level of financial literacy and expertise. Each member of the Audit Committee has been determined by the Board to be *independent* and *financially literate* within the meaning of the definitions under Canadian and U.S. securities laws and the NYSE rules. In addition, the Board has determined that Ms. Power and Mr. Vandal are *Audit Committee Financial Experts* as that term is defined under U.S. securities laws. The Board has made these determinations based on the education and breadth and depth of experience of each member of the Audit Committee. The following is a description of the education and experience, apart from their respective roles as directors of TC Energy, of each member of the Audit Committee that is relevant to the performance of his or her responsibilities as a member of the Audit Committee.

**Una Power (Chair)**

Ms. Power earned a Bachelor of Commerce (Honours) degree from Memorial University and holds Chartered Professional Accountant, Chartered Accountant and Chartered Financial Analyst designations. She serves on the board of directors for Teck where she currently serves as audit committee Chair and also serves on the board of directors for Scotiabank, where she previously served as a member and Chair of its audit committee. Ms. Power was previously the Chief Financial Officer of Nexen Energy ULC, a former publicly traded oil and gas company that is now a wholly-owned subsidiary of CNOOC Limited, where she held various executive positions with responsibility for financial and risk management, strategic planning, budgeting, business development, energy marketing and trading, information technology and capital investment.

**Cheryl F. Campbell**

Ms. Campbell holds a Master of Science degree in finance, with a minor in management, from the University of Colorado, Denver, as well as Bachelor of Science degrees in chemical engineering and business from the University of Colorado, Boulder. She currently serves on the board of directors of PGE, where she is Chair of the Safety & Nuclear Oversight Committee as well as a member of the Sustainability & Governance Committee. She also serves on the boards and is a member of the Audit Committees of Summit Utilities and National Underground Group, as well as serving on the board of JANA. She previously served, for 13 years, as a Senior Vice President, Gas, with Xcel.

**Michael R. Culbert**

Mr. Culbert holds a Bachelor of Science degree in Business Administration from Emmanuel College in Boston, Massachusetts. He currently serves on the board of directors of Precision, and is a member of its audit committee. He previously served as a director of Enerplus and Reserve Royalty Income Trust, and as a director and Vice-Chair of PETRONAS, where he also served as a member of each of their audit committees. Mr. Culbert was also a director and President of PNW LNG LP and former co-founder, director, President and CEO of Progress Energy Ltd.

**William D. Johnson**

Mr. Johnson holds a Juris Doctor degree (high honors) from the University of North Carolina School of Law and a Bachelor of Arts degree (history, summa cum laude) from Duke University in North Carolina. He recently served as President and CEO of PGE. Mr. Johnson also served as President and CEO of Tennessee Valley, as well as serving as Chairman, President and CEO of Progress Energy, Inc.

40 \| TC Energy **Annual information form 2022**

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**Susan C. Jones**

Ms. Jones earned a Bachelor of Arts degree in Political Science and Hispanic Studies from the University of Victoria. She also holds a Bachelor of Laws degree from the University of Ottawa. She earned a Leadership Diploma from the University of Oxford and holds a Director Certificate from Harvard University. Ms. Jones serves as a director of ARC and was a member of the audit and finance committee of Seven Generations Energy Ltd. prior to its merger with ARC. She also serves as a director of Piedmont. She previously served on the boards and as a member of the audit committees of Gibson and Canpotex, where she also served as Chair of the board. Ms. Jones held an executive leadership role at Nutrien for 15 years, most recently as Executive Vice-President and CEO of the Potash Business Unit.

**Thierry Vandal**

Mr. Vandal earned a Bachelor of Engineering degree from École Polytechnique de Montréal and a Master of Business Administration in Finance from the École des Hautes Etudes Commerciale Montréal. He is the President of Axium U.S. and serves on the board of directors for Axium. He also serves on the board of directors for RBC where he was previously designated as RBC's audit committee's financial expert. Mr. Vandal previously served on the audit committee for Veresen Inc. and has over 10 years' experience of serving with Hydro-Québec where he also held the position of President and CEO.

**Dheeraj "D" Verma**

Mr. Verma earned a Bachelor of Arts/Bachelor of Science in Mathematics and Finance from Ithaca College and a Master in International Management from Thunderbird School of Global Management. Mr. Verma serves as a Senior Advisor to Quantum, previously serving as President, and was on the Executive and Investment Committees of the firm during his tenure. Prior to joining Quantum, Mr. Verma was a senior member of JPMorgan Chase & Co.'s Mergers and Acquisitions group for seven years.

**PRE-APPROVAL POLICIES AND PROCEDURES** 

TC Energy's Audit Committee maintains a pre-approval policy with respect to permitted non-audit services and audit services. For non-audit service engagements of up to $250,000, approval of the Audit Committee Chair is required, and the Audit Committee is to be informed of the engagement at the next scheduled Audit Committee meeting. For all non-audit service engagements of $250,000 or more, pre-approval of the Audit Committee is required.

To date, all non-audit services have been pre-approved by the Audit Committee in accordance with the pre-approval policy described above.

**EXTERNAL AUDITOR SERVICE FEES**

The table below shows the services KPMG LLP provided during the last two fiscal years and the fees they invoiced us:

---

| | | |
|:---|:---|:---|
| **($ millions)** | **2022** | **2021** |
| **Audit fees** | **13.4** | 12.3 |
| • audit of the annual consolidated financial statements |  |  |
| • services related to statutory and regulatory filings or engagements |  |  |
| • review of interim consolidated financial statements and information contained in various prospectuses and other securities offering documents |  |  |
| **Audit-related fees** | **0.4** | 0.2 |
| • services related to the audit of the financial statements of TC Energy pipeline abandonment trusts and certain post-retirement plans |  |  |
| • French translation services |  |  |
| • ESG assurance services |  |  |
| **Tax fees** | **0.8** | 0.9 |
| • Canadian and international tax planning and tax compliance matters, including the review of income tax returns and other tax filings |  |  |
| **All other fees** | **0.1** | 0.1 |
| • ESG advisory services |  |  |
| **Total fees** | **14.7** | 13.5 |

---

TC Energy **Annual information form 2022** \| 41

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Legal proceedings and regulatory actions

Legal proceedings, arbitrations and actions are part of doing business. While we cannot predict the final outcomes of proceedings and actions with certainty, management does not expect any current or potential proceeding or action to have a material impact on our consolidated financial position or results of operations.

Transfer agent and registrar

TC Energy's transfer agent and registrar is Computershare Investor Services, Inc. with its Canadian transfer facilities in the cities of Vancouver, Calgary, Toronto, Halifax and Montréal.

Material contracts

TC Energy did not enter into any material contracts outside the ordinary course of business during the year ended December 31, 2022, nor has it entered into any material contracts outside the ordinary course of business prior to the year ended December 31, 2022 which are still in effect as at the date of this AIF.

Interest of experts

KPMG LLP are the auditors of TC Energy and have confirmed with respect to TC Energy that they are independent within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations and also that they are independent accountants with respect to TC Energy under all relevant U.S. professional and regulatory standards.

Additional information

1. Additional information in relation to TC Energy may be found under TC Energy's profile on SEDAR (www.sedar.com).

2. Additional information including directors' and officers' remuneration and indebtedness, principal holders of TC Energy's securities and securities authorized for issuance under equity compensation plans (all where applicable), is contained in TC Energy's Management Information Circular for its most recent annual meeting of shareholders that involved the election of directors and can be obtained upon request from the Corporate Secretary of TC Energy.

3. Additional financial information is provided in TC Energy's audited consolidated financial statements and MD&A for its most recently completed financial year.

42 \| TC Energy **Annual information form 2022**

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Glossary

---

| | |
|:---|:---|
| **Units of measure** | **Units of measure** |
| Bbl/d | Barrel(s) per day |
| Bcf | Billion cubic feet |
| hp | horsepower |
| km | Kilometres |
| MMcf/d | Million cubic feet per day |
| MW | Megawatt(s) |
| MWh | Megawatt hours |
| TJ/d | Terajoules per day |
| **General terms and terms related to our operations** | **General terms and terms related to our operations** |
| ATM | An at-the-market program allowing us to issue common shares from treasury at the prevailing market price |
| B.C. | British Columbia |
| bitumen | A thick, heavy oil that must be diluted to flow (also see: diluent). One of the components of the oil sands, along with sand, water and clay |
| diluent | A thinning agent made up of organic compounds. Used to dilute bitumen so it can be transported through pipelines |
| DRP | Dividend Reinvestment and Share Purchase Plan |
| ESG | Environmental, social and governance |
| force majeure | Unforeseeable circumstances that prevent a party to a contract from fulfilling it |
| GHG | Greenhouse gas |
| investment base | Includes rate base as well as assets under construction |
| LNG | Liquefied natural gas |
| MCR | major component replacement |
| rate base | Average assets in service, working capital and deferred amounts used in setting of regulated rates |
| WCSB | Western Canada Sedimentary Basin |
| Year End | Year ended December 31, 2021 |

---

---

| | |
|:---|:---|
| **Accounting terms** | **Accounting terms** |
| GAAP | U.S. generally accepted accounting principles |
| ROE | Return on common equity |
| **Government and regulatory bodies terms** | **Government and regulatory bodies terms** |
| AER | Alberta Energy Regulator |
| BCEAO | Environmental Assessment Office (British Columbia) |
| CBCA | *Canada Business Corporations Act* |
| CER | Canada Energy Regulator (formerly the National Energy Board (Canada)) |
| CFE | Comisión Federal de Electricidad (Mexico) |
| CRE | Comisión Reguladora de Energía (Mexico) |
| DOS | U.S. Department of State |
| FERC | Federal Energy Regulatory Commission (U.S.) |
| IESO | Independent Electricity System Operator |
| NEB | National Energy Board (Canada) |
| NYSE | New York Stock Exchange |
| OGC | Oil and Gas Commission (British Columbia) |
| PHMSA | Pipeline and Hazardous Materials Safety and Administration |
| SEC | U.S. Securities and Exchange Commission |
| TSX | Toronto Stock Exchange |

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TC Energy **Annual information form 2022** \| 43

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Schedule A

METRIC CONVERSION TABLE

The conversion factors set out below are approximate factors. To convert from Metric to Imperial multiply by the factor indicated. To convert from Imperial to Metric divide by the factor indicated.

---

| | | |
|:---|:---|:---|
| **Metric** | **Imperial** | **Factor** |
| Kilometres  | Miles | 0.62 |
| Millimetres | Inches | 0.04 |
| Gigajoules | Million British thermal units | 0.95 |
| Cubic metres\* | Cubic feet | 35.3 |
| Kilopascals | Pounds per square inch | 0.15 |
| Degrees Celsius | Degrees Fahrenheit | to convert to Fahrenheit multiply by 1.8, then add 32 degrees; to convert to Celsius subtract 32 degrees, then divide by 1.8 |

---

\*The conversion is based on natural gas at a base pressure of 101.325 kilopascals and at a base temperature of 15 degrees Celsius.

44 \| TC Energy **Annual information form 2022**

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Schedule B

CHARTER OF THE AUDIT COMMITTEE

**1.&nbsp;&nbsp;&nbsp;&nbsp;PURPOSE**

The Audit Committee shall assist the Board of Directors (the Board) in overseeing and monitoring, among other things, the:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Company's financial accounting and reporting process;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• integrity of the financial statements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Company's internal control over financial reporting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• external financial audit process;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• compliance by the Company with legal and regulatory requirements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• independence and performance of the Company's internal and external auditor.

To fulfill its purpose, the Audit Committee has been delegated certain authorities by the Board that it may exercise on behalf of the Board.

**2.&nbsp;&nbsp;&nbsp;&nbsp;ROLES AND RESPONSIBILITIES**

**I.&nbsp;&nbsp;&nbsp;&nbsp;Appointment of the Company's External Auditor**

Subject to confirmation by the external auditor of their compliance with Canadian and U.S. regulatory registration requirements, the Audit Committee shall recommend to the Board the appointment of the external auditor, such appointment to be confirmed by the Company's shareholders at each annual meeting. The Audit Committee shall also recommend to the Board the compensation to be paid to the external auditor for audit services. The Audit Committee shall also be directly responsible for the oversight of the work of the external auditor (including resolution of disagreements between management and the external auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The external auditor shall report directly to the Audit Committee.

The Audit Committee shall review and approve the audit plan of the external auditor. The Audit Committee shall also receive periodic reports from the external auditor regarding the auditor's independence, discuss such reports with the auditor, consider whether the provision of non-audit services is compatible with maintaining the auditor's independence and take appropriate action to satisfy itself of the independence of the external auditor. In addition, to further satisfy itself of audit quality and the independence of the external auditor, the Audit Committee shall undertake a Periodic Comprehensive Review of the External Auditor at least once every five years.

**II.&nbsp;&nbsp;&nbsp;&nbsp;Oversight in Respect of Financial Disclosure**

The Audit Committee shall, to the extent it deems it necessary or appropriate:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;review, discuss with management and the external auditor and recommend to the Board for approval, the Company's audited annual consolidated financial statements, annual information form, management's discussion and analysis (MD&A), all financial information in prospectuses and other offering memoranda, financial statements required by securities regulators, all prospectuses and all documents which may be incorporated by reference into a prospectus, including, without limitation, the annual management information circular, but excluding any pricing or prospectus supplement relating to the issuance of debt securities of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;review, discuss with management and the external auditor and approve, the release to the public of the Company's interim reports, including the consolidated financial statements, MD&A and news releases on quarterly financial results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;review and discuss with management and the external auditor the use of non-GAAP information and the applicable reconciliation;

TC Energy **Annual information form 2022** \| 45

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;review and discuss with management any financial outlook or future-oriented financial information disclosure in advance of its public release; provided, however, that such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made). The Audit Committee need not discuss in advance each instance in which the Company may provide financial projections or presentations to credit rating agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;review with management and the external auditor major issues regarding accounting policies and auditing practices, including any significant changes in the Company's selection or application of accounting policies, as well as major issues as to the adequacy of the Company's internal controls and any special audit steps adopted in light of material control deficiencies that could significantly affect the Company's financial statements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;review and discuss quarterly findings reports from the external auditor on:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;all critical accounting policies and practices to be used;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;other material written communications between the external auditor and management, such as any management letter or schedule of unadjusted differences;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;review with management and the external auditor the effect of regulatory and accounting developments on the Company's financial statements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;review with management and the external auditor the effect of any off-balance sheet structures on the Company's financial statements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;review with management, the external auditor and, if necessary, legal counsel, any litigation, claim or contingency, including arbitration and tax assessments, that could have a material effect upon the financial position of the Company, and the manner in which these matters have been disclosed in the financial statements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;review disclosures made to the Audit Committee by the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO) during their certification process for the periodic reports filed with securities regulators about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company's internal controls;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;&nbsp;discuss with management the Company's material financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies;

**III.&nbsp;&nbsp;&nbsp;&nbsp;Oversight in Respect of Legal and Regulatory Matters**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;review with the Company's General Counsel legal matters that may have a material impact on the financial statements, the Company's compliance policies and any material reports or inquiries received from regulators or governmental agencies;.

**IV.&nbsp;&nbsp;&nbsp;&nbsp;Oversight in Respect of Internal Audit**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;review and approve the audit plans of the internal auditor of the Company including the degree of coordination between such plans and those of the external auditor and the extent to which the planned audit scope can be relied upon to detect weaknesses in internal control, fraud or other illegal acts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;review the significant findings prepared by the internal audit department and recommendations issued by it or by any external party relating to internal audit issues, together with management's response thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;review compliance with the Company's policies and avoidance of conflicts of interest;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;review the report prepared by the internal auditor on officers' expenses and aircraft usage;

46 \| TC Energy **Annual information form 2022**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;review the adequacy of the resources of the internal auditor to ensure the objectivity and independence of the internal audit function, including reports from the internal audit department on its audit process with subsidiaries and affiliates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;ensure the internal auditor has access to the Chair of the Audit Committee, the Board and the CEO and meet separately with the internal auditor to review with him or her any problems or difficulties he or she may have encountered and specifically:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;any difficulties which were encountered in the course of the audit work, including restrictions on the scope of activities or access to required information, and any disagreements with management;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;any changes required in the planned scope of the internal audit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;the internal audit department responsibilities, budget and staffing;

and to report to the Board on such meetings;

**V.&nbsp;&nbsp;&nbsp;&nbsp;Oversight in Respect of the External Auditor** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;review any letter, report or other communication from the external auditor in respect of any identified weakness in internal control or unadjusted difference and management's response and follow-up, inquire regularly of management and the external auditor of any significant issues between them and how they have been resolved, and intervene in the resolution if required;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;receive and review annually the external auditor's formal written statement of independence delineating all relationships between itself and the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;meet separately with the external auditor to review any problems or difficulties the external auditor may have encountered and specifically:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;any difficulties which were encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information, and any disagreements with management;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;any changes required in the planned scope of the audit;

and to report to the Board on such meetings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;meet with the external auditor prior to the audit to review the planning and staffing of the audit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;receive and review annually the external auditor's written report on their own internal quality control procedures; any material issues raised by the most recent internal quality control review, or peer review, of the external auditor, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, and any steps taken to deal with such issues;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;review and evaluate the external auditor, including the lead partner of the external auditor team;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law, but at least every five years;

**VI.&nbsp;&nbsp;&nbsp;&nbsp;Oversight in Respect of Audit and Non-Audit Services**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;pre-approve all audit services (which may entail providing comfort letters in connection with securities underwritings) and all permitted non-audit services, other than non-audit services where:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;the aggregate amount of all such non-audit services provided to the Company that were not pre-approved constitutes not more than five percent of the total fees paid by the Company and its subsidiaries to the external auditor during the fiscal year in which the non-audit services are provided;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;such services were not recognized by the Company at the time of the engagement to be non-audit services;

TC Energy **Annual information form 2022** \| 47

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;such services are promptly brought to the attention of the Audit Committee and approved, prior to the completion of the audit, by the Audit Committee or by one or more members of the Audit Committee to whom authority to grant such approvals has been delegated by the Audit Committee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;approval by the Audit Committee of a non-audit service to be performed by the external auditor shall be disclosed as required under securities laws and regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;the Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant pre-approvals required by this subsection. The decisions of any member to whom authority is delegated to pre-approve an activity shall be presented to the Audit Committee at its first scheduled meeting following such pre-approval;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;if the Audit Committee approves an audit service within the scope of the engagement of the external auditor, such audit service shall be deemed to have been pre-approved for purposes of this subsection;

**VII.&nbsp;&nbsp;&nbsp;&nbsp;Oversight in Respect of Certain Policies**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;review and recommend to the Board for approval the implementation of, and significant amendments to, policies and program initiatives deemed advisable by management or the Audit Committee with respect to the Company's code of business ethics (COBE), risk management and financial reporting policies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;obtain reports from management, the Company's senior internal auditing executive and the external auditor and report to the Board on the status and adequacy of the Company's efforts to ensure its businesses are conducted and its facilities are operated in an ethical, legally compliant and socially responsible manner, in accordance with the Company's COBE;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;establish a non-traceable, confidential and anonymous system by which callers may ask for advice or report any ethical or financial concern, ensure that procedures for the receipt, retention and treatment of complaints in respect of accounting, internal controls and auditing matters are in place, and receive reports on such matters as necessary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;annually review and assess the adequacy of the Company's public disclosure policy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;review and approve the Company's hiring policy for partners, employees and former partners and employees of the present and former external auditor (recognizing the Sarbanes-Oxley Act of 2002 does not permit the CEO, controller, CFO or chief accounting officer to have participated in the Company's audit as an employee of the external auditor during the preceding one-year period) and monitor the Company's adherence to the policy;

**VIII.&nbsp;&nbsp;&nbsp;&nbsp;Oversight in Respect of Financial Aspects of the Company's Canadian Pension Plans (the Company's pension plans), specifically:**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)review and approve annually the Statement of Investment Beliefs for the Company's pension plans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)delegate the ongoing administration and management of the financial aspects of the Canadian pension plans to the Pension Committee comprised of members of the Company's management team appointed by the Human Resources Committee, in accordance with the Pension Committee Charter, which terms shall be approved by both the Audit Committee and the Human Resources Committee, and the terms of the Statement of Investment Beliefs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)monitor the financial management activities of the Pension Committee and receive updates at least annually from the Pension Committee on the investment of the Plan assets to ensure compliance with the Statement of Investment Beliefs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;provide advice to the Human Resources Committee on any proposed changes in the Company's pension plans in respect of any significant effect such changes may have on pension financial matters;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;review and consider financial and investment reports and the funded status relating to the Company's pension plans and recommend to the Board on pension contributions;

48 \| TC Energy **Annual information form 2022**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;receive, review and report to the Board on the actuarial valuation and funding requirements for the Company's pension plans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;approve the initial selection or change of actuary for the Company's pension plans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;approve the appointment or termination of the pension plans' auditor;

**IX.&nbsp;&nbsp;&nbsp;&nbsp;U.S. Stock Plans**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;review and approve the engagement and related fees of the auditor for any plan of a U.S. subsidiary that offers Company stock to employees as an investment option under the plan;

**X.&nbsp;&nbsp;&nbsp;&nbsp;Oversight in Respect of Internal Administration**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;review annually the reports of the Company's representatives on certain audit committees of subsidiaries and affiliates of the Company and any significant issues and auditor recommendations concerning such subsidiaries and affiliates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;oversee succession planning for the senior management in finance, treasury, tax, risk, internal audit and the controllers' group;

**XI.&nbsp;&nbsp;&nbsp;&nbsp;Information Security**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)review quarterly, the report of the Chief Information Officer (or such other appropriate Company representative) on information security controls, education and awareness.

**XII.&nbsp;&nbsp;&nbsp;&nbsp;Oversight Function**

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate or are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the external auditor. The Audit Committee, its Chair and any of its members who have accounting or related financial management experience or expertise, are members of the Board, appointed to the Audit Committee to provide broad oversight of the financial disclosure, financial risk and control related activities of the Company, and are specifically not accountable nor responsible for the day to day operation of such activities. Although designation of a member or members as an "audit committee financial expert" is based on that individual's education and experience, which that individual will bring to bear in carrying out his or her duties on the Audit Committee, designation as an "audit committee financial expert" does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit Committee and Board in the absence of such designation. Rather, the role of any audit committee financial expert, like the role of all Audit Committee members, is to oversee the process and not to certify or guarantee the internal or external audit of the Company's financial information or public disclosure.

**3.&nbsp;&nbsp;&nbsp;&nbsp;COMPOSITION OF AUDIT COMMITTEE**

The Audit Committee shall consist of three or more directors, a majority of whom are resident Canadians (as defined in the *Canada Business Corporations Act*), and all of whom are unrelated and/or independent for the purposes of applicable Canadian and United States securities law and applicable rules of any stock exchange on which the Company's securities are listed. Each member of the Audit Committee shall be financially literate and at least one member shall have accounting or related financial management expertise (as those terms are defined from time to time under the requirements or guidelines for audit committee service under securities laws and the applicable rules of any stock exchange on which the Company's securities are listed for trading or, if it is not so defined, as that term is interpreted by the Board in its business judgment).

**4.&nbsp;&nbsp;&nbsp;&nbsp;APPOINTMENT OF AUDIT COMMITTEE MEMBERS**

The members of the Audit Committee shall be appointed by the Board from time to time on the recommendation of the Governance Committee and shall hold office until the next annual meeting of shareholders or until their successors are earlier appointed or until they cease to be directors of the Company.

TC Energy **Annual information form 2022** \| 49

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**5.&nbsp;&nbsp;&nbsp;&nbsp;VACANCIES**

Where a vacancy occurs at any time in the membership of the Audit Committee, it may be filled by the Board on the recommendation of the Governance Committee.

**6.&nbsp;&nbsp;&nbsp;&nbsp;AUDIT COMMITTEE CHAIR**

The Board shall appoint a Chair of the Audit Committee who shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;review and approve the agenda for each meeting of the Audit Committee and, as appropriate, consult with members of management;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;preside over meetings of the Audit Committee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;make suggestions and provide feedback from the Audit Committee to management regarding information that is or should be provided to the Audit Committee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;report to the Board on the activities of the Audit Committee relative to its recommendations, resolutions, actions and concerns; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;meet as necessary with the internal and external auditor.

**7.&nbsp;&nbsp;&nbsp;&nbsp;ABSENCE OF AUDIT COMMITTEE CHAIR**

If the Chair of the Audit Committee is not present at any meeting of the Audit Committee, one of the other members of the Audit Committee present at the meeting shall be chosen by the Audit Committee to preside at the meeting.

**8.&nbsp;&nbsp;&nbsp;&nbsp;SECRETARY OF AUDIT COMMITTEE**

The Corporate Secretary shall act as Secretary to the Audit Committee.

**9.&nbsp;&nbsp;&nbsp;&nbsp;MEETINGS**

The Chair, or any two members of the Audit Committee, or the internal auditor, or the external auditor, may call a meeting of the Audit Committee. The Audit Committee shall meet at least quarterly. The Audit Committee shall meet periodically with management, the internal auditor and the external auditor in separate executive sessions.

**10.&nbsp;&nbsp;&nbsp;&nbsp;QUORUM**

A majority of the members of the Audit Committee, present in person or by telephone or other telecommunication device that permit all persons participating in the meeting to speak to each other, shall constitute a quorum.

**11.&nbsp;&nbsp;&nbsp;&nbsp;NOTICE OF MEETINGS**

Notice of the time and place of every meeting shall be given in writing, facsimile communication or by other electronic means to each member of the Audit Committee at least 24 hours prior to the time fixed for such meeting; provided, however, that a member may in any manner waive a notice of a meeting. Attendance of a member at a meeting is a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

**12.&nbsp;&nbsp;&nbsp;&nbsp;ATTENDANCE OF COMPANY OFFICERS AND EMPLOYERS AT MEETING**

At the invitation of the Chair of the Audit Committee, one or more officers or employees of the Company may attend any meeting of the Audit Committee.

**13.&nbsp;&nbsp;&nbsp;&nbsp;PROCEDURE, RECORDS AND REPORTING**

The Audit Committee shall fix its own procedure at meetings, keep records of its proceedings and report to the Board when the Audit Committee may deem appropriate but not later than the next meeting of the Board.

**14.&nbsp;&nbsp;&nbsp;&nbsp;REVIEW OF CHARTER AND EVALUATION OF AUDIT COMMITTEE**

The Audit Committee shall review its Charter annually or otherwise, as it deems appropriate and, if necessary, propose changes to the Governance Committee and the Board. The Audit Committee shall annually review the Audit Committee's own performance.

50 \| TC Energy **Annual information form 2022**

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**15.&nbsp;&nbsp;&nbsp;&nbsp;OUTSIDE EXPERTS AND ADVISORS**

The Audit Committee is authorized, when deemed necessary or desirable, to retain and set and pay the compensation for independent counsel, outside experts and other advisors, at the Company's expense, to advise the Audit Committee or its members independently on any matter.

**16.&nbsp;&nbsp;&nbsp;&nbsp;RELIANCE**

Absent actual knowledge to the contrary (which shall be promptly reported to the Board), each member of the Audit Committee shall be entitled to rely on (i) the integrity of those persons or organizations within and outside the Company from which it receives information, (ii) the accuracy of the financial and other information provided to the Audit Committee by such persons or organizations and (iii) representations made by management and the external auditor, as to any information technology, internal audit and other non-audit services provided by the external auditor to the Company and its subsidiaries.

TC Energy **Annual information form 2022** \| 51

## Exhibit 13.2

EXHIBIT 13.2

**Management's discussion and analysis**

February 13, 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 year ended December 31, 2022.

This MD&A should also be read in conjunction with our December 31, 2022 audited Consolidated financial statements and notes for the same period, which have been prepared in accordance with U.S. GAAP.

   

Contents

---

| | |
|:---|:---|
| **ABOUT THIS DOCUMENT** | [10](#ic46b3ca541974a448e1f8d0cf8476e02_7) |
| **ABOUT OUR BUSINESS** | [14](#ic46b3ca541974a448e1f8d0cf8476e02_10) |
| • Three core businesses | [15](#ic46b3ca541974a448e1f8d0cf8476e02_13) |
| • Our strategy | [16](#ic46b3ca541974a448e1f8d0cf8476e02_16) |
| • 2022 Financial highlights | [20](#ic46b3ca541974a448e1f8d0cf8476e02_19) |
| • Outlook | [29](#ic46b3ca541974a448e1f8d0cf8476e02_22) |
| • Capital program | [30](#ic46b3ca541974a448e1f8d0cf8476e02_25) |
| **NATURAL GAS PIPELINES BUSINESS** | [35](#ic46b3ca541974a448e1f8d0cf8476e02_31) |
| **CANADIAN NATURAL GAS PIPELINES** | [44](#ic46b3ca541974a448e1f8d0cf8476e02_43) |
| **U.S. NATURAL GAS PIPELINES** | [50](#ic46b3ca541974a448e1f8d0cf8476e02_58) |
| **MEXICO NATURAL GAS PIPELINES** | [56](#ic46b3ca541974a448e1f8d0cf8476e02_73) |
| **LIQUIDS PIPELINES** | [61](#ic46b3ca541974a448e1f8d0cf8476e02_91) |
| **POWER AND ENERGY SOLUTIONS** | [70](#ic46b3ca541974a448e1f8d0cf8476e02_109) |
| **CORPORATE** | [81](#ic46b3ca541974a448e1f8d0cf8476e02_130) |
| **FINANCIAL CONDITION** | [87](#ic46b3ca541974a448e1f8d0cf8476e02_142) |
| **OTHER INFORMATION** | [99](#ic46b3ca541974a448e1f8d0cf8476e02_145) |
| • Enterprise risk management | [99](#ic46b3ca541974a448e1f8d0cf8476e02_148) |
| • Controls and procedures | [114](#ic46b3ca541974a448e1f8d0cf8476e02_160) |
| • Critical accounting estimates | [115](#ic46b3ca541974a448e1f8d0cf8476e02_163) |
| • Financial instruments | [118](#ic46b3ca541974a448e1f8d0cf8476e02_166) |
| • Related party transactions | [120](#ic46b3ca541974a448e1f8d0cf8476e02_169) |
| • Accounting changes | [121](#ic46b3ca541974a448e1f8d0cf8476e02_172) |
| • Quarterly results | [122](#ic46b3ca541974a448e1f8d0cf8476e02_175) |
| **GLOSSARY** | [134](#ic46b3ca541974a448e1f8d0cf8476e02_178) |

---

TC Energy **Management's discussion and analysis** 2022 \| 9

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About this document

Throughout this MD&A, the terms we, us, our and TC Energy mean TC Energy Corporation and its subsidiaries. Abbreviations and acronyms that are not defined in the document are defined in the glossary on page 134. All information is as of February 13, 2023 and all amounts are in Canadian dollars, unless noted otherwise.

**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, including our expectations regarding the size, timing and outcome of the asset divestiture program

• expected dividend growth

• expected duration of discounted DRP

• 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 2022 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.

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 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.

10 \| TC Energy **Management's discussion and analysis** 2022

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**Risks and uncertainties**

• realization of expected benefits from acquisitions and divestitures

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

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

• the operating performance of our 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.

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.sedar.com).

**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.

TC Energy **Management's discussion and analysis** 2022 \| 11

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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

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

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

• legal, contractual, bankruptcy and other settlements

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

• acquisition and integration costs

• restructuring costs.

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. Beginning in first quarter 2022, with consistent presentation of prior periods, we excluded 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 third quarter 2022, Transportadora de Gas Natural de la Huasteca (TGNH) and the CFE executed agreements which consolidate a number of operating and in-development natural gas pipelines in central and southeast Mexico under one TSA. As this TSA contains a lease, we have recognized amounts in net investment in leases on our Consolidated balance sheet. In accordance with the requirements of U.S. GAAP, we have recognized an expected credit loss provision related to net investment in leases and certain contract assets. The amount of this provision will fluctuate from period to period based on changing economic assumptions and forward-looking information. The provision is an estimate of losses that may occur over the duration of the TSA through 2055. As this provision, as well as a provision related to certain contract assets in Mexico, do not reflect losses or cash outflows that were incurred under this lease arrangement in the current period or from our underlying operations, we have excluded any unrealized changes from comparable measures. Refer to Note 28, Risk management and financial instruments, of our 2022 Consolidated financial statements for additional information on expected credit loss provisions.

We also 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 do not accurately reflect the gains and losses that will be realized at settlement. These amounts offset within each reporting period, resulting in no impact on net income. This peso-denominated loan was fully repaid in first quarter 2022.

12 \| TC Energy **Management's discussion and analysis** 2022

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

---

| | |
|:---|:---|
| **Comparable measure** | **GAAP measure** |
| comparable EBITDA | segmented earnings |
| comparable EBIT | segmented earnings |
| 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 adjusted for certain specific items, excluding non-cash 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 adjusted for specific items and is an effective tool for evaluating trends in each segment. Refer to the Financial results sections for each business segment for a reconciliation to segmented earnings.

**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, Interest expense, AFUDC, Foreign exchange (loss)/gain, net, Interest income and other, Income tax expense, Non-controlling interests and Preferred share dividends, adjusted for specific items. Refer to the Financial highlights 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 Note 29, Changes in operating working capital, of 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.

TC Energy **Management's discussion and analysis** 2022 \| 13

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About our business

With over 70 years of experience, TC Energy is a leader in the responsible development and reliable operation of North American energy infrastructure including natural gas and liquids pipelines, power generation and natural gas storage facilities.

![ar_aboutourbusinessx1122xv4.jpg](ar_aboutourbusinessx1122xv4.jpg)

14 \| TC Energy **Management's discussion and analysis** 2022

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**THREE CORE BUSINESSES**

We operate in three core businesses – Natural Gas Pipelines, Liquids Pipelines and Power and Energy Solutions. In order to provide information that is aligned with how management decisions about our businesses are made and how performance of our businesses is assessed, our results are reflected in five operating segments: Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines and Power and Energy Solutions. We also have a Corporate segment consisting of corporate and administrative functions that provide governance, financing and other support to TC Energy's business segments.

**Year at-a-glance**

---

| | | |
|:---|:---|:---|
| **at December 31** | | |
| (millions of $) | **2022** | **2021** |
| **Total assets by segment** |  |  |
| Canadian Natural Gas Pipelines | **27456** | 25452 |
| U.S. Natural Gas Pipelines | **50038** | 45502 |
| Mexico Natural Gas Pipelines | **9231** | 7547 |
| Liquids Pipelines | **15587** | 14951 |
| Power and Energy Solutions | **8272** | 6563 |
| Corporate | **3764** | 4203 |
|  | **114348** | 104218 |

---

---

| | | |
|:---|:---|:---|
| **year ended December 31** | | |
| (millions of $) | **2022** | **2021** |
| **Total revenues by segment** |  |  |
| Canadian Natural Gas Pipelines | **4764** | 4519 |
| U.S. Natural Gas Pipelines | **5933** | 5233 |
| Mexico Natural Gas Pipelines | **688** | 605 |
| Liquids Pipelines | **2668** | 2306 |
| Power and Energy Solutions | **924** | 724 |
|  | **14977** | 13387 |

---

---

| | | |
|:---|:---|:---|
| **year ended December 31** | | |
| (millions of $) | **2022** | **2021** |
| **Comparable EBITDA by segment**<sup>1</sup> |  |  |
| Canadian Natural Gas Pipelines | **2806** | 2675 |
| U.S. Natural Gas Pipelines | **4089** | 3856 |
| Mexico Natural Gas Pipelines | **753** | 666 |
| Liquids Pipelines | **1366** | 1526 |
| Power and Energy Solutions | **907** | 669 |
| Corporate | **(20)** | (24) |
|  | **9901** | 9368 |

---

1&nbsp;&nbsp;&nbsp;&nbsp;For further information on the reconciliation of segmented earnings to comparable EBITDA, refer to the Financial results sections for each business segment.

TC Energy **Management's discussion and analysis** 2022 \| 15

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**OUR STRATEGY**

Our vision is to be the premier energy infrastructure company in North America today and in the future by safely generating, storing and delivering the energy people need every day. Our goal is to develop, build and operate a portfolio of infrastructure assets that enable us to prosper irrespective of the pace and direction of energy transition. We are a team of energy problem solvers working to deliver this energy in a more affordable, reliable and sustainable manner while developing lower carbon energy solutions to drive energy transition ranging from natural gas and renewables to carbon capture and hydrogen.

Our business consists of natural gas and crude oil transportation, storage and delivery systems and power generation assets that produce electricity. These long-life infrastructure assets cover all strategic North American corridors and are supported by long-term commercial arrangements and/or rate regulation. Our assets generate predictable and sustainable cash flows and earnings providing the cornerstones of our low-risk, utility-like business model. Our long-term strategy is driven by several key beliefs:

• natural gas will continue to play a pivotal role in North America's energy future

• crude oil will remain an important part of the fuel mix

• the need for renewables along with reliable, on-demand energy sources to support grid stability will grow significantly

• the value of existing infrastructure assets will become more valuable given the challenges to develop new greenfield, linear-energy infrastructure, in particular, pipelines.

**Allocation of comparable EBITDA**<sup>1</sup>

---

| | | |
|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** |
| **Comparable EBITDA by segment** |  |  |
| Canadian Natural Gas Pipelines | **28%** | 29% |
| U.S. Natural Gas Pipelines | **41%** | 41% |
| Mexico Natural Gas Pipelines | **8%** | 7% |
| Liquids Pipelines | **14%** | 16% |
| Power and Energy Solutions | **9%** | 7% |
|  | **100%** | 100% |

---

1&nbsp;&nbsp;&nbsp;&nbsp;Refer to Note 4, Segmented information, of our 2022 Consolidated financial statements for an allocation of segmented earnings by business segment.

Our asset mix will continue to evolve to align with the North American energy mix as energy transition unfolds with the following anticipated shifts in capital allocation:

• Power and Energy Solutions weighting in our portfolio is expected to grow

• Natural Gas Pipelines will continue to attract capital

• Liquids Pipelines investment will be targeted and tied to maximizing the value of our asset base

• Measured investment in new technology without taking significant commodity price or volumetric risk.

16 \| TC Energy **Management's discussion and analysis** 2022

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**Key components of our strategy** 

---

| | |
|:---|:---|
| **1** | **Maximize the full-life value of our infrastructure assets and commercial positions** |
|  | • Maintaining safe, reliable operations and ensuring asset integrity, while minimizing environmental impacts, continues to be the foundation of our business<br>• Our pipeline assets include large-scale natural gas and crude oil pipelines and associated storage facilities that connect long-life, low cost supply basins with premium North American and export markets, generating predictable and sustainable cash flows and earnings<br>• Our power and non-regulated storage assets are primarily under long-term contracts that provide stable cash flows and earnings. |
| **2** | **Commercially develop and build new asset investment programs** |
|  | • We are developing high quality, long-life assets under our current capital program, comprised of approximately $34 billion in secured projects. As well, our projects under development are, or are expected to be, largely commercially supported. We expect that these investments will contribute to incremental earnings and cash flows as they are placed in service<br>• Our existing extensive footprint offers significant in-corridor growth opportunities. This includes possible future opportunities to deploy low-emission infrastructure technologies such as renewables, hydrogen and carbon capture, which will help reduce the carbon footprint of our customers and us, and also support extending the longevity of our existing assets<br>• We continue to develop projects and manage construction risk in a disciplined manner that maximizes capital efficiency and returns to shareholders<br>• As part of our growth strategy, we rely on our experience and our regulatory, commercial, financial, legal and operational expertise to successfully permit, fund, build and integrate new pipeline and other energy facilities<br>• Safety, executability, profitability and responsible ESG performance are fundamental to our investments. |
| **3** | **Cultivate a focused portfolio of high-quality development and investment options** |
|  | • We assess opportunities to develop and acquire energy infrastructure that complements our existing portfolio, enhances future resilience under a changing energy mix, and diversifies access to attractive supply and market regions within our risk preferences. Refer to the Enterprise risk management section for an overview of our enterprise risks<br>• We focus on commercially regulated and/or long-term contracted growth initiatives in core regions of North America and prudently manage development costs, minimizing capital at risk in a project's early stages<br>• We will advance selected opportunities, including energy transition growth initiatives, to full development and construction when market conditions are appropriate and project risks and returns are acceptable<br>• We monitor trends specific to energy supply and demand fundamentals, in addition to analyzing how our portfolio performs under different energy mix scenarios considering the recommendations of the Financial Stability Board's TCFD. This enables the identification of opportunities that contribute to our resilience, strengthen our asset base or improve diversification.  |
| **4** | **Maximize our competitive strengths** |
|  | • We continually seek to enhance our core competencies in safety, operational excellence, investment opportunity origination, project execution and stakeholder relations as well as key sustainability and ESG areas to ensure we deliver shareholder value <br>• The use of a disciplined approach to capital allocation supports our ability to maximize value over the short, medium and long term. We allocate capital in a manner that improves the breadth and cost competitiveness of the services we provide, extends the life of our assets, increases diversification and strengthens the carbon-competitiveness of our assets<br>• We believe that our high-quality, diversified portfolio of incumbent assets results in predictable, low risk cash flows and positions us well to succeed under an energy transition scenario<br>• A strong focus on talent management ensures that we have the necessary capabilities to execute and deliver on our strategy. |

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TC Energy **Management's discussion and analysis** 2022 \| 17

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**Our competitive advantage**

The need for secure, reliable and sustainable energy solutions has become increasingly important. Decades of experience in the energy infrastructure business, a disciplined approach to project management and a proven capital allocation model result in a solid competitive position as we remain focused on our purpose – to deliver the energy people need today and in the future. We will do this safely, responsibly, collaboratively and with integrity through:

• strong leadership and governance: we maintain rigorous governance over our approach to business ethics, enterprise risk management, competitive behaviour, operating capabilities and strategy development as well as regulatory, legal, commercial, stakeholder and financing support

• a high-quality portfolio: our low-risk and enduring utility-like business model offers the scale and presence to provide essential and highly competitive infrastructure services that enable us to maximize the full-life value of our long-life assets and commercial positions throughout all points of the business cycle. Our incumbent portfolio of assets and synergistic footprint support transporting both molecules and electrons, providing us flexibility to allocate capital towards electrification or other emerging low-carbon technologies in support of any energy transition scenario. For example, we are working with an industry partner on the Alberta Carbon Grid (ACG) – a world scale carbon capture and storage system in development to help the province's industrial sectors sequester their emissions

• disciplined operations: our values-centred workforce is highly skilled in designing, building and operating energy infrastructure with a focus on operational excellence and a commitment to health, safety, sustainability and the environment that is suited to both today's environment as well as an evolving energy industry

• financial positioning: we exhibit consistently strong financial performance, long-term stability and profitability, along with a disciplined approach to capital investment. We can access sizable amounts of competitively priced capital to support new investments balanced with common share dividend growth while preserving financial flexibility, including asset divestitures, to fund our operations in all market conditions. In addition, we continue to maintain the simplicity and understandability of our business and corporate structure

• proven ability to adapt: we have a long track record of turning policy and technology changes into opportunities – for example, re-entering Mexico when the country shifted from fuel oil to natural gas, reversing pipeline flows in response to the shale gas revolution, re-purposing the underutilized Canadian Mainline pipeline capacity from natural gas to crude oil service, installing electric compression and/or switching gas compression to electrification such as the proposed Valhalla North and Berland River (VNBR) and WR projects in Canada and the U.S., respectively, and currently leveraging our complementary asset mix with the objective of reducing emissions on our Liquids pipelines through our Power and Energy Solutions business

• commitment to sustainability and ESG: we take a long-term view to managing our interactions with the environment, Indigenous groups, community members and landowners. We aim to communicate transparently on sustainability-related topics with all stakeholders. As part of our 2022 Report on Sustainability, we published our emissions intensity on a corporate-wide basis, providing more transparency and insight into our goals as we progress toward our 2030 target to reduce GHG emissions intensity from our operations by 30 per cent. We continue to make steady progress on 10 sustainability commitments from last year. In alignment with our pursuit of meaningful partnerships that will endeavour to solve critical global sustainability challenges, TC Energy became an official participant of the UNGC in 2022

• open communication: we carefully manage relationships with our customers and stakeholders and offer clear, candid communication to investors in order to build trust and support.

18 \| TC Energy **Management's discussion and analysis** 2022

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**Our risk preferences**

The following is an overview of our risk philosophy:

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| |
|:---|
| **Financial strength and flexibility** |
| • Rely on internally generated cash flows, existing debt capacity, partnerships and asset divestitures to finance new initiatives. |
| **Known and acceptable project risks** |
| • Select investments with known, acceptable and manageable project execution risk, including stakeholder considerations. |
| **Business underpinned by strong fundamentals** |
| • Invest in assets that are investment-grade on a stand-alone basis with stable cash flows supported by strong underlying macroeconomic fundamentals, conducive regulation and/or long-term contracts with creditworthy counterparties. |
| **Manage credit metrics to ensure "top-end" sector ratings** |
| • Solid investment-grade ratings are an important competitive advantage and TC Energy will seek to ensure our credit profile remains at the top end of our sector while balancing the interests of equity and fixed income investors. |
| **Prudent management of counterparty exposure** |
| • Limit counterparty concentration and sovereign risk; seek diversification and solid commercial arrangements underpinned by strong fundamentals. |

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TC Energy **Management's discussion and analysis** 2022 \| 19

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**2022 FINANCIAL HIGHLIGHTS**

We use certain financial measures that do not have a standardized meaning under GAAP because we believe they improve our ability to compare results between reporting periods and enhance understanding of our operating performance. Known as non-GAAP measures, they may not be comparable to similar measures provided by other companies.

Comparable EBITDA, comparable earnings, comparable earnings per common share and comparable funds generated from operations are all non-GAAP measures. Refer to page 11 for more information about the non-GAAP measures we use and pages 23 and 89 as well as the business segment Financial results sections for reconciliations to the most directly comparable GAAP measures.

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $, except per share amounts) | **2022** | **2021** | **2020** |
| **Income** |  |  |  |
| Revenues | **14977** | 13387 | 12999 |
| Net income attributable to common shares | **641** | 1815 | 4457 |
| &nbsp;&nbsp;&nbsp;per common share – basic | **$0.64** | $1.87 | $4.74 |
| Comparable EBITDA<sup>1</sup> | **9901** | 9368 | 9342 |
| Comparable earnings | **4279** | 4142 | 3939 |
| &nbsp;&nbsp;&nbsp;per common share | **$4.30** | $4.26 | $4.19 |
| **Cash flows** |  |  |  |
| Net cash provided by operations | **6375** | 6890 | 7058 |
| Comparable funds generated from operations | **7353** | 7406 | 7385 |
| Capital spending<sup>2</sup> | **8961** | 7134 | 8900 |
| Proceeds from sales of assets, net of transaction costs | **—** | 35 | 3407 |
| **Balance sheet**<sup>3</sup> |  |  |  |
| Total assets | **114348** | 104218 | 100300 |
| Long-term debt, including current portion | **41543** | 38661 | 36885 |
| Junior subordinated notes | **10495** | 8939 | 8498 |
| Redeemable non-controlling interest<sup>4</sup> | **—** |  | 393 |
| Preferred shares | **2499** | 3487 | 3980 |
| Non-controlling interests | **126** | 125 | 1682 |
| Common shareholders' equity | **31491** | 29784 | 27418 |
| **Dividends declared** |  |  |  |
| &nbsp;&nbsp;&nbsp;per common share | **$3.60** | $3.48 | $3.24 |
| **Basic common shares** (millions) |  |  |  |
| &nbsp;&nbsp;&nbsp;– weighted average for the year | **995** | 973 | 940 |
| &nbsp;&nbsp;&nbsp;– issued and outstanding at end of year | **1018** | 981 | 940 |

---

1Additional information on Segmented earnings, the most directly comparable GAAP measure, can be found on page 21.

2Includes Capital expenditures, Capital projects in development and Contributions to equity investments. Refer to Note 4, Segmented information, of our 2022 Consolidated financial statements for the financial statement line items that comprise total capital spending.

3As at December 31.

4At December 31, 2020, redeemable non-controlling interest was classified in mezzanine equity and subsequently repurchased in 2021.

20 \| TC Energy **Management's discussion and analysis** 2022

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**Consolidated results**

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| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $, except per share amounts) | **2022** | **2021** | **2020** |
| Canadian Natural Gas Pipelines | **(1440)** | 1449 | 1657 |
| U.S. Natural Gas Pipelines | **2617** | 3071 | 2837 |
| Mexico Natural Gas Pipelines | **491** | 557 | 669 |
| Liquids Pipelines | **1123** | (1600) | 1359 |
| Power and Energy Solutions | **833** | 628 | 181 |
| Corporate | **8** | (46) | 70 |
| **Total segmented earnings** | **3632** | 4059 | 6773 |
| Interest expense | **(2588)** | (2360) | (2228) |
| Allowance for funds used during construction | **369** | 267 | 349 |
| Foreign exchange (loss)/gain, net | **(185)** | 10 | 28 |
| Interest income and other | **146** | 190 | 185 |
| **Income before income taxes** | **1374** | 2166 | 5107 |
| Income tax expense | **(589)** | (120) | (194) |
| **Net income** | **785** | 2046 | 4913 |
| Net income attributable to non-controlling interests | **(37)** | (91) | (297) |
| **Net income attributable to controlling interests** | **748** | 1955 | 4616 |
| Preferred share dividends | **(107)** | (140) | (159) |
| **Net income attributable to common shares** | **641** | 1815 | 4457 |
| **Net income per common share – basic** | **$0.64** | $1.87 | $4.74 |

---

Net income attributable to common shares in 2022 was $0.6 billion or $0.64 per share (2021 – $1.8 billion or $1.87 per share; 2020 – $4.5 billion or $4.74 per share), a decrease of $1.2 billion or $1.23 per share compared to 2021. The significant decrease for the year ended December 31, 2022 compared to 2021 as well as the significant decrease in Net income per common share of $2.87 in 2021 compared to 2020 is primarily due to the net effect of specific items mentioned below. Net income per common share in both years also reflects the impact of common shares issued for the acquisition of TC PipeLines, LP in first quarter 2021 and common shares issued in 2022.

The following specific items were recognized in Net income attributable to common shares and were excluded from comparable earnings:

**2022**

• an after-tax impairment charge of $2.6 billion related to our equity investment in Coastal GasLink Pipeline Limited Partnership (Coastal GasLink LP). Refer to Note 7, Coastal GasLink, of our 2022 Consolidated financial statements for additional information

• an after-tax goodwill impairment charge of $531 million related to Great Lakes. Refer to the Other Information – Critical accounting estimates section for additional information

• a $196 million income tax expense for the settlement related to prior years' income tax assessments in Mexico

• $114 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 $19 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.

TC Energy **Management's discussion and analysis** 2022 \| 21

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**2021**

• a $2.1 billion after-tax asset impairment charge, net of expected contractual recoveries and other contractual and legal obligations, related to the termination of the Keystone XL pipeline project following the January 2021 revocation of the Presidential Permit

• a $48 million after-tax expense with respect to transition payments incurred as part of the Voluntary Retirement Program (VRP)

• preservation and other costs for Keystone XL pipeline project assets of $37 million after tax, which could not be accrued as part of the Keystone XL asset impairment charge, as well as interest expense on the Keystone XL project-level credit facility prior to its termination

• an after-tax gain of $19 million related to the sale of the remaining 15 per cent interest in Northern Courier

• a $7 million after-tax recovery primarily related to certain costs from the IESO associated with the Ontario natural gas-fired power plants sold in April 2020.

**2020**

• an after-tax loss of $283 million related to the Ontario natural gas-fired power plants sold in April 2020. The total after-tax loss on this transaction to the end of 2020 was $477 million including losses accrued in 2019 upon classification of the assets as held for sale

• an after-tax gain of $402 million related to the sale of a 65 per cent equity interest in Coastal GasLink LP

• an income tax valuation allowance release of $299 million following our reassessment of deferred tax assets that were deemed more likely than not to be realized in 2020

• an additional $18 million income tax recovery related to state income taxes on the sale of certain Columbia Midstream assets.

Refer to the Financial results section in each business segment and the Financial condition section of this MD&A for further discussion of these highlights.

Net income in all years 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.

22 \| TC Energy **Management's discussion and analysis** 2022

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**Reconciliation of net income attributable to common shares to comparable earnings**

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| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $, except per share amounts) | **2022** | **2021** | **2020** |
| **Net income attributable to common shares** | **641** | 1815 | 4457 |
| **Specific items (net of tax):** |  |  |  |
| Coastal GasLink LP impairment charge | **2643** |  |  |
| Great Lakes goodwill impairment charge | **531** |  |  |
| Settlement of Mexico prior years' income tax assessments | **196** |  |  |
| Expected credit loss provision on net investment in leases and certain contract assets | **114** |  |  |
| Keystone CER decision | **20** |  |  |
| Keystone XL preservation and other | **19** | 37 |  |
| Bruce Power unrealized fair value adjustments | **13** | (11) | (6) |
| Keystone XL asset impairment charge and other | **5** | 2134 |  |
| Voluntary Retirement Program | **—** | 48 |  |
| Gain on sale of Northern Courier | **—** | (19) |  |
| (Gain)/loss on sale of Ontario natural gas-fired power plants | **—** | (7) | 283 |
| Gain on partial sale of Coastal GasLink LP | **—** |  | (402) |
| Income tax valuation allowance releases | **—** |  | (299) |
| Gain on sale of Columbia Midstream assets | **—** |  | (18) |
| Risk management activities<sup>1</sup> | **97** | 145 | (76) |
| **Comparable earnings** | **4279** | 4142 | 3939 |
| **Net income per common share** | **$0.64** | $1.87 | $4.74 |
| Coastal GasLink LP impairment charge | **2.66** |  |  |
| Great Lakes goodwill impairment charge | **0.53** |  |  |
| Settlement of Mexico prior years' income tax assessments | **0.20** |  |  |
| Expected credit loss provision on net investment in leases and certain contract assets | **0.11** |  |  |
| Keystone CER decision | **0.02** |  |  |
| Keystone XL preservation and other | **0.02** | 0.04 |  |
| Bruce Power unrealized fair value adjustments | **0.01** | (0.01) | (0.01) |
| Keystone XL asset impairment charge and other | **0.01** | 2.19 |  |
| Voluntary Retirement Program | **—** | 0.05 |  |
| Gain on sale of Northern Courier | **—** | (0.02) |  |
| (Gain)/loss on sale of Ontario natural gas-fired power plants | **—** | (0.01) | 0.30 |
| Gain on partial sale of Coastal GasLink LP | **—** |  | (0.43) |
| Income tax valuation allowance releases | **—** |  | (0.32) |
| Gain on sale of Columbia Midstream assets | **—** |  | (0.02) |
| Risk management activities | **0.10** | 0.15 | (0.07) |
| **Comparable earnings per common share** | **$4.30** | $4.26 | $4.19 |

---

TC Energy **Management's discussion and analysis** 2022 \| 23

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---

| | | | | |
|:---|:---|:---|:---|:---|
| 1 | **year ended December 31** |  |  |  |
|  | (millions of $) | **2022** | **2021** | **2020** |
|  | U.S. Natural Gas Pipelines | **(15)** | 6 |  |
|  | Liquids Pipelines | **20** | (3) | (9) |
|  | Canadian Power | **4** | 12 | (2) |
|  | Natural Gas Storage | **11** | (6) | (13) |
|  | Foreign exchange | **(149)** | (203) | 126 |
|  | Income tax attributable to risk management activities | **32** | 49 | (26) |
|  | **Total unrealized (losses)/gains from risk management activities** | **(97)** | (145) | 76 |

---

**Comparable EBITDA to comparable earnings**

Comparable EBITDA represents segmented earnings adjusted for the specific items described above and excludes non-cash charges for depreciation and amortization. For further information on our reconciliation to comparable EBITDA, refer to the Financial results sections for each business segment.

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $, except per share amounts) | **2022** | **2021** | **2020** |
| **Comparable EBITDA** |  |  |  |
| &nbsp;&nbsp;&nbsp;Canadian Natural Gas Pipelines | **2806** | 2675 | 2566 |
| &nbsp;&nbsp;&nbsp;U.S. Natural Gas Pipelines | **4089** | 3856 | 3638 |
| &nbsp;&nbsp;&nbsp;Mexico Natural Gas Pipelines | **753** | 666 | 786 |
| &nbsp;&nbsp;&nbsp;Liquids Pipelines | **1366** | 1526 | 1700 |
| &nbsp;&nbsp;&nbsp;Power and Energy Solutions | **907** | 669 | 668 |
| &nbsp;&nbsp;&nbsp;Corporate | **(20)** | (24) | (16) |
| **Comparable EBITDA** | **9901** | 9368 | 9342 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | **(2584)** | (2522) | (2590) |
| &nbsp;&nbsp;&nbsp;Interest expense included in comparable earnings | **(2588)** | (2354) | (2228) |
| &nbsp;&nbsp;&nbsp;Allowance for funds used during construction | **369** | 267 | 349 |
| &nbsp;&nbsp;&nbsp;Foreign exchange (loss)/gain, net included in comparable earnings | **(8)** | 254 | (12) |
| &nbsp;&nbsp;&nbsp;Interest income and other | **146** | 190 | 185 |
| &nbsp;&nbsp;&nbsp;Income tax expense included in comparable earnings | **(813)** | (830) | (651) |
| &nbsp;&nbsp;&nbsp;Net income attributable to non-controlling interests | **(37)** | (91) | (297) |
| &nbsp;&nbsp;&nbsp;Preferred share dividends | **(107)** | (140) | (159) |
| **Comparable earnings** | **4279** | 4142 | 3939 |
| **Comparable earnings per common share** | **$4.30** | $4.26 | $4.19 |

---

24 \| TC Energy **Management's discussion and analysis** 2022

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**Comparable EBITDA – 2022 versus 2021**

Comparable EBITDA in 2022 increased by $533 million compared to 2021 primarily due to the net result of the following:

• increased Power and Energy Solutions EBITDA primarily attributable to higher contributions from Bruce Power due to a higher contract price, higher earnings from Canadian Power related to higher realized power prices and increased contributions from Natural Gas Storage and Other as a result of higher realized spreads in 2022

• higher EBITDA in U.S. Natural Gas Pipelines largely due to incremental earnings from growth projects placed in service, increased earnings from our mineral rights business as well as Columbia Gas following the FERC-approved settlement for higher transportation rates effective February 2021, partially offset by higher property taxes on Columbia Gas

• increased EBITDA from Canadian Natural Gas Pipelines largely attributable to the impact of higher flow-through costs and increased rate-base earnings on the NGTL System, higher Canadian Mainline incentive earnings and flow-through costs

• higher EBITDA from Mexico Natural Gas Pipelines primarily related to the north section of the Villa de Reyes pipeline (VdR North) and east section of the Tula pipeline (Tula East) that were placed in commercial service in third quarter 2022

• decreased EBITDA from Liquids Pipelines as a result of lower rates on lower contracted volumes on the U.S. Gulf Coast section of the Keystone Pipeline System as well as reduced contributions from liquids marketing activities due to lower margins and volumes

• the positive foreign exchange impact of a stronger U.S. dollar on the Canadian dollar equivalent comparable EBITDA in our U.S. dollar-denominated operations. As detailed on page 27, U.S. dollar-denominated comparable EBITDA decreased by US$63 million compared to 2021; however, this was translated to Canadian dollars at an average rate of 1.30 in 2022 versus 1.25 in 2021. Refer to the Foreign exchange discussion below for additional information.

**Comparable EBITDA – 2021 versus 2020**

Comparable EBITDA in 2021 increased by $26 million compared to 2020 primarily due to the net result of the following:

• increased earnings in U.S. Natural Gas Pipelines from higher Columbia Gas transportation rates effective February 1, 2021 as a result of the subsequently uncontested rate case settlement, improved earnings across our U.S. natural gas pipelines following the cold weather events of 2021 impacting many of the U.S. markets in which we operate, increased earnings from our mineral rights business and increased capitalization of pipeline integrity costs, partially offset by higher property taxes

• higher comparable EBITDA from Canadian Natural Gas Pipelines largely as a result of the impact of increased flow-through costs along with higher rate-base earnings on the NGTL System, full-year recognition of Coastal GasLink development fee revenue and higher Canadian Mainline incentive earnings, partially offset by lower flow-through costs

• consistent Power and Energy Solutions results mainly attributable to increased Canadian Power earnings primarily due to higher realized margins in 2021, contributions from trading activities and a full year of earnings from our MacKay River cogeneration facility following its return to service in May 2020, partially offset by the sale of our Ontario natural gas-fired power plants in April 2020 and decreased earnings at Bruce Power in 2021 due to lower volumes resulting from greater planned outage days and higher operating expenses

• decreased earnings from Liquids Pipelines attributable to lower volumes on the U.S. Gulf Coast section of the Keystone Pipeline System, partially offset by increased contributions from liquids marketing activities reflecting higher margins and volumes

• lower contribution from Mexico Natural Gas Pipelines mainly due to US$55 million of fees recognized in 2020 associated with the successful completion of the Sur de Texas pipeline

• the negative foreign exchange impact of a weaker U.S. dollar on the Canadian dollar equivalent segmented earnings in our U.S. dollar-denominated operations. As detailed on page 27, U.S. dollar-denominated comparable EBITDA of US$4.6 billion increased by US$226 million compared to 2020; however, this was translated to Canadian dollars at an average rate of 1.25 in 2021 versus 1.34 in 2020. Refer to the Foreign exchange discussion below for additional information.

The net impact of U.S. dollar movements on comparable earnings, after considering natural offsets and economic hedges, was not significant. Refer to the Foreign exchange discussion below 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.

TC Energy **Management's discussion and analysis** 2022 \| 25

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**Comparable earnings – 2022 versus 2021**

Comparable earnings in 2022 were $137 million or $0.04 per common share higher than in 2021, and were primarily the net result of:

• changes in comparable EBITDA described above

• net realized losses in 2022 compared to net realized gains in 2021 on derivatives used to manage our net exposure to foreign exchange rate fluctuations on U.S. dollar-denominated income, foreign exchanges losses in 2022 compared to gains in 2021 on the revaluation of peso-denominated net monetary liabilities, partially offset by higher realized gains in 2022 compared to 2021 on derivatives used to manage our exposure to these net liabilities in Mexico that give rise to foreign exchange gains and losses

• increased Interest expense primarily due to higher interest rates on increased levels of short-term borrowings, long-term debt and junior subordinated note issuances, net of maturities, as well as the foreign exchange impact of a stronger U.S. dollar in 2022

• lower Interest income and other due to the repayment of the inter-affiliate loan receivable by the Sur de Texas joint venture on July 29, 2022

• higher AFUDC predominantly due to the reactivation of AFUDC on the TGNH assets under construction following the new TSA with the CFE completed in third quarter 2022 and capital expenditures on the Southeast Gateway pipeline project, partially offset by the impact of decreased capital expenditures and projects placed in service on our U.S. natural gas pipeline projects

• higher Depreciation and amortization mainly in U.S. Natural Gas Pipelines reflecting new assets placed in service and a stronger U.S. dollar in 2022

• lower Net income attributable to non-controlling interests following the March 2021 acquisition of all outstanding common units of TC PipeLines, LP not beneficially owned by TC Energy

• decreased Income tax expense primarily due to lower flow-through income taxes and higher foreign tax rate differentials, partially offset by higher earnings subject to tax and other various valuation allowances

• lower Preferred share dividends due to the redemption of preferred shares in 2022 and 2021.

**Comparable earnings – 2021 versus 2020**

Comparable earnings in 2021 were $203 million or $0.07 per common share higher than in 2020, and were primarily the net result of:

• changes in comparable EBITDA described above

• net foreign exchange gain in 2021 compared to net foreign exchange loss in 2020 on derivatives used to manage our net exposure to foreign exchange rate fluctuations on U.S. dollar-denominated income

• decreased Net income attributable to non-controlling interests following the March 2021 acquisition of all outstanding common units of TC PipeLines, LP not beneficially owned by TC Energy

• lower Depreciation and amortization on our U.S. dollar-denominated assets primarily as a result of the weaker U.S. dollar and in Canadian Natural Gas Pipelines due to one section of the Canadian Mainline being fully depreciated in 2021

• higher Income tax expense mainly due to increased pre-tax earnings and higher flow-through income taxes on our Canadian rate-regulated pipelines

• higher Interest expense primarily due to lower capitalized interest as a result of the cessation for the Keystone XL pipeline project following the revocation of the Presidential Permit on January 2021, the change to equity accounting for our Coastal GasLink investment upon the sale of a 65 per cent interest in Coastal GasLink LP and the completion of the Napanee power plant in 2020, partially offset by the foreign exchange impact from a weaker U.S. dollar on translation of U.S. dollar-denominated interest

• lower AFUDC, predominantly due to the suspension of recording AFUDC on the Villa de Reyes project effective January 2021 as a result of ongoing project delays, partially offset by the NGTL System and U.S. natural gas pipeline expansion projects.

Comparable earnings per common share for the year ended December 31, 2022 and 2021 reflect the dilutive effect of common shares issued in 2022 and the impact of common shares issued for the acquisition of the remaining ownership interests in TC PipeLines, LP in March 2021, respectively. Refer to the Financial Condition section for further information on common share issuances.

26 \| TC Energy **Management's discussion and analysis** 2022

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**Foreign exchange**

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. The balance of the 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 year ended December 31, 2022 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**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of US$) | **2022** | **2021** | **2020** |
| **Comparable EBITDA** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Natural Gas Pipelines | **3142** | 3075 | 2714 |
| &nbsp;&nbsp;&nbsp;&nbsp;Mexico Natural Gas Pipelines<sup>1</sup> | **602** | 602 | 666 |
| &nbsp;&nbsp;&nbsp;&nbsp;Liquids Pipelines | **754** | 884 | 955 |
|  | **4498** | 4561 | 4335 |
| Depreciation and amortization | **(952)** | (911) | (877) |
| Interest on long-term debt and junior subordinated notes | **(1267)** | (1259) | (1302) |
| Allowance for funds used during construction | **161** | 101 | 182 |
| Non-controlling interests and other | **(101)** | (66) | (117) |
|  | **2339** | 2426 | 2221 |
| Average exchange rate – U.S. to Canadian dollars | **1.30** | 1.25 | 1.34 |

---

1 &nbsp;&nbsp;&nbsp;&nbsp;Excludes 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.

A portion of our Mexico Natural Gas Pipelines monetary assets and liabilities are peso-denominated, while the functional currency for our Mexico operations is U.S. dollars. These peso-denominated balances are revalued to U.S. dollars and, as a result, 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 the 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. As our U.S. dollar-denominated monetary assets and liabilities continue to grow, this exposure increases. These exposures are partially managed using foreign exchange derivatives, with the gains and losses on the derivatives recorded in Foreign exchange loss/(gain), net in our Consolidated statement of income.

TC Energy **Management's discussion and analysis** 2022 \| 27

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**Cash flows**

Net cash provided by operations of $6.4 billion in 2022 was seven per cent lower than 2021 primarily due to the amount and timing of working capital changes and lower funds generated from operations. Comparable funds generated from operations in 2022 and 2021 were $7.4 billion.

**Funds used in investing activities**

***Capital spending***<sup>1</sup>

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| Canadian Natural Gas Pipelines | **4719** | 2737 | 3608 |
| U.S. Natural Gas Pipelines | **2137** | 2820 | 2785 |
| Mexico Natural Gas Pipelines | **1027** | 129 | 173 |
| Liquids Pipelines | **143** | 571 | 1442 |
| Power and Energy Solutions | **894** | 842 | 834 |
| Corporate | **41** | 35 | 58 |
|  | **8961** | 7134 | 8900 |

---

1Capital spending includes Capital expenditures, Capital projects in development and Contributions to equity investments. Refer to Note 4, Segmented information, of our 2022 Consolidated financial statements for the financial statement line items that comprise total capital spending.

In 2022 and 2021, we invested $9.0 billion and $7.1 billion, respectively, in capital projects to maintain and optimize the value of our existing assets and to develop new, complementary assets in high-demand areas. Our total capital spending in 2022 and 2021 included contributions of $2.2 billion and $1.2 billion, respectively, to our equity investments, predominantly related to Coastal GasLink LP and Bruce Power.

***Proceeds from sales of assets***

In 2021, we completed the sale of our remaining 15 per cent equity interest in Northern Courier for gross proceeds of $35 million.

In 2020, we completed the following asset divestiture transactions. All cash proceeds amounts are prior to income tax and post-closing adjustments:

• the sale of a 65 per cent equity interest in Coastal GasLink LP for proceeds of $656 million

• the sale of our Ontario natural gas-fired power plants for net proceeds of approximately $2.8 billion.

**Balance sheet**

We continue to maintain a solid financial position while growing our total assets by $10.1 billion in 2022. At December 31, 2022, common shareholders' equity, including non-controlling interests, represented 35 per cent (2021 – 35 per cent) of our capital structure, while other subordinated capital, in the form of junior subordinated notes, redeemable non-controlling interest and preferred shares, represented an additional 14 per cent (2021 – 15 per cent). Refer to the Financial Condition section for more information about our capital structure.

**Dividends**

We increased the quarterly dividend on our outstanding common shares by 3.3 per cent to $0.93 per common share for the quarter ending March 31, 2023 which equates to an annual dividend of $3.72 per common share. This was the twenty-third consecutive year we have increased the dividend on our common shares and is consistent with our goal of growing our common share dividend at an average annual rate of three to five per cent.

28 \| TC Energy **Management's discussion and analysis** 2022

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**Dividend reinvestment and share purchase plan**

Under the DRP, eligible holders of common and preferred shares of TC Energy can reinvest their dividends and make optional cash payments to obtain additional TC Energy common shares. To prudently fund our growth program that includes increased project costs on the NGTL System and following our July 2022 obligation to make an equity contribution of $1.9 billion to Coastal GasLink LP, we reinstated the issuance of common shares from treasury at a two per cent discount under our DRP, commencing with the dividends declared on July 27, 2022. On dividends declared in 2022, the participation rate by common shareholders was approximately 33 per cent, resulting in $607 million reinvested in common equity under the program. The discounted DRP is expected to be in place through the dividend declarations for the quarter ending June 30, 2023.

**Cash dividends paid**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| Common shares | **3192** | 3317 | 2987 |
| Preferred shares | **106** | 141 | 159 |

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**OUTLOOK**

**Comparable EBITDA and comparable earnings**

We expect our 2023 comparable EBITDA to be higher than 2022 and our 2023 comparable earnings per common share are expected to be modestly higher than 2022 due to the net impact of the following:

• growth in the NGTL System from advancement of expansion programs

• higher contributions from our Mexico Natural Gas Pipelines segment primarily related to the new TGNH TSA with the CFE

• full-year impact from assets placed in service in 2022 and new projects anticipated to be placed in service in 2023, net of incremental depreciation expense

• modestly lower contributions from the Keystone Pipeline System including liquids marketing, primarily as a result of the de-rate associated with the Milepost 14 incident and continuing lower margins

• higher Interest expense as a result of long-term debt issuances, net of maturities and higher floating interest rates

• higher AFUDC related to the Southeast Gateway pipeline.

We continue to monitor developments in energy markets, our construction projects, regulatory proceedings and our asset divestiture program for any potential impacts on the above outlook.

**Consolidated capital spending and equity investments**

We expect to spend approximately $11.5 to $12.0 billion in 2023 on growth projects, maintenance capital expenditures and contributions to equity investments. The majority of the 2023 capital program is focused on NGTL System expansions, advancement of the Southeast Gateway Pipeline and the Coastal GasLink pipeline project, U.S. Natural Gas Pipelines projects, the Bruce Power life extension program and normal course maintenance capital expenditures.

Refer to the relevant business segment's outlook and Financial condition sections for additional details on expected earnings and capital spending for 2023.

TC Energy **Management's discussion and analysis** 2022 \| 29

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**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 2022, we placed approximately $5.8 billion of primarily Canadian, U.S. and Mexico natural gas pipelines capacity capital projects in service and approximately $1.9 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.

30 \| TC Energy **Management's discussion and analysis** 2022

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**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**<br>**as at December 31, 2022** |
| (billions of $) | **Expected in-service date** | **Estimated project cost** | **Project costs incurred**<br>**as at December 31, 2022** |
| **Canadian Natural Gas Pipelines** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;NGTL System<sup>1</sup> | 2023 | 3.1 | 1.4 |
|  | 2024 | 0.5 | 0.2 |
|  | 2025+ | 0.6 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Coastal GasLink<sup>2</sup> | 2023 | 5.4 | 1.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Regulated maintenance capital expenditures | 2023-2025 | 2.2 |  |
| **U.S. Natural Gas Pipelines** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Modernization III (Columbia Gas) | 2023-2024 | US 1.2 | US 0.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Delivery market projects | 2025 | US 1.5 | US 0.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other capital | 2023-2028 | US 1.8 | US 0.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Regulated maintenance capital expenditures | 2023-2025 | US 2.4 |  |
| **Mexico Natural Gas Pipelines** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Villa de Reyes – lateral and south sections<sup>3</sup> | 2023 | US 0.6 | US 0.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Tula – central and west sections<sup>4</sup> |  | US 0.5 | US 0.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Southeast Gateway | 2025 | US 4.5 | US 0.8 |
| **Liquids Pipelines** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other capacity capital | 2023 | US 0.1 | US 0.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Recoverable maintenance capital expenditures | 2023-2025 | 0.1 |  |
| **Power and Energy Solutions** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Bruce Power – life extension<sup>5</sup> | 2023-2027 | 4.3 | 2.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other capacity capital | 2023 | 0.1 |  |
| **Other** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-recoverable maintenance capital expenditures<sup>6</sup> | 2023-2025 | 0.7 | 0.2 |
|  |  | 29.6 | 8.4 |
| Foreign exchange impact on secured projects<sup>7</sup> |  | 4.4 | 1.0 |
| Total secured projects (Cdn$) |  | 34.0 | 9.4 |

---

1Estimated project costs include $0.7 billion, primarily reflected in 2023, for the Foothills portion of the West Path Delivery Program.

2Subsequent 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 Canadian Natural Gas Pipelines – Significant events section for additional information.

3We are currently working with the CFE on completing the remaining sections of the Villa de Reyes pipeline, expecting commercial in-service in 2023. Refer to the Mexico Natural Gas Pipelines – Significant events section for additional information.

4With 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 Mexico Natural Gas Pipelines – Significant events section for additional information.

5Reflects our expected share of cash contributions for the Bruce Power Unit 6 Major Component Replacement (MCR) program, expected to be in service in 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 Power and Energy Solutions – Significant events section for additional information.

6Includes 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.

7Reflects U.S./Canada foreign exchange rate of 1.35 at December 31, 2022.

TC Energy **Management's discussion and analysis** 2022 \| 31

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**Projects under development**

In addition to our secured projects, we have a portfolio of projects that we are currently pursuing that are in varying stages of development. 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. Each business segment has also outlined additional areas of focus for further ongoing business development activities and growth opportunities. As these projects advance, and reach necessary milestones, they will be included in the secured projects table.

**Canadian Natural Gas Pipelines**

We continue to focus on optimizing the utilization and value of our existing Canadian Natural Gas Pipelines assets, including in-corridor expansions, providing connectivity to LNG export terminals and connections to growing shale gas supplies. Sustainability development projects are expected to include additional compressor station electrification and waste heat capture power generation on our systems as well as other GHG abatement initiatives.

**U.S. Natural Gas Pipelines**

***Delivery Market Projects***

Projects are in development that are expected to replace, upgrade and expand certain U.S. Natural Gas Pipelines facilities while reducing emissions along portions of our pipeline systems in principal delivery markets. The enhanced facilities are expected to improve reliability of our systems and allow for additional transportation services under long-term contracts to address growing demand in the U.S. Midwest and the Mid-Atlantic regions, while reducing direct carbon dioxide equivalent emissions.

***Renewable Natural Gas Hub Development***

In April 2022, we announced a strategic collaboration with GreenGasUSA to explore development of a network of RNG transportation hubs. These hubs are designed to provide centralized access to existing energy transportation infrastructure for RNG sources, such as farms, wastewater treatment facilities and landfills. We believe that this collaboration, which targets 10 transportation hubs nationally, will rapidly expand and provide incremental capability to the already existing RNG interconnects across our U.S. natural gas footprint. In late 2022, we signed a development agreement on the first of the 10 targeted transportation hubs. The development of these hubs is an important step towards the acceleration of methane capture projects and the concurrent reduction of GHG emissions.

***Other Opportunities***

We are currently pursuing a variety of projects, including compression replacement, while furthering the electrification of our fleet, power generation and LDCs, expanding our modernization programs and in-corridor expansion opportunities on our existing systems. These projects are expected to improve the reliability of our systems with an environmental focus on cleaner energy.

We are also developing multiple transmission projects to link gas supply to the facilities that will serve the growing global demand for North American LNG.

Refer to the U.S. Natural Gas Pipelines – Significant events section for additional information.

**Mexico Natural Gas Pipelines**

On August 4, 2022, we announced a strategic alliance with the CFE, Mexico's state-owned electric utility, to accelerate the development of natural gas infrastructure in the central and southeast regions of Mexico. Along with the assets currently under construction, we are assessing the completion of the central section of Tula, subject to an FID in the first half of 2023.

Refer to the Mexico Natural Gas Pipelines – Significant events section for additional information.

**Liquids Pipelines** 

We remain focused on maximizing the value of our liquids assets by finding solutions to enable flexible and tailored solutions for our customers. We continue to seek ways of optimizing our existing assets by extending connectivity between supply and delivery markets. We are pursuing selective growth opportunities to add incremental value to our business and expansions that leverage latent capacity on our existing infrastructure. We remain disciplined in our approach and will position our business development activities strategically to capture opportunities within our risk preferences.

32 \| TC Energy **Management's discussion and analysis** 2022

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**Power and Energy Solutions** 

***Bruce Power***

*Life Extension Program*

The continuation of Bruce Power's life extension program will require the investment of our proportionate share of both the Major Component Replacement (MCR) program costs on Units 4, 5, 7 and 8 and the remaining Asset Management program costs which continue beyond 2033, extending the life of Units 3 to 8 and the Bruce Power site to 2064. Preparation work for the Unit 4 MCR is well underway and work for the Unit 5, 7 and 8 MCRs has also begun. Future MCR investments will be subject to discrete decisions for each unit with specified off-ramps available to Bruce Power and the IESO. We expect to spend approximately $4.8 billion for our proportionate share of the Bruce Power MCR program costs for Units 4, 5, 7 and 8 and the remaining Asset Management program costs beyond 2027, as well as the incremental uprate initiative discussed below.

*Uprate Initiative* 

Bruce Power's Project 2030 has a goal of achieving a site peak output of 7,000 MW by 2033 in support of climate change targets and future clean energy needs. Project 2030 is focused on continued asset optimization, innovation and leveraging new technology, which could include integration with storage and other forms of energy, to increase the site peak output. Project 2030 is arranged in three stages with the first two stages fully approved for execution. Stage 1 started in 2019 and is expected to add 150 MW of output and Stage 2, which began in early 2022, is targeting another 200 MW.

***Development-Stage Projects***

*Ontario Pumped Storage*

We continue to progress the development of the Ontario Pumped Storage project (OPSP), an energy storage facility located near Meaford, Ontario designed to provide 1,000 MW of flexible, clean energy to Ontario's electricity system using a process known as pumped hydro storage.

The OPSP has been granted long-term land access to the fourth Canadian Division Training Centre for development of the project on this site from the Federal Minister of National Defence and has been included in Gate 2 of the IESO's Unsolicited Proposals Process. Once in service, this project would store emission-free energy when available and provide that energy to Ontario during periods of peak demand, thereby maximizing the value of existing emission-free generation in the province.

*Canyon Creek Pumped Storage*

We are utilizing the existing site infrastructure from a decommissioned coal mine, located near Hinton, Alberta, to develop a pumped hydro storage project that is expected to have a generating capacity of 75 MW. The facility is expected to provide up to 37 hours of on-demand, flexible, clean energy and ancillary services to the Alberta electricity grid. The project has received the approval of the Alberta Utilities Commission and the required approval of the Government of Alberta for hydro projects under the Dunvegan Hydro Development Act (Alberta).

The Canyon Creek Pumped Storage project is part of a larger product offering by us, a 24-by-7 carbon-free power product in the Province of Alberta and includes output from wind and solar projects currently under construction or being developed, thereby positioning our customers to manage hourly power needs with cost certainty and achieve decarbonization goals by sourcing power from emission-free assets.

*Renewable Energy Contracts and/or Investment Opportunities*

We continue to pursue potential contracts and/or investment opportunities in wind, solar and energy storage projects to meet the electricity needs of the U.S. portion of the Keystone Pipeline System and supply renewable energy products and services to industrial and oil and gas sectors proximate to our in-corridor demand. To date, we have contracted approximately 600 MW from wind and solar projects.

*Other Opportunities* 

We are actively building our customer-focused origination platform across North America, providing commodity products and energy services to help customers address the challenges of energy transition. Our existing network of assets, customers and suppliers provide a mutual opportunity in which we can tailor solutions to meet their clean energy needs. Although we may adopt custom-tailored strategies, the core underpinning remains consistent, which is that every opportunity we undertake will ultimately be driven by customer needs allowing us to complement each other's capabilities, diversify risk and share learnings as we navigate the energy transition.

Refer to the Power and Energy Solutions – Significant events section for additional information.

TC Energy **Management's discussion and analysis** 2022 \| 33

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***Other Energy Solutions***

We are targeting five focus areas to reduce the emissions intensity of our operations, while also capturing growth opportunities that meet the energy needs of the future:

• modernize our existing system and assets

• decarbonize our energy consumption

• drive digital solutions and technologies

• leverage carbon credits and offsets

• invest in low-carbon energy and infrastructure, such as renewables along with emerging fuels and technology.

*Alberta Carbon Grid*

In June 2021, we announced a partnership with Pembina Pipeline Corporation to jointly develop a world-scale system which, when fully constructed, is expected to be capable of transporting and sequestering more than 20 million tonnes of carbon dioxide annually. As an open-access system, ACG is intended to serve as the backbone for Alberta's emerging carbon capture utilization and storage (CCUS) industry. On October 18, 2022, ACG announced that it has entered into a carbon sequestration evaluation agreement with the Government of Alberta to further evaluate one of the largest Areas of Interest (AOI) for safely storing carbon from industrial emissions in Alberta. This agreement will allow ACG to continue to evaluate the suitability of our AOI and move forward into the next phase of the province's CCUS process to provide confidence to customers, Indigenous communities, other stakeholders and the Government of Alberta in the project's carbon storage capabilities. ACG is exploring options to potentially leverage existing infrastructure and right-of-ways to connect the Alberta Industrial Heartland emissions region to a key sequestration location.

*Hydrogen Hubs*

We have entered into individual Joint Development Agreements (JDAs) with Nikola Corporation (Nikola) and Hyzon Motors Inc. (Hyzon) to support customer-driven hydrogen production for long-haul transportation, power generation, large industrials and heating customers across the U.S. and Canada. Under their JDA, Nikola will be a long-term anchor customer for hydrogen production infrastructure supporting hydrogen-fueled, zero-emission, heavy-duty trucks and the co-development of large-scale green and blue hydrogen production hubs. The Hyzon JDA is expected to support the development of hydrogen production facilities focused on zero-to-negative carbon intensity hydrogen from RNG, biogas and other sustainable sources. These facilities are expected to be located close to demand, supporting Hyzon's back-to-base vehicle deployments.

Our significant pipeline, storage and power assets can potentially be leveraged to lower the cost and increase the speed of development of these hubs. This may include exploring the integration of pipeline assets to enable hydrogen distribution and storage via pipeline and/or to deliver carbon dioxide to permanent sequestration sites to decarbonize the hydrogen production process. In April 2022, we announced a plan to evaluate a hydrogen production hub that would produce an estimated 60 tonnes of hydrogen per day, with the capacity to increase to 150 tonnes of hydrogen per day in the future, on 140 acres in Crossfield, Alberta, where we currently operate a natural gas storage facility. We expect an FID in 2024, subject to customary regulatory approvals.

34 \| TC Energy **Management's discussion and analysis** 2022

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NATURAL GAS PIPELINES BUSINESS

Our natural gas pipeline network transports natural gas from supply basins to local distribution companies, power generation plants, industrial facilities, interconnecting pipelines, LNG export terminals and other businesses across Canada, the U.S. and Mexico. Our network of pipelines taps into most major supply basins and transports over 25 per cent of continental daily natural gas needs through:

• wholly-owned natural gas pipelines – 88,472 km (54,973 miles)

• partially-owned natural gas pipelines – 5,259 km (3,267 miles).

In addition to our natural gas pipelines, we have regulated natural gas storage facilities in the U.S. with a total working gas capacity of 532 Bcf, making us one of the largest providers of natural gas storage and related services to key markets in North America.

Our Natural Gas Pipelines business is split into three operating segments representing its geographic diversity: Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines and Mexico Natural Gas Pipelines.

**Strategy**

Our strategy is to optimize the value of our existing natural gas pipeline systems in a safe and reliable manner while responding to the changing flow patterns of natural gas in North America. We also pursue new pipeline opportunities to add incremental value to our business.

Our key areas of focus include:

• primarily in-corridor expansion and extension of our existing significant North American natural gas pipeline footprint

• connections to new and growing industrial and electric power generation markets and LDCs

• expanding our systems in key locations and developing new projects to provide connectivity to LNG export terminals, both operating and proposed, in Canada, the U.S. and Mexico

• connections to growing Canadian and U.S. shale gas and other supplies

• decarbonizing our energy consumption, thereby reducing overall GHG intensity.

Each of these areas plays a critical role in meeting the transportation requirements for supply of and demand for natural gas in North America.

Our natural gas pipeline systems are enabling energy transition. Natural gas is a reliable, high-efficiency energy source that is displacing coal-fired power while backstopping the intermittency of renewable power sources across North America. In support of our GHG intensity reduction targets, we continue to improve operational efficiencies and factor sustainability into our decision making around new projects, modernization, maintenance, electrification and enhanced leak detection. Further, a growing number of RNG customers are connecting to our system. Our business provides socioeconomic benefits as we work closely with Indigenous communities, community-based organizations, landowners and other stakeholders in alignment with our values and sustainability commitments.

TC Energy **Management's discussion and analysis** 2022 \| 35

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**Recent highlights**

**Canadian Natural Gas Pipelines**

• approximately $3.2 billion of projects placed in service in 2022, primarily related to the NGTL System expansions

• sanctioned the $0.6 billion VNBR project on the NGTL System

• received remaining primary regulatory approvals on the NGTL System/Foothills West Path Delivery Program

• advanced construction of the Coastal GasLink pipeline project

• announced the signing of option agreements to sell a 10 per cent equity interest in Coastal GasLink LP to Indigenous communities across the project corridor.

**U.S. Natural Gas Pipelines**

• placed approximately US$2.1 billion of capital projects into service including Louisiana XPress on Columbia Gulf in addition to Elwood Power and Wisconsin Access on ANR

• sanctioned an additional US$1.3 billion of growth projects including the greenfield pipeline Gillis Access project, the KO Transmission acquisition by Columbia Gas and Ventura XPress on ANR

• ANR uncontested rate case settlement filed with FERC and Great Lakes rate case settlement approved by FERC

• achieved record throughput volumes on a number of our pipelines.

**Mexico Natural Gas Pipelines**

• announced a strategic alliance with Mexico's state-owned electric utility, the CFE, resolving previous international arbitrations related to the Villa de Reyes and Tula pipelines

• sanctioned the Southeast Gateway pipeline under our alliance with the CFE, a 1.3 Bcf/d, 715 km (444 mile) offshore natural gas pipeline that will serve the southeast region of Mexico with an expected in-service by mid-2025

• the lateral section of the Villa de Reyes pipeline was mechanically completed in second quarter 2022. We placed the north section of Villa de Reyes and the east section of Tula in service in third quarter 2022. In addition, we are working with the CFE to advance the construction of the remaining sections of both pipelines

• continued feasibility assessments with the CFE on potential alternatives to complete the central section of the Tula pipeline, subject to an FID in the first half of 2023

• overall pipeline utilization continued to increase.

36 \| TC Energy **Management's discussion and analysis** 2022

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**UNDERSTANDING OUR NATURAL GAS PIPELINES BUSINESS**

Natural gas pipelines move natural gas from major sources of supply to locations or markets that use natural gas to meet their energy needs.

Our natural gas pipelines business builds, owns and operates a network of natural gas pipelines across North America that connects gas production to interconnects, end-use markets and LNG export terminals. The network includes underground pipelines that transport natural gas predominantly under high pressure, compressor stations that act like pumps to move large volumes of natural gas along the pipeline, meter stations that record the amount of natural gas coming on the network at receipt locations and leaving the network at delivery locations and regulated natural gas storage facilities that provide services to customers and help maintain the overall balance of the pipeline systems.

**Our major pipeline systems**

The Natural Gas Pipelines map on page 40 shows our extensive pipeline network in North America that connects major supply sources and markets. The highlights shown on the map include:

**Canadian Natural Gas Pipelines**

*NGTL System:* This is our natural gas gathering and transportation system for the WCSB, connecting most of the natural gas production in western Canada to domestic and export markets. We are well positioned to connect growing supply in northeast British Columbia and northwest Alberta. Our capital program for new pipeline facilities is driven by these two supply areas, along with growing demand for intra-Alberta firm transportation for electric power generation conversion from coal, oil sands development and petro-chemical feedstock as well as to our major export points at the Empress and Alberta/British Columbia delivery locations. The NGTL System is also well positioned to connect WCSB supply to LNG export facilities on the Canadian west coast, through future extensions or expansions of the system or future connections to other pipelines serving that area.

*Canadian Mainline:* This pipeline supplies markets in the Canadian Prairies, Ontario, Québec, the Canadian Maritimes as well as the U.S. Midwest and Northeast from the WCSB and, through interconnects, from the Appalachian basin.

**U.S. Natural Gas Pipelines**

*Columbia Gas:* This is our natural gas transportation system for the Appalachian basin, which contains the Marcellus and Utica shale plays, two of the largest natural gas shale plays in North America. Similar to our footprint in the WCSB, our Columbia Gas assets are well positioned to connect growing supply to markets in this area. This system also interconnects with other pipelines that provide access to key markets in the U.S. Northeast, the Midwest, the Atlantic coast and south to the Gulf of Mexico and its growing demand for natural gas to serve LNG exports.

*ANR:* This pipeline system connects supply basins and markets throughout the U.S. Midwest and south to the Gulf of Mexico. This includes connecting supply in Texas, Oklahoma, the Appalachian basin and the Gulf of Mexico to markets in Wisconsin, Michigan, Illinois and Ohio. In addition, ANR has bidirectional capability on its Southeast Mainline and delivers gas produced from the Appalachian basin to customers throughout the U.S. Gulf Coast region.

*Columbia Gulf:* This pipeline system transports growing Appalachian basin supplies to various U.S. Gulf Coast markets and LNG export terminals from its interconnections with Columbia Gas and other pipelines.

*Other U.S. Natural Gas Pipelines:* We have ownership interests in eight wholly-owned or partially-owned natural gas pipelines serving major markets in the U.S. that were previously held by our subsidiary, TC PipeLines, LP.

**Mexico Natural Gas Pipelines**

*Sur de Texas:* This offshore pipeline transports natural gas from Texas to power and industrial markets in the eastern and central regions of Mexico. The average volumes transported by this pipeline in 2022 supplied approximately 15 per cent of Mexico's total natural gas imports via pipelines. We own a 60 per cent equity interest and are the operator of this pipeline.

*Northwest System:* The Topolobampo and Mazatlán pipelines make up our Mexico northwest system. The system runs through the states of Chihuahua and Sinaloa, supplying power plants and industrial facilities, bringing natural gas to a region of the country that previously did not have access to it.

TC Energy **Management's discussion and analysis** 2022 \| 37

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*TGNH System:* This system is located in the central region of Mexico and is comprised of the existing Tamazunchale pipeline and the Tula, Villa de Reyes and Southeast Gateway pipelines with sections that are either in-service or currently under construction. This system supplies, or will supply, several power plants and industrial facilities in Veracruz, Tabasco, San Luis Potosí, Querétaro and Hidalgo. It has interconnects with upstream pipelines that bring in supply from the Agua Dulce and Waha hubs in Texas.

*Guadalajara:* This bidirectional pipeline connects imported LNG supply near Manzanillo and continental gas supply near Guadalajara to power plants and industrial customers in the states of Colima and Jalisco.

**Regulation of tolls and cost recovery**

Our natural gas pipelines are generally regulated by the CER in Canada, FERC in the U.S. and CRE in Mexico. These entities regulate the construction, operation and requested abandonment of pipeline infrastructure.

Regulators in Canada, the U.S. and Mexico allow us to recover costs to operate the network by collecting tolls for services. These tolls generally include a return on our capital invested in the assets or rate base as well as recovery of the rate base over time through depreciation. Other costs generally recovered through tolls include OM&A, taxes and interest on debt. The regulators review our costs to ensure they are reasonable and prudently incurred and approve tolls that provide a reasonable opportunity to recover those costs.

**Business environment and strategic priorities**

The North American natural gas pipeline network has been developed to connect diverse supply regions to domestic markets and to meet demand from LNG export facilities. Use and growth of this infrastructure is affected by changes in the location and relative cost of natural gas supplies as well as changes in the location of markets and level of demand.

We have significant pipeline footprints that serve two of the most prolific supply regions of North America – the WCSB and the Appalachian basin. Our pipelines also source natural gas from other significant basins including the Rockies, Williston, Haynesville, Fayetteville and Anadarko basins as well as the Gulf of Mexico. We expect continued growth in North American natural gas production to meet demand within growing domestic markets, particularly in the electric generation and industrial sectors which benefit from a relatively low natural gas price. In addition, North American supply is expected to benefit from increased natural gas demand in Mexico and growing access to international markets via LNG exports. We expect North American natural gas demand, including LNG exports, of approximately 125 Bcf/d by 2027, reflecting an increase of approximately 16 Bcf/d from 2022 levels.

As the world shifts toward lower-emission fuel sources, we believe that further retirements of coal-fired power generation and export demand growth over the next five to 10 years will offer growth opportunities for base-load power from natural gas-fired generation. We expect that this projected growth in demand for natural gas, coupled with the anticipated production increases in key producing areas like WCSB, onshore Gulf Coast, Appalachian and the Permian basin, will provide investment opportunities for pipeline infrastructure companies to build new facilities or increase utilization of the existing footprint. Modernizing and decarbonizing our natural gas pipeline systems is expected to provide ongoing additional capital investment opportunities that will meet our risk preferences while supporting our GHG intensity reduction goals.

38 \| TC Energy **Management's discussion and analysis** 2022

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**Changing demand**

The abundant supply of natural gas has supported increased demand, particularly in the following areas:

• natural gas-fired power generation

• global LNG exports

• petrochemical and industrial facilities

• Alberta oil sands.

The growing focus on ESG is expected to result in shifting market dynamics as both energy demand and pressure for accelerated climate action increase simultaneously.

**Commodity prices**

In general, the profitability of our natural gas pipelines business is not directly tied to commodity prices given we are a transporter of the commodity and the transportation tolls are not tied to the price of natural gas. However, the cyclical supply and demand nature of commodities and related pricing can have an indirect impact on our business where producers may choose to accelerate or delay development of gas reserves or, similarly on the demand side, projects requiring natural gas may be accelerated or delayed depending on market or price conditions.

**More competition**

Changes in supply and demand levels and locations have resulted in increased competition to provide transportation services throughout North America. Our well-distributed footprint of natural gas pipelines, particularly in the liquids-rich and low-cost WCSB and the Appalachian basin, both of which are connected to North American demand centres, has placed us in a strong competitive position. Incumbent pipelines benefit from the connectivity and economies of scale afforded by the base infrastructure as well as existing right-of-way and operational synergies given the increasing challenges of siting and permitting new pipeline construction and expansions. We have and will continue to offer competitive services to capture growing supply and North American demand that now includes access to global markets through LNG exports.

**Strategic priorities**

Our pipelines deliver the natural gas that millions of individuals and businesses across North America rely on for their energy needs. We are focused on capturing opportunities resulting from growing natural gas supply and connecting new markets while satisfying increasing demand for natural gas within existing markets. We are also focused on adapting our existing assets to changing natural gas flow dynamics and supporting our corporate-level sustainability goals and ESG targets, including GHG intensity reduction.

In 2023, we will continue to focus on the execution of our existing capital program that includes progressing construction on our Southeast Gateway pipeline in Mexico, further investment in the NGTL System, mechanical completion of the Coastal GasLink pipeline as well as the completion and initiation of new pipeline projects in the United States. We will also continue to pursue the next wave of growth opportunities. Our goal is to place all of our projects into service on time and on budget while ensuring the safety of our people, of the environment and the general public impacted by the construction and operation of these facilities.

Our marketing entities will complement our natural gas pipeline operations and generate non-regulated revenues by managing the procurement of natural gas supply and pipeline transportation capacity for natural gas customers within our pipeline corridors.

TC Energy **Management's discussion and analysis** 2022 \| 39

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![ar_naturalgasx1122xv4-bign.jpg](ar_naturalgasx1122xv4-bign.jpg)

40 \| TC Energy **Management's discussion and analysis** 2022

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We are the operator of all of the following natural gas pipelines and regulated natural gas storage assets except for Iroquois.

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| | | | | |
|:---|:---|:---|:---|:---|
| | | **Length** | **Description** | **<br>Ownership** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Canadian pipelines** | &nbsp;&nbsp;&nbsp;&nbsp;**Canadian pipelines** | | | |
| 1 | NGTL System | 24,631 km<br>(15,305 miles) | Receives, transports and delivers natural gas within Alberta and British Columbia, and connects with Canadian Mainline, Foothills and third-party pipelines. | 100% |
| 2 | Canadian Mainline | 14,082 km<br>(8,750 miles) | Transports natural gas from the Alberta/Saskatchewan border and the Ontario/U.S. border to serve eastern Canada and interconnects to the U.S. | 100% |
| 3 | Foothills | 1,237 km<br>(769 miles) | Transports natural gas from central Alberta to the U.S. border for export to the U.S. Midwest, Pacific Northwest, California and Nevada. | 100% |
| 4 | Trans Québec & Maritimes (TQM) | 649 km<br>(403 miles) | Connects with the Canadian Mainline near the Ontario/Québec border to transport natural gas to the Montréal to Québec City corridor and interconnects with Portland. | 50% |
| 5 | Ventures LP | 133 km<br>(83 miles) | Transports natural gas to the oil sands region near Fort McMurray, Alberta. | 100% |
|  | Great Lakes Canada<sup>1</sup> | 60 km<br>(37 miles) | Transports natural gas from the Great Lakes system in the U.S. to a point near Dawn, Ontario through a connection at the U.S. border underneath the St. Clair River. | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;**U.S. pipelines and gas storage assets** | &nbsp;&nbsp;&nbsp;&nbsp;**U.S. pipelines and gas storage assets** |  |  |  |
| 6 | Columbia Gas | 18,768 km<br>(11,662 miles) | Transports natural gas primarily from the Appalachian basin to markets and pipeline interconnects throughout the U.S. Northeast, Midwest and Atlantic regions. | 100% |
| 6a | Columbia Storage | 285 Bcf | Provides regulated underground natural gas storage service from several facilities (not all shown) to customers in key eastern markets. We also own a 50 per cent interest in the 12 Bcf Hardy Storage facility. | 100% |
| 7 | ANR | 15,075 km<br>(9,367 miles) | Transports natural gas from various supply basins to markets throughout the U.S. Midwest and U.S. Gulf Coast. | 100% |
| 7a | ANR Storage | 247 Bcf | Provides regulated underground natural gas storage service from several facilities (not all shown) to customers in key mid-western markets. |  |
| 8 | Columbia Gulf | 5,419 km<br>(3,367 miles) | Transports natural gas to various markets and pipeline interconnects in the southern U.S. and U.S. Gulf Coast. | 100% |
| 9 | Great Lakes | 3,404 km<br>(2,115 miles) | Connects with the Canadian Mainline near Emerson, Manitoba and to Great Lakes Canada near St Clair, Ontario, plus interconnects with ANR at Crystal Falls and Farwell in Michigan, to transport natural gas to eastern Canada and the U.S. Midwest. | 100% |
| 10 | Northern Border | 2,272 km<br>(1,412 miles) | Transports WCSB, Bakken and Rockies natural gas from connections with Foothills and Bison to U.S. Midwest markets. | 50% |
| 11 | Gas Transmission Northwest (GTN) | 2,216 km<br>(1,377 miles) | Transports WCSB and Rockies natural gas to Washington, Oregon and California. Connects with Tuscarora and Foothills. | 100% |
| 12 | Iroquois | 669 km<br>(416 miles) | Connects with the Canadian Mainline and serves markets in New York. | 50% |
| 13 | Tuscarora | 491 km<br>(305 miles) | Transports natural gas from GTN at Malin, Oregon to markets in northeastern California and northwestern Nevada. | 100% |
| 14 | Bison | 488 km<br>(303 miles) | Transports natural gas from the Powder River basin in Wyoming to Northern Border in North Dakota. | 100% |
| 15 | Portland | 475 km<br>(295 miles) | Connects with TQM near East Hereford, Québec to deliver natural gas to customers in the U.S. Northeast and Canadian Maritimes. | 61.7% |

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TC Energy **Management's discussion and analysis** 2022 \| 41

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| | | | | |
|:---|:---|:---|:---|:---|
| | | **Length** | **Description** | **<br>Ownership** |
| 16 | Millennium | 424 km<br>(263 miles) | Transports natural gas primarily sourced from the Marcellus shale play to markets across southern New York and the lower Hudson Valley as well as to New York City through its pipeline interconnections. | 47.5% |
| 17 | Crossroads | 325 km<br>(202 miles) | Interstate natural gas pipeline operating in Indiana and Ohio with multiple interconnects to other pipelines. | 100% |
| 18 | North Baja | 138 km<br>(86 miles) | Transports natural gas between Arizona and California and connects with a third-party pipeline on the California/Mexico border. | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Mexico pipelines** | &nbsp;&nbsp;&nbsp;&nbsp;**Mexico pipelines** |  |  |  |
| 19 | Sur de Texas | 770 km<br>(478 miles) | Offshore pipeline that transports natural gas from the U.S./ Mexican border near Brownsville, Texas, to Mexican power plants in Altamira, Tamaulipas and Tuxpan, Veracruz, where it interconnects with the Tamazunchale and Tula pipelines and other third-party facilities. | 60% |
| 20 | Topolobampo | 572 km<br>(355 miles) | Transports natural gas to El Oro and Topolobampo, Sinaloa, from interconnects with third-party pipelines in El Encino, Chihuahua and El Oro. | 100% |
| 21 | Mazatlán | 430 km<br>(267 miles) | Transports natural gas from El Oro to Mazatlán, Sinaloa and connects to the Topolobampo Pipeline at El Oro. | 100% |
| 22 | Tamazunchale | 370 km<br>(230 miles) | Transports natural gas from Naranjos, Veracruz to Tamazunchale, San Luis Potosi and on to El Sauz, Querétaro in central Mexico. | 100% |
| 23 | Guadalajara | 313 km<br>(194 miles) | Bidirectional pipeline that connects imported LNG supply near Manzanillo and continental gas supply near Guadalajara to power plants and industrial customers in the states of Colima and Jalisco. | 100% |
| 24 | Tula – east section | 114 km<br>(71 miles) | The east section of the Tula pipeline transports natural gas from Sur de Texas to power plants in Tuxpan, Veracruz. | 100% |
| 25 | Villa de Reyes – north section | 206 km<br>(128 miles) | The north section of the Villa de Reyes pipeline is interconnected to our Tamazunchale pipeline and third-party systems, supporting gas deliveries to a power plant in <br>Villa de Reyes, San Luis Potosí. | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Under construction** | &nbsp;&nbsp;&nbsp;&nbsp;**Under construction** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Canadian pipelines** | &nbsp;&nbsp;&nbsp;&nbsp;**Canadian pipelines** |  |  |  |
| 26 | Coastal GasLink | 670 km<br>(416 miles) | A greenfield project to deliver natural gas from the Montney gas producing region to LNG Canada's liquefaction facility under construction near Kitimat, British Columbia. | 35% |
|  | NGTL System 2023 Facilities<sup>1,2</sup>  | 168 km<br>(105 miles) | Components of each of the 2021 NGTL System Expansion Program, 2022 NGTL System Expansion Program, NGTL System/Foothills West Path Delivery Program and 2023 NGTL System Intra-Basin Expansion, along with other facilities, with expected in-service dates in 2023. | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;**U.S. pipelines** | &nbsp;&nbsp;&nbsp;&nbsp;**U.S. pipelines** |  |  |  |
|  | North Baja XPress<sup>3</sup> | n/a | An expansion project on North Baja to meet increased customer demand in Arizona and California, with expected in-service in 2023. | 100% |
|  | Alberta XPress<sup>3</sup> | n/a | An expansion project of ANR through compressor station modifications and additions, placed in service in January 2023. | 100% |

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42 \| TC Energy **Management's discussion and analysis** 2022

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;**Under construction** **(continued)** | &nbsp;&nbsp;&nbsp;&nbsp;**Under construction** **(continued)** | **Length** | **Description** | **<br>Ownership** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Mexico pipelines** | &nbsp;&nbsp;&nbsp;&nbsp;**Mexico pipelines** | | | |
| 27 | Villa de Reyes – lateral and south sections | 230 km<br>(143 miles) | These pipeline sections will connect to the operational north section of the Villa de Reyes pipeline and Tula pipeline. The lateral section was mechanically completed in 2022. | 100% |
| 28 | Tula – central and west sections | 200 km<br>(124 miles) | The pipeline will interconnect the completed east segment with Villa de Reyes near Tula, Hidalgo to supply natural gas to CFE combined-cycle power generating facilities in central Mexico. | 100% |
| 29 | Southeast Gateway | 715 km<br>(444 miles) | Offshore pipeline that will connect to the Tula pipeline and transport gas to delivery points in Coatzacoalcos, Veracruz and Paraíso, Tabasco in Mexico's southeast region. | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Permitting and pre-construction phase** | &nbsp;&nbsp;&nbsp;&nbsp;**Permitting and pre-construction phase** | &nbsp;&nbsp;&nbsp;&nbsp;**Permitting and pre-construction phase** |  |  |
|  | NGTL System 2023/2024/2025+ Facilities<sup>1,2</sup> | 96 km<br>(60 miles) | Components of each of the NGTL System/Foothills West Path Delivery Program and the 2023 NGTL System Intra-Basin Expansion with expected in-service dates commencing in 2023, along with the VNBR project expected to be placed <br>in service in 2026. | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;**U.S. pipelines** | &nbsp;&nbsp;&nbsp;&nbsp;**U.S. pipelines** |  |  |  |
|  | VR Project<sup>3</sup> | n/a | A delivery market project on Columbia Gas that will replace and upgrade certain facilities while improving reliability and reducing emissions with expected in-service in 2025. | 100% |
|  | WR Project<sup>3</sup> | n/a | A delivery market project on ANR that will replace and upgrade certain facilities while improving reliability and reducing emissions with expected in-service in 2025. | 100% |
|  | GTN XPress<sup>3</sup> | n/a | An expansion project of GTN through compressor station modifications and additions with expected in-service in 2023 and 2024. | 100% |
|  | Virginia Electrification Project<sup>3</sup> | n/a | A delivery market project on Columbia Gas that will replace and upgrade certain facilities while improving reliability and reducing emissions, including electrification, with expected in-service in 2024. | 100% |
|  | Ventura XPress Project<sup>3</sup> | n/a | A project on ANR that will replace and upgrade certain facilities improving base system reliability with expected<br>in-service in 2025. | 100% |
|  | Gillis Access Project<sup>1,2</sup> | 68 km<br>(42 miles) | A greenfield pipeline system project that will connect supplies from the Haynesville basin at Gillis, Louisiana to markets elsewhere in Louisiana with expected in-service in 2024. | 100% |
|  | East Lateral XPress<sup>1,3</sup> | n/a | An expansion project on Columbia Gulf through compressor station modifications and additions with expected in-service in 2025. | 100% |

---

1Facilities and some pipelines are not shown on the map.

2Final pipe lengths are subject to change during construction and/or final design considerations.

3Project includes compressor station modifications and additions with no additional pipe length.

TC Energy **Management's discussion and analysis** 2022 \| 43

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Canadian Natural Gas Pipelines

**UNDERSTANDING OUR CANADIAN NATURAL GAS PIPELINES SEGMENT**

The Canadian Natural Gas Pipelines business is subject to regulation by various federal and provincial governmental agencies. The CER has jurisdiction over our regulated Canadian natural gas interprovincial pipeline systems, while provincial regulators have jurisdiction over pipeline systems operating entirely within a single province. All of our major Canadian natural gas pipeline assets are regulated by the CER with the exception of the Coastal GasLink pipeline, which is currently under construction.

For the interprovincial natural gas pipelines it regulates, the CER approves tolls, facilities and services that are in the public interest and provide a reasonable opportunity for the pipeline to recover its costs to operate the pipeline. Included in the overall toll is a return on the investment we have made in the assets, referred to as the return on equity. Equity is generally 40 per cent of the deemed capital structure, with the remaining 60 per cent debt. Typically, tolls are based on the cost of providing service, including the cost of financing, divided by a forecast of throughput volumes. Any variance in either costs or the actual volumes transported can result in an over-collection or under-collection of revenues that is normally trued up the following year in the calculation of the tolls for that period. The return on equity, however, would continue to be earned at the rate approved by the CER.

We and our shippers can also establish settlement arrangements, subject to approval by the CER, that may have elements that vary from the typical toll-setting process. Settlements can include longer terms and mechanisms such as incentive agreements that can have an impact on the actual return on equity achieved. Examples include fixing the OM&A component in determining revenue requirements, where variances are to the pipeline's account or shared between the pipeline and shippers.

The NGTL System is operating under a five-year revenue requirement settlement for 2020-2024 which includes an incentive mechanism for certain operating costs and the opportunity to increase depreciation rates if tolls fall below specified levels. The Canadian Mainline is operating under the 2021-2026 Mainline settlement which includes an incentive to decrease costs and increase revenues.

**SIGNIFICANT EVENTS**

**Coastal GasLink**

The 670 km (416 mile) Coastal GasLink pipeline project is currently under construction and will have an initial capacity of approximately 2.2 PJ/d (2.1 Bcf/d). Once complete, the pipeline will transport natural gas from a receipt point in the Dawson Creek area of British Columbia to a natural gas liquefaction facility near Kitimat, British Columbia. The LNG facility, which is owned by LNG Canada, is also currently under construction. Transportation service on the pipeline is underpinned by 25-year TSAs (with renewal provisions) with each of the five LNG Canada participants. We hold a 35 per cent ownership interest in Coastal GasLink LP, the partnership entity that owns the pipeline and that has been contracted to develop, construct and operate the pipeline.

The Coastal GasLink pipeline project is approximately 84 per cent complete. The entire route has been cleared, grading is more than 96 per cent complete and more than 510 km of pipeline has been welded, lowered and backfilled with restoration activities underway in many areas.

On July 28, 2022, Coastal GasLink LP executed definitive agreements with LNG Canada, TC Energy and the other Coastal GasLink LP partners (collectively, the July 2022 agreements) that amended existing project agreements to address and resolve disputes over certain incurred and anticipated costs of the Coastal GasLink pipeline project. The revised agreements incorporated a target date for mechanical completion of December 31, 2023 and a new capital cost for the project to reflect, among other changes, scope increases and the impacts of COVID-19, weather and other events outside the control of Coastal GasLink LP.

44 \| TC Energy **Management's discussion and analysis** 2022

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Subsequent to execution of the July 2022 agreements, the project has faced material cost pressures that reflect challenging conditions in the Western Canadian labour market, shortages of skilled labour, impacts of contractor underperformance and disputes, as well as other unexpected events, including drought conditions and erosion and sediment control challenges. A comprehensive cost and schedule risk analysis (CSRA) was conducted to assess current market conditions and potential risks and uncertainties facing the remaining project scope. As a result of the CSRA, the estimate of the cost to complete the pipeline has increased to approximately $14.5 billion. This estimate excludes potential cost recoveries and incorporates contingencies for certain factors that may be outside the control of Coastal GasLink LP, such as labour conditions, contractor underperformance and weather-related events. The work plan continues to target mechanical completion by year-end 2023, with commissioning and restoration work continuing into 2024 and 2025. TC Energy expects to fund the incremental project costs and is actively pursuing cost mitigants and recoveries that may partially offset a portion of these costs, some of which may not be conclusively determined until after the pipeline is in service. The CSRA review also considered the potential impact of an extension of construction well into 2024. In that event, costs would increase further by up to $1.2 billion.

This increase in the capital cost estimate for the project and our corresponding funding requirements were indicators that a decrease in the value of our equity investment had occurred.

As a result, we completed a valuation assessment and concluded that the fair value of our 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 and, as a result, we recognized a pre-tax impairment of $3.0 billion ($2.6 billion after tax) in fourth quarter 2022. The pre-impairment carrying value of our investment in Coastal GasLink LP at December 31, 2022 consisted of amounts in Equity investments ($2.8 billion) and Loans receivable from affiliates ($250 million), which were reduced to a nil balance. Due to the funding provisions of the July 2022 agreements, we expect to fund an additional $3.3 billion related to the revised estimated capital cost to complete the Coastal GasLink pipeline, and a significant portion of this future investment in Coastal GasLink LP is expected to be impaired. We will continue to assess for other-than-temporary declines in the fair value of our investment and the extent of any additional impairment charges will depend on our valuation assessment performed at the respective reporting date. Refer to Note 7, Coastal GasLink, of our 2022 Consolidated financial statements for additional information.

Going forward, project costs will be funded in part by existing project-level credit facilities with a revised total capacity of $8.4 billion following an expansion of these facilities by $1.6 billion in third quarter 2022. Additional equity financing required to fund construction of the pipeline will initially be provided through a subordinated loan agreement between TC Energy and Coastal GasLink LP, which was originally put in place in fourth quarter 2021 and amended in July 2022. Following this amendment, 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 as a result of the increase in capital cost will be predominantly funded by us, except under certain conditions, but will not result in a change to our 35 per cent ownership. Committed capacity under this subordinated loan agreement was $1.3 billion at December 31, 2022 with an outstanding balance of $250 million, prior to the above impairment. The committed capacity under this loan will increase as required in the future to support the estimated $3.3 billion of additional equity financing requirements through completion of construction of the Coastal GasLink pipeline. We currently estimate our portion of the equity contributions to Coastal GasLink LP over the project life to be approximately $5.4 billion, including contributions recognized to the end of 2022.

In March 2022, we announced the signing of option agreements to sell up to a 10 per cent equity interest in Coastal GasLink LP to Indigenous communities across the project corridor. The opportunity to become business partners through equity ownership was made available to all 20 Nations holding existing agreements with Coastal GasLink LP. The Nations have established two entities that together currently represent 16 Indigenous communities that have confirmed their support for the option agreements. The equity option is exercisable after commercial in-service of the pipeline, subject to customary regulatory approvals and consents, including the consent of LNG Canada.

TC Energy **Management's discussion and analysis** 2022 \| 45

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**NGTL System**

In the year ended December 31, 2022, the NGTL System placed approximately $3.0 billion of capacity projects in service.

**2021 NGTL System Expansion Program**

The 2021 NGTL System Expansion Program consists of 344 km (214 miles) of new pipeline, three new compressor units and associated facilities and is expected to add 1.59 PJ/d (1.45 Bcf/d) of incremental capacity to the NGTL System. Construction of the expansion program is nearing completion with an estimated capital cost of the program of $3.5 billion due to regulatory and weather delays, along with inflationary pressures throughout construction. As of December 31, 2022, $3.0 billion of the program's facilities have been placed in service, adding 1.4 PJ/d (1.3 Bcf/d) of incremental capacity to the NGTL System. The facilities required to declare the remaining capacity are expected to be placed in service in first quarter 2023.

**2022 NGTL System Expansion Program** 

The 2022 NGTL System Expansion Program consists of approximately 166 km (103 miles) of new pipeline, one compressor unit and associated facilities and is expected to provide incremental capacity of approximately 773 TJ/d (722 MMcf/d) to meet firm-receipt and intra-basin delivery requirements with eight-year minimum terms. Inflationary pressures and regulatory delays have contributed to an increased estimated program cost of $1.5 billion. As of December 31, 2022, $0.6 billion of facilities have been placed in service, with the remaining facilities expected to be placed in service in the first half of 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 system to facilitate incremental contracted export capacity connecting to the GTN pipeline system. The combined NGTL System and Foothills program consists of approximately 107 km (66 miles) of pipeline and associated facilities and is underpinned by 275 TJ/d (258 MMcf/d) of new firm-service contracts with terms that exceed 30 years. In 2022, construction was initiated on three of the six pipeline segments with one pipeline segment being placed in service in fourth quarter 2022 and construction continuing into 2023 on the other two segments. The primary regulatory approvals have been received with certain required ancillary permits still outstanding and are anticipated in the first half of 2023. Terrain complexity, inflationary pressures, permitting delays and additional permitting conditions have contributed to an estimated program cost of $1.6 billion. As of December 31, 2022, $0.3 billion of facilities have been placed in service, with all remaining facilities forecasted to be placed in service throughout 2023, subject to receiving timely approval of outstanding ancillary permits.

**2023 NGTL System Intra-Basin Expansion**

The NGTL System Intra-Basin Expansion consists of 23 km (14 miles) of new pipeline and two new compressor stations and is underpinned by approximately 255 TJ/d (238 MMcf/d) of new firm-service contracts with 15-year terms. The estimated capital cost of the expansion is $0.6 billion. Construction activities commenced in 2022 with anticipated in-service dates commencing in late 2023.

**Valhalla North and Berland River Project**

In November 2022, we sanctioned the VNBR project which will serve aggregate system requirements and connect migrating supply to key demand markets, providing incremental capacity on the NGTL System of approximately 527 TJ/d (500 MMcf/d) and is expected to contribute to lower GHG emission intensity for the overall system. With an estimated capital cost of $0.6 billion, the project consists of approximately 33 km (21 miles) of new pipeline, one new non-emitting electric compressor unit and associated facilities. An application for the project is expected to be submitted to the CER in third quarter 2023, with an anticipated in-service date in 2026 subject to regulatory approval.

**Canadian Mainline**

In the year ended December 31, 2022, the Canadian Mainline placed approximately $0.2 billion of capacity projects in service.

46 \| TC Energy **Management's discussion and analysis** 2022

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**FINANCIAL RESULTS**

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to segmented earnings (the most directly comparable GAAP measure). Refer to page 11 for more information on non-GAAP measures we use.

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| NGTL System | **1853** | 1649 | 1509 |
| Canadian Mainline | **770** | 838 | 911 |
| Other Canadian pipelines<sup>1</sup> | **183** | 188 | 146 |
| **Comparable EBITDA** | **2806** | 2675 | 2566 |
| Depreciation and amortization | **(1198)** | (1226) | (1273) |
| **Comparable EBIT** | **1608** | 1449 | 1293 |
| Specific items: |  |  |  |
| &nbsp;&nbsp;&nbsp;Coastal GasLink LP impairment charge | **(3048)** |  |  |
| &nbsp;&nbsp;&nbsp;Gain on partial sale of Coastal GasLink LP | **—** |  | 364 |
| **Segmented (losses)/earnings** | **(1440)** | 1449 | 1657 |

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1Includes results from Foothills, Ventures LP, Great Lakes Canada and 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 (losses)/earnings decreased by $2,889 million in 2022 compared to 2021 and decreased by $208 million in 2021 compared to 2020 and included the following specific items which have been excluded from our calculation of comparable EBIT and comparable earnings:

• a pre-tax impairment charge of $3.0 billion in 2022 related to our equity investment in Coastal GasLink LP. Refer to Note 7, Coastal GasLink, of our 2022 Consolidated financial statements for additional information

• a pre-tax gain of $364 million in 2020 related to the sale of a 65 per cent equity interest in Coastal GasLink LP.

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**

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| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Net income** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;NGTL System | **708** | 631 | 565 |
| &nbsp;&nbsp;&nbsp;&nbsp;Canadian Mainline | **223** | 213 | 160 |
| **Average investment base** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;NGTL System | **17493** | 15560 | 14070 |
| &nbsp;&nbsp;&nbsp;&nbsp;Canadian Mainline | **3735** | 3724 | 3673 |

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Net income for the NGTL System increased by $77 million in 2022 compared to 2021 and $66 million in 2021 compared to 2020 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.

TC Energy **Management's discussion and analysis** 2022 \| 47

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Net income for the Canadian Mainline increased by $10 million in 2022 compared to 2021 as a result of higher incentive earnings. Net income in 2021 increased by $53 million compared to 2020 mainly as a result of higher incentive earnings and the elimination of a $20 million after-tax annual TC Energy contribution included in the previous settlement ended in 2020. 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. In 2020, the Canadian Mainline operated under the terms of the 2015-2030 Tolls Application approved in 2014. The terms of the previous settlement included an ROE of 10.1 per cent on deemed common equity of 40 per cent, an incentive mechanism with both upside and downside risk and a $20 million after-tax annual TC Energy contribution to reduce the revenue requirement.

**Comparable EBITDA**

Comparable EBITDA for Canadian Natural Gas Pipelines was $131 million higher in 2022 compared to 2021 primarily due to the net effect of:

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

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

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

Comparable EBITDA for Canadian Natural Gas Pipelines in 2021 was $109 million higher than 2020 primarily due to the net effect of:

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

• Coastal GasLink development fee revenue which commenced in second quarter 2020

• lower flow-through depreciation and financial charges, partially offset by higher flow-through income taxes, increased incentive earnings and elimination of the TC Energy contribution on the Canadian Mainline.

**Depreciation and amortization**

Depreciation and amortization was $28 million lower in 2022 compared to 2021 and $47 million lower in 2021 compared to 2020 due to one section of the Canadian Mainline being fully depreciated in 2021, partially offset by higher depreciation on the NGTL System from expansion facilities that were placed in service.

48 \| TC Energy **Management's discussion and analysis** 2022

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**OUTLOOK**

**Comparable EBITDA and comparable earnings**

Net income for Canadian rate-regulated pipelines is affected by changes in investment base, ROE and deemed capital structure, as well as by the terms of toll settlements approved by the CER. Under the current regulatory model, earnings from Canadian rate-regulated natural gas pipelines are not materially affected by short-term fluctuations in the commodity price of natural gas, changes in throughput volumes or changes in contracted capacity levels.

Canadian Natural Gas Pipelines comparable EBITDA and earnings in 2023 are expected to be higher than 2022 mainly due to continued growth of the NGTL System as we advance expansion programs which extend and expand supply facilities, enhance delivery facilities in Alberta and provide incremental service at our major border delivery locations in response to requests for firm service on the system. Due to the flow-through treatment of certain costs on our Canadian rate-regulated pipelines, changes in these costs can impact our comparable EBITDA despite having no significant effect on comparable earnings.

**Capital spending**

We spent a total of $3.3 billion in 2022 in our Canadian Natural Gas Pipelines business on growth projects and maintenance capital expenditures. We expect to spend approximately $2.8 billion in 2023, primarily on NGTL System expansion projects and maintenance capital expenditures, all of which are immediately reflected in investment base and related earnings.

We also contributed $1.4 billion to our investment in Coastal GasLink LP in 2022, and are obligated to contribute an additional $0.5 billion in 2023, primarily related to installments of partner equity contributions in accordance with the July 2022 agreements with Coastal GasLink LP. We also expect to make further contributions related to the revised estimated capital cost of the project in 2023. Refer to the Canadian Natural Gas Pipelines – Significant events section for additional information on Coastal GasLink.

TC Energy **Management's discussion and analysis** 2022 \| 49

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U.S. Natural Gas Pipelines

**UNDERSTANDING OUR U.S. NATURAL GAS PIPELINES SEGMENT**

The U.S. interstate natural gas pipeline business is subject to regulation by various federal, state and local governmental agencies. FERC, however, has comprehensive jurisdiction over our U.S. interstate natural gas business. FERC approves maximum transportation rates that are cost-based and are designed to recover the pipeline's investment, operating expenses and a reasonable return for our investors. In the U.S., we have the ability to contract for negotiated or discounted rates with shippers.

FERC does not require U.S. interstate pipelines to calculate rates annually, nor do they generally allow for the collection or refund of the variance between actual and expected revenues and costs into future years. This difference in U.S. regulation from the Canadian regulatory environment puts our U.S. pipelines at risk for the difference in expected and actual costs and revenues between rate cases. If revenues no longer provide a reasonable opportunity to recover our costs, we can file with FERC for a new determination of rates, subject to any moratorium in effect. Similarly, FERC or our shippers may institute proceedings to lower rates if they consider the return on capital invested to be unjust or unreasonable.

Similar to Canada, we can also establish settlement arrangements with our U.S. shippers that are ultimately subject to approval by FERC. Rate case moratoriums for a period of time, before either we or the shippers can file for a rate review, are common for a settlement in that they provide some certainty for shippers in terms of rates, eliminate the costs associated with frequent rate proceedings for all parties and can provide an incentive for pipelines to lower costs.

**PHMSA compliance regulation**

Most of our U.S. natural gas pipeline systems are subject to federal pipeline safety statutes and regulations enacted and administered by PHMSA. PHMSA has disseminated regulations governing, among other things, maximum operating pressures, pipeline patrols and leak surveys, public awareness, operation and maintenance procedures, operator qualification, minimum depth requirements and emergency procedures. Additionally, PHMSA has put into place regulations requiring pipeline operators to develop and implement integrity management programs for certain natural gas pipelines that, in the event of a pipeline leak or rupture, could affect high-consequence areas (HCAs), which are areas where a release could have the most significant adverse consequences, including high-population areas.

In 2016, PHMSA proposed new rules to revise the U.S. Federal Pipeline Safety Regulations and issued a Notice of Proposed Rulemaking (NPRM) for onshore natural gas transmission and gathering lines that impose more stringent inspection, reporting and integrity management requirements on operators. The rulemaking is commonly referred to as the Gas Mega Rule, and was subsequently issued in three separate parts focusing on the following: 1) confirmation of maximum allowable operating pressure and expanded integrity assessments in areas outside of HCAs, known as moderate consequence areas; 2) additional integrity management repair criteria, corrosion inspections and corrosion control; and 3) expanded jurisdictional gathering line definition. The first and largest of the three parts, addressing the confirmation of maximum allowable operating pressure, was published as a final rule in October 2019. Part one was followed by the gathering line definition rule (part three) which was issued as final in November 2021. Lastly, part two, with additional integrity management repair criteria and corrosion inspections, completed the Gas Mega Rule with its issuance in August 2022. With all parts of the Gas Mega Rule promulgated, we continue to assess the cumulative operational and financial impacts related to its numerous revisions and newly introduced language, with a specific focus on those aspects associated with the 15-year implementation window related to part one that began in July 2020 and, for which, we seek cost recovery.

In addition to the major rulemakings noted above, new pipeline safety legislation was signed into law in December 2020 that reauthorized PHMSA and its Office of Pipeline Safety program, which expired under the 2016 Pipeline Safety Act at the end of September 2019. We are in the process of assessing the impacts associated with this new legislation which include self-directed mandates to natural gas transmission operations requiring targeted reduction of methane releases.

50 \| TC Energy **Management's discussion and analysis** 2022

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Lastly, the requirement of valve installation and minimum rupture detection standards rulemaking was published as a final rule in April 2022. The non-retroactive rupture detection and mitigation rule defines when the installation of automatic shutoff valves, remote-controlled valves or manual valves is required on newly constructed pipelines or certain pipe replacements six inches and larger in diameter and meeting a cumulative length requirement. The rule primarily targets Class 3 and 4 locations and HCAs but also includes more stringent mandates on the timeliness of response and the ability for the Supervisory Control and Data Acquisition System to detect, locate and alert gas controllers of a potential rupture. In addition, PHMSA mandates emergency response protocols including a 30-minute requirement to have a gas release fully isolated from the time it was identified as a rupture.

**SIGNIFICANT EVENTS**

**Columbia Gas Section 4 Rate Case**

Columbia Gas reached a settlement with its customers effective February 2021 and received FERC approval in February 2022. As part of the settlement, there is a moratorium on any further rate changes until April 1, 2025 and Columbia Gas must file for new rates with an effective date no later than April 1, 2026. Previously accrued rate refund liabilities were refunded to customers, including interest, in second quarter 2022.

**ANR Section 4 Rate Case**

ANR filed a Section 4 rate case with FERC in January 2022 requesting an increase to ANR's maximum transportation rates effective August 1, 2022, subject to refund upon completion of the rate proceeding. In November 2022, ANR notified FERC that it reached a settlement-in-principle with its customers. In January 2023, the presiding Administrative Law Judge certified the settlement as uncontested and recommended it for approval by FERC. While there is no timeframe in which FERC must act on the settlement, in line with other recent rate case settlement approval timelines, we expect to receive FERC approval of the settlement in early 2023.

**Great Lakes Rate Settlement**

In April 2022, FERC approved Great Lakes' unopposed rate case settlement with its customers by which Great Lakes and the settling parties agreed to maintain existing recourse rates through October 31, 2025.

While the settlement created short-term rate certainty, it prompted a re-evaluation of Great Lakes' long-term free cash flows which resulted in a US$451 million goodwill impairment charge being recorded in first quarter 2022. Refer to the Other Information – Critical accounting estimates section for additional information.

**KO Transmission Enhancement Acquisition**

On April 28, 2022, we approved the approximately US$80 million acquisition of KO Transmission assets to be integrated into our Columbia Gas pipeline. The expanded footprint is expected to provide additional last-mile connectivity of Columbia Gas into northern Kentucky and southern Ohio to growing LDC markets and a platform for future capital investments including future conversions of coal-fueled power plants in the region. FERC approval for the acquisition was received in November 2022 and the transaction closed in February 2023.

**Renewable Natural Gas Hub Development**

In April 2022, we announced a strategic collaboration with GreenGasUSA to explore development of a network of RNG transportation hubs. These hubs are designed to provide centralized access to existing energy transportation infrastructure for RNG sources, such as farms, wastewater treatment facilities and landfills. We believe that this collaboration, which targets 10 transportation hubs nationally, will rapidly expand and provide incremental capability to the already existing RNG interconnects across our U.S. natural gas footprint. The development of these hubs is an important step towards the acceleration of methane capture projects and the concurrent reduction of GHG emissions.

**Alberta XPress Project**

The Alberta XPress project, an expansion project on ANR that utilizes existing capacity on the Great Lakes and the Canadian Mainline systems to connect growing supply from the WCSB to U.S. Gulf Coast LNG export markets, was placed in service in January 2023.

TC Energy **Management's discussion and analysis** 2022 \| 51

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**Louisiana XPress Project**

The Louisiana XPress project, a Columbia Gulf project designed to connect natural gas supply to U.S. Gulf Coast LNG export facilities, was phased into service over the course of third quarter 2022.

**Elwood Power and Wisconsin Access Projects**

The Elwood Power and Wisconsin Access projects, both including upgrade and reliability components, while reducing GHG emissions along portions of the ANR pipeline system, were placed in commercial service on November 1, 2022.

**Gillis Access Project**

In November 2022, we sanctioned the development of the Gillis Access project, a 1.5 Bcf/d greenfield pipeline system that will connect supplies from the Haynesville basin at Gillis to markets elsewhere in Louisiana. The 68 km (42 mile) Louisiana header system will also enable the rapidly growing Louisiana LNG export market to access Haynesville-sourced gas production as well as create a platform for further growth into the southeast Louisiana markets. The project has an anticipated in-service date in 2024 and a total estimated cost of US$0.4 billion.

In February 2023, we approved a 63 km (39 mile), 1.4 Bcf/d extension of the Gillis Access project to further connect supplies from the Haynesville basin at Gillis. Subject to customer FID, the project has an anticipated in-service date in 2025 and a total estimated cost of US$0.3 billion.

**Ventura XPress Project**

In December 2022, we approved the Ventura XPress project, a set of ANR projects designed to improve base system reliability and allow for additional long-term contracted transportation services to a point of delivery on the Northern Border pipeline at Ventura, Iowa. The project has an anticipated in-service date in 2025 and a total estimated cost of US$0.2 billion.

52 \| TC Energy **Management's discussion and analysis** 2022

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**FINANCIAL RESULTS**

In March 2021, we acquired all the outstanding common units of TC PipeLines, LP not beneficially owned by TC Energy in exchange for TC Energy common shares (TC PipeLines, LP acquisition). TC PipeLines, LP results for the year ended December 31, 2021 and comparative results for 2020 reflect our ownership interests in eight natural gas pipelines prior to the acquisition.

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to segmented earnings (the most directly comparable GAAP measure). Refer to page 11 for more information on non-GAAP measures we use.

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| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of US$, unless otherwise noted) | **2022** | **2021** | **2020** |
| Columbia Gas | **1511** | 1529 | 1305 |
| ANR | **582** | 592 | 512 |
| Columbia Gulf | **207** | 220 | 195 |
| GTN<sup>1,2</sup> | **184** | 139 |  |
| Great Lakes<sup>1,3</sup> | **178** | 158 | 91 |
| Other U.S. pipelines<sup>1,4</sup> | **441** | 313 | 117 |
| TC PipeLines, LP<sup>1,5</sup> | **—** | 24 | 119 |
| Non-controlling interests<sup>5</sup> | **39** | 100 | 375 |
| **Comparable EBITDA** | **3142** | 3075 | 2714 |
| Depreciation and amortization | **(681)** | (630) | (597) |
| **Comparable EBIT** | **2461** | 2445 | 2117 |
| Foreign exchange impact | **742** | 620 | 720 |
| **Comparable EBIT** (Cdn$) | **3203** | 3065 | 2837 |
| Specific items: |  |  |  |
| &nbsp;&nbsp;&nbsp;Great Lakes goodwill impairment charge | **(571)** |  |  |
| &nbsp;&nbsp;&nbsp;Risk management activities | **(15)** | 6 |  |
| **Segmented earnings** (Cdn$) | **2617** | 3071 | 2837 |

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1Our ownership interest in TC PipeLines, LP was 25.5 per cent prior to the acquisition in March 2021, at which time it became 100 per cent. Prior to March 2021, results reflected TC PipeLines, LP's 46.45 per cent interest in Great Lakes, its ownership of GTN, Bison, North Baja, Portland and Tuscarora as well as its share of equity income from Northern Border and Iroquois.

2Reflects 100 per cent of GTN's comparable EBITDA subsequent to the TC PipeLines, LP acquisition in March 2021.

3Results reflect our 53.55 per cent direct interest in Great Lakes until March 2021 and our 100 per cent ownership interest subsequent to the March 2021 acquisition of all outstanding common units of TC PipeLines, LP not beneficially owned by us.

4Reflects comparable EBITDA from our ownership in our mineral rights business (CEVCO), Crossroads and our share of equity income from 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. For the period subsequent to our March 2021 acquisition of TC PipeLines, LP, results also include 100 per cent of Bison, North Baja and Tuscarora, 61.7 per cent of Portland plus our equity income from Northern Border and Iroquois.

5Reflects comparable EBITDA attributable to portions of TC PipeLines, LP and Portland that we did not own prior to our March 2021 acquisition of TC PipeLines, LP and subsequently reflects earnings attributable to the remaining 38.3 per cent interest in Portland we do not own.

TC Energy **Management's discussion and analysis** 2022 \| 53

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U.S. Natural Gas Pipelines segmented earnings in 2022 decreased by $454 million compared to 2021 and increased by $234 million in 2021 compared to 2020 and included the following specific items which have been excluded from our calculation of comparable EBIT and comparable earnings:

• a pre-tax goodwill impairment charge of $571 million related to Great Lakes in first quarter 2022. Refer to the Other Information – Critical accounting estimates section for additional information

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

A stronger U.S. dollar in 2022 had a positive impact on the Canadian dollar equivalent segmented earnings from our U.S. operations compared to 2021, while a weaker U.S. dollar in 2021 had a negative impact on the Canadian dollar equivalent segmented earnings from our U.S. operations compared to 2020.

Earnings from our U.S. Natural Gas Pipelines operations are generally affected by contracted volume levels, volumes delivered and the rates charged as well as by the cost of providing services. Columbia and ANR results are also affected by the contracting and pricing of their natural gas storage capacity and incidental commodity sales. Natural gas pipeline and storage volumes and revenues are generally higher in the winter months because of the seasonal nature of the business.

Comparable EBITDA for U.S. Natural Gas Pipelines was US$67 million higher in 2022 than 2021 primarily due to the net effect of:

• incremental earnings from growth projects placed in service

• increased earnings from our mineral rights business due to higher commodity prices

• a net increase in earnings from Columbia Gas following the FERC-approved settlement for higher transportation rates effective February 2021, partially offset by higher property taxes as a result of projects placed in service

• decreased earnings due to the impact of cold weather events and other discrete items recognized in 2021

• a decrease in earnings as a result of certain fourth quarter 2022 adjustments related to regulatory deferrals, partially offset by an increase in earnings due to higher transportation rates effective August 1, 2022, both pursuant to the ANR uncontested rate settlement. Refer to the U.S. Natural Gas Pipelines – Significant events section for additional information.

Comparable EBITDA for U.S. Natural Gas Pipelines was US$361 million higher in 2021 than 2020 primarily due to the net effect of:

• a net increase in earnings from Columbia Gas as a result of higher transportation rates effective February 1, 2021, pursuant to the Columbia Gas uncontested rate case settlement

• increased earnings across our U.S. Natural Gas Pipelines assets which includes the impact of cold weather events in 2021 impacting many of the U.S. markets in which we operate

• increased earnings from our mineral rights business due to higher commodity prices

• incremental earnings resulting from increased capitalization of pipeline integrity costs and the contribution from growth projects placed in service primarily on Columbia Gas and ANR, partially offset by higher property taxes.

The positive impact on comparable earnings following the TC PipeLines, LP acquisition noted above is reflected through a reduction in Net income attributable to non-controlling interests in the Consolidated statement of income.

**Depreciation and amortization**

Depreciation and amortization was US$51 million higher in 2022 compared to 2021 and US$33 million higher in 2021 compared to 2020 mainly due to new projects placed in service.

54 \| TC Energy **Management's discussion and analysis** 2022

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**OUTLOOK**

**Comparable EBITDA**

Our U.S. natural gas pipelines are largely backed by long-term take-or-pay contracts that are expected to deliver stable and consistent financial performance. Our ability to retain customers and recontract or sell capacity at favourable rates is influenced by prevailing market conditions and competitive factors, including alternatives available to end-use customers in the form of competing natural gas pipelines and supply sources as well as broader conditions that impact demand from certain customers or market segments. Comparable EBITDA is also affected by operational and other costs, which can be impacted by safety, environmental and other regulators' decisions, as well as customer credit risk.

U.S. Natural Gas Pipelines comparable EBITDA in 2023 is expected to be consistent with 2022. This is due to, among other factors, completion of expansion projects in 2022 and 2023 on the ANR and Columbia Gulf systems as well as higher revenues on ANR due to the full-year implementation of higher transportation rates as part of the uncontested Section 4 rate case settlement filed with FERC. Our pipeline systems continue to see historically strong demand for service and we anticipate our assets will maintain the high utilization levels experienced in 2022. These positive results are expected to be partially offset by higher operational costs, reflective of increased system utilization across our footprint, and an anticipated increase in property taxes from capital projects placed in service.

**Capital spending**

We spent a total of US$1.7 billion in 2022 on our U.S. natural gas pipelines and expect to spend approximately US$1.9 billion in 2023 primarily on our Gillis Access, North Baja and Columbia Gas expansion projects and our Columbia Gas Modernization III program, as well as Columbia Gas and ANR maintenance capital expenditures, the return on and recovery of which is expected to be reflected in future tolls.

TC Energy **Management's discussion and analysis** 2022 \| 55

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Mexico Natural Gas Pipelines

**UNDERSTANDING OUR MEXICO NATURAL GAS PIPELINES SEGMENT**

For over a decade, Mexico has been undergoing a significant transition from fuel oil and diesel as its primary energy sources for electric generation to using natural gas. As a result, new natural gas pipeline infrastructure has been and continues to be required to meet the growing demand for natural gas. The CFE, Mexico's state-owned electric utility, is the counterparty on all of our existing pipelines under long-term contracts, which are predominately denominated in U.S. dollars. These fixed-rate contracts are generally designed to recover the cost of service and provide a return on and of invested capital. As the pipeline developer and operator, we are generally at risk for operating and construction costs and in-service delay penalties, excluding force majeure events which provide schedule relief. Our Mexico pipelines have approved tariffs, services and related rates for other potential users.

**SIGNIFICANT EVENTS**

**Strategic Alliance with the CFE**

On August 4, 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. This alliance consolidates previous TSAs executed between TC Energy's Mexico-based subsidiary TGNH and the CFE in connection with our natural gas pipeline assets in central Mexico (including the Tamazunchale, Villa de Reyes and Tula pipelines) under a single, U.S. dollar-denominated, take-or-pay contract that extends through 2055. This agreement also resolved and terminated previous international arbitrations with the CFE related to the Villa de Reyes and Tula pipelines.

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 lateral section of the Villa de Reyes pipeline was mechanically completed in second quarter 2022, while VdR North and Tula East were placed in commercial service in third quarter 2022. We are working with the CFE, and expect the lateral and the south sections of the Villa de Reyes pipeline to begin commercial service in 2023. Additionally, we have agreed to jointly develop and complete the central segment of the Tula pipeline, subject to an FID in the first 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 economic competition commission 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. Regulatory approvals related to the CFE's equity participation in TGNH are expected to take up to 24 months.

56 \| TC Energy **Management's discussion and analysis** 2022

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**FINANCIAL RESULTS**

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to segmented earnings (the most directly comparable GAAP measure). Refer to page 11 for more information on non-GAAP measures we use.

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| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of US$, unless otherwise noted) | **2022** | **2021** | **2020** |
| TGNH<sup>1</sup> | **164** | 118 | 120 |
| Topolobampo | **161** | 161 | 159 |
| Sur de Texas<sup>2</sup> | **112** | 113 | 171 |
| Guadalajara | **73** | 71 | 64 |
| Mazatlán | **67** | 70 | 70 |
| **Comparable EBITDA** | **577** | 533 | 584 |
| Depreciation and amortization | **(76)** | (86) | (87) |
| **Comparable EBIT** | **501** | 447 | 497 |
| Foreign exchange impact | **153** | 110 | 172 |
| **Comparable EBIT** (Cdn$) | **654** | 557 | 669 |
| Specific item: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expected credit loss provision on net investment in leases and certain contract<br>assets | **(163)** |  |  |
| **Segmented earnings** (Cdn$) | **491** | 557 | 669 |

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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 in 2022 decreased by $66 million compared to 2021 and includes the impact of an expected credit loss provision of $163 million relating to the TGNH net investment in leases and certain contract assets. In accordance with the requirements of U.S. GAAP, an expected credit loss provision must be recognized on the TGNH net investment in leases. The provision is an estimate of losses that may occur over the duration of the TSA through 2055. As this provision, as well as a provision related to certain contract assets in Mexico, do not reflect actual losses or cash outflows that were incurred under the lease arrangement in the current period or from our underlying operations, we have excluded these unrealized changes from our calculation of comparable EBITDA and comparable EBIT. Refer to Note 28, Risk management and financial instruments, of our 2022 Consolidated financial statements for additional information on expected credit loss provisions. A stronger U.S. dollar in 2022 had a positive impact on the Canadian dollar equivalent segmented earnings from our Mexico operations compared to 2021.

Mexico Natural Gas Pipelines segmented earnings decreased by $112 million in 2021 compared to 2020. A weaker U.S. dollar in 2021 had a negative impact on the Canadian dollar equivalent segmented earnings from our Mexico operations compared to 2020.

Comparable EBITDA for Mexico Natural Gas Pipelines increased by US$44 million in 2022 compared to 2021 primarily due to higher revenues related to the commercial in-service of VdR North and Tula East in third quarter 2022.

Comparable EBITDA for Mexico Natural Gas Pipelines decreased by US$51 million in 2021 compared to 2020 mainly due to:

• decreased Sur de Texas equity income due to one-time fees of US$55 million recognized in 2020 associated with the construction of the project

• higher earnings from Guadalajara following the in-service of a flow reversal project in 2020.

In 2017, we entered into a MXN$21.3 billion unsecured revolving credit facility with the Sur de Texas joint venture. This peso-denominated inter-affiliate loan was fully repaid upon maturity on March 15, 2022 and replaced with a new U.S. dollar-denominated inter-affiliate loan. In July 2022, the Sur de Texas joint venture entered into an unsecured U.S. dollar-denominated term loan agreement with third parties and used the proceeds to fully repay the U.S. dollar-denominated inter-affiliate loan with TC Energy. Our share of related interest expense in Sur de Texas prior to this refinancing was fully offset by corresponding interest income recorded in Interest income and other in the Corporate segment.

TC Energy **Management's discussion and analysis** 2022 \| 57

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**Depreciation and amortization**

Depreciation and amortization was US$10 million lower in 2022 compared to 2021 due to the change in accounting for Tamazunchale subsequent to the execution of the new TGNH TSA with the CFE in mid-2022. Under sales-type lease accounting, our in-service TGNH pipeline assets are reflected on our Consolidated balance sheet within net investment in leases with no depreciation expense being recognized. Depreciation and amortization in 2021 was consistent with 2020.

**OUTLOOK**

**Comparable EBITDA**

Mexico Natural Gas Pipelines comparable EBITDA reflects long-term, stable, principally U.S. dollar-denominated transportation contracts that are affected by the cost of providing service and includes our share of equity income from our 60 per cent interest in the Sur de Texas pipeline. Due to the long-term nature of the underlying transportation contracts, comparable EBITDA is generally consistent year-over-year except when new assets are placed in service. Comparable EBITDA for 2023 is expected to be higher than 2022 due to full-year revenues from VdR North and Tula East which were placed in service in third quarter 2022 under the new TGNH TSA with the CFE.

**Capital spending**

We spent a total of US$0.8 billion in 2022 primarily related to the construction of the Southeast Gateway, Villa de Reyes and Tula pipelines and the completion of specific Villa de Reyes and Tula segments. Capital spending in 2023 to advance construction of the Southeast Gateway, Villa de Reyes and Tula pipelines is expected to be US$2.1 billion.

58 \| TC Energy **Management's discussion and analysis** 2022

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**NATURAL GAS PIPELINES – BUSINESS RISKS** 

The following are risks specific to our Natural Gas Pipelines business. Refer to page 99 for information about general risks related to TC Energy as a whole, including other operational, safety and financial risks as well as our approach to risk management.

**Production levels within supply basins**

The NGTL System and our pipelines downstream depend largely on supply from the WCSB. Columbia Gas and its connecting pipelines largely depend on Appalachian supply. We continue to monitor any changes in our customers' natural gas production plans and how these may impact our existing assets and new project schedules. There is competition amongst pipelines to connect to major basins. An overall decrease in production and/or increased competition for supply could reduce throughput on our connected pipelines that, in turn, could negatively impact overall revenues generated. The WCSB and Appalachian basins are two of the most prolific and cost-competitive basins in North America and have considerable natural gas reserves. However, the amount actually produced depends on many variables including the price of natural gas and natural gas liquids, basin-on-basin competition, pipeline and gas-processing tolls, demand within the basin, changes in policy and regulations and the overall value of the reserves, including liquids content.

**Market access** 

**Competition for greenfield pipeline expansion**

We face competition from other pipeline companies seeking to invest in greenfield natural gas pipeline development opportunities. This competition could result in fewer available projects that meet our investment hurdles or projects that proceed with lower overall financial returns. While renewable deployments are expected to garner an increasing portion of future energy needs, including in the power generation sector, natural gas demand is still projected to grow under the most aggressive renewable deployment forecasts. The reliability of natural gas is an important factor in the successful wide-scale deployment of renewables with more intermittent capabilities.

**Demand for pipeline capacity**

Demand for pipeline capacity ultimately drives the sale of pipeline transportation services and is impacted by supply and market competition, variations in economic activity, weather variability, natural gas pipeline and storage competition, energy conservation as well as demand for and prices of alternative sources of energy. Renewal of expiring contracts and the opportunity to charge a competitive toll depends on the overall demand for transportation service. A decrease in the level of demand for our pipeline transportation services could adversely impact revenues, although overall utilization of our pipeline capacity continues to grow and warrant further investment and expansion.

**Commodity prices**

The cyclical supply and demand nature of commodities and related pricing can have a secondary impact on our business where our shippers may choose to accelerate or delay certain projects. This can impact the timing of demand for transportation services and/or new natural gas pipeline infrastructure. Disruptions in the energy supply chain can result in price volatility and a decline in natural gas prices that could impact our shippers' financial condition and their ability to meet their transportation service cost obligations.

TC Energy **Management's discussion and analysis** 2022 \| 59

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**Regulatory risk**

Decisions and evolving policies by regulators and other government authorities, including changes in regulation, can impact the approval, timing, construction, operation and financial performance of our natural gas pipelines. There is a risk that decisions are delayed or are not favourable and could therefore adversely impact construction costs, in-service dates, anticipated revenues and the opportunity to further invest in our systems. There is also risk of a regulator disallowing recovery of a portion of our prudently incurred costs, now or at some point in the future.

The regulatory approval process for larger infrastructure projects, including the time it takes to receive a decision, could be delayed or lead to an unfavourable decision due to evolving public opinion and government policy related to natural gas pipeline infrastructure development. If regulatory decisions are subsequently challenged in courts, this could result in further impacts to project costs and schedule delays.

Increased scrutiny of construction and operations processes by the regulator or other enforcing agencies has the potential to delay construction, increase operating costs or require additional capital investment. There is a risk of an adverse impact to income if these costs are not fully recoverable and/or reduce the competitiveness of tolls charged to customers.

We continuously manage these risks by monitoring legislative and regulatory developments and decisions to determine the possible impact on our natural gas pipelines business and developing rate, facility and tariff applications that account for and mitigate these risks where possible.

**Governmental risk**

Shifts in government policy or changes in government can impact our ability to grow our business. More complex regulatory processes, broader consultation requirements, more restrictive emissions policies and changes to environmental regulations can impact our opportunities for continued growth. We are committed to working with all levels of government to ensure our business benefits and risks are understood and mitigation strategies are implemented.

**Construction and operations**

Constructing and operating our pipelines to ensure transportation services are provided safely and reliably is essential to the success of our business. Interruptions in our pipeline operations impacting throughput capacity may result in reduced revenues and can affect corporate reputation as well as customer and public confidence in our operations. We manage this by investing in a highly skilled workforce, hiring third-party inspectors during construction, operating prudently, monitoring our pipeline systems continuously, using risk-based preventive maintenance programs and making effective capital investments. We use pipeline inspection equipment to regularly check the integrity of our pipelines, and repair or replace sections when necessary. We also calibrate meters regularly to ensure accuracy and employ robust reliability and integrity programs to maintain compression equipment and ensure safe and reliable operations.

60 \| TC Energy **Management's discussion and analysis** 2022

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Liquids Pipelines

Our Liquids Pipelines infrastructure provides transportation of Canadian crude oil from Hardisty, Alberta to key refining and export markets in the U.S. Midwest and the U.S. Gulf Coast, as well as U.S. domestic service from Cushing, Oklahoma to the U.S. Gulf Coast. Our Liquids Pipelines assets in Alberta also transport oil from the Fort McMurray area to the Edmonton/Heartland areas.

Our Liquids Pipelines business includes:

• wholly-owned liquids pipelines – approximately 4,400 km (2,700 miles)

• wholly-owned operational and term storage – approximately 7 million barrels

• partially-owned liquids pipelines – over 460 km (287 miles).

**Strategy**

We remain focused on safely and reliably optimizing our Liquids Pipelines assets. We continue to expand our transportation service offerings to add incremental value to our business. We intend to leverage our existing competitive infrastructure to pursue in-corridor growth opportunities that enable increased optionality and market access for our customers.

ESG forms an important part of our strategy and we are committed to evolving our Liquids Pipelines business to support global energy transition goals. While low-carbon power generation is expected to grow significantly, our Liquids Pipelines assets could underpin early initiatives for our decarbonizing goals.

**Recent highlights**

• construction of the Port Neches Link Pipeline System is near completion and is expected to be placed in service in first quarter 2023

• commercialized an incremental 30,000 Bbl/d of the 2019 Open Season contracted volumes on the Keystone Pipeline System

• achieved record demand for throughput volumes on the Keystone Pipeline System.

TC Energy **Management's discussion and analysis** 2022 \| 61

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![ar_liquidsx1122xv3-bignumb.jpg](ar_liquidsx1122xv3-bignumb.jpg)

62 \| TC Energy **Management's discussion and analysis** 2022

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We are the operator and developer of the following:

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| | | | | |
|:---|:---|:---|:---|:---|
| | | **Length** | **Description** | **Ownership** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Liquids pipelines** | &nbsp;&nbsp;&nbsp;&nbsp;**Liquids pipelines** | | | |
| 1 | Keystone Pipeline System | 4,324 km<br>(2,687 miles) | Transports crude oil from Hardisty, Alberta to U.S. markets at Wood River and Patoka, Illinois, Cushing, Oklahoma and the U.S. Gulf Coast. | 100% |
| 2 | Marketlink |  | Transports crude oil from Cushing, Oklahoma to the U.S. Gulf Coast on facilities that form part of the Keystone Pipeline System. | 100% |
| 3 | Grand Rapids | 460 km <br>(287 miles) | Transports crude oil from the producing area northwest of Fort McMurray, Alberta to the Edmonton/Heartland, Alberta market region. | 50% |
| 4 | White Spruce | 72 km<br>(45 miles) | Transports crude oil from Canadian Natural Resources Limited's Horizon facility in northeast Alberta to the Grand Rapids pipeline. | 100% |

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TC Energy **Management's discussion and analysis** 2022 \| 63

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**UNDERSTANDING OUR LIQUIDS PIPELINES BUSINESS**

Our Liquids Pipelines segment consists of crude oil pipeline and terminal assets. The business safely transports crude oil from major supply sources to markets where crude oil can be refined into petroleum products. Ancillary services are also offered such as storage at terminal locations to provide our customers with delivery flexibility while optimizing the value of our pipeline assets. A non-regulated marketing entity also forms part of the Liquids Pipelines business.

We provide pipeline transportation capacity to customers predominantly supported by long-term contracts generating stable earnings over the contract term. These long-term contracts provide for the recovery of costs incurred to construct our assets, with operating and maintenance costs primarily recovered through a variable flow-through toll. Uncontracted pipeline capacity is offered to the market on a monthly spot basis and through periodic open seasons, per regulatory requirements, which provides opportunities to generate incremental earnings. Storage of liquids at terminals is offered to our customers in return for fixed fee payments.

Our pipeline systems and associated facilities are regulated by the CER and AER, as well as FERC, PHMSA and various state authorities. These entities regulate the construction, operation and abandonment of pipeline infrastructure. The CER and FERC regulate the transportation service of our pipeline systems and oversee the reasonableness of our tolls.

**Keystone Pipeline System**

The Keystone Pipeline System, our largest liquids pipeline asset, transports crude oil exported from western Canada to various delivery points in the U.S. Mid Continent and Gulf Coast. It also transports U.S. domestic crude receipts between Cushing, Oklahoma and the U.S. Gulf Coast market through the Marketlink lease. As the system operates in both Canadian and U.S. jurisdictions, it is subject to the common carrier obligations imposed by the CER and FERC, respectively.

**TC Energy Liquids Marketing**

Our liquids marketing business provides customers with a variety of crude oil marketing services including transportation, storage and logistics, largely through the purchase and sale of physical crude oil. This business contracts for capacity on our pipelines as well as third-party owned pipelines and tank terminals.

**Intra-Alberta Pipeline Systems**

Our two intra-Alberta liquids pipelines, Grand Rapids and White Spruce, provide crude oil transportation for producers in northern Alberta to move volumes between the Fort McMurray area and the Edmonton/Heartland areas. These pipeline systems are regulated by the AER.

**Business environment**

Dynamic shifts in geopolitical events, government policy changes and various macroeconomic factors continue to impact global crude oil supply and demand balances. While the upstream sector remains focused on capital discipline, we expect crude oil demand to increase over the next 30 years, which is driven by world population growth and economic expansion. North America's crude oil supply, inclusive of the WCSB, is critical to supporting this future demand.

**Supply outlook**

**Canada**

Canada has the world's third largest crude oil reserves with over 160 billion barrels of economically and technically recoverable conventional and oil sands reserves, primarily in Alberta. WCSB crude oil production in 2022 was approximately 4.6 million Bbl/d and we expect it to increase to over 5 million Bbl/d by 2035. Oil sands heavy production comprises the majority of western Canadian crude oil supply at approximately 3.3 million Bbl/d and is a favourable supply source given its decades-long reserve life, steady production and rapidly improving cost and environmental performance.

**U.S.**

The U.S. is one of the largest crude oil producing countries in the world at approximately 12 million Bbl/d in 2022. The majority of continental U.S. crude oil production is in the form of light tight oil from the Permian, Williston, Eagle Ford and Niobrara basins. With light oil processing capacity fully utilized in the U.S., exports to offshore markets are generally used as outlets for incremental light tight oil production. U.S. refineries have been optimized through significant capital investments to refine a mix of light and heavy crude oils to economically produce an optimized refined products slate. By 2035, we expect the U.S. to export over 5 million Bbl/d of light crude oil while importing approximately 4 million Bbl/d of heavy crude oil.

64 \| TC Energy **Management's discussion and analysis** 2022

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**Demand**

The U.S. is the primary source of crude oil demand in North America with refining capacity greater than 16 million Bbl/d. Canada's heavy crude oil production is of strategic importance to the U.S. refining industry. Many refiners in the U.S. Midwest and U.S. Gulf Coast process a wide variety of crude oil but have invested significant capital to process heavy crude oil. Access to an abundance of low-cost natural gas, proximity to light and heavy crude oil supply, economies of scale and ready access to markets have positioned these refineries to be among the most profitable in the world.

Demand for heavy crude oil in the U.S. has been resilient and is expected to remain strong for the foreseeable future. While Canada and Mexico are the top suppliers of heavy crude oil to the U.S., Mexico oil production is not expected to see significant growth moving forward. This presents a continued opportunity for Canada to remain the prominent supplier of heavy crude oil to the U.S. Gulf Coast.

**Strategic priorities**

Our intra-Alberta liquids pipelines and the Keystone Pipeline System strategically position our liquids business to provide competitive transportation solutions for growing supplies of Alberta and U.S. crude oil to the Midwest and the U.S. Gulf Coast.

Within our established risk preferences, we remain committed to:

• optimizing the value and competitiveness of our existing assets

• expanding and leveraging our existing infrastructure

• expanding the transportation services that we offer and extending into adjacent markets

• progressing our energy transition goals, including system operational improvements and decarbonizing our systems.

The long-term contract profile supporting our business model provides stable tolls for our customers and stable revenues for our business. The cyclical nature of commodity prices may influence the pace at which our customers expand their operations. This can impact the rate of project growth in our industry, the value of our services as contracts expire, and the timing for the demand of transportation services and/or new liquids infrastructure.

We believe that our Alberta assets are well-positioned to capture production growth from the stable and resilient WCSB, which is needed to meet the growing U.S. Gulf Coast demand for secure Canadian heavy crude oil, as traditional offshore imports decline.

With the continued growth of U.S. light tight oil production and a satisfied demand for light oil in North America, we will examine opportunities to expand our transportation services and extend our pipeline platform to include last-mile delivery connectivity to refineries and terminals with storage and marine export capabilities. We will also focus on leveraging our existing assets and development of projects to provide optionality for customers to reach new proximate supply sources.

We believe that Liquids Pipelines is well positioned to endure the impact of short-term commodity price fluctuations and supply/demand responses, while supporting North American energy security. Our assets are predominantly supported by long-term contracts generating stable earnings. We continually work with existing and potential customers to enhance their customer experience and provide pipeline transportation and terminal services to meet their needs. The combination of the scale and strategic location of our assets assists us in attracting additional volumes and in growing our business.

We closely monitor the marketplace for strategic asset acquisitions as well as joint venture or joint tolling opportunities to enhance our system connectivity or expand our footprint within North America. We remain disciplined in our approach and will position our business development activities strategically to capture opportunities within our risk preferences.

ESG considerations form an important part of our strategy. Our business will continue to factor sustainability into our projects, maintenance and operational activities, while keeping innovation at the forefront of our business, including modernizing and decarbonizing our existing liquids infrastructure.

TC Energy **Management's discussion and analysis** 2022 \| 65

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**SIGNIFICANT EVENTS**

**Milepost 14 Incident**

In December 2022, a pipeline rupture occurred in Washington County, Kansas on the Cushing Extension section of the Keystone Pipeline System. Recovery and remediation efforts are underway and we are committed to fully remediating the site. To date, our oil recovery efforts continue to progress successfully with 90 per cent of the 12,937 barrel measured release volume recovered. The affected segment was restarted following approval of the repair and restart plan by PHMSA. Per the terms of a Corrective Action Order, the pipeline is required to operate under a pressure de-rate until the conditions are satisfied. The cause of the release remains the subject of an investigation.

At December 31, 2022, we accrued an environmental remediation liability of $650 million, before expected insurance recoveries and not including potential fines and penalties which are currently indeterminable. This amount represents our estimate of costs relating to emergency response, environmental remediation and cleanup activities required to fully remediate the site and has been recorded on an undiscounted basis. The accrual is based on certain assumptions such as the scope of remediation efforts that are subject to revision in future periods which could result in future modifications of this accrual. Therefore, it is reasonably possible that we will incur additional costs beyond the amounts accrued; however, we are currently unable to estimate the range of possible additional costs.

We have appropriate insurance policies in place and it is probable that the majority of estimated environmental remediation costs will be eligible for recovery under our existing insurance coverage. We have recorded an asset of $650 million, representing the expected recovery of the estimated environmental remediation costs. To the extent costs beyond the amounts accrued are incurred, they will be evaluated under our existing insurance policies. We expect remediation activities to be substantially completed within a year.

**CER and FERC Proceedings**

In 2019 and 2020, certain Keystone customers initiated complaints before FERC and the CER. The complaints indicated that Keystone had provided insufficient information to support its 2020 and 2021 estimated variable rates and challenged the just and reasonableness of Keystone's committed rates charged dating back to 2018 and 2020 at FERC and the CER, respectively.

CER proceedings concluded in September 2022 and in December 2022, the CER issued a decision which has resulted in a one-time adjustment related 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.

The FERC hearing commenced in June 2022 and concluded in August, with a judiciary recommendation expected to be issued in early 2023.

**2019 Open Season**

Approximately 20,000 Bbl/d of long-term contracts from the 2019 Open Season were commercialized in April 2022 with

an additional 10,000 Bbl/d in September 2022.

**Port Neches**

Construction of the Port Neches Link Pipeline System, which connects the Keystone Pipeline System to Motiva's Port Neches Terminal, providing access to Motiva's 630,000 Bbl/d refinery as well as other downstream infrastructure, is nearly complete and expected to be placed in service in first quarter 2023.

**Keystone XL**

In September 2022, the International Centre for Settlement of Investment Disputes formally constituted a tribunal to hear our Request for Arbitration under NAFTA where we are seeking to recover more than US$15 billion in economic damages resulting from the revocation of the Presidential Permit for the Keystone XL pipeline project. This claim is in an early stage and the timing and outcome is unknown at present.

Keystone XL termination activities undertaken in 2022, including asset dispositions and preservation, will continue throughout 2023. We will continue to coordinate with regulators, stakeholders and Indigenous groups to meet our environmental and regulatory commitments.

66 \| TC Energy **Management's discussion and analysis** 2022

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**FINANCIAL RESULTS**

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). Refer to page 11 for more information on non-GAAP measures we use.

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| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| Keystone Pipeline System<sup>1</sup> | **1304** | 1448 | 1614 |
| Intra-Alberta pipelines<sup>2</sup> | **71** | 87 | 92 |
| Other<sup>1</sup> | **(9)** | (9) | (6) |
| **Comparable EBITDA** | **1366** | 1526 | 1700 |
| Depreciation and amortization | **(329)** | (318) | (332) |
| **Comparable EBIT** | **1037** | 1208 | 1368 |
| Specific items: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Keystone XL asset impairment charge and other | **118** | (2775) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Keystone CER decision | **(27)** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Keystone XL preservation and other | **(25)** | (43) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of Northern Courier |  | 13 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Risk management activities | **20** | (3) | (9) |
| **Segmented earnings/(losses)** | **1123** | (1600) | 1359 |
| **Comparable EBITDA denominated as follows:** |  |  |  |
| Canadian dollars | **383** | 417 | 418 |
| U.S. dollars | **754** | 884 | 955 |
| Foreign exchange impact | **229** | 225 | 327 |
| **Comparable EBITDA** | **1366** | 1526 | 1700 |

---

1Liquids marketing results were previously disclosed separately, but almost fully relate to marketing activities with respect to the Keystone Pipeline System. For 2022 and comparative periods, liquids marketing results have been reclassified within Keystone Pipeline System.

2Intra-Alberta pipelines included Grand Rapids, White Spruce and Northern Courier. In November 2021, we sold our remaining 15 per cent interest in Northern Courier.

Liquids Pipelines segmented earnings increased by $2.7 billion in 2022 compared to 2021 and decreased by $3.0 billion in 2021 compared to 2020 and included the following specified items which have been excluded from our calculation of comparable EBIT:

• a $2.8 billion pre-tax asset impairment charge was recognized in 2021 associated with the termination of the Keystone XL pipeline project and related projects following the January 2021 revocation of the Presidential Permit, net of expected contractual recoveries and other contractual and legal obligations

• a $118 million pre-tax adjustment in 2022 to the 2021 Keystone XL asset impairment charge and other resulting from the gain on sale of Keystone XL project assets and reduction to the estimate for contractual and legal obligations related to termination activities

• a $27 million pre-tax charge due to the CER decision issued in December 2022 in respect of a tolling-related complaint pertaining to amounts reflected in 2021 and 2020

• pre-tax preservation and other costs in 2022 of $25 million (2021 – $43 million) related to the preservation and storage of the Keystone XL pipeline project assets which could not be accrued as part of the Keystone XL asset impairment charge

• pre-tax gain of $13 million in 2021 related to the sale of the remaining 15 per cent interest in Northern Courier

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

A stronger U.S. dollar in 2022 had a positive impact on the Canadian dollar equivalent segmented earnings from our U.S. operations compared to 2021, while a weaker U.S. dollar in 2021 had a negative impact on the Canadian dollar equivalent segmented earnings from our U.S. operations compared to 2020.

TC Energy **Management's discussion and analysis** 2022 \| 67

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Comparable EBITDA for Liquids Pipelines was $160 million lower in 2022 compared to 2021 primarily due to the net effect of:

• lower rates and volumes on the U.S. Gulf Coast section of the Keystone Pipeline System, partially offset by higher long-haul contracted volumes and approximately 20,000 Bbl/d of long-term contracts from the 2019 Open Season that were commercialized in April 2022 with an additional 10,000 Bbl/d in September 2022

• liquids marketing earnings for 2022 decreased relative to 2021 due to lower margins and volumes

• the CER decision on the tolling-related complaint in respect of amounts invoiced in 2022.

Comparable EBITDA for Liquids Pipelines was $174 million lower in 2021 compared to 2020 primarily due to the net effect of:

• lower volumes and compressed margins on the U.S. Gulf Coast section of the Keystone Pipeline System

• increased contributions from liquids marketing activities mainly attributable to higher margins and volumes.

**Depreciation and amortization**

Depreciation and amortization was $11 million higher in 2022 compared to 2021 primarily as a result of a stronger U.S. dollar. Depreciation and amortization was $14 million lower in 2021 compared to 2020 primarily as a result of a weaker U.S. dollar.

**OUTLOOK**

**Comparable EBITDA**

Comparable EBITDA in 2023 is expected to be modestly lower than 2022 for the Keystone Pipeline System including liquids marketing as a result of the de-rate associated with the Milepost 14 incident and continuing lower margins on the U.S. Gulf Coast section of the Keystone Pipeline System; however, we expect to continue to be able to fulfill our Keystone Pipeline System contract commitments.

**Capital spending**

We spent a total of $0.1 billion in 2022 primarily related to capital projects in the U.S. Gulf Coast and on our operating pipelines and expect to spend approximately $0.1 billion in 2023.

68 \| TC Energy **Management's discussion and analysis** 2022

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**BUSINESS RISKS**

The following are risks specific to our Liquids Pipelines business. Refer to page 99 for information about general risks related to TC Energy as a whole, including other operational, safety and financial risks as well as our approach to risk management.

**Operations**

Operating our liquids pipelines safely and reliably while optimizing available capacity are essential drivers of our business success. Interruptions in our pipeline operations may impact our throughput capacity and result in our inability to deliver on our contracted volume obligations and to capture spot volume opportunities. We manage these risks and possible impacts to local communities using environmental risk-based preventive maintenance programs, effective capital investments and a highly skilled workforce. We utilize in-line internal inspection equipment to monitor our pipelines regularly and perform repairs and preventative maintenance whenever necessary.

**Regulatory and government**

Decisions by Canadian and U.S. regulators can have a significant impact on the design, construction, operations and financial performance of our liquids pipelines. Shifts in government policy can impact the ability to grow our business. Public opinion about crude oil development and production, may also have an adverse impact on regulatory processes. In conjunction with this, there are individuals and special interest groups that express opposition to oil usage for energy by lobbying against the construction and operation of liquids pipelines. Changing environmental requirements or revisions to the current regulatory process may adversely impact the timing or ability to obtain approvals for our liquids pipelines. We manage these risks by continuously monitoring regulatory and government policy developments to determine their possible impact on our Liquids Pipelines business, building scenario analysis into our strategic outlook and working closely with our stakeholders in the development and operation of our assets.

**Crude oil supply and demand for pipeline capacity**

A decrease in demand for refined products could adversely impact the price that crude oil producers receive for their product. In the long term, lower crude oil prices could cause producers to curtail their investment in the further development of crude oil supplies. Depending on the severity, these factors could negatively impact opportunities to expand our liquids pipelines infrastructure and, in the longer term, to re-contract with customers as current agreements expire.

**Competition**

As we continue to further develop our competitive position in the North American liquids transportation market to connect growing crude oil supplies between key North American producing regions and demand markets, we face competition from other midstream companies which also seek to transport crude oil to the same markets. Our success is dependent on our ability to offer and contract transportation services on terms that are market competitive.

**Liquids marketing**

Our liquids marketing business provides customers with a variety of crude oil marketing services including transportation, storage and logistics, primarily through the purchase and sale of physical crude oil. Changing market conditions could adversely impact the value of the underlying capacity contracts and margins realized. Availability of alternative pipeline systems that can deliver into the same areas can also impact contract value. The liquids marketing business complies with our risk management policies which are described in the Other Information – Enterprise risk management section.

**Shifting political trends and ESG requirements**

North American governments are changing their environmental standards and positioning climate goals as key priorities. Meanwhile, the business environment is also evolving quickly as investors demand greater ESG commitments. While there is downside risk to policies that shift support away from our traditional services, there are also opportunities to reduce GHG emissions and generate associated renewable energy and carbon credits for TC Energy. Numerous oil producers have set net GHG reduction targets, and there is significant work underway across North America to advance carbon capture, utilization and storage opportunities to help achieve these targets.

TC Energy **Management's discussion and analysis** 2022 \| 69

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Power and Energy Solutions

The previously described Power and Storage segment has been renamed Power and Energy Solutions. This business consists of power generation, non-regulated natural gas storage assets as well as new technologies which reduce our emissions footprint, in addition to being a partner to our customers and other industries that are also looking for low-carbon solutions.

Our Power and Energy Solutions business includes approximately 4,300 MW of generation capacity located in Alberta, Ontario, Québec and New Brunswick, using natural gas and nuclear fuel sources and is generally supported by long-term contracts. Additionally, we have secured 600 MW in the U.S. and 416 MW in Canada of PPAs from wind and solar facilities. We continue to pursue generation assets and PPA opportunities in Canada and the U.S.

We also own and operate approximately 118 Bcf of non-regulated natural gas storage capacity in Alberta.

**Strategy**

Our strategy is to leverage our competitive footprint as a platform to grow our Power and Energy Solutions business and enhance the life cycle and reliability of our assets, all driven by internal and external customer needs. Long term, we believe there will be a growing need for a reliable supply of resources as energy transition unfolds. We can play a vital role in energy transition by sourcing zero-carbon growth opportunities, new technologies and markets while decarbonizing our existing assets.

**Recent highlights**

• further advanced the Bruce Power life extension program with the IESO verifying the Unit 3 MCR program's final cost and schedule duration estimate. As a result, the Unit 3 MCR program is scheduled to begin first quarter 2023 with expected completion in 2026. The Unit 6 MCR project is proceeding on budget and schedule with expected completion in fourth quarter 2023

• secured approximately 600 MW through PPAs from wind and solar facilities in the U.S.

• commenced construction of the Saddlebrook Solar project consisting of 81 MW of solar generation

• announced a plan to evaluate a hydrogen production hub in Crossfield, Alberta.

70 \| TC Energy **Management's discussion and analysis** 2022

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![ar_powerandstoragex1122xv3.jpg](ar_powerandstoragex1122xv3.jpg)

TC Energy **Management's discussion and analysis** 2022 \| 71

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Power and Energy Solutions assets currently have a combined power generation capacity, net to TC Energy, of 4,339 MW and we operate each facility except for Bruce Power.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Generating<br> capacity (MW)** | **Generating<br> capacity (MW)** | **Type of fuel** | **Description** | **Ownership** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Power assets** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Power assets** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Power assets** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Power assets** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Power assets** | |
| 1 | Bruce Power<sup>1</sup> | 3170 | nuclear | Eight operating reactors in Tiverton, Ontario. Bruce Power leases the nuclear facilities from OPG. | 48.3% |
| 2 | Bécancour | 550 | natural gas | Cogeneration plant in Trois-Rivières, Québec. Power generation has been suspended since 2008 although we continue to receive PPA capacity payments while generation is suspended. | 100% |
| 3 | Mackay River | 207 | natural gas | Cogeneration plant in Fort McMurray, Alberta. | 100% |
| 4 | Bear Creek | 100 | natural gas | Cogeneration plant in Grande Prairie, Alberta. | 100% |
| 5 | Carseland | 95 | natural gas | Cogeneration plant in Carseland, Alberta. | 100% |
| 6 | Grandview | 90 | natural gas | Cogeneration plant in Saint John, New Brunswick. | 100% |
| 7 | Redwater | 46 | natural gas | Cogeneration plant in Redwater, Alberta. | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Canadian non-regulated natural gas storage**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Canadian non-regulated natural gas storage**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Canadian non-regulated natural gas storage**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Canadian non-regulated natural gas storage**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Canadian non-regulated natural gas storage**  |  |
| 8 | Crossfield | 68 Bcf |  | Underground facility connected to the NGTL System near Crossfield, Alberta. | 100% |
| 9 | Edson | 50 Bcf |  | Underground facility connected to the NGTL System near Edson, Alberta. | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Under construction** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Under construction** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Under construction** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Under construction** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Under construction** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Other energy solutions** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Other energy solutions** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Other energy solutions** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Other energy solutions** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Other energy solutions** |  |
| 10 | Lynchburg |  | RNG | RNG production facility in Lynchburg, Tennessee. | 30% |
| 11 | Saddlebrook Solar | 81 | solar | Hybrid solar generation facility near Aldersyde, Alberta. | 100% |

---

1Our share of power generation capacity.

72 \| TC Energy **Management's discussion and analysis** 2022

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**UNDERSTANDING OUR POWER AND ENERGY SOLUTIONS BUSINESS**

**Canadian Power**

**Canadian Power Generation & Marketing**

We own or have the rights to approximately 1,200 MW of power supply in Canada, excluding our investment in Bruce Power. In Alberta we own four natural gas-fired cogeneration facilities and are constructing a solar project. We exercise a disciplined operating strategy to maximize revenues. Our marketing group sells uncommitted power while also buying and selling power and natural gas to maximize earnings. To reduce commodity price exposure associated with uncontracted power, we sell a portion of this output in forward sales markets when acceptable contract terms are available while the remainder is retained to be sold in the spot market or under short-term forward arrangements. The objective of this strategy is to maintain adequate power supply to fulfill our sales obligations if we have unexpected plant outages and enable us to capture opportunities to increase earnings in periods of high spot prices. Our two eastern Canadian natural gas-fired cogeneration assets, Bécancour and Grandview, are fully contracted.

**Bruce Power**

Bruce Power is a nuclear power generation facility located near Tiverton, Ontario and is comprised of eight nuclear units with a combined capacity of approximately 6,550 MW. Bruce Power leases the facilities from OPG, has no spent fuel risk and will return the facilities to OPG for decommissioning at the end of the lease. We hold a 48.3 per cent ownership interest in Bruce Power.

Results from Bruce Power will fluctuate primarily due to units being offline for the MCR program and the frequency, scope and duration of planned and unplanned maintenance outages.

Through a long-term agreement with the IESO, Bruce Power has begun to progress a series of incremental life-extension investments to extend the operating life of the facility to 2064. This agreement represents an extension and material amendment to the earlier agreement that led to the refurbishment of Units 1 and 2 at the site. Under the amended agreement, which took economic effect in January 2016, Bruce Power began investing in life extension activities for Units 3 through 8 to support the long-term refurbishment programs. Investment in the Asset Management program is designed to result in near-term life extensions of each of the six units up to the planned major refurbishment outages and beyond. The Asset Management program includes the one-time refurbishment or replacement of systems, structures or components that are not within the scope of the MCR program, which focuses on the actual replacement of the key, life-limiting reactor components. The MCR program is designed to add 30 years of operational life to each of the six units.

The Unit 6 MCR is the first of the six-unit MCR life extension program. This outage commenced in January 2020 and is moving to the last part of the installation phase and remains on time and on budget with an expected return to service in fourth quarter 2023. The second unit in the MCR program is Unit 3 and the final cost and schedule duration estimate was verified by the IESO in March 2022. The Unit 3 MCR is scheduled to commence in first quarter 2023 and has an expected completion in 2026. The third unit in the MCR program is Unit 4. The Unit 4 MCR definition phase was completed in June 2022 and is now in the preparation phase. A preliminary basis of estimate (including an initial cost and schedule duration estimate) for the Unit 4 MCR was submitted to the IESO in fourth quarter 2022, with the final submission following an FID, scheduled for fourth quarter 2023. Investments in the remaining three units' MCR programs are expected to continue through 2033. Future MCR investments will be subject to discrete decisions for each unit with specified off-ramps available for Bruce Power and the IESO.

Along with the MCR life extension program, Bruce Power's Project 2030 has a goal of achieving site peak output of 7,000 MW by 2033 in support of climate change targets and future clean energy needs. Project 2030 will focus on continued asset optimization, innovation and leveraging new technology, which could include integration with storage and other forms of energy, to increase the site peak output. Project 2030 is arranged in three stages with the first two stages fully approved for execution. Stage 1 started in 2019 and is expected to add 150 MW of output and Stage 2, which began in early 2022, is targeting another 200 MW.

TC Energy **Management's discussion and analysis** 2022 \| 73

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As part of the life extension and refurbishment agreement, Bruce Power receives a uniform contract price for all units which includes certain flow-through items such as fuel and lease expense recovery. The contract also provides for payment if the IESO requests a reduction in Bruce Power's generation to balance the supply of, and demand for, electricity and/or manage other operating conditions of the Ontario power grid. The amount of the reduction is considered deemed generation, for which Bruce Power is paid the contract price. Bruce Power's contract price increased on April 1, 2022, in accordance with contract terms, reflecting capital to be invested under the Unit 3 MCR program and the 2022 to 2027 Asset Management program plus normal annual inflation adjustments.

The contract price is subject to adjustments for the return of and on capital invested at Bruce Power under the Asset Management and MCR programs, along with various other pricing adjustments that allow for a better matching of revenues and costs over the long term. As part of the amended agreement, Bruce Power is also required to share operating cost efficiencies with the IESO for better than planned performance. These efficiencies are reviewed every three years and paid out on a monthly basis over the subsequent three-year period. No operating cost efficiencies for the 2022 to 2024 period have been provided for at December 31, 2022, and no operating efficiencies were realized for the 2019 to 2021 period.

Bruce Power is a global supplier of Cobalt-60, a medical isotope used in the sterilization of medical equipment and to treat certain types of cancer. Cobalt-60 is produced during Bruce Power's generation of electricity, harvested during certain planned maintenance outages and provided for medical use in the treatment of brain tumours and breast cancer. In addition, Bruce Power continues to advance a project to expand isotope production from its reactors with a focus on Lutetium-177, another medical isotope used in the treatment of prostate cancer and neuroendocrine tumors. This project was undertaken with a Canadian-based nuclear medicine partnership and the Saugeen Ojibway Nation, on whose traditional territory the Bruce Power facilities are located.

**Power Purchase Agreements – Canada**

We have secured 416 MW of wind and solar generation PPAs and associated environmental attributes in Alberta. These PPAs allow us to generate incremental earnings while also contributing to the reduction of our operational GHG intensity and allowing us to offer renewable power products to our customers.

**U.S. Power**

Our U.S. power and emissions commercial trading and marketing business provides our customers with various physical and financial products with a measured approach to our risk management and a focus on financial discipline, compliance and operational excellence.

**Power Purchase Agreements – U.S.**

We have secured approximately 600 MW of wind and solar generation PPAs and associated environmental attributes in the U.S. These PPAs allow us to generate incremental earnings while also contributing to the reduction of our operational GHG intensity and allowing us to offer renewable power products to our customers.

**Other Energy Solutions**

Our vision is to be the premier energy infrastructure company in North America today and in the future. That future includes embracing the energy transition that is underway and contributing to a lower-carbon energy world. As energy transition continues to evolve, we recognize a significant opportunity to reduce our emissions footprint, in addition to being a partner to our customers and other industries which are also looking for low-carbon solutions. Currently, it is uncertain how the energy mix will evolve and at what pace. We continue to observe a reliance on the existing sources of natural gas, crude oil and electricity, which we currently provide services to our customers.

We are targeting five focus areas to reduce the emissions intensity of our operations, while also capturing growth opportunities that meet the energy needs of the future:

• modernize our existing system and assets

• decarbonize our energy consumption

• drive digital solutions and technologies

• leverage carbon credits and offsets

• invest in low-carbon energy and infrastructure such as renewables, along with emerging fuels and technology.

74 \| TC Energy **Management's discussion and analysis** 2022

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**Canadian Natural Gas Storage**

We own and operate 118 Bcf of non-regulated natural gas storage capacity in Alberta. This business operates independently from our regulated natural gas transmission and U.S. storage businesses.

Our Canadian natural gas storage business helps balance seasonal and short-term supply and demand while also adding flexibility to the delivery of natural gas to markets in Alberta and the rest of North America. Market volatility creates arbitrage opportunities and our natural gas storage facilities also give us and our customers the ability to capture value from short-term price movements. The natural gas storage business is affected by changes in seasonal natural gas price spreads which are generally determined by the differential in natural gas prices between the traditional summer injection and winter withdrawal seasons. In addition, the business may be affected by pipeline restrictions in Alberta which limit the ability to capture price differentials.

Our natural gas storage business contracts with third parties, typically participants in the Alberta and interconnected gas markets, for a fixed fee to provide natural gas storage services on a short, medium and/or long-term basis.

We also enter into proprietary natural gas storage transactions which include a forward purchase of our own natural gas to be injected into storage and a simultaneous forward sale of natural gas for withdrawal at a later period, typically during the winter withdrawal season. By matching purchase and sales volumes on a back-to-back basis, we lock in future positive margins, effectively eliminating our exposure to changes in natural gas prices for these transactions.

**Alberta Carbon Grid**

The ACG is a world-leading carbon transportation and sequestration solution being designed to serve multiple customers, industries and sectors. A collaboration between Pembina and TC Energy, ACG is focused on providing CO2 transportation and sequestration solutions across Alberta by leveraging both companies' collective skills, experience and extensive network of pipeline infrastructure and right-of-ways.

ACG is exploring options to potentially develop several ACG hubs throughout the province that would be designed to independently, safely and cost-effectively collect and store CO2 from customers across multiple industries. The long-term vision is to annually transport and store up to 20 million tonnes of CO2 through several hubs across Alberta.

The ACG is part of Pembina's and TC Energy's commitment to energy diversification, industry collaboration and a lower carbon future that benefits the environment and the Alberta economy.

TC Energy **Management's discussion and analysis** 2022 \| 75

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**SIGNIFICANT EVENTS**

**Bruce Power Life Extension**

On March 7, 2022, the IESO verified Bruce Power's Unit 3 MCR program final cost and schedule duration estimate submitted in December 2021. The Unit 3 MCR program is scheduled to begin in March 2023 with expected completion in 2026.

Bruce Power's contract price increased on April 1, 2022, in accordance with contract terms, reflecting capital to be invested under the Unit 3 MCR program and the 2022 to 2024 Asset Management program, plus normal annual inflation adjustments.

Unit 4, the third unit in the Bruce Power MCR program, completed its definition phase in June 2022 and is now in the preparation phase leading up to an FID, expected in fourth quarter 2023. A preliminary basis of estimate (including an initial cost and schedule duration estimate) was submitted to the IESO in fourth quarter 2022.

**Renewable Energy Contracts and/or Investment Opportunities**

We are seeking potential contracts and/or investment opportunities in wind, solar and energy storage projects to meet the electricity needs of the U.S. portion of the Keystone Pipeline System and supply renewable energy products and services to industrial and oil and gas sectors proximate to our in-corridor demand. To date we have finalized contracts for approximately 600 MW from wind and solar projects.

**Saddlebrook Solar Project**

On October 4, 2022, we announced that we have commenced pre-construction activities on the 81 MW Saddlebrook Solar project located near Aldersyde, Alberta. The expected capital cost is $146 million, with the project partially supported by $10 million from Emissions Reduction Alberta. Construction is expected to be completed in 2023.

**OTHER ENERGY SOLUTIONS**

**Hydrogen Hubs**

As part of our JDA with Nikola, on April 26, 2022, we announced a plan to evaluate a hydrogen production hub on 140 acres in Crossfield, Alberta, where we currently operate our natural gas storage facility. Our significant pipeline, storage and power assets can potentially be leveraged to lower the cost and increase the speed of development of these hubs. This may include exploring the integration of pipeline assets to enable hydrogen distribution and storage via pipeline and/or to deliver carbon dioxide to permanent sequestration sites to decarbonize the hydrogen production process. We expect an FID in 2024, subject to customary regulatory approvals.

**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 more than 20 million tonnes of carbon dioxide annually. On October 18, 2022, ACG announced that it has entered into a carbon sequestration evaluation agreement with the Government of Alberta to further evaluate one of the largest AOI for safely storing carbon from industrial emissions in Alberta. This agreement will allow ACG to continue evaluating the suitability of its AOI and move forward into the next stage of the province's CCUS process to provide confidence to customers, Indigenous communities, stakeholders and the Government of Alberta in the project's carbon storage capabilities. ACG is exploring options to potentially leverage existing infrastructure and right-of-ways to connect the Alberta Industrial Heartland emissions region to a key sequestration location.

**Lynchburg Renewable Fuels**

On October 17, 2022, we announced a US$29 million investment for a 30 per cent ownership interest in the Lynchburg Renewable Fuels project, a RNG production facility in Lynchburg, Tennessee being developed by 3 Rivers Energy Partners, LLC. Along with our ownership interest, we will market all RNG and environmental attributes generated from the facility once operational, which we expect in 2024. We also have the option to jointly develop future RNG projects with 3 Rivers Energy Partners, LLC.

76 \| TC Energy **Management's discussion and analysis** 2022

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**FINANCIAL RESULTS**

The following is a reconciliation of comparable EBITDA and comparable EBIT (our non-GAAP measures) to segmented earnings (the most directly comparable GAAP measure). Refer to page 11 for more information on non-GAAP measures we use.

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| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| Bruce Power<sup>1</sup> | **552** | 397 | 430 |
| Canadian Power<sup>2</sup> | **322** | 253 | 213 |
| Natural Gas Storage and other | **33** | 19 | 25 |
| **Comparable EBITDA** | **907** | 669 | 668 |
| Depreciation and amortization | **(72)** | (78) | (67) |
| **Comparable EBIT** | **835** | 591 | 601 |
| Specific items: |  |  |  |
| &nbsp;&nbsp;&nbsp;Gain/(loss) on sale of Ontario natural gas-fired power plants | **—** | 17 | (414) |
| &nbsp;&nbsp;&nbsp;Bruce Power unrealized fair value adjustments | **(17)** | 14 | 9 |
| &nbsp;&nbsp;&nbsp;Risk management activities | **15** | 6 | (15) |
| **Segmented earnings** | **833** | 628 | 181 |

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1Includes our share of equity income from Bruce Power.

2Includes our Ontario natural gas-fired power plants until sold in April 2020.

Power and Energy Solutions segmented earnings increased by $205 million in 2022 compared to 2021 and increased by $447 million in 2021 compared to 2020 and included the following specific items which have been excluded from our calculation of comparable EBIT and comparable earnings:

• a $17 million pre-tax recovery of certain costs from the IESO in 2021 associated with the Ontario natural gas-fired power plants sold in April 2020 (pre-tax loss 2020 – $414 million)

• 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 increased by $238 million in 2022 compared to 2021 primarily due to:

• positive contributions from Bruce Power primarily due to a higher contract price

• improved Canadian Power earnings primarily due to higher realized power prices

• increased Natural Gas Storage and other results from higher realized Alberta natural gas storage spreads in 2022.

Comparable EBITDA for Power and Energy Solutions increased by $1 million in 2021 compared to 2020 primarily due to the net effect of:

• increased Canadian Power earnings primarily due to higher realized margins in 2021, contributions from trading activities and a full of year of earnings from our MacKay River cogeneration facility following its return to service in May 2020, partially offset by the sale of our Ontario natural gas-fired power plants in April 2020

• decreased Bruce Power contributions as a result of increased operating expenses and lower volumes resulting from greater planned outage days, partially offset by higher realized prices. Additional financial and operating information on Bruce Power is provided below

• decreased Natural Gas Storage and other earnings as a result of increased business development costs across the segment, partially offset by higher realized Alberta natural gas storage spreads in 2021.

**Depreciation and amortization**

Depreciation and amortization decreased by $6 million in 2022 compared to 2021 as a result of certain adjustments in 2022. Depreciation increased by $11 million in 2021 compared to 2020 primarily due to incremental TC Turbines depreciation following the November 2020 acquisition of the remaining 50 per cent ownership interest as well as other adjustments in 2020.

TC Energy **Management's discussion and analysis** 2022 \| 77

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**Bruce Power results**

Bruce Power results reflect our proportionate share. Comparable EBITDA and comparable EBIT are non-GAAP measures. Refer to page 11 for more information on non-GAAP measures we use. The following is our proportionate share of the components of comparable EBITDA and comparable EBIT.

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| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $, unless otherwise noted) | **2022** | **2021** | **2020** |
| Items included in comparable EBITDA and EBIT are comprised of: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues<sup>1</sup> | **1848** | 1642 | 1672 |
| &nbsp;&nbsp;&nbsp;Operating expenses | **(924)** | (922) | (884) |
| &nbsp;&nbsp;&nbsp;Depreciation and other | **(372)** | (323) | (358) |
| **Comparable EBITDA and EBIT**<sup>2</sup> | **552** | 397 | 430 |
| **Bruce Power – other information** |  |  |  |
| Plant availability<sup>3,4</sup> | **86%** | 86% | 88% |
| Planned outage days<sup>4</sup> | **302** | 321 | 276 |
| Unplanned outage days | **34** | 22 | 36 |
| Sales volumes (GWh)<sup>5</sup> | **20610** | 20542 | 20956 |
| Realized power price per MWh<sup>6</sup> | **$89** | $80 | $80 |

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

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 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 6 MCR outage, which began in January 2020, is now in the installation phase. Excluding Units 6 and 8, planned maintenance was completed on all units in 2022. In 2021, planned maintenance on Units 1 and 3 was completed and an outage on Unit 7 commenced in the fourth quarter. In 2020, planned maintenance was completed on Unit 3, 4, 5 and 8.

78 \| TC Energy **Management's discussion and analysis** 2022

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**OUTLOOK**

**Comparable EBITDA**

Power and Energy Solutions comparable EBITDA in 2023 is expected to be consistent with 2022 provided Alberta power prices experienced in 2022 continue into 2023. We expect that Bruce Power's equity income will be higher in 2023 than 2022 due to the full year impact of the Unit 3 MCR program contract price increase and fewer non-MCR planned outage days, partially offset by greater MCR outage days. The planned maintenance for 2023 is currently scheduled to begin on Unit 4 in the second quarter and on Unit 8 in the second half of 2023. The average 2023 plant availability percentage, excluding the Unit 3 and Unit 6 MCR programs, is expected to be in the low-90 per cent range.

**Capital spending**

We invested $0.9 billion in 2022 for our share of Bruce Power's life extension program, construction of the Saddlebrook Solar Project and other maintenance capital projects across the segment and expect to invest approximately $1.0 billion in 2023.

**BUSINESS RISKS**

The following are risks specific to our Power and Energy Solutions business. Refer to page 99 for information about general risks related to TC Energy as a whole, including other operational, safety and financial risks. The Power and Energy Solutions marketing business complies with our risk management policies which are described in the Other information – Enterprise risk management section.

**Fluctuating power and natural gas market prices**

Much of the physical power generation and fuel used in our power operations is currently exposed to commodity price volatility. These exposures are partially mitigated through long-term contracts and hedging activities including selling and purchasing power and natural gas in forward markets. As contracts expire, new contracts are entered into at prevailing market prices.

Our two eastern Canadian natural gas-fired assets are fully contracted and not materially impacted by fluctuating spot power and natural gas prices. As the contracts on these assets expire it is uncertain if we will be able to re-contract on similar terms and may face future commodity exposure.

Our natural gas storage business is subject to fluctuating seasonal natural gas price spreads which are generally determined by the differential in natural gas prices between the traditional summer injection and winter withdrawal seasons. In addition, the business may be affected by pipeline restrictions in Alberta which limit the ability to capture price differentials.

**Plant availability**

Operating our plants to ensure services are provided safely and reliably as well as optimizing and maintaining their availability are essential to the continued success of our Power and Energy Solutions business. Unexpected outages or extended planned outages at our power plants can increase maintenance costs as well as lower plant output, revenues and margins. We may also have to buy power or natural gas on the spot market to meet our delivery obligations. We manage this risk by investing in a highly skilled workforce, operating prudently, running comprehensive risk-based preventive maintenance programs and making effective capital investments.

**Regulatory**

We operate in both regulated and deregulated power markets in Canada and the United States. These markets are subject to various federal, provincial and state regulations. As power markets evolve, there is the potential for regulatory bodies to implement new rules that could negatively affect us as a generator and marketer of electricity. These may be in the form of market rule or market design changes, changes in the interpretation and application of market rules by regulators, price caps, emission controls, emissions costs, cost allocations to generators and out-of-market actions taken by others to build excess generation, all of which may negatively affect the price of power. In addition, our development projects rely on an orderly permitting process and any disruption to that process can have negative effects on project schedules and costs. We are an active participant in formal and informal regulatory proceedings and take legal action where required.

TC Energy **Management's discussion and analysis** 2022 \| 79

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**Compliance**

Market rules, regulations and operating standards apply to our power business based on the jurisdictions in which they operate. Our trading and marketing activities may be subject to fair competition and market conduct requirements as well as specific rules that apply to physical and financial transactions in deregulated markets. Similarly, our generators may be subject to specific operating and technical standards relating to maintenance activities, generator availability and delivery of power and power-related products. While significant efforts are made to ensure we comply with all applicable statutory requirements, situations including unforeseen operational challenges, lack of rule clarity and the ambiguous and unpredictable application of requirements by regulators and market monitors occasionally arise and create compliance risk. Deemed contravention of these requirements may result in mandatory mitigation activities, monetary penalties, imposition of operational limitations, or even prosecution.

**Weather**

Significant changes in temperature and weather, including the potential impacts of climate change, have many effects on our business, ranging from the impact on demand, availability and commodity prices, to efficiency and output capability. Extreme temperature and weather can affect market demand for power and natural gas and can lead to significant price volatility, as well as restrict the availability of natural gas and power if demand is higher than supply. Seasonal changes in temperature can reduce the efficiency and production of our natural gas-fired power plants.

**Competition**

We face various competitive forces that impact our existing assets and prospects for growth. For instance, our existing power plants will compete over time with new power capacity. New supply could come in several forms including supply that employs more efficient power generation technologies or additional supply from regional power transmission interconnections. We also face competition from other power companies in Canada and the U.S. as well as in the development of greenfield power plants. Traditional and non-traditional players are entering the growing low-carbon economy in North America and, as a result, we face competition in building low-carbon platforms with energy and financial options to provide customer-driven solutions for energy transition.

**Execution and capital costs** 

We make substantial capital commitments developing power generation infrastructure based on the assumption that these assets will deliver an attractive return on investment. While we carefully consider the scope and expected costs of our capital projects, we are exposed to execution and capital cost overrun risk which may impact our return on these projects. We mitigate this risk by implementing comprehensive project governance and oversight processes and through the structuring of engineering, procurement and construction contracts with reputable counterparties.

80 \| TC Energy **Management's discussion and analysis** 2022

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Corporate

**SIGNIFICANT EVENTS**

**Mexico Tax Audit**

In 2019, the Mexican tax authority, the Tax Administration Services (SAT), completed an audit of the 2013 tax return of one of our subsidiaries in Mexico. The audit resulted in a tax assessment that denied the deduction for all interest expense and an assessment of additional tax, penalties and financial charges totaling less than US$1 million. We disagreed with this assessment and commenced litigation to challenge it. In January 2022, we received the tax court's ruling on the 2013 tax return, which upheld the SAT assessment. From September 2021 to February 2022, the SAT issued assessments for tax years 2014 through 2017 which denied the deduction of all interest expense as well as assessed incremental withholding tax on the interest. These assessments totaled approximately US$490 million in income and withholding taxes, interest, penalties and other financial charges.

In 2022, we settled with the SAT on all of the above matters for the tax years 2013 through 2021 and recorded US$153 million of income tax expense (inclusive of withholding taxes, interest, penalties and other financial charges).

**Dividend Reinvestment and Share Purchase Plan**

To prudently fund our growth program that includes increased project costs on the NGTL System and following our July 2022 obligation to make an equity contribution of $1.9 billion to Coastal GasLink LP, we reinstated the issuance of common shares from treasury at a two per cent discount under our DRP commencing with the dividends declared on July 27, 2022. On dividends declared in 2022, the participation rate by common shareholders was approximately 33 per cent, resulting in $607 million reinvested in common equity under the program. The discounted DRP is expected to be in place through the dividend declarations for the quarter ending June 30, 2023.

**Common Shares Issued Under Public Offering**

On August 10, 2022, we issued 28.4 million common shares at a price of $63.50 each for gross proceeds of approximately $1.8 billion. Proceeds from the offering are being used, directly or indirectly, together with other financing sources and cash on hand, to fund costs associated with the construction of the Southeast Gateway pipeline.

**Asset Divestiture Program** 

In late 2022, we announced our plan to proceed with a $5+ billion asset divestiture program that will include the sale of assets, and may include partial monetization of certain assets.

The objectives of this asset divestiture program are to accelerate our deleveraging, execute on our vast opportunity set and provide a self-funding source for high-value growth opportunities. We believe that executing these steps will strengthen our balance sheet to ensure we remain competitively positioned to capitalize on future opportunities. Refer to the Financial Condition section for further information.

TC Energy **Management's discussion and analysis** 2022 \| 81

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**FINANCIAL RESULTS**

The following is a reconciliation of comparable EBITDA and EBIT (our non-GAAP measures) to Corporate segmented earnings/(losses)(the most directly comparable GAAP measure). Refer to page 11 for more information on non-GAAP measures we use.

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Comparable EBITDA and EBIT** | **(20)** | (24) | (16) |
| Specific items: |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign exchange gain – inter-affiliate loans<sup>1</sup> | **28** | 41 | 86 |
| &nbsp;&nbsp;&nbsp;Voluntary Retirement Program | **—** | (63) |  |
| **Segmented earnings/(losses)** | **8** | (46) | 70 |

---

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

Corporate segmented earnings of $8 million in 2022 increased by $54 million from segmented losses of $46 million in 2021. Corporate segmented losses of $46 million in 2021 increased by $116 million from segmented earnings of $70 million in 2020.

Corporate segmented earnings/(losses) included foreign exchange gains 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 are recorded in Income from equity investments in the Corporate segment and have been excluded from our calculation of comparable EBITDA and EBIT as they are fully offset by corresponding foreign exchange losses on the inter-affiliate loan receivable included in Foreign exchange (loss)/gain, net. Refer to the Other Information – Related party transactions section for additional information on our peso-denominated inter-affiliate loans.

Corporate segmented losses in 2021 included pre-tax costs for the VRP offered in 2021 of $63 million.

Comparable EBITDA and EBIT for Corporate in 2022 was consistent with 2021 and decreased by $8 million in 2021 compared to 2020 primarily due to a U.S. capital tax adjustment recorded in 2020.

**OTHER INCOME STATEMENT ITEMS**

**Interest expense**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Interest on long-term debt and junior subordinated notes** |  |  |  |
| Canadian dollar-denominated | **(776)** | (712) | (685) |
| U.S. dollar-denominated | **(1267)** | (1259) | (1302) |
| Foreign exchange impact | **(383)** | (320) | (446) |
|  | **(2426)** | (2291) | (2433) |
| Other interest and amortization expense | **(189)** | (85) | (89) |
| Capitalized interest | **27** | 22 | 294 |
| **Interest expense included in comparable earnings** | **(2588)** | (2354) | (2228) |
| Specific item: |  |  |  |
| &nbsp;&nbsp;&nbsp;Keystone XL preservation and other | **—** | (6) |  |
| **Interest expense** | **(2588)** | (2360) | (2228) |

---

82 \| TC Energy **Management's discussion and analysis** 2022

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Interest expense increased by $228 million in 2022 compared to 2021 and increased by $132 million in 2021 compared to 2020. Interest expense in 2021 included $6 million related to the Keystone XL project-level credit facility for the period following the revocation of the Presidential Permit for the Keystone XL pipeline project. This has been removed from our calculation of interest expense included in comparable earnings.

Interest expense included in comparable earnings in 2022 increased by $234 million compared to 2021 primarily due to the net effect of:

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

• long-term debt and junior subordinated note issuances, net of maturities. Refer to the Financial Condition section for additional information on long-term debt and junior subordinated notes

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

Interest expense included in comparable earnings in 2021 increased by $126 million compared to 2020 mainly due to the net effect of:

• lower capitalized interest due to its cessation for the Keystone XL pipeline project following the revocation of the Presidential Permit in January 2021, the change to equity accounting for our Coastal GasLink investment upon the sale of a 65 per cent interest in Coastal GasLink LP in 2020 and the completion of the Napanee power plant in 2020

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

• lower interest rates on reduced levels of short-term borrowings

• long-term debt and junior subordinated note issuances, net of maturities.

**Allowance for funds used during construction**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Allowance for funds used during construction** |  |  |  |
| Canadian dollar-denominated | **157** | 140 | 106 |
| U.S. dollar-denominated | **161** | 101 | 182 |
| Foreign exchange impact | **51** | 26 | 61 |
| **Allowance for funds used during construction** | **369** | 267 | 349 |

---

AFUDC increased by $102 million in 2022 compared to 2021. The increase in Canadian dollar-denominated AFUDC is primarily related to increased capital expenditures on the NGTL System. The increase in U.S. dollar-denominated AFUDC is due to the reactivation of AFUDC on the TGNH assets under construction following the new TSA with the CFE as well as capital expenditures on the Southeast Gateway pipeline project, partially offset by the impact of decreased capital expenditures and projects placed in service on our U.S. natural gas pipeline projects. Refer to the Mexico Natural Gas Pipelines – Significant events section for additional information on the Southeast Gateway pipeline project.

AFUDC decreased by $82 million in 2021 compared to 2020. The increase in Canadian dollar-denominated AFUDC was primarily related to a higher balance of NGTL System expansion projects under construction. The decrease in U.S. dollar-denominated AFUDC was mainly the result of the suspension of recording AFUDC on the Villa de Reyes project and the Columbia Gas BXP project which went into service in January 2021, partially offset by the impact of increased capital expenditures on our U.S. natural gas pipeline projects.

TC Energy **Management's discussion and analysis** 2022 \| 83

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**Foreign exchange (loss)/gain, net**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Foreign exchange (loss)/gain, net included in comparable earnings** | **(8)** | 254 | (12) |
| Specific items: |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign exchange loss – inter-affiliate loan | **(28)** | (41) | (86) |
| &nbsp;&nbsp;&nbsp;Risk management activities | **(149)** | (203) | 126 |
| **Foreign exchange (loss)/gain, net** | **(185)** | 10 | 28 |

---

Foreign exchange losses were $185 million in 2022 compared to foreign exchange gains of $10 million in 2021 and $28 million in 2020. The following specific items have been removed from our calculation of Foreign exchange (loss)/gain, net included in comparable earnings:

• 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

• unrealized losses and gains from changes in the fair value of derivatives used to manage our foreign exchange risk. Refer to the Other Information – Financial risks and financial instruments sections for additional information.

Our proportionate share of the corresponding foreign exchange gains and interest expense on the peso-denominated inter-affiliate loans to the Sur de Texas joint venture from its partners were reflected in Income from equity investments in the Corporate and Mexico Natural Gas Pipelines segments, respectively. The foreign exchange losses on these inter-affiliate loans were removed from comparable earnings. As part of refinancing activities with the Sur de Texas joint venture, on March 15, 2022, the peso-denominated inter-affiliate loan discussed above was replaced with a new U.S. dollar-denominated inter-affiliate loan of an equivalent $1.2 billion (US$938 million). On July 29, 2022, this U.S. dollar-denominated inter-affiliate loan was fully repaid and replaced with U.S. dollar-denominated third-party financing. The interest income and interest expense on both the peso-denominated and U.S. dollar-denominated inter-affiliate loans were included in comparable earnings with all amounts offsetting and resulting in no impact on consolidated net income. Refer to the Other Information – Related party transactions for additional information.

Foreign exchange losses of $8 million were included in comparable earnings in 2022 compared to foreign exchange gains of $254 million in 2021, with the change primarily due to the net effect of:

• net realized losses in 2022 compared to net realized gains in 2021 on derivatives used to manage our net exposure to foreign exchange rate fluctuations on U.S. dollar-denominated income

• foreign exchange losses in 2022 compared to gains in 2021 on the revaluation of peso-denominated net monetary liabilities

• higher realized gains in 2022 compared to 2021 on derivatives used to manage our exposure to net liabilities in Mexico that give rise to foreign exchange gains and losses.

Foreign exchange gains of $254 million were included in comparable earnings in 2021 compared to foreign exchange losses of $12 million in 2020. Realized gains in 2021 compared to realized losses in 2020 were related to derivatives used to manage our net exposure to foreign exchange rate fluctuation on U.S. dollar-denominated income.

**Interest income and other**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Interest income and other** | **146** | 190 | 185 |

---

Interest income and other decreased by $44 million in 2022 compared to 2021 due to the March 15, 2022 refinancing of the inter-affiliate loan receivable from the Sur de Texas joint venture and subsequent repayment of the loan on July 29, 2022. Interest income and other included in comparable earnings in 2021 was relatively consistent compared to 2020.

84 \| TC Energy **Management's discussion and analysis** 2022

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**Income tax expense**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Income tax expense included in comparable earnings** | **(813)** | (830) | (651) |
| Specific items: |  |  |  |
| &nbsp;&nbsp;&nbsp;Coastal GasLink LP impairment charge | **405** |  |  |
| &nbsp;&nbsp;&nbsp;Great Lakes goodwill impairment charge | **40** |  |  |
| &nbsp;&nbsp;&nbsp;Settlement of Mexico prior years' income tax assessments | **(196)** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expected credit loss provision on net investment in leases and certain contract<br>assets | **49** |  |  |
| &nbsp;&nbsp;&nbsp;Keystone CER decision | **7** |  |  |
| &nbsp;&nbsp;&nbsp;Keystone XL preservation and other | **6** | 12 |  |
| &nbsp;&nbsp;&nbsp;Bruce Power unrealized fair value adjustments | **4** | (3) | (3) |
| &nbsp;&nbsp;&nbsp;Keystone XL asset impairment charge and other | **(123)** | 641 |  |
| &nbsp;&nbsp;&nbsp;Voluntary Retirement Program | **—** | 15 |  |
| &nbsp;&nbsp;&nbsp;Sale of Northern Courier | **—** | 6 |  |
| &nbsp;&nbsp;&nbsp;Sale of Ontario natural gas-fired power plants | **—** | (10) | 131 |
| &nbsp;&nbsp;&nbsp;Partial sale of Coastal GasLink LP | **—** |  | 38 |
| &nbsp;&nbsp;&nbsp;Income tax valuation allowance releases | **—** |  | 299 |
| &nbsp;&nbsp;&nbsp;Sale of Columbia Midstream assets | **—** |  | 18 |
| &nbsp;&nbsp;&nbsp;Risk management activities | **32** | 49 | (26) |
| **Income tax expense** | **(589)** | (120) | (194) |

---

Income tax expense in 2022 increased by $469 million compared to 2021 and decreased by $74 million in 2021 compared to 2020 and included the following specific items which have been removed from our calculation of Income tax expense included in comparable earnings, in addition to some of the income tax impacts on other specific items referenced elsewhere in this MD&A.

Specific items in 2022:

• a $405 million income tax recovery related to the impairment of our equity investment in Coastal GasLink LP, net of certain unrealized tax losses not recognized

• $196 million related to the settlement of prior years' income tax assessments related to our operations in Mexico. Refer to the Corporate – Significant events section for additional information

• a $123 million income tax expense as part of the Keystone XL asset impairment charge and other that includes a $96 million U.S. minimum tax related to the termination of the Keystone XL pipeline project.

Specific item in 2021:

• income tax impact of the Keystone XL pipeline project asset impairment charge and other.

Specific items in 2020:

• income tax valuation allowance releases of $299 million primarily related to the reassessment of deferred tax assets that were deemed more likely than not to be realized as a result of our March 31, 2020 decision to proceed with the Keystone XL pipeline project

• an $18 million income tax recovery related to state income taxes on the sale of certain Columbia Midstream assets.

Income tax expense included in comparable earnings in 2022 decreased by $17 million compared to 2021 primarily due to lower flow-through income taxes and higher foreign tax rate differentials, partially offset by higher earnings subject to tax and other various valuation allowances.

Income tax expense included in comparable earnings in 2021 increased by $179 million compared to 2020 primarily due to higher flow-through income taxes on Canadian rate-regulated pipelines, increased earnings subject to income tax and the impact of Mexico inflationary adjustments, partially offset by higher foreign tax rate differentials.

TC Energy **Management's discussion and analysis** 2022 \| 85

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**Net income attributable to non-controlling interests**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Net income attributable to non-controlling interests** | **(37)** | (91) | (297) |

---

Net income attributable to non-controlling interests decreased by $54 million in 2022 compared to 2021 and by $206 million in 2021 compared to 2020 primarily as a result of the March 2021 acquisition of all outstanding common units of TC PipeLines, LP not beneficially owned by TC Energy. Subsequent to the acquisition, TC PipeLines, LP became an indirect, wholly-owned subsidiary of TC Energy.

**Preferred share dividends** 

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Preferred share dividends** | **(107)** | (140) | (159) |

---

Preferred share dividends decreased by $33 million in 2022 compared to 2021 and $19 million in 2021 compared to 2020 primarily due to the redemption of preferred shares in 2022 and 2021.

86 \| TC Energy **Management's discussion and analysis** 2022

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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 asset divestitures to meet our financing needs, manage our capital structure and to preserve our credit ratings. More information on how our credit ratings can impact our financing costs, liquidity and operations is available in our Annual Information Form available on SEDAR (www.sedar.com).

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

**Financial Plan**

Our capital program is comprised of approximately $34 billion of secured projects, as well as our projects under development, which are subject to key corporate and regulatory approvals. As discussed throughout this Financial Condition section, our capital program is expected to be financed through our growing internally-generated cash flows and a combination of other funding options including:

• senior debt

• hybrid securities

• preferred shares

• asset divestitures

• project financing

• potential involvement of strategic or financial partners.

In addition, we may access additional funding options below, as deemed appropriate:

• common shares issued from treasury under our DRP

• discrete common equity issuance.

TC Energy **Management's discussion and analysis** 2022 \| 87

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**Balance sheet analysis** 

At December 31, 2022, our current assets totaled $7.3 billion and current liabilities amounted to $16.9 billion, leaving us with a working capital deficit of $9.6 billion compared to $5.6 billion at December 31, 2021. 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 $10.4 billion of committed revolving credit facilities of which $5.9 billion of short-term borrowing capacity remains available, net of $4.5 billion backstopping outstanding commercial paper balances. In addition, on November 22, 2022, TransCanada PipeLines Limited (TCPL) entered into a 364-day $1.5 billion senior unsecured term loan bearing interest at a floating rate. We also have arrangements in place for a further $2.4 billion of demand credit facilities of which $1.1 billion remains available as of December 31, 2022

• our access to capital markets, including through securities issuances, incremental credit facilities, our asset divestiture program and DRP, if deemed appropriate.

The working capital deficiency was reduced on January 17, 2023 as a result of a wholly-owned Mexican subsidiary entering into a US$1.8 billion senior unsecured term loan and a US$500 million senior unsecured credit facility further described below.

Our total assets at December 31, 2022 were $114.3 billion compared to $104.2 billion at December 31, 2021 with the increase primarily reflecting our 2022 capital spending program, and increased equity investments and net investment in leases, partially offset by depreciation. The increase was also due to a stronger U.S. dollar at December 31, 2022 compared to December 31, 2021 on translation of our U.S. dollar-denominated assets.

At December 31, 2022 our total liabilities were $80.2 billion, compared to $70.8 billion at December 31, 2021 due to the net effect of movements in debt, working capital and foreign exchange rates as discussed above.

Our equity at December 31, 2022 was $34.1 billion, consistent with $33.4 billion at December 31, 2021.

**Consolidated capital structure**

The following table summarizes the components of our capital structure.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | | **Per cent <br>of total** | | **Per cent<br> of total** |
| (millions of $, unless otherwise noted) | **2022** | **Per cent <br>of total** | **2021** | **Per cent<br> of total** |
| Notes payable | **6262** | **7** | 5166 | 6 |
| Long-term debt, including current portion | **41543** | **45** | 38661 | 45 |
| Cash and cash equivalents | **(620)** | **(1)** | (673) | (1) |
|  | **47185** | **51** | 43154 | 50 |
| Junior subordinated notes | **10495** | **11** | 8939 | 11 |
| Preferred shares | **2499** | **3** | 3487 | 4 |
| Common shareholders' equity | **31491** | **35** | 29784 | 35 |
| Non-controlling interests | **126** | **—** | 125 |  |
|  | **91796** | **100** | 85489 | 100 |

---

Provisions of various trust indentures and credit arrangements with certain of our subsidiaries can restrict those subsidiaries' ability and, in certain cases, our ability to declare and pay dividends or make distributions under certain circumstances. In the opinion of management, these provisions do not currently restrict our ability to declare or pay dividends. These trust indentures and credit arrangements also require us to comply with various affirmative and negative covenants and maintain certain financial ratios. We were in compliance with all of our financial covenants at December 31, 2022.

88 \| TC Energy **Management's discussion and analysis** 2022

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**Cash flows**

The following tables summarize our consolidated cash flows.

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| Net cash provided by operations | **6375** | 6890 | 7058 |
| Net cash used in investing activities | **(7009)** | (7712) | (6052) |
| Net cash provided by/(used in) financing activities | **487** | (88) | (800) |
|  | **(147)** | (910) | 206 |
| Effect of foreign exchange rate changes on cash and cash equivalents | **94** | 53 | (19) |
| **(Decrease)/increase in cash and cash equivalents** | **(53)** | (857) | 187 |

---

**Cash provided by operating activities**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| Net cash provided by operations | **6375** | 6890 | 7058 |
| Increase in operating working capital | **639** | 287 | 327 |
| Funds generated from operations | **7014** | 7177 | 7385 |
| Specific items: |  |  |  |
| &nbsp;&nbsp;&nbsp;Settlement of Mexico prior years' income tax assessments | **196** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current income tax expense on Keystone XL asset impairment charge, <br>preservation and other | **91** | 131 |  |
| &nbsp;&nbsp;&nbsp;Keystone CER decision | **27** |  |  |
| &nbsp;&nbsp;&nbsp;Keystone XL preservation and other | **25** | 49 |  |
| &nbsp;&nbsp;&nbsp;Voluntary Retirement Program | **—** | 63 |  |
| &nbsp;&nbsp;&nbsp;Current income tax recovery on Voluntary Retirement Program | **—** | (14) |  |
| **Comparable funds generated from operations** | **7353** | 7406 | 7385 |

---

**Net cash provided by operations**

Net cash provided by operations decreased by $515 million in 2022 compared to 2021 primarily due to the amount and timing of working capital changes and lower funds generated from operations.

Net cash provided by operations decreased by $168 million in 2021 compared to 2020 primarily due to lower funds generated from operations, partially offset by the amount and timing of working capital changes.

TC Energy **Management's discussion and analysis** 2022 \| 89

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**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 decreased by $53 million in 2022 compared to 2021 primarily due to higher interest expense and net realized foreign exchange losses on derivatives used to manage our net exposure to foreign exchange rate fluctuations on U.S. dollar-denominated income and peso-denominated transactions, partially offset by higher comparable EBITDA.

Comparable funds generated from operations increased by $21 million in 2021 compared to 2020 primarily due to higher comparable earnings, including realized gains in 2021 compared to realized losses in 2020 on derivatives used to manage our net exposure to foreign exchange rate fluctuations on U.S. dollar-denominated income. This was partially offset by fees collected in 2020 associated with the construction of the Sur de Texas pipeline, as well as lower distributions from the operating activities of our equity investments in 2021.

**Cash used in investing activities**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Capital spending** |  |  |  |
| &nbsp;&nbsp;Capital expenditures | **(6678)** | (5924) | (8013) |
| &nbsp;&nbsp;Capital projects in development | **(49)** |  | (122) |
| &nbsp;&nbsp;Contributions to equity investments | **(2234)** | (1210) | (765) |
|  | **(8961)** | (7134) | (8900) |
| Keystone XL contractual recoveries | **571** |  |  |
| Proceeds from sales of assets, net of transaction costs | **—** | 35 | 3407 |
| Loans to affiliate issued, net | **(11)** | (239) |  |
| Other distributions from equity investments | **1433** | 73 |  |
| Deferred amounts and other | **(41)** | (447) | (559) |
| **Net cash used in investing activities** | **(7009)** | (7712) | (6052) |

---

Net cash used in investing activities decreased from $7.7 billion in 2021 to $7.0 billion in 2022 largely as a result of higher other distributions from our equity investments primarily related to our proportionate share of the Sur de Texas debt repayment, contractual recoveries received in 2022 with respect to the Keystone XL pipeline project termination in 2021, as well as a loan issued to one of our affiliates in 2021, partially offset by higher capital spending in 2022.

Net cash used in investing activities increased from $6.1 billion in 2020 to $7.7 billion in 2021 largely as a result of proceeds received from the sale of assets in 2020 as well as higher contributions to equity investments and a loan issued to one of our affiliates in 2021, partially offset by lower capital spending in 2021.

90 \| TC Energy **Management's discussion and analysis** 2022

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**Capital spending**<sup>1</sup>

The following table summarizes capital spending by segment.

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| Canadian Natural Gas Pipelines | **4719** | 2737 | 3608 |
| U.S. Natural Gas Pipelines | **2137** | 2820 | 2785 |
| Mexico Natural Gas Pipelines | **1027** | 129 | 173 |
| Liquids Pipelines | **143** | 571 | 1442 |
| Power and Energy Solutions | **894** | 842 | 834 |
| Corporate | **41** | 35 | 58 |
|  | **8961** | 7134 | 8900 |

---

1Capital spending includes Capital expenditures, Capital projects in development and Contributions to equity investments. Refer to Note 4, Segmented information, of our 2022 Consolidated financial statements for the financial statement line items that comprise total capital spending.

***Capital expenditures***

Capital expenditures in 2022 were incurred primarily for the expansion of the NGTL System, Columbia Gas and ANR projects, and development of the Southeast Gateway pipeline, as well as maintenance capital expenditures. Higher capital expenditures in 2022 compared to 2021 reflect spending for the development of the Southeast Gateway pipeline and expansion of the NGTL System, including the Foothills West Path Delivery Program, partially offset by reduced spending on ANR projects and the termination of the Keystone XL pipeline project following the revocation of the Presidential Permit in January 2021.

***Capital projects in development***

Costs incurred during 2022 on Capital projects in development were predominantly attributable to spending on projects in the Power and Energy Solutions segment.

***Contributions to equity investments***

Contributions to equity investments increased in 2022 compared to 2021 mainly due to the partner equity contribution of approximately $1.3 billion made in 2022 to Coastal GasLink LP in accordance with revised agreements impacting Coastal GasLink LP. Refer to the Canadian Natural Gas Pipelines – Significant events section for additional information on the Coastal GasLink project. This was partially offset by contributions made to Iroquois in 2021.

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.

Contributions to equity investments increased in 2021 compared to 2020 mainly due to higher investments in Bruce Power and Iroquois.

**Keystone XL contractual recoveries**

In 2022, we received $571 million of contractual recoveries with respect to the Keystone XL pipeline project termination in 2021.

**Proceeds from sales of assets**

In 2021, we completed the sale of our remaining 15 per cent equity interest in Northern Courier for gross proceeds of $35 million.

In 2020, we completed the following asset divestitures. All cash proceeds amounts are prior to income tax and post-closing adjustments:

• the sale of our Ontario natural gas-fired power plant assets for net proceeds of approximately $2.8 billion

• the sale of a 65 per cent equity interest in Coastal GasLink LP for net proceeds of $656 million.

TC Energy **Management's discussion and analysis** 2022 \| 91

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**Loans to affiliate**

Loans to affiliate represent issuances and repayments on the subordinated demand revolving credit facility and the subordinated loan agreement that we entered with Coastal GasLink LP to provide additional liquidity and funding to the project. Refer to the Financial instruments – Related party transactions section for additional information.

**Other distributions from equity investments**

Other distributions from equity investments primarily relate to our proportionate share of the Sur de Texas debt repayments in 2022 and 2021 as well as the return of capital from our equity investment in Iroquois in 2022.

Subsequent to the refinancing activities with the Sur de Texas joint venture discussed above, on July 29, 2022, the 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.

**Cash provided by/(used in) financing activities**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| Notes payable issued/(repaid), net | **766** | 1003 | (220) |
| Long-term debt issued, net of issue costs | **2508** | 10730 | 5770 |
| Long-term debt repaid | **(1338)** | (7758) | (3977) |
| Junior subordinated notes issued, net of issue costs | **1008** | 495 |  |
| Gain/(Loss) on settlement of financial instruments | **23** | (10) | (130) |
| Redeemable non-controlling interest repurchased | **—** | (633) |  |
| Contributions from redeemable non-controlling interest | **—** |  | 1033 |
| Dividends and distributions paid | **(3385)** | (3548) | (3367) |
| Common shares issued, net of issue costs | **1905** | 148 | 91 |
| Preferred shares redeemed | **(1000)** | (500) |  |
| Acquisition of TC PipeLines, LP transaction costs | **—** | (15) |  |
| **Net cash provided by/(used in) financing activities** | **487** | (88) | (800) |

---

Net cash provided by financing activities increased by $575 million in 2022 compared to 2021 primarily due to higher proceeds from common shares and junior subordinated notes issued in 2022 as well as the 2021 subsequent repurchase of the redeemable non-controlling interest from contributions received in 2020 in support of Keystone XL construction, partially offset by lower net issuances of long-term debt and notes payable along with higher preferred shares redemption.

Net cash used in financing activities decreased by $0.7 billion in 2021 compared to 2020 primarily due to higher net issuances of long-term debt and notes payable along with the 2021 issuance of junior subordinated notes, partially offset by contributions received in 2020 in support of Keystone XL construction in the form of a redeemable non-controlling interest as well as the 2021 subsequent repurchase of the redeemable non-controlling interest in addition to the preferred shares redemption.

The principal transactions reflected in our financing activities are discussed in further detail below.

92 \| TC Energy **Management's discussion and analysis** 2022

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**Long-term debt issued**

The following table outlines significant long-term debt issuances in 2022.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) |  |  |  |
| **Company** | **Issue date** | **Type** | **Maturity date** | **Amount** | **Interest rate** |
| **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** |  |  |  |
|  | May 2022 | Medium Term Notes | May 2032 | 800 | 5.33% |
|  | May 2022 | Medium Term Notes | May 2026 | 400 | 4.35% |
|  | May 2022 | Medium Term Notes | May 2052 | 300 | 5.92% |
| **ANR PIPELINE COMPANY** | **ANR PIPELINE COMPANY** | **ANR PIPELINE COMPANY** |  |  |  |
|  | May 2022 | Senior Unsecured Notes | May 2032 | US 300 | 3.43% |
|  | May 2022 | Senior Unsecured Notes | May 2034 | US 200 | 3.58% |
|  | May 2022 | Senior Unsecured Notes | May 2037 | US 200 | 3.73% |
|  | May 2022 | Senior Unsecured Notes | May 2029 | US 100 | 3.26% |

---

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 credit facility. Both the term loan and the revolving commitment are due in January 2028 and bear interest at a floating rate.

**Long-term debt retired**

The following table outlines significant long-term debt retired in 2022.

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) |  |  |
| **Company** | **Retirement date** | **Type** | **Amount** | **Interest rate** |
| **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** |  |  |
|  | August 2022 | Senior Unsecured Notes | US 1,000 | 2.50% |

---

**Junior subordinated notes issued**

In March 2022, TransCanada Trust (the Trust) issued US$800 million of Trust Notes – Series 2022-A to investors with a fixed interest rate of 5.60 per cent per annum for the first 10 years and resetting on the tenth anniversary and every five years thereafter. All of the proceeds of the issuance by the Trust were loaned to TCPL for US$800 million of junior subordinated notes of TCPL at an initial fixed rate of 5.85 per cent per annum, including a 0.25 per cent administration charge. The rate on the junior subordinated notes of TCPL will reset every five years commencing March 2032 until March 2052 to the then Five-Year Treasury Rate, as defined in the document governing the subordinated notes, plus 4.236 per cent per annum; from March 2052 until March 2082, the interest rate will reset every five years to the then Five-Year Treasury Rate plus 4.986 per cent per annum. The junior subordinated notes are callable at TCPL's option at any time from December 7, 2031 to March 7, 2032 and on each interest payment and reset date thereafter at 100 per cent of the principal amount plus accrued and unpaid interest to the date of redemption.

Pursuant to the terms of the notes issued between the Trust and TCPL (the Trust Notes) and related agreements, in certain circumstances: 1) TCPL may issue deferral preferred shares to holders of the Trust Notes in lieu of interest; and 2) TC Energy and TCPL would be prohibited from declaring or paying dividends on or redeeming their outstanding preferred shares (or, if none are outstanding, their respective common shares) until all deferral preferred shares are redeemed by TCPL. The Trust Notes may also be automatically exchanged for preferred shares of TCPL upon certain kinds of bankruptcy and insolvency events. All of these preferred shares would rank equally with any other outstanding first preferred shares of TCPL.

For more information about long-term debt and junior subordinated notes issued and long-term debt repaid in 2022, 2021 and 2020, refer to the notes to our 2022 Consolidated financial statements.

TC Energy **Management's discussion and analysis** 2022 \| 93

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**Redeemable non-controlling interest repurchased**

On January 8, 2021, we exercised our call right in accordance with contractual terms and paid US$497 million ($633 million) to repurchase the Government of Alberta Class A Interests which were classified as Current liabilities on the Consolidated balance sheet at December 31, 2020. This transaction was funded by draws on the Keystone XL project-level credit facility.

**Dividend reinvestment and share purchase plan**

To prudently fund our growth program that includes increased project costs on the NGTL System and following our July 2022 obligation to make an equity contribution of $1.9 billion to Coastal GasLink LP, we reinstated the issuance of common shares from treasury at a two per cent discount under our DRP commencing with the dividends declared on July 27, 2022. On dividends declared in 2022, the participation rate by common shareholders was approximately 33 per cent, resulting in $607 million reinvested in common equity under the program. The discounted DRP is expected to be in place through the dividend declarations for the quarter ending June 30, 2023.

**TC Energy Corporate ATM program**

In December 2020, we established a new ATM program that allowed us to issue common shares from treasury having an aggregate gross sales price of up to $1.0 billion, or the U.S. dollar equivalent, to the public from time to time, at our discretion, at the prevailing market price when sold through the TSX, the NYSE, or any other applicable existing trading market for TC Energy common shares in Canada or the U.S. While not a component of our base funding plan, the ATM program, which was effective for a 25-month period, provided additional financial flexibility in support of our consolidated credit metrics and capital program. The ATM program was not activated and in January 2023, the ATM program expired with no common shares issued under this program thereunder.

**Share information**

---

| | | |
|:---|:---|:---|
| **as at February 8, 2023** | | |
| **Common Shares** | **issued and outstanding** | |
|  | 1.0 billion |  |
| **Preferred Shares** | **issued and outstanding** | **convertible to** |
| Series 1 | 14.6 million | Series 2 preferred shares |
| Series 2 | 7.4 million | Series 1 preferred shares |
| Series 3 | 10 million | Series 4 preferred shares |
| Series 4 | 4 million | Series 3 preferred shares |
| Series 5 | 12.1 million | Series 6 preferred shares |
| Series 6 | 1.9 million | Series 5 preferred shares |
| Series 7 | 24 million | Series 8 preferred shares |
| Series 9 | 18 million | Series 10 preferred shares |
| Series 11 | 10 million | Series 12 preferred shares |
| **Options to buy common shares** | **outstanding** | **exercisable** |
|  | 6 million | 3 million |

---

On August 10, 2022 we issued 28.4 million common shares at a price of $63.50 each for gross proceeds of approximately $1.8 billion. Proceeds of the offering are being used, directly or indirectly, together with other financing sources and cash on hand, to fund costs associated with the construction of the Southeast Gateway pipeline.

On May 31, 2022, we redeemed all of the 40 million issued and outstanding Series 15 preferred shares at a redemption price of $25.00 per share and paid the final quarterly dividend of $0.30625 per Series 15 preferred share for the period up to but excluding May 31, 2022, as previously declared on April 28, 2022.

For more information on preferred shares refer to the notes to our 2022 Consolidated financial statements.

94 \| TC Energy **Management's discussion and analysis** 2022

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**Dividends** 

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| **Dividends declared** |  |  |  |
| per common share | $3.60 | $3.48 | $3.24 |
| per Series 1 preferred share | $0.86975 | $0.86975 | $0.86975 |
| per Series 2 preferred share | $0.82611 | $0.50997 | $0.7099 |
| per Series 3 preferred share | $0.4235 | $0.4235 | $0.48075 |
| per Series 4 preferred share | $0.66655 | $0.34997 | $0.54989 |
| per Series 5 preferred share | $0.48725 | $0.48725 | $0.56575 |
| per Series 6 preferred share | $0.80668 | $0.41622 | $0.52537 |
| per Series 7 preferred share | $0.97575 | $0.97575 | $0.97575 |
| per Series 9 preferred share | $0.9405 | $0.9405 | $0.9405 |
| per Series 11 preferred share | $0.83775 | $0.83775 | $0.92194 |
| per Series 13 preferred share |  | $0.34375 | $1.375 |
| per Series 15 preferred share | $0.30625 | $1.225 | $1.225 |

---

On February 13, 2023, we increased the quarterly dividend on our outstanding common shares by 3.3 per cent to $0.93 per common share for the quarter ending March 31, 2023 which equates to an annual dividend of $3.72 per common share.

**Credit facilities**

We have several committed credit facilities that support our commercial paper programs and provide short-term liquidity for general corporate purposes. In addition, we have demand credit facilities that are also used for general corporate purposes, including issuing letters of credit and providing additional liquidity.

At February 8, 2023, we had a total of $12.8 billion of committed revolving and demand credit facilities, including:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| (billions of Canadian $, unless otherwise noted) | (billions of Canadian $, unless otherwise noted) |  |  |  |  |  |
| **Borrower** | **Description** | **Matures** | **Total facilities** |  | **Unused** <br>**capacity**<sup>1</sup> |  |
| **Committed, syndicated, revolving, extendible, senior unsecured credit facilities:** | **Committed, syndicated, revolving, extendible, senior unsecured credit facilities:** | **Committed, syndicated, revolving, extendible, senior unsecured credit facilities:** | **Committed, syndicated, revolving, extendible, senior unsecured credit facilities:** |  |  |  |
| TCPL | Supports TCPL's Canadian dollar commercial paper program and for general corporate purposes | December 2027 | 3.0 |  | 1.7 |  |
| TCPL / TCPL USA /Columbia / TransCanada American Investments Ltd. | Supports TCPL's and TCPL USA's U.S. dollar commercial paper programs and for general corporate purposes of the borrowers, guaranteed by TCPL | December 2023 | US 3.0 |  | US 1.7 |  |
| TCPL / TCPL USA / Columbia / TransCanada American Investments Ltd. | Supports TCPL's and TCPL USA's U.S. dollar commercial paper programs and for general corporate purposes of the borrowers, guaranteed by TCPL | December 2025 | US 2.5 |  | US 2.5 |  |
| **Demand senior unsecured revolving credit facilities:** | **Demand senior unsecured revolving credit facilities:** | **Demand senior unsecured revolving credit facilities:** | **Demand senior unsecured revolving credit facilities:** |  |  |  |
| TCPL / TCPL USA | Supports the issuance of letters of credit and provides additional liquidity; TCPL USA facility guaranteed by TCPL | Demand | 2.1 | <sup>2</sup> | 1.0 | <sup>2</sup> |
| Mexico subsidiary | For Mexico general corporate purposes, guaranteed by TCPL | Demand | MXN 5.0 | <sup>2</sup> | MXN 5.0 | <sup>2</sup> |

---

1Unused capacity is net of commercial paper outstanding and facility draws.

2Or the U.S. dollar equivalent.

TC Energy **Management's discussion and analysis** 2022 \| 95

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**Contractual obligations**

Our contractual obligations include our long-term debt, operating leases, purchase obligations and other liabilities incurred in our business such as environmental liability funds and employee pension and post-retirement benefit plans.

**Payments due (by period)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **at December 31, 2022** | **Total** | **< 1 year** | **1 - 3 years** | **4 - 5 years** | **> 5 years** |
| (millions of $) | **Total** | **< 1 year** | **1 - 3 years** | **4 - 5 years** | **> 5 years** |
| Notes payable | 6262 | 6262 |  |  |  |
| Long-term debt and junior subordinated notes<sup>1</sup> | 52299 | 1898 | 5609 | 5391 | 39401 |
| Operating leases<sup>2</sup> | 496 | 68 | 127 | 114 | 187 |
| Purchase obligations and other | 6049 | 3781 | 805 | 454 | 1009 |
|  | 65106 | 12009 | 6541 | 5959 | 40597 |

---

1Excludes issuance costs and fair value adjustments.

2Includes future payments for corporate offices, various premises, services, equipment, land and lease commitments from corporate restructuring. Some of our operating leases include the option to renew the agreement for one to 25 years.

**Notes payable**

Total notes payable outstanding were $6.3 billion at the end of 2022 compared to $5.2 billion at the end of 2021.

**Long-term debt and junior subordinated notes**

At December 31, 2022, we had $41.5 billion of long-term debt and $10.5 billion of junior subordinated notes outstanding compared to $38.7 billion of long-term debt and $8.9 billion of junior subordinated notes at December 31, 2021.

We attempt to ladder the maturity profile of our debt. The weighted-average maturity of our junior subordinated notes and long-term debt, excluding call features is approximately 20 years.

***Interest payments***

At December 31, 2022, scheduled interest payments related to our long-term debt and junior subordinated notes were as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **at December 31, 2022** | **Total** | **< 1 year** | **1 - 3 years** | **4 - 5 years** | **> 5 years** |
| (millions of $) | **Total** | **< 1 year** | **1 - 3 years** | **4 - 5 years** | **> 5 years** |
| Long-term debt | 23966 | 1964 | 3630 | 3129 | 15243 |
| Junior subordinated notes | 49109 | 612 | 1239 | 1477 | 45781 |
|  | 73075 | 2576 | 4869 | 4606 | 61024 |

---

**Purchase obligations**

We have purchase obligations that are transacted at market prices and in the normal course of business, including long-term natural gas transportation and purchase arrangements.

Capital expenditure commitments include obligations related to the construction of growth projects and are based on the projects proceeding as planned. Changes to these projects, including cancellation, would reduce or possibly eliminate these commitments as a result of cost mitigation efforts.

We have entered into PPAs with solar and wind-power generating facilities ranging from one to 15 years, that require the purchase of generated energy and associated environmental attributes. At December 31, 2022, the total planned capacity secured under the PPAs is approximately 1,020 MWs with the generation subject to operating availability and capacity factors. Future payments and their timing cannot be reasonably estimated as they are dependent on when certain underlying facilities are placed in service and the amount of energy generated. Certain of these purchase commitments have offsetting sale PPAs for all or a portion of the related output from the facility.

96 \| TC Energy **Management's discussion and analysis** 2022

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***Payments due (by period)***

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **at December 31, 2022** | **Total** | **< 1 year** | **1 - 3 years** | **4 - 5 years** | **> 5 years** |
| (millions of $) | **Total** | **< 1 year** | **1 - 3 years** | **4 - 5 years** | **> 5 years** |
| **Canadian Natural Gas Pipelines** |  |  |  |  |  |
| Transportation by others<sup>1</sup> | 1671 | 185 | 320 | 300 | 866 |
| Capital spending<sup>2</sup> | 974 | 951 | 21 | 2 |  |
| **U.S. Natural Gas Pipelines** |  |  |  |  |  |
| Transportation by others<sup>1</sup> | 640 | 154 | 247 | 98 | 141 |
| Capital spending<sup>2</sup> | 266 | 257 | 9 |  |  |
| **Mexico Natural Gas Pipelines** |  |  |  |  |  |
| Capital spending<sup>2</sup> | 1699 | 1699 |  |  |  |
| **Liquids Pipelines** |  |  |  |  |  |
| Transportation by others<sup>1</sup> | 68 | 26 | 38 | 4 |  |
| Capital spending<sup>2</sup> | 21 | 21 |  |  |  |
| Other | 7 | 3 | 4 |  |  |
| **Power and Energy Solutions** |  |  |  |  |  |
| Capital spending<sup>2</sup> | 315 | 257 | 57 | 1 |  |
| Other<sup>3</sup> | 43 | 10 | 16 | 15 | 2 |
| **Corporate** |  |  |  |  |  |
| Other | 319 | 192 | 93 | 34 |  |
| Capital spending<sup>2</sup> | 26 | 26 |  |  |  |
|  | 6049 | 3781 | 805 | 454 | 1009 |

---

1Demand rates are subject to change. The contractual obligations in the table are based on demand volumes only and exclude variable charges incurred when volumes flow.

2Amounts are primarily for capital expenditures and contributions to equity investments for capital projects. Amounts are estimates and are subject to variability based on timing of construction and project requirements.

3Includes estimates of certain amounts which are subject to change depending on plant-fired hours, the consumer price index, actual plant maintenance costs, plant salaries as well as changes in regulated rates for fuel transportation.

TC Energy **Management's discussion and analysis** 2022 \| 97

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**GUARANTEES**

**Sur de Texas**

We and our 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. The guarantee has terms that can be renewed in June 2023, with the annual option to extend for one year periods ending in 2053.

At December 31, 2022, our share of potential exposure under the Sur de Texas pipeline guarantees was estimated to be $100 million with a carrying amount of less than $1 million.

**Bruce Power**

We and our 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. The Bruce Power guarantee has a term that can be renewed in December 2023 and is extendable for any number of successive two-year periods, with a final renewal period of three years ending in 2065.

At December 31, 2022, our share of the potential exposure under the Bruce Power guarantee was estimated to be $88 million with no carrying amount.

**Other jointly-owned entities**

We and our partners in certain other jointly-owned entities have also guaranteed (jointly, severally, jointly and severally, or exclusively) the financial performance of these entities. Such agreements include guarantees and letters of credit which are primarily related to delivery of natural gas, construction services including purchase agreements and the payment of liabilities. The guarantees have terms ranging to 2043.

Our share of the potential exposure under these assurances was estimated at December 31, 2022 to be approximately $81 million with a carrying amount of $3 million. In certain cases, if we make a payment that exceeds our ownership interest, the additional amount must be reimbursed by our partners.

**OBLIGATIONS – PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS**

In 2022, we made funding contributions of $78 million to our defined benefit pension plans, $8 million for other post-retirement benefit plans and $64 million for the savings plan and defined contribution plans. No additional letters of credit were provided to the Canadian defined benefit plan for funding of solvency requirements.

Considering current market conditions and the reduction to the number of active plan members due to the VRP, we expect 2023 required funding levels to be lower than 2022 levels, although actuarial valuations for determining 2023 funding of our pension and other post-retirement benefit plans as at January 1, 2023 will be carried out in mid-2023. We currently expect 2023 funding contributions of approximately $32 million for the defined benefit pension plans, $6 million for other post-retirement benefit plans and approximately $69 million for the savings plans and defined contribution pension plans. We do not expect to issue additional letters of credit to the Canadian defined benefit plan for solvency funding requirements.

The net benefit cost for our defined benefit and other post-retirement plans decreased to $57 million in 2022 from $108 million in 2021 primarily due to the impact of increased interest rates.

Future net benefit costs and the amount we will need to contribute to fund our plans will depend on a range of factors including:

• interest rates

• actual returns on plan assets

• changes to actuarial assumptions and plan design

• actual plan experience versus projections

• amendments to pension plan regulations and legislation.

We do not expect future increases in the level of funding needed to maintain our plans to have a material impact on our liquidity or financial condition.

98 \| TC Energy **Management's discussion and analysis** 2022

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Other information

**ENTERPRISE RISK MANAGEMENT**

Risk management is integral to the successful operation of our business. Our strategy is to ensure that our risks and related exposures are aligned with our business objectives and risk tolerance. We manage risk through a centralized enterprise risk management (ERM) program that identifies enterprise risks, including ESG-related risks, that could materially impact the achievement of our strategic objectives.

Our Board of Directors retains general oversight of all enterprise risks, as identified below, and specifically has direct oversight of reputation and relationships, regulatory uncertainty, capital allocation strategy and execution and capital costs. The Board reviews the enterprise risk register annually and is informed quarterly on emerging risks and how these risks are being managed and mitigated in accordance with TC Energy's risk appetite and tolerances. The Board also participates in detailed presentations on each enterprise risk identified in the enterprise risk register as required or requested.

Our Board of Directors' Governance Committee oversees the ERM program, ensuring appropriate oversight of our risk management activities. Other Board committees oversee specific types of risk, including ESG-related risk, within their mandate. More specifically:

• the Human Resources Committee oversees executive resourcing, organizational capabilities and compensation risk to ensure human and labour policies and remuneration practices align with our overall business strategy

• the HSSE Committee oversees operational, major project execution, health, safety, sustainability and environmental risk, including climate change related risks

• the Audit Committee oversees management's role in managing financial risk, including market risk, counterparty credit risk and cyber security.

Our executive leadership team is accountable for developing and implementing risk management plans and actions, and effective risk management is reflected in their compensation. Each identified enterprise risk has an executive leadership team member as the governance and execution owner who provides an in-depth review for the Board on an annual basis.

Key segment-specific financial, health, safety and environment risks are covered in their respective sections of this MD&A. Further, our management of climate-related governance, strategy, risks, metrics and targets are outlined in the TCFD section of our ESG Data Sheet. The following is a summary of enterprise-wide risks with potential to affect all of our operations. These risks are being continuously monitored through our robust ERM program, which includes a network of emerging risk liaisons in key positions across the organization who are responsible for identifying potential enterprise-level risks that are reported quarterly to the Board of Directors.

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| | | |
|:---|:---|:---|
| **Risk and description** | **Impact** | **Monitoring and mitigation** |
| **Business interruption** | | |
| Operational risks, including equipment malfunctions and breakdowns, labour disputes, pandemic and other catastrophic events including those related to climate change, acts of terror, sabotage and third-party excavations on our right of way. | Decrease in revenues and increase in operating costs, legal proceedings or regulatory actions, or other expenses, all of which could reduce our earnings. Losses not recoverable through tolls or contracts or covered by insurance could have an adverse effect on operations, cash flows and financial position. Certain events could lead to risk of injury or fatality, property and environmental damage.  | Our management system, TOMS, includes our corporate health, safety, sustainability, environment and asset integrity programs to prevent incidents and protect employees, contractors, members of the public, the environment and our assets. TOMS includes process safety, incident, emergency and crisis management programs to ensure TC Energy can effectively respond to operational events, minimize loss or injury and enhance our ability to resume operations. This is supported by our business continuity program that identifies critical business processes and develops corresponding business resumption plans. We also have a comprehensive insurance program to mitigate a certain portion of our risks, but insurance does not cover all events in all circumstances. |
| **Climate change** |  |  |
| As a leading energy infrastructure company in North America, our assets could be impacted by significant temperature or weather changes and our business may be impacted by market risks resulting from evolving climate change policies or emerging decarbonization policies or shifts in energy consumption affecting long-term energy supply and demand trajectories. | Fluctuations in energy supply and demand, increasing commodity prices or volatility and output capability. Business interruption caused by physical changes to our environment or increased climate change compliance requirements, which could result in a decrease in revenues and increase in operating costs, legal proceedings or regulatory actions, or other expenses, all of which could reduce our earnings. | We have a dedicated energy transition team to assess relevant technologies and opportunities to support business resiliency irrespective of the pace or direction of energy transition. This team worked cross functionally to set our enterprise-wide goal of 30 per cent reduction of GHG emission intensity from our operations by 2030 which positions us to achieve net-zero emissions from our operations by 2050, using a 2019 baseline year. <br>We evaluate the resilience of our asset portfolio over a range of potential energy supply and demand outcomes, also known as scenario analysis, as part of our strategic planning process. We monitor climate policy and related developments through our ERM program to ensure leadership has visibility to the broader perspective, and that treatments are applied in a holistic and consistent manner. Our engineering standards are also regularly reviewed to ensure assets continue to be designed and operated to withstand the potential impacts of climate change. |
| **Cyber security** |  |  |
| We rely on our information technology to process, transmit and store electronic information, including information we use to safely operate our assets. We continue to face cyber security risks and could be subject to cyber security events directed against our information technology. This risk has been elevated with the evolving geo-political conflict in Eastern Europe. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time. This has also resulted in more and stricter cybersecurity regulations in the jurisdictions in which we operate. | A breach in the security of our information technology could expose our business to a risk of loss, misuse or interruption of critical information and functions. This could affect our operations, damage our assets, result in safety incidents, damage to the environment and/or result in reputational harm, competitive disadvantage, regulatory enforcement actions and potential litigation, which could have a material adverse effect on our operations, financial position and results of operations. | We have a comprehensive cyber security strategy which aligns with industry and recognized standards for cyber security. This strategy is regularly reviewed and updated, and the status of our cyber security program is reported to the Audit Committee on a quarterly basis. The program includes governance covered by policies and standards, risk assessments, continuous monitoring of networks and other information sources for threats to the organization, comprehensive incident response plans/processes and a robust cyber security awareness program for employees and contractors. We have insurance which may cover losses from physical damage to our facilities as a result of a cyber security event, but insurance does not cover all events in all circumstances.  |

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| | | |
|:---|:---|:---|
| **Risk and description** | **Impact** | **Monitoring and mitigation** |
| **Reputation and relationships** | | |
| Our operations and growth prospects require us to have strong relationships with key stakeholders including customers, Indigenous communities, landowners, suppliers, investors, governments and government agencies and environmental non-governmental organizations. | Inadequately managing stakeholder expectations and concerns, including those related to ESG, can have a significant impact on our operations and projects, infrastructure development and overall reputation. It could also affect our ability to operate and grow. | Our core values – safety, responsibility, collaboration, integrity and innovation – guide us in building and maintaining our key relationships as well as our interactions with stakeholders. We are proud of the strong relationships we have built with stakeholders across our geographies, and we are continuously seeking ways to strengthen these relationships. Beyond our core values, we have specific stakeholder programs and policies that shape our interactions, clarify expectations, assess risks and facilitate mutually beneficial outcomes. Our most recent Report on Sustainability and ESG Data Sheet includes details on our specific commitments and performance metrics related to safety, partnerships with Indigenous communities, focus on landowner relationships and our workplace inclusion and diversity. |
| **Regulatory uncertainty** |  |  |
| Our ability to construct and operate energy infrastructure requires regulatory approvals and is dependent on evolving policies and regulations by government authorities. This includes changes in regulation that may affect our projects and operations. | Adverse impacts on competitive geographic and business positions could result in the inability to meet our growth targets through missed or lost organic, greenfield and brownfield opportunities. Financial impacts of denied or delayed projects could include lost development costs, loss of investor confidence and potential legal costs from litigation. Regulations could also increase the cost of our operations resulting in the inability to earn a reasonable return on our invested capital. | We monitor regulatory and government developments and decisions to analyze their possible impact on our businesses. We build scenario analysis into our strategic outlook and work closely with our stakeholders in the development and operation of our assets. <br>We identify emerging risks and signposts including customer, regulatory and government decisions as well as innovative technology development and report on our management of these risks quarterly through the ERM program to the Board. We also use this information to inform our capital allocation strategy and adapt to changing market conditions.  |
| **Access to capital at a competitive cost** | **Access to capital at a competitive cost** |  |
| We require substantial amounts of capital in the form of debt and equity to finance our portfolio of growth projects and maturing debt obligations at costs that are sufficiently lower than the returns on our investments. | Significant deterioration in market conditions for an extended period of time and changes in investor and lender sentiment could affect our ability to access capital at a competitive cost, which could negatively impact our ability to deliver an attractive return on our investments or inhibit our growth. | We operate within our financial means and risk tolerances, maintain a diverse array of funding levers and also utilize asset divestitures as an important component of our financing program. In addition, we have candid and proactive engagement with the investment community, including credit rating agencies, with the objective of hearing their feedback and keeping them apprised of developments in our business and factually communicating our prospects, risks and challenges as well as ESG-related updates. We also conduct research around the evolving ESG preferences of our investors and financial partners which we consider in our decision making. In 2022, we launched our first sustainability linked loan as we continue to build sustainability and ESG performance metrics into our business strategy. |

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| | | |
|:---|:---|:---|
| **Risk and description** | **Impact** | **Monitoring and mitigation** |
| **Capital allocation strategy** | | |
| To be competitive, we must offer integral energy infrastructure services in supply and demand areas, and in forms of energy that are attractive to customers. | Should alternative lower-carbon forms of energy result in decreased demand for our services on an accelerated timeline versus our pace of depreciation, the value of our long-lived energy infrastructure assets could be negatively impacted. | We have a diverse portfolio of assets and use portfolio management to divest of non-strategic assets, effectively rotating capital while adhering to our risk preferences and focus on per share metrics. We conduct analyses to identify resilient supply sources as part of our energy fundamentals and strategic development reviews. We recover depreciation through our regulated pipeline rates which is an important lever to accelerate or decelerate the return of capital from a substantial portion of our assets. We also monitor signposts including customer, regulatory and government decisions as well as innovative technology development to inform our capital allocation strategy and adapt to changing market conditions. |
| **Execution and capital costs** | **Execution and capital costs** | |
| Investing in large infrastructure projects involves substantial capital commitments and associated execution risks, including skilled labour shortages and weather-related delays which can impact project costs and schedules, based on the assumption that these assets will deliver an attractive return on investment in the future. | While we carefully determine the expected cost of our capital projects, under some commercial arrangements, we bear capital cost overrun and schedule risk which may decrease our return on these projects. | Our Project Governance program supports project execution and operational excellence. The program aligns with TOMS which provides the framework and standards to optimize project execution, supporting timely and on budget completion. We prefer to contractually structure our projects to recover development costs if a project does not proceed along with mechanisms to minimize the impact should cost overruns occur. However, under some commercial arrangements, we share or bear the cost of execution risk. Additionally, we can utilize project financing and/or involve partners in our projects to manage capital at risk. |

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**Health, safety, sustainability and environment**

The Board's HSSE Committee oversees operational risk, major project execution risk, occupational and process safety, sustainability, security of personnel, environmental and climate change-related risks, as well as monitoring development and implementation of systems, programs and policies relating to HSSE matters through regular reporting from management. We use an integrated management system that establishes a framework for managing these risks and is used to capture, organize, document, monitor and improve our related policies, programs and procedures.

Our management system, TOMS, is modeled after international standards, including the International Organization for Standardization (ISO) standard for environmental management systems, ISO 14001, and the Occupational Health and Safety Assessment Series for occupational health and safety. TOMS also conforms to applicable industry standards and complies with applicable regulatory requirements. Periodic audits of TOMS, as they apply to our Canadian assets, are conducted by the CER and lessons learned from these audits are shared and applied across our system where applicable. TOMS covers the lifecycle of our assets and follows a continuous improvement cycle organized into four key areas:

• Plan – risk and regulatory assessment as well as objective and target setting, while striving for zero incidents plus defining roles and responsibilities

• Do – development and implementation of programs, procedures and standards to manage operational risk

• Check – incident reporting, investigation, assurance activities, including internal and external audits and performance monitoring

• Act – non-conformance, non-compliance and opportunities for improvement are managed and assessed by management.

The HSSE Committee reviews performance and operational risk management. It receives updates and reports on:

• overall HSSE corporate governance

• operational performance and preventive maintenance metrics

• asset integrity programs

• significant occupational safety and process safety incidents

• occupational and process safety performance metrics

• our Occupational Health and Hygiene Program, which includes physical and mental health and psychological safety

• emergency preparedness, incident response and evaluation

• environment programs

• biodiversity and land reclamation

• developments in and compliance with applicable legislation and regulations, including those related to the environment

• prevention, mitigation and management of risks related to HSSE matters, including climate change or business interruption risks, such as pandemics, that may adversely impact TC Energy

• sustainability matters, including social, environmental and climate change related risks and opportunities as well as related voluntary public disclosure such as our Report on Sustainability, Reconciliation Action Plan, ESG Data Sheet and GHG Emissions Reduction Plan.

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**Focus on ESG and sustainability**

Starting in 2022, we have embedded ESG goals into our corporate scorecard, with a weighting of 50 per cent of our overall corporate performance on progressing ESG priorities and advancing key strategic priorities including growth and energy transition. Key performance areas that we are tracking to measure success against these goals include achieving top personal safety, maintaining safe reliable operations and asset integrity while minimizing environmental impacts and developing solutions for a lower-carbon energy future. Our approach to sustainability is guided by our 10 commitments that align to the UN Sustainable Development Goals, with 30 tangible targets to measure and drive performance in areas including emissions reductions, biodiversity and safety. We are committed to ensuring balanced, transparent disclosure of our progress against these targets annually in our Report on Sustainability and ESG Data Sheet. Our targets relevant for environment, safety and sustainability include, but are not limited to the following:

• zero significant process safety incidents

• total Recordable Case Rate of no higher than 0.50 for employees and contractors combined

• reduce GHG emissions intensity from our operations by 30 per cent by 2030

• position to achieve zero emissions from our operations on a net basis by 2050

• restore or offset 100 per cent of disturbances to sensitive habitat resulting from construction and operation of our North American assets

• invest $1.2 million per year in community initiatives that restore biodiversity and reduce the impacts of climate change.

Another way in which we demonstrate our commitment to ESG and sustainability is through participation in international forums. In May 2022, we became an approved participant to the UNGC. The UNGC is a call for companies to align their strategies and operations with universal principles and take actions that advance societal goals. Our participation strengthens our commitment to the United Nations' global sustainability goals and involves submitting annual responses to a Communication on Progress questionnaire and submission of an annual statement expressing support for the UNGC. In July 2022, we were accepted to join the Task Force on Nature-based Financial Disclosures (TNFD) Forum. The mission of TNFD is to develop a risk management and disclosure framework for reporting, with the aim to shift global financial flows toward nature-positive outcomes. Participating in the TNFD Forum demonstrates alignment with TNFD's mission and provides early access to information on TNFD development and the opportunity to provide input to the framework. Working with TNFD aligns with our existing reporting alignment to the TCFD.

**Health, safety and asset integrity**

The safety of our employees, contractors and the public, the integrity of our pipelines and our power and energy solutions infrastructure, are a top priority. All assets are designed, constructed and commissioned with full consideration given to safety and integrity, and are placed in service only after all necessary requirements, both regulatory and internal, have been satisfied.

In 2022, we are forecasting to spend $1.5 billion (2021 – $1.4 billion) for pipeline integrity on the natural gas and liquids pipelines we operate. Pipeline integrity spending will fluctuate based on the results of annual risk assessments conducted on our pipeline systems and evaluations of information obtained from recent inspections, incidents and maintenance activities.

Under the approved regulatory models in Canada, non-capital pipeline integrity expenditures on CER-regulated natural gas pipelines are generally treated on a flow-through basis and, as a result, fluctuations in these expenditures generally have no impact on our earnings. Similarly, under our Keystone Pipeline System contracts, pipeline integrity expenditures are recovered through the tolling mechanism and, as a result, generally have no impact on our earnings. Non-capital pipeline integrity expenditures on our U.S. natural gas pipelines are primarily treated as operations and maintenance expenditures and are typically recoverable through tolls approved by FERC.

Spending associated with process safety and various integrity programs for the Power and Energy Solutions assets we operate is used to minimize risk to employees, contractors, the public, equipment and the surrounding environment, and also prevent disruptions to serving the energy needs of our customers.

As described in the Business interruption and Climate change risk discussions above, we have a set of procedures in place to manage our response to natural disasters, which include catastrophic events such as forest fires, tornadoes, earthquakes, floods, volcanic eruptions and hurricanes. The procedures, which are included in our Emergency Management Program, are designed to help protect the health and safety of our employees and contractors, minimize risk to the public and limit the potential for adverse effects on the environment.

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We are committed to protecting the health and safety of all individuals involved in our activities. Our Occupational Health and Hygiene Program provides comprehensive strategies for health promotion and protection. We are committed to delivering effective programs that:

• reduce the human and financial impact of illness and injury

• ensure fitness for work

• strengthen worker resiliency

• build organizational capacity by focusing on individual well-being, health education and improved working conditions to sustain a productive workforce

• increase mental well-being awareness, provide various mental health supports and training to employees and leaders, measure the success of programs and improve psychological health and safety.

**Environmental risk, compliance and liabilities**

TOMS provides requirements for our day-to-day work to protect employees, contractors, our workplace and assets, the communities in which we work and the environment. It conforms to external industry consensus standards and voluntary programs in addition to complying with applicable legislative requirements. Under TOMS, mandated programs set requirements to manage specific risk areas for TC Energy, including the Environment Program, which is a documented set of processes and procedures that identifies our requirements to proactively and systematically manage environmental hazards and risks throughout the lifecycle of our assets. The program outlines environmental training requirements for applicable roles in the organization to raise awareness of environmental protection commitments and requirements plus sets environment performance goals that are monitored regularly.

As part of our Environment Program, we complete environmental assessments for our projects, which include field studies that examine existing natural resources, biodiversity and land use along our proposed project footprint such as vegetation, soils, wildlife, water resources, wetland and protected areas. We consider the information collected during environmental assessments, and where sensitive habitats or areas of high biodiversity value are identified, we apply the biodiversity protection hierarchy and avoid those areas, as practicable. Where those areas cannot be avoided, we minimize our disturbance, restore and reclaim the disturbed area and provide offset where required. To conserve and protect the environment during construction, information gathered for an environmental impact assessment is used to develop project-specific environmental protection plans. Whenever the potential exists for a proposed facility or pipeline to interact with water resources, we conduct evaluations to understand the full nature and extent of the interactions. When we temporarily use water to test the integrity of our pipelines, we adhere to strict regulatory requirements and ensure water meets applicable water quality standards before it is discharged or disposed of, and when our construction activities involve crossing waterbodies, we implement protection measures to avoid or minimize potential adverse effects. Project plans are communicated with stakeholders and Indigenous communities, as applicable, and engagement with these groups informs the environmental assessments and protection plans. Additionally, the Environment Program, which applies to all of our operations, includes practices and procedures to manage potential adverse environmental effects to these resources during the full lifecycle of our facilities.

Our primary sources of risk related to the environment include:

• changing regulations and requirements coupled with increased costs related to impacts on the environment

• product releases, including crude oil, diluent and natural gas, that may cause harm to the environment (land, water and air)

• use, storage and disposal of chemicals and hazardous materials

• natural disasters and other catastrophic events, including those related to climate change, that may impact our operations.

Our assets are subject to federal, state, provincial and local environmental statutes and regulations governing environmental protection, including air and GHG emissions, water quality, species at risk, wastewater discharges and waste management. Operating our assets requires obtaining and complying with a wide variety of environmental registrations, licenses, permits and other approvals and requirements. Failure to comply could result in administrative, civil or criminal penalties, remedial requirements, or orders affecting future operations.

Through the implementation of our Environment Program, we continually monitor our facilities for compliance with all material legal and regulatory environmental requirements across all jurisdictions where we operate. We also comply with all material legal and regulatory permitting requirements in our project routing and development. We routinely monitor proposed changes to environmental policy, legislation and regulation. Where the risks are uncertain or have the potential to affect our ability to effectively operate our business, we comment on proposals independently or through industry associations.

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We are not aware of any material outstanding orders, claims or lawsuits against us related to releasing or discharging any material into the environment or in connection with environmental protection.

Compliance obligations can result in significant costs associated with installing and maintaining pollution controls, fines and penalties resulting from any failure to comply and potential limitations on operations. Remediation obligations can result in significant costs associated with the investigation and remediation of contaminated properties, and with damage claims arising from the contamination of properties.

The timing and complete extent of future expenditures related to environmental matters is difficult to estimate accurately because:

• environmental laws and regulations and their interpretations and enforcement change

• new claims can be brought against our existing or discontinued assets

• our pollution control and clean-up cost estimates may change, especially when our current estimates are based on preliminary site investigations or agreements

• new contaminated sites may be found or what we know about existing sites could change

• where there is potentially more than one responsible party involved in litigation, we cannot estimate our joint and several liability with certainty.

At December 31, 2022, accruals related to these obligations, with the exception of the accrual related to the Milepost 14 incident, totaled $20 million (2021 – $30 million) representing the estimated amount we will need to manage our currently known environmental liabilities. Refer to the Liquids Pipelines – Significant events section for additional information regarding the Milepost 14 incident. We believe we have considered all necessary contingencies and established appropriate reserves for environmental liabilities; however, a risk exists that unforeseen matters may arise requiring us to set aside additional amounts. We adjust reserves regularly to account for changes in liabilities.

**Climate change and related regulation** 

We own assets and have business interests in a number of regions subject to GHG emissions regulations, including GHG emissions management and carbon pricing policies. In 2022, we incurred $118 million (2021 – $59 million) of expenses under existing carbon pricing programs. Across North America, there are a variety of new and evolving initiatives and policies in development at the federal, regional, state and provincial level aimed at reducing GHG emissions. We actively monitor and submit comments to regulators as these new and evolving initiatives are undertaken and policies are implemented. We support transparent climate change policies that promote sustainable and economically responsible natural resource development, and in October 2021, we published a GHG Emissions Reduction Plan that includes GHG reduction targets in support of global climate goals. Our assets in specific geographies are currently subject to GHG regulations and we expect that the number of our assets subject to GHG regulations will continue to increase over time across our footprint. Changes in regulations may result in higher operating costs, other expenses or capital expenditures to comply with new or changing regulations. We monitor the pace and magnitude of energy transition through various signposts and look for material shifts that pose threats or create opportunities. We evaluate climate-related scenarios to gain perspective on the implications for our footprint, growth opportunities and portfolio optimization; this plays a critical role in understanding how we can manage several of our key enterprise risks. The following existing jurisdictional policies and anticipated policies sections describe some of the more relevant existing and anticipated policies applicable to our business.

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**Existing jurisdictional policies**

***Canadian jurisdictions***

• *Federal:* ECCC's methane reduction regulations that detail requirements to reduce methane emissions through operational and capital modifications came into effect in January 2020. ECCC's methane reduction regulation aims to reduce the oil and gas sector emissions by 40 to 45 per cent below 2012 levels by 2025. Alberta, British Columbia and Saskatchewan have drafted their own methane regulations that take the place of the federal regulation for provincially-regulated assets. For federally-regulated facilities in these jurisdictions, the federal methane regulation is applicable. Compliance with the regulations requires an increased level of leak detection and repair (LDAR) surveys, repairs to identified leaking equipment components following prescribed timelines and measurements to quantify emission reductions. Power facilities are not affected by this regulation at the current time

• *Federal:* The Federal OBPS regulation imposes carbon pricing for larger industrial facilities and sets federal benchmarks for GHG emissions for various industry sectors. This federal regulation is in effect for 2022 in the provinces of Manitoba, Saskatchewan and New Brunswick as these jurisdictions did not have provincial carbon pricing plans in place which met the Government of Canada's equivalency criteria. As a result of the Federal program, our assets across Canada are all subject to some type of carbon pricing and the costs under these programs are recovered in tolls. These carbon prices are scheduled to increase by $15/tonne every year after 2022 to $170/tonne in 2030

• *Federal:* New requirements for federally regulated project applications under the Impact Assessment Agency were introduced through the Strategic Assessment of Climate Change, requiring a project proponent to provide a credible plan for a proposed project to achieve net-zero emissions by 2050. The CER published a revision to its Filing Manual to integrate the Strategic Assessment of Climate Change, which includes a requirement that projects regulated by the CER with a lifetime beyond 2050 must also include a credible plan to achieve net-zero emissions by 2050. Responses to this requirement are being developed and provided as part of the project applications on a case-by-case basis

• *British Columbia:* British Columbia implemented a tax on GHG emissions from fossil fuel combustion. While we are subject to this tax, the compliance costs are recovered through tolls. Additionally, British Columbia established the CleanBC program which provides incentive payments or tax rebates for industrial operations that meet an established emission intensity benchmark. The CleanBC Industry Fund directs a portion of the carbon tax paid by industry to fund incentives for cleaner operations by means of performance benchmarking or funding emissions reduction projects

• *Alberta:* In Alberta, the Technology Innovation and Emissions Reduction (TIER) regulation has been in effect since January 2020. The TIER regulation requires established industrial facilities with GHG emissions above a certain threshold to reduce their emissions below an intensity baseline. The TIER system covers all of our natural gas pipelines and Power and Energy Solutions assets in Alberta. Compliance costs with respect to our regulated Canadian natural gas pipelines are recovered through tolls. A portion of the compliance costs for the Power and Energy Solutions assets are recovered through market pricing and hedging activities

• *Québec:* Québec has a GHG cap-and-trade program under the Western Climate Initiative (WCI) GHG emissions market. In Québec, our Bécancour cogeneration plant is subject to this program as are the Canadian Mainline and TQM natural gas pipeline facilities. The provincial government allocates free emission units for the majority of Bécancour's compliance requirements. The remaining requirements were met with GHG instruments purchased at auctions or secondary markets. The costs of these emissions units are recovered through commercial contracts. For TQM and the Canadian Mainline assets in Québec, compliance instruments have been or will be purchased in order to comply with the requirements of this initiative with these compliance costs being recovered through tolls

• *Ontario:* The Ontario and Federal governments reached an agreement whereby the Federal OBPS in Ontario was replaced on January 1, 2022 by the Ontario Emissions Performance Standards program. Federal OBPS and the Ontario Emissions Performance Standards apply to our Canadian Mainline operations in the province and costs under this program will be recovered in tolls. There was no material impact to the financial performance of our Ontario natural gas facilities as a result of the Ontario Emissions Performance Standards program

• *Saskatchewan:* In September 2022, the Saskatchewan and Federal governments reached an agreement whereby the Federal OBPS in Saskatchewan will be replaced on January 1, 2023 by the Saskatchewan Emissions Performance Standards program for pipeline transmission sector assets. Covered facilities are still required to meet the Federal OBPS regulations for the 2022 compliance period. Federal OBPS and the Saskatchewan Emissions Performance Standards apply to our Canadian Mainline and Foothills operations in the province and costs under this program will be recovered in tolls. At this time, we do not anticipate a material impact to the financial performance of our natural gas facilities as a result of the transition to the Saskatchewan Emissions Performance Standards program.

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***U.S. jurisdictions***

*• Federal:* A joint Congressional resolution (CRA resolution) disapproving the 2020 policy amendment was signed into law in June 2021. The CRA resolution reinstated the 2016 New Source Performance Standards on the transmission and storage segments. The impact to us from the reinstatement was minimal as we previously made the decision to continue to comply even though the 2020 policy amendments removed the transmission and storage segment as an applicable source category

*• California:* Tuscarora facilities are subject to the California Air Resources Board's LDAR program requiring owners/operators of oil and gas facilities to monitor and repair methane leaks. Beginning in January 2020, thresholds for leak repair under this program were reduced. California also has a GHG cap-and-trade program linked with Québec's program through the WCI. All Tuscarora facilities fall below the threshold requiring participation in the GHG cap-and-trade program

*• Pennsylvania:* The Pennsylvania Department of Environmental Protection has an LDAR program for new source installations which require leak repair within 15 days of discovery

• *Pennsylvania:* Effective August 2022, the Pennsylvania Department of Environmental Protection (PDEP) finalized Reasonable Available Control Technologies (RACT) requirements and limitations for major stationary sources of nitrogen oxides (NOx) and volatile organic compounds (VOCs) statewide. TC Energy has four facilities impacted by this rule. If case by case evaluations to be submitted to PDEP by December 31, 2022 demonstrate that controls are needed to comply with the updated emission limitations, then the facilities would potentially have until December 2025 to install these controls

• *Ohio:* Effective March 2022, the Ohio Environmental Protection Agency (OEPA) finalized RACT requirements and limitations for emissions of NOx from stationary sources in the Cleveland non-attainment area. TC Energy has four facilities impacted by this rule, but only one potentially requires modifications to meet the updated emissions limitations. If a facility specific evaluation, which is due to OEPA by March 2023, demonstrates that additional controls are needed, then the facility would potentially have until March 2026 to install these controls

*• Oregon:* The Governor of Oregon issued an executive order to reduce and regulate GHGs by establishing annual reduction goals, developing a new carbon cap and reduce program and enhancing clean fuel standards on January 1, 2022. The state Department of Environmental Quality recommended a final draft of the rule to the state Environmental Quality Commission (EQC) and the EQC approved the program which still exempts our facilities and their emissions

*• Maryland:* Effective November 2020, the Maryland Department of the Environment (MDE) finalized a methane regulation program for new and existing natural gas facilities that includes an LDAR program, emission control and reporting requirements, plus a requirement to notify not only the MDE, but also the public of any events above a specific threshold. We have one electric-powered compressor station and associated pipeline segments impacted by this regulation

• *Washington:* The Washington Commercial Building Code passed a ban to limit the use of natural gas-powered furnaces and water heaters in all new commercial and residential properties with four stories or more, starting in July 2023.

***Mexico jurisdictions***

• the General Climate Change Law (LGCC) establishes various public policy instruments, including the National Emissions Registry and its regulations, which allow for the compilation of information on the emission of compounds and GHGs of the different productive sectors of the country. The LGCC defines the National Inventory of Emissions as the document that contains the estimate of anthropogenic emissions by sources and absorption by sinks in Mexico. This law requires an annual submission of our emissions

• the Government of Mexico published a regulation that established guidelines for the prevention and control of methane emissions from the hydrocarbon sector. Companies are required to prepare a Program for the Comprehensive Prevention and Control of Methane Emissions (PPCIEM) which includes identification of sources of methane, quantification of baseline emissions and an estimate of the expected emission reductions from prevention and control activities. This regulation requires the PPCIEM, through which operational and technological practices are adopted, to determine a reduction goal that must be met within a period not exceeding six calendar years from the delivery of the PPCIEM. TC Energy developed and applied the PPCIEM to all of its facilities in Mexico in 2020

• the Secretariat of Environment and Natural Resources published an agreement to progressively and gradually establish an emissions commerce system in Mexico and comply with the LGCC. It functions as a three-year pilot from 2020 to 2022 allowing the Secretariat to test the design and rules of the system as well as evaluate its performance and then propose adjustments for a subsequent operational phase after 2022.

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**Anticipated policies**

***Canadian jurisdictions***

*• Federal:* The Government of Canada is developing the Clean Fuel Standard (CFS) to achieve reductions in GHG emissions and in December 2020 the Canadian Federal Government unveiled its plan aimed to exceed their previous 2030 GHG emissions reduction target of 30 per cent below 2005 levels to a new target of 32 to 40 per cent below 2005 levels with the ultimate goal of achieving net-zero emissions by 2050. As part of this plan, the Canadian Federal Government narrowed the CFS scope to include only liquid fuels, which will not directly impact TC Energy. This plan also increased carbon pricing levels and released a complementary hydrogen strategy. Carbon prices are scheduled to increase by $15/tonne every year after 2022 to $170/tonne in 2030. While the scope of the CFS is limited to liquid fuels, there will be opportunities to generate credits for the gaseous fuel stream to incentivize emission reduction opportunities. We will continue to engage with Canadian policy makers and monitor and assess the extent of the impacts as more information is made available

• *Federal:* ECCC committed to expand on the current methane reduction regulations and develop a plan to reduce oil and gas sector methane emissions by at least 75 per cent below 2012 levels by 2030. We will continue to assess the potential implications of any policy and regulatory updates associated with this announcement as more information is made available

• *Federal:* In July 2022, ECCC released a discussion paper on the options to cap and cut oil and gas sector GHG emissions to achieve 2030 goals and net-zero by 2050. The discussion paper proposed excluding natural gas pipeline transmission from this proposed cap; however, coverage and details are yet to be worked out by ECCC and the provinces. We have provided feedback and supported the exclusion of natural gas transmission emission from this cap. We will continue monitoring and providing feedback to ECCC as this file evolves in 2023.

***U.S. jurisdictions***

*• Federal:* The U.S. Senate passed the PHMSA reauthorization bill, the PIPES Act, which included methane regulations requiring, for example, pipeline owners/operators to implement methane LDAR programs, deploy advanced leak detection technology and incorporate LDAR surveys in inspection and maintenance plans. If the U.S. House of Representatives also supports the inclusion of these methane provisions, PHMSA will join the United States Environmental Protection Agency (USEPA) as another federal regulator of GHG emissions, indicating the nation's increasing desire to combat climate change. The expected impact to our assets is still being evaluated

*• Federal:* On November 11, 2022, the USEPA released a supplemental proposal to expand and strengthen the November 2021 proposal to reduce methane and VOC emissions from the oil and natural gas industry. The associated public comment period ends on February 13, 2023. The supplemental proposal impacts any new projects (new, modified, or reconstructed on or after November 15, 2021) and also affects existing facilities when fully implemented. The supplemental proposal is expected to be finalized in 2023

• *Federal*: On June 21, 2022, USEPA proposed updates to the GHG Reporting program that would go into effect on January 1, 2023 and be included in 2023 GHG reporting due to the USEPA by April 1, 2024. TC Energy reports to the USEPA as required by the GHG Reporting rule (40 CFR 98). The proposal includes reporting of additional emission sources (such as reciprocating engine exhaust methane and centrifugal compressor dry seal venting), revisions to current emission factors for fugitive equipment leaks and pneumatic devices, and options to use facility specific measurements in place of emission factors for certain emission sources

• *Federal:* The Inflation Reduction Act (IRA) was passed and signed into law on August 16, 2022. The IRA instructs USEPA to implement a waste methane fee program by 2024 based on GHG emissions reported to USEPA as required by 40 CFR 98 Subpart W. TC Energy reports to Subpart W for the natural gas transmission compression, underground natural gas storage and onshore natural gas transmission pipeline industry segments. For these industry segments, the IRA imposes and collects a fee on methane emissions that exceeds 0.11 per cent of the natural gas sent for sale from the facility. The proposed fee is $900/tonne for 2024, $1,200/tonne for 2025 and $1,500/tonne for 2026 reporting and forward. In an initial assessment, there would have been no fee impact to TC Energy based on 2021 emissions. The IRA also instructs USEPA to revise Subpart W by August 2024 to ensure GHG reporting is based on empirical data

TC Energy **Management's discussion and analysis** 2022 \| 109

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*• Washington:* On September 29, 2022, the Washington Department of Ecology (WDE) adopted Chapter 173-446 WAC Climate Commitment Act Program (AO# 21-06). Key proposed requirements affect facilities included in the GHG reporting program. WDE will participate in emission trading via the WCI program established in 2011. The applicability threshold is marginally higher for the trading program (25,000 tonnes annually) than the reporting program threshold (10,000 tonnes annually). WDE formally notified affected facilities in November 2022 that they are subject; those entities are required to provide WDE with corporate information and designate account representatives in December 2022. WDE will host four auctions a year, the first being in the first quarter of 2023. The program is designed to achieve Climate Commitment Act milestones of 40 per cent reduction by 2030 and net zero emissions by 2050

*• California:* Our assets may be affected by the Governor of California's executive order, issued in September 2020, requiring all new cars and light trucks sold in California to be emission-free by 2035 and heavy and medium trucks to be emission-free by 2045. The significance of the impact on our assets is still being evaluated

• *California:* California Air Resource Board is planning potential changes to their California Oil and Gas Methane Regulation that include requirements for monitoring plans, repairing leaks after being identified by satellites and changes that would align with USEPA's proposed emissions guidelines for existing sources

*• Michigan:* The Michigan Department of Environment, Great Lakes and Energy is currently evaluating potential ozone control strategies for the southeast Michigan ozone non-attainment area and the interaction of methane and ozone, which may lead to the development of laws and regulations that affect TC Energy through impacted ANR and Great Lakes facilities in the state

*• New York:* On February 2, 2022, the New York Department of Environmental Conservation (NY DEC) adopted 6 NYCRR Part 203, "Oil and Natural Gas Sector" with an effective date of March 3, 2022. Part 203 will regulate VOCs and methane emissions from the oil and gas sector. Compliance with the regulation is effective starting January 1, 2023. Compliance obligations include leak detection and repair at all storage wells, compressor stations and city gate meter and regulator sites, blowdown notifications, reporting of pigging activities and a baseline inventory for all assets in New York.

**Changes to environmental remediation regulations – U.S. Jurisdictions** 

*• Federal:* The USEPA proposed a rule entitled, Alternate Polychlorinated Biphenyl (PCB) Extraction Methods and Amendments to PCB Cleanup and Disposal Regulations in 2021. The rule addresses a myriad of issues related to laboratory methodologies, performance-based disposal options for PCB remediation waste and emergency situations, among other proposed changes. We are currently reviewing the proposed rule to determine its impact, if any, to our PCB Management activities but at this time do not believe that it will have a material impact on our business, financial condition or results of operations.

110 \| TC Energy **Management's discussion and analysis** 2022

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**Financial risks**

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. Our risks are managed within limits that are established by our Board of Directors, implemented by senior management and monitored by our risk management, internal audit and business segment groups. Our Board of Directors' Audit Committee oversees how management monitors compliance with risk management policies and procedures and oversees management's review of the adequacy of the risk management framework.

**Market risk**

We construct and invest in energy infrastructure projects, purchase and sell commodities, issue short- and long-term debt, including amounts in foreign currencies, and invest in foreign operations. Certain of these activities expose us to market risk from changes in commodity prices, foreign exchange rates and interest rates, which may affect our earnings, cash flows and the value of our financial assets and liabilities. We assess contracts used to manage market risk to determine whether all, or a portion, meet the definition of a derivative.

Derivative contracts used to assist in managing exposure to market risk may include the following:

• forwards and futures contracts – agreements to purchase or sell a specific financial instrument or commodity at a specified price and date in the future

• swaps – agreements between two parties to exchange streams of payments over time according to specified terms

• options – agreements that convey the right, but not the obligation of the purchaser, to buy or sell a specific amount of a financial instrument or commodity at a fixed price, either at a fixed date or at any time within a specified period.

**Commodity price risk**

The following strategies may be used to manage our exposure to market risk resulting from commodity price risk management activities in our non-regulated businesses:

• in our natural gas marketing business, we enter into natural gas transportation and storage contracts as well as natural gas purchase and sale agreements. We manage our exposure on these contracts using financial instruments and hedging activities to offset market price volatility

• in our liquids marketing business, we enter into pipeline and storage terminal capacity contracts as well as crude oil purchase and sale agreements. We fix a portion of our exposure on these contracts by entering into financial instruments to manage variable price fluctuations that arise from physical liquids transactions

• in our power businesses, we manage the exposure to fluctuating commodity prices through long-term contracts and hedging activities including selling and purchasing electricity and natural gas in forward markets

• in our non-regulated natural gas storage business, our exposure to seasonal natural gas price spreads is managed with a portfolio of third-party storage capacity contracts and through offsetting purchases and sales of natural gas in forward markets to lock in future positive margins.

Lower natural gas, crude oil and electricity prices could lead to reduced investment in the development, expansion and production of these commodities. A reduction in the demand for these commodities could negatively impact opportunities to expand our asset base and/or re-contract with our shippers and customers as contractual agreements expire.

Climate change also presents a potential financial impact to commodity prices and volumes. Our exposure to climate change-related risk and resulting policy changes is managed through our business model, which is based on a long-term, low-risk strategy whereby the majority of our earnings are underpinned by regulated cost-of-service arrangements and/or long-term contracts. In addition, scenario planning against several demand outlooks and monitoring of key signposts is also considered as part of our long-term corporate strategic planning process.

TC Energy **Management's discussion and analysis** 2022 \| 111

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**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**

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 can affect our comparable EBITDA and comparable earnings.

A portion of our Mexico Natural Gas Pipelines monetary assets and liabilities are peso-denominated, while the functional currency for our Mexico operations is U.S. dollars, therefore changes in the value of the Mexican peso against the U.S. dollar can affect our net 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.

We actively manage our foreign exchange risk using foreign exchange derivatives. Refer to the 2022 Financial highlights – Foreign exchange section for additional information on our foreign currency exposures.

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

• loans receivable

• net investment in leases and certain contract assets.

At times, our counterparties may endure financial challenges resulting from commodity price and market volatility, economic instability and political or regulatory changes. In addition to actively monitoring these situations, there are a number of factors that reduce our counterparty credit risk exposure in the event of default, including:

• contractual rights and remedies together with the utilization of contractually-based financial assurances

• current regulatory frameworks governing certain of our operations

• the competitive position of our assets and the demand for our services

• potential recovery of unpaid amounts through bankruptcy and similar proceedings.

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 December 31, 2022 and 2021, we had no significant credit risk concentrations and no significant amounts past due or impaired. We recorded a $163 million expected credit loss provision before tax recognized on the TGNH net investment in leases and certain contract assets in 2022, as required by U.S. GAAP. Other than the expected credit loss provision noted above, we had no significant credit losses at December 31, 2022 and 2021. Refer to Note 28, Risk management and financial instruments, of our 2022 Consolidated financial statements for additional information on expected credit loss provisions.

112 \| TC Energy **Management's discussion and analysis** 2022

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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.

**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. Refer to the Financial Condition section for more information about our liquidity.

**Legal proceedings**

Legal proceedings, arbitrations and actions are part of doing business. While we cannot predict the final outcomes of proceedings and actions with certainty, management does not expect any current or potential legal proceeding or action to have a material impact on our consolidated financial position or results of operations.

TC Energy **Management's discussion and analysis** 2022 \| 113

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**CONTROLS AND PROCEDURES**

We meet Canadian and U.S. regulatory requirements for disclosure controls and procedures, internal control over financial reporting and related CEO and CFO certifications.

**Disclosure controls and procedures**

Under the supervision and with the participation of management, including our President and CEO and our CFO, we carried out quarterly evaluations of the effectiveness of our disclosure controls and procedures, including for the year ended December 31, 2022, as required by the Canadian securities regulatory authorities and by the SEC. Based on this evaluation, our President and CEO and our CFO have concluded that the disclosure controls and procedures are effective in that they are designed to ensure that the information we are required to disclose in reports we file with or send to securities regulatory authorities is recorded, processed, summarized and reported accurately within the time periods specified under Canadian and U.S. securities laws.

**Management's annual report on internal control over financial reporting**

We are responsible for establishing and maintaining adequate internal control over financial reporting, which is a process designed by, or under the supervision of, our President and CEO and our CFO, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Under the supervision and with the participation of management, including our President and CEO and our CFO, an evaluation of the effectiveness of the internal control over financial reporting was conducted as of December 31, 2022, based on the criteria described in "Internal Control – Integrated Framework" issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, as of December 31, 2022, the internal control over financial reporting was effective.

Our internal control over financial reporting as of December 31, 2022 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their attestation report which is included in our 2022 Consolidated financial statements.

**CEO and CFO certifications**

Our President and CEO and our CFO have attested to the quality of the public disclosure in our fiscal 2022 reports filed with Canadian securities regulators and the SEC and have filed certifications with them.

**Changes in internal control over financial reporting**

There were no changes during the year covered by this annual report that had or are reasonably likely to have a material impact on our internal control over financial reporting.

114 \| TC Energy **Management's discussion and analysis** 2022

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**CRITICAL ACCOUNTING ESTIMATES**

In preparing our Consolidated financial statements, we are 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. We use the most current information available and exercise careful judgment in making these estimates and assumptions.

Certain estimates and judgments have a material impact where the assumptions underlying these accounting estimates relate to matters that are highly uncertain at the time the estimate or judgment is made or are subjective. Refer to Note 2, Accounting policies, of our 2022 Consolidated financial statements for additional information.

**Equity Investment in Coastal GasLink LP**

**July 2022 Coastal GasLink Amended Agreements**

On July 28, 2022, amended agreements were executed between Coastal GasLink LP, LNG Canada and TC Energy and its Coastal GasLink LP partners (collectively, the July 2022 agreements). These amendments revised the commercial terms between LNG Canada and Coastal GasLink LP, as well as funding provisions between the partners of Coastal GasLink LP and required TC Energy to make a contractual equity contribution to Coastal GasLink LP in the amount of $1.9 billion, which did not result in a change in our 35 per cent ownership. Refer to Note 32, Variable interest entities, of our 2022 Consolidated financial statements for additional information.

The $1.9 billion contractual equity contribution was accrued and initially recognized in Equity investments on the Consolidated balance sheet at the time of signing the July 2022 agreements and is being paid in installments over the period August 2022 to February 2023. At December 31, 2022, $0.5 billion of this equity contribution remained in Accounts payable and other on the Consolidated balance sheet.

Under the terms of the July 2022 agreements, any additional equity financing required by Coastal GasLink LP to fund construction of the pipeline beyond the $1.9 billion equity contribution will initially be financed through a subordinated loan agreement between TC Energy and Coastal GasLink LP. Any amounts outstanding on this loan will be repaid by Coastal GasLink LP to TC Energy once final 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 these additional equity contributions will be predominantly funded by TC Energy but will not result in a change to our 35 per cent ownership.

**Capital Cost Update, Impairment and Maximum Exposure to Loss**

In the fourth quarter of 2022, we announced that we expected a material increase in project costs and to our corresponding funding requirements. 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, such as challenging conditions in the Western Canadian labour market, shortages of skilled labour, the impacts of contractor underperformance, as well as drought conditions and erosion and sediment control challenges, as with any complex construction project, the final capital cost is subject to certain risks and uncertainties. The increase in project costs and our corresponding funding requirements were indicators that a decrease in the value of our equity investment had occurred.

As a result, 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 and a pre-tax impairment charge of $3,048 million ($2,643 million after tax) was recognized in fourth quarter 2022 in Impairment of equity investment in the Consolidated statement of income in the Canadian Natural Gas Pipelines segment. The pre-impairment carrying value of the investment in Coastal GasLink LP at December 31, 2022 consisted of amounts in Equity investments ($2.8 billion) and Loans receivable from affiliates ($250 million), which were reduced to a nil balance.

TC Energy expects to fund an additional $3.3 billion related to the revised estimated capital cost to complete the Coastal GasLink pipeline, and a significant portion of our future investment in Coastal GasLink LP is expected to be impaired. 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.

TC Energy **Management's discussion and analysis** 2022 \| 115

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The fair value of TC Energy's investment in Coastal GasLink LP at December 31, 2022 was estimated using a 40-year discounted, cash flow model. Cash inflows in the model were estimated using contractually agreed upon terms and extension provisions in the TSAs between Coastal GasLink LP and the LNG Canada participants.

For cash outflows in the model, the increase in estimated capital cost and our corresponding funding requirements have the most significant impact on the determination of the fair value of TC Energy's investment in Coastal GasLink LP. The cash flow analysis included a capital cost estimate for the Coastal GasLink pipeline of $14.5 billion. Any change from this capital cost estimate will have an approximate dollar-for-dollar impact on our future funding requirements, subject to any final cost sharing between the Coastal GasLink LP partners, and will impact the estimated fair value of, and our recovery of, our equity investment in Coastal GasLink LP in future periods.

Other assumptions included in the discounted cash flow model include discount rate, long-term project financing plans and estimated completion date. Changes to these other assumptions would not reasonably expect to change the impairment recorded in the fourth quarter of 2022.

The maximum exposure to loss as a result of our involvement with Coastal GasLink LP, a variable interest entity (VIE), as at December 31, 2022 was $3.3 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. Under the terms of the July 2022 agreements, TC Energy is contractually obligated to fund the capital costs to complete the Coastal GasLink pipeline, which is estimated to be $3.3 billion, through additional equity contributions in Coastal GasLink LP (future funding requirements), 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 goodwill**

We test goodwill for impairment annually or more frequently if events or changes in circumstances lead us to believe it might be impaired. We can initially assess qualitative factors which include, but are not limited to, macroeconomic conditions, industry and market considerations, current valuation multiples and discount rates, cost factors, historical and forecasted financial results, or events specific to that reporting unit. 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. We can elect to proceed directly to the quantitative goodwill impairment test for any reporting unit. If the quantitative goodwill impairment test is performed, we compare the fair value of the reporting unit to its carrying value, including its goodwill. If the carrying value of a reporting unit exceeds its fair value, goodwill impairment is measured at the amount by which the reporting unit's carrying value exceeds its fair value.

When a portion of a reporting unit that constitutes a business is disposed, goodwill associated with that business is included in the carrying amount of the business in determining the gain or loss on disposal. The amount of goodwill disposed is determined based on the relative fair values of the business to be disposed and the portion of the reporting unit that will be retained.

We determine the fair value of a reporting unit based on our projections of future cash flows, which involves making estimates and assumptions about transportation rates, market supply and demand, growth opportunities, output levels, competition from other companies, operating costs, regulatory changes, discount rates and earnings and other multiples.

**Qualitative goodwill impairment indicators**

As part of the annual goodwill impairment assessment, we evaluated qualitative factors impacting the fair value of the reporting units, other than the ANR reporting unit for which we elected to proceed directly to a quantitative impairment test. Qualitative factors such as macroeconomic conditions, industry and market considerations, valuation multiples and discount rates, cost factors and historical and forecasted financial results and events specific to the various reporting units were considered. It was determined that it was more likely than not that the fair value of all reporting units exceeded their carrying amounts, including goodwill, and therefore, goodwill was not impaired.

116 \| TC Energy **Management's discussion and analysis** 2022

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**Valuation of goodwill for the ANR reporting unit**

Following the passage of time from the previous test at December 31, 2016, and subsequent to the ANR settlement-in-principle, we performed a quantitative annual goodwill impairment test for ANR as at December 31, 2022.

The estimated fair value measurements used in our goodwill impairment analysis is classified as Level III. In the determination of the fair value utilized in the quantitative goodwill impairment test for the ANR reporting unit, we used a discounted cash flow model incorporating projections of our future revenue and capital expenditures as well as a valuation multiple and applied a risk-adjusted discount rate which involved significant estimates and judgments. It was determined that the fair value of ANR exceeded its carrying value, including goodwill, at December 31, 2022.

**Valuation of goodwill for the Great Lakes reporting unit**

During first quarter 2022, we elected to pursue an unanticipated opportunity to extend the existing recourse rates on Great Lakes. This prompted us to re-evaluate the impact of maintaining recourse rates at the current level as opposed to moving forward with the previously presumed Great Lakes rate case process in 2022.

On March 18, 2022, Great Lakes reached a pre-filing settlement with its customers and filed an unopposed rate case settlement with FERC by which Great Lakes and the settling parties agreed to maintain existing recourse rates through October 31, 2025. While the settlement created short-term rate certainty, it prompted a re-evaluation of Great Lakes' long-term free cash flows. With recourse rates maintained at the current level for the next three years, the expectation of increased contracting, growth and other near-term commercial and regulatory opportunities were negatively impacted.

Management performed a quantitative impairment test that evaluated a range of assumptions, including revenue and capital expenditure projections and a valuation multiple, through a discounted cash flow analysis using a risk-adjusted discount rate. It was determined that the estimated fair value of the Great Lakes reporting unit no longer exceeded its carrying value, including goodwill and that an impairment charge was necessary. As a result, we recorded a pre-tax goodwill impairment charge of $571 million ($531 million after tax) in first quarter 2022 within the U.S. Natural Gas Pipelines segment that is included in Goodwill and asset impairment charges and other in the Consolidated statement of income and was excluded from comparable earnings. The remaining goodwill balance related to Great Lakes is US$122 million at December 31, 2022 (December 31, 2021 – US$573 million). There is a risk that continued reductions in future cash flow forecasts and adverse changes in other key assumptions could result in a future impairment of the goodwill balance relating to Great Lakes.

We have elected to allocate goodwill impairment charges first to goodwill that is non-deductible for income tax purposes, with any remaining charge allocated to tax-deductible goodwill. The majority of the Great Lakes goodwill impairment charge was allocated to non-deductible goodwill and the income tax recovery of $40 million was attributable to the portion of the goodwill that was deductible for income tax purposes.

TC Energy **Management's discussion and analysis** 2022 \| 117

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**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 assets or regulatory liabilities 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:

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| | | |
|:---|:---|:---|
| **at December 31** | | |
| (millions of $) | **2022** | **2021** |
| Other current assets | **614** | 169 |
| Other long-term assets | **91** | 48 |
| Accounts payable and other | **(871)** | (221) |
| Other long-term liabilities | **(151)** | (47) |
|  | **(317)** | (51) |

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**Anticipated timing of settlement of derivative instruments**

The anticipated timing of settlement of derivative instruments assumes constant commodity prices, interest rates and foreign exchange rates. Settlements will vary based on the actual value of these factors at the date of settlement.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **at December 31, 2022** | **Total fair value** | **< 1 year** | **1 - 3 years** | **4 - 5 years** | **> 5 years** |
| (millions of $) | **Total fair value** | **< 1 year** | **1 - 3 years** | **4 - 5 years** | **> 5 years** |
| **Derivative instruments held-for-trading** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Assets | 685 | 608 | 73 | 4 |  |
| &nbsp;&nbsp;&nbsp;Liabilities | (837) | (742) | (82) | (13) |  |
| **Derivative instruments in hedging relationships** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Assets | 20 | 6 | 1 | 5 | 8 |
| &nbsp;&nbsp;&nbsp;Liabilities | (185) | (129) | (34) | (9) | (13) |
|  | (317) | (257) | (42) | (13) | (5) |

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118 \| TC Energy **Management's discussion and analysis** 2022

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**Unrealized and realized gains and losses on derivative instruments**

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

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| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | | | |
| (millions of $) | **2022** | **2021** | **2020** |
| **Derivative instruments held-for-trading**<sup>1</sup> |  |  |  |
| Amount of unrealized gains/(losses) in the year |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commodities | **14** | 9 | (23) |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange | **(149)** | (203) | 126 |
| Amount of realized gains/(losses) in the year |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commodities | **759** | 287 | 183 |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange | **(2)** | 240 | (33) |
| **Derivative instruments in hedging relationships**<sup>2</sup> |  |  |  |
| Amount of realized (losses)/gains in the year |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commodities | **(73)** | (44) | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest rate | **(3)** | (32) | (16) |

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1Realized and unrealized gains and 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 and losses on foreign exchange held-for-trading derivative instruments are included on a net basis in Foreign exchange (loss)/gain, net.

2In 2022, there were no gains or losses included in Net income relating to discontinued cash flow hedges where it was probable that the anticipated transaction would not occur (2021 – realized loss of $10 million, 2020 – nil).

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 28, Risk management and financial instruments, of our 2022 Consolidated financial statements.

TC Energy **Management's discussion and analysis** 2022 \| 119

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**RELATED PARTY TRANSACTIONS**

**Loans receivable from affiliates**

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.

***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 and was fully repaid upon maturity on March 15, 2022 in the amount of $1.2 billion.

Our Consolidated statement of income reflects the related interest income and foreign exchange impact on this loan receivable until its repayment on March 15, 2022, which were fully offset upon consolidation with corresponding amounts included in our proportionate share of Sur de Texas equity earnings as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
| **year ended December 31** | | | | **Affected line item in the Consolidated statement of income** |
| (millions of $) | **2022** | **2021** | **2020** | **Affected line item in the Consolidated statement of income** |
| Interest income<sup>1</sup> | **19** | 87 | 110 | Interest income and other |
| Interest expense<sup>2</sup> | **(19)** | (87) | (110) | Income from equity investments |
| Foreign exchange losses<sup>1</sup> | **(28)** | (41) | (86) | Foreign exchange loss/(gain), net |
| Foreign exchange gains<sup>1</sup> | **28** | 41 | 86 | Income from equity investments |

---

1Included in our Corporate segment.

2Included in our Mexico Natural Gas Pipelines segment.

On March 15, 2022, as part of refinancing activities with the Sur de Texas joint venture, the peso-denominated inter-affiliate loan discussed above was replaced with a new U.S. dollar-denominated inter-affiliate loan from us of 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.

***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 Equity Contributions and Subordinated Loan Agreement*

As part of the amendments in the July 2022 agreements between the Coastal GasLink LP partners, we are required to make an equity contribution to Coastal GasLink LP of $1.9 billion, payable in monthly installments from August 2022 to February 2023, with no resulting change to our 35 per cent ownership. The $1.9 billion equity contribution was recognized in Equity investments on the Consolidated balance sheet at December 31, 2022, and the remaining $0.5 billion of installments outstanding was recorded in Accounts payable and other on the Consolidated balance sheet.

In 2021, TC Energy entered into a subordinated loan agreement with Coastal GasLink LP. This loan agreement was amended as part of the July 2022 agreements, and subsequent draws on this loan by Coastal GasLink LP will be provided through an interest-bearing loan, subject to a floating, market-based interest rate to fund the incremental $3.3 billion related to the revised estimated capital cost to complete the Coastal GasLink pipeline. As at December 31, 2022, the total capacity committed by TC Energy under this subordinated loan agreement was $1.3 billion. The committed capacity is expected to increase in the future as required to support additional financing requirements under this loan. Any amounts outstanding on this loan will be repaid by Coastal GasLink LP to TC Energy, once final 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 the July 2022 agreements, these additional equity contributions will be predominantly funded by TC Energy but will not result in a change to our 35 per cent ownership. Refer to Note 7, Coastal GasLink, of our 2022 Consolidated financial statements for additional information.

The balance outstanding on this loan at December 31, 2022 was $250 million which was reduced to nil as part of the impairment charge recognized in fourth quarter 2022.

120 \| TC Energy **Management's discussion and analysis** 2022

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*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 had a capacity of $100 million with an outstanding balance of nil at December 31, 2022 (December 31, 2021 – $1 million) reflected in Loans receivable from affiliates under Current assets on our Consolidated balance sheet. This revolver was not impacted by the impairment charge recognized in fourth quarter 2022.

**ACCOUNTING CHANGES**

For a description of our significant accounting policies and a summary of changes in accounting policies and standards impacting our business, refer to Note 2, Accounting policies, and Note 3, Accounting changes, of our 2022 Consolidated financial statements.

TC Energy **Management's discussion and analysis** 2022 \| 121

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**QUARTERLY RESULTS**

**Selected quarterly consolidated financial data**

---

| | | | | |
|:---|:---|:---|:---|:---|
| **2022** |  |  |  |  |
| (millions of $, except per share amounts) | **Fourth** | **Third** | **Second** | **First** |
| Revenues | **4041** | **3799** | **3637** | **3500** |
| Net (loss)/income attributable to common shares | **(1447)** | **841** | **889** | **358** |
| Comparable earnings | **1129** | **1068** | **979** | **1103** |
| Share statistics: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (loss)/income per common share – basic | **($1.42)** | **$0.84** | **$0.90** | **$0.36** |
| &nbsp;&nbsp;&nbsp;&nbsp;Comparable earnings per common share | **$1.11** | **$1.07** | **$1.00** | **$1.12** |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividends declared per common share | **$0.90** | **$0.90** | **$0.90** | **$0.90** |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **2021** |  |  |  |  |
| (millions of $, except per share amounts) | **Fourth** | **Third** | **Second** | **First** |
| Revenues | 3584 | 3240 | 3182 | 3381 |
| Net income/(loss) attributable to common shares | 1118 | 779 | 975 | (1057) |
| Comparable earnings | 1028 | 970 | 1038 | 1106 |
| Share statistics: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income/(loss) per common share – basic | $1.14 | $0.80 | $1.00 | ($1.11) |
| &nbsp;&nbsp;&nbsp;&nbsp;Comparable earnings per common share | $1.05 | $0.99 | $1.06 | $1.16 |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividends declared per common share | $0.87 | $0.87 | $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 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 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, annual revenues and segmented earnings are based on contracted and uncontracted spot transportation, as well as liquids marketing activities. Quarter-over-quarter revenues and segmented earnings 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

• certain fair value adjustments.

122 \| TC Energy **Management's discussion and analysis** 2022

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In Power and Energy Solutions, quarter-over-quarter revenues and segmented earnings 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 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.

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. Beginning in first quarter 2022, with consistent presentation of prior periods, we excluded 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 third quarter 2022, TGNH and the CFE executed agreements which consolidate a number of operating and in-development natural gas pipelines in central and southeast Mexico under one TSA. As this TSA contains a lease, we have recognized amounts in net investment in leases on our Condensed consolidated balance sheet. In accordance with the requirements of U.S. GAAP, we have recognized an expected credit loss provision related to net investment in leases. The amount of this provision will fluctuate from period to period based on changing economic assumptions and forward-looking information. The provision is an estimate of losses that may occur over the duration of the TSA through 2055. As this provision, as well as a provision related to certain contract assets in Mexico, do not reflect losses or cash outflows that were incurred under this lease arrangement in the current period or from our underlying operations, we have excluded any unrealized changes from comparable measures.

We also 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 do not accurately reflect the gains and losses that will be realized at settlement. These amounts offset within each reporting period, resulting in no impact on net income. This peso-denominated loan was fully repaid in first quarter 2022.

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. Refer to Note 7, Coastal GasLink, of our 2022 Consolidated financial statements for additional information

• 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.

TC Energy **Management's discussion and analysis** 2022 \| 123

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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 VRP

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

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

In second quarter 2021, comparable earnings also excluded:

• preservation and other costs of $16 million after tax, which could not be accrued as part of the Keystone XL asset impairment charge and interest expense on the Keystone XL project-level credit facility prior to its termination

• a $13 million after-tax recovery of certain costs from the IESO associated with the Ontario natural gas-fired power plants sold in 2020

• an incremental $2 million after-tax asset impairment charge, net of expected contractual recoveries and other contractual and legal obligations, related to the termination of the Keystone XL pipeline project.

In first quarter 2021, comparable earnings also excluded:

• an after-tax asset impairment charge, net of expected contractual recoveries and other contractual and legal obligations, of $2.2 billion related to the formal suspension of the Keystone XL pipeline project following the January 2021 revocation of the Presidential Permit.

124 \| TC Energy **Management's discussion and analysis** 2022

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**FOURTH QUARTER 2022 HIGHLIGHTS**

**Consolidated results** 

---

| | | |
|:---|:---|:---|
| **three months ended December 31** | **2022** | **2021** |
| (millions of $, except per share amounts) | **2022** | **2021** |
| Canadian Natural Gas Pipelines | **(2592)** | 389 |
| U.S. Natural Gas Pipelines | **882** | 818 |
| Mexico Natural Gas Pipelines | **96** | 123 |
| Liquids Pipelines | **322** | 373 |
| Power and Energy Solutions | **298** | 191 |
| Corporate | **(4)** | (6) |
| **Total segmented (losses)/earnings** | **(998)** | 1888 |
| Interest expense | **(722)** | (611) |
| Allowance for funds used during construction | **115** | 72 |
| Foreign exchange (loss)/gain, net | **132** | 28 |
| Interest income and other | **53** | 59 |
| **(Loss)/income before income taxes** | **(1420)** | 1436 |
| Income tax recovery/(expense) | **4** | (278) |
| **Net (loss)/income** | **(1416)** | 1158 |
| Net income attributable to non-controlling interests | **(9)** | (8) |
| **Net (loss)/income attributable to controlling interests** | **(1425)** | 1150 |
| Preferred share dividends | **(22)** | (32) |
| **Net (loss)/income attributable to common shares** | **(1447)** | 1118 |
| **Net (loss)/income per common share – basic** | **($1.42)** | $1.14 |

---

Net (loss)/income attributable to common shares decreased by $2,565 million or $2.56 per common share for the three months ended December 31, 2022 compared to the same period in 2021. The significant decrease for the three months ended December 31, 2022 is primarily due to the net effect of specific items mentioned below. Net (loss)/income per common share also reflects the impact of common shares issued for the acquisition of TC PipeLines, LP in first quarter 2021 and common shares issued in 2022.

The following specific items were recognized in Net (loss)/income attributable to common shares and were excluded from comparable earnings:

**Fourth quarter 2022 results included:**

• an after-tax impairment charge of $2.6 billion related to our equity investment in Coastal GasLink LP. Refer to Note 7, Coastal GasLink, of our 2022 Consolidated financial statements for additional information

• 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.

TC Energy **Management's discussion and analysis** 2022 \| 125

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**Fourth quarter 2021 results included:**

• 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 following the January 20, 2021 revocation of the Presidential Permit

• an after-tax gain of $19 million related to the sale of the remaining 15 per cent 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 primarily related to pension adjustments incurred as part of the VRP

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

Net (loss)/income in both periods 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 (loss)/income attributable to common shares to comparable earnings is shown in the following table.

126 \| TC Energy **Management's discussion and analysis** 2022

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**Reconciliation of net (loss)/income attributable to common shares to comparable earnings**

---

| | | |
|:---|:---|:---|
| **three months ended December 31** | **2022** | **2021** |
| (millions of $, except per share amounts) | **2022** | **2021** |
| **Net (loss)/income attributable to common shares** | **(1447)** | 1118 |
| **Specific items (net of tax):** |  |  |
| &nbsp;&nbsp;&nbsp;Coastal GasLink LP impairment charge | **2643** |  |
| &nbsp;&nbsp;&nbsp;Expected credit loss provision on net investment in leases and certain contract assets | **64** |  |
| &nbsp;&nbsp;&nbsp;Keystone CER decision | **20** |  |
| &nbsp;&nbsp;&nbsp;Keystone XL preservation and other | **8** | 10 |
| &nbsp;&nbsp;&nbsp;Keystone XL asset impairment charge and other | **5** | (60) |
| &nbsp;&nbsp;&nbsp;Settlement of Mexico prior years' income tax assessments | **1** |  |
| &nbsp;&nbsp;&nbsp;Bruce Power unrealized fair value adjustments | **(9)** | (7) |
| &nbsp;&nbsp;&nbsp;Loss on sale of Ontario natural gas-fired power plants | **—** | 6 |
| &nbsp;&nbsp;&nbsp;Voluntary Retirement Program | **—** | (7) |
| &nbsp;&nbsp;&nbsp;Gain on sale of Northern Courier | **—** | (19) |
| &nbsp;&nbsp;&nbsp;Risk management activities<sup>1</sup> | **(156)** | (13) |
| **Comparable earnings** | **1129** | 1028 |
| **Net (loss)/income per common share** | **($1.42)** | $1.14 |
| **Specific items (net of tax):** |  |  |
| &nbsp;&nbsp;&nbsp;Coastal GasLink LP impairment charge | **2.60** |  |
| &nbsp;&nbsp;&nbsp;Expected credit loss provision on net investment in leases and certain contract assets | **0.06** |  |
| &nbsp;&nbsp;&nbsp;Keystone CER decision | **0.02** |  |
| &nbsp;&nbsp;&nbsp;Keystone XL preservation and other | **0.01** | 0.01 |
| &nbsp;&nbsp;&nbsp;Keystone XL asset impairment charge and other | **—** | (0.06) |
| &nbsp;&nbsp;&nbsp;Settlement of Mexico prior years' income tax assessments | **—** |  |
| &nbsp;&nbsp;&nbsp;Bruce Power unrealized fair value adjustments | **(0.01)** | (0.01) |
| &nbsp;&nbsp;&nbsp;Loss on sale of Ontario natural gas-fired power plants | **—** | 0.01 |
| &nbsp;&nbsp;&nbsp;Voluntary Retirement Program | **—** | (0.01) |
| &nbsp;&nbsp;&nbsp;Gain on sale of Northern Courier | **—** | (0.02) |
| &nbsp;&nbsp;&nbsp;Risk management activities | **(0.15)** | (0.01) |
| **Comparable earnings per common share** | **$1.11** | $1.05 |

---

---

| | | | |
|:---|:---|:---|:---|
| 1 | **three months ended December 31** | **2022** | **2021** |
|  | (millions of $) | **2022** | **2021** |
|  | U.S. Natural Gas Pipelines | (28) | 7 |
|  | Liquids Pipelines | (38) | (5) |
|  | Canadian Power | 30 | 4 |
|  | U.S. Power | 5 |  |
|  | Natural Gas Storage | 67 | 30 |
|  | Foreign exchange | 172 | (20) |
|  | Income tax attributable to risk management activities | (52) | (3) |
|  | **Total unrealized gains from risk management activities** | 156 | 13 |

---

TC Energy **Management's discussion and analysis** 2022 \| 127

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**Comparable EBITDA to comparable earnings**

Comparable EBITDA represents segmented earnings adjusted for the specific items described above and excludes non-cash charges for depreciation and amortization.

---

| | | |
|:---|:---|:---|
| **three months ended December 31** | | |
| (millions of $, except per share amounts) | **2022** | **2021** |
| **Comparable EBITDA** |  |  |
| Canadian Natural Gas Pipelines | **768** | 674 |
| U.S. Natural Gas Pipelines | **1141** | 1032 |
| Mexico Natural Gas Pipelines | **211** | 151 |
| Liquids Pipelines | **364** | 380 |
| Power and Energy Solutions | **203** | 168 |
| Corporate | **(4)** | (10) |
| **Comparable EBITDA** | **2683** | 2395 |
| Depreciation and amortization | **(670)** | (634) |
| Interest expense | **(722)** | (611) |
| Allowance for funds used during construction | **115** | 72 |
| Foreign exchange (loss)/gain, net included in comparable earnings | **(40)** | 44 |
| Interest income and other | **53** | 59 |
| Income tax expense included in comparable earnings | **(259)** | (257) |
| Net income attributable to non-controlling interests | **(9)** | (8) |
| Preferred share dividends | **(22)** | (32) |
| **Comparable earnings** | **1129** | 1028 |
| **Comparable earnings per common share** | **$1.11** | $1.05 |

---

128 \| TC Energy **Management's discussion and analysis** 2022

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**Comparable EBITDA – 2022 versus 2021**

Comparable EBITDA increased by $288 million for the three months ended December 31, 2022 compared to the same period in 2021 primarily due to the net effect of the following:

• higher EBITDA in U.S. Natural Gas Pipelines mainly due to increased earnings from our U.S. natural gas marketing business relative to 2021 as a result of increased trading activity and higher margins, incremental earnings from growth projects placed in service and increased earnings from our mineral rights business, partially offset by a decrease due to certain discrete items recognized in 2021

• increased EBITDA from Canadian Natural Gas Pipelines largely attributable to the impact of higher flow-through costs and increased rate-base earnings on the NGTL System and higher Canadian Mainline incentive earnings and flow-through costs

• higher EBITDA from Mexico Natural Gas Pipelines primarily related to earnings from VdR North and Tula East that were placed in commercial service in third quarter 2022

• increased Power and Energy Solutions EBITDA primarily as a result of higher contributions from Bruce Power due to a higher contract price, partially offset by realized losses on funds invested for post-retirement benefits and lower plant output

• lower EBITDA from Liquids Pipelines due to lower results on the U.S. Gulf Coast section of the Keystone Pipeline System and the CER decision in respect of a tolling-related complaint pertaining to amounts reflected in 2022, partially offset by increased contributions from liquids marketing activities attributable to higher margins

• the positive foreign exchange impact of a stronger U.S. dollar on the Canadian dollar equivalent comparable EBITDA in our U.S. dollar-denominated operations. U.S. dollar-denominated comparable EBITDA increased by US$27 million compared to 2021; this was translated to Canadian dollars at an average rate of 1.36 in 2022 versus 1.26 in 2021. Refer to the Foreign exchange discussion below 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 – 2022 versus 2021**

Comparable earnings increased by $101 million or $0.06 per common share for the three months ended December 31, 2022 compared to the same period in 2021 and was primarily the net effect of:

• changes in comparable EBITDA described above

• 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 and capital expenditures on the Southeast Gateway pipeline project, partially offset by the impact of decreased capital expenditures on our U.S. natural gas pipeline projects

• increased Interest expense primarily due to higher interest rates on increased levels of short-term borrowings, long-term debt and junior subordinated note issuances, net of maturities and the foreign exchange impact of a stronger U.S. dollar in 2022

• net foreign exchange losses in the fourth quarter compared to net foreign exchange gains for the same period in 2021 on derivatives used to manage our net exposure to foreign exchange rate fluctuation on U.S. dollar-denominated income, partially offset by higher realized gains for the same period in 2022 compared to 2021 on derivatives used to manage our exposure to net liabilities in Mexico that give rise to foreign exchange gains and losses

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

TC Energy **Management's discussion and analysis** 2022 \| 129

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**Foreign exchange**

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. The balance of the 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 months ended December 31, 2022 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 December 31** | | |
| (millions of US$) | **2022** | **2021** |
| **Comparable EBITDA** |  |  |
| &nbsp;&nbsp;&nbsp;U.S. Natural Gas Pipelines | **842** | 819 |
| &nbsp;&nbsp;&nbsp;Mexico Natural Gas Pipelines<sup>1</sup> | **156** | 140 |
| &nbsp;&nbsp;&nbsp;Liquids Pipelines | **204** | 216 |
|  | **1202** | 1175 |
| Depreciation and amortization | **(237)** | (245) |
| Interest on long-term debt and junior subordinated notes | **(323)** | (314) |
| Allowance for funds used during construction | **55** | 28 |
| Non-controlling interests and other | **(44)** | (9) |
|  | **653** | 635 |
| Average exchange rate - U.S. to Canadian dollars | **1.36** | 1.26 |

---

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

A portion of our Mexico Natural Gas Pipelines monetary assets and liabilities are peso-denominated, while the functional currency for our Mexico operations is U.S. dollars. These peso-denominated balances are revalued to U.S. dollars and, as a result, 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 the 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. As our U.S. dollar-denominated monetary assets and liabilities continue to grow, this exposure increases. These exposures are partially managed using foreign exchange derivatives, with the gains and losses on the derivatives recorded in Foreign exchange loss/(gain), net in our Consolidated statement of income.

130 \| TC Energy **Management's discussion and analysis** 2022

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**Highlights by business segment**

**Canadian Natural Gas Pipelines**

Canadian Natural Gas Pipelines segmented (losses)/earnings decreased by $2,981 million for the three months ended December 31, 2022 compared to the same period in 2021 and included the following specific item which has been excluded from our calculation of comparable EBIT and comparable earnings:

• a pre-tax impairment charge of $3.0 billion in 2022 related to our equity investment in Coastal GasLink LP. Refer to Note 7, Coastal GasLink, of our 2022 Consolidated financial statements for additional information.

Net income for the NGTL System increased by $21 million for the three months ended December 31, 2022 compared to the same period in 2021 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 for the three months ended December 31, 2022 increased by $4 million compared to the same period in 2021 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 for Canadian Natural Gas Pipelines increased by $94 million for the three months ended December 31, 2022 compared to the same period in 2021 due to the net effect of:

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

• higher flow-through income taxes and incentive earnings on the Canadian Mainline

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

Depreciation and amortization increased by $27 million for the three months ended December 31, 2022 compared to the same period in 2021 due to NGTL System expansion facilities that were placed in service.

**U.S. Natural Gas Pipelines**

U.S. Natural Gas Pipelines segmented earnings increased by $64 million for the three months ended December 31, 2022 compared to the same period in 2021 and included the following specific item which has been excluded from our calculation of comparable EBITDA and comparable EBIT:

• 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 months ended December 31, 2022 had a positive impact on the Canadian dollar equivalent segmented earnings from our U.S. operations compared to the same period in 2021.

Comparable EBITDA for U.S. Natural Gas Pipelines increased by US$23 million for the three months ended December 31, 2022 compared to the same period in 2021 and was primarily due to the net effect of:

• higher realized earnings related to our U.S. natural gas marketing business relative to 2021 due to increased trading activity and higher margins

• incremental earnings from growth projects placed in service

• increased earnings from our mineral rights business due to higher commodity prices

• decreased earnings in 2022 primarily due to certain discrete items recognized in 2021

• a decrease in earnings as a result of certain fourth quarter 2022 adjustments related to regulatory deferrals, partially offset by an increase in earnings due to higher transportation rates effective August 1, 2022, both pursuant to the ANR uncontested rate settlement. Refer to the U.S. Natural Gas Pipelines – Significant events section for additional information.

Depreciation and amortization decreased by US$4 million for the three months ended December 31, 2022 compared to the same period in 2021 mainly due to the timing of certain depreciation adjustments related to the Columbia Gas rate case settlement in 2021, partially offset by new projects placed in service.

TC Energy **Management's discussion and analysis** 2022 \| 131

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**Mexico Natural Gas Pipelines**

Mexico Natural Gas Pipelines segmented earnings decreased by $27 million for the three months ended December 31, 2022 compared to the same period in 2021. This decrease is due to the impact of an expected credit loss provision of $92 million, relating to the TGNH net investment in leases and certain contract assets. In accordance with the requirements of U.S. GAAP, an expected credit loss provision must be recognized on the TGNH net investment in leases. The provision is an estimate of losses that may occur over the duration of the TSA through 2055. As this provision, as well as a provision related to certain contract assets in Mexico, do not reflect actual losses or cash outflows that were incurred under the lease arrangement in the current period or from our underlying operations, we have excluded these unrealized changes from our calculation of comparable EBITDA and comparable EBIT. Refer to Note 28, Risk management and financial instruments, of our 2022 Consolidated financial statements for additional information on expected credit loss provisions.

A stronger U.S. dollar for the three months ended December 31, 2022 had a positive impact on the Canadian dollar equivalent segmented earnings compared to the same period in 2021.

Comparable EBITDA for Mexico Natural Gas Pipelines increased by US$34 million for the three months ended December 31, 2022 compared to the same period in 2021, primarily due to higher revenues related to the commercial in-service of VdR North and Tula East in third quarter 2022.

The decrease in Depreciation and amortization of US$4 million for the three months ended December 31, 2022 compared to the same period in 2021 is 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 Consolidated balance sheet within net investment in leases with no depreciation expense being recognized.

**Liquids Pipelines**

Liquids Pipelines segmented earnings decreased by $51 million for the three months ended December 31, 2022 compared to the same period in 2021 and included the following specific items which have been excluded from our calculation of comparable EBIT:

• a $118 million pre-tax adjustment in 2022 to the 2021 Keystone XL asset impairment charge and other resulting from the gain on sale of Keystone XL project assets and reduction to the estimate for contractual and legal obligations related to termination activities

• a $79 million pre-tax asset impairment charge reduction recognized for the three months ended December 31, 2021, associated with the termination of the Keystone XL pipeline project and related projects following the January 2021 revocation of the Presidential Permit

• a $27 million pre-tax charge due to the CER decision issued in December 2022 in respect of a tolling-related complaint pertaining to amounts reflected in 2021 and 2020

• pre-tax gain of $13 million in 2021 related to the sale of the remaining 15 per cent interest in Northern Courier

• pre-tax preservation and other costs for Keystone XL pipeline project assets of $10 million for the three months ended December 31, 2022 ($14 million for the three months ended December 31, 2021), 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 2022 relative to 2021 had a positive impact on the Canadian dollar equivalent segmented earnings from our U.S. operations.

Comparable EBITDA for Liquids Pipelines decreased by $16 million for the three months ended December 31, 2022 compared to the same period in 2021 primarily due to the net effect of:

• lower rates and volumes on the U.S. Gulf Coast section of the Keystone Pipeline System, partially offset by higher long-haul contracted volumes and approximately 20,000 Bbl/d of long-term contracts from the 2019 Open Season that were commercialized in April 2022 with an additional 10,000 Bbl/d in September 2022

• the CER decision issued in December 2022 in respect of a tolling-related complaint pertaining to amounts invoiced in 2022

• increased contributions from liquids marketing activities due to higher margins.

Depreciation and amortization increased by $5 million for the three months ended December 31, 2022 compared to the same period in 2021 primarily as a result of a stronger U.S. dollar.

132 \| TC Energy **Management's discussion and analysis** 2022

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**Power and Energy Solutions**

Power and Energy Solutions segmented earnings increased by $107 million for the three months ended December 31, 2022 compared to the same period in 2021 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 increased by $35 million for the three months ended December 31, 2022 compared to the same periods in 2021 primarily due to the net effect of:

• higher contributions from Bruce Power primarily due to a higher contract price, partially offset by realized losses on funds invested for post-retirement benefits and risk management activities and lower plant output resulting from greater outage days

• increased Natural Gas Storage and other results mainly due to decreased business development costs across the segment in the fourth quarter of 2022

• lower results from Canadian Power were primarily due to reduced contributions from trading activities, partially offset by higher realized power prices.

Depreciation and amortization for the three months ended December 31, 2022 was consistent with the same period in 2021.

**Corporate**

Corporate segmented losses for the three months ended December 31, 2022 were consistent compared to the same period in 2021. Corporate segmented (losses)/earnings included accrued pre-tax costs for the VRP offered in 2021 and foreign exchange losses and gains 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 losses and 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 gains and losses on the inter-affiliate loan receivable included in Foreign exchange (loss)/gain, net. Corporate segmented (losses)/earnings for the three months ended December 31, 2021 included an $8 million gain primarily due to a pension settlement and curtailment following the VRP offered in 2021.

Comparable EBITDA and EBIT for Corporate for the three months ended December 31, 2022 was consistent with the same period in 2021.

TC Energy **Management's discussion and analysis** 2022 \| 133

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Glossary

---

| | |
|:---|:---|
| **Units of measure** | **Units of measure** |
| Bbl/d | Barrel(s) per day |
| Bcf | Billion cubic feet |
| Bcf/d | Billion cubic feet per day |
| GWh | Gigawatt hours |
| km | Kilometres |
| MMcf/d | Million cubic feet per day |
| MW | Megawatt(s) |
| MWh | Megawatt hours |
| PJ/d | Petajoule per day |
| TJ/d | Terajoule per day |
| **General terms and terms related to our operations** | **General terms and terms related to our operations** |
| ATM | An at-the-market program allowing us to issue common shares from treasury at the prevailing market price |
| bitumen | A thick, heavy oil that must be diluted to flow (also see: diluent). One of the components of the oil sands, along with sand, water and clay |
| CEO | Chief Executive Officer |
| CFO | Chief Financial Officer |
| cogeneration facilities | Facilities that produce both electricity and useful heat at the same time |
| diluent | A thinning agent made up of organic compounds. Used to dilute bitumen so it can be transported through pipelines |
| DRP | Dividend Reinvestment and Share Purchase Plan |
| ESG | Environmental, social and governance |
| Empress | A major delivery/receipt point for natural gas near the Alberta/Saskatchewan border |
| FID | Final investment decision |
| force majeure | Unforeseeable circumstances that prevent a party to a contract from fulfilling it |
| GHG | Greenhouse gas |
| HCAs | High-consequence areas |
| HSSE | Health, safety, sustainability and environment |
| investment base | Includes rate base as well as assets under construction |
| LDC | Local distribution company |
| LNG | Liquefied natural gas |
| MOU | Memorandum of understanding |
| OM&A | Operating, maintenance and administration |
| PPA | Power purchase arrangement |
| rate base | Average assets in service, working capital and deferred amounts used in setting of regulated rates |
| RNG | Renewable natural gas |
| TSA | Transportation Service Agreement |
| TOMS | TC Energy's Operational Management System |
| UNGC | United Nations Global Compact |
| WCSB | Western Canadian Sedimentary basin |

---

---

| | |
|:---|:---|
| **Accounting terms** | **Accounting terms** |
| AFUDC | Allowance for funds used during construction |
| U.S.GAAP / GAAP | U.S. generally accepted accounting principles |
| LIBOR | London Interbank Offered Rate |
| RRA | Rate-regulated accounting |
| ROE | Return on common equity |
| **Government and regulatory bodies terms** | **Government and regulatory bodies terms** |
| AER | Alberta Energy Regulator |
| CER | Canada Energy Regulator |
| CFE | Comisión Federal de Electricidad (Mexico) |
| CRE | Comisión Reguladora de Energia, or Energy Regulatory Commission (Mexico) |
| ECCC | Environment and Climate Change Canada |
| FERC | Federal Energy Regulatory Commission (U.S.) |
| IESO | Independent Electricity System Operator (Ontario) |
| NYSE | New York Stock Exchange |
| OBPS | Output Based Pricing System |
| OPEC+ | Organization of the Petroleum Exporting Countries plus certain other<br>oil-exporting nations |
| OPG | Ontario Power Generation |
| PHMSA | Pipeline and Hazardous Materials Safety Administration |
| SEC | U.S. Securities and Exchange Commission |
| TCFD | Task Force on Climate-Related Financial Disclosures |
| TSX | Toronto Stock Exchange |

---

134 \| TC Energy **Management's discussion and analysis** 2022

## Exhibit 13.3

?xml version="1.0" ? trp-20221231_d2

EXHIBIT 13.3

Management's Report on Internal Control over Financial Reporting

The consolidated financial statements and Management's Discussion and Analysis (MD&A) included in this Annual Report are the responsibility of the management of TC Energy Corporation (TC Energy or the Company) and have been approved by the Board of Directors of the Company. The consolidated financial statements have been prepared by management in accordance with United States generally accepted accounting principles (GAAP) and include amounts that are based on estimates and judgments. The MD&A is based on the Company's financial results. It compares the Company's financial and operating performance in 2022 to that in 2021, and highlights significant changes between 2021 and 2020. The MD&A should be read in conjunction with the consolidated financial statements and accompanying notes. Financial information contained elsewhere in this Annual Report is consistent with the consolidated financial statements.

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management has designed and maintains a system of internal control over financial reporting, including a program of internal audits to carry out its responsibility. Management believes these controls provide reasonable assurance that financial records are reliable and form a proper basis for the preparation of financial statements. The internal control over financial reporting includes management's communication to employees of policies that govern ethical business conduct.

Under the supervision and with the participation of the President and Chief Executive Officer and the Chief Financial Officer, management conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management concluded, based on its evaluation, that internal control over financial reporting was effective as of December 31, 2022, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes.

The Board of Directors is responsible for reviewing and approving the consolidated financial statements and MD&A and ensuring that management fulfills its responsibilities for financial reporting and internal control. The Board of Directors carries out these responsibilities primarily through the Audit Committee, which consists of independent, non-management directors. The Audit Committee meets with management at least four times a year and meets independently with internal and external auditors and as a group to review any significant accounting, internal control and auditing matters in accordance with the terms of the Charter of the Audit Committee, which is set out in the Annual Information Form. The Audit Committee's responsibilities include overseeing management's performance in carrying out its financial reporting responsibilities and reviewing the Annual Report, including the consolidated financial statements and MD&A, before these documents are submitted to the Board of Directors for approval. The internal and independent external auditors have access to the Audit Committee without the requirement to obtain prior management approval.

The Audit Committee approves the terms of engagement of the independent external auditors and reviews the annual audit plan, the Auditors' Report and the results of the audit. It also recommends to the Board of Directors the firm of external auditors to be appointed by the shareholders.

The shareholders have appointed KPMG LLP as independent external auditors to express an opinion as to whether the consolidated financial statements present fairly, in all material respects, the Company's consolidated financial position, results of operations and cash flows in accordance with GAAP. The reports of KPMG LLP outline the scope of its examinations and its opinions on the consolidated financial statements and the effectiveness of the Company's internal control over financial reporting.

---

| | |
|:---|:---|
| ![trp-20221231_g1.jpg](trp-20221231_g1.jpg) | ![trp-20221231_g2.jpg](trp-20221231_g2.jpg) |
| **François L. Poirier**<br>President and<br>Chief Executive Officer | **Joel E. Hunter**<br>Executive Vice-President and<br>Chief Financial Officer |
| February 13, 2023 | |

---

TC Energy **Consolidated Financial Statements** 2022 \| 135

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Report of Independent Registered Public Accounting Firm

**To the Shareholders and Board of Directors TC Energy Corporation:**

**Opinion on the Consolidated Financial Statements**

We have audited the accompanying consolidated balance sheets of TC Energy Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, cash flows, and equity for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 13, 2023 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements; and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

**Assessment of control of Coastal GasLink Limited Partnership under the variable interest model**

As discussed in Notes 2, 7, 11, 12 and 32 to the consolidated financial statements, in July 2022, the Company entered into revised project agreements (collectively, the July 2022 agreements) relating to its investment in Coastal GasLink Limited Partnership (Coastal GasLink LP) and committed to make additional equity contributions. These revisions and additional equity contributions were determined to be a variable interest entity (VIE) reconsideration event for the Company's investment in Coastal GasLink LP. The Company performed a re-assessment of control and determined that Coastal GasLink LP continued to meet the definition of a VIE in which the Company held a variable interest. The re-assessment further determined that the Company was not the primary beneficiary of Coastal GasLink LP as the Company does not have the power, either explicit or implicit through voting rights or otherwise, to direct the activities that most significantly impact the economic performance of Coastal GasLink LP. Accordingly, the Company continued to account for its investment using the equity method of accounting. The carrying value of the Company's equity investment in Coastal GasLink LP was nil and its maximum exposure to loss as it relates to its investment in Coastal GasLink LP was $3.3 billion as of December 31, 2022.

136 \| TC Energy **Consolidated Financial Statements** 2022

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We identified the determination of the primary beneficiary under the VIE model for the Company's interest in Coastal GasLink LP following the reconsideration event as a critical audit matter. Evaluating whether the July 2022 agreements, which included changes to the governing documents and contractual arrangements relating to Coastal GasLink LP, would provide the Company with the substantive power to direct the activities of Costal GasLink LP that most significantly impacted its economic performance, required an increased extent of audit effort due to the complexity of the July 2022 agreements.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of internal control related to the re-assessment of control as a result of the reconsideration event, including the determination of the primary beneficiary. In addition, we performed the following:

• inquired of management and inspected relevant internal materials and the July 2022 agreements to obtain an understanding and evaluate the business purpose of the reconsideration event and its impact on the risks Coastal GasLink LP was designed to create and pass along to its variable interest holders and on the overall governance at Coastal GasLink LP

• evaluated management's determination of:

&nbsp;&nbsp;&nbsp;&nbsp;• the activities that most significantly impact the economic performance of Coastal GasLink LP

&nbsp;&nbsp;&nbsp;&nbsp;• how decisions about the most significant activities are made and the party or parties that make them, including whether the Company's economic interest in Coastal GasLink LP provides actual or effective power beyond its stated power

&nbsp;&nbsp;&nbsp;&nbsp;• whether the Company had substantive power to direct the activities of Coastal GasLink LP that most significantly impact its economic performance

by comparing to relevant internal materials and the July 2022 agreements, as well as other publicly disclosed information.

**Evaluation of the Company's maximum exposure to loss resulting from its involvement with Coastal GasLink LP** 

As discussed in Notes 7 and 32 to the consolidated financial statements, the maximum exposure to loss as a result of the Company's involvement with Coastal GasLink LP, a VIE, as of December 31, 2022 was $3.3 billion. As discussed in Note 2, the Company's maximum exposure to loss is the maximum loss that could potentially be recorded through net income in future periods as a result of the Company's variable interest in a VIE. Under the terms of the July 2022 agreements, the Company is contractually obligated to fund the capital costs to complete the Coastal GasLink pipeline which is estimated to be $3.3 billion (capital costs to complete) through additional equity contributions in Coastal GasLink LP (future funding requirements), which are subject to any final cost sharing between the Coastal GasLink LP partners. The determination of the Company's maximum exposure to loss involves an estimate of capital costs to complete.

We identified the evaluation of the Company's maximum exposure to loss resulting from its involvement with Coastal GasLink LP as a critical audit matter. The estimate of capital costs to complete involved significant audit effort, subjectivity, and judgment.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company's determination of the estimate of capital costs to complete and resulting maximum exposure to loss. In addition, we performed the following:

• evaluated the estimate of capital costs to complete used in the Company's determination of its maximum exposure to loss by:

&nbsp;&nbsp;&nbsp;&nbsp;• inspecting the July 2022 agreements and documents with contractors

&nbsp;&nbsp;&nbsp;&nbsp;• gaining an understanding of the status of pipeline construction project activities and the related risks by comparing to status reports provided to the partners of Coastal GasLink LP, governance committee minutes, and interviewing project personnel

• tested the Company's maximum exposure to loss resulting from its involvement with Coastal GasLink LP using the estimate of capital costs to complete and future funding requirements in accordance with the July 2022 agreements.

TC Energy **Consolidated Financial Statements** 2022 \| 137

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**Qualitative goodwill impairment indicators for the Columbia reporting unit**

As discussed in Notes 2 and 14 to the consolidated financial statements, the goodwill balance as of December 31, 2022 for the Columbia Pipeline Group, Inc. (Columbia) reporting unit was $9,948 million. The Company assesses goodwill for impairment testing annually or more frequently if events or changes in circumstances indicate that the carrying value of a reporting unit, including goodwill, might be impaired. The Company performed qualitative assessments to determine whether events or changes in circumstances indicate that the Columbia reporting unit goodwill might be impaired. This qualitative assessment was performed as of December 31, 2022.

We identified the evaluation of qualitative goodwill impairment indicators, or qualitative factors, for the Columbia reporting unit as a critical audit matter. The assessment of the potential impact that these qualitative factors have on the Columbia reporting unit's fair value required the application of subjective auditor judgment. Qualitative factors include macroeconomic conditions, industry and market considerations, valuation multiples and discount rates, cost factors, historical and forecasted financial results and events specific to the Columbia reporting unit, which required a higher degree of auditor judgment to evaluate. These qualitative factors could have had a significant effect on the Company's qualitative assessment and the potential for the need to perform a quantitative goodwill impairment test. In addition, the audit effort associated with this evaluation required specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company's goodwill impairment assessment process, including controls related to the assessment of potential qualitative factors. We evaluated the Company's assessment of identified event-specific changes with respect to the Columbia reporting unit against our knowledge of event-specific changes obtained through other audit procedures. We evaluated information relevant to the Columbia reporting unit from analyst reports in the energy and utility industries, including global energy consumption forecasts and natural gas production forecasts, which were compared to geopolitical and market considerations used by the Company. We compared the current valuation multiple and discount rate, cost factors, historical and forecasted financial results of the Columbia reporting unit, including the impact of newly approved growth projects to assumptions used in the quantitative goodwill impairment test performed in a previous period. In addition, we involved a valuation professional with specialized skills and knowledge, who assisted in:

• evaluating the Company's determination of the valuation multiple by comparing it to independently observed, recent market transactions of comparable assets and using publicly available market data for comparable entities

• evaluating the discount rate used by management in the assessment, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities.

138 \| TC Energy **Consolidated Financial Statements** 2022

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**Valuation of goodwill for the ANR reporting unit**

As discussed in Notes 2 and 14 to the consolidated financial statements, the goodwill balance as of December 31, 2022 for the American Natural Resources (ANR) reporting unit was $2,634 million. The Company assesses goodwill for impairment testing annually or more frequently if events or changes in circumstances indicate that the carrying value of a reporting unit, including goodwill, might be impaired. The Company has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment assessment. In respect of the ANR reporting unit, the Company elected to proceed directly to the quantitative goodwill impairment test as of December 31, 2022 following the passage of time from the previous test as of December 31, 2016, and following the ANR settlement-in-principle in 2022. The quantitative goodwill impairment assessment involves determining the fair value of a reporting unit and comparing that value to the carrying value of the reporting unit, including goodwill. Fair value is estimated using a discounted cash flow model which requires the use of assumptions related to revenue and capital expenditure projections, the valuation multiple and the discount rate (key assumptions). It was determined that the fair value of the ANR reporting unit exceeded its carrying value, including goodwill, as of December 31, 2022.

We identified the valuation of goodwill for the ANR reporting unit as a critical audit matter. A high degree of auditor judgment was required to evaluate the key assumptions. Minor changes to the key assumptions could have had a significant effect on the Company's determination of the fair value of the ANR reporting unit. In addition, the audit effort associated with this estimate required specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to the Company's determination of the fair value of the ANR reporting unit and key assumptions. We compared the Company's historical revenue and capital expenditure projections to actual results to assess the Company's ability to accurately forecast. We evaluated the Company's revenue and capital expenditure projections by comparing them to the actual results and the outcomes of the ANR settlement-in-principle in 2022. We also compared the Company's revenue and capital expenditure projections to assumptions used in industry publications related to North American and global energy consumption and natural gas production forecasts. In addition, we involved a valuation professional with specialized skills and knowledge, who assisted in:

• evaluating the Company's determination of a valuation multiple by comparing it to independently observed recent market transactions of comparable assets and publicly available market data for comparable entities

• evaluating the discount rate used by management in the valuation, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities

• evaluating the Company's estimate of the fair value of the ANR reporting unit by comparing the result of the Company's estimate to publicly available market data and valuation metrics for comparable entities.

TC Energy **Consolidated Financial Statements** 2022 \| 139

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**Valuation of goodwill for the Great Lakes reporting unit**

As discussed in Notes 2 and 14 to the consolidated financial statements, the Company performed a quantitative goodwill impairment test for the Great Lakes reporting unit during first quarter 2022. The Company assesses goodwill for impairment testing annually or more frequently if events or changes in circumstances indicate that the carrying value of a reporting unit, including goodwill, might be impaired. In respect of the Great Lakes reporting unit, the Company performed the quantitative goodwill impairment test following an unopposed rate case settlement. The quantitative goodwill impairment assessment involves determining the fair value of a reporting unit and comparing that value to the carrying value of the reporting unit, including goodwill. Fair value is estimated using a discounted cash flow model which requires the use of assumptions related to revenue and capital expenditure projections, the valuation multiple and the discount rate (key assumptions). It was determined that the estimated fair value of the Great Lakes reporting unit no longer exceeded its carrying value and a pre-tax goodwill impairment charge of $571 million was recorded during the period.

We identified the valuation of goodwill for the Great Lakes reporting unit as a critical audit matter. A high degree of auditor judgment was required to evaluate the key assumptions. Minor changes to the key assumptions used to estimate fair value could have had a significant effect on the Company's determination of the fair value of the Great Lakes reporting unit. In addition, the audit effort associated with this estimate required specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to the Company's determination of the fair value of the Great Lakes reporting unit and key assumptions. We compared the Company's historical revenue and capital expenditure projections to actual results to assess the Company's ability to accurately forecast. We evaluated the Company's revenue and capital expenditure projections by comparing them to the actual results and the outcomes of the unopposed rate case settlement with shippers during first quarter of 2022. We also compared the Company's revenue projections to assumptions used in industry publications related to North American and global energy consumption and natural gas production forecasts. In addition, we involved a valuation professional with specialized skills and knowledge, who assisted in:

• evaluating the Company's determination of a valuation multiple by comparing it to independently observed recent market transactions of comparable assets and publicly available market data for comparable entities

• evaluating the discount rate used by management in the valuation, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities

• evaluating the Company's estimate of the fair value of the Great Lakes reporting unit by comparing the result of the Company's estimate to publicly available market data and valuation metrics for comparable entities.

![trp-20221231_g3.jpg](trp-20221231_g3.jpg)

Chartered Professional Accountants

We have served as the Company's auditor since 1956.

Calgary, Canada

February 13, 2023

140 \| TC Energy **Consolidated Financial Statements** 2022

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Report of Independent Registered Public Accounting Firm

**To the Shareholders and Board of Directors TC Energy Corporation:**

**Opinion on Internal Control Over Financial Reporting**

We have audited TC Energy Corporation's (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, cash flows, and equity for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 13, 2023 expressed an unqualified opinion on those consolidated financial statements.

**Basis for Opinion**

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting included in the Company's Management's Discussion and Analysis. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

**Definition and Limitations of Internal Control Over Financial Reporting**

A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

![trp-20221231_g3.jpg](trp-20221231_g3.jpg)

Chartered Professional Accountants

Calgary, Canada

February 13, 2023

TC Energy **Consolidated Financial Statements** 2022 \| 141

------

Consolidated statement of income

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $, except per share amounts) | **2022** | **2021** | **2020** |
| **Revenues** (Note 5) |  |  |  |
| Canadian Natural Gas Pipelines | **4764** | 4519 | 4469 |
| U.S. Natural Gas Pipelines | **5933** | 5233 | 5031 |
| Mexico Natural Gas Pipelines | **688** | 605 | 716 |
| Liquids Pipelines | **2668** | 2306 | 2371 |
| Power and Energy Solutions | **924** | 724 | 412 |
|  | **14977** | 13387 | 12999 |
| **Income from Equity Investments** (Note 11) | **1054** | 898 | 1019 |
| **Impairment of Equity Investment** (Notes 7 and 11) | **(3048)** |  |  |
| **Operating and Other Expenses** |  |  |  |
| Plant operating costs and other | **4932** | 4098 | 3878 |
| Commodity purchases resold | **534** | 87 |  |
| Property taxes | **848** | 774 | 727 |
| Depreciation and amortization | **2584** | 2522 | 2590 |
| Goodwill and asset impairment charges and other (Notes 6 and 14) | **453** | 2775 |  |
|  | **9351** | 10256 | 7195 |
| **Net Gain/(Loss) on Sale of Assets** (Note 30) | **—** | 30 | (50) |
| **Financial Charges** |  |  |  |
| Interest expense (Note 20) | **2588** | 2360 | 2228 |
| Allowance for funds used during construction | **(369)** | (267) | (349) |
| Foreign exchange loss/(gain), net (Note 22) | **185** | (10) | (28) |
| Interest income and other | **(146)** | (190) | (185) |
|  | **2258** | 1893 | 1666 |
| **Income before Income Taxes** | **1374** | 2166 | 5107 |
| **Income Tax Expense** (Note 19) |  |  |  |
| Current | **415** | 305 | 252 |
| Deferred | **174** | (185) | (58) |
|  | **589** | 120 | 194 |
| **Net Income** | **785** | 2046 | 4913 |
| Net income attributable to non-controlling interests (Note 23) | **37** | 91 | 297 |
| **Net Income Attributable to Controlling Interests** | **748** | 1955 | 4616 |
| Preferred share dividends | **107** | 140 | 159 |
| **Net Income Attributable to Common Shares** | **641** | 1815 | 4457 |
| **Net Income per Common Share** (Note 24) |  |  |  |
| Basic | **$0.64** | $1.87 | $4.74 |
| Diluted | **$0.64** | $1.86 | $4.74 |
| **Dividends Declared per Common Share** | **$3.60** | $3.48 | $3.24 |
| **Weighted Average Number of Common Shares** (millions) (Note 24) |  |  |  |
| Basic | **995** | 973 | 940 |
| Diluted | **996** | 974 | 940 |

---

The accompanying Notes to the consolidated financial statements are an integral part of these statements.

142 \| TC Energy **Consolidated Financial Statements** 2022

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Consolidated statement of comprehensive income

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| **Net Income** | **785** | 2046 | 4913 |
| **Other Comprehensive Income/(Loss), Net of Income Taxes** |  |  |  |
| Foreign currency translation gains and losses on net investment in foreign operations | **1494** | (108) | (609) |
| Change in fair value of net investment hedges | **(36)** | (2) | 36 |
| Change in fair value of cash flow hedges | **(39)** | (10) | (583) |
| Reclassification to net income of gains and losses on cash flow hedges | **42** | 55 | 489 |
| &nbsp;&nbsp;Unrealized actuarial gains and losses on pension and other post-retirement benefit <br>plans | **63** | 158 | 12 |
| &nbsp;&nbsp;Reclassification to net income of actuarial gains and losses on pension and other <br>post-retirement benefit plans | **6** | 14 | 17 |
| Other comprehensive income/(loss) on equity investments | **867** | 535 | (280) |
| Other comprehensive income/(loss) (Note 26) | **2397** | 642 | (918) |
| **Comprehensive Income** | **3182** | 2688 | 3995 |
| Comprehensive income attributable to non-controlling interests | **45** | 81 | 259 |
| **Comprehensive Income Attributable to Controlling Interests** | **3137** | 2607 | 3736 |
| Preferred share dividends | **107** | 140 | 159 |
| **Comprehensive Income Attributable to Common Shares** | **3030** | 2467 | 3577 |

---

The accompanying Notes to the consolidated financial statements are an integral part of these statements.

TC Energy **Consolidated Financial Statements** 2022 \| 143

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Consolidated statement of cash flows

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| **Cash Generated from Operations** |  |  |  |
| Net income | **785** | 2046 | 4913 |
| Depreciation and amortization | **2584** | 2522 | 2590 |
| Goodwill and asset impairment charges and other (Notes 6 and 14) | **453** | 2775 |  |
| Deferred income taxes (Note 19) | **174** | (185) | (58) |
| Income from equity investments (Note 11) | **(1054)** | (898) | (1019) |
| Impairment of equity investment (Notes 7 and 11) | **3048** |  |  |
| Distributions received from operating activities of equity investments (Note 11) | **1025** | 975 | 1123 |
| Employee post-retirement benefits funding, net of expense (Note 27) | **(29)** | (5) | (19) |
| Net (gain)/loss on sale of assets (Note 30) | **—** | (30) | 50 |
| Equity allowance for funds used during construction | **(248)** | (191) | (235) |
| Unrealized losses/(gains) on financial instruments | **135** | 194 | (103) |
| Expected credit loss provision | **163** |  |  |
| Foreign exchange losses on loan receivable from affiliate (Note 12) | **28** | 41 | 86 |
| Other | **(50)** | (67) | 57 |
| Increase in operating working capital (Note 29) | **(639)** | (287) | (327) |
| Net cash provided by operations | **6375** | 6890 | 7058 |
| **Investing Activities** |  |  |  |
| Capital expenditures (Note 4) | **(6678)** | (5924) | (8013) |
| Capital projects in development (Note 4) | **(49)** |  | (122) |
| Contributions to equity investments (Notes 4, 7 and 11) | **(3433)** | (1210) | (765) |
| Keystone XL contractual recoveries (Note 6) | **571** |  |  |
| Proceeds from sales of assets, net of transaction costs | **—** | 35 | 3407 |
| Loans to affiliate issued, net (Notes 7 and 12) | **(11)** | (239) |  |
| Other distributions from equity investments (Note 11) | **2632** | 73 |  |
| Deferred amounts and other | **(41)** | (447) | (559) |
| Net cash used in investing activities | **(7009)** | (7712) | (6052) |
| **Financing Activities** |  |  |  |
| Notes payable issued/(repaid), net | **766** | 1003 | (220) |
| Long-term debt issued, net of issue costs | **2508** | 10730 | 5770 |
| Long-term debt repaid | **(1338)** | (7758) | (3977) |
| Junior subordinated notes issued, net of issue costs | **1008** | 495 |  |
| Gain/(loss) on settlement of financial instruments | **23** | (10) | (130) |
| Redeemable non-controlling interest repurchased (Note 6) | **—** | (633) |  |
| Contributions from redeemable non-controlling interest (Note 6) | **—** |  | 1033 |
| Dividends on common shares | **(3192)** | (3317) | (2987) |
| Dividends on preferred shares | **(106)** | (141) | (159) |
| Distributions to non-controlling interests | **(44)** | (74) | (221) |
| Distributions on Class C Interests (Note 6) | **(43)** | (16) |  |
| Common shares issued, net of issue costs | **1905** | 148 | 91 |
| Preferred shares redeemed (Note 25) | **(1000)** | (500) |  |
| Acquisition of TC PipeLines, LP transaction costs (Note 23) | **—** | (15) |  |
| Net cash provided by/(used in) financing activities | **487** | (88) | (800) |
| **Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents** | **94** | 53 | (19) |
| **(Decrease)/Increase in Cash and Cash Equivalents** | **(53)** | (857) | 187 |
| **Cash and Cash Equivalents** |  |  |  |
| Beginning of year | **673** | 1530 | 1343 |
| **Cash and Cash Equivalents** |  |  |  |
| End of year | **620** | 673 | 1530 |

---

The accompanying Notes to the consolidated financial statements are an integral part of these statements.

144 \| TC Energy **Consolidated Financial Statements** 2022

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Consolidated balance sheet

---

| | | | |
|:---|:---|:---|:---|
| **at December 31** | **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | (millions of Canadian $) | **2022** | **2021** |
| **ASSETS** | **ASSETS** |  |  |
| **Current Assets** | **Current Assets** |  |  |
| Cash and cash equivalents | Cash and cash equivalents | **620** | 673 |
| Accounts receivable | Accounts receivable | **3624** | 3092 |
| Loans receivable from affiliates (Note 12) |  | **—** | 1217 |
| Inventories | Inventories | **936** | 724 |
| Other current assets (Note 8)  | Other current assets (Note 8)  | **2152** | 1717 |
|  |  | **7332** | 7423 |
| **Plant, Property and Equipment** (Note 9) | **Plant, Property and Equipment** (Note 9) | **75940** | 70182 |
| **Net Investment in Leases** (Note 10) | **Net Investment in Leases** (Note 10) | **1895** |  |
| **Equity Investments** (Note 11) | **Equity Investments** (Note 11) | **9535** | 8441 |
| **Long-Term Loans Receivable from Affiliate** (Notes 7 and 12) | **Long-Term Loans Receivable from Affiliate** (Notes 7 and 12) | **—** | 238 |
| **Restricted Investments** | **Restricted Investments** | **2108** | 2182 |
| **Regulatory Assets** (Note 13) | **Regulatory Assets** (Note 13) | **1910** | 1767 |
| **Goodwill** (Note 14) | **Goodwill** (Note 14) | **12843** | 12582 |
| **Other Long-Term Assets** (Note 15) | **Other Long-Term Assets** (Note 15) | **2785** | 1403 |
|  |  | **114348** | 104218 |
| **LIABILITIES** | **LIABILITIES** |  |  |
| **Current Liabilities** | **Current Liabilities** |  |  |
| Notes payable (Note 16) | Notes payable (Note 16) | **6262** | 5166 |
| Accounts payable and other (Note 17) | Accounts payable and other (Note 17) | **7149** | 5099 |
| Dividends payable | Dividends payable | **930** | 879 |
| Accrued interest | Accrued interest | **668** | 577 |
| Current portion of long-term debt (Note 20) | Current portion of long-term debt (Note 20) | **1898** | 1320 |
|  |  | **16907** | 13041 |
| **Regulatory Liabilities** (Note 13) | **Regulatory Liabilities** (Note 13) | **4520** | 4300 |
| **Other Long-Term Liabilities** (Note 18)  | **Other Long-Term Liabilities** (Note 18)  | **1017** | 1059 |
| **Deferred Income Tax Liabilities** (Note 19) | **Deferred Income Tax Liabilities** (Note 19) | **7648** | 6142 |
| **Long-Term Debt** (Note 20) | **Long-Term Debt** (Note 20) | **39645** | 37341 |
| **Junior Subordinated Notes** (Note 21) | **Junior Subordinated Notes** (Note 21) | **10495** | 8939 |
|  |  | **80232** | 70822 |
| **EQUITY** | **EQUITY** |  |  |
| Common shares, no par value (Note 24) | Common shares, no par value (Note 24) | **28995** | 26716 |
| &nbsp;&nbsp;&nbsp;Issued and outstanding: | December 31, 2022 – 1,018 million shares |  |  |
|  | December 31, 2021 – 981 million shares |  |  |
| Preferred shares (Note 25) | Preferred shares (Note 25) | **2499** | 3487 |
| Additional paid-in capital | Additional paid-in capital | **722** | 729 |
| Retained earnings | Retained earnings | **819** | 3773 |
| Accumulated other comprehensive income/(loss) (Note 26) | Accumulated other comprehensive income/(loss) (Note 26) | **955** | (1434) |
| **Controlling Interests** | **Controlling Interests** | **33990** | 33271 |
| **Non-controlling interests** (Note 23) | **Non-controlling interests** (Note 23) | **126** | 125 |
|  |  | **34116** | 33396 |
|  |  | **114348** | 104218 |

---

**Commitments, Contingencies and Guarantees** (Note 31)

**Variable Interest Entities** (Note 32)

**Subsequent Event** (Note 33)

The accompanying Notes to the consolidated financial statements are an integral part of these statements.

On behalf of the Board:

---

| | |
|:---|:---|
| ![trp-20221231_g1.jpg](trp-20221231_g1.jpg) | ![trp-20221231_g4.jpg](trp-20221231_g4.jpg) |
| **François L. Poirier,** Director | **Una M. Power,** Director |

---

TC Energy **Consolidated Financial Statements** 2022 \| 145

------

Consolidated statement of equity

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| **Common Shares** (Note 24) |  |  |  |
| Balance at beginning of year | **26716** | 24488 | 24387 |
| Shares issued: |  |  |  |
| &nbsp;&nbsp;Under public offering, net of issue costs | **1754** |  |  |
| &nbsp;&nbsp;Dividend reinvestment and share purchase plan | **342** |  |  |
| &nbsp;&nbsp;Exercise of stock options | **183** | 165 | 101 |
| &nbsp;&nbsp;Acquisition of TC PipeLines, LP, net of transaction costs (Note 23) | **—** | 2063 |  |
| Balance at end of year | **28995** | 26716 | 24488 |
| **Preferred Shares** (Note 25) |  |  |  |
| Balance at beginning of year | **3487** | 3980 | 3980 |
| Redemption of shares | **(988)** | (493) |  |
| Balance at end of year | **2499** | 3487 | 3980 |
| **Additional Paid-In Capital** |  |  |  |
| Balance at beginning of year | **729** | 2 |  |
| Issuance of stock options, net of exercises | **(7)** | (6) | 2 |
| Keystone XL project-level credit facility retirement and issuance of Class C Interests (Note 6) | **—** | 737 |  |
| Acquisition of TC PipeLines, LP (Note 23) | **—** | (398) |  |
| Repurchase of redeemable non-controlling interest (Note 6) | **—** | 394 |  |
| Balance at end of year | **722** | 729 | 2 |
| **Retained Earnings** |  |  |  |
| Balance at beginning of year | **3773** | 5367 | 3955 |
| Net income attributable to controlling interests | **748** | 1955 | 4616 |
| Common share dividends | **(3595)** | (3409) | (3045) |
| Preferred share dividends | **(95)** | (133) | (159) |
| Redemption of preferred shares | **(12)** | (7) |  |
| Balance at end of year | **819** | 3773 | 5367 |
| **Accumulated Other Comprehensive Income/(Loss)** (Note 26) |  |  |  |
| Balance at beginning of year | **(1434)** | (2439) | (1559) |
| Other comprehensive income/(loss) attributable to controlling interests | **2389** | 652 | (880) |
| Acquisition of TC PipeLines, LP (Note 23) | **—** | 353 |  |
| Balance at end of year | **955** | (1434) | (2439) |
| **Equity Attributable to Controlling Interests** | **33990** | 33271 | 31398 |
| **Equity Attributable to Non-Controlling Interests** |  |  |  |
| Balance at beginning of year | **125** | 1682 | 1634 |
| Net income attributable to non-controlling interests | **37** | 90 | 307 |
| Other comprehensive income/(loss) attributable to non-controlling interests | **8** | (10) | (38) |
| Distributions declared to non-controlling interests | **(44)** | (74) | (221) |
| Acquisition of TC PipeLines, LP (Note 23) | **—** | (1563) |  |
| Balance at end of year | **126** | 125 | 1682 |
| **Total Equity** | **34116** | 33396 | 33080 |

---

The accompanying Notes to the consolidated financial statements are an integral part of these statements.

146 \| TC Energy **Consolidated Financial Statements** 2022

------

Notes to consolidated financial statements

**1. DESCRIPTION OF TC ENERGY'S BUSINESS**

TC Energy Corporation (TC Energy or the Company) is a leading North American energy infrastructure company which operates in five business segments: Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines and Power and Energy Solutions. These segments offer different products and services, including certain natural gas, crude oil and electricity marketing and storage services. The Company also has a Corporate segment, consisting of corporate and administrative functions that provide governance, financing and other support to the Company's business segments.

**Canadian Natural Gas Pipelines**

The Canadian Natural Gas Pipelines segment primarily consists of the Company's investments in 40,792 km (25,347 miles) of regulated natural gas pipelines currently in operation.

**U.S. Natural Gas Pipelines**

The U.S. Natural Gas Pipelines segment primarily consists of the Company's investments in 50,164 km (31,170 miles) of regulated natural gas pipelines, 532 Bcf of regulated natural gas storage facilities and other assets currently in operation.

**Mexico Natural Gas Pipelines**

The Mexico Natural Gas Pipelines segment primarily consists of the Company's investments in 2,775 km (1,723 miles) of regulated natural gas pipelines currently in operation.

**Liquids Pipelines**

The Liquids Pipelines segment primarily consists of the Company's investments in 4,856 km (3,019 miles) of crude oil pipeline systems currently in operation which connect Alberta and U.S. crude oil supplies to U.S. refining markets in Illinois, Oklahoma and Texas.

**Power and Energy Solutions**

For the period ended December 31, 2022, the Power and Storage segment has been renamed the Power and Energy Solutions segment, which primarily consists of the Company's investments in approximately 4,300 MW of power generation facilities and 118 Bcf of non-regulated natural gas storage facilities. These assets are located in Alberta, Ontario, Québec and New Brunswick. In addition, TC Energy has physical and virtual power purchase agreements (PPAs) in Canada and the U.S. to buy and/or sell power from wind and solar facilities. These PPAs have the potential to be leases, derivatives or revenue arrangements depending on the contractual terms of the agreement.

TC Energy **Consolidated Financial Statements** 2022 \| 147

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**2. ACCOUNTING POLICIES**

The Company's consolidated financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles. Amounts are stated in Canadian dollars unless otherwise indicated.

**Basis of Presentation**

These consolidated financial statements include the accounts of TC Energy and its subsidiaries. The Company consolidates variable interest entities (VIEs) for which it is considered to be the primary beneficiary as well as voting interest entities in which it has a controlling financial interest. To the extent there are interests owned by other parties, these interests are included in non-controlling interests. TC Energy uses the equity method of accounting for joint ventures in which the Company is able to exercise joint control and for investments in which the Company is able to exercise significant influence.

Certain prior year amounts have been reclassified to conform to current year presentation.

**Use of Estimates and Judgments**

In preparing these 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.

Certain estimates and judgments have a material impact where the assumptions underlying these accounting estimates relate to matters that are highly uncertain at the time the estimate or judgment is made or are subjective. These estimates and judgments include, but are not limited to:

• assessment of goodwill impairment indicators and fair value of reporting units that contain goodwill (Note 14)

• capital cost estimates to complete the Coastal GasLink pipeline used to measure TC Energy's maximum exposure to loss resulting from its involvement with Coastal GasLink Limited Partnership (Coastal GasLink LP) and in measuring the fair value of TC Energy's equity investment in Coastal GasLink LP (Notes 7 and 32).

Some of the estimates and judgments the Company has to make have a material impact on the consolidated financial statements, but do not involve significant subjectivity or uncertainty. These estimates and judgments include, but are not limited to:

• valuation of Keystone XL assets (Note 6)

• recoverability and depreciation rates of plant, property and equipment (Note 9)

• allocation of consideration to lease and non-lease components in a contract that contains a lease (Note 10)

• assumptions used to measure the carrying amount of (Note 10) and expected credit losses (Note 28) on net investment in leases and certain contract assets

• fair value of equity investments not otherwise noted above (Note 11)

• carrying value of regulatory assets and liabilities (Note 13)

• assumptions used to measure the environmental remediation liability from the Keystone pipeline rupture (Note 17)

• recognition of asset retirement obligations (Note 18)

• provisions for income taxes, including valuation allowances and releases (Note 19)

• assumptions used to measure retirement and other post-retirement benefit obligations (Note 27)

• fair value of financial instruments (Note 28)

• fair value of assets and liabilities acquired in a business combination (Note 30)

• provisions for commitments, contingencies and guarantees (Note 31).

TC Energy continues to assess the impact of climate change on the consolidated financial statements. The Company has announced internal greenhouse gas reduction targets and closely monitors regulatory initiatives that may impact its existing businesses. There were also recent developments in the ESG frameworks and regulatory initiatives that could further impact accounting estimates and judgments including, but not limited to, assessment of asset useful lives, goodwill valuation, impairment of plant, property and equipment and accrued environmental costs. The impact of these changes is continuously assessed to ensure any changes in assumptions that would impact estimates listed above are adjusted on a timely basis.

Actual results could differ from these estimates.

148 \| TC Energy **Consolidated Financial Statements** 2022

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**Regulation**

Certain Canadian, U.S. and Mexico natural gas pipeline and storage assets are regulated with respect to construction, operations and the determination of tolls. In Canada, regulated natural gas pipelines and liquids pipelines are subject to the authority of the Canada Energy Regulator (CER), the Alberta Energy Regulator or the B.C. Oil and Gas Commission. In the U.S., regulated interstate natural gas pipelines and liquids pipelines as well as regulated natural gas storage assets are subject to the authority of the Federal Energy Regulatory Commission (FERC). In Mexico, regulated natural gas pipelines are subject to the authority of the Energy Regulatory Commission (CRE). Rate-regulated accounting (RRA) standards may impact the timing of the recognition of certain revenues and expenses in TC Energy's rate-regulated businesses which may differ from that otherwise recognized in non-rate-regulated businesses to reflect the economic impact of the regulators' decisions regarding revenues and tolls. Regulatory assets represent costs that are expected to be recovered in customer rates in future periods and regulatory liabilities represent amounts that are expected to be returned to customers through future rate-setting processes. An operation qualifies for the use of RRA when it meets three criteria:

• a regulator must establish or approve the rates for the regulated services or activities

• the regulated rates must be designed to recover the cost of providing the services or products

• it is reasonable to assume that rates set at levels to recover the cost can be charged to (and collected from) customers because of the demand for services or products and the level of direct or indirect competition.

TC Energy's businesses that apply RRA currently include natural gas pipelines in Canada, U.S. and Mexico and regulated U.S. natural gas storage. RRA is not applicable to the Company's liquids pipelines as the regulators' decisions regarding operations and tolls on those systems generally do not have an impact on timing of recognition of revenues and expenses.

**Revenue Recognition**

The total consideration for services and products to which the Company expects to be entitled can include fixed and variable amounts. The Company has variable revenue that is subject to factors outside the Company's influence, such as market prices, actions of third parties and weather conditions. The Company considers this variable revenue to be "constrained" as it cannot be reliably estimated and, therefore, recognizes variable revenue when the service is provided.

Revenues from contracts with customers are recognized net of any commodity taxes collected from customers which are subsequently remitted to governmental authorities. The Company's contracts with customers include natural gas and liquids pipelines capacity arrangements and transportation contracts, power generation contracts, natural gas storage and other contracts.

Revenues from non-lease components associated with a lease arrangement are recognized systematically over the term of the contract.

The majority of income earned from marketing activities, as it relates to the purchase and sale of crude oil, natural gas and electricity, is recorded on a net basis in the month of delivery.

**Canadian Natural Gas Pipelines**

***Capacity Arrangements and Transportation***

Revenues from the Company's Canadian natural gas pipelines are generated from contractual arrangements for committed capacity and from the transportation of natural gas. Revenues earned from firm contracted capacity arrangements are recognized ratably over the term of the contract regardless of the amount of natural gas that is transported. Transportation revenues for interruptible or volumetric-based services are recognized when the service is performed.

Revenues from the Company's Canadian natural gas pipelines under federal jurisdiction are subject to regulatory decisions by the CER. The tolls charged on these pipelines are based on revenue requirements designed to recover the costs of providing natural gas capacity for transportation services, which includes a return of and on capital, as approved by the CER. The Company's Canadian natural gas pipelines are generally not subject to earnings volatility related to variances in revenues and costs. These variances, except as related to incentive arrangements, are generally subject to deferral treatment and are recovered or refunded in future tolls. Revenues recognized prior to a CER decision on rates for that period reflect the CER's last approved return on equity (ROE) assumptions. Adjustments to revenues are recorded when the CER decision is received. Canadian natural gas pipelines' revenues are invoiced and received on a monthly basis. The Company does not take ownership of the natural gas that it transports for customers.

TC Energy **Consolidated Financial Statements** 2022 \| 149

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***Other***

The Company is contracted to provide pipeline construction services to a partially-owned entity for a development fee. The development fee is considered variable consideration due to refund provisions in the contract. The Company recognizes its estimate of the most likely amount of the variable consideration to which it will be entitled. The development fee is recognized over time as the services are provided based on the input method using an estimate of activity level.

**U.S. Natural Gas Pipelines**

***Capacity Arrangements and Transportation***

Revenues from the Company's U.S. natural gas pipelines are generated from contractual arrangements for committed capacity and from the transportation of natural gas. Revenues earned from firm contracted capacity arrangements are generally recognized ratably over the term of the contract regardless of the amount of natural gas that is transported. Transportation revenues for interruptible or volumetric-based services are recognized when the service is performed.

The Company's U.S. natural gas pipelines are subject to FERC regulations and, as a result, a portion of revenues collected may be subject to refund if invoiced during an interim period when a rate proceeding is ongoing. Allowances for these potential refunds are recognized using management's best estimate based on the facts and circumstances of the proceeding. Any allowances that are recognized during the proceeding process are refunded or retained at the time a regulatory decision becomes final. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. natural gas pipelines' revenues are invoiced and received on a monthly basis. The Company does not take ownership of the natural gas that it transports for customers.

***Natural Gas Storage and Other***

Revenues from the Company's regulated U.S. natural gas storage services are generated mainly from firm committed capacity storage contracts. The performance obligation in these contracts is the reservation of a specified amount of capacity for storage including specifications with regard to the amount of natural gas that can be injected or withdrawn on a daily basis. Revenues are recognized ratably over the contract period for firm committed capacity regardless of the amount of natural gas that is stored, and when gas is injected or withdrawn for interruptible or volumetric-based services. Natural gas storage services revenues are invoiced and received on a monthly basis. The Company does not take ownership of the natural gas that it stores for customers.

The Company owns mineral rights associated with certain natural gas storage facilities. These mineral rights can be leased or contributed to producers of natural gas in return for a royalty interest which is recognized when natural gas and associated liquids are produced.

**Mexico Natural Gas Pipelines**

***Capacity Arrangements and Transportation***

Revenues from certain of the Company's Mexico natural gas pipelines are primarily collected based on CRE-approved negotiated firm capacity contracts and are generally recognized ratably over the term of the contract. Transportation revenues related to interruptible or volumetric-based services are recognized when the service is performed. Mexico natural gas pipelines' revenues are invoiced and received on a monthly basis. The Company does not take ownership of the natural gas that it transports for customers.

**Liquids Pipelines**

***Capacity Arrangements and Transportation***

Revenues from the Company's liquids pipelines are generated mainly from providing customers with firm capacity arrangements to transport crude oil. The performance obligation in these contracts is the reservation of a specified amount of capacity together with the transportation of crude oil on a monthly basis. Revenues earned from these arrangements are recognized ratably over the term of the contract regardless of the amount of crude oil that is transported. Revenues for interruptible or volumetric-based services are recognized when the service is performed. Liquids pipelines' revenues are invoiced and received on a monthly basis. The Company does not take ownership of the crude oil that it transports for customers.

150 \| TC Energy **Consolidated Financial Statements** 2022

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**Power and Energy Solutions**

***Power***

Revenues from the Company's Power and Energy Solutions business are primarily derived from long-term contractual commitments to provide power capacity to meet the demands of the market and from the sale of electricity to both centralized markets and to customers. Power generation revenues also include revenues from the sale of steam to customers. Revenues and capacity payments are recognized as the services are provided and as electricity and steam is delivered. Power generation revenues are invoiced and received on a monthly basis.

***Natural Gas Storage and Other***

Non-regulated natural gas storage contracts include park, loan and term storage arrangements. Revenues are recognized as the services are provided. Term storage revenues are invoiced and received on a monthly basis. Revenues from ancillary services are recognized as the service is provided. The Company does not take ownership of the natural gas that it stores for customers.

**Cash and Cash Equivalents**

The Company's Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of three months or less and are recorded at cost, which approximates fair value.

**Inventories**

Inventories primarily consist of materials and supplies including spare parts and fuel, proprietary crude oil in transit, proprietary natural gas inventory in storage and emissions allowances and credits not held for compliance. The Company purchases certain emissions allowances and credits as part of bundled arrangements that also include the purchase of electricity for a fixed price. The cost allocated to emissions allowances and credits under such arrangements is based on observable market prices. Inventories are carried at the lower of cost and net realizable value.

**Assets Held for Sale**

The Company classifies assets as held for sale when management approves and commits to a formal plan to actively market a disposal group and expects the sale to close within the next 12 months. Upon classifying an asset as held for sale, the asset is recorded at the lower of its carrying amount or its estimated fair value, net of selling costs and any losses are recognized in net income. Gains related to the expected sale of these assets are not recognized until the transaction closes. Once an asset is classified as held for sale, depreciation expense is no longer recorded.

**Plant, Property and Equipment**

**Natural Gas Pipelines**

Plant, property and equipment for natural gas pipelines is carried at cost. Depreciation is calculated on a straight-line basis once the assets are ready for their intended use. Pipeline and compression equipment are depreciated at annual rates ranging from 0.75 per cent to 6.67 per cent and metering and other plant equipment are depreciated at various rates reflecting their estimated useful lives. The cost of major overhauls of equipment is capitalized and depreciated over the estimated service lives of the overhauls. The cost of regulated natural gas pipelines includes an allowance for funds used during construction (AFUDC) consisting of a debt component and an equity component based on the rate of return on rate base approved by regulators. AFUDC is reflected as an increase in the cost of the assets in Plant, property and equipment with a corresponding credit recognized in Allowance for funds used during construction in the Consolidated statement of income. The equity component of AFUDC is a non-cash expenditure. Interest is capitalized during construction of non-regulated natural gas pipelines.

Natural gas pipelines' linepack and natural gas storage base gas are valued at cost and are maintained to ensure adequate pressure exists to transport natural gas through pipelines and deliver natural gas held in storage. Linepack and base gas are not depreciated.

When rate-regulated natural gas pipelines retire plant, property and equipment from service, the original book cost is removed from the gross plant amount and recorded as a reduction to accumulated depreciation with no amount recorded to net income. Costs incurred to remove plant, property and equipment from service, net of any salvage proceeds, are also recorded in accumulated depreciation.

TC Energy **Consolidated Financial Statements** 2022 \| 151

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***Other***

The Company participates as a working interest partner in the development of certain Marcellus and Utica acreage. The working interest allows the Company to invest in drilling activities in addition to receiving a royalty interest in well production. The Company uses the successful efforts method of accounting for natural gas and crude oil resulting from its portion of drilling activities. Capitalized well costs are depleted based on the units of production method.

**Liquids Pipelines**

Plant, property and equipment for liquids pipelines is carried at cost. Depreciation is calculated on a straight-line basis once the assets are ready for their intended use. Pipeline and pumping equipment are depreciated at annual rates ranging from two per cent to 2.5 per cent and other plant and equipment are depreciated at various rates reflecting their estimated useful lives. The cost of these assets includes interest capitalized during construction. When liquids pipelines retire plant, property and equipment from service, the original book cost and related accumulated depreciation are derecognized and any gain or loss is recorded in net income.

**Power and Energy Solutions**

Plant, property and equipment for Power and Energy Solutions assets are recorded at cost and, once the assets are ready for their intended use, depreciated by major component on a straight-line basis over their estimated service lives at average annual rates ranging from two per cent to 20 per cent. Other equipment is depreciated at various rates reflecting their estimated useful lives. The cost of major overhauls of equipment is capitalized and depreciated over the estimated service lives of the overhauls. Interest is capitalized on facilities under construction. When these assets are retired from plant, property and equipment, the original book cost and related accumulated depreciation are derecognized and any gain or loss is recorded in net income.

Natural gas storage base gas, which is valued at original cost, represents gas volumes that are maintained to ensure adequate reservoir pressure exists to deliver gas held in storage. Base gas is not depreciated.

**Corporate**

Corporate plant, property and equipment is recorded at cost and depreciated on a straight-line basis over its estimated useful life at average annual rates ranging from four per cent to 20 per cent.

**Capital Projects in Development**

The Company capitalizes project costs once advancement of the project to construction stage is probable or costs are otherwise likely to be recoverable. The Company capitalizes interest costs for non-regulated projects in development and AFUDC for regulated projects in development. Capital projects in development are included in Other long-term assets on the Consolidated balance sheet. These represent larger projects that generally require regulatory or other approvals before physical construction can begin. Once approvals are received, projects are moved to plant, property and equipment under construction.

**Leases**

The Company determines if&nbsp;&nbsp;&nbsp;&nbsp; a contract contains a lease at inception of a contract by using judgment in assessing the following aspects: 1) the contract specifies an identified asset which is physically distinct or, if not physically distinct, represents substantially all of the capacity of the asset; 2) the contract provides the customer&nbsp;&nbsp;&nbsp;&nbsp;with the&nbsp;&nbsp;&nbsp;&nbsp;right to obtain substantially all of the economic benefits from the use of the asset and 3) the customer has the right to direct how and for what purpose the identified asset is used throughout the period of the contract.

If the contract is determined to contain a lease, further judgment is required to identify separate lease components of the arrangement by assessing whether the lessee can benefit from the right of use either on its own or together with other resources that are readily available to the lessee, as well as if the right of use is neither highly dependent on, nor highly interrelated, with the other rights to use the underlying assets in the contract.

The Company considers non-lease components as distinct elements of a contract that are not related to the use of the leased asset. A good or service that is provided to a customer is distinct if: 1) the&nbsp;&nbsp;&nbsp;&nbsp;customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and 2) the entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The Company applies the practical expedient to not separate lease and non-lease components for all lessee contracts and facilities and liquids tank terminals for which the Company is the lessor in an operating lease.

152 \| TC Energy **Consolidated Financial Statements** 2022

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**Lessee Accounting Policy**

Operating leases are recognized as right-of-use (ROU) assets and included in Plant, property and equipment while corresponding liabilities are included in Accounts payable and other and Other long-term liabilities on the Consolidated balance sheet.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date of the lease agreement. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As the Company's lease contracts do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Operating lease expense is recognized on a straight-line basis over the lease term and included in Plant operating costs and other in the Consolidated statement of income.

The Company applies the practical expedient to not recognize ROU assets or lease liabilities for leases that qualify for the short-term lease recognition exemption.

**Lessor Accounting Policy**

The Company provides transportation and other services on certain assets to customers according to long-term service agreements through sales-type and operating leases.

In a sales-type lease, the Company measures the total consideration within the contract at lease commencement. When a lease arrangement contains more than one lease and/or non-lease component, a portion of the contract consideration is allocated to each component based on the stand-alone selling price for each distinct service. The Company applies judgment to determine reasonable estimates of the expected future cost of satisfying the performance obligations of each service. The payments associated with lease components are apportioned between a reduction in the lease receivable and sales-type lease income.

At lease commencement, the Company recognizes a net investment in lease represented by the present value of both the future lease payments and the estimated residual value of the leased asset. The plant, property and equipment of the leased asset is derecognized, with related gains/losses, if any, recognized in the Consolidated statement of income. Sales-type lease income is determined using the rate implicit in the lease and is recorded in Revenues.

The Company is the lessor within certain other contracts, including PPAs, that are accounted for as operating leases. In an operating lease, the leased asset remains capitalized in Plant, property and equipment on the Consolidated balance sheet and is depreciated over its useful life, while lease payments are recognized as income over the term of the lease on a straight-line basis. Variable lease payments are recognized as income in the period in which they occur.

**Impairment of Long-Lived Assets**

The Company reviews long-lived assets such as plant, property and equipment and capital projects in development for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. If the total of the estimated undiscounted future cash flows for an asset within plant, property and equipment, or the estimated selling price of any long-lived asset is less than the carrying value of an asset, an impairment loss is recognized for the excess of the carrying value over the estimated fair value of the asset.

**Impairment of Equity Method Investments**

The Company reviews equity method investments for impairment when an event or change in circumstances has a significant adverse effect on the investment's fair value. Where the Company concludes an investment's fair value is below its carrying value, the Company then determines whether the impairment is other-than-temporary, and if so, an impairment loss is recognized for the excess of the carrying value over the estimated fair value of the investment, not exceeding the carrying value of the investment.

**Acquisitions and Goodwill**

The Company accounts for business combinations using the acquisition method of accounting and, accordingly, the assets and liabilities of the acquired entities are primarily measured at their estimated fair values at the date of acquisition. The excess of the fair value of the consideration transferred over the estimated fair value of the net assets acquired is classified as goodwill. Goodwill is not amortized and is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired.

TC Energy **Consolidated Financial Statements** 2022 \| 153

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The annual review for goodwill impairment is performed at the reporting unit level which is one level below the Company's operating segments. The Company can initially assess qualitative factors to determine whether events or changes in circumstances indicate that goodwill might be impaired. The factors the Company considers include, but are not limited to, macroeconomic conditions, industry and market considerations, current valuation multiples and discount rates, cost factors, historical and forecasted financial results and events specific to that reporting unit.

If the Company concludes that it is not more likely than not that the fair value of the reporting unit is greater than its carrying value, the Company will then perform a quantitative goodwill impairment test. The Company can elect to proceed directly to the quantitative goodwill impairment test for any of its reporting units. If the quantitative goodwill impairment test is performed, the Company compares the fair value of the reporting unit to its carrying value, including its goodwill. If the carrying value of a reporting unit exceeds its fair value, goodwill impairment is measured at the amount by which the reporting unit's carrying value exceeds its fair value. The fair value of a reporting unit is determined by using a discounted cash flow analysis which requires the use of assumptions that may include, but are not limited to, revenue and capital expenditure projections, valuation multiples and discount rates. The Company has elected to allocate goodwill impairment charges first to goodwill that is non-deductible for income tax purposes, with any remaining charge allocated to tax-deductible goodwill.

When a portion of a reporting unit that constitutes a business is disposed, goodwill associated with that business is included in the carrying amount of the business in determining the gain or loss on disposal. The amount of goodwill disposed is determined based on the relative fair values of the business to be disposed and the portion of the reporting unit that will be retained. A goodwill impairment test will be completed for both the goodwill disposed and the portion of the goodwill that will be retained.

**Loans and Receivables**

Loans receivable from affiliates and accounts receivable are measured at amortized cost.

**Impairment of Financial Assets**

The Company reviews financial assets, inclusive of net investment in leases and certain contract 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. An expected credit loss (ECL) is calculated using a model and methodology based on assumptions and judgment considering historical data, current counterparty information as well as reasonable and supportable forecasts of future economic conditions.

The ECL is recognized in Plant operating costs and other on the Consolidated statement of income, and is presented on the Consolidated balance sheet as a reduction to the carrying value of the related financial asset.

**Restricted Investments**

The Company has certain investments that are restricted as to their withdrawal and use. These restricted investments are classified as available for sale and are recorded at fair value on the Consolidated balance sheet.

As a result of the CER's Land Matters Consultation Initiative (LMCI), TC Energy is required to collect funds to cover estimated future pipeline abandonment costs for larger CER-regulated Canadian pipelines. Funds collected are placed in trusts that hold and invest the funds and are accounted for as restricted investments (LMCI restricted investments). LMCI restricted investments may only be used to fund the abandonment of the CER-regulated pipeline facilities, therefore, a corresponding regulatory liability is recorded on the Consolidated balance sheet. The Company also has other restricted investments that have been set aside to fund insurance claim losses to be paid by the Company's wholly-owned captive insurance subsidiary.

154 \| TC Energy **Consolidated Financial Statements** 2022

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**Income Taxes**

The Company uses the asset and liability method of accounting for income taxes. This method requires the recognition of deferred income tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates at the balance sheet date that are anticipated to apply to taxable income in the years in which temporary differences are expected to be reversed or settled. Changes to these balances are recognized in net income in the period in which they occur, except for changes in balances related to regulated natural gas pipelines which are deferred until they are refunded or recovered in tolls, as permitted by the regulator. Deferred income tax assets and liabilities are classified as non-current on the Consolidated balance sheet. The Company's exposure to uncertain tax positions is evaluated and a provision is made where it is more likely than not that this exposure will materialize.

Canadian income taxes are not provided for on the unremitted earnings of foreign investments that the Company does not intend to repatriate in the foreseeable future.

Any interest and/or penalty incurred related to tax is reflected in income tax expense.

**Asset Retirement Obligations**

The Company recognizes the fair value of a liability for asset retirement obligations (ARO) in the period in which it is incurred, when a legal obligation exists and a reasonable estimate of fair value can be made. The fair value is added to the carrying amount of the associated asset and the liability is accreted through charges to Plant operating costs and other in the Consolidated statement of income.

In determining the fair value of ARO, the following assumptions are used:

• the expected retirement date

• the scope and cost of abandonment and reclamation activities that are required

• appropriate inflation and discount rates.

The Company's AROs are substantively related to its power generation facilities. The scope and timing of asset retirements related to the Company's natural gas and liquids pipelines and storage facilities are indeterminable because the Company intends to operate them as long as there is supply and demand. As a result, the Company has not recorded an amount for ARO related to these assets.

**Environmental Liabilities and Emission Allowances and Credits**

The Company records liabilities on an undiscounted basis for environmental remediation efforts that are likely to occur and where the cost can be reasonably estimated. These estimates, including associated legal costs, are based on available information using existing technology and enacted laws and regulations and are subject to revision in future periods based on actual costs incurred or new circumstances. TC Energy evaluates recoveries from insurers and other third parties separately from the liability and, when recovery is probable, it records an asset separately from the associated liability. These recoveries are presented, along with environmental remediation costs, on a net basis in Plant operating costs and other in the Consolidated statement of income. Variations in one or more of the categories described above could result in additional costs such as fines, penalties and/or expenditures associated with litigation and settlement of claims with respect to environmental liabilities.

Emission allowances or credits purchased for compliance are recorded on the Consolidated balance sheet at historical cost and derecognized when they are utilized or cancelled/retired by government agencies. Compliance costs are expensed when incurred. Allowances granted to or internally generated by TC Energy are not attributed a value for accounting purposes. When required, TC Energy accrues emission liabilities on the Consolidated balance sheet using the best estimate of the amount required to settle the compliance obligation. Allowances and credits not used for compliance are sold and any gain or loss is recorded in Revenues within the Power and Energy Solutions segment in the Consolidated statement of income. The Company records allowances and credits held for compliance in Other current assets and Other long-term assets on the Consolidated balance sheet. Allowances and credits not held for compliance are classified as Inventories on the Consolidated balance sheet.

TC Energy **Consolidated Financial Statements** 2022 \| 155

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**Stock Options and Other Compensation Programs**

TC Energy's Stock Option Plan permits options for the purchase of common shares to be awarded to certain employees, including officers. Stock options granted are recorded using the fair value method. Under this method, compensation expense is measured at the grant date based on the fair value as calculated using a binomial model and is recognized on a straight-line basis over the vesting period with an offset to Additional paid-in capital. Forfeitures are accounted for when they occur. Upon exercise of stock options, amounts originally recorded against Additional paid-in capital are reclassified to Common shares on the Consolidated balance sheet.

The Company has medium-term incentive plans under which payments are made to eligible employees. The expense related to these incentive plans is accounted for on an accrual basis. Under these plans, benefits vest when certain conditions are met, including the employees' continued employment during a specified period and achievement of specified corporate performance targets.

**Employee Post-Retirement Benefits**

The Company sponsors defined benefit pension plans (DB Plans), defined contribution plans (DC Plans), savings plans and other post-retirement benefit plans. Contributions made by the Company to the DC Plans and savings plans are expensed in the period in which contributions are made. The cost of the DB Plans and other post-retirement benefits received by employees is actuarially determined using the projected benefit method pro-rated based on service and management's best estimate of expected plan investment performance, salary escalation, retirement age of employees and expected health care costs.

The DB Plans' assets are measured at fair value at December 31 of each year. The expected return on the DB Plans' assets is determined using market-related values based on a five-year moving average value for all of the DB Plans' assets. Past service costs are amortized over the expected average remaining service life (EARSL) of the employees. Adjustments arising from plan amendments are amortized on a straight-line basis over the EARSL of employees active at the date of amendment. The Company recognizes the overfunded or underfunded status of its DB Plans as an asset or liability, respectively, on its Consolidated balance sheet and recognizes changes in that funded status through Other comprehensive income/(loss)(OCI) in the year in which the change occurs. The excess of net actuarial gains or losses over 10 per cent of the greater of the benefit obligation and the market-related value of the DB Plans' assets, if any, is amortized out of Accumulated other comprehensive income/(loss)(AOCI) and into net income over the EARSL of the active employees. When the restructuring of a benefit plan gives rise to both a curtailment and a settlement, the curtailment is accounted for prior to the settlement.

For certain regulated operations, post-retirement benefit amounts are recoverable through tolls as benefits are funded. The Company records any unrecognized gains or losses or changes in actuarial assumptions related to these post-retirement benefit plans as either regulatory assets or liabilities. The regulatory assets or liabilities are amortized on a straight-line basis over the EARSL of active employees.

**Foreign Currency Transactions and Translation**

Foreign currency transactions are those transactions whose terms are denominated in a currency other than the currency of the primary economic environment in which the Company or reporting subsidiary operates. This is referred to as the functional currency. Transactions denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency using the rate of exchange in effect at the balance sheet date whereas non-monetary assets and liabilities are translated at the historical rate of exchange in effect on the date of the transaction. Exchange gains and losses resulting from translation of monetary assets and liabilities are recorded in net income except for exchange gains and losses on any foreign currency debt related to Canadian regulated natural gas pipelines, which are deferred until they are refunded or recovered in tolls, as permitted by the CER.

Gains and losses arising from translation of foreign operations' functional currencies to the Company's Canadian dollar reporting currency are reflected in OCI until the operations are sold, at which time the gains and losses are reclassified to net income. Asset and liability accounts are translated at the period-end exchange rates while revenues, expenses, gains and losses are translated at the exchange rates in effect at the time of the transaction. The Company's U.S. dollar-denominated debt and certain derivative hedging instruments have been designated as a hedge of the net investment in foreign subsidiaries and, as a result, the unrealized foreign exchange gains and losses on the U.S. dollar-denominated debt and derivatives are also reflected in OCI.

156 \| TC Energy **Consolidated Financial Statements** 2022

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**Derivative Instruments and Hedging Activities**

All derivative instruments are recorded on the Consolidated balance sheet at fair value, unless they qualify for and are designated under a normal purchase and normal sales exemption, or are considered to meet other permitted exemptions.

The Company applies hedge accounting to arrangements that qualify for and are designated for hedge accounting treatment. This includes fair value and cash flow hedges and hedges of foreign currency exposures of net investments in foreign operations. Hedge accounting is discontinued prospectively if the hedging relationship ceases to be effective or the hedging or hedged items cease to exist as a result of maturity, expiry, sale, termination, cancellation or exercise.

In a fair value hedging relationship, the carrying value of the hedged item is adjusted for changes in fair value attributable to the hedged risk and these changes are recognized in net income. Changes in the fair value of the hedged item, to the extent that the hedging relationship is effective, are offset by changes in the fair value of the hedging item, which are also recorded in net income. Changes in the fair value of foreign exchange and interest rate fair value hedges are recorded in Interest income and other and Interest expense, respectively. If hedge accounting is discontinued, the carrying value of the hedged item is no longer adjusted and the cumulative fair value adjustments to the carrying value of the hedged item are amortized to net income over the remaining term of the original hedging relationship.

In a cash flow hedging relationship, the change in the fair value of the hedging derivative is recognized in OCI. When hedge accounting is discontinued, the amounts recognized previously in AOCI are reclassified to Revenues, Interest expense and Interest income and other, as appropriate, during the periods when the variability in cash flows of the hedged item affects net income or as the original hedged item settles. Gains and losses on derivatives are reclassified immediately to net income from AOCI when the hedged item is sold or terminated early, or when it becomes probable that the anticipated transaction will not occur. Termination payments on interest rate derivatives are classified as a financing activity on the Consolidated statement of cash flows.

In hedging the foreign currency exposure of a net investment in a foreign operation, the foreign exchange gains and losses on the hedging instruments are recognized in OCI. The amounts recognized previously in AOCI are reclassified to net income in the event the Company reduces its net investment in a foreign operation.

In some cases, derivatives do not meet the specific criteria for hedge accounting treatment. In these instances, the changes in fair value are recorded in net income in the period of change.

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 refunded or recovered through the tolls charged by the Company. As a result, these gains and losses are deferred as regulatory assets or liabilities and are refunded to or collected from ratepayers in subsequent periods when the derivative settles.

Derivatives embedded in other financial instruments or contracts (host instrument) are recorded as separate derivatives. Embedded derivatives are measured at fair value if their economic characteristics are not clearly and closely related to those of the host instrument, their terms are the same as those of a stand-alone derivative and the total contract is not held for trading or accounted for at fair value. When changes in the fair value of embedded derivatives are measured separately, they are included in Net income.

**Long-Term Debt Transaction Costs and Issuance Costs**

The Company records long-term debt transaction costs and issuance costs as a deduction from the carrying amount of the related debt liability and amortizes these costs using the effective interest method except those related to the Canadian natural gas regulated pipelines, which continue to be amortized on a straight-line basis in accordance with the provisions of regulatory tolling mechanisms.

**Guarantees**

Upon issuance, the Company records the fair value of certain guarantees entered into by the Company on behalf of a partially-owned entity or by partially-owned entities for which contingent payments may be made. The fair value of these guarantees is estimated by discounting the cash flows that would be incurred by the Company if letters of credit were used in place of the guarantees as appropriate in the circumstances. Guarantees are recorded as an increase to Equity investments or Plant, property and equipment and a corresponding liability is recorded in Other long-term liabilities. The release from the obligation is recognized either over the term of the guarantee or upon expiration or settlement of the guarantee.

TC Energy **Consolidated Financial Statements** 2022 \| 157

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**Variable Interest Entities**

A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity's operations through voting rights or do not substantively participate in the gains and losses of the entity. The assessment of whether an entity is a VIE and, if so, whether the Company is the primary beneficiary, is completed at the inception of the entity or at a reconsideration event.

**Consolidated VIEs**

The Company's consolidated VIEs consist of legal entities where the Company has a variable interest and for which it is considered the primary beneficiary. As the primary beneficiary, the Company has the power, through voting or similar rights, to direct the activities of the VIE that most significantly impact economic performance including: purchasing or selling significant assets; maintenance and operations of assets; incurring additional indebtedness; or determining the strategic operating direction of the entity. In addition, the Company has the obligation to absorb losses or the right to receive benefits from the consolidated VIE that could potentially be significant to the VIE.

**Non-Consolidated VIEs**

The Company's non-consolidated VIEs consist of legal entities where the Company has a variable interest but is not the primary beneficiary as it does not have the power (either explicit or implicit), through voting or similar rights, to direct the activities that most significantly impact the economic performance of these VIEs or where this power is shared with third parties. The Company contributes capital to these VIEs and receives ownership interests that provide it with residual claims on assets after liabilities are paid. Non-consolidated VIEs are accounted for as equity investments.

The Company's maximum exposure to loss is the maximum loss that could potentially be recorded through net income in future periods as a result of the Company's variable interest in a VIE.

**3. ACCOUNTING CHANGES**

**Changes in Accounting Policies for 2022** 

**Reference Rate Reform**

In March 2020, FASB issued optional guidance with respect to the expected cessation of certain reference interest rates. The guidance provides optional expedients for contracts and hedging relationships that are affected by reference rate reform if certain criteria are met. In December 2022, FASB issued an update to defer the sunset date of the guidance to December 31, 2024. For eligible hedging relationships, the Company has applied the optional expedient allowing an entity to assume that the hedged forecasted transaction in a cash flow hedge is probable of occurring. The Company expects to use practical expedients available in the guidance to treat contract modifications as events that do not require contract remeasurement or reassessment of previous accounting determinations. As such, these changes are not expected to have a material impact on the Company's consolidated financial statements.

**Government Assistance**

In November 2021, the FASB issued new guidance that expands annual disclosure requirements for entities that account for a transaction with a government by applying a grant or contribution accounting model by analogy to other accounting guidance. Entities are required to disclose the nature of the transactions, the related accounting policies used to account for the transactions, the effect of the transactions on an entity's financial statements and any significant terms and conditions of the transaction. This new guidance is effective for annual disclosure requirements at December 31, 2022 and can be applied either prospectively or retrospectively, with early application permitted. The Company adopted the guidance effective January 1, 2022 on a prospective basis and it did not have a material impact on the Company's consolidated financial statements.

**Contract Assets and Liabilities from Contracts with Customers**

In October 2021, the FASB issued new guidance that amends the accounting for contract assets and liabilities from contracts with customers acquired in a business combination. At the acquisition date, an acquirer should account for the contract assets and liabilities in accordance with guidance on revenue from contracts with customers. This new guidance is effective January 1, 2023 and is applied prospectively with early adoption permitted. Early adoption requires the application of the amendments retrospectively to all business combinations with an acquisition date in the year of early adoption. The Company elected to adopt the new guidance effective January 1, 2022 and it did not have any impact on the Company's consolidated financial statements.

158 \| TC Energy **Consolidated Financial Statements** 2022

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**4. SEGMENTED INFORMATION**

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31, 2022** | **Canadian Natural Gas Pipelines** | **U.S. <br>Natural Gas Pipelines** | **Mexico Natural Gas Pipelines** | **Liquids <br>Pipelines** | **Power and Energy Solutions** | **Corporate**<sup>1</sup> | | **Total** |
| (millions of Canadian $) | **Canadian Natural Gas Pipelines** | **U.S. <br>Natural Gas Pipelines** | **Mexico Natural Gas Pipelines** | **Liquids <br>Pipelines** | **Power and Energy Solutions** | **Corporate**<sup>1</sup> |  | **Total** |
| Revenues | **4764** | **5933** | **688** | **2668** | **924** | **—** |  | **14977** |
| Intersegment revenues | **—** | **132** | **—** | **—** | **12** | **(144)** | 2 | **—** |
|  | **4764** | **6065** | **688** | **2668** | **936** | **(144)** |  | **14977** |
| Income from equity investments | **18** | **292** | **122** | **55** | **539** | **28** | 3 | **1054** |
| Impairment of equity investment | **(3048)** | **—** | **—** | **—** | **—** | **—** |  | **(3048)** |
| Plant operating costs and other | **(1679)** | **(1856)** | **(221)** | **(756)** | **(544)** | **124** | 2 | **(4932)** |
| Commodity purchases resold | **—** | **—** | **—** | **(512)** | **(22)** | **—** |  | **(534)** |
| Property taxes | **(297)** | **(426)** | **—** | **(121)** | **(4)** | **—** |  | **(848)** |
| Depreciation and amortization | **(1198)** | **(887)** | **(98)** | **(329)** | **(72)** | **—** |  | **(2584)** |
| Goodwill and asset impairment charges and other | **—** | **(571)** | **—** | **118** | **—** | **—** |  | **(453)** |
| **Segmented (Losses)/Earnings** | **(1440)** | **2617** | **491** | **1123** | **833** | **8** |  | **3632** |
| Interest expense |  |  |  |  |  |  |  | **(2588)** |
| Allowance for funds used during construction |  |  |  |  |  |  |  | **369** |
| Foreign exchange loss, net<sup>3</sup> |  |  |  |  |  |  |  | **(185)** |
| Interest income and other |  |  |  |  |  |  |  | **146** |
| **Income before Income Taxes** |  |  |  |  |  |  |  | **1374** |
| Income tax expense |  |  |  |  |  |  |  | **(589)** |
| **Net Income** |  |  |  |  |  |  |  | **785** |
| Net income attributable to non-controlling interests | Net income attributable to non-controlling interests |  |  |  |  |  |  | **(37)** |
| **Net Income Attributable to Controlling Interests** | **Net Income Attributable to Controlling Interests** |  |  |  |  |  |  | **748** |
| Preferred share dividends |  |  |  |  |  |  |  | **(107)** |
| **Net Income Attributable to Common Shares** | **Net Income Attributable to Common Shares** |  |  |  |  |  |  | **641** |
| **Capital Spending** |  |  |  |  |  |  |  |  |
| Capital expenditures | **3274** | **2137** | **1027** | **106** | **93** | **41** |  | **6678** |
| Capital projects in development | **—** | **—** | **—** | **—** | **49** | **—** |  | **49** |
| Contributions to equity investments<sup>4</sup> | **1445** | **—** | **—** | **37** | **752** | **—** |  | **2234** |
|  | **4719** | **2137** | **1027** | **143** | **894** | **41** |  | **8961** |

---

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.

3Income from equity investments includes the Company's proportionate share of Sur de Texas foreign exchange gains and losses on the peso-denominated loans from affiliates which are fully offset in Foreign exchange loss, net by the corresponding foreign exchange losses and gains on the affiliate receivable balance until March 15, 2022, when it was fully repaid upon maturity. Refer to Note 12, Loans receivable from affiliates, for additional information.

4Contributions to equity investments in the Corporate segment of $1.2 billion are offset by the equivalent amount in Other distributions from equity investments, although they are reported on a gross basis in the Company's Consolidated statement of cash flows. Refer to Note 12, Loans receivable from affiliates, for additional information.

TC Energy **Consolidated Financial Statements** 2022 \| 159

------

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31, 2021** | **Canadian Natural Gas Pipelines** | **U.S. <br>Natural Gas Pipelines** | **Mexico Natural Gas Pipelines** | **Liquids<br>Pipelines** | **Power and Energy Solutions** | **Corporate**<sup>1</sup> | | **Total** |
| (millions of Canadian $) | **Canadian Natural Gas Pipelines** | **U.S. <br>Natural Gas Pipelines** | **Mexico Natural Gas Pipelines** | **Liquids<br>Pipelines** | **Power and Energy Solutions** | **Corporate**<sup>1</sup> |  | **Total** |
| Revenues | 4519 | 5233 | 605 | 2306 | 724 |  |  | 13387 |
| Intersegment revenues |  | 145 |  |  | 14 | (159) | 2 |  |
|  | 4519 | 5378 | 605 | 2306 | 738 | (159) |  | 13387 |
| Income from equity investments | 12 | 244 | 119 | 71 | 411 | 41 | 3 | 898 |
| Plant operating costs and other | (1567) | (1393) | (55) | (700) | (455) | 72 | 2 | (4098) |
| Commodity purchases resold |  |  | (3) | (84) |  |  |  | (87) |
| Property taxes | (289) | (367) |  | (113) | (5) |  |  | (774) |
| Depreciation and amortization | (1226) | (791) | (109) | (318) | (78) |  |  | (2522) |
| Asset impairment charge and other |  |  |  | (2775) |  |  |  | (2775) |
| Gain on sale of assets |  |  |  | 13 | 17 |  |  | 30 |
| **Segmented Earnings/(Losses)** | 1449 | 3071 | 557 | (1600) | 628 | (46) |  | 4059 |
| Interest expense |  |  |  |  |  |  |  | (2360) |
| Allowance for funds used during construction |  |  |  |  |  |  |  | 267 |
| Foreign exchange gain, net<sup>3</sup> |  |  |  |  |  |  |  | 10 |
| Interest income and other |  |  |  |  |  |  |  | 190 |
| **Income before Income Taxes** |  |  |  |  |  |  |  | 2166 |
| Income tax expense |  |  |  |  |  |  |  | (120) |
| **Net Income** |  |  |  |  |  |  |  | 2046 |
| Net income attributable to non-controlling interests | Net income attributable to non-controlling interests |  |  |  |  |  |  | (91) |
| **Net Income Attributable to Controlling Interests** | **Net Income Attributable to Controlling Interests** |  |  |  |  |  |  | 1955 |
| Preferred share dividends |  |  |  |  |  |  |  | (140) |
| **Net Income Attributable to Common Shares** | **Net Income Attributable to Common Shares** |  |  |  |  |  |  | 1815 |
| **Capital Spending** |  |  |  |  |  |  |  |  |
| Capital expenditures | 2629 | 2611 | 129 | 488 | 32 | 35 |  | 5924 |
| Contributions to equity investments | 108 | 209 |  | 83 | 810 |  |  | 1210 |
|  | 2737 | 2820 | 129 | 571 | 842 | 35 |  | 7134 |

---

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.

3Income from equity investments includes the Company's proportionate share of Sur de Texas foreign exchange gains and losses on the peso-denominated loans from affiliates which are fully offset in Foreign exchange gain, net by the corresponding foreign exchange losses and gains on the affiliate receivable balance. Refer to Note 12, Loans receivable from affiliates, for additional information.

160 \| TC Energy **Consolidated Financial Statements** 2022

------

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31, 2020** | **Canadian Natural Gas Pipelines** | **U.S. <br>Natural Gas Pipelines** | **Mexico Natural Gas Pipelines** | **Liquids<br>Pipelines** | **Power and Energy Solutions** | **Corporate**<sup>1</sup> | | **Total** |
| (millions of Canadian $) | **Canadian Natural Gas Pipelines** | **U.S. <br>Natural Gas Pipelines** | **Mexico Natural Gas Pipelines** | **Liquids<br>Pipelines** | **Power and Energy Solutions** | **Corporate**<sup>1</sup> |  | **Total** |
| Revenues | 4469 | 5031 | 716 | 2371 | 412 |  |  | 12999 |
| Intersegment revenues |  | 165 |  |  | 20 | (185) | 2 |  |
|  | 4469 | 5196 | 716 | 2371 | 432 | (185) |  | 12999 |
| Income from equity investments | 12 | 264 | 127 | 75 | 455 | 86 | 3 | 1019 |
| Plant operating costs and other | (1631) | (1485) | (57) | (654) | (220) | 169 | 2 | (3878) |
| Property taxes | (284) | (337) |  | (101) | (5) |  |  | (727) |
| Depreciation and amortization | (1273) | (801) | (117) | (332) | (67) |  |  | (2590) |
| Net gain/(loss) on sale of assets | 364 |  |  |  | (414) |  |  | (50) |
| **Segmented Earnings** | 1657 | 2837 | 669 | 1359 | 181 | 70 |  | 6773 |
| Interest expense |  |  |  |  |  |  |  | (2228) |
| Allowance for funds used during construction |  |  |  |  |  |  |  | 349 |
| Foreign exchange gain, net<sup>3</sup> |  |  |  |  |  |  |  | 28 |
| Interest income and other |  |  |  |  |  |  |  | 185 |
| **Income before Income Taxes** |  |  |  |  |  |  |  | 5107 |
| Income tax expense |  |  |  |  |  |  |  | (194) |
| **Net Income** |  |  |  |  |  |  |  | 4913 |
| Net income attributable to non-controlling interests | Net income attributable to non-controlling interests |  |  |  |  |  |  | (297) |
| **Net Income Attributable to Controlling Interests** | **Net Income Attributable to Controlling Interests** |  |  |  |  |  |  | 4616 |
| Preferred share dividends |  |  |  |  |  |  |  | (159) |
| **Net Income Attributable to Common Shares** | **Net Income Attributable to Common Shares** |  |  |  |  |  |  | 4457 |
| **Capital Spending** |  |  |  |  |  |  |  |  |
| Capital expenditures | 3503 | 2785 | 173 | 1315 | 179 | 58 |  | 8013 |
| Capital projects in development |  |  |  | 122 |  |  |  | 122 |
| Contributions to equity investments | 105 |  |  | 5 | 655 |  |  | 765 |
|  | 3608 | 2785 | 173 | 1442 | 834 | 58 |  | 8900 |

---

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.

3Income from equity investments includes the Company's proportionate share of Sur de Texas foreign exchange gains and losses on the peso-denominated loans from affiliates which are fully offset in Foreign exchange gain, net by the corresponding foreign exchange losses and gains on the affiliate receivable balance. Refer to Note 12, Loans receivable from affiliates, for additional information.

TC Energy **Consolidated Financial Statements** 2022 \| 161

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---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| **Total Assets by Segment** |  |  |
| Canadian Natural Gas Pipelines | **27456** | 25452 |
| U.S. Natural Gas Pipelines | **50038** | 45502 |
| Mexico Natural Gas Pipelines | **9231** | 7547 |
| Liquids Pipelines | **15587** | 14951 |
| Power and Energy Solutions | **8272** | 6563 |
| Corporate | **3764** | 4203 |
|  | **114348** | 104218 |

---

**Geographic Information**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| **Revenues** |  |  |  |
| Canada – domestic | **4942** | 4603 | 4392 |
| Canada – export | **1322** | 1226 | 1059 |
| United States | **8025** | 6953 | 6832 |
| Mexico | **688** | 605 | 716 |
|  | **14977** | 13387 | 12999 |

---

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| **Plant, Property and Equipment** |  |  |
| Canada | **27232** | 24890 |
| United States | **43505** | 39335 |
| Mexico | **5203** | 5957 |
|  | **75940** | 70182 |

---

162 \| TC Energy **Consolidated Financial Statements** 2022

------

**5. REVENUES**

**Disaggregation of Revenues**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31, 2022** | **Canadian <br>Natural <br>Gas <br>Pipelines** | **U.S. <br>Natural <br>Gas <br>Pipelines** | **Mexico <br>Natural <br>Gas <br>Pipelines** | **Liquids Pipelines** | **Power <br>and <br>Energy<br> Solutions** | **Total** |
| (millions of Canadian $) | **Canadian <br>Natural <br>Gas <br>Pipelines** | **U.S. <br>Natural <br>Gas <br>Pipelines** | **Mexico <br>Natural <br>Gas <br>Pipelines** | **Liquids Pipelines** | **Power <br>and <br>Energy<br> Solutions** | **Total** |
| Revenues from contracts with customers |  |  |  |  |  |  |
| &nbsp;&nbsp;Capacity arrangements and transportation | **4696** | **4621** | **507** | **1983** | **—** | **11807** |
| &nbsp;&nbsp;Power generation | **—** | **—** | **—** | **—** | **490** | **490** |
| &nbsp;&nbsp;Natural gas storage and other<sup>1,2</sup> | **68** | **1298** | **54** | **4** | **391** | **1815** |
|  | **4764** | **5919** | **561** | **1987** | **881** | **14112** |
| Sales-type lease income<sup>3</sup> | **—** | **—** | **127** | **—** | **—** | **127** |
| Other revenues<sup>4,5</sup> | **—** | **14** | **—** | **681** | **43** | **738** |
|  | **4764** | **5933** | **688** | **2668** | **924** | **14977** |

---

1Includes $68 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 as at December 31, 2022. Refer to Note 30, Acquisitions and dispositions, for additional information.

2Includes $37 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. Refer to Note 10, Leases, for additional information.

3Represents the sales-type lease income on the in-service TGNH pipelines. Refer to Note 10, Leases, for additional information.

4Other revenues include income from the Company's operating lease arrangements, marketing activities and financial instruments. Refer to Note 10, Leases, and Note 28, Risk management and financial instruments, for additional information on income from operating lease arrangements and financial instruments, respectively.

5Other revenues from U.S. Natural Gas Pipelines include the amortization of the net regulatory liabilities resulting from H.R.1, the Tax Cuts and Jobs Act &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (U.S. Tax Reform). Refer to Note 13, Rate-regulated businesses, for additional information.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31, 2021** | **Canadian <br>Natural <br>Gas <br>Pipelines** | **U.S. <br>Natural <br>Gas <br>Pipelines** | **Mexico <br>Natural <br>Gas <br>Pipelines** | **Liquids Pipelines** | **Power <br>and <br>Energy Solutions** | **Total** |
| (millions of Canadian $) | **Canadian <br>Natural <br>Gas <br>Pipelines** | **U.S. <br>Natural <br>Gas <br>Pipelines** | **Mexico <br>Natural <br>Gas <br>Pipelines** | **Liquids Pipelines** | **Power <br>and <br>Energy Solutions** | **Total** |
| Revenues from contracts with customers |  |  |  |  |  |  |
| &nbsp;&nbsp;Capacity arrangements and transportation | 4432 | 4139 | 576 | 2025 |  | 11172 |
| &nbsp;&nbsp;Power generation |  |  |  |  | 324 | 324 |
| &nbsp;&nbsp;Natural gas storage and other<sup>1</sup> | 87 | 1057 | 29 | 5 | 278 | 1456 |
|  | 4519 | 5196 | 605 | 2030 | 602 | 12952 |
| Other revenues<sup>2,3</sup> |  | 37 |  | 276 | 122 | 435 |
|  | 4519 | 5233 | 605 | 2306 | 724 | 13387 |

---

1Includes $87 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 as at December 31, 2021. Refer to Note 30, Acquisitions and dispositions, for additional information.

2Other revenues include income from the Company's operating lease arrangements, marketing activities and financial instruments. Refer to Note 10, Leases, and Note 28, Risk management and financial instruments, for additional information on income from operating lease arrangements and financial instruments, respectively.

3Other revenues from U.S. Natural Gas Pipelines include the amortization of the net regulatory liabilities resulting from U.S. Tax Reform. Refer to Note 13, Rate-regulated businesses, for additional information.

TC Energy **Consolidated Financial Statements** 2022 \| 163

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---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31, 2020** | **Canadian <br>Natural <br>Gas <br>Pipelines** | **U.S. <br>Natural <br>Gas <br>Pipelines** | **Mexico <br>Natural <br>Gas <br>Pipelines** | **Liquids Pipelines** | **Power <br>and <br>Energy Solutions** | **Total** |
| (millions of Canadian $) | **Canadian <br>Natural <br>Gas <br>Pipelines** | **U.S. <br>Natural <br>Gas <br>Pipelines** | **Mexico <br>Natural <br>Gas <br>Pipelines** | **Liquids Pipelines** | **Power <br>and <br>Energy Solutions** | **Total** |
| Revenues from contracts with customers |  |  |  |  |  |  |
| &nbsp;&nbsp;Capacity arrangements and transportation | 4408 | 4301 | 607 | 2206 |  | 11522 |
| &nbsp;&nbsp;Power generation |  |  |  |  | 192 | 192 |
| &nbsp;&nbsp;Natural gas storage and other<sup>1</sup> | 61 | 654 | 109 | 3 | 106 | 933 |
|  | 4469 | 4955 | 716 | 2209 | 298 | 12647 |
| Other revenues<sup>2,3</sup> |  | 76 |  | 162 | 114 | 352 |
|  | 4469 | 5031 | 716 | 2371 | 412 | 12999 |

---

1Includes $138 million of fee revenues from affiliates, of which $77 million was related to the construction of the Sur de Texas pipeline which is 60 per cent owned by TC Energy and $61 million was related to development and construction of the Coastal GasLink pipeline project which is 35 per cent owned by TC Energy as at December 31, 2020. Refer to Note 30, Acquisitions and dispositions, for additional information.

2Other revenues include income from the Company's operating lease arrangements, marketing activities and financial instruments. Refer to Note 10, Leases, and Note 28, Risk management and financial instruments, for additional information on income from operating lease arrangements and financial instruments, respectively.

3Other revenues from U.S. Natural Gas Pipelines include the amortization of the net regulatory liabilities resulting from U.S. Tax Reform. Refer to Note 13, Rate-regulated businesses, for additional information.

**Contract Balances**

---

| | | | |
|:---|:---|:---|:---|
| **at December 31** | **2022** | **2021** | **Affected line item on the<br>Consolidated balance sheet** |
| (millions of Canadian $) | **2022** | **2021** | **Affected line item on the<br>Consolidated balance sheet** |
| Receivables from contracts with customers | **1907** | 1627 | Accounts receivable |
| Contract assets (Note 8) | **155** | 202 | Other current assets |
| Long-term contract assets (Note 15) | **355** | 249 | Other long-term assets |
| Contract liabilities<sup>1</sup> (Note 17) | **62** | 90 | Accounts payable and other |
| Long-term contract liabilities (Note 18) | **32** | 184 | Other long-term liabilities |

---

1During the year ended December 31, 2022, $51 million (2021 – $95 million) of revenues were recognized that were included in contract liabilities at the beginning of the year.

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. In the prior year, contract liabilities and long-term contract liabilities primarily related to force majeure fixed capacity payments received on long-term capacity arrangements in Mexico. During the year ended December 31, 2022, and under the terms of the consolidated Transportation Service Agreement (TSA), the contract liability relating to the in-service TGNH pipelines was netted against certain contract asset balances and settled against the initial recording of the net investment in leases on the Consolidated balance sheet.

164 \| TC Energy **Consolidated Financial Statements** 2022

------

**Future Revenues from Remaining Performance Obligations**

As at December 31, 2022, future revenues from long-term pipeline capacity arrangements and transportation as well as natural gas storage and other contracts extending through 2055 are approximately $23.3 billion, of which approximately $3.8 billion is expected to be recognized in 2023.

A significant portion of the Company's revenues are considered constrained and therefore not included in the future revenue amounts above as the Company uses the following practical expedients:

• right to invoice practical expedient – applied to all U.S. and certain Mexico rate-regulated natural gas pipeline capacity arrangements and flow-through revenues

• variable consideration practical expedient – applied to the following variable revenues:

&nbsp;&nbsp;&nbsp;&nbsp;◦ interruptible transportation service revenues as volumes cannot be estimated

&nbsp;&nbsp;&nbsp;&nbsp;◦ liquids pipelines capacity revenues based on volumes transported

&nbsp;&nbsp;&nbsp;&nbsp;◦ power generation revenues related to market prices that are subject to factors outside the Company's influence

• contracts for a duration of one year or less.

In addition, future revenues from the Company's Canadian natural gas pipelines' regulated firm capacity contracts include fixed revenues only for the time periods that approved tolls under current rate settlements are in effect and certain. Future revenues exclude lease income from the Company's Mexico natural gas pipelines on projects that have not been placed into service.

**6. KEYSTONE XL**

**Asset Impairment Charge and Other**

Following the revocation of the Presidential Permit for the Keystone XL pipeline project on January 20, 2021, the Company terminated the Keystone XL pipeline project and evaluated the Keystone XL investment for impairment in 2021. As a result, the Company determined that the carrying amount of these assets within the Liquids Pipelines segment was no longer fully recoverable and recognized an asset impairment charge, net of expected contractual recoveries and other contractual and legal obligations related to termination activities, of $2,775 million ($2,134 million after tax) for the year ended December 31, 2021. The asset impairment charge was based on the excess of the carrying value of $3,301 million over the estimated fair value of $175 million.

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31, 2021** | **Estimated Fair Value<br> of Plant, Property<br> and Equipment** | **Asset impairment charge and other** | **Asset impairment charge and other** |
| (millions of Canadian $) | **Estimated Fair Value<br> of Plant, Property<br> and Equipment** | **Pre tax** | **After tax** |
| **Asset impairment charge** |  |  |  |
| Plant and equipment | **175** | **412** | **312** |
| Related capital projects in development | **—** | **230** | **175** |
| Other capitalized costs | **—** | **2158** | **1642** |
| Capitalized interest | **—** | **326** | **248** |
|  | **175** | **3126** | **2377** |
| **Other** |  |  |  |
| Contractual recoveries | **n/a** | **(693)** | **(525)** |
| Contractual and legal obligations related to termination activities | **n/a** | **342** | **282** |
|  | **175** | **2775** | **2134** |

---

The estimated fair value of $175 million at December 31, 2021 related to plant and equipment was based on the price that was expected to be received from selling these assets in their current condition and is updated as required. The initial key assumptions used in the determination of selling price included an estimated two-year disposal period and current energy market demand. The valuation considered a variety of potential selling prices based on various markets that could be used to dispose of these assets and required the use of unobservable inputs. As a result, the fair value is classified in Level III of the fair value hierarchy.

TC Energy **Consolidated Financial Statements** 2022 \| 165

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In 2022, the Company received $571 million towards its contractual recoveries, resulting in a remaining balance of $130 million at December 31, 2022.

In 2022, the Company revised its estimate of contractual and legal obligations related to termination activities based on a review of costs and commitments incurred, which resulted in a $54 million reduction to the asset impairment charge. The Company paid $24 million in 2022 (2021 – $192 million) towards contractual and legal obligations related to termination activities. At December 31, 2022, the remaining balance accrued was $48 million.

For the year ended December 31, 2022, the Company sold plant and equipment with a carrying value of approximately $25 million (2021 – $16 million), resulting in a gain of $64 million (2021 – nil). The Company expects to dispose of the remaining assets in 2023.

In 2022, as part of the Keystone XL impairment charge and other, the Company recognized a $96 million U.S. minimum tax related to the termination of the Keystone XL pipeline project.

**Redeemable Non-Controlling Interest and Long-Term Debt**

In March 2020, the Company announced that it would proceed with construction of the Keystone XL pipeline. As part of the funding plan, the Government of Alberta invested $1,033 million in the form of Class A Interests in the year ended December 31, 2020.

On January 4, 2021, the Company put in place a US$4.1 billion project-level credit facility to support construction of the Keystone XL pipeline, that was fully guaranteed by the Government of Alberta and non-recourse to the Company. On January 8, 2021, the Company exercised its call right with the Government of Alberta in accordance with contractual terms and paid $633 million (US$497 million) to repurchase the Government of Alberta Class A Interests in certain Keystone XL subsidiaries. This transaction was funded by draws on the project-level credit facility. For the year ended December 31, 2021, the Company made draws under the Keystone XL project-level credit facility totaling $1,028 million (US$849 million) and in accordance with the terms of the guarantee, the Government of Alberta repaid the full outstanding balance in June 2021 and it was subsequently terminated. As part of this arrangement, TC Energy issued $91 million of Class C Interests in the Keystone XL subsidiaries which entitled the Government of Alberta to future liquidation proceeds from specified Keystone XL project assets. The entire $91 million was recorded (net of distributions) in Accounts payable and other on the Consolidated balance sheet. Termination of the project-level credit facility, net of the issuance of Class C Interests, resulted in $937 million ($737 million after tax) recorded to Additional paid-in capital. In June 2021, the Company repurchased the remaining Government of Alberta Class A Interests for a nominal amount, which was accounted for as an equity transaction and resulted in $394 million recognized in Additional paid-in capital. For the year ended December 31, 2022, the Company made Class C distributions to the Government of Alberta of $43 million (2021 – $16 million).

The changes in Redeemable non-controlling interest classified in mezzanine equity were as follows:

---

| | |
|:---|:---|
| (millions of Canadian $) |  |
| Balance at January 1, 2021 | 393 |
| Net income attributable to redeemable non-controlling interest | 1 |
| Class A Interests repurchased | (394) |
| **Balance at December 31, 2021** |  |

---

166 \| TC Energy **Consolidated Financial Statements** 2022

------

**7. COASTAL GASLINK**

**Impairment of Equity Investment in Coastal GasLink LP**

**July 2022 Amended Coastal GasLink Agreements**

On July 28, 2022, amended agreements were executed between Coastal GasLink LP, LNG Canada, TC Energy and its &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Coastal GasLink LP partners (collectively, the July 2022 agreements). These amendments revised the commercial terms between LNG Canada and Coastal GasLink LP, as well as funding provisions between the partners of Coastal GasLink LP and required &nbsp;&nbsp;&nbsp;&nbsp;TC Energy to make a contractual equity contribution to Coastal GasLink LP in the amount of $1.9 billion, which did not result in a change in the Company's 35 per cent ownership. Refer to Note 32, Variable interest entities, for additional information.

The $1.9 billion contractual equity contribution was accrued and initially recognized in Equity investments on the Consolidated balance sheet at the time of signing the July 2022 agreements and is being paid in installments over the period August 2022 to February 2023. At December 31, 2022, $0.5 billion of this equity contribution remained in Accounts payable and other on the Consolidated balance sheet.

Under the terms of the July 2022 agreements, any additional equity financing required by Coastal GasLink LP to fund construction of the pipeline beyond the $1.9 billion equity contribution will initially be financed through a subordinated loan agreement between TC Energy and Coastal GasLink LP. Any amounts outstanding on this loan will be repaid by Coastal GasLink LP to TC Energy, once final 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 but will not result in a change to the Company's 35 per cent ownership.

**Capital Cost Update and Impairment**

In the fourth quarter of 2022, the Company announced that it expected a material increase in project costs and to the Company's corresponding funding requirements. 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, such as challenging conditions in the Western Canadian labour market, shortages of skilled labour, the impacts of contractor underperformance, as well as drought conditions and erosion and sediment control challenges, as with any complex construction project, the final capital cost is subject to certain risks and uncertainties. The increase in project costs and the Company's corresponding funding requirements were indicators that a decrease in the value of the Company's equity investment had occurred.

As a result, the Company completed a valuation assessment and concluded that the fair value of TC Energy's investment was below its carrying value at December 31, 2022. The Company determined that this was an other-than-temporary impairment of its equity investment in Coastal GasLink LP and a pre-tax impairment charge of $3,048 million ($2,643 million after tax) was recognized in fourth quarter 2022 in Impairment of equity investment in the Consolidated statement of income in the Canadian Natural Gas Pipelines segment. The pre-impairment carrying value of the investment in Coastal GasLink LP at December 31, 2022 consisted of amounts in Equity investments ($2,798 million) and Loans receivable from affiliates ($250 million), which were reduced to a nil balance.

TC Energy expects to fund an additional $3.3 billion related to the revised estimated capital cost to complete the Coastal GasLink pipeline, and a significant portion of the Company's future investment in Coastal GasLink LP is expected to be impaired. The Company 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 December 31, 2022 was estimated using a 40-year discounted cash flow model. Cash inflows in the model were estimated using contractually agreed upon terms and extension provisions in the TSAs between Coastal GasLink LP and the LNG Canada participants.

TC Energy **Consolidated Financial Statements** 2022 \| 167

------

For cash outflows in the model, the increase in estimated capital cost and the Company's corresponding funding requirements have the most significant impact on the determination of the fair value of TC Energy's investment in Coastal GasLink LP. The cash flow analysis included a capital cost estimate for the Coastal GasLink pipeline of $14.5 billion. Any change from this capital cost estimate will have an approximate dollar-for-dollar impact on the Company's future funding requirements, subject to any final cost sharing between the Coastal GasLink LP partners, and will impact the estimated fair value of, and the Company's recovery of, its equity investment in Coastal GasLink LP in future periods.

Other assumptions included in the discounted cash flow model include discount rate, long-term project financing plans and estimated completion date. Changes to these other assumptions would not reasonably expect to change the impairment recorded in the fourth quarter of 2022.

A deferred income tax recovery was recognized on the pre-tax impairment charge, net of certain unrealized tax losses not recognized. Refer to Note 19, Income taxes, for additional information.

**Subordinated Loan Agreement**

In 2021, TC Energy entered into a subordinated loan agreement with Coastal GasLink LP. This loan agreement was amended as part of the July 2022 agreements, and subsequent draws on this loan by Coastal GasLink LP will be provided through an &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;interest-bearing loan, subject to a floating market-based interest rate to fund the capital cost to complete the Coastal GasLink pipeline, which is estimated to be $3.3 billion. As at December 31, 2022, the total capacity committed by TC Energy under this subordinated loan agreement was $1.3 billion. The committed capacity under this loan is expected to increase in the future as required to support additional financing requirements. Any amounts outstanding will be repaid by Coastal GasLink LP to &nbsp;&nbsp;&nbsp;&nbsp;TC Energy, once final 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, in accordance with the July 2022 agreements, these additional equity contributions will be predominantly funded by TC Energy but will not result in a change to the Company's 35 per cent ownership.

As noted above, the $250 million balance outstanding on this loan at December 31, 2022 was reduced to nil as part of the impairment charge recognized in fourth quarter 2022.

The table below reflects the changes in this loan balance for the year ended December 31, 2022.

---

| | |
|:---|:---|
| (millions of Canadian $) |  |
| Outstanding balance as at December 31, 2021 | 238 |
| Issuances<sup>1</sup> | **112** |
| Repayments<sup>1</sup> | **(100)** |
| Outstanding balance at December 31, 2022 | **250** |
| Impairment | **(250)** |
| **Carrying value at December 31, 2022** | **—** |

---

1Presented on a net basis on the Company's Consolidated statement of cash flows.

168 \| TC Energy **Consolidated Financial Statements** 2022

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**8. OTHER CURRENT ASSETS**

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| Fair value of derivative contracts (Note 28) | **614** | 169 |
| Current portion of Keystone environmental provision recovery (Note 17) | **410** |  |
| Current portion of net investment in leases (Note 10) | **291** |  |
| Contract assets (Note 5) | **155** | 202 |
| Keystone XL assets held for sale | **122** | 138 |
| Prepaid expenses | **118** | 112 |
| Cash provided as collateral | **106** | 273 |
| Keystone XL contractual recoveries (Note 6) | **86** | 640 |
| Regulatory assets (Note 13) | **67** | 53 |
| Other | **183** | 130 |
|  | **2152** | 1717 |

---

TC Energy **Consolidated Financial Statements** 2022 \| 169

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**9. PLANT, PROPERTY AND EQUIPMENT**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **at December 31** | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  | **Cost** | **Accumulated<br>Depreciation** | **Net** <br>**Book Value** | **Cost** | **Accumulated<br>Depreciation** | **Net**<br>**Book Value** |
| (millions of Canadian $) | **Cost** | **Accumulated<br>Depreciation** | **Net** <br>**Book Value** | **Cost** | **Accumulated<br>Depreciation** | **Net**<br>**Book Value** |
| **Canadian Natural Gas Pipelines** |  |  |  |  |  |  |
| NGTL System |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pipeline | **18119** | **6285** | **11834** | 14892 | 5751 | 9141 |
| &nbsp;&nbsp;&nbsp;Compression | **6265** | **2224** | **4041** | 6191 | 2065 | 4126 |
| &nbsp;&nbsp;&nbsp;Metering and other | **1518** | **769** | **749** | 1458 | 705 | 753 |
|  | **25902** | **9278** | **16624** | 22541 | 8521 | 14020 |
| &nbsp;&nbsp;&nbsp;Under construction | **1552** | **—** | **1552** | 2285 |  | 2285 |
|  | **27454** | **9278** | **18176** | 24826 | 8521 | 16305 |
| Canadian Mainline |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pipeline | **10472** | **7852** | **2620** | 10423 | 7698 | 2725 |
| &nbsp;&nbsp;&nbsp;Compression | **4328** | **3247** | **1081** | 4165 | 3125 | 1040 |
| &nbsp;&nbsp;&nbsp;Metering and other | **692** | **285** | **407** | 652 | 264 | 388 |
|  | **15492** | **11384** | **4108** | 15240 | 11087 | 4153 |
| &nbsp;&nbsp;&nbsp;Under construction | **269** | **—** | **269** | 139 |  | 139 |
|  | **15761** | **11384** | **4377** | 15379 | 11087 | 4292 |
| Other Canadian Natural Gas Pipelines<sup>1</sup> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Other | **1984** | **1624** | **360** | 1937 | 1567 | 370 |
| &nbsp;&nbsp;&nbsp;Under construction | **455** | **—** | **455** | 58 |  | 58 |
|  | **2439** | **1624** | **815** | 1995 | 1567 | 428 |
|  | **45654** | **22286** | **23368** | 42200 | 21175 | 21025 |
| **U.S. Natural Gas Pipelines** |  |  |  |  |  |  |
| Columbia Gas |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pipeline | **12471** | **1069** | **11402** | 11205 | 799 | 10406 |
| &nbsp;&nbsp;&nbsp;Compression | **5190** | **495** | **4695** | 4522 | 381 | 4141 |
| &nbsp;&nbsp;&nbsp;Metering and other | **4026** | **346** | **3680** | 3657 | 257 | 3400 |
|  | **21687** | **1910** | **19777** | 19384 | 1437 | 17947 |
| &nbsp;&nbsp;&nbsp;Under construction | **659** | **—** | **659** | 433 |  | 433 |
|  | **22346** | **1910** | **20436** | 19817 | 1437 | 18380 |
| ANR |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pipeline | **2066** | **641** | **1425** | 1820 | 557 | 1263 |
| &nbsp;&nbsp;&nbsp;Compression | **3785** | **734** | **3051** | 2559 | 565 | 1994 |
| &nbsp;&nbsp;&nbsp;Metering and other | **1666** | **440** | **1226** | 1391 | 422 | 969 |
|  | **7517** | **1815** | **5702** | 5770 | 1544 | 4226 |
| &nbsp;&nbsp;&nbsp;Under construction | **328** | **—** | **328** | 833 |  | 833 |
|  | **7845** | **1815** | **6030** | 6603 | 1544 | 5059 |

---

170 \| TC Energy **Consolidated Financial Statements** 2022

------

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **at December 31** | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  | **Cost** | **Accumulated<br>Depreciation** | **Net** <br>**Book Value** | **Cost** | **Accumulated<br>Depreciation** | **Net**<br>**Book Value** |
| (millions of Canadian $) | **Cost** | **Accumulated<br>Depreciation** | **Net** <br>**Book Value** | **Cost** | **Accumulated<br>Depreciation** | **Net**<br>**Book Value** |
| Other U.S. Natural Gas Pipelines |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Columbia Gulf | **3511** | **224** | **3287** | 2749 | 178 | 2571 |
| &nbsp;&nbsp;&nbsp;GTN | **2964** | **1239** | **1725** | 2701 | 1071 | 1630 |
| &nbsp;&nbsp;&nbsp;Great Lakes | **2367** | **1387** | **980** | 2162 | 1255 | 907 |
| &nbsp;&nbsp;&nbsp;Other<sup>2</sup> | **1928** | **760** | **1168** | 1755 | 657 | 1098 |
|  | **10770** | **3610** | **7160** | 9367 | 3161 | 6206 |
| &nbsp;&nbsp;&nbsp;Under construction | **328** | **—** | **328** | 533 |  | 533 |
|  | **11098** | **3610** | **7488** | 9900 | 3161 | 6739 |
|  | **41289** | **7335** | **33954** | 36320 | 6142 | 30178 |
| **Mexico Natural Gas Pipelines**<sup>3</sup> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pipeline | **2299** | **348** | **1951** | 2957 | 476 | 2481 |
| &nbsp;&nbsp;&nbsp;Compression | **374** | **59** | **315** | 480 | 80 | 400 |
| &nbsp;&nbsp;&nbsp;Metering and other | **487** | **113** | **374** | 626 | 155 | 471 |
|  | **3160** | **520** | **2640** | 4063 | 711 | 3352 |
| &nbsp;&nbsp;&nbsp;Under construction | **2547** | **—** | **2547** | 2590 |  | 2590 |
|  | **5707** | **520** | **5187** | 6653 | 711 | 5942 |
| **Liquids Pipelines** |  |  |  |  |  |  |
| Keystone Pipeline System |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pipeline | **9777** | **2056** | **7721** | 9209 | 1758 | 7451 |
| &nbsp;&nbsp;&nbsp;Pumping equipment | **1064** | **288** | **776** | 1020 | 252 | 768 |
| &nbsp;&nbsp;&nbsp;Tanks and other | **3723** | **859** | **2864** | 3534 | 737 | 2797 |
|  | **14564** | **3203** | **11361** | 13763 | 2747 | 11016 |
| &nbsp;&nbsp;&nbsp;Under construction | **96** | **—** | **96** | 72 |  | 72 |
|  | **14660** | **3203** | **11457** | 13835 | 2747 | 11088 |
| Intra-Alberta Pipelines | **199** | **19** | **180** | 199 | 14 | 185 |
|  | **14859** | **3222** | **11637** | 14034 | 2761 | 11273 |
| **Power and Energy Solutions** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Natural Gas Power Generation | **1260** | **642** | **618** | 1267 | 605 | 662 |
| &nbsp;&nbsp;&nbsp;Natural Gas Storage and Other | **820** | **238** | **582** | 797 | 216 | 581 |
|  | **2080** | **880** | **1200** | 2064 | 821 | 1243 |
| &nbsp;&nbsp;&nbsp;Under construction | **80** | **—** | **80** | 5 |  | 5 |
|  | **2160** | **880** | **1280** | 2069 | 821 | 1248 |
| **Corporate** | **900** | **386** | **514** | 836 | 320 | 516 |
|  | **110569** | **34629** | **75940** | 102112 | 31930 | 70182 |

---

1Includes Foothills, Ventures LP and Great Lakes Canada.

2Includes Portland, North Baja, Tuscarora, Crossroads and mineral rights.

3During the year ended December 31, 2022, the Company derecognized $2,319 million of Plant, property and equipment and recorded a corresponding asset for net investment in leases for the in-service TGNH pipelines. Refer to Note 10, Leases, for additional information.

TC Energy **Consolidated Financial Statements** 2022 \| 171

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**10. LEASES**

**As a Lessee**

The Company has operating leases for corporate offices, other various premises, equipment and land. Some leases have an option to renew for periods of one to 25 years, and some may include options to terminate the lease within one year. Payments due under lease contracts include fixed payments plus, for many of the Company's leases, variable payments such as a proportionate share of the buildings' property taxes, insurance and common area maintenance. The Company subleases some of the leased premises.

Operating lease cost was as follows:

---

| | | |
|:---|:---|:---|
| **year ended December 31** | | |
| (millions of Canadian $) | **2022** | **2021** |
| Operating lease cost<sup>1</sup> | **106** | 105 |
| Sublease income | **(5)** | (8) |
| Net operating lease cost | **101** | 97 |

---

1&nbsp;&nbsp;&nbsp;&nbsp;Includes short-term leases and variable lease costs.

Other information related to operating leases is noted in the following tables:

---

| | | |
|:---|:---|:---|
| **year ended December 31** | | |
| (millions of Canadian $) | **2022** | **2021** |
| Cash paid for amounts included in the measurement of operating lease liabilities | **67** | 69 |
| ROU assets obtained in exchange for new operating lease liabilities | **49** | 7 |

---

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| Weighted average remaining lease term | **8 years** | 9 years |
| Weighted average discount rate | **3.5%** | 3.5% |

---

Maturities of operating lease liabilities are as follows:

---

| | | |
|:---|:---|:---|
| (millions of Canadian $) | **2022** | **2021** |
| Less than one year | **68** | 63 |
| One to two years | **65** | 60 |
| Two to three years | **62** | 58 |
| Three to four years | **60** | 55 |
| Four to five years | **54** | 54 |
| More than five years | **187** | 213 |
| Total operating lease payments | **496** | 503 |
| Imputed interest | **(63)** | (74) |
| Operating lease liabilities | **433** | 429 |

---

172 \| TC Energy **Consolidated Financial Statements** 2022

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The amounts recognized on TC Energy's Consolidated balance sheet for its operating lease liabilities were as follows:

---

| | | |
|:---|:---|:---|
| **at December 31** | | |
| (millions of Canadian $) | **2022** | **2021** |
| Accounts payable and other | **54** | 49 |
| Other long-term liabilities (Note 18) | **379** | 380 |
|  | **433** | 429 |

---

As at December 31, 2022, the carrying value of the ROU assets recorded under operating leases was $415 million (2021 – $415 million) and is included in Plant, property and equipment on the Consolidated balance sheet.

**As a Lessor**

**Operating Leases**

The Grandview and Bécancour power plants in the Power and Energy Solutions segment are accounted for as operating leases. The Company has long-term PPAs for the sale of power from these assets which expire between 2024 and 2026.

Some operating leases contain variable lease payments that are based on operating hours and the reimbursement of variable costs, and options to purchase the underlying asset at fair value or based on a formula considering the remaining fixed payments. Lessees have rights under some leases to terminate under certain circumstances.

The Company also leases liquids tanks which are accounted for as operating leases.

The fixed portion of the operating lease income recorded by the Company for the year ended December 31, 2022 was $118 million (2021 – $126 million; 2020 – $130 million).

Future lease payments to be received under operating leases are as follows:

---

| | | |
|:---|:---|:---|
| (millions of Canadian $) | **2022** | **2021** |
| Less than one year | **113** | 113 |
| One to two years | **111** | 111 |
| Two to three years | **94** | 110 |
| Three to four years | **70** | 94 |
| Four to five years | **—** | 70 |
|  | **388** | 498 |

---

The cost and accumulated depreciation for facilities accounted for as operating leases was $802 million and $360 million, respectively, at December 31, 2022 (2021 – $812 million and $340 million, respectively).

**Sales-Type Leases**

On August 4, 2022, TC Energy announced a strategic alliance with Mexico's state-owned electric utility, the Comisión Federal de Electricidad (CFE), for the development of new natural gas infrastructure in central and southeast Mexico. This alliance consolidates previous TSAs executed between TC Energy's Mexico-based subsidiary TGNH and the CFE in connection with the Company's natural gas pipeline assets in central Mexico (including the Tamazunchale, Villa de Reyes and Tula pipelines) under a single, U.S. dollar-denominated take-or-pay TSA that extends through 2055.

The consolidated TSA contains a lease with multiple lease and non-lease components. The lease components represent the capacity available to the CFE provided by the in-service pipelines which, at December 31, 2022, included the Tamazunchale pipeline, the north section of the Villa de Reyes pipeline and the east section of the Tula pipeline. The non-lease components represent the Company's services with respect to operation and maintenance of the TGNH pipelines in service.

The consolidated TSA provides the CFE with substantially all of the economic benefits from the use of each identified in-service asset, therefore, the lease arrangements in the consolidated TSA are classified as sales-type leases.

TC Energy **Consolidated Financial Statements** 2022 \| 173

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The Company allocated a portion of the contract consideration to non-lease components for the provision of operating and maintenance services based on the stand-alone selling price using an expected cost plus margin approach. The remaining consideration was allocated to the lease components using the residual approach due to uncertainty surrounding the stand-alone selling price.

At lease commencement, the Company recognized an aggregate net investment in sales-type leases. The TGNH pipelines are rate-regulated and the tolls are designed to recover the cost of providing service. On this basis, the Company applied judgment to determine that, at the inception of the lease arrangement, the fair value of the underlying assets approximated the carrying value and the residual value approximated the remaining carrying value at the end of the lease term.

The following table lists the components of the aggregate Net investment in leases reflected on the Company's Consolidated balance sheet:

---

| | |
|:---|:---|
| (millions of Canadian $) | **December 31, 2022** |
| **Net Investment in Leases** |  |
| Minimum lease payments | **9457** |
| Unearned lease income | **(7132)** |
| Lease receivable | **2325** |
| Expected credit loss provision<sup>1</sup> | **(150)** |
| Present value of unguaranteed residual value | **11** |
|  | **2186** |
| Current portion included in Other current assets (Note 8) | **(291)** |
|  | **1895** |

---

1Includes $1 million of foreign currency translation losses.

Future lease payments to be received under the existing sales-type leases are as follows:

---

| | |
|:---|:---|
| (millions of Canadian $) | **December 31, 2022** |
| Less than one year | **291** |
| One to two years | **291** |
| Two to three years | **291** |
| Three to four years | **291** |
| Four to five years | **291** |
| More than five years | **8002** |
|  | **9457** |

---

Future lease payments will increase as assets associated with sales-type leases come into service.

For the year ended December 31, 2022, the Company recorded $127 million of sales-type lease income in Mexico Natural Gas Pipelines revenues.

For the year ended December 31, 2022, the Company recorded a $149 million (2021 and 2020 – nil) ECL provision in Plant operating costs and other relating to net investment in leases. Refer to Note 28, Risk management and financial instruments, for additional information.

174 \| TC Energy **Consolidated Financial Statements** 2022

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**11. EQUITY INVESTMENTS**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| (millions of Canadian $) | **Ownership** <br> **Interest at** <br> **December 31, 2022** | **Income from Equity<br>Investments** | **Income from Equity<br>Investments** | **Income from Equity<br>Investments** | **Equity<br>Investments** | **Equity<br>Investments** |
| (millions of Canadian $) | **Ownership** <br> **Interest at** <br> **December 31, 2022** | **year ended December 31** | **year ended December 31** | **year ended December 31** | **at December 31** | **at December 31** |
| (millions of Canadian $) | **Ownership** <br> **Interest at** <br> **December 31, 2022** | **2022** | **2021** | **2020** | **2022** | **2021** |
| **Canadian Natural Gas Pipelines** |  |  |  |  |  |  |
| &nbsp;&nbsp;TQM<sup>1</sup> | 50.0% | **17** | 12 | 12 | **165** | 118 |
| &nbsp;&nbsp;Coastal GasLink<sup>1</sup> | 35.0% | **1** |  |  | **—** | 386 |
| **U.S. Natural Gas Pipelines** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Northern Border | 50.0% | **92** | 80 | 100 | **516** | 505 |
| &nbsp;&nbsp;&nbsp;Millennium | 47.5% | **103** | 91 | 96 | **500** | 474 |
| &nbsp;&nbsp;&nbsp;Iroquois | 50.0% | **77** | 55 | 52 | **237** | 392 |
| &nbsp;&nbsp;&nbsp;Other | Various | **20** | 18 | 16 | **122** | 137 |
| **Mexico Natural Gas Pipelines** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Sur de Texas | 60.0% | **150** | 160 | 213 | **1050** | 835 |
| **Liquids Pipelines** |  |  |  |  |  |  |
| &nbsp;&nbsp;Grand Rapids<sup>1</sup> | 50.0% | **54** | 54 | 53 | **964** | 980 |
| &nbsp;&nbsp;Port Neches Link LLC<sup>2</sup> | 95.0% | **—** |  |  | **149** | 103 |
| &nbsp;&nbsp;HoustonLink Pipeline<sup>1</sup> | 50.0% | **1** | 1 |  | **19** | 18 |
| &nbsp;&nbsp;Northern Courier<sup>1,3</sup> | nil | **—** | 16 | 22 | **—** |  |
| **Power and Energy Solutions** |  |  |  |  |  |  |
| &nbsp;&nbsp;Bruce Power<sup>1</sup> | 48.3% | **537** | 411 | 439 | **5783** | 4493 |
| &nbsp;&nbsp;&nbsp;Other | Various | **2** |  | 16 | **30** |  |
|  |  | **1054** | 898 | 1019 | **9535** | 8441 |

---

1Classified as a non-consolidated VIE. Refer to Note 32, Variable interest entities, for additional information.

2Classified as a non-consolidated VIE in 2021. Refer to Note 32, Variable interest entities, for additional information.

3In November 2021, TC Energy sold its remaining 15 per cent equity interest in Northern Courier. Refer to Note 30, Acquisitions and dispositions, for additional information.

**Impairment of Equity Investment**

On February 1, 2023, Coastal GasLink LP announced that the revised capital cost of the Coastal GasLink pipeline project is expected to be approximately $14.5 billion. The increase in the expected capital cost of the project caused TC Energy to &nbsp;&nbsp;&nbsp;&nbsp;re-evaluate its investment in Coastal GasLink LP, resulting in a pre-tax impairment charge of $3,048 million ($2,643 million after tax) recorded in fourth quarter 2022. Refer to Note 7, Coastal GasLink, for additional information.

TC Energy **Consolidated Financial Statements** 2022 \| 175

------

**Distributions and Contributions**

Distributions received from equity investments and contributions made to equity investments for the years ended December 31, 2022, 2021 and 2020 were as follows:

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| **Distributions** |  |  |  |
| Sur de Texas debt repayments<sup>1,2</sup> | **2404** | 73 |  |
| Distributions received from operating activities of equity investments | **1025** | 975 | 1123 |
| Other<sup>1</sup> | **228** |  |  |
|  | **3657** | 1048 | 1123 |
| **Contributions** |  |  |  |
| Contributions to Coastal GasLink<sup>1</sup> | **1414** | 92 | 101 |
| Sur de Texas debt financing<sup>1,2</sup> | **1199** |  |  |
| Contributions made to other equity investments<sup>1</sup> | **820** | 1118 | 664 |
|  | **3433** | 1210 | 765 |

---

1Included in Investing activities in the Consolidated statement of cash flows.

2Represents TC Energy's proportionate share of the Sur de Texas debt financing requirements and subsequent repayments. Refer to Note 12, Loans receivable from affiliates, for further information on 2022 refinancing activities with the Sur de Texas joint venture.

**Summarized Financial Information of Equity Investments**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| **Income** |  |  |  |
| Revenues | **5891** | 5447 | 5838 |
| Operating and other expenses | **(3390)** | (3293) | (3341) |
| Net income | **2147** | 1859 | 2047 |
| Net income attributable to TC Energy | **1054** | 898 | 1019 |

---

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| **Balance Sheet** |  |  |
| Current assets | **3414** | 3498 |
| Non-current assets | **37713** | 30165 |
| Current liabilities | **(2856)** | (2540) |
| Non-current liabilities | **(17690)** | (16400) |

---

At December 31, 2022, the cumulative carrying value of the Company's equity investments was $299 million lower than the cumulative underlying equity in the net assets primarily due to the 2022 impairment of the equity investment in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Coastal GasLink LP, partially offset by fair value adjustments at the time of acquisition or partial monetization as well as interest capitalized during construction. Refer to Note 7, Coastal GasLink, for additional information. At December 31, 2021, the cumulative carrying value of the Company's equity investments was $1,109 million higher than the cumulative underlying equity in the net assets primarily due to fair value adjustments at the time of acquisition or partial monetization as well as interest capitalized during construction.

176 \| TC Energy **Consolidated Financial Statements** 2022

------

**12. LOANS RECEIVABLE FROM AFFILIATES**

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.

**Sur de Texas**

TC Energy holds a 60 per cent equity interest in a joint venture with IEnova to own the Sur de Texas pipeline, for which TC Energy is the operator. In 2017, TC Energy entered into a MXN$21.3 billion unsecured revolving credit facility with the joint venture, which bore interest at a floating rate and was fully repaid upon maturity on March 15, 2022 in the amount of $1.2 billion.

The Company's Consolidated statement of income reflects the related interest income and foreign exchange impact on this loan receivable until its repayment on March 15, 2022, which were fully offset upon consolidation with corresponding amounts included in TC Energy's proportionate share of Sur de Texas equity earnings as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **year ended December 31** | | | | **Affected line item in the Consolidated statement of income** |
| (millions of Canadian $) | **2022** | **2021** | **2020** | **Affected line item in the Consolidated statement of income** |
| Interest income<sup>1</sup> | **19** | 87 | 110 | Interest income and other |
| Interest expense<sup>2</sup> | **(19)** | (87) | (110) | Income from equity investments |
| Foreign exchange losses<sup>1</sup> | **(28)** | (41) | (86) | Foreign exchange loss/(gain), net |
| Foreign exchange gains<sup>1</sup> | **28** | 41 | 86 | Income from equity investments |

---

1Included in the Corporate segment.

2Included in the Mexico Natural Gas Pipelines segment.

On March 15, 2022, as part of refinancing activities with the Sur de Texas joint venture, the peso-denominated inter-affiliate loan discussed above was replaced with a new U.S. dollar-denominated inter-affiliate loan of 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.

**Coastal GasLink Pipeline Limited Partnership**

TC Energy holds a 35 per cent equity interest in Coastal GasLink LP and has been contracted to develop and operate the Coastal GasLink pipeline.

**Subordinated Demand Revolving Credit Facility**

The Company has 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 had a capacity of $100 million with an outstanding balance of nil at December 31, 2022 (2021 – $1 million) reflected in Loans receivable from affiliates under Current assets on the Company's Consolidated balance sheet.

**Subordinated Loan Agreement**

In 2021, TC Energy entered into a subordinated loan agreement with Coastal GasLink LP. This loan agreement was amended on July 28, 2022. Refer to Note 7, Coastal GasLink, for additional information.

TC Energy **Consolidated Financial Statements** 2022 \| 177

------

**13. RATE-REGULATED BUSINESSES**

TC Energy's businesses that apply RRA currently include almost all of the Canadian, U.S. and Mexico natural gas pipelines and certain U.S. natural gas storage operations. Rate-regulated businesses account for and report assets and liabilities consistent with the resulting economic impact of the regulators' established rates, provided the rates are designed to recover the costs of providing the regulated service and the competitive environment makes it probable that such rates can be charged and collected. Certain revenues and expenses subject to utility regulation or rate determination that would otherwise be reflected in the statement of income are deferred on the balance sheet and are expected to be recovered from or refunded to customers in future service rates.

**Canadian Regulated Operations**

The majority of TC Energy's Canadian natural gas pipelines are regulated by the CER under the Canadian Energy Regulator Act (CER Act). The Impact Assessment Agency continues to assess designated projects under the CER Act.

The CER regulates the construction and operation of facilities and the terms and conditions of services, including rates, for the Company's Canadian regulated natural gas transmission systems under federal jurisdiction.

TC Energy's Canadian natural gas transmission services are supplied under natural gas transportation tariffs that provide for cost recovery, including return of and on capital as approved by the CER. Rates charged for these services are typically set through a process that involves filing an application with the regulator wherein forecasted operating costs, including a return of and on capital, determine the revenue requirement for the upcoming year or multiple years. To the extent actual costs and revenues are more or less than forecasted costs and revenues, the regulators generally allow the difference to be deferred to a future period and recovered or refunded in rates at that time. Differences between actual and forecasted costs that the regulator does not allow to be deferred are included in the determination of net income in the year they occur. The Company's most significant regulated Canadian natural gas pipelines, based on total operated pipe length, are described below.

**NGTL System**

The NGTL System currently operates under the terms of the 2020-2024 Revenue Requirement Settlement which includes an 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 between the NGTL System and its customers.

**Canadian Mainline**

The Canadian Mainline currently operates under the terms of the 2015-2030 Tolls Application approved in 2014 (the 2014 Decision). The terms in the 2015-2020 six-year settlement of the 2014 Decision, which ended December 31, 2020, included an ROE of 10.1 per cent on 40 per cent deemed common equity, an incentive mechanism that had both upside and downside risk and a $20 million after-tax annual TC Energy contribution to reduce the revenue requirement. Toll stabilization was achieved through the use of deferral accounts, namely the bridging amortization account and the long-term adjustment account (LTAA), to capture the surplus or shortfall between the Company's revenues and cost of service for each year over the 2015-2020 six-year fixed-toll term of the 2014 Decision. The 2014 Decision also directed TC Energy to file an application to review tolls for the 2018-2020 period. In December 2018, a decision was received on the 2018-2020 Tolls Review which included an accelerated amortization of the December 31, 2017 LTAA balance and an increase to the composite depreciation rate from 3.2 per cent to 3.9 per cent.

In April 2020, the CER approved the six-year unanimous negotiated settlement (2021-2026 Mainline Settlement) effective January 1, 2021. Similar to the previous settlement, the 2021-2026 Mainline Settlement maintains a base equity return of 10.1 per cent on 40 per cent deemed common equity and includes an incentive to either achieve cost efficiencies and/or increase revenues on the pipeline with a beneficial sharing mechanism to both the shippers and TC Energy. An estimate of the remaining LTAA balance at the end of 2020 was included as an adjustment in the calculation of Mainline fixed tolls and amortized over the settlement term. Similar to the LTAA, the short-term adjustment accounts (STAA) captures the surplus or shortfall between system revenues and cost of service each year under the 2021-2026 Mainline Settlement and the Company will commence amortization over the remaining settlement term when predetermined thresholds per the settlement agreement are met.

178 \| TC Energy **Consolidated Financial Statements** 2022

------

**U.S. Regulated Operations**

TC Energy's U.S. regulated natural gas pipelines operate under the provisions of the Natural Gas Act (NGA) of 1938, the Natural Gas Policy Act of 1978 and the Energy Policy Act of 2005, and are subject to the jurisdiction of FERC. The NGA grants FERC authority over the construction, acquisition and operation of pipelines and related facilities, including the regulation of tariffs which incorporates maximum and minimum rates for services and allows U.S. regulated natural gas pipelines to discount or negotiate rates on a non-discriminatory basis. The Company's most significant regulated U.S. natural gas pipelines, based on effective ownership and total operated pipe length, are described below.

**Columbia Gas**

Columbia Gas' natural gas transportation and storage services are provided under a tariff at rates subject to FERC approval. Columbia Gas reached a settlement with its customers effective February 2021 and received FERC approval on

February 25, 2022. As part of the settlement, there is a moratorium on any further rate changes until April 1, 2025.

Columbia Gas must file for new rates with an effective date no later than April 1, 2026. Previously accrued rate refund

liabilities were refunded to customers, including interest, in second quarter 2022.

Additionally, Columbia Gas maintains a FERC-approved modernization program allowing for the cost recovery and return on additional investment up to US$1.2 billion over a four-year period through 2024 to modernize the Columbia Gas system, thereby improving system integrity and enhancing service reliability and flexibility.

**ANR Pipeline**

ANR Pipeline operated under rates established through a 2016 FERC-approved rate settlement until July 31, 2022. To meet terms of the 2016 settlement, on January 28, 2022, ANR Pipeline filed a Section 4 Rate Case with FERC requesting an increase to maximum transportation rates. On December 14, 2022 ANR Pipeline filed a Stipulation and Agreement of Settlement (ANR Settlement) with FERC. The ANR Settlement reflects the agreement of ANR Pipeline and its shippers and FERC staff to resolve all outstanding issues pertaining to the original rate case filing on January 28, 2022. The ANR Settlement was uncontested and is currently awaiting final FERC approval which is expected in early 2023.

**Columbia Gulf**

Columbia Gulf reached a rate settlement with its customers, which was approved by FERC in December 2019, increasing Columbia Gulf's recourse rates which took effect on August 1, 2020. This settlement established a rate case and tariff filing moratorium, which expired on August 1, 2022, and Columbia Gulf is required to file a general rate case under Section 4 of the NGA no later than January 31, 2027, with new rates to be effective August 1, 2027.

**Great Lakes**

Great Lakes operates under a settlement approved by FERC in February 2018 which does not include a moratorium; however, Great Lakes was required to file for new rates no later than March 31, 2022.

On March 18, 2022, Great Lakes filed a rate settlement (2022 Great Lakes Settlement) with FERC that satisfies the obligations from the 2017 settlement that Great Lakes file for rates to become effective no later than October 1, 2022. The 2022 Great Lakes Settlement, approved by FERC on April 26, 2022, maintains Great Lakes' existing maximum transportation rates through October 31, 2025. The 2022 Great Lakes Settlement contains a moratorium until October 31, 2025. Great Lakes will be required to file for new rates no later than April 30, 2025, with such new rates effective no later than November 1, 2025.

**Tuscarora**

Tuscarora operates under rates established as part of the FERC-approved rate settlement effective August 1, 2019. Under the terms of this settlement, Tuscarora is required to file for new rates to be effective no later than February 1, 2023. Tuscarora filed a general NGA Section 4 Rate Case with FERC on July 29, 2022, requesting an increase to its maximum rates effective February 1, 2023, subject to refund.

**Mexico Regulated Operations**

TC Energy's Mexico natural gas pipelines are regulated by CRE and operate in accordance with CRE-approved tariffs. The rates in effect on TC Energy's Mexico natural gas pipelines are in compliance with CRE economic regulations that provide for cost recovery, including a return of and on invested capital.

TC Energy **Consolidated Financial Statements** 2022 \| 179

------

**Regulatory Assets and Liabilities**

---

| | | | |
|:---|:---|:---|:---|
| **at December 31** | **2022** | **2021** | **Remaining**<br>**Recovery/**<br>**Settlement**<br>**Period** <br>(years) |
| (millions of Canadian $) | **2022** | **2021** | **Remaining**<br>**Recovery/**<br>**Settlement**<br>**Period** <br>(years) |
| **Regulatory Assets** |  |  |  |
| Deferred income taxes<sup>1</sup> | **1817** | 1509 | n/a |
| Pensions and other post-retirement benefits<sup>1,2</sup> | **28** | 203 | n/a |
| Foreign exchange on long-term debt<sup>1,3</sup> | **19** | 3 | 1-7 |
| Operating and debt-service regulatory assets<sup>4</sup> | **2** | 1 | 1 |
| Other | **111** | 104 | n/a |
|  | **1977** | 1820 |  |
| Less: Current portion included in Other current assets (Note 8) | **67** | 53 |  |
|  | **1910** | 1767 |  |
| **Regulatory Liabilities** |  |  |  |
| Pipeline abandonment trust balances<sup>5</sup> | **2014** | 2086 | n/a |
| Deferred income taxes – U.S. Tax Reform<sup>6</sup> | **1197** | 1141 | n/a |
| Canadian Mainline bridging amortization account<sup>7</sup> | **429** | 483 | 8 |
| Cost of removal<sup>8</sup> | **337** | 254 | n/a |
| Canadian Mainline short-term adjustment and toll-stabilization accounts<sup>7,9</sup> | **284** | 60 | n/a |
| Canadian Mainline long-term adjustment account<sup>7,10</sup> | **149** | 186 | 4 |
| Deferred income taxes<sup>1</sup> | **181** | 139 | n/a |
| Operating and debt-service regulatory liabilities<sup>4</sup> | **50** | 32 | 1 |
| ANR post-employment and retirement benefits other than pension<sup>11</sup> | **43** | 40 | n/a |
| Pensions and other post-retirement benefits<sup>2</sup> | **10** | 13 | n/a |
| Other | **99** | 66 | n/a |
|  | **4793** | 4500 |  |
| Less: Current portion included in Accounts payable and other (Note 17) | **273** | 200 |  |
|  | **4520** | 4300 |  |

---

1These regulatory assets and liabilities are underpinned by non-cash transactions or are recovered without an allowance for return as approved by the regulator. Accordingly, these regulatory assets or liabilities are not included in rate base and do not yield a return on investment during the recovery period.

2These balances represent the regulatory offset to pension plan and other post-retirement benefit obligations to the extent the amounts are expected to be collected from or refunded to customers in future rates.

3Foreign exchange on long-term debt of the NGTL System represents the variance resulting from revaluing foreign currency-denominated debt instruments to the current foreign exchange rate from the historical foreign exchange rate at the time of issue. Foreign exchange gains and losses realized when foreign debt matures or is redeemed early are expected to be recovered or refunded through the determination of future tolls.

4Operating and debt-service regulatory assets and liabilities represent the accumulation of cost and revenue variances to be included in determination of rates in the following year.

5This balance represents the amounts collected in tolls from shippers and included in the LMCI restricted investments to fund future abandonment of the Company's CER-regulated pipeline facilities.

6The U.S. corporate income tax rate was reduced from 35 per cent to 21 per cent in 2017 as a result of H.R.1, the Tax Cuts and Jobs Act (U.S. Tax Reform). This U.S. regulated operations balance, where applicable, represents established regulatory liabilities driven by 2018 FERC prescribed changes related to U.S. Tax Reform being amortized over varying terms that approximate the expected reversal of the underlying deferred tax liabilities that gave rise to the regulatory liabilities.

7These regulatory accounts are used to capture revenue and cost variances plus toll-stabilization adjustments during the 2015-2030 settlement term.

8This balance represents anticipated costs of removal that have been, and continue to be, included in depreciation rates and collected in the service rates of certain rate-regulated operations for future costs to be incurred.

9Under the terms of the 2021-2026 Mainline Settlement, the STAA account will commence amortization when predetermined thresholds are met, over the term outlined per the settlement agreement.

10Under the terms of the 2021-2026 Mainline Settlement, $223 million is amortized over the six-year settlement term.

11This balance represents the amount ANR estimates it would be required to refund to its customers for post-retirement and post-employment benefit amounts collected through its FERC-approved rates that have not been used to pay benefits to its employees. Pursuant to a FERC-approved rate settlement, the $43 million (US$32 million) balance at December 31, 2022 is subject to resolution through future regulatory proceedings and, accordingly, a settlement period cannot be determined at this time.

180 \| TC Energy **Consolidated Financial Statements** 2022

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**14. GOODWILL**

The Company's Goodwill balance on the Consolidated balance sheet is comprised of the following amounts:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | **2022** | **2022** | **2021** | **2021** |
| (millions) | **Canadian <br>dollars** | **US <br>dollars** | **Canadian dollars** | **US <br>dollars** |
| Columbia Pipeline Group, Inc. | **9948** | **7351** | 9303 | 7351 |
| ANR | **2634** | **1946** | 2464 | 1946 |
| Great Lakes | **165** | **122** | 725 | 573 |
| North Baja | **65** | **48** | 61 | 48 |
| Tuscarora | **31** | **23** | 29 | 23 |
|  | **12843** | **9490** | 12582 | 9941 |

---

Changes in Goodwill were as follows:

---

| | |
|:---|:---|
| (millions of Canadian $) | **U.S. Natural <br>Gas Pipelines** |
| Balance at January 1, 2021 | 12679 |
| Foreign exchange rate changes | (97) |
| Balance at December 31, 2021<sup>1</sup> | 12582 |
| Great Lakes impairment charge | **(571)** |
| Foreign exchange rate changes | **832** |
| **Balance at December 31, 2022**<sup>1</sup> | **12843** |

---

1Represents gross amount of goodwill as at December 31, 2022 of $14,578 million (2021 – $13,746 million), net of accumulated impairment of $1,735 million (2021 – $1,164 million).

As part of the annual goodwill impairment assessment at December 31, 2022, the Company evaluated qualitative factors impacting the fair value of the underlying reporting units for all reporting units other than the ANR reporting unit. It was determined that it was more likely than not that the fair value of these reporting units exceeded their carrying amounts, including goodwill.

**ANR**

The Company elected to proceed directly to a quantitative annual impairment test at December 31, 2022 for the $2,634 million (US$1,946 million) of goodwill related to the ANR reporting unit following the passage of time from the previous test at December 31, 2016, and subsequent to the ANR settlement-in-principle in 2022. It was determined that the fair value of ANR exceeded its carrying value, including goodwill at December 31, 2022.

**Great Lakes**

During first quarter 2022, TC Energy elected to pursue an unanticipated opportunity to extend the existing recourse rates on Great Lakes. This prompted the Company to re-evaluate the impact of maintaining recourse rates at the current level as opposed to moving forward with the previously presumed Great Lakes rate case process in 2022.

On March 18, 2022, Great Lakes reached a pre-filing settlement with its customers and filed an unopposed rate case settlement with FERC by which Great Lakes and the settling parties agreed to maintain existing recourse rates through October 31, 2025. While the settlement created short-term rate certainty, it prompted a re-evaluation of Great Lakes' long-term free cash flows. With recourse rates maintained at the current level for the next three years, the expectation of increased contracting, growth and other near-term commercial and regulatory opportunities were negatively impacted.

TC Energy **Consolidated Financial Statements** 2022 \| 181

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Management performed a quantitative impairment test that evaluated a range of assumptions through a discounted cash flow analysis using a risk-adjusted discount rate. It was determined that the estimated fair value of the Great Lakes reporting unit no longer exceeded its carrying value, including goodwill and that an impairment charge was necessary. As a result, the Company recorded a pre-tax goodwill impairment charge of $571 million ($531 million after tax) within the U.S. Natural Gas Pipelines segment that is included in Goodwill and asset impairment charges and other in the Company's Consolidated statement of income. The remaining goodwill balance related to Great Lakes is US$122 million at December 31, 2022 (December 31, 2021 – US$573 million). There is a risk that continued reductions in future cash flow forecasts and adverse changes in other key assumptions could result in a future impairment of the goodwill balance relating to Great Lakes.

The Company elected to allocate the goodwill impairment charge first to goodwill that is non-deductible for income tax purposes, with any remaining charge allocated to tax-deductible goodwill. The majority of the Great Lakes goodwill impairment charge was allocated to non-deductible goodwill and the income tax recovery of $40 million was attributable to the portion of the goodwill that was deductible for income tax purposes.

The estimated fair value measurements used in the Company's goodwill impairment analysis is classified as Level III. In the determination of the fair value utilized in the quantitative goodwill impairment test for each reporting unit, the Company used its projections of future cash flows and applied a risk-adjusted discount rate which involved significant estimates and judgments.

**Asset Divestiture Program**

TC Energy has announced an asset divestiture program that may involve the divestiture of reporting units, or portions thereof. To the extent that a sale transaction indicates a value lower than previously estimated, goodwill could be impaired. These divestitures could include assets that have associated goodwill. In the event of a partial sale of such assets, the anticipated proceeds will be considered in management's assessment of fair value of the retained interest and any associated goodwill.

**15. OTHER LONG-TERM ASSETS**

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| Deferred income tax assets (Note 19) | **1070** | 509 |
| Employee post-retirement benefits (Note 27) | **563** | 312 |
| Long-term contract assets (Note 5) | **355** | 249 |
| Keystone environmental provision recovery (Note 17) | **240** |  |
| Capital projects in development | **99** | 42 |
| Fair value of derivative contracts (Note 28) | **91** | 48 |
| Keystone XL contractual recoveries (Note 6) | **44** | 50 |
| Other | **323** | 193 |
|  | **2785** | 1403 |

---

182 \| TC Energy **Consolidated Financial Statements** 2022

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**16. NOTES PAYABLE**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2021** | **2021** |
| (millions of Canadian $, unless otherwise noted) | **Outstanding at December 31** | **Weighted<br>Average<br>Interest Rate<br>per Annum<br>at December 31** | **Outstanding at December 31** | **Weighted<br>Average<br>Interest Rate<br>per Annum<br>at December 31** |
| Canada<sup>1</sup> | **5971** | **4.9%** | 4953 | 0.4% |
| U.S. (2022 – nil; 2021 – US$54) | **—** | **—** | 68 | 0.3% |
| Mexico (2022 – US$215; 2021 – US$115)<sup>2</sup> | **291** | **6.0%** | 145 | 1.7% |
|  | **6262** |  | 5166 |  |

---

1At December 31, 2022, Notes payable consisted of Canadian dollar-denominated notes of $2,810 million (2021 – $1,989 million) and U.S. dollar-denominated notes of US$2,336 million (2021 – US$2,341 million).

2The demand senior unsecured revolving credit facility for the Company's Mexico subsidiary can be drawn in either Mexican pesos or U.S. dollars, up to the total facility amount of MXN$5.0 billion or the U.S. dollar equivalent.

On November 22, 2022, TransCanada PipeLines Limited (TCPL) entered into a 364-day $1.5 billion senior unsecured term loan bearing interest at a floating rate. At December 31, 2022 and 2021, Notes payable reflects short-term borrowings in Canada by TCPL, in the U.S. by TransCanada PipeLine USA Ltd. (TCPL USA) and in Mexico by a wholly-owned Mexican subsidiary.

At December 31, 2022, total committed revolving and demand credit facilities were $12.9 billion (2021 – $12.4 billion). When drawn, interest on these lines of credit is charged at negotiated floating rates of Canadian and U.S. banks, and at other negotiated financial bases. These unsecured credit facilities included the following:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **at December 31** | **at December 31** | **at December 31** | **at December 31** | **at December 31** | **at December 31** | **at December 31** | |
| (billions of Canadian $, unless otherwise noted) | (billions of Canadian $, unless otherwise noted) |  | **2022** | **2022** | **2022** | **2021** |  |
| **Borrowers** | **Description** | **Matures** | **Total Facilities** |  | **Unused Capacity**<sup>1</sup> | **Total Facilities** |  |
| **Committed, syndicated, revolving, extendible, senior unsecured credit facilities**<sup>2</sup>**:** | **Committed, syndicated, revolving, extendible, senior unsecured credit facilities**<sup>2</sup>**:** | **Committed, syndicated, revolving, extendible, senior unsecured credit facilities**<sup>2</sup>**:** | **Committed, syndicated, revolving, extendible, senior unsecured credit facilities**<sup>2</sup>**:** | **Committed, syndicated, revolving, extendible, senior unsecured credit facilities**<sup>2</sup>**:** | **Committed, syndicated, revolving, extendible, senior unsecured credit facilities**<sup>2</sup>**:** | **Committed, syndicated, revolving, extendible, senior unsecured credit facilities**<sup>2</sup>**:** |  |
| TCPL | Supports TCPL's Canadian dollar commercial paper program and for general corporate purposes | December 2027 | **3.0** |  | **1.7** | 3.0 |  |
| TCPL / TCPL USA / Columbia / TransCanada American Investments Ltd. | Supports TCPL's and TCPL USA's U.S. dollar commercial paper programs and for general corporate purposes of the borrowers, guaranteed by TCPL | December 2023 | **US 3.0** |  | **US 0.6** | US 4.5 |  |
| TCPL / TCPL USA / Columbia / TransCanada American Investments Ltd. | Supports TCPL's and TCPL USA's U.S. dollar commercial paper programs and for general and corporate purposes of the borrowers, guaranteed by TCPL | December 2025 | **US 2.5** |  | **US 2.5** | US 1.0 |  |
| **Demand senior unsecured revolving credit facilities**<sup>2</sup>**:** | **Demand senior unsecured revolving credit facilities**<sup>2</sup>**:** | **Demand senior unsecured revolving credit facilities**<sup>2</sup>**:** |  |  |  |  |  |
| TCPL / TCPL USA | Supports the issuance of letters of credit and provides additional liquidity; TCPL USA facility guaranteed by TCPL | Demand | **2.1** | <sup>3</sup> | **1.0** | 2.1 | <sup>3</sup> |
| Mexico subsidiary | For Mexico general corporate purposes, guaranteed by TCPL | Demand | **MXN 5.0** | <sup>3</sup> | **MXN 0.8** | MXN 5.0 | <sup>3</sup> |

---

1Unused capacity is net of commercial paper outstanding and facility draws.

2Provisions of various trust indentures and credit arrangements with the Company's subsidiaries can restrict their ability to declare and pay dividends or make distributions under certain circumstances. If such restrictions apply, they may, in turn, have an impact on the Company's ability to declare and pay dividends on common and preferred shares. These trust indentures and credit arrangements also require the Company to comply with various affirmative and negative covenants and maintain certain financial ratios. At December 31, 2022, the Company was in compliance with all financial covenants.

3Or the U.S. dollar equivalent.

For the year ended December 31, 2022, the cost to maintain the above facilities was $14 million (2021 – $17 million; 2020 – $21 million).

TC Energy **Consolidated Financial Statements** 2022 \| 183

------

**17. ACCOUNTS PAYABLE AND OTHER**

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| Trade payables | **4330** | 4183 |
| Fair value of derivative contracts (Note 28) | **871** | 221 |
| Keystone environmental provision | **650** |  |
| Coastal GasLink contractual contribution (Notes 7, 11 and 32) | **537** |  |
| Regulatory liabilities (Note 13) | **273** | 200 |
| Contract liabilities (Note 5) | **62** | 90 |
| Class C Interests (Note 6) | **37** | 75 |
| Other | **389** | 330 |
|  | **7149** | 5099 |

---

**Keystone Environmental Provision**

In December 2022, a pipeline rupture occurred in Washington County, Kansas on the Cushing Extension section of 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 are currently indeterminable. This amount represents the Company's estimate of costs relating to emergency response, environmental remediation and cleanup activities required to fully remediate the site and has been recorded on an undiscounted basis. The accrual is based on certain assumptions such as the scope of remediation efforts that are subject to revision in future periods which could result in future modifications of this accrual. Therefore, it is reasonably possible that the Company will incur additional costs beyond the amounts accrued. TC Energy has accrued the minimum estimated cost of environmental remediation; however, the Company is currently unable to estimate a maximum range of possible costs.

TC Energy has appropriate insurance policies in place and it is probable that the majority of estimated environmental remediation costs will be eligible for recovery under the Company's existing insurance coverage. The Company has recorded an asset of $410 million in Other current assets and $240 million in Other long-term assets, representing the expected recovery of the estimated environmental remediation costs. Estimated insured amounts expected to be recovered from insurers are presented in the same income statement line as the environmental remediation costs. To the extent costs beyond the amounts accrued are incurred, they will be evaluated under the Company's existing insurance policies. The Company expects remediation activities to be substantially completed within a year.

**18. OTHER LONG-TERM LIABILITIES**

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| Operating lease obligations (Note 10) | **379** | 380 |
| Fair value of derivative contracts (Note 28) | **151** | 47 |
| Employee post-retirement benefits (Note 27) | **111** | 174 |
| Asset retirement obligations | **79** | 61 |
| Long-term contract liabilities (Note 5) | **32** | 184 |
| Other | **265** | 213 |
|  | **1017** | 1059 |

---

184 \| TC Energy **Consolidated Financial Statements** 2022

------

**19. INCOME TAXES** 

**Geographic Components of Income before Income Taxes**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| Canada | **(2154)** | (292) | 691 |
| Foreign | **3528** | 2458 | 4416 |
| **Income before Income Taxes** | **1374** | 2166 | 5107 |

---

**Provision for Income Taxes**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| **Current** |  |  |  |
| Canada | **43** | 29 | (54) |
| Foreign | **372** | 276 | 306 |
|  | **415** | 305 | 252 |
| **Deferred** |  |  |  |
| Canada | **(467)** | (327) | (224) |
| Foreign | **641** | 142 | 166 |
|  | **174** | (185) | (58) |
| **Income Tax Expense** | **589** | 120 | 194 |

---

**Reconciliation of Income Tax Expense**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| Income before income taxes | **1374** | 2166 | 5107 |
| Federal and provincial statutory tax rate | **23.0%** | 23.0% | 24.0% |
| Expected income tax expense | **316** | 498 | 1226 |
| Foreign income tax rate differentials | **(271)** | (230) | (258) |
| Income tax differential related to regulated operations | **(174)** | (139) | (228) |
| Income from non-controlling interests and equity investments | **(54)** | (70) | (141) |
| Valuation allowance/(releases) | **199** | (8) | (400) |
| Non-taxable capital (gains) and losses | **173** |  | (62) |
| Settlement of Mexico prior years' income tax assessments | **196** |  |  |
| U.S. minimum tax | **96** |  |  |
| Non-deductible goodwill impairment | **91** |  |  |
| Impact of Mexico inflationary adjustments | **24** | 32 | 7 |
| Other | **(7)** | 37 | 50 |
| **Income Tax Expense** | **589** | 120 | 194 |

---

TC Energy **Consolidated Financial Statements** 2022 \| 185

------

**Deferred Income Tax Assets and Liabilities**

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| **Deferred Income Tax Assets** |  |  |
| Tax loss and credit carryforwards | **1519** | 1163 |
| Regulatory and other deferred amounts | **571** | 537 |
| Unrealized foreign exchange losses on long-term debt | **333** | 130 |
| Other | **193** | 46 |
|  | **2616** | 1876 |
| Less: Valuation allowance | **640** | 229 |
|  | **1976** | 1647 |
| **Deferred Income Tax Liabilities** |  |  |
| Difference in accounting and tax bases of plant, property and equipment | **6686** | 5616 |
| Equity investments | **1152** | 1219 |
| Taxes on future revenue requirement | **397** | 333 |
| Financial instruments | **126** |  |
| Other | **193** | 112 |
|  | **8554** | 7280 |
| **Net Deferred Income Tax Liabilities** | **6578** | 5633 |

---

The above deferred tax amounts have been classified on the Consolidated balance sheet as follows:

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| **Deferred Income Tax Assets** |  |  |
| Other long-term assets (Note 15) | **1070** | 509 |
| **Deferred Income Tax Liabilities** |  |  |
| Deferred income tax liabilities | **7648** | 6142 |
| **Net Deferred Income Tax Liabilities** | **6578** | 5633 |

---

At December 31, 2022, the Company has recognized the benefit of non-capital loss carryforwards of $5,429 million (2021 – $4,067 million) for federal and provincial purposes in Canada, which expire from 2030 to 2042. The Company has not yet recognized the benefit of capital loss carryforwards of $251 million (2021 – $21 million) for federal and provincial purposes in Canada which have no expiry date. The Company also has Ontario corporate minimum tax (CMT) credits of $126 million (2021 – $113 million), which expire from 2026 to 2042. As of December 31, 2022, the Company has not recognized the benefit of CMT credits of $22 million (2021 – nil).

At December 31, 2022, the Company has fully utilized the benefit of net operating loss carryforwards (2021 – US$446 million) for federal purposes in the U.S.

At December 31, 2022, the Company has recognized the benefit of net operating loss carryforwards of US$69 million (2021 – US$10 million) in Mexico, which expire from 2024 to 2032.

186 \| TC Energy **Consolidated Financial Statements** 2022

------

TC Energy recorded an income tax valuation allowance of $640 million and $229 million against the deferred income tax asset balances at December 31, 2022 and 2021, respectively. The increase in the valuation allowance is primarily a result of the foreign exchange movement on unrecognized capital losses and the unrealized capital losses on the Coastal GasLink equity investment. At December 31, 2022, the Company recorded $173 million in valuation allowance as a result of the Coastal GasLink equity investment impairment that resulted in a portion of the impairment having unrealized non-taxable capital losses. These losses have not been recognized as of December 31, 2022. At each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As at December 31, 2022, the Company determined there was sufficient positive evidence to conclude that it is more likely than not that the net deferred tax assets will be realized.

At December 31, 2020, the Company recorded $400 million in valuation allowance releases primarily a result of the final investment decision to proceed with the construction of the Keystone XL pipeline, the sale of the Ontario natural gas-fired power plants and the sale of a 65 per cent equity interest in Coastal GasLink LP. Refer to Note 30, Acquisitions and dispositions, for additional information on the sale of the Ontario natural gas-fired power plants and Coastal GasLink LP equity sale.

**Unremitted Earnings of Foreign Investments**

Income taxes have not been provided on the unremitted earnings of foreign investments that the Company does not intend to repatriate in the foreseeable future. Deferred income tax liabilities would have increased at December 31, 2022 by approximately $1,216 million (2021 – $896 million) if there had been a provision for these taxes.

**Income Tax Payments**

Income tax payments of $394 million, net of refunds, were made in 2022 (2021 – payments, net of refunds, of $371 million; 2020 – payments, net of refunds, of $252 million).

**Reconciliation of Unrecognized Tax Benefit**

Below is the reconciliation of the annual changes in the total unrecognized tax benefit:

---

| | | | |
|:---|:---|:---|:---|
| **at December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| Unrecognized tax benefit at beginning of year | **80** | 52 | 29 |
| Gross increases – tax positions in prior years | **6** | 5 | 26 |
| Gross decreases – tax positions in prior years | **—** | (1) | (2) |
| Gross increases – tax positions in current year | **7** | 26 | 1 |
| Lapse of statutes of limitations | **(2)** | (2) | (2) |
| **Unrecognized Tax Benefit at End of Year** | **91** | 80 | 52 |

---

TC Energy's practice is to recognize interest and penalties related to income tax uncertainties in Income tax expense. Income tax expense for the year ended December 31, 2022 reflects $6 million interest expense (2021 – $1 million; 2020 – $4 million). At December 31, 2022, the Company had accrued $18 million in interest expense (2021 – $12 million; 2020 – $11 million). The Company incurred no penalties associated with income tax uncertainties related to Income tax expense for the years ended December 31, 2022, 2021 and 2020 and no penalties were accrued as at December 31, 2022, 2021 and 2020.

Subject to the results of audit examinations by taxing authorities and other legislative amendments, TC Energy does not anticipate further adjustments to the unrecognized tax benefits during the next 12 months that would have a material impact on its financial statements.

TC Energy and its subsidiaries are subject to either Canadian federal and provincial income tax, U.S. federal, state and local income tax or the relevant income tax in other international jurisdictions. The Company has substantially concluded all Canadian federal and provincial income tax matters for the years through 2014. Substantially all material U.S. federal, state and local income tax matters have been concluded for years through 2015. Substantially all material Mexico income tax matters have been concluded for years through 2014, except as further described below.

TC Energy **Consolidated Financial Statements** 2022 \| 187

------

**Mexico Tax Audit**

In 2019, the Mexican tax authority, the Tax Administration Services (SAT), completed an audit of the 2013 tax return of one of the Company's subsidiaries in Mexico. The audit resulted in a tax assessment that denied the deduction for all interest expense and an assessment of additional tax, penalties and financial charges totaling less than US$1 million. The Company disagreed with this assessment and commenced litigation to challenge it. In January 2022, TC Energy received the tax court's ruling on the 2013 tax return, which upheld the SAT assessment. From September 2021 to February 2022, the SAT issued assessments for tax years 2014 through 2017 which denied the deduction of all interest expense as well as assessed incremental withholding tax on the interest. These assessments totaled approximately US$490 million in income and withholding taxes, interest, penalties and other financial charges.

During 2022, TC Energy settled with the SAT on all of the above matters for the tax years 2013 through 2021 and recorded $196 million (US$153 million) of income tax expense, inclusive of withholding taxes, interest, penalties and other financial charges for the year ended December 31, 2022.

**20. LONG-TERM DEBT**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Outstanding amounts** |  | **2022** | **2022** | **2021** | **2021** |
|  | **Maturity Dates** | **Outstanding at December 31** | **Interest**<br>**Rate**<sup>1</sup> | **Outstanding at December 31** | **Interest**<br>**Rate**<sup>1</sup> |
| (millions of Canadian $, unless otherwise noted) | **Maturity Dates** | **Outstanding at December 31** | **Interest**<br>**Rate**<sup>1</sup> | **Outstanding at December 31** | **Interest**<br>**Rate**<sup>1</sup> |
| **TRANSCANADA PIPELINES LIMITED** |  |  |  |  |  |
| Medium Term Notes |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Canadian | 2023 to 2052 | **13966** | **4.5%** | 12491 | 4.2% |
| Senior Unsecured Notes |  |  |  |  |  |
| &nbsp;&nbsp;U.S. (2022 – US$15,542; 2021 – US$16,542) | 2023 to 2049 | **21032** | **4.9%** | 20936 | 4.8% |
|  |  | **34998** |  | 33427 |  |
| **NOVA GAS TRANSMISSION LTD.** |  |  |  |  |  |
| Debentures and Notes |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Canadian | 2024 | **100** | **9.9%** | 100 | 9.9% |
| &nbsp;&nbsp;U.S. (2022 and 2021 – US$200) | 2023 | **271** | **7.9%** | 254 | 7.9% |
| Medium Term Notes |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Canadian | 2025 to 2030 | **504** | **7.4%** | 504 | 7.4% |
| &nbsp;&nbsp;U.S. (2022 and 2021 – US$33) | 2026 | **44** | **7.5%** | 41 | 7.5% |
|  |  | **919** |  | 899 |  |
| **COLUMBIA PIPELINE GROUP, INC.** |  |  |  |  |  |
| Senior Unsecured Notes<sup>2</sup> |  |  |  |  |  |
| &nbsp;&nbsp;U.S. (2022 and 2021 – US$1,500) | 2025 to 2045 | **2030** | **4.9%** | 1898 | 4.9% |
| **ANR PIPELINE COMPANY** |  |  |  |  |  |
| Senior Unsecured Notes |  |  |  |  |  |
| &nbsp;&nbsp;U.S. (2022 – US$1,172; 2021 – US$372) | 2024 to 2037 | **1587** | **4.1%** | 472 | 5.3% |
| **TC PIPELINES, LP** |  |  |  |  |  |
| Senior Unsecured Notes |  |  |  |  |  |
| &nbsp;&nbsp;U.S. (2022 and 2021 – US$850) | 2025 to 2027 | **1150** | **4.2%** | 1076 | 4.2% |
| **GAS TRANSMISSION NORTHWEST LLC** |  |  |  |  |  |
| Senior Unsecured Notes |  |  |  |  |  |
| &nbsp;&nbsp;U.S. (2022 and 2021 – US$325) | 2030 to 2035 | **440** | **4.3%** | 411 | 4.3% |

---

188 \| TC Energy **Consolidated Financial Statements** 2022

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Outstanding amounts** |  | **2022** | **2022** | **2021** | **2021** |
|  | **Maturity Dates** | **Outstanding at December 31** | **Interest**<br>**Rate**<sup>1</sup> | **Outstanding at December 31** | **Interest**<br>**Rate**<sup>1</sup> |
| (millions of Canadian $, unless otherwise noted) | **Maturity Dates** | **Outstanding at December 31** | **Interest**<br>**Rate**<sup>1</sup> | **Outstanding at December 31** | **Interest**<br>**Rate**<sup>1</sup> |
| **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** | **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** |  |  |  |  |
| Senior Unsecured Notes |  |  |  |  |  |
| &nbsp;&nbsp;U.S. (2022 and 2021 – US$250) | 2030 to 2031 | **338** | **2.8%** | 316 | 2.8% |
| **GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP** | **GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP** |  |  |  |  |
| Senior Unsecured Notes |  |  |  |  |  |
| &nbsp;&nbsp;U.S. (2022 – US$146; 2021 – US$167) | 2028 to 2030 | **198** | **7.6%** | 211 | 7.6% |
| **TUSCARORA GAS TRANSMISSION COMPANY** | **TUSCARORA GAS TRANSMISSION COMPANY** |  |  |  |  |
| Unsecured Term Loan |  |  |  |  |  |
| &nbsp;&nbsp;U.S. (2022 – US$34; 2021 – US$36) | 2024 | **46** | **6.5%** | 46 | 1.3% |
|  |  | **41706** |  | 38756 |  |
| Current portion of long-term debt |  | **(1898)** |  | (1320) |  |
| Unamortized debt discount and issue costs |  | **(239)** |  | (243) |  |
| Fair value adjustments<sup>3</sup> |  | **76** |  | 148 |  |
|  |  | **39645** |  | 37341 |  |

---

1Interest rates are the effective interest rates except for those pertaining to long-term debt issued for the Company's Canadian regulated natural gas operations, in which case the weighted average interest rate is presented as approved by the regulators. The effective interest rate is calculated by discounting the expected future interest payments, adjusted for loan fees, premiums and discounts. Weighted average and effective interest rates are stated as at the respective outstanding dates.

2Certain subsidiaries of Columbia have guaranteed the principal payments of Columbia's senior unsecured notes. Each guarantor of Columbia's obligations is required to comply with covenants under the debt indenture and, in the event of default, the guarantors would be obligated to pay the principal and related interest.

3The fair value adjustments include $140 million (2021 – $148 million) related to the acquisition of Columbia Pipeline Group, Inc. These adjustments also include a decrease of $64 million (2021 – nil) related to hedged interest rate risk. Refer to Note 28, Risk management and financial instruments for additional information.

**Principal Repayments**

At December 31, 2022, principal repayments for the next five years on the Company's long-term debt are approximately as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (millions of Canadian $) | **2023** | **2024** | **2025** | **2026** | **2027** |
| Principal repayments on long-term debt | 1898 | 2782 | 2827 | 2278 | 3113 |

---

TC Energy **Consolidated Financial Statements** 2022 \| 189

------

**Long-Term Debt Issued**

The Company issued long-term debt over the three years ended December 31, 2022 as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) |  |
| **Company** | **Issue Date** | **Type** | **Maturity Date** | **Amount** | **Interest Rate** |  |
| **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** | **TRANSCANADA PIPELINES LIMITED** |  |
|  | May 2022 | Medium Term Notes | May 2032 | 800 | 5.33% |  |
|  | May 2022 | Medium Term Notes | May 2026 | 400 | 4.35% |  |
|  | May 2022 | Medium Term Notes | May 2052 | 300 | 5.92% |  |
|  | October 2021 | Senior Unsecured Notes | October 2024 | US 1,250 | 1.00% |  |
|  | October 2021 | Senior Unsecured Notes | October 2031 | US 1,000 | 2.50% |  |
|  | June 2021 | Medium Term Notes | June 2024 | 750 | Floating |  |
|  | June 2021 | Medium Term Notes | June 2031 | 500 | 2.97% |  |
|  | June 2021 | Medium Term Notes | September 2047 | 250 | 4.33% | <sup>1</sup> |
|  | April 2020 | Senior Unsecured Notes | April 2030 | US 1,250 | 4.10% |  |
|  | April 2020 | Medium Term Notes | April 2027 | 2000 | 3.80% |  |
| **ANR PIPELINE COMPANY** | **ANR PIPELINE COMPANY** | **ANR PIPELINE COMPANY** | **ANR PIPELINE COMPANY** | **ANR PIPELINE COMPANY** | **ANR PIPELINE COMPANY** |  |
|  | May 2022 | Senior Unsecured Notes | May 2032 | US 300 | 3.43% |  |
|  | May 2022 | Senior Unsecured Notes | May 2034 | US 200 | 3.58% |  |
|  | May 2022 | Senior Unsecured Notes | May 2037 | US 200 | 3.73% |  |
|  | May 2022 | Senior Unsecured Notes | May 2029 | US 100 | 3.26% |  |
| **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** | **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** | **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** | **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** | **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** | **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** |  |
|  | October 2021 | Senior Unsecured Notes | October 2031 | US 125 | 2.68% |  |
|  | October 2020 | Senior Unsecured Notes | October 2030 | US 125 | 2.84% |  |
| **TUSCARORA GAS TRANSMISSION COMPANY** | **TUSCARORA GAS TRANSMISSION COMPANY** | **TUSCARORA GAS TRANSMISSION COMPANY** | **TUSCARORA GAS TRANSMISSION COMPANY** | **TUSCARORA GAS TRANSMISSION COMPANY** | **TUSCARORA GAS TRANSMISSION COMPANY** |  |
|  | August 2021 | Unsecured Term Loan | August 2024 | US 13 | Floating |  |
| **KEYSTONE XL SUBSIDIARIES**<sup>2</sup> | **KEYSTONE XL SUBSIDIARIES**<sup>2</sup> | **KEYSTONE XL SUBSIDIARIES**<sup>2</sup> | **KEYSTONE XL SUBSIDIARIES**<sup>2</sup> | **KEYSTONE XL SUBSIDIARIES**<sup>2</sup> | **KEYSTONE XL SUBSIDIARIES**<sup>2</sup> |  |
|  | Various | Project-Level Credit Facility | June 2021 | US 849 | Floating |  |
| **COLUMBIA PIPELINE GROUP, INC.**<sup>3</sup> |  |  |  |  |  |  |
|  | January 2021 | Unsecured Term Loan | June 2022 | US 4,040 | Floating |  |
| **GAS TRANSMISSION NORTHWEST LLC** | **GAS TRANSMISSION NORTHWEST LLC** | **GAS TRANSMISSION NORTHWEST LLC** | **GAS TRANSMISSION NORTHWEST LLC** | **GAS TRANSMISSION NORTHWEST LLC** | **GAS TRANSMISSION NORTHWEST LLC** |  |
|  | June 2020 | Senior Unsecured Notes | June 2030 | US 175 | 3.12% |  |
| **COASTAL GASLINK PIPELINE LIMITED PARTNERSHIP** <sup>4</sup> | **COASTAL GASLINK PIPELINE LIMITED PARTNERSHIP** <sup>4</sup> | **COASTAL GASLINK PIPELINE LIMITED PARTNERSHIP** <sup>4</sup> | **COASTAL GASLINK PIPELINE LIMITED PARTNERSHIP** <sup>4</sup> | **COASTAL GASLINK PIPELINE LIMITED PARTNERSHIP** <sup>4</sup> | **COASTAL GASLINK PIPELINE LIMITED PARTNERSHIP** <sup>4</sup> |  |
|  | April 2020 | Senior Secured Credit Facilities | April 2027 | 1603 | Floating |  |

---

1Reflects coupon rate on re-opening of a pre-existing Medium Term Notes (MTN) issue. The MTNs were issued at a premium to par, resulting in a re-issuance yield of 4.186 per cent.

2In January 2021, the Company established a US$4.1 billion project-level credit facility to support the construction of the Keystone XL pipeline, which was fully guaranteed by the Government of Alberta and non-recourse to TC Energy. The availability of this credit facility was subsequently reduced to US$1.6 billion and all amounts outstanding were fully repaid by the Government of Alberta in June 2021. Refer to Note 6, Keystone XL, for additional information.

3In December 2020, Columbia entered into a US$4.2 billion Unsecured Term Loan agreement. In January 2021, US$4.0 billion was drawn on the Unsecured Term Loan and the total availability under the loan agreement was reduced accordingly. The loan was fully repaid and retired in December 2021.

4In April 2020, Coastal GasLink LP entered into secured long-term project financing credit facilities. In May 2020, TC Energy completed the sale of a 65 per cent equity interest in Coastal GasLink LP and subsequently accounts for its remaining 35 per cent interest using the equity method. Immediately preceding the equity sale, Coastal GasLink LP made an initial draw of $1.6 billion on the credit facilities, of which approximately $1.5 billion was paid to TC Energy. Refer to Note 30, Acquisitions and dispositions, for additional information.

190 \| TC Energy **Consolidated Financial Statements** 2022

------

**Long-Term Debt Retired/Repaid**

The Company retired/repaid long-term debt over the three years ended December 31, 2022 as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) | (millions of Canadian $, unless otherwise noted) |
| **Company** | **Retirement/Repayment Date** | **Type** | **Amount** | **Interest Rate** |
| **TRANSCANADA PIPELINES LIMITED** |  |  |  |  |
|  | December 2022 | Medium Term Notes | 25 | 9.95% |
|  | August 2022 | Senior Unsecured Notes | US 1,000 | 2.50% |
|  | November 2021 | Medium Term Notes | 500 | 3.65% |
|  | January 2021 | Debentures | US 400 | 9.875% |
|  | November 2020 | Debentures | 250 | 11.80% |
|  | October 2020 | Senior Unsecured Notes | US 1,000 | 3.80% |
|  | March 2020<sup>1</sup> | Senior Unsecured Notes | US 750 | 4.60% |
| **COLUMBIA PIPELINE GROUP, INC.** |  |  |  |  |
|  | December 2021 | Unsecured Term Loan<sup>2</sup> | US 4,040 | Floating |
|  | June 2020 | Senior Unsecured Notes | US 750 | 3.30% |
| **NORTH BAJA PIPELINE, LLC** |  |  |  |  |
|  | December 2021 | Unsecured Term Loan | US 50 | Floating |
| **TC PIPELINES, LP** |  |  |  |  |
|  | November 2021 | Unsecured Term Loan | US 450 | Floating |
|  | March 2021 | Senior Unsecured Notes | US 350 | 4.65% |
| **ANR PIPELINE COMPANY** |  |  |  |  |
|  | November 2021 | Senior Unsecured Notes | US 300 | 9.625% |
| **GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP** | **GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP** |  |  |  |
|  | November 2021 | Senior Unsecured Notes | US 10 | 9.09% |
| **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** | **PORTLAND NATURAL GAS TRANSMISSION SYSTEM** |  |  |  |
|  | October 2021 | Unsecured Loan Facility | US 93 | Floating |
|  | October 2020 | Unsecured Loan Facility | US 99 | Floating |
| **KEYSTONE XL SUBSIDIARIES**<sup>3</sup> | **KEYSTONE XL SUBSIDIARIES**<sup>3</sup> | **KEYSTONE XL SUBSIDIARIES**<sup>3</sup> | **KEYSTONE XL SUBSIDIARIES**<sup>3</sup> | **KEYSTONE XL SUBSIDIARIES**<sup>3</sup> |
|  | June 2021 | Project-Level Credit Facility | US 849 | Floating |
| **GAS TRANSMISSION NORTHWEST LLC** |  |  |  |  |
|  | June 2020 | Senior Unsecured Notes | US 100 | 5.29% |

---

1Related unamortized debt issue costs of $8 million were included in Interest expense in the Consolidated statement of income for the year ended December 31, 2020.

2In December 2020, Columbia entered into a US$4.2 billion Unsecured Term Loan agreement. In January 2021, US$4.0 billion was drawn on the Unsecured Term Loan and the total availability under the loan agreement was reduced accordingly. The loan was fully repaid and retired in December 2021. Related unamortized debt issue costs of $5 million were included in Interest expense in the Consolidated statement of income for the year ended December 31, 2021.

3In June 2021, in accordance with the terms of the guarantee, the Government of Alberta repaid the US$849 million outstanding balance under the Keystone XL project-level credit facility bearing interest at a floating rate, subsequent to which it was terminated, resulting in no cash impact to TC Energy. Refer to Note 6, Keystone XL, for additional information.

In March 2021, the Company's subsidiary, TC PipeLines, LP, terminated its US$500 million Unsecured Loan Facility bearing interest at a floating rate on which no amount was outstanding.

TC Energy **Consolidated Financial Statements** 2022 \| 191

------

**Interest Expense**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| Interest on long-term debt | **1883** | 1841 | 1963 |
| Interest on junior subordinated notes | **543** | 453 | 470 |
| Interest on short-term debt | **153** | 10 | 46 |
| Capitalized interest | **(27)** | (22) | (294) |
| Amortization and other financial charges<sup>1</sup> | **36** | 78 | 43 |
|  | **2588** | 2360 | 2228 |

---

1Amortization and other financial charges includes amortization of transaction costs and debt discounts calculated using the effective interest method and losses on derivatives used to manage the Company's exposure to changes in interest rates.

The Company made interest payments of $2,478 million in 2022 (2021 – $2,299 million; 2020 – $2,203 million) on long-term debt, junior subordinated notes and short-term debt, net of interest capitalized.

192 \| TC Energy **Consolidated Financial Statements** 2022

------

**21. JUNIOR SUBORDINATED NOTES**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | **2022** | **2022** | **2021** | **2021** |
| **Outstanding loan amount** | **Maturity<br>Date** | **Outstanding at December 31** | **Effective**<br>**Interest Rate**<sup>1</sup> | **Outstanding at December 31** | **Effective**<br>**Interest Rate**<sup>1</sup> |
| (millions of Canadian $, unless otherwise noted) | **Maturity<br>Date** | **Outstanding at December 31** | **Effective**<br>**Interest Rate**<sup>1</sup> | **Outstanding at December 31** | **Effective**<br>**Interest Rate**<sup>1</sup> |
| **TRANSCANADA PIPELINES LIMITED** |  |  |  |  |  |
| US$1,000 notes issued 2007 at 6.35%<sup>2</sup> | 2067 | **1353** | **6.2%** | 1265 | 4.0% |
| US$750 notes issued 2015 at 5.875%<sup>3,4</sup> | 2075 | **1015** | **7.4%** | 949 | 5.0% |
| US$1,200 notes issued 2016 at 6.125%<sup>3,4</sup> | 2076 | **1624** | **8.0%** | 1519 | 5.8% |
| US$1,500 notes issued 2017 at 5.55%<sup>3,4</sup> | 2077 | **2030** | **7.1%** | 1899 | 4.7% |
| $1,500 notes issued 2017 at 4.90%<sup>3,4</sup> | 2077 | **1500** | **6.8%** | 1500 | 4.5% |
| US$1,100 notes issued 2019 at 5.75%<sup>3,4</sup> | 2079 | **1488** | **7.6%** | 1392 | 5.4% |
| $500 notes issued 2021 at 4.45%<sup>3,5</sup> | 2081 | **500** | **5.7%** | 500 | 4.0% |
| US$800 notes issued 2022 at 5.85%<sup>3,5</sup> | 2082 | **1083** | **7.2%** |  |  |
|  |  | **10593** |  | 9024 |  |
| Unamortized debt discount and issue costs |  | **(98)** |  | (85) |  |
|  |  | **10495** |  | 8939 |  |

---

1The effective interest rate is calculated by discounting the expected future interest payments using the coupon rate and any estimated future rate resets, adjusted for issue costs and discounts.

2Junior subordinated notes of US$1 billion were issued in 2007 at a fixed rate of 6.35 per cent and converted in 2017 to a floating interest rate that is reset quarterly to the three-month LIBOR plus 2.21 per cent.

3The Junior subordinated notes were issued to TransCanada Trust (the Trust), a financing trust subsidiary wholly-owned by TCPL. While the obligations of the Trust are fully and unconditionally guaranteed by TCPL on a subordinated basis, the Trust is not consolidated in TC Energy's financial statements since TCPL does not have a variable interest in the Trust and the only substantive assets of the Trust are junior subordinated notes of TCPL.

4The coupon rate is initially a fixed interest rate for the first 10 years and converts to a floating rate thereafter.

5The coupon rate is initially a fixed interest rate for the first 10 years and resets every five years thereafter.

The Junior subordinated notes are subordinated in right of payment to existing and future senior indebtedness or other obligations of TCPL.

In March 2022, TransCanada Trust (the Trust) issued US$800 million of Trust Notes – Series 2022-A to investors with a fixed interest rate of 5.60 per cent per annum for the first 10 years and resetting on the 10th anniversary and every five years thereafter. All of the proceeds of the issuance by the Trust were loaned to TCPL for US$800 million of junior subordinated notes of TCPL at an initial fixed rate of 5.85 per cent per annum, including a 0.25 per cent administration charge. The rate on the junior subordinated notes of TCPL will reset every five years commencing March 2032 until March 2052 to the then Five-Year Treasury Rate, as defined in the document governing the subordinated notes, plus 4.236 per cent per annum; from March 2052 until March 2082, the interest rate will reset every five years to the then Five-Year Treasury Rate plus 4.986 per cent per annum. The junior subordinated notes are callable at TCPL's option at any time from December 7, 2031 to March 7, 2032 and on each interest payment and reset date thereafter at 100 per cent of the principal amount plus accrued and unpaid interest to the date of redemption.

In March 2021, the Trust issued $500 million of Trust Notes – Series 2021-A to investors with a fixed interest rate of 4.20 per cent per annum for the first 10 years and resetting on the 10th anniversary and every five years thereafter. All of the proceeds of the issuance by the Trust were loaned to TCPL for $500 million of junior subordinated notes of TCPL at an initial fixed rate of 4.45 per cent per annum, including a 0.25 per cent administration charge. The rate on the junior subordinated notes of TCPL will reset every five years commencing March 2031 until March 2051 to the then Five-Year Government of Canada Yield, as defined in the document governing the subordinated notes, plus 3.316 per cent per annum; from March 2051 until March 2081, the interest rate will reset every five years to the then Five-Year Government of Canada Yield plus 4.066 per cent per annum. The junior subordinated notes are callable at TCPL's option at any time from December 4, 2030 to March 4, 2031 and on each interest payment and reset date thereafter at 100 per cent of the principal amount plus accrued and unpaid interest to the date of redemption.

TC Energy **Consolidated Financial Statements** 2022 \| 193

------

Pursuant to the terms of the notes issued between the Trust and TCPL (the Trust Notes) and related agreements, in certain circumstances: 1) TCPL may issue deferral preferred shares to holders of the Trust Notes in lieu of interest; and 2) TC Energy and TCPL would be prohibited from declaring or paying dividends on or redeeming their outstanding preferred shares (or, if none are outstanding, their respective common shares) until all deferral preferred shares are redeemed by TCPL. The Trust Notes may also be automatically exchanged for preferred shares of TCPL upon certain kinds of bankruptcy and insolvency events. All of these preferred shares would rank equally with any other outstanding first preferred shares of TCPL.

**22. FOREIGN EXCHANGE LOSS/(GAIN), NET**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| &nbsp;&nbsp;Derivative instruments held for trading (Note 28) | **151** | (37) | (93) |
| &nbsp;&nbsp;Other | **34** | 27 | 65 |
|  | **185** | (10) | (28) |

---

**23. NON-CONTROLLING INTERESTS**

**TC PipeLines, LP**

**Acquisition**

In December 2020, the Company entered into a definitive agreement and plan of merger to acquire all the outstanding common units of TC PipeLines, LP not beneficially owned by TC Energy or its affiliates in exchange for TC Energy common shares. Upon close of the transaction on March 3, 2021, TC PipeLines, LP common unitholders received 0.70 TC Energy common shares for each issued and outstanding publicly-held TC PipeLines, LP common unit representing, in aggregate, 37,955,093 TC Energy common shares. As a result, TC PipeLines, LP became an indirect, wholly-owned subsidiary of TC Energy.

As the Company controlled TC PipeLines, LP, this acquisition was accounted for as an equity transaction with the following impact reflected on the Consolidated balance sheet:

---

| | |
|:---|:---|
| (millions of Canadian $) | **March 3, 2021** |
| Common shares | **2063** |
| Additional paid-in-capital | **(398)** |
| Accumulated other comprehensive loss | **353** |
| Non-controlling interests | **(1563)** |
| Deferred income tax liabilities | **(443)** |
| Other | **(12)** |

---

**Non-controlling interests**

Prior to the March 3, 2021 acquisition described above, the non-controlling interests in TC PipeLines, LP were 74.5 per cent (2020 – 74.5 per cent). Subsequent to this acquisition, the remaining non-controlling interest on the Consolidated balance sheet is related to the Company's 61.7 per cent investment in Portland Natural Gas Transmission System (PNGTS), which is held by TC PipeLines, LP.

The Company's Net income attributable to non-controlling interests included in the Consolidated statement of income were as follows:

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| Non-controlling interest in TC PipeLines, LP | **—** | 60 | 284 |
| Non-controlling interest in PNGTS | **37** | 30 | 23 |
| Redeemable non-controlling interest (Note 6) | **—** | 1 | (10) |
|  | **37** | 91 | 297 |

---

194 \| TC Energy **Consolidated Financial Statements** 2022

------

**24. COMMON SHARES**

---

| | | |
|:---|:---|:---|
| | **Number of Shares** | **Amount** |
| | (thousands) | (millions of Canadian $) |
| Outstanding at January 1, 2020 | 938400 | 24387 |
| Exercise of options | 1664 | 101 |
| Outstanding at December 31, 2020 | 940064 | 24488 |
| Acquisition of TC PipeLines, LP, net of transaction costs (Note 23) | 37955 | 2063 |
| Exercise of options | 2797 | 165 |
| Outstanding at December 31, 2021 | 980816 | 26716 |
| Issued under public offering<sup>1</sup> | **28400** | **1754** |
| Dividend reinvestment and share purchase plan | **5916** | **342** |
| Exercise of options | **2830** | **183** |
| **Outstanding at December 31, 2022** | **1017962** | **28995** |

---

1Net of underwriting commissions and deferred income taxes.

**Common Shares Issued and Outstanding**

The Company is authorized to issue an unlimited number of common shares without par value.

**Common Shares Issued Under Public Offering**

On August 10, 2022, TC Energy issued 28,400,000 common shares at a price of $63.50 each for total gross proceeds of approximately $1.8 billion.

**Dividend Reinvestment and Share Purchase Plan**

Under the Company's Dividend Reinvestment and Share Purchase Plan (DRP), eligible holders of common and preferred shares of TC Energy can reinvest their dividends and make optional cash payments to obtain additional TC Energy common shares. Commencing with the dividends declared on July 27, 2022, the Company reinstated the issuance of common shares from treasury at a two per cent discount. For dividends declared between January 1, 2020 and July 27, 2022, common shares purchased with reinvested cash dividends under the DRP were acquired on the open market at 100 per cent of the weighted average purchase price.

**Acquisition of TC PipeLines, LP**

On March 3, 2021, TC Energy issued 37,955,093 common shares to acquire all the outstanding publicly-held common units of

TC PipeLines, LP. Refer to Note 23, Non-controlling interests, for additional information.

**TC Energy Corporation At-the-Market Equity Issuance Program**

In December 2020, the Company established an At-the-Market (ATM) program that allowed, from time to time, for the issuance of common shares from treasury at the prevailing market price when sold through the Toronto Stock Exchange, the New York Stock Exchange or any other existing trading market for TC Energy common shares in Canada or the United States. The ATM program was effective for a 25-month period to assist in managing the Company's capital structure. Under this program, the Company had the ability to issue up to $1.0 billion in common shares or the U.S. dollar equivalent. In January 2023, the ATM program expired with no common shares issued thereunder.

TC Energy **Consolidated Financial Statements** 2022 \| 195

------

**Basic and Diluted Net Income per Common Share**

Net income per common share is calculated by dividing Net income attributable to common shares by the weighted average number of common shares outstanding. The weighted average number of shares for the diluted earnings per share calculation includes options exercisable under TC Energy's Stock Option Plan and, subsequent to July 27, 2022, common shares issuable from treasury under the DRP.

---

| | | | |
|:---|:---|:---|:---|
| **Weighted Average Common Shares Outstanding** | | | |
| (millions) | **2022** | **2021** | **2020** |
| Basic | **995** | 973 | 940 |
| Diluted | **996** | 974 | 940 |

---

**Stock Options**

---

| | | | |
|:---|:---|:---|:---|
| | **Number of<br>Options**  | **Weighted Average Exercise Prices** | **Weighted Average Remaining Contractual Life** |
| | (thousands) | | (years) |
| Options outstanding at January 1, 2022 | **7769** | **$61.29** |  |
| Options granted | **1396** | **$66.49** |  |
| Options exercised | **(2830)** | **$58.09** |  |
| Options forfeited/expired | **(226)** | **$63.96** |  |
| **Options Outstanding at December 31, 2022** | **6109** | **$63.86** | **4.4** |
| **Options Exercisable at December 31, 2022** | **3175** | **$63.13** | **3.4** |

---

At December 31, 2022, an additional 3,656,518 common shares were reserved for future issuance from treasury under TC Energy's Stock Option Plan. The contractual life of options granted is seven years. Options may be exercised at a price determined at the time the option is awarded and vest equally on the anniversary date in each of the three years following the award. Forfeiture of stock options results from their expiration and, if not previously vested, upon resignation or termination of the option holder's employment.

The Company used a binomial model for determining the fair value of options granted and applied the following weighted average assumptions:

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| Weighted average fair value | **$8.24** | $7.39 | $7.73 |
| Expected life (years)<sup>1</sup> | **5.4** | 5.4 | 5.7 |
| Interest rate | **1.6%** | 0.5% | 1.5% |
| Volatility<sup>2</sup> | **22%** | 25% | 17% |
| Dividend yield | **5.5%** | 6.0% | 4.2% |

---

1Expected life is based on historical exercise activity.

2Volatility is derived based on the average of both the historical and implied volatility of the Company's common shares.

196 \| TC Energy **Consolidated Financial Statements** 2022

------

The amount expensed for stock options, with a corresponding increase in Additional paid-in capital was $10 million in 2022 (2021 – $12 million; 2020 – $12 million). At December 31, 2022, unrecognized compensation costs related to non-vested stock options were $12 million. The cost is expected to be fully recognized over a weighted average period of 1.9 years.

The following table summarizes additional stock option information:

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $, unless otherwise noted) | **2022** | **2021** | **2020** |
| Total intrinsic value of options exercised | **33** | 28 | 31 |
| Total fair value of options that have vested | **89** | 110 | 101 |
| Total options vested | **1.6 million** | 1.9 million | 2.0 million |

---

As at December 31, 2022, the aggregate intrinsic values of the total options exercisable and the total options outstanding were each less than $1 million.

**Shareholder Rights Plan**

TC Energy's Shareholder Rights Plan is designed to provide the Board of Directors (Board) with sufficient time to explore and develop alternatives for maximizing shareholder value in the event of a takeover offer for the Company and to encourage the fair treatment of shareholders in connection with any such offer. Attached to each common share is one right that, under certain circumstances, entitles certain holders to purchase an additional common share of the Company.

**25. PREFERRED SHARES**

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **at** <br>**December 31, 2022** | **Number of**<br>**Shares**<br>**Outstanding** | **Current Yield** | | **Annual Dividend Per Share**<sup>1,2</sup> | **Redemption Price Per Share** | **Redemption and Conversion Option Date** | **Right to Convert Into** | **Carrying Value**<br>**December 31**<sup>3</sup> | **Carrying Value**<br>**December 31**<sup>3</sup> | **Carrying Value**<br>**December 31**<sup>3</sup> |
| **at** <br>**December 31, 2022** | **Number of**<br>**Shares**<br>**Outstanding** | **Current Yield** |  | **Annual Dividend Per Share**<sup>1,2</sup> | **Redemption Price Per Share** | **Redemption and Conversion Option Date** | **Right to Convert Into** | **2022** | **2021** | **2020** |
|  | (thousands) |  |  |  |  |  |  | (millions of Canadian $) | (millions of Canadian $) | (millions of Canadian $) |
| **Cumulative First Preferred Shares** | **Cumulative First Preferred Shares** | **Cumulative First Preferred Shares** |  |  |  |  |  |  |  |  |
| Series 1 | 14577 | 3.479% |  | $0.86975 | $25.00 | December 31, 2024 | Series 2 | **360** | 360 | 360 |
| Series 2 | 7423 | Floating | 4 | Floating | $25.00 | December 31, 2024 | Series 1 | **179** | 179 | 179 |
| Series 3 | 9997 | 1.694% |  | $0.4235 | $25.00 | June 30, 2025 | Series 4 | **246** | 246 | 246 |
| Series 4 | 4003 | Floating | 4 | Floating | $25.00 | June 30, 2025 | Series 3 | **97** | 97 | 97 |
| Series 5 | 12071 | 1.949% | 5 | $0.48725 | $25.00 | January 30, 2026 | Series 6 | **294** | 294 | 310 |
| Series 6 | 1929 | Floating | 4 | Floating | $25.00 | January 30, 2026 | Series 5 | **48** | 48 | 32 |
| Series 7 | 24000 | 3.903% |  | $0.97575 | $25.00 | April 30, 2024 | Series 8 | **589** | 589 | 589 |
| Series 9 | 18000 | 3.762% |  | $0.9405 | $25.00 | October 30, 2024 | Series 10 | **442** | 442 | 442 |
| Series 11 | 10000 | 3.351% |  | $0.83775 | $25.00 | November 28, 2025 | Series 12 | **244** | 244 | 244 |
| Series 13 |  |  |  |  |  |  |  | **—** |  | 493 |
| Series 15 |  |  |  |  |  |  |  | **—** | 988 | 988 |
|  |  |  |  |  |  |  |  | **2499** | 3487 | 3980 |

---

1Each of the even-numbered series of preferred shares, if in existence, will be entitled to receive floating rate cumulative quarterly preferential dividends per share at an annualized rate equal to the 90-day Government of Canada Treasury bill rate (T-bill rate) plus 1.92 per cent (Series 2), 1.28 per cent (Series 4), 1.54 per cent (Series 6), 2.38 per cent (Series 8), 2.35 per cent (Series 10), or 2.96 per cent (Series 12). These rates reset quarterly with the then current T-Bill rate.

2The odd-numbered series of preferred shares, if in existence, will be entitled to receive fixed rate cumulative quarterly preferential dividends, which will reset on the redemption and conversion option date and every fifth year thereafter, at an annualized rate equal to the then Five-Year Government of Canada bond yield plus 1.92 per cent (Series 1), 1.28 per cent (Series 3), 1.54 per cent (Series 5), 2.38 per cent (Series 7), 2.35 per cent (Series 9), or 2.96 per cent (Series 11).

3Net of underwriting commissions and deferred income taxes.

4The floating quarterly dividend rate for the Series 2 preferred shares is 6.053 per cent for the period starting December 30, 2022 to, but excluding, March 31, 2023. The floating quarterly dividend rate for the Series 4 preferred shares is 5.413 per cent for the period starting December 30, 2022 to, but excluding, March 31, 2023. The floating quarterly dividend rate for the Series 6 preferred shares is 5.192 per cent for the period starting October 30, 2022 to, but excluding, January 30, 2023. These rates will reset each quarter going forward.

5The fixed rate dividend for Series 5 preferred shares decreased from 2.263 per cent to 1.949 per cent on January 30, 2021 and is due to reset on every fifth anniversary thereafter.

TC Energy **Consolidated Financial Statements** 2022 \| 197

------

The holders of preferred shares are entitled to receive a fixed cumulative quarterly preferential dividend as and when declared by the Board with the exception of Series 2, Series 4 and Series 6 preferred shares. The holders of Series 2, Series 4 and Series 6 preferred shares are entitled to receive quarterly floating rate cumulative preferential dividends as and when declared by the Board. The holders will have the right, subject to certain conditions, to convert their first preferred shares of a specified series into first preferred shares of another specified series on the conversion option date and every fifth anniversary thereafter as indicated in the table above.

TC Energy may, at its option, redeem all or a portion of the outstanding preferred shares for the redemption price per share, plus all accrued and unpaid dividends on the applicable redemption option date and on every fifth anniversary thereafter. In addition, Series 2, Series 4 and Series 6 preferred shares are redeemable by TC Energy at any time other than on a designated date for $25.50 per share plus all accrued and unpaid dividends on such redemption date.

On May 31, 2022, TC Energy redeemed all 40,000,000 issued and outstanding Series 15 preferred shares at a redemption price of $25.00 per share and paid the final quarterly dividend of $0.30625 per Series 15 preferred share, for the period up to but excluding May 31, 2022. The Company used the proceeds from the March 2022 issuance of US$800 million of Junior Subordinated Notes through the Trust to finance this preferred share redemption.

In May 2021, TC Energy redeemed all 20,000,000 issued and outstanding Series 13 preferred shares at a redemption price of $25.00 per share and paid the final quarterly dividend of $0.34375 per Series 13 preferred share for the period up to but excluding May 31, 2021. The Company used the proceeds from the March 2021 issuance of $500 million of Junior Subordinated Notes through the Trust to finance this preferred share redemption.

In February 2021, 818,876 Series 5 preferred shares were converted, on a one-for-one basis, into Series 6 preferred shares and 175,208 Series 6 preferred shares were converted, on a one-for-one basis, into Series 5 preferred shares.

In June 2020, 401,590 Series 3 preferred shares were converted, on a one-for-one basis, into Series 4 preferred shares and 1,865,362 Series 4 preferred shares were converted, on a one-for-one basis, into Series 3 preferred shares.

198 \| TC Energy **Consolidated Financial Statements** 2022

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**26. 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, were as follows:

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31, 2022** | **Before Tax Amount** | **Income Tax Recovery/(Expense)** | **Net of Tax Amount** |
| (millions of Canadian $) | **Before Tax Amount** | **Income Tax Recovery/(Expense)** | **Net of Tax Amount** |
| &nbsp;&nbsp;Foreign currency translation gains and losses on net investment in foreign <br>operations | **1410** | **84** | **1494** |
| Change in fair value of net investment hedges | **(48)** | **12** | **(36)** |
| Change in fair value of cash flow hedges | **(58)** | **19** | **(39)** |
| Reclassification to net income of gains and losses on cash flow hedges | **63** | **(21)** | **42** |
| Unrealized actuarial gains and losses on pension and other post-retirement benefit plans | **81** | **(18)** | **63** |
| &nbsp;&nbsp;Reclassification to net income of actuarial gains and losses on pension and other<br>post-retirement benefit plans | **9** | **(3)** | **6** |
| Other comprehensive income on equity investments | **1156** | **(289)** | **867** |
| **Other Comprehensive Income** | **2613** | **(216)** | **2397** |

---

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31, 2021** | **Before Tax Amount** | **Income Tax Recovery/(Expense)** | **Net of Tax Amount** |
| (millions of Canadian $) | **Before Tax Amount** | **Income Tax Recovery/(Expense)** | **Net of Tax Amount** |
| Foreign currency translation gains and losses on net investment in foreign operations | (100) | (8) | (108) |
| Change in fair value of net investment hedges | (3) | 1 | (2) |
| Change in fair value of cash flow hedges | (13) | 3 | (10) |
| Reclassification to net income of gains and losses on cash flow hedges | 68 | (13) | 55 |
| &nbsp;&nbsp;Unrealized actuarial gains and losses on pension and other post-retirement benefit<br>plans | 208 | (50) | 158 |
| &nbsp;&nbsp;Reclassification to net income of actuarial gains and losses on pension and other <br>post-retirement benefit plans | 20 | (6) | 14 |
| Other comprehensive income on equity investments | 714 | (179) | 535 |
| **Other Comprehensive Income** | 894 | (252) | 642 |

---

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31, 2020** | **Before Tax Amount** | **Income Tax Recovery/(Expense)** | **Net of Tax Amount** |
| (millions of Canadian $) | **Before Tax Amount** | **Income Tax Recovery/(Expense)** | **Net of Tax Amount** |
| &nbsp;&nbsp;Foreign currency translation gains and losses on net investment in foreign <br>operations | (647) | 38 | (609) |
| Change in fair value of net investment hedges | 48 | (12) | 36 |
| Change in fair value of cash flow hedges | (771) | 188 | (583) |
| Reclassification to net income of gains and losses on cash flow hedges | 649 | (160) | 489 |
| &nbsp;&nbsp;Unrealized actuarial gains and losses on pension and other post-retirement benefit <br>plans | 15 | (3) | 12 |
| &nbsp;&nbsp;Reclassification to net income of actuarial gains and losses on pension and other <br>post-retirement benefit plans | 23 | (6) | 17 |
| Other comprehensive loss on equity investments | (373) | 93 | (280) |
| **Other Comprehensive Loss** | (1056) | 138 | (918) |

---

TC Energy **Consolidated Financial Statements** 2022 \| 199

------

The changes in AOCI by component were as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (millions of Canadian $) | **Currency<br>Translation<br>Adjustments** | **Cash Flow<br>Hedges** | **Pension and Other Post-Retirement Benefit Plan Adjustments** | **Equity Investments** | **Total**<sup>1</sup> |
| AOCI balance at January 1, 2020 | (730) | (58) | (314) | (457) | (1559) |
| Other comprehensive (loss)/income before reclassifications<sup>2</sup> | (543) | (567) | 12 | (292) | (1390) |
| Amounts reclassified from AOCI |  | 482 | 17 | 11 | 510 |
| Net current period other comprehensive (loss)/income | (543) | (85) | 29 | (281) | (880) |
| AOCI balance at December 31, 2020 | (1273) | (143) | (285) | (738) | (2439) |
| Other comprehensive (loss)/income before reclassifications<sup>2</sup> | (98) | (11) | 158 | 506 | 555 |
| Amounts reclassified from AOCI |  | 55 | 14 | 28 | 97 |
| Net current period other comprehensive (loss)/income | (98) | 44 | 172 | 534 | 652 |
| Acquisition of TC PipeLines, LP<sup>3</sup> | 362 | (13) |  | 4 | 353 |
| AOCI balance at December 31, 2021 | (1009) | (112) | (113) | (200) | (1434) |
| Other comprehensive income/(loss) before reclassifications<sup>2</sup> | **1450** | **(39)** | **63** | **870** | **2344** |
| Amounts reclassified from AOCI<sup>4</sup> | **—** | **42** | **6** | **(3)** | **45** |
| **Net current period other comprehensive income** | **1450** | **3** | **69** | **867** | **2389** |
| **AOCI balance at December 31, 2022** | **441** | **(109)** | **(44)** | **667** | **955** |

---

1All amounts are net of tax. Amounts in parentheses indicate losses recorded to OCI.

2Other comprehensive income/(loss) before reclassifications on currency translation adjustments, cash flow hedges and equity investments are net of non-controlling interest gains of $8 million (2021 – losses of $12 million; 2020 – losses of $30 million), nil (2021 – gains of $1 million; 2020 – losses of $16 million), and nil (2021 – gains of $1 million; 2020 – gains of $1 million), respectively.

3Represents the AOCI attributable to non-controlling interests of TC PipeLines, LP which was reclassified to AOCI on the Consolidated balance sheet upon completion of the acquisition of all the outstanding publicly-held common units of TC PipeLines, LP on March 3, 2021. Refer to Note 23, Non-controlling interests, for additional information.

4Losses 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 $84 million ($64 million, net of tax) at December 31, 2022. 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.

200 \| TC Energy **Consolidated Financial Statements** 2022

------

Details about reclassifications out of AOCI into the Consolidated statement of income were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **year ended December 31** | **Amounts Reclassified** <br>**From AOCI** | **Amounts Reclassified** <br>**From AOCI** | **Amounts Reclassified** <br>**From AOCI** | **Affected Line Item in the Consolidated Statement of Income**<sup>1</sup> |
|  | **2022** | **2021** | **2020** | **Affected Line Item in the Consolidated Statement of Income**<sup>1</sup> |
| (millions of Canadian $) | **2022** | **2021** | **2020** | **Affected Line Item in the Consolidated Statement of Income**<sup>1</sup> |
| Cash flow hedges |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | **(47)** | (22) | (1) | Revenues (Power and Energy Solutions) |
| &nbsp;&nbsp;&nbsp;Interest rate | **(16)** | (46) | (28) | Interest expense |
| &nbsp;&nbsp;&nbsp;Interest rate | **—** |  | (613) | Net gain/(loss) on sale of assets<sup>2</sup> |
|  | **(63)** | (68) | (642) | Total before tax |
|  | **21** | 13 | 160 | Income tax expense |
|  | **(42)** | (55) | (482) | Net of tax<sup>3</sup> |
| Pension and other post-retirement benefit plan adjustments |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Amortization of actuarial losses | **(11)** | (22) | (23) | Plant operating costs and other<sup>4</sup> |
| &nbsp;&nbsp;&nbsp;Settlement gain | **2** | 2 |  | Plant operating costs and other<sup>4</sup> |
|  | **(9)** | (20) | (23) | Total before tax |
|  | **3** | 6 | 6 | Income tax expense |
|  | **(6)** | (14) | (17) | Net of tax |
| Equity investments |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Equity income | **4** | (37) | (15) | Income from equity investments |
|  | **(1)** | 9 | 4 | Income tax expense |
|  | **3** | (28) | (11) | Net of tax |

---

1Amounts in parentheses indicate expenses to the Consolidated statement of income.

2Represents a loss of $613 million ($459 million, net of tax) related to a contractually required derivative instrument used to hedge the interest rate risk associated with project-level financing of the Coastal GasLink construction. The derivative instrument was derecognized as part of the sale of a 65 per cent equity interest in Coastal GasLink LP. Refer to Note 30, Acquisitions and dispositions, for additional information.

3Amounts reclassified from AOCI on cash flow hedges are net of non-controlling interest of nil (2021 – nil; 2020 – losses of $7 million).

4These AOCI components are included in the computation of net benefit cost. Refer to Note 27, Employee post-retirement benefits, for additional information.

TC Energy **Consolidated Financial Statements** 2022 \| 201

------

**27. EMPLOYEE POST-RETIREMENT BENEFITS**

The Company sponsors DB Plans for certain employees. Pension benefits provided under the DB Plans are generally based on years of service and highest average earnings over three consecutive years of employment. Effective January 1, 2019, there were certain amendments made to the Canadian DB Plan for new members whereby, subsequent to that date, benefits provided for these new members are based on years of service and highest average earnings over five consecutive years of employment. Upon commencement of retirement, pension benefits in the Canadian DB Plan increase annually by a portion of the increase in the Consumer Price Index for employees hired prior to January 1, 2019. The Company's U.S. DB Plan is closed to non-union new entrants and all non-union hires participate in the DC Plan. Net actuarial gains or losses are amortized out of AOCI over the EARSL of Plan participants, which was approximately nine years at December 31, 2022 (2021 – 10 years; 2020 – nine years).

The Company also provides its employees with savings plans in Canada and Mexico, DC Plans consisting of a 401(k) Plan in the U.S. and post-employment benefits other than pensions, including termination benefits and life insurance and medical benefits beyond those provided by government-sponsored plans. Net actuarial gains or losses for the plans are amortized out of AOCI over the EARSL of employees, which was approximately 12 years at December 31, 2022 (2021 and 2020 – 11 years). In 2022, the Company expensed $64 million (2021 and 2020 – $58 million) for the savings and DC Plans.

Total cash contributions by the Company for employee post-retirement benefits were as follows:

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| DB Plans | **78** | 105 | 124 |
| Other post-retirement benefit plans | **8** | 8 | 9 |
| Savings and DC Plans | **64** | 58 | 58 |
|  | **150** | 171 | 191 |

---

Current Canadian pension legislation allows for partial funding of solvency requirements over a number of years through letters of credit in lieu of cash contributions, up to certain limits. After the cash contributions noted above, no additional letters of credit were provided to the Canadian DB Plan in 2022 (2021 – $20 million; 2020 – $13 million). Total letters of credit provided to the Canadian DB plan at December 31, 2022 was $322 million.

The most recent actuarial valuation of the pension plans for funding purposes was as at January 1, 2022 and the next required valuation is at January 1, 2023.

In 2022, a settlement occurred for the U.S. DB Plan as a result of lump sum payments made during the year. The impact of the settlement was determined using actuarial assumptions consistent with those employed at December 31, 2022. The settlement gain decreased the U.S. DB Plan's unrealized actuarial gain by $2 million which was included in OCI, and was recorded in net benefit cost in 2022.

In mid-2021, the Company offered a one-time Voluntary Retirement Program (VRP) to eligible employees. Participants in the program retired by December 31, 2021 and received a transition payment along with existing retirement benefits. In 2021, the Company expensed $81 million mainly related to VRP transition payments which were included in Plant operating costs and other. In addition, $18 million was recorded in Revenues related to costs that are recoverable through regulatory and tolling structures on a flow-through basis.

As a result of employee participation in the VRP in 2021, a settlement and curtailment occurred for the U.S. DB Plan and a curtailment occurred in the U.S. other post-retirement benefits plan (OPEB). The impact of these amounts were determined using actuarial assumptions consistent with those employed at December 31, 2021. The settlement gain decreased the U.S. DB Plan's unrealized actuarial gain by $2 million which was included in OCI, while the curtailment gain decreased the U.S. DB Plan's benefit obligation by $5 million, both of which were recorded in net benefit cost in 2021. The curtailment loss decreased the OPEB's unrealized actuarial gain by $3 million which was included in OCI and increased the OPEB obligation by $3 million, resulting in no adjustment to net benefit cost in 2021.

202 \| TC Energy **Consolidated Financial Statements** 2022

------

The Company's funded status at December 31 was comprised of the following:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | &nbsp;&nbsp;&nbsp;**Pension<br>Benefit Plans** | &nbsp;&nbsp;&nbsp;**Pension<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** |
| (millions of Canadian $) | **2022** | **2021** | **2022** | **2021** |
| **Change in Benefit Obligation**<sup>1</sup> |  |  |  |  |
| Benefit obligation – beginning of year | **4027** | 4326 | **419** | 457 |
| Service cost | **145** | 171 | **5** | 6 |
| Interest cost | **125** | 119 | **13** | 12 |
| Employee contributions | **6** | 6 | **2** | 1 |
| Benefits paid | **(324)** | (372) | **(24)** | (21) |
| Actuarial gain | **(949)** | (208) | **(120)** | (35) |
| Curtailment | **—** | (5) | **—** | 3 |
| Foreign exchange rate changes | **51** | (10) | **15** | (4) |
| Benefit obligation – end of year | **3081** | 4027 | **310** | 419 |
| **Change in Plan Assets** |  |  |  |  |
| Plan assets at fair value – beginning of year | **4145** | 4038 | **431** | 441 |
| Actual return on plan assets | **(483)** | 376 | **(89)** | 5 |
| Employer contributions<sup>2</sup> | **78** | 105 | **8** | 8 |
| Employee contributions | **6** | 6 | **2** | 1 |
| Benefits paid | **(324)** | (372) | **(24)** | (21) |
| Foreign exchange rate changes | **59** | (8) | **26** | (3) |
| Plan assets at fair value – end of year | **3481** | 4145 | **354** | 431 |
| **Funded Status – Plan Surplus** | **400** | 118 | **44** | 12 |

---

1The benefit obligation for the Company's pension benefit plans represents the projected benefit obligation. The benefit obligation for the Company's other post-retirement benefit plans represents the accumulated post-retirement benefit obligation.

2Excludes a nil (2021 – $20 million) letter of credit provided to the Canadian DB Plan for funding purposes.

The actuarial gain realized on the defined benefit plan obligation is primarily attributable to an increase in the weighted average discount rate from 3.05 per cent in 2021 to 5.15 per cent in 2022.

The actuarial gain realized on the other post-retirement benefit plan obligation is primarily due to the increase in the weighted average discount rate from 3.10 per cent in 2021 to 5.45 per cent in 2022.

The amounts recognized on the Company's Consolidated balance sheet for its DB Plans and other post-retirement benefits plans were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | &nbsp;&nbsp;&nbsp;**Pension<br>Benefit Plans** | &nbsp;&nbsp;&nbsp;**Pension<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** |
| (millions of Canadian $) | **2022** | **2021** | **2022** | **2021** |
| Other long-term assets (Note 15) | **400** | 119 | **163** | 193 |
| Accounts payable and other | **—** |  | **(8)** | (8) |
| Other long-term liabilities (Note 18) | **—** | (1) | **(111)** | (173) |
|  | **400** | 118 | **44** | 12 |

---

TC Energy **Consolidated Financial Statements** 2022 \| 203

------

Included in the above benefit obligation and fair value of plan assets were the following amounts for plans that were not fully funded:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | &nbsp;&nbsp;&nbsp;&nbsp;**Pension<br>Benefit Plans** | &nbsp;&nbsp;&nbsp;&nbsp;**Pension<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** |
| (millions of Canadian $) | **2022** | **2021** | **2022** | **2021** |
| Projected benefit obligation<sup>1</sup> | **—** | (2687) | **(119)** | (183) |
| Plan assets at fair value | **—** | 2686 | **—** |  |
| **Funded Status – Plan Deficit** | **—** | (1) | **(119)** | (183) |

---

1The projected benefit obligation for the pension benefit plans differs from the accumulated benefit obligation in that it includes an assumption with respect to future compensation levels.

The funded status based on the accumulated benefit obligation for all DB Plans was as follows:

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $) | **2022** | **2021** |
| Accumulated benefit obligation | **(2880)** | (3714) |
| Plan assets at fair value | **3481** | 4145 |
| **Funded Status – Plan Surplus** | **601** | 431 |

---

The Company's DB Plans with respect to accumulated benefit obligations and the fair value of plan assets were fully funded as at December 31, 2022 and December 31, 2021.

The Company pension plans' weighted average asset allocations and target allocations by asset category were as follows:

---

| | | | |
|:---|:---|:---|:---|
| **at December 31** | **Percentage of<br>Plan Assets** | **Percentage of<br>Plan Assets** | **Target Allocations** |
|  | **2022** | **2021** | **2022** |
| Fixed income securities | **38%** | 34% | **25% to 50%** |
| Equity securities | **44%** | 53% | **30% to 55%** |
| Other investments | **18%** | 13% | **10% to 25%** |
|  | **100%** | 100% |  |

---

Fixed income and equity securities include the Company's debt and common shares as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | | | **Percentage of<br>Plan Assets** | **Percentage of<br>Plan Assets** |
| (millions of Canadian $) | **2022** | **2021** | **2022** | **2021** |
| Fixed income securities | **7** | 7 | **0.2%** | 0.2% |
| Equity securities | **3** | 5 | **0.1%** | 0.1% |

---

Pension plan assets are managed on a going concern basis, subject to legislative restrictions, and are diversified across asset classes to maximize returns at an acceptable level of risk. Asset mix strategies consider plan demographics and may include traditional equity and debt securities as well as alternative assets such as infrastructure, private equity, real estate and derivatives to diversify risk. Derivatives are not used for speculative purposes and may be used to hedge certain liabilities.

All investments are measured at fair value using market prices. Where the fair value cannot be readily determined by reference to generally available price quotations, the fair value is determined by considering the discounted cash flows on a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;risk-adjusted basis and by comparison to similar assets which are publicly traded. In Level I, the fair value of assets is determined by reference to quoted prices in active markets for identical assets that the Company has the ability to access at the measurement date. In Level II, the fair value of assets is determined using valuation techniques such as option pricing models and extrapolation using significant inputs which are observable directly or indirectly. In Level III, the fair value of assets is determined using a market approach based on inputs that are unobservable and significant to the overall fair value measurement.

204 \| TC Energy **Consolidated Financial Statements** 2022

------

The following table presents plan assets for DB Plans and other post-retirement benefits measured at fair value, which have been categorized into the three categories based on a fair value hierarchy. For additional information on the fair value hierarchy, refer to Note 28, Risk management and financial instruments.

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **at December 31** | **Quoted Prices in<br>Active Markets<br>(Level I)** | **Quoted Prices in<br>Active Markets<br>(Level I)** | **Significant Other Observable Inputs<br>(Level II)** | **Significant Other Observable Inputs<br>(Level II)** | **Significant Unobservable Inputs<br>(Level III)** | **Significant Unobservable Inputs<br>(Level III)** | **Total** | **Total** | **Percentage of<br>Total Portfolio** | **Percentage of<br>Total Portfolio** |
| (millions of Canadian $) | **2022** | **2021** | **2022** | **2021** | **2022** | **2021** | **2022** | **2021** | **2022** | **2021** |
| **Asset Category** |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Cash and Cash Equivalents | **55** | 68 | **1** | 2 | **—** |  | **56** | 70 | **1** | 2 |
| Equity Securities: |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Canadian | **117** | 269 | **—** | 148 | **—** |  | **117** | 417 | **3** | 9 |
| &nbsp;&nbsp;&nbsp;U.S. | **897** | 649 | **—** | 164 | **—** |  | **897** | 813 | **24** | 18 |
| &nbsp;&nbsp;&nbsp;International | **172** | 126 | **172** | 354 | **—** |  | **344** | 480 | **9** | 10 |
| &nbsp;&nbsp;&nbsp;Global | **—** | 111 | **75** | 313 | **—** |  | **75** | 424 | **2** | 9 |
| &nbsp;&nbsp;&nbsp;Emerging | **50** | 25 | **127** | 120 | **—** |  | **177** | 145 | **5** | 3 |
| Fixed Income Securities: |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Canadian Bonds: |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal | **—** |  | **221** | 226 | **—** |  | **221** | 226 | **6** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provincial | **—** |  | **249** | 331 | **—** |  | **249** | 331 | **6** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal | **—** |  | **12** | 16 | **—** |  | **12** | 16 | **—** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate | **—** |  | **108** | 147 | **—** |  | **108** | 147 | **3** | 4 |
| &nbsp;&nbsp;&nbsp;U.S. Bonds: |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal | **177** | 433 | **158** | 15 | **—** |  | **335** | 448 | **9** | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal | **—** |  | **1** | 1 | **—** |  | **1** | 1 | **—** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate | **345** | 67 | **94** | 143 | **—** |  | **439** | 210 | **11** | 5 |
| &nbsp;&nbsp;&nbsp;International: |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government | **5** | 6 | **6** | 7 | **—** |  | **11** | 13 | **—** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate | **—** |  | **58** | 73 | **—** |  | **58** | 73 | **1** | 2 |
| &nbsp;&nbsp;&nbsp;Mortgage backed | **36** | 42 | **1** | 5 | **—** |  | **37** | 47 | **1** | 1 |
| Net forward contracts | **—** |  | **(78)** |  | **—** |  | **(78)** |  | **(2)** |  |
| Other Investments: |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Real estate | **—** |  | **—** |  | **336** | 283 | **336** | 283 | **9** | 6 |
| &nbsp;&nbsp;&nbsp;Infrastructure | **—** |  | **—** |  | **296** | 281 | **296** | 281 | **8** | 6 |
| &nbsp;&nbsp;&nbsp;Private equity funds | **—** |  | **—** |  | **—** | 1 | **—** | 1 | **—** |  |
| &nbsp;&nbsp;&nbsp;Funds held on deposit | **144** | 150 | **—** |  | **—** |  | **144** | 150 | **4** | 3 |
|  | **1998** | 1946 | **1205** | 2065 | **632** | 565 | **3835** | 4576 | **100** | 100 |

---

The following table presents the net change in the Level III fair value category:

---

| | |
|:---|:---|
| (millions of Canadian $, pre-tax) |  |
| Balance at December 31, 2020 | 417 |
| Purchases and sales | 100 |
| Realized and unrealized gains | 48 |
| Balance at December 31, 2021 | 565 |
| Purchases and sales | **52** |
| Realized and unrealized gains | **15** |
| **Balance at December 31, 2022** | **632** |

---

TC Energy **Consolidated Financial Statements** 2022 \| 205

------

The Company's expected funding contributions in 2023 are approximately $32 million for the DB Plans, $6 million for the other post-retirement benefit plans and approximately $69 million for the savings plans and DC Plans. The Company does not expect to issue additional letters of credit to the Canadian DB Plan for the funding of solvency requirements.

The following are estimated future benefit payments, which reflect expected future service:

---

| | | |
|:---|:---|:---|
| (millions of Canadian $) | **Pension Benefits** | **Other Post-Retirement Benefits** |
| 2023 | 210 | 25 |
| 2024 | 214 | 24 |
| 2025 | 217 | 24 |
| 2026 | 221 | 23 |
| 2027 | 224 | 23 |
| 2028 to 2032 | 1160 | 111 |

---

The rate used to discount pension and other post-retirement benefit plan obligations was developed based on a yield curve of primarily corporate AA bond yields at December 31, 2022. This yield curve is used to develop spot rates that vary based on the duration of the obligations. The estimated future cash flows for the pension and other post-retirement benefit obligations were matched to the corresponding rates on the spot rate curve to derive a weighted average discount rate.

The significant weighted average actuarial assumptions adopted in measuring the Company's benefit obligations were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | &nbsp;&nbsp;&nbsp;&nbsp;**Pension <br>Benefit Plans** | &nbsp;&nbsp;&nbsp;&nbsp;**Pension <br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** |
|  | **2022** | **2021** | **2022** | **2021** |
| Discount rate | **5.15%** | 3.05% | **5.45%** | 3.10% |
| Rate of compensation increase | **3.30%** | 2.95% | **—** |  |

---

The significant weighted average actuarial assumptions adopted in measuring the Company's net benefit plan costs were as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31** | &nbsp;&nbsp;**Pension <br>Benefit Plans** | &nbsp;&nbsp;**Pension <br>Benefit Plans** | &nbsp;&nbsp;**Pension <br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** |
|  | **2022** | **2021** | **2020** | **2022** | **2021** | **2020** |
| Discount rate | **3.05%** | 2.70% | 3.20% | **3.10%** | 2.80% | 3.35% |
| Expected long-term rate of return on plan assets | **6.10%** | 6.15% | 6.40% | **3.25%** | 3.00% | 3.50% |
| Rate of compensation increase | **3.00%** | 2.60% | 3.00% |  |  |  |

---

206 \| TC Energy **Consolidated Financial Statements** 2022

------

The overall expected long-term rate of return on plan assets is based on historical and projected rates of return for the portfolio in aggregate and for each asset class in the portfolio. Assumed projected rates of return are selected after analyzing historical experience and estimating future levels and volatility of returns. Asset class benchmark returns, asset mix and anticipated benefit payments from plan assets are also considered in determining the overall expected rate of return. The discount rate is based on market interest rates of high-quality bonds that match the timing and benefits expected to be paid under each plan.

A 6.10 per cent weighted-average annual rate of increase in the per capita cost of covered health care benefits was assumed for 2023 measurement purposes. The rate was assumed to decrease gradually to 4.80 per cent by 2030 and remain at this level thereafter.

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31** | **Pension <br>Benefit Plans** | **Pension <br>Benefit Plans** | **Pension <br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** | **Other Post-Retirement<br>Benefit Plans** |
| (millions of Canadian $) | **2022** | **2021** | **2020** | **2022** | **2021** | **2020** |
| Service cost<sup>1</sup> | **145** | 171 | 155 | **5** | 6 | 6 |
| Other components of net benefit cost<sup>1</sup> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest cost | **125** | 119 | 133 | **13** | 12 | 14 |
| &nbsp;&nbsp;&nbsp;Expected return on plan assets | **(239)** | (234) | (230) | **(14)** | (13) | (14) |
| &nbsp;&nbsp;&nbsp;Amortization of actuarial loss | **10** | 23 | 21 | **1** | 2 | 2 |
| &nbsp;&nbsp;&nbsp;Amortization of regulatory asset | **12** | 27 | 25 | **1** | 2 | 2 |
| &nbsp;&nbsp;&nbsp;Curtailment gain | **—** | (5) |  | **—** |  |  |
| &nbsp;&nbsp;&nbsp;Settlement gain – AOCI | **(2)** | (2) |  | **—** |  |  |
|  | **(94)** | (72) | (51) | **1** | 3 | 4 |
| **Net Benefit Cost Recognized** | **51** | 99 | 104 | **6** | 9 | 10 |

---

1&nbsp;&nbsp;&nbsp;&nbsp;Service cost and other components of net benefit cost are included in Plant operating costs and other in the Consolidated statement of income.

Pre-tax amounts recognized in AOCI were as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
|  | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** |
| (millions of Canadian $) | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** |
| Net loss | **38** | **24** | 147 | 5 | 358 | 22 |

---

Pre-tax amounts recognized in OCI were as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
|  | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** |
| (millions of Canadian $) | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** | **Pension<br>Benefits** | **Other Post-<br>Retirement<br>Benefits** |
| &nbsp;&nbsp;&nbsp;Amortization of net loss from <br>AOCI to net income | **(10)** | **(1)** | (23) | (2) | (21) | (2) |
| Curtailment | **—** | **—** |  | 3 |  |  |
| Settlement | **2** | **—** | 2 |  |  |  |
| Funded status adjustment | **(101)** | **20** | (190) | (18) | (18) | 3 |
|  | **(109)** | **19** | (211) | (17) | (39) | 1 |

---

TC Energy **Consolidated Financial Statements** 2022 \| 207

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**28. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS**

**Risk Management Overview**

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

Risk management strategies, policies and limits are designed to ensure TC Energy's risks and related exposures are in line with the Company's business objectives and risk tolerance. TC Energy's risks are managed within limits that are established by the Company's Board, implemented by senior management and monitored by the Company's risk management, internal audit and business segment groups. The Board's Audit Committee oversees how management monitors compliance with risk management policies and procedures and oversees management's review of the adequacy of the risk management framework.

**Market Risk**

The Company constructs and invests in energy infrastructure projects, purchases and sells commodities, issues short- and long-term debt, including amounts in foreign currencies and invests in foreign operations. Certain of these activities expose the Company to market risk from changes in commodity prices, foreign exchange rates and interest rates, which may affect the Company's earnings, cash flows and the value of its financial assets and liabilities. The Company assesses contracts used to manage market risk to determine whether all, or a portion, meets the definition of a derivative.

Derivative contracts the Company uses to assist in managing exposure to market risk may include the following:

• Forwards and futures contracts – agreements to purchase or sell a specific financial instrument or commodity at a specified price and date in the future

• Swaps – agreements between two parties to exchange streams of payments over time according to specified terms

• Options – agreements that convey the right, but not the obligation of the purchaser to buy or sell a specific amount of a financial instrument or commodity at a fixed price, either at a fixed date or at any time within a specified period.

**Commodity price risk**

The following strategies may be used to manage the Company's exposure to market risk resulting from commodity price risk management activities in the Company's non-regulated businesses:

• in the Company's natural gas marketing business, TC Energy enters into natural gas transportation and storage contracts as well as natural gas purchase and sale agreements. The Company manages exposure on these contracts using financial instruments and hedging activities to offset market price volatility

• in the Company's liquids marketing business, TC Energy enters into pipeline and storage terminal capacity contracts as well as crude oil purchase and sale agreements. The Company fixes a portion of the exposure on these contracts by entering into financial instruments to manage variable price fluctuations that arise from physical liquids transactions

• in the Company's power businesses, TC Energy manages the exposure to fluctuating commodity prices through long-term contracts and hedging activities including selling and purchasing electricity and natural gas in forward markets

• in the Company's non-regulated natural gas storage business, TC Energy's exposure to seasonal natural gas price spreads is managed with a portfolio of third-party storage capacity contracts and through offsetting purchases and sales of natural gas in forward markets to lock in future positive margins.

Lower natural gas, crude oil and electricity prices could lead to reduced investment in the development, expansion and production of these commodities. A reduction in the demand for these commodities could negatively impact opportunities to expand the Company's asset base and/or re-contract with TC Energy's shippers and customers as contractual agreements expire.

Climate change also presents a potential financial impact to commodity prices and volumes. TC Energy's exposure to climate change-related risk and resulting policy changes is managed through the Company's business model, which is based on a long-term, low-risk strategy whereby the majority of TC Energy's earnings are underpinned by regulated cost-of-service arrangements and/or long-term contracts. In addition, scenario planning against several demand outlooks and monitoring of key signposts is also considered as part of the Company's long-term corporate strategic planning process.

208 \| TC Energy **Consolidated Financial Statements** 2022

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**Interest rate risk**

TC Energy utilizes short- and long-term debt to finance its operations which exposes the Company to interest rate risk. TC Energy typically pays fixed rates of interest on its long-term debt and floating rates on short-term debt including its commercial paper programs and amounts drawn on its credit facilities. A small portion of TC Energy's long-term debt bears interest at floating rates. In addition, the Company is exposed to interest rate risk on financial instruments and contractual obligations containing variable interest rate components. The Company actively manages its interest rate risk using interest rate derivatives. For eligible hedging relationships affected by the expected cessation of certain reference interest rates, the Company has applied the optional expedient allowing an entity to assume that the hedged forecasted transaction in a cash flow hedge is probable of occurring and, therefore, these changes are not expected to have a material impact on the consolidated financial statements. Refer to Note 3, Accounting changes, for additional information on Reference Rate Reform.

**Foreign exchange risk**

Certain of TC Energy's businesses generate all or most of their earnings in U.S. dollars and, since the Company reports its financial results in Canadian dollars, changes in the value of the U.S. dollar against the Canadian dollar can affect its net income. As the Company's U.S. dollar-denominated operations continue to grow, this exposure increases. A portion of this risk is offset by interest expense on U.S. dollar-denominated debt. The balance of the exposure is actively managed on a rolling basis up to three years in advance using foreign exchange derivatives; however, the natural exposure beyond that period remains.

A portion of the Company's Mexico Natural Gas Pipelines monetary assets and liabilities are peso-denominated, while the functional currency for TC Energy's Mexico operations is U.S. dollars. These peso-denominated balances are revalued to U.S. dollars and, as a result, changes in the value of the Mexican peso against the U.S. dollar can affect the Company's net 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 peso-denominated income tax exposure for these entities, leading to fluctuations in Income from equity investments and Income tax expense. As the Company's U.S. dollar-denominated monetary assets and liabilities in our Mexico operations continue to grow, this exposure increases. These exposures are managed using foreign exchange derivatives.

**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:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | **2022** | **2022** | **2021** | **2021** |
|  | **Fair<br>Value**<sup>1,2</sup> | **Notional Amount** | **Fair<br>Value**<sup>1,2</sup> | **Notional Amount** |
| (millions of Canadian $, unless otherwise noted) | **Fair<br>Value**<sup>1,2</sup> | **Notional Amount** | **Fair<br>Value**<sup>1,2</sup> | **Notional Amount** |
| U.S. dollar foreign exchange options (maturing 2023 to 2024) | **(22)** | **US 3,600** | (4) | US 3,800 |
| U.S. dollar cross-currency interest rate swaps (maturing 2023 to 2025)<sup>3</sup> | **(5)** | **US 300** | 23 | US 400 |
|  | **(27)** | **US 3,900** | 19 | US 4,200 |

---

1Fair value equals carrying value.

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

3In 2022, Net income includes net realized gains of $1 million (2021 – gains of $1 million) related to the interest component of cross-currency swap settlements which are reported within Interest expense.

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

---

| | | |
|:---|:---|:---|
| **at December 31** | **2022** | **2021** |
| (millions of Canadian $, unless otherwise noted) | **2022** | **2021** |
| Notional amount | **32,500 (US 24,000)** | 30,700 (US 24,200) |
| Fair value | **30,800 (US 22,700)** | 35,500 (US 28,100) |

---

TC Energy **Consolidated Financial Statements** 2022 \| 209

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**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, loans receivable, net investment in leases and contract assets.

At times, the Company's counterparties may endure financial challenges resulting from commodity price and market volatility, economic instability and political or regulatory changes. In addition to actively monitoring these situations, there are a number of factors that reduce TC Energy's counterparty credit risk exposure in the event of default, including:

• contractual rights and remedies together with the utilization of contractually-based financial assurances

• current regulatory frameworks governing certain TC Energy operations

• the competitive position of the Company's assets and the demand for the Company's services

• potential recovery of unpaid amounts through bankruptcy and similar proceedings.

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.

The Company's net investment in leases and certain contract assets are financial assets subject to ECL. TC Energy's methodology for assessing the ECL regarding these financial assets includes consideration of the probability of default (the probability that the customer will default on its obligation), the loss given default (the economic loss as a proportion of the financial asset balance in the event of a default) and the exposure at default (the financial asset balance at the time of a hypothetical default) with one-year forward-looking information that includes assumptions for future macroeconomic conditions under three probability-weighted future scenarios.

The macroeconomic factors considered most relevant to the Company's net investment in leases and contract assets include Mexico's GDP, Mexico's government debt to GDP and Mexico's inflation. The ECL amount is updated at each reporting date to reflect changes in assumptions and forecasts for future economic conditions.

For the year ended December 31, 2022, the Company recorded a $149 million (2021 and 2020 – nil) ECL provision with respect to the net investment in leases associated with the in-service TGNH pipelines and a $14 million (2021 and 2020 – nil) ECL provision for contract assets related to certain other Mexico Natural Gas pipelines.

Other than the ECL provision noted above, the Company had no significant credit losses at December 31, 2022 and 2021. At December 31, 2022 and 2021, there were no significant credit risk concentrations and no significant 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.

**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, Loans receivable from affiliates, Other current assets, Long-term loans receivable from affiliate, 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.

210 \| TC Energy **Consolidated Financial Statements** 2022

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**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:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | **2022** | **2022** | **2021** | **2021** |
|  | **Carrying**<br>**Amount** | **Fair**<br>**Value** | **Carrying<br>Amount** | **Fair<br>Value** |
| (millions of Canadian $) | **Carrying**<br>**Amount** | **Fair**<br>**Value** | **Carrying<br>Amount** | **Fair<br>Value** |
| Long-term debt, including current portion (Note 20)<sup>1,2</sup> | **(41543)** | **(39505)** | (38661) | (45615) |
| Junior subordinated notes (Note 21) | **(10495)** | **(9415)** | (8939) | (9236) |
|  | **(52038)** | **(48920)** | (47600) | (54851) |

---

1Long-term debt is recorded at amortized cost, except for US$1.6 billion (2021 – nil) that is attributed to hedged risk and recorded at fair value.

2Net income for 2022 included unrealized gains of $64 million (2021 – nil) 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 December 31, 2022 (2021 – nil). There were no other unrealized gains or losses from fair value adjustments to the non-derivative financial instruments.

**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:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | **2022** | **2022** | **2021** | **2021** |
|  | **LMCI Restricted Investments** | **Other Restricted Investments**<sup>1</sup> | **LMCI Restricted Investments** | **Other Restricted Investments**<sup>1</sup> |
| (millions of Canadian $) | **LMCI Restricted Investments** | **Other Restricted Investments**<sup>1</sup> | **LMCI Restricted Investments** | **Other Restricted Investments**<sup>1</sup> |
| Fair value of fixed income securities<sup>2,3</sup> |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Maturing within 1 year | **—** | **54** |  | 26 |
| &nbsp;&nbsp;&nbsp;Maturing within 1-5 years | **—** | **106** | 8 | 107 |
| &nbsp;&nbsp;&nbsp;Maturing within 5-10 years | **1153** | **—** | 1150 |  |
| &nbsp;&nbsp;&nbsp;Maturing after 10 years | **77** | **—** | 84 |  |
| Fair value of equity securities<sup>2,4</sup> | **749** | **—** | 817 |  |
|  | **1979** | **160** | 2059 | 133 |

---

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 Consolidated balance sheet.

3Classified in Level II of the fair value hierarchy.

4Classified in Level I of the fair value hierarchy.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| <br>(millions of Canadian $) | **LMCI Restricted Investments**<sup>1</sup> | **Other Restricted Investments**<sup>2</sup> | **LMCI Restricted Investments**<sup>1</sup> | **Other Restricted Investments**<sup>2</sup> | **LMCI Restricted Investments**<sup>1</sup> | **Other Restricted Investments**<sup>2</sup> |
| Net unrealized (losses)/gains | **(244)** | **(7)** | 45 | (2) | 130 | 1 |
| Net realized (losses)/gains<sup>3</sup> | **(32)** | **—** | 3 |  | 20 | 1 |

---

1Gains and 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 assets or regulatory liabilities.

2Gains and losses on other restricted investments are included in Interest income and other in the Company's Consolidated statement of income.

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

TC Energy **Consolidated Financial Statements** 2022 \| 211

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**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 year-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.

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 RRA, 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 assets or regulatory liabilities and are refunded to or collected from the rate payers in subsequent years when the derivative settles.

212 \| TC Energy **Consolidated Financial Statements** 2022

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**Balance sheet presentation of derivative instruments**

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

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **at December 31, 2022** | **Cash Flow Hedges** | **Fair Value Hedges** | **Net<br> Investment Hedges** | **Held for<br> Trading** | **Total Fair**<br> **Value of Derivative Instruments**<sup>1</sup> |
| (millions of Canadian $) | **Cash Flow Hedges** | **Fair Value Hedges** | **Net<br> Investment Hedges** | **Held for<br> Trading** | **Total Fair**<br> **Value of Derivative Instruments**<sup>1</sup> |
| Other current assets (Note 8) |  |  |  |  |  |
| &nbsp;&nbsp;Commodities<sup>2</sup> | **—** | **—** | **—** | **597** | **597** |
| &nbsp;&nbsp;&nbsp;Foreign exchange | **—** | **—** | **6** | **11** | **17** |
|  | **—** | **—** | **6** | **608** | **614** |
| Other long-term assets (Note 15) |  |  |  |  |  |
| &nbsp;&nbsp;Commodities<sup>2</sup> | **—** | **—** | **—** | **62** | **62** |
| &nbsp;&nbsp;&nbsp;Foreign exchange | **—** | **—** | **2** | **15** | **17** |
| &nbsp;&nbsp;&nbsp;Interest rate | **—** | **12** | **—** | **—** | **12** |
|  | **—** | **12** | **2** | **77** | **91** |
| **Total Derivative Assets** | **—** | **12** | **8** | **685** | **705** |
| Accounts payable and other (Note 17) |  |  |  |  |  |
| &nbsp;&nbsp;Commodities<sup>2</sup> | **(72)** | **—** | **—** | **(584)** | **(656)** |
| &nbsp;&nbsp;&nbsp;Foreign exchange | **—** | **—** | **(31)** | **(158)** | **(189)** |
| &nbsp;&nbsp;&nbsp;Interest rate | **—** | **(26)** | **—** | **—** | **(26)** |
|  | **(72)** | **(26)** | **(31)** | **(742)** | **(871)** |
| Other long-term liabilities (Note 18) |  |  |  |  |  |
| &nbsp;&nbsp;Commodities<sup>2</sup> | **(2)** | **—** | **—** | **(75)** | **(77)** |
| &nbsp;&nbsp;&nbsp;Foreign exchange | **—** | **—** | **(4)** | **(20)** | **(24)** |
| &nbsp;&nbsp;&nbsp;Interest rate | **—** | **(50)** | **—** | **—** | **(50)** |
|  | **(2)** | **(50)** | **(4)** | **(95)** | **(151)** |
| **Total Derivative Liabilities** | **(74)** | **(76)** | **(35)** | **(837)** | **(1022)** |
| **Total Derivatives** | **(74)** | **(64)** | **(27)** | **(152)** | **(317)** |

---

1Fair value equals carrying value.

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

TC Energy **Consolidated Financial Statements** 2022 \| 213

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31, 2021** | **Cash Flow Hedges** | **Net Investment Hedges** | **Held for Trading** | **Total Fair Value of Derivative Instruments**<sup>1</sup> |
| (millions of Canadian $) | **Cash Flow Hedges** | **Net Investment Hedges** | **Held for Trading** | **Total Fair Value of Derivative Instruments**<sup>1</sup> |
| Other current assets (Note 8) |  |  |  |  |
| &nbsp;&nbsp;Commodities<sup>2</sup> |  |  | 122 | 122 |
| &nbsp;&nbsp;&nbsp;Foreign exchange |  | 10 | 37 | 47 |
|  |  | 10 | 159 | 169 |
| Other long-term assets (Note 15) |  |  |  |  |
| &nbsp;&nbsp;Commodities<sup>2</sup> |  |  | 8 | 8 |
| &nbsp;&nbsp;&nbsp;Foreign exchange |  | 32 | 6 | 38 |
| &nbsp;&nbsp;&nbsp;Interest rate | 2 |  |  | 2 |
|  | 2 | 32 | 14 | 48 |
| **Total Derivative Assets** | 2 | 42 | 173 | 217 |
| Accounts payable and other (Note 17) |  |  |  |  |
| &nbsp;&nbsp;Commodities<sup>2</sup> | (23) |  | (138) | (161) |
| &nbsp;&nbsp;&nbsp;Foreign exchange |  | (4) | (46) | (50) |
| &nbsp;&nbsp;&nbsp;Interest rate | (10) |  |  | (10) |
|  | (33) | (4) | (184) | (221) |
| Other long-term liabilities (Note 18) |  |  |  |  |
| &nbsp;&nbsp;Commodities<sup>2</sup> | (4) |  | (6) | (10) |
| &nbsp;&nbsp;&nbsp;Foreign exchange |  | (19) | (10) | (29) |
| &nbsp;&nbsp;&nbsp;Interest rate | (8) |  |  | (8) |
|  | (12) | (19) | (16) | (47) |
| **Total Derivative Liabilities** | (45) | (23) | (200) | (268) |
| **Total Derivatives** | (43) | 19 | (27) | (51) |

---

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 Consolidated balance sheet in relation to cumulative adjustments for fair value hedges included in the carrying amount of the hedged liabilities:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31** | **Carrying Amount** | **Carrying Amount** | **Fair Value Hedging Adjustments**<sup>1</sup> | **Fair Value Hedging Adjustments**<sup>1</sup> |
| (millions of Canadian $) | **2022** | **2021** | **2022** | **2021** |
| Long-term debt | **(2101)** | **—** | **64** | **—** |

---

1At December 31, 2022 and 2021, adjustments for discontinued hedging relationships included in these balances were nil.

214 \| TC Energy **Consolidated Financial Statements** 2022

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**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 December 31, 2022** | **Power** | **Natural Gas** | **Liquids** | **Foreign Exchange** | **Interest Rate** |
| Net sales/(purchases)<sup>1</sup> | **673** | **(96)** | **11** | **—** | **—** |
| Millions of U.S. dollars | **—** | **—** | **—** | **5997** | **1600** |
| Millions of Mexican pesos | **—** | **—** | **—** | **9747** | **—** |
| 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. In 2022, TC Energy updated this presentation to a net basis as it better reflects the Company's trading positions and how it manages its business.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **at December 31, 2021** | **Power** | **Natural Gas** | **Liquids** | **Foreign Exchange** | **Interest Rate** |
| Net sales/(purchases)<sup>1</sup> | 490 | (52) | 4 |  |  |
| Millions of U.S. dollars |  |  |  | 6636 | 650 |
| Millions of Mexican pesos |  |  |  | 5500 |  |
| Maturity dates | 2022-2026 | 2022-2027 | 2022 | 2022-2026 | 2024-2026 |

---

1Volumes for power, natural gas and liquids derivatives are in GWh, Bcf and MMBbls, respectively. In 2022, TC Energy updated this presentation to a net basis as it better reflects the Company's trading positions and how it manages its business.

**Unrealized and Realized Gains and Losses on Derivative Instruments** 

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

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| **Derivative Instruments Held For Trading**<sup>1</sup> |  |  |  |
| Amount of unrealized gains/(losses) in the year |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | **14** | 9 | (23) |
| &nbsp;&nbsp;Foreign exchange (Note 22) | **(149)** | (203) | 126 |
| Amount of realized gains/(losses) in the year |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | **759** | 287 | 183 |
| &nbsp;&nbsp;Foreign exchange (Note 22) | **(2)** | 240 | (33) |
| **Derivative Instruments in Hedging Relationships**<sup>2</sup> |  |  |  |
| Amount of realized (losses)/gains in the year |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | **(73)** | (44) | 6 |
| &nbsp;&nbsp;&nbsp;Interest rate | **(3)** | (32) | (16) |

---

1Realized and unrealized gains and 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 and losses on foreign exchange held-for-trading derivative instruments are included on a net basis in Foreign exchange (loss)/gain, net.

2In 2022, there were no gains or losses included in Net Income relating to discontinued cash flow hedges where it was probable that the anticipated transaction would not occur (2021 – realized loss of $10 million, 2020 – nil).

TC Energy **Consolidated Financial Statements** 2022 \| 215

------

**Derivatives in cash flow hedging relationships**

The components of OCI (Note 26) 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:

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $, pre-tax) | **2022** | **2021** | **2020** |
| Change in fair value of derivative instruments recognized in OCI<sup>1</sup> |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | **(94)** | (35) | (5) |
| &nbsp;&nbsp;&nbsp;Interest rate | **36** | 22 | (766) |
|  | **(58)** | (13) | (771) |

---

1No amounts have been excluded from the assessment of hedge effectiveness. Amounts in parentheses indicate losses recorded to OCI and AOCI.

**Effect of fair value and cash flow hedging relationships**

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

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| **Fair Value Hedges** |  |  |  |
| Interest rate contracts<sup>1</sup> |  |  |  |
| &nbsp;&nbsp;&nbsp;Hedged items | **(30)** |  | (3) |
| &nbsp;&nbsp;&nbsp;Derivatives designated as hedging instruments | **(1)** |  | 1 |
| **Cash Flow Hedges** |  |  |  |
| Reclassification of losses on derivative instruments from AOCI to Net income<sup>2,3</sup> |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodity contracts<sup>4</sup> | **(47)** | (22) | (1) |
| &nbsp;&nbsp;&nbsp;Interest rate contracts<sup>1</sup> | **(16)** | (46) | (648) |

---

1Presented within Interest expense in the Consolidated statement of income, except for a loss of $613 million recorded in May 2020 related to a contractually required derivative instrument used to hedge the interest rate risk associated with project-level financing for the Coastal GasLink construction. This derivative instrument was derecognized as part of the sale of a 65 per cent equity interest in Coastal GasLink LP. The loss was included in Net gain/(loss) on sale of assets. Refer to Note 30, Acquisitions and dispositions, for additional information.

2Refer to Note 26, Other comprehensive income/(loss) and accumulated other comprehensive income/(loss), for the components of OCI related to derivatives in cash flow hedging relationships including the portion attributable to non-controlling interests.

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

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

**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 Consolidated balance sheet.

216 \| TC Energy **Consolidated Financial Statements** 2022

------

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 December 31, 2022** | **Gross Derivative Instruments** | **Amounts Available for Offset**<sup>1</sup> | **Net Amounts** |
| (millions of Canadian $) | **Gross Derivative Instruments** | **Amounts Available for Offset**<sup>1</sup> | **Net Amounts** |
| **Derivative Instrument Assets** |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | **659** | **(591)** | **68** |
| &nbsp;&nbsp;&nbsp;Foreign exchange | **34** | **(33)** | **1** |
| &nbsp;&nbsp;&nbsp;Interest rate | **12** | **(4)** | **8** |
|  | **705** | **(628)** | **77** |
| **Derivative Instrument Liabilities** |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | **(733)** | **591** | **(142)** |
| &nbsp;&nbsp;&nbsp;Foreign exchange | **(213)** | **33** | **(180)** |
| &nbsp;&nbsp;&nbsp;Interest rate | **(76)** | **4** | **(72)** |
|  | **(1022)** | **628** | **(394)** |

---

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

---

| | | | |
|:---|:---|:---|:---|
| **at December 31, 2021** | **Gross Derivative Instruments** | **Amounts Available for Offset**<sup>1</sup> | **Net Amounts** |
| (millions of Canadian $) | **Gross Derivative Instruments** | **Amounts Available for Offset**<sup>1</sup> | **Net Amounts** |
| **Derivative Instrument Assets** |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | 130 | (91) | 39 |
| &nbsp;&nbsp;&nbsp;Foreign exchange | 85 | (54) | 31 |
| &nbsp;&nbsp;&nbsp;Interest rate | 2 | (1) | 1 |
|  | 217 | (146) | 71 |
| **Derivative Instrument Liabilities** |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | (171) | 91 | (80) |
| &nbsp;&nbsp;&nbsp;Foreign exchange | (79) | 54 | (25) |
| &nbsp;&nbsp;&nbsp;Interest rate | (18) | 1 | (17) |
|  | (268) | 146 | (122) |

---

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 $138 million and letters of credit of $68 million at December 31, 2022 (2021 – $144 million and $130 million, respectively) to its counterparties. At December 31, 2022, the Company held less than $1 million in cash collateral and $10 million in letters of credit (2021 – nil and $6 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.

Based on contracts in place and market prices at December 31, 2022, the aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position was $19 million (2021 – $5 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 December 31, 2022, 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.

TC Energy **Consolidated Financial Statements** 2022 \| 217

------

**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.<br>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 and the Company uses the most observable inputs available or, if not available, long-term broker quotes to estimate the fair value for these transactions.<br>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 December 31, 2022** | **Quoted Prices in Active Markets <br>(Level I)** | **Significant Other Observable Inputs**<br> **(Level II)**<sup>1</sup> | **Significant Unobservable Inputs <br>(Level III)**<sup>1</sup> | **Total** |
| (millions of Canadian $) | **Quoted Prices in Active Markets <br>(Level I)** | **Significant Other Observable Inputs**<br> **(Level II)**<sup>1</sup> | **Significant Unobservable Inputs <br>(Level III)**<sup>1</sup> | **Total** |
| **Derivative Instrument Assets** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | **515** | **142** | **2** | **659** |
| &nbsp;&nbsp;&nbsp;Foreign exchange | **—** | **34** | **—** | **34** |
| &nbsp;&nbsp;&nbsp;Interest rate | **—** | **12** | **—** | **12** |
| **Derivative Instrument Liabilities** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | **(478)** | **(242)** | **(13)** | **(733)** |
| &nbsp;&nbsp;&nbsp;Foreign exchange | **—** | **(213)** | **—** | **(213)** |
| &nbsp;&nbsp;&nbsp;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.

218 \| TC Energy **Consolidated Financial Statements** 2022

------

---

| | | | | |
|:---|:---|:---|:---|:---|
| **at December 31, 2021** | **Quoted Prices in Active Markets** <br>**(Level I)** | **Significant Other Observable Inputs** <br>**(Level II)**<sup>1</sup> | **Significant Unobservable Inputs <br>(Level III)**<sup>1</sup> | **Total** |
| (millions of Canadian $) | **Quoted Prices in Active Markets** <br>**(Level I)** | **Significant Other Observable Inputs** <br>**(Level II)**<sup>1</sup> | **Significant Unobservable Inputs <br>(Level III)**<sup>1</sup> | **Total** |
| **Derivative Instrument Assets** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | 39 | 91 |  | 130 |
| &nbsp;&nbsp;&nbsp;Foreign exchange |  | 85 |  | 85 |
| &nbsp;&nbsp;&nbsp;Interest rate |  | 2 |  | 2 |
| **Derivative Instrument Liabilities** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commodities | (49) | (116) | (6) | (171) |
| &nbsp;&nbsp;&nbsp;Foreign exchange |  | (79) |  | (79) |
| &nbsp;&nbsp;&nbsp;Interest rate |  | (18) |  | (18) |
|  | (10) | (35) | (6) | (51) |

---

1There were no transfers from Level II to Level III for the year ended December 31, 2021.

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

---

| | | |
|:---|:---|:---|
| (millions of Canadian $, pre-tax) | **2022** | **2021** |
| Balance at beginning of year | **(6)** | (4) |
| Net losses included in Net income | **(10)** | (3) |
| Net losses included in OCI | **(3)** |  |
| Transfers out of Level III | **7** |  |
| Settlements | **1** | 1 |
| **Balance at End of Year**<sup>1</sup> | **(11)** | (6) |

---

1Revenues include unrealized losses of $10 million attributed to derivatives in the Level III category that were still held at December 31, 2022 (2021 – unrealized losses of $3 million).

**29. CHANGES IN OPERATING WORKING CAPITAL**

---

| | | | |
|:---|:---|:---|:---|
| **year ended December 31** | **2022** | **2021** | **2020** |
| (millions of Canadian $) | **2022** | **2021** | **2020** |
| (Increase)/decrease in Accounts receivable | **(575)** | (925) | 129 |
| Increase in Inventories | **(190)** | (93) | (55) |
| Decrease/(increase) in Other current assets | **118** | (141) | (221) |
| (Decrease)/increase in Accounts payable and other | **(83)** | 890 | (162) |
| Increase/(decrease) in Accrued interest | **91** | (18) | (18) |
| **Increase in Operating Working Capital** | **(639)** | (287) | (327) |

---

TC Energy **Consolidated Financial Statements** 2022 \| 219

------

**30. ACQUISITIONS AND DISPOSITIONS**

**Canadian Natural Gas Pipelines**

**Coastal GasLink LP**

In May 2020, TC Energy completed the sale of a 65 per cent equity interest in Coastal GasLink LP to third parties for net proceeds of $656 million before post-closing adjustments resulting in a pre-tax gain of $364 million ($402 million after tax). The pre-tax gain included $231 million related to the required remeasurement of the Company's retained 35 per cent equity interest to fair value which was based on the proceeds realized for the 65 per cent equity interest, and also incorporated the reclassification from AOCI to income of the fair value of a derivative instrument used to hedge the interest rate risk associated with project-level financing for the Coastal GasLink construction. The $402 million after-tax gain also reflected the utilization of previously unrecognized tax loss benefits. The pre-tax gain was included in Net gain/(loss) on sale of assets in the Consolidated statement of income. As part of this transaction, TC Energy was contracted by Coastal GasLink LP to construct and operate the pipeline. TC Energy uses the equity method to account for its remaining 35 per cent equity interest in the Company's consolidated financial statements.

Immediately preceding the equity sale, Coastal GasLink LP drew down $1.6 billion on the secured long-term project financing credit facilities, of which approximately $1.5 billion was paid to TC Energy.

**Liquids Pipelines**

**Northern Courier**

In November 2021, TC Energy completed the sale of its remaining 15 per cent equity interest in Northern Courier to a third party for gross proceeds of approximately $35 million resulting in a pre-tax gain of $13 million ($19 million after tax). The pre-tax gain was included in Net gain/(loss) on sale of assets in the Consolidated statement of income.

**Power and Energy Solutions**

**TransCanada Turbines Ltd.** 

In November 2020, TC Energy acquired the remaining 50 per cent ownership interest in TransCanada Turbines Ltd. (TC Turbines) for cash consideration of US$67 million. TC Turbines provides industrial gas turbine maintenance, parts, repair and overhaul services. The acquisition was accounted for as a business combination and the evaluation of assigned fair value of acquired assets and liabilities did not result in recognition of goodwill. TC Energy previously accounted for its 50 per cent interest in TC Turbines as an equity investment but commenced full consolidation of TC Turbines as of the date of acquisition, which did not have a material impact on Revenues and Net income of the Company. In addition, the pro forma incremental impact on the Company's Revenues and Net income for each of the periods presented was not material.

**Ontario Natural Gas-fired Power Plants**

In April 2020, the Company completed the sale of the Halton Hills and Napanee power plants as well as its 50 per cent interest in Portlands Energy Centre to a subsidiary of Ontario Power Generation Inc. for net proceeds of approximately $2.8 billion before post-closing adjustments. The total pre-tax loss of $676 million ($470 million after tax) on this transaction included losses accrued during 2019 while classified as an asset held for sale and a 2021 post-close adjustment and also reflected utilization of previously unrecognized tax loss benefits. The pre-tax loss was included in Net gain/(loss)on sale of assets in the Consolidated statement of income. This loss may be amended in the future upon the settlement of existing insurance claims.

220 \| TC Energy **Consolidated Financial Statements** 2022

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**31. COMMITMENTS, CONTINGENCIES AND GUARANTEES**

**Commitments**

TC Energy and its affiliates have long-term natural gas transportation and natural gas purchase arrangements as well as other purchase obligations, all of which are transacted at market prices and in the normal course of business. Purchases under these contracts in 2022 were $362 million (2021 – $239 million; 2020 – $224 million).

The Company has entered into PPAs with solar and wind-power generating facilities ranging from one to 15 years that require the purchase of generated energy and associated environmental attributes. At December 31, 2022, the total planned capacity secured under the PPAs is approximately 1,020 MW with the generation subject to operating availability and capacity factors. Future payments and their timing cannot be reasonably estimated as they are dependent on when certain underlying facilities are placed into service and the amount of energy generated. Certain of these purchase commitments have offsetting sale PPAs for all or a portion of the related output from the facility.

Capital expenditure commitments include obligations related to the construction of growth projects and are based on the projects proceeding as planned. Changes to these projects, including cancellation, would reduce or possibly eliminate these commitments as a result of cost mitigation efforts. At December 31, 2022, TC Energy had the following capital expenditure commitments:

• approximately $1.0 billion for its Canadian natural gas pipelines, primarily related to construction costs associated with NGTL System expansion projects

• approximately $0.3 billion for its U.S. natural gas pipelines, primarily related to construction costs associated with ANR and Columbia Gas pipeline projects

• approximately $1.7 billion for its Mexico natural gas pipelines, primarily related to construction of the Southeast Gateway pipeline

• approximately $0.3 billion for its Power and Energy Solutions business, primarily related to the Company's proportionate share of commitments for Bruce Power's life extension program.

**Contingencies**

TC Energy is subject to laws and regulations governing environmental quality and pollution control. At December 31, 2022, the Company had accrued approximately $20 million (2021 – $30 million) related to operating facilities, which represents the present value of the estimated future amount it expects to spend to remediate the sites. However, additional liabilities may be incurred as assessments take place and remediation efforts continue.

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

**Keystone XL**

In September 2022, the International Centre for Settlement of Investment Disputes (ICSID) formally constituted a tribunal to hear TC Energy's request for arbitration under NAFTA where the Company is seeking to recover more than US$15 billion in economic damages resulting from the revocation of the Presidential Permit for the Keystone XL pipeline project. This claim is in an early stage and the timing and outcome is unknown at present. Termination activities undertaken in 2022, including asset dispositions and preservation, will continue throughout 2023. The Company will continue to coordinate with regulators, stakeholders and Indigenous groups to meet its environmental and regulatory commitments.

TC Energy **Consolidated Financial Statements** 2022 \| 221

------

**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 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.

The carrying value of these guarantees has been recorded in Other long-term liabilities on the Consolidated balance sheet. Information regarding the Company's guarantees were as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **at December 31** |  | **2022** | **2022** | **2021** | **2021** |
|  | **Term** | **Potential Exposure**<sup>1</sup> | **Carrying Value** | **Potential Exposure**<sup>1</sup> | **Carrying Value** |
| (millions of Canadian $) | **Term** | **Potential Exposure**<sup>1</sup> | **Carrying Value** | **Potential Exposure**<sup>1</sup> | **Carrying Value** |
| Sur de Texas | Renewable to 2053 | **100** | **—** | 93 |  |
| Bruce Power | Renewable to 2065 | **88** | **—** | 88 |  |
| Other jointly-owned entities | to 2043 | **81** | **3** | 80 | 4 |
|  |  | **269** | **3** | 261 | 4 |

---

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

222 \| TC Energy **Consolidated Financial Statements** 2022

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**32. 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:

---

| | | |
|:---|:---|:---|
| **at December 31** | | |
| (millions of Canadian $) | **2022** | **2021** |
| **ASSETS** |  |  |
| **Current Assets** |  |  |
| Cash and cash equivalents | **60** | 72 |
| Accounts receivable | **98** | 70 |
| Inventories | **32** | 28 |
| Other current assets | **14** | 13 |
|  | **204** | 183 |
| **Plant, Property and Equipment** | **3997** | 3672 |
| **Equity Investments** | **748** | 890 |
| **Goodwill** | **449** | 421 |
|  | **5398** | 5166 |
| **LIABILITIES** |  |  |
| **Current Liabilities** |  |  |
| Accounts payable and other | **234** | 232 |
| Accrued interest | **18** | 17 |
| Current portion of long-term debt | **31** | 29 |
|  | **283** | 278 |
| **Regulatory Liabilities** | **78** | 66 |
| **Other Long-Term Liabilities** | **1** | 1 |
| **Deferred Income Tax Liabilities** | **16** | 13 |
| **Long-Term Debt** | **2136** | 2025 |
|  | **2514** | 2383 |

---

TC Energy **Consolidated Financial Statements** 2022 \| 223

------

**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 were as follows:

---

| | | |
|:---|:---|:---|
| **at December 31** | | |
| (millions of Canadian $) | **2022** | **2021** |
| **Balance sheet** |  |  |
| &nbsp;&nbsp;Loans receivable from affiliates (Notes 7 and 12)<sup>1</sup> | **—** | 1 |
| &nbsp;&nbsp;&nbsp;Equity investments |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bruce Power | **5783** | 4493 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Coastal GasLink (Note 7)<sup>1</sup> | **—** | 386 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pipeline equity investments and other | **1148** | 1219 |
| &nbsp;&nbsp;Long-term loans receivable from affiliate (Note 7) | **—** | 238 |
| **Off-balance sheet**<sup>2</sup> |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bruce Power<sup>3</sup> | **2025** | 974 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Coastal GasLink<sup>4</sup> | **3300** | 3037 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pipeline equity investments | **58** | 171 |
| **Maximum exposure to loss** | **12314** | 10519 |

---

1The pre-impairment balances in Equity investments ($2,798 million) and Loans receivable from affiliates ($250 million) at December 31, 2022 related to TC Energy's investment in Coastal GasLink LP were reduced to a nil balance and an impairment charge was recognized in fourth quarter 2022 in Impairment of equity investment in the Consolidated statement of income.

2Includes maximum potential exposure to guarantees and future funding commitments.

3On March 7, 2022, the IESO verified Bruce Power's Unit 3 MCR program final cost and schedule duration estimate submitted in December 2021. As at December 31, 2022, the maximum exposure includes TC Energy's portion of capital to be invested under the Unit 3 MCR program as well as the expected increase in the capital to be invested under the Asset Management program through 2027.

4TC 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 incremental capacity on the subordinated loan agreement with Coastal GasLink LP until final costs are determined. The committed capacity under the subordinated loan agreement was $1,262 million as at December 31, 2022 and will increase in the future as required to support the estimated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$3.3 billion of additional equity financing requirements through completion of construction of the Coastal GasLink pipeline. The determination of the Company's maximum exposure to loss involves an estimate of the capital costs to complete the Coastal GasLink pipeline.

In July 2022, the Company entered into revised project agreements relating to its investment in Coastal GasLink LP and committed to make additional equity contributions, which did not result in a change in the Company's 35 per cent ownership. These revisions and additional equity contributions were determined to be a VIE reconsideration event for TC Energy's investment in Coastal GasLink LP. The Company performed a re-assessment of control and determined that Coastal GasLink LP continued to meet the definition of a VIE in which the Company held a variable interest. The re-assessment further determined that TC Energy was not the primary beneficiary of Coastal GasLink LP as the Company does not have the power, either explicit or implicit through voting rights or otherwise, to direct the activities that most significantly impact the economic performance of Coastal GasLink LP. Accordingly, the Company continued to account for its investment using the equity method of accounting. Refer to Note 7, Coastal GasLink, for additional information.

224 \| TC Energy **Consolidated Financial Statements** 2022

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**33. SUBSEQUENT EVENT**

**Mexico Debt Issuance**

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 credit facility. Both the term loan and the revolving commitment are due in January 2028 and bear interest at a floating rate.

TC Energy **Consolidated Financial Statements** 2022 \| 225

## Exhibit 23.1

EXHIBIT 23.1

**Consent of Independent Registered Public Accounting Firm**

We consent to the use of:

• our report dated February 13, 2023 on the consolidated financial statements of TC Energy Corporation (the "Company") which comprise the consolidated balance sheets as at December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, cash flows, and equity for each of the years in the three-year period ended December 31, 2022, and the related notes, and

• our report dated February 13, 2023 on the effectiveness of the Company's internal control over financial reporting as of December 31, 2022

each of which is included in the Annual Report on Form 40-F of the Company for the fiscal year ended December 31, 2022.

We also consent to the incorporation by reference of such reports in:

• Registration Statements No. 333-5916, No. 333-8470, No. 333-9130, No. 333-151736, No. 333-184074, No. 333-227114 and No. 333-237979 on Form S-8 of TC Energy Corporation;

• Registration Statements No. 33-13564 and No. 333-6132 on Form F-3 of TC Energy Corporation;

• Registration Statements No. 333-151781, No. 333-161929, No. 333-208585, No. 333-250988 and No. 333-252123 on Form F-10 of TC Energy Corporation; and,

• Registration Statement No. 333-261533 and No. 333-267323 on Form F-10 of TransCanada PipeLines Limited.

/s/ KPMG LLP

Chartered Professional Accountants

February 13, 2023

Calgary, Canada

## Exhibit 31.1

EXHIBIT 31.1

**Certifications**

I, François L. Poirier, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this annual report on Form 40-F of TC Energy Corporation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 February 14, 2023

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| |
|:---|
| /s/ FRANÇOIS L. POIRIER |
| François L. Poirier<br>*President and Chief Executive Officer* |

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1 of 2

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**Certifications**

I, François L. Poirier, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this annual report on Form 40-F of TransCanada PipeLines Limited;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 February 14, 2023

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| |
|:---|
| /s/ FRANÇOIS L. POIRIER |
| François L. Poirier<br>*President and Chief Executive Officer* |

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## Exhibit 31.2

EXHIBIT 31.2

**Certifications**

I, Joel E. Hunter, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this annual report on Form 40-F of TC Energy Corporation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 February 14, 2023

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| |
|:---|
| /s/ JOEL E. HUNTER |
| Joel E. Hunter<br>*Executive Vice-President and Chief Financial Officer* |

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1 of 2

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**Certifications**

I, Joel E. Hunter, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this annual report on Form 40-F of TransCanada PipeLines Limited;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 February 14, 2023

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| |
|:---|
| /s/ JOEL E. HUNTER |
| Joel E. Hunter<br>*Executive Vice-President and Chief Financial Officer* |

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## Exhibit 32.1

EXHIBIT 32.1

**TC ENERGY CORPORATION**

450 – 1st Street S.W.

Calgary, Alberta, Canada

T2P 5H1

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

**UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002**

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 Annual report as filed on Form 40-F for the fiscal year ended December 31, 2022 with the Securities and Exchange Commission (the "Report"), that:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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<br>*Chief Executive Officer* |
| February 14, 2023 |

---

1 of 2

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**TRANSCANADA PIPELINES LIMITED**

450 – 1st Street S.W.

Calgary, Alberta, Canada

T2P 5H1

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

**UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002**

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 TC Energy Corporation's Annual report as filed on Form 40-F for the fiscal year ended December 31, 2022 with the Securities and Exchange Commission (the "Report"), that:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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<br>*Chief Executive Officer* |
| February 14, 2023 |

---

2 of 2

## Exhibit 32.2

EXHIBIT 32.2

**TC ENERGY CORPORATION**

450 – 1st Street S.W.

Calgary, Alberta, Canada

T2P 5H1

**CERTIFICATION OF CHIEF FINANCIAL OFFICER**

**UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002**

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 Annual report as filed on Form 40-F for the fiscal year ended December 31, 2022 with the Securities and Exchange Commission (the "Report"), that:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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<br>*Chief Financial Officer* |
| February 14, 2023 |

---

1 of 2

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**TRANSCANADA PIPELINES LIMITED**

450 – 1st Street S.W.

Calgary, Alberta, Canada

T2P 5H1

**CERTIFICATION OF CHIEF FINANCIAL OFFICER**

**UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002**

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 TC Energy Corporation's Annual report as filed on Form 40-F for the fiscal year ended December 31, 2022 with the Securities and Exchange Commission (the "Report"), that:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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<br>*Chief Financial Officer* |
| February 14, 2023 |

---

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## Exhibit 99.1

![](tce_tcpl-2022xcobexpolic001.jpg)

Making the right choices – doing the right thing TC Energy's Code of Business Ethics (COBE) Policy Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help EXHIBIT 99.1

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![](tce_tcpl-2022xcobexpolic002.jpg)

Message from François Poirier At TC Energy, we know what we do – and just as importantly – how we do it, matters. Our daily decisions and activities impact the Company and the communities we serve. That's why we must ensure our actions are aligned with our values. It is important that stakeholders, rightsholders and the public are confident they can count on us to act with integrity no matter the circumstances. Our corporate values – safety, innovation, responsibility, collaboration and integrity – form the foundation of how we do business. Our Code of Business Ethics (COBE) helps us put those values into practice by clarifying what honest and ethical conduct look like in action. Every member of the TC Energy team is expected to read, understand and comply with the principles and requirements set out in COBE and is required to complete annual COBE training and certification. We encourage people to refer regularly to COBE to help guide decisions in ethical situations they may face at work, since it offers clear guidelines and examples of expected behaviour. COBE also provides a framework for asking questions and highlights resources in place to report concerns. Our reputation as a safe, reliable and honest company that moves, generates and stores the energy North America relies on is critical to our continued success. It will take all of us consistently living our values every day to ensure TC Energy continues to be a company that is trusted to make the right choices and do the right thing. François Poirier President & CEO TC Energy – Code of Business Ethics Policy 2 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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![](tce_tcpl-2022xcobexpolic003.jpg)

Our expectations and your responsibilities The Code of Business Ethics (COBE) Policy reinforces TC Energy Corporation's (the Company's) requirements and expectations for conducting business and behaviours, and provides guidance to ensure our daily activities and decisions appropriately reflect, and are consistent with, our corporate values of safety, innovation, responsibility, collaboration and integrity. Doing business ethically, fairly and responsibly is not just a concept at TC Energy, it is a commitment we make every day. The COBE Policy functions in conjunction with TC Energy's other policies and applies to all Employees, directors, officers and Contingent Workforce Contractors (CWCs) of TC Energy and its wholly-owned subsidiaries and/or operated entities in all countries in which TC Energy conducts business. In addition, TC Energy has a Contractor Code of Business Ethics (COBE) Handbook that communicates the same requirements in the COBE Policy, as applicable. You must understand these requirements and know how to meet TC Energy's standards. We expect compliance with all applicable laws, regulations, policies and rules. Have a question? We're here to help. If you are unsure of what standard you need to comply with, ask. Contact information is located in the Resources section of this document. Failure to comply with the requirements set out in this document, or any TC Energy policy, may lead to serious consequences and disciplinary action up to and including termination. Ꝓ Look for this symbol throughout the COBE Policy to guide you to relevant policies available on our websites at TCEnergy.com/about/governance and on our policy 1TC webpage. TC Energy – Code of Business Ethics Policy 3 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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![](tce_tcpl-2022xcobexpolic004.jpg)

Table of contents Message from François Poirier . . . . . . . . . . . . . . . . . . . . . . . . 2 Our expectations and your responsibilities . . . . . . . . . . . . . . .3 Ethics Help Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Our values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Living our values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Making the right choices and doing the right thing . . . . . . . . .7 Reporting safety, legal and ethical violations . . . . . . . . . . . . . 8 Leader responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Zero is Real . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 TC Energy's Life Saving Rules . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Alcohol and drug use and being fit for work . . . . . . . . . . . . . 12 Diversity, employment equity and equal opportunity . . . . . . 13 Harassment and violence-free workplace . . . . . . . . . . . . . . . 13 Protecting everyone from weapons in the workplace . . . . . . . 14 Ethical Business Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Avoiding conflicts of interest . . . . . . . . . . . . . . . . . . . . . . . . . 16 Personal Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Outside business activities and outside directorships . . . . . . . 18 Other potential conflicts of interest . . . . . . . . . . . . . . . . . . . .19 Gifts, invitations and entertainment . . . . . . . . . . . . . . . . . . . 20 Expenses for Government Officials . . . . . . . . . . . . . . . . . . . . .22 Political contributions and lobbying . . . . . . . . . . . . . . . . . . . .23 International trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Insider trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Complying with regulatory requirements . . . . . . . . . . . . . . 26 Inter-affiliate interactions . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Competing fairly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Accounting, financial reporting and fraud prevention . . . . . 29 Preventing money laundering and terrorist financing . . . . . . 30 Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Being socially responsible . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 Being a good ambassador of TC Energy . . . . . . . . . . . . . . . . . .33 Social media and communications with the public . . . . . . . . 34 Public disclosure of information . . . . . . . . . . . . . . . . . . . . . . .35 Dealing fairly with customers, suppliers and other stakeholders . . . . . . . . . . . . . . . . . . . . . 36 Dealing fairly with competitors . . . . . . . . . . . . . . . . . . . . . . .37 Assets and information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Protecting confidential information . . . . . . . . . . . . . . . . . . 39 Protecting personal information . . . . . . . . . . . . . . . . . . . . . . 40 Managing and maintaining the security of information . . . . .41 Protecting and respecting intellectual property rights . . . . . 42 Use and protection of TC Energy's assets . . . . . . . . . . . . . . . 43 Have a question? We're here to help . . . . . . . . . . . . . . . . . . 45 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Asking questions and reporting concerns . . . . . . . . . . . . . . . .47 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Ethics Help Line Canada / U.S.: 1-888-920-2042 Mexico: 800-283-2783 (if calling from a cell phone) 0-800-283-2783 (if calling from a land line) TCEnergy.com/about/governance/code-of-business-ethics TC Energy – Code of Business Ethics Policy 4 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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![](tce_tcpl-2022xcobexpolic005.jpg)

Our values Safety We believe Zero is Real. All injuries and occupational illnesses are preventable. Our Personnel are expected to speak up about unsafe conditions and behaviours, take action to address concerns or stop unsafe work, and look out for each other 24/7. Innovation We do things differently – we turn challenge into opportunity and ideas into creative solutions. We challenge assumptions, show up curious and encourage new ideas. Responsibility We care for the environment and minimize our impact. We make a positive difference in our communities and consider sustainability in everything we do. We deliver for our customers and take personal accountability for results. Collaboration We engage others, participate in healthy debate and respect different perspectives. We work together to find better ways to solve problems and create value. We find win-win outcomes for our shareholders and our customers. Integrity We act with high ethical standards, treat others with honesty and respect, and keep promises and commitments to stakeholders. Consistent with our five core values of safety, innovation, responsibility, collaboration and integrity, TC Energy does not tolerate human rights abuses . In our business activities, including engaging with Indigenous groups and stakeholders across Canada, the United States and Mexico, we support access to basic human rights such as fresh water and will not be complicit with or engage in any activity that solicits or encourages abuse of human rights such as forced labour, child labour, or physical or mental abuse . As a participant of the UN Global Compact, TC Energy supports the Ten Principles of the United Nations Global Compact on human rights, labour, environment and anti-corruption. We are committed to making the UN Global Compact and its principles part of the strategy, culture and day-to-day operations of our company, and to engage in collaborative projects which advance the broader development goals of the United Nations, particularly the Sustainable Development Goals. TC Energy demonstrates this commitment through embracing energy transition, reducing greenhouse gas emissions, and leaving the environment in a condition equal to, or better than we found it. TC Energy – Code of Business Ethics Policy 5 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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![](tce_tcpl-2022xcobexpolic006.jpg)

Living our values • Making the right choices and doing the right thing • Reporting safety, legal and ethical violations • Leader responsibilities • Zero is Real: Protecting health, safety and the environment • Life Saving Rules • Alcohol and drug use • Diversity and employment equity • Harassment and violence-free workplace • Protecting everyone from weapons in the workplace TC Energy – Code of Business Ethics Policy 6 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Making the right choices and doing the right thing At TC Energy, making the right choices and doing the right thing aren't just words – these are fundamental requirements to how we do business that all Personnel must carry out in everything we do. But, what does it really mean to make the right choices and do the right thing? At a minimum, it means following the principles set out in COBE, including: • We report all health, safety and environment related hazards, potential hazards, incidents, near hits and unsafe acts • We comply with the applicable legal requirements and policies that impact us in our daily work • We report, through appropriate internal channels or the Ethics Help Line, any instances of actual or potential non-compliance with legal requirements or with our policies that we become aware of • We do not retaliate against anyone for good-faith reporting • We support others in making the right choices and doing the right thing Even if we try our best to make the right choices and do the right thing, there are times when the right thing isn't completely clear. It's at those times that we need to ask ourselves some necessary questions. The below guide to making the right choices and doing the right thing is intended to help you identify the right path in those situations. NO NOT SURE NO NOT SURE NO NOT SURE Is it legal? Would I want everyone to know? You are on the right track! Does it feel right, fair and honest? Contact any of the various safe and confidential resources available to steer you in the right direction. Does it follow COBE and our other policies? Does it support our values? YES YES YES YES YES NO NOT SURE NO NOT SURE TC Energy – Code of Business Ethics Policy 7 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Reporting safety, legal and ethical violations We report actual or potential non-compliances with our policies or our legal requirements, so they can be addressed appropriately. Retaliation for Good Faith Reporting is prohibited at TC Energy and you can be assured that your confidentiality and identity will be protected to the greatest extent possible. How do I report an issue or seek guidance? You are required to report any actual or suspected violation of the law or COBE and all health, safety and environment related hazards, potential hazards, incidents, near hits and unsafe acts of which you may become aware. We take every report seriously and provide immunity from disciplinary action for Good Faith Reporting of incidents and issues. Resources To report an issue, or if you would like guidance on how to make the right choices and do the right thing in a particular situation, the following resources are available to you: • Your leader • Your Human Resources Consultant • Your Compliance Coordinator • Corporate Compliance • Internal Audit • Legal department • Privacy Office • Harassment Investigation Coordinator • Safety Personnel • TC Energy's Environment Health and Safety Management (EHSM) Incident Management System For contact information – click here. If you are uncomfortable speaking to any of these resources or if you would like to remain anonymous, you can contact the Ethics Help Line. Ethics Help Line Canada / U.S.: 1-888-920-2042 Mexico: 800-283-2783 (if calling from a cell phone) 0-800-283-2783 (if calling from a land line) TCEnergy.com/about/governance/code-of-business-ethics TC Energy – Code of Business Ethics Policy 8 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Leader responsibilities TC Energy's leaders are here to help us make the right choices and do the right thing together. If you are a leader, in addition to acting in accordance with the principles set out in COBE, you are required to: • Inspire Personnel to act ethically by setting an ethical tone within your team • Reinforce the importance of making the right choices and doing the right thing when carrying out other corporate objectives (for example, profits and cost management) and support those who are unsure how to make the right choices and do the right thing • Set an example by modeling exemplary ethical business conduct • Create a safe environment where individuals are encouraged to speak up if they become aware of or suspect a legal or ethical violation, and help prevent against retaliation for reporting • Ensure that your team members understand and act in accordance with all legal and ethical requirements that impact them in their jobs, that they know how to report actual or potential non- compliance with the law or COBE or to ask questions regarding ethical or legal matters, and that they complete all required ethics and compliance-related training • Understand your obligation to act on any actual or suspected violations of COBE, any of our other policies, or the law that may be reported to you and the requirement for you to report these issues, as appropriate, to your Compliance Coordinator, Corporate Compliance, Internal Audit, the Harassment Investigation Coordinator, Privacy Office or the Ethics Help Line • Engage with Human Resources, your Compliance Coordinator, Corporate Compliance or Internal Audit to ensure violations of legal requirements or COBE by your direct reports are addressed appropriately (including appropriate corrective disciplinary action) TC Energy – Code of Business Ethics Policy 9 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Zero is Real Protecting health, safety and the environment Our commitment to safety isn't just a mantra – it's how we work 24/7, 365 days of the year across our entire organization. What started as a foundational value within our safety department decades ago has now come to mean much more to our company. We believe zero is real, and today – for us – zero means: All harm, loss and incidents are preventable. We expect that our Contractors share TC Energy's commitment to safety. Whether you work in a field location or in an office setting, you must always ensure that you comply with all health, safety and environment related legal requirements, as well as the requirements set out by TC Energy in COBE and applicable policies. + If it isn't safe, we won't do it. By reinforcing a disciplined set of rules and providing rigorous training, we approach every day with our goal of a zero-incident workplace. TC Energy – Code of Business Ethics Policy 10 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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TC Energy's Life Saving Rules TC Energy's Life Saving Rules guide the way we work and help us hold each other accountable to the highest possible safety standards. TC Energy's Life Saving Rules are: • Drive safely and without distraction • Use the appropriate personal protective equipment (PPE) • Conduct a pre-job safety analysis (JSA) • Work with a valid work permit when required • Obtain authorization before entering a confined space • Verify isolation before work begins • Protect ourselves against a fall when working at heights • Follow prescribed lift plans and techniques • Control excavations and ground disturbances We report all health, safety and environment related hazards, potential hazards, incidents, near hits and unsafe acts. We take every report seriously, investigate to identify facts and ensure immunity from disciplinary action for the Good Faith Reporting of all incidents and issues. QUESTION: I'm working on a big project and it's very important to the Company that it be completed on-time and on-budget. I'm concerned that I might be injured if I rush my work, but I'm feeling a lot of pressure to do so. What should I do? ANSWER: You should never compromise your or anyone else's safety. If someone is pressuring you to do so, you should report the issue. + Committing to TC Energy's Life Saving Rules means meeting our goal of everyone going home safe from our offices, facilities and project sites, every day. Nothing is more important. TC Energy – Code of Business Ethics Policy 11 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Alcohol and drug use and being fit for work We do not compromise our ability to do our jobs or the safety of others through the use of intoxicants, including alcohol, drugs or medications, whether they are legal or not. Given the nature of TC Energy's business, it is essential that all Personnel be fit to perform their jobs. The use of alcohol or drugs can impair your judgment and productivity and can lead to serious accidents and health and safety concerns – not only for yourself, but also for your coworkers and the public. Ꝓ Alcohol and Drug Policy TC Energy takes a zero-tolerance approach toward the use of alcohol, drugs and intoxication while working. You must always be fit for work while engaged in any TC Energy business. Inability to do so will result in serious consequences including being removed from our site(s) and corrective disciplinary action up to and including termination. What does being fit for work mean? Fit for work means being able to safely and acceptably perform your assigned duties without any limitations due to the use or after-effects of any intoxicants. This can include legally- obtained medications (prescription and over the counter) which has the potential to change or adversely affect the way a person thinks, feels, or acts. TC Energy – Code of Business Ethics Policy 12 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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• Intimidating • Hostile • Offensive • Threatening • Violent • Demeaning or humiliating • Of a sexual nature • Creating an inappropriate work environment TC Energy will take allegations of harassment and violence seriously and address them promptly in a respectful, fair and thorough manner by trained investigators. If required, TC Energy will take appropriate corrective action, up to and including termination of employment or contract. Ꝓ Equal Employment Opportunity and Non- Discrimination Policy Ꝓ Reasonable Workplace Accommodation Policy Ꝓ Harassment-Free Workplace Policy Canada • U.S. • Mexico Ꝓ Supplier Diversity and Local Participation Business Policy In particular, you must never take actions or make unwanted comments, gestures or discriminate against anyone on the basis of: • Gender • Race • National or ethnic origin • Colour • Disability • Religion • Age • Sexual orientation and gender identity • Marital status • Family status • Veteran status • National Guard or reserve unit obligations • A criminal conviction • Or any other legally protected grounds + TC Energy requires that we treat one another with dignity and respect, and we are committed to maintaining an inclusive and respectful work environment that is free of harassment and violence. + TC Energy requires you to be tolerant, inclusive and to demonstrate respect for others. Diversity, employment equity and equal opportunity TC Energy believes that our differences make us stronger and encourages a culture of diversity, inclusion and respect. We prohibit any form of discrimination and require reasonable accommodation of differences. We expect Personnel to create and reinforce an inclusive, creative and productive work environment in which everyone feels accepted and respected. Harassment and violence-free workplace Everyone deserves to do their job in a safe, respectful, and inclusive workplace, without fear of harassment or violence. You must always be respectful to our Personnel and Contractors and be sensitive to the way in which others may react to your behaviours, comments, gestures or contacts. Always try to resolve differences in a calm and respectful manner, without resorting to insults, threats or violence. TC Energy prohibits any behaviour, including displaying any statements, messages, or images (e.g., on clothing, stickers on hard hats, decals on vehicles, etc.), that is: TC Energy – Code of Business Ethics Policy 13 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Protecting everyone from weapons in the workplace Unless otherwise prohibited by law, we prohibit the possession, use, carrying, or transportation of any dangerous or potentially dangerous weapons, as defined by TC Energy's Weapons in the Workplace Policy, when conducting Company business: • on or off all Company owned or controlled premises; • in all Company vehicles (whether owned, leased or rented); and • in all personal vehicles being used while conducting Company business. For individuals in jurisdictions that permit firearms to be kept in personal vehicles, the vehicle must be locked, firearms must be hidden from plain view and be kept within a locked case or container within the vehicle. Ꝓ Weapons in the Workplace Policy + Individuals who are licensed to carry firearms (openly or in a concealed manner) are not exempt from our Policy. TC Energy – Code of Business Ethics Policy 14 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Ethical Business Conduct • Avoiding conflicts of interest • Personal Relationships • Gifts and entertainment • Engaging government officials • Political contributions and lobbying • International trade • Insider trading • Complying with regulatory requirements • Inter-affiliate interactions • Competing fairly • Accounting, financial reporting and fraud prevention • Preventing money laundering and terrorist financing TC Energy – Code of Business Ethics Policy 15 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Avoiding conflicts of interest We must act in the best interests of TC Energy, avoiding any situation that could place us in a conflict of interest, or create the perception of a conflict of interest. If, and when, a conflict of interest arises, you are required to report the conflict in a timely manner so it can be appropriately investigated and addressed. You should never make or influence business decisions on behalf of TC Energy based on personal relationships, bias or the potential for personal gain. Some examples of conflict of interest can include, but are not limited to: • Gifts, invitations and entertainment • Outside business activities • Corporate opportunities • Directorships or other board positions outside of TC Energy • Director independence • Personal Relationships • Intimate Relationships Ꝓ Conflict of Interest and Integrity Policy What is a conflict of interest? Conflict of interest means a situation in which TC Energy Personnel have private interests that could conflict with their ability to act in good faith and the best interests of the Company, or where they may improperly benefit from knowledge acquired at the Company which is not available to the general public. + Integrity is one of our core values. In simple terms this means making the right choices and doing the right thing – always. At TC Energy, this is part of who we are and how we do business – every day. TC Energy – Code of Business Ethics Policy 16 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Personal Relationships Personnel who have a Personal Relationship within the Company must not be in a direct or indirect reporting relationship with each other. In particular, the Company prohibits all Intimate Relationships between individuals in a direct or indirect reporting relationship. If Personnel are not certain whether a Personal Relationship within the Company is permissible, they should immediately discuss their situation with their TC Energy leader, HR Business Partners or HR Governance. QUESTION: I want to hire someone who I know has a family member already working for TC Energy. Is that allowed? ANSWER: Yes, it is acceptable to hire someone (Employee or CWC) who has family members already working for TC Energy provided that person is not directly or indirectly (through other leader(s)) reporting to their family member. The onus is on all Personnel to notify HR Governance when they become aware of a Personal Relationship where there is a direct or indirect reporting relationship within the Company. TC Energy – Code of Business Ethics Policy 17 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Outside business activities and outside directorships Personnel must not engage in outside business activities (e.g., as a consultant, employee, or director) or Advisory Relationships that are in conflict with or detrimental to the interests of TC Energy, and which may include: • Owning, controlling or directing a material financial interest (greater than one per cent) in a competitor, or in a vendor, supplier, customer or other business which does or seeks to do business with TC Energy; • Advising or being involved in a business that competes with TC Energy or that does or seeks to do business with TC Energy; • Outside business activities that interfere with Personnel's day-to-day responsibilities at TC Energy; and • An outside business activity that requires Personnel to violate their confidentiality or other obligations to TC Energy. TC Energy Personnel who have a Family Relationship with a supplier or potential supplier to the Company must ensure that they are not involved in the selection process or in directing or influencing the work of the supplier to whom they are related. In cases where the spouse, common law partner, or other family member of TC Energy Personnel owns, controls, or directs a material financial interest in any of the outside business activities, that Personnel must contact the Corporate Compliance department for guidance. Personnel must declare all outside business activities and Advisory Relationships to the Corporate Compliance department for guidance. Personnel must declare all Outside Directorship positions on a board (e.g., board chair, treasurer, secretary, member, etc.) to Corporate Secretarial for review and approval, prior to accepting the position or upon joining the Company. TC Energy – Code of Business Ethics Policy 18 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Other potential conflicts of interest Corporate opportunities Personnel must not take personal advantage of a business opportunity that you discover through the use of Company assets, property, information or your position with TC Energy, or use Company assets, property, information or your position with TC Energy for personal gain or to compete with TC Energy. Political office, appointments to boards or tribunals Personnel may not serve in a political office or on an administrative board or tribunal, if that office, board or tribunal has or may have decision-making authority in respect of any aspect of TC Energy's business (such as the approval of projects or the issuing of permits). Executive leadership team - other business activities In addition to the conditions set out in the outside business activities and outside directorships section above, prior to serving in any capacity in an unaffiliated organization, the Chief Executive Officer and any member of the Executive Leadership Team must obtain the consent of the Governance Committee of the TC Energy's Board of Directors. Directors' independence To maintain their independence and to ensure that no relationships exist that may violate applicable corporate, securities and competition laws, all members of the Board of Directors of TC Energy must have their independence assessed: • Annually; • In the event of a material change in their respective primary employment status; and • When they wish to join another board of directors, whether private or public. All candidates to TC Energy's Board of Directors must declare to the Corporate Secretarial group any material interest that they may have in a contract or transaction. All members of the TC Energy Board of Directors who have any material interest in a contract or transaction must recuse themselves from related deliberations and approval. TC Energy – Code of Business Ethics Policy 19 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Gifts, invitations and entertainment Local customs with respect to providing gifts and other benefits can change depending on where we are doing business; however, these local customs must never compromise, or appear to compromise, our ability to act legally, ethically and objectively. While giving gifts can help to build and maintain strong business relationships, they can also cloud one's judgement or be seen to improperly influence decisions depending on the nature and context of the gift. Corruption in business and government prevents fair and open competition based on merit and it can have a negative impact for both the Company and the individual. To mitigate these negative impacts, we must all comply with TC Energy's Avoiding Bribery and Corruption Policy, Gift, Meals, Entertainment and Travel for Government Officials Standard, and Gifts and Entertainment Policy. + We must always be prudent in offering gifts, entertainment or anything of value to anyone or any organization that is a competitor or that TC Energy does, or seeks to do, business with, or that TC Energy requires consent or approval from (e.g., a government authority). TC Energy – Code of Business Ethics Policy 20 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Accepting gifts, invitations and entertainment from suppliers Accepting gifts or invitations from suppliers or potential suppliers can affect the way TC Energy is perceived and can run counter to our business objectives and values. We all have an obligation to conduct ourselves in a fair and impartial fashion in all business dealings with the supplier community. Personnel may accept food and beverages over a business meal, provided it is not lavish, but may not accept invitations to events or sporting activities, cash or cash equivalents, or gifts with a value greater than $50. Careful consideration must be taken when a supplier extends an invitation to a social event or offers a gift. Please see the Gifts and Entertainment Policy for more information. Ꝓ Avoiding Bribery and Corruption Policy Ꝓ Gifts and Entertainment Policy Ꝓ Gift, Meals, Entertainment and Travel for Government Officials Standard QUESTION: I have been invited by a supplier to attend the rodeo at the Calgary Stampede. Can I accept the invitation and attend the event? ANSWER: All Personnel must ensure they are acting in a manner which is fair and impartial to our supplier community and which does not create a real or perceived conflict of interest with those with whom we do business. As such, since this invitation would fall outside acceptable thresholds for gifts and entertainment, attendance at this event would only be acceptable if prior written approval is obtained from your Vice- President or Senior Vice-President. QUESTION: I sometimes receive items such as coffee mugs and pens from a company that I have a relationship with and which is a supplier to TC Energy. Am I able to accept these items? ANSWER: Employees may accept occasional promotional gifts (such as pens, coffee mugs, calendars) as a customary business courtesy, provided that the gift does not exceed a value of CAD $50/ USD $50/ MXN $1000 per instance or total more than CAD $100/ USD $100/ MXN $2000 in aggregate for the calendar year. All dollar amounts for occasional promotional gifts are in local currency where they are being accepted. QUESTION: One of our existing auto leasing suppliers has invited me to attend their annual product roll-out, which will be held in Las Vegas. It is a big event that all customers are invited to. The supplier has offered to pay for all flights and accommodation, in addition to the meals that will be provided as part of the event. The supplier's contract is not currently up for renewal, and I am not the person responsible for making the decision whether to renew. Can I attend? ANSWER: Since we have an existing business relationship with the supplier and the Company is not currently involved in any renewal or other negotiations, and since the event is a business-related event attended by many customers as well as supplier representatives, you may attend with the approval of your Vice-President or Senior Vice- President. However, given the location of the event, the business benefit to TC Energy should be carefully considered and discussed with your leader. Additionally, since the value of the event is significant, the supplier's payment for flights and accommodation could create a perception of conflict and/or an obligation on the part of TC Energy. As a result, flights and accommodation should be paid for by TC Energy. You may accept the meals provided by the supplier as part of the event. TC Energy – Code of Business Ethics Policy 21 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Expenses for Government Officials Engaging with Government Officials is an important part of TC Energy's business, and during those engagements, expenses for Government Officials may be incurred. You should never provide Government Officials with bribes, payments, kickbacks, gifts or anything else of value for the purpose of improperly influencing their actions or decisions in TC Energy's favour. These benefits can include entertainment, private parties, charitable contributions or employment opportunities. Even if there is no intent to influence, you should not provide a payment or benefit to any third party if it could appear to be improper. Ꝓ Avoiding Bribery and Corruption Policy Ꝓ Gifts and Entertainment Policy Ꝓ Enhanced Community Support Standard Ꝓ Gift, Meals, Entertainment and Travel for Government Officials Standard Many anti-corruption laws allow small gifts or reasonable meals or entertainment for Government Officials in limited circumstances. Only gifts, meals, and entertainment that are reasonable, do not influence business decisions and are not otherwise prohibited may be offered. All gifts, meals or entertainment must be provided in accordance with local laws and regulations, be appropriately recorded in TC Energy's books and records, and follow the appropriate approval processes and thresholds as set out in TC Energy's Gift, Meals, Entertainment and Travel for Government Officials Standard. + We are prohibited from offering, paying, promising or authorizing a compensation, payment or benefit to any Government Official, directly or indirectly, to secure any contract, concession or other improper advantage for TC Energy. Such action is prohibited even if the intent is not to influence a Government Official(s), as it could appear to be improper. TC Energy – Code of Business Ethics Policy 22 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Political contributions and lobbying TC Energy respects the political process and only makes political contributions and engages in lobbying activities that are legal and transparent. Legal requirements concerning political contributions and lobbying are aimed at preventing corruption in government and at ensuring the proper functioning of the political system. These legal requirements can be complex and vary by jurisdiction (we are not allowed to make political donations at all in some jurisdictions). Therefore, you must seek approval from the appropriate department before engaging in these activities on behalf of TC Energy. QUESTION: I am very politically active. Is that allowed? ANSWER: TC Energy encourages you to participate in the political process as an individual, in accordance with your own political views and the laws and regulations governing this activity. In doing so, however, you may not use TC Energy's name, nor indicate that you represent TC Energy, unless you have been authorized to do so. Ꝓ Avoiding Bribery and Corruption Policy Ꝓ Political Contributions and Activities Policy Ꝓ Gift, Meals, Entertainment and Travel for Government Officials Standard TC Energy – Code of Business Ethics Policy 23 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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International trade When engaging in international business and procuring products from the global marketplace, TC Energy complies with all applicable international trade laws, as well as all customs and taxation requirements. International trade laws prohibit or restrict trade with certain countries that are subject to embargoes or sanctions, as well as with certain individuals and organizations (e.g., entities that have ties to actual or suspected terrorists or drug traffickers). These laws also prohibit or restrict imports and exports of certain types of goods, information and technologies and often impose stringent reporting obligations. Ꝓ Customs and Trade Policy Even if TC Energy does not have ownership of a product it has purchased when it crosses a border (e.g., because it takes ownership, or title, on delivery), it may nevertheless be responsible for import and/or export compliance based on certain terms of the purchase contract. It is important to ensure the contract does not contain terms that result in TC Energy inadvertently taking on these obligations. + Prior to engaging in any transaction, you must ensure: • That it is legally permitted • That all applicable licensing requirements and reporting and customs obligations are met And consider: • The types and use of the goods, information or technology • The counterparty with which you are dealing • The country in which the counterparty is located TC Energy – Code of Business Ethics Policy 24 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Insider trading We engage only in transactions that have a legitimate business purpose, and we do not interfere with the normal functioning of the markets in which we operate and transact. We also report transactions in accordance with all legal requirements. Through the course of your work with TC Energy, you may have access to non-public information regarding TC Energy, our customers, Contractors and other business partners. You must always maintain the confidentiality of any non-public information encountered through the course of business with TC Energy. To the extent non-public information that you are aware of could be material to a decision to buy or sell shares in TC Energy or another company, you and your immediate family members must not trade TC Energy shares or other securities based on that information. Ꝓ Trading Policy QUESTION: I own units of a mutual fund that invests in shares of one of our suppliers. Is that a problem? ANSWER: Your ownership of mutual fund units is likely not a problem. If your investment in the supplier is through a mutual fund, you would need to ensure that you do not own more than one per cent of the stock of the supplier; however, because of the indirect nature of the investment, it is also less of a concern than if you owned the shares directly. Insider trading is a serious offence and can have significant reputational and legal impacts. + We conduct business in a way that promotes a fair, efficient and openly competitive operation of markets we participate in and which complies with market manipulation laws. TC Energy – Code of Business Ethics Policy 25 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Complying with regulatory requirements TC Energy is committed to meeting our obligations under all regulations and tariffs. As a regulated company, TC Energy is subject to many regulatory requirements, including those of the Canada Energy Regulator (CER), the Federal Energy Regulatory Commission (FERC), the Comisión Nacional de Hidrocarburos, and the North American Energy Reliability Corporation (NERC), among others. In addition, TC Energy's transmission providers are subject to tariffs that we must comply with. Although it is impossible to list all of these requirements here, you must ensure you are familiar with the specific requirements applicable to you in your job. These can include reporting requirements and compliance with technical or other standards. To the extent the requirements of more than one jurisdiction apply, you must comply with the highest of the various standards. TC Energy – Code of Business Ethics Policy 26 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Inter-affiliate interactions As a transmission provider, TC Energy is subject to the Canadian Gas Pipelines Code of Conduct (Code) in Canada, the FERC Standards of Conduct (SOC) in the U.S., and the TC Energía Code of Conduct in Mexico (Inter-Affiliate Codes/Standards of Conduct). These Inter- Affiliate Codes/Standards of Conduct are intended to ensure that our non-regulated affiliates do not receive an unfair advantage over other customers, whether as a result of discriminatory treatment or the improper sharing of information, Personnel or resources. The Inter- Affiliate Codes/Standards of Conduct also prohibit cross-subsidization at the expense of our transmission customers. In order to ensure compliance with the Inter-Affiliate Codes/Standards of Conduct, you must observe the following rules in your day-to-day activities: All customers must be treated equally • Regulated transmission providers cannot give undue preference to any customer, whether affiliated with a TC Energy entity or not. Independent functioning • Regulated Personnel must function independently of non-regulated Personnel (e.g., they cannot perform the same jobs). No conduit of information • Regulated and shared Personnel must not share, or act as a conduit for the sharing of regulated information\* with non-regulated Personnel. Pay fair share • Non-regulated entities must pay their fair share of any costs incurred by our regulated transmission providers, so as not to burden our transmission customers with costs our non-regulated entities benefit from. Reporting violations • Any violations of the Inter-Affiliate Codes/Standards of Conduct must be reported to the Corporate Compliance department, since TC Energy may be legally required to either publicly post such information on its web site or report it to our regulators. \*Regulated information (which may not be shared with non-regulated Personnel or affiliates) includes commercial, financial, strategic, planning, operational and customer information of our transmission providers. Ꝓ TC Energy's Inter-affiliate Codes/Standards of Conduct TC Energy – Code of Business Ethics Policy 27 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Competing fairly A competitive marketplace in the energy and transmission services that TC Energy provides helps ensure fair prices and customer choice and, in turn, results in the industry as a whole providing more effective and better service. We believe in vigorous, fair competition and comply with all laws designed to protect the ability of companies to compete freely. You should never enter into agreements to: • Fix prices • Decrease capacity or volume available to customers • Allocate customers or markets among competitors • Boycott certain customers or Contractors As such, you need to be very careful whenever you have contact with competitors (whether in trade association meetings, at conferences, through participation in benchmarking groups or in negotiating or otherwise dealing with actual or potential joint venture partners who are also TC Energy competitors) to avoid sharing competitively sensitive information. You must never enter into an agreement to reduce competition, or that is likely to have that effect. QUESTION: While at a trade association meeting recently, a few competitors I was sitting with at dinner started talking about their pricing. I knew it wasn't appropriate, so I didn't say anything. Did I do the right thing? ANSWER: While you were right not to participate in the discussion, when in such a situation, it's a good idea to take the further step of making clear to everyone that the discussion is inappropriate and that you will not participate. If the inappropriate discussion continues, you should excuse yourself from the situation. You should also document what happened and report the matter. This will help to protect you and TC Energy in case anyone ever points to the fact that you were part of a group in which an inappropriate discussion took place. TC Energy – Code of Business Ethics Policy 28 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Accounting, financial reporting and fraud prevention TC Energy ensures that our accounting, financial records and reporting are fair, accurate, understandable and complete, and we do not falsify financial documents or records, or misstate or misrepresent the nature of costs or expenditures. You must ensure all transactions that you engage in, or that you approve, whether under a TC Energy contract or as an individual business expense, are true and reported accurately, completely and in compliance with all applicable accounting and legal requirements. You must also follow TC Energy's corporate policies and other requirements respecting the transaction (for example, obtaining of approvals). You must never engage in "off-the-record" or other transactions or accounts that do not fully and accurately state the nature and amount of specific transactions. You must also never falsify any invoice, expenditure, time sheet or other document related to Company cost or revenue. Doing so constitutes fraud and may result in disciplinary action up to and including termination. Ꝓ Avoiding Bribery and Corruption Policy Ꝓ Business Expense Policy TC Energy's Business Expense Policy The Business Expense Policy outlines proper management of low cost and low risk expenses incurred while conducting business on TC Energy's behalf and sets expectations regarding Employee use of the corporate credit card for such expenses. These expectations include a prohibition on splitting transactions to circumvent credit card limits or incurring costs for other Employees. If there is more than one Employee from the same business unit included in the expense, the most senior Employee present must always incur the expense. TC Energy – Code of Business Ethics Policy 29 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Preventing money laundering and terrorist financing We expect all our Personnel to be vigilant in ensuring the payments we make and the methods of payment we use are legitimate and legal. Legal requirements concerning money laundering and terrorist financing are in place to deter criminal and terrorist activities of those with whom we might do business. To ensure compliance with these legal requirements you must: • Exercise care before agreeing to do business with a third-party, including ensuring that they were reviewed as part of Supply Chain's qualification process • Ensure the third-party is legitimate and reputable • Recognize and report any suspicious payments or transactions Examples of suspicious payments or transactions include: • Any request by a third-party to have a payment deposited into a personal account rather than a business account • Transactions with entities other than those involved in the underlying contract or business deal • Payments or other transactions involving a country other than that in which the parties to the contract or business deal are located Payments of cash, unusual financing arrangements, fictitious invoices or other efforts by a third party to conceal the true purpose of a payment or transaction also raise concerns. + Ignoring the signs that a transaction or payment initiated by a third party is not legitimate can result in TC Energy being found complicit in any illegal activity that may be associated with the transaction, even if the Company did not expressly authorize it or even know about it. TC Energy – Code of Business Ethics Policy 30 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Communication • Being socially responsible • Being a good ambassador of TC Energy • Social media and communication with the public • Public disclosure of information • Dealing fairly with customers, suppliers, and other stakeholders • Dealing fairly with competitors TC Energy – Code of Business Ethics Policy 31 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Being socially responsible We respect human rights and we are committed to being a good neighbour and supporting and enhancing the communities in which we live and work. Some of the most important communities our business impacts are Indigenous communities. We are committed to working with these communities, to develop positive, long-term relationships based on mutual trust and respect, and recognizing their diversity and the importance they place on the land, their culture and their traditional way of life. In addition to working with Indigenous communities, we also work hard to build and maintain relationships with landowners. We recognize the importance of farming to their communities, and actively support farming-related organizations. Ꝓ Our Commitment Statement Ꝓ Indigenous Relations Policy + TC Energy understands the importance that community, charitable and similar non-governmental organizations play in making the communities in which we live and work better places. We actively support these organizations and encourage our Personnel to become involved by volunteering and contributing to charitable and other community-based organizations, including during work hours if approved by your leader. TC Energy – Code of Business Ethics Policy 32 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Being a good ambassador of TC Energy We recognize that we are ambassadors of TC Energy and conduct ourselves in a manner that is respectful and appropriate, and that will not harm TC Energy's reputation. You must always keep in mind that you are a representative of TC Energy. The things you say and do should reflect the Company's core values. You should not speak publicly on behalf of TC Energy unless authorized to do so. Any posting or statement on an external website, including personal sites or in other media, should be considered a public statement. Even on your personal time, you must not participate in any illegal or inappropriate statements or activities that could be detrimental to the Company or its reputation. Ꝓ Public Disclosure Policy Ꝓ Communications Policy TC Energy – Code of Business Ethics Policy 33 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Social media and communications with the public In the age of social media, it is easy to broadly and publicly communicate information. You need to be particularly aware of your obligations and our expectations when it comes to the disclosure of Company information and ensuring it is in accordance with legal and internal requirements. When sharing information on social media, keep the following requirements in mind: • Do not speak on behalf of, or giving the impression that you are speaking on behalf of, TC Energy unless you have been authorized to do so • Never falsely represent yourself • Do not post anything that reflects negatively on TC Energy and ensure posts are not discriminatory, offensive, or in poor taste • Share only approved TC Energy content, add value to the conversation, and be accurate • Do not post pictures of TC Energy's facilities or operations unless you are authorized to do so TC Energy – Code of Business Ethics Policy 34 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Public disclosure of information TC Energy ensures that public statements regarding the Company are provided in a timely manner, are fair, accurate and complete, comply with legal requirements and corporate policies, and preserve and protect our reputation and brand. TC Energy has prescribed Personnel who are authorized to speak on our behalf. If you receive an inquiry for information or comment, you should direct it to the appropriate Company representative for response. If you are not sure who the appropriate company representative is to respond, please direct the inquiry to our media line 1-800-608-7859. Ꝓ Public Disclosure Policy Ꝓ Communications Policy Use of company name for personal gain You must never use the Company's name or purchasing power or your employment status to obtain personal discounts or rebates from Contractors, unless those discounts or rebates are available to all Employees. TC Energy – Code of Business Ethics Policy 35 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Dealing fairly with customers, suppliers and other stakeholders We consider the impact of our actions on stakeholders, the environment and the communities in which we operate. We follow the requirements of TC Energy's Operational Management System (TOMS) which are in place to make sure we act responsibly to protect us, our co-workers, our workplace and assets and the communities we work in, and that we act as responsible stewards of the environment. TOMS provides a strong foundation to manage risk, share knowledge and best practices, and it ensures continual improvement of the business. You should never make business decisions on behalf of TC Energy based on personal relationships, unfair bias or the potential for personal gain. Treating customers, Contractors, and other stakeholders fairly requires that you: • Enter into business relationships based on merit • Use objective criteria to evaluate them, such as: – Price – Quality – Service It also requires that you are honest and forthright when dealing with others (never omitting important facts, manipulating another person or situation, or misrepresenting yourself or TC Energy), and that you honour TC Energy's contractual, regulatory and other commitments. + We are fair and honest in our dealings with Contractors and other stakeholders and we honour our obligations and commitments to them. TC Energy – Code of Business Ethics Policy 36 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Dealing fairly with competitors You must ensure that you use only legitimate means (such as searches of public information) to obtain competitive intelligence. You must never use deceit or misrepresent yourself to obtain such information, and you should never take advantage of information you receive in error, for example: • Emails or faxes received in error • Physical documents left in a meeting room or in a public place or which have been sent to you in error • Information you overheard TC Energy – Code of Business Ethics Policy 37 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Assets and information • Protecting confidential information • Protecting personal information • Managing and maintaining the security of information • Protecting and respecting intellectual property rights • Use and protection of TC Energy assets TC Energy – Code of Business Ethics Policy 38 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Protecting confidential information We protect TC Energy's confidential information, and that of our customers, Contractors and other stakeholders, from improper disclosure and use. We all have access to confidential information. TC Energy confidential information includes all TC Energy non-public information that may be of use to competitors or harmful to TC Energy or its customers, Contractors or other stakeholders, if disclosed. Confidential information can include: • Information regarding TC Energy's business, operations, finances, strategies, business plans, or projects • Proposed mergers, acquisitions and divestitures • Engineering designs and reports • Legal proceedings, contracts • Environmental reports • Land and lease information • Technical and economic data • Marketing information and field notes • Sketches and photographs • Electronic information assets (including emails, voicemails, and text messages) • Computer records or software, specifications, models • Other information which is or may be either applicable to or related in any way to the assets, business or affairs of TC Energy Because such information is sensitive and can be used by competitors or others to TC Energy's detriment, it must be protected. You must not disclose such information to anyone who does not need to know the information for legitimate business purposes (including within TC Energy). All confidential information should be protected from unauthorized access. When disposing of confidential information, you should do so in a secure manner, which may include shredding of hard copies. See additional information in the Protecting and Using TC Energy's Assets and the Managing and Maintaining the Security of Information sections. Ꝓ Information Management Policy Ꝓ Cybersecurity Policy Ꝓ Records Retention Schedule TC Energy – Code of Business Ethics Policy 39 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Protecting personal information TC Energy takes seriously the fact that its Employees, Contractors, customers and other stakeholders have entrusted the Company with their personal information. Some examples of personal information include an individual's name, home address, telephone number, identification numbers (such as an Employee number or social insurance/social security number), financial information, and medical information. You should never collect, store, access, use, or disclose personal information for an inappropriate purpose or by inappropriate or illegal means. Use of personal information must be limited to the business purposes for which the information was provided. To the extent that you have personal information of any individual as a result of your work with TC Energy, whether the individual is an Employee, Contractor, landowner or a shareholder (to name just a few examples), you may not disclose that personal information to others, nor may you use it for a purpose other than that for which it was collected, either within or outside TC Energy, without the express approval of TC Energy's Privacy Officer or the individual's written consent. If you are ever unsure if information can be disclosed or used for a new purpose, you should check with TC Energy's Privacy Office before taking any action. For more information, please see the Protection of Personal Information Policy. Ꝓ Protection of Personal Information Policy You should also protect and safeguard personal information from inappropriate access, by keeping it in a locked cabinet, or in a password protected or otherwise restricted folder, memory stick or other similar storage device, if the information is electronic. + TC Energy is committed to protecting personal information in compliance with all legal requirements and requires that our Contractors share this commitment to information security. TC Energy – Code of Business Ethics Policy 40 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Managing and maintaining the security of information Company records are valuable assets of the Company and you must ensure appropriate and reasonable efforts are made to manage, protect and preserve these assets. All of these information assets are important Company records that TC Energy may be required to produce in the event of a legal or regulatory proceeding, audit or investigation. It is important that you manage and retain these assets in accordance with all legal requirements and TC Energy's corporate policies. In particular, you must never destroy an information asset in the event of a legal hold or an actual or pending legal or regulatory proceeding. Ꝓ Information Management Policy Ꝓ Cybersecurity Policy What is an information asset? • Memos • Emails • Accounting records • Invoices and contracts • Technical drawings • Recordings of trade-related phone calls • Records of safety or other incidents • Marketing literature • Other similar types of records What form can an information asset take? An information asset can take any form or on any media, including: • Paper • CD • DVD • Voice or video recordings • Text and instant messages • Other electronic formats TC Energy – Code of Business Ethics Policy 41 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Protecting and respecting intellectual property rights We preserve TC Energy's intellectual property rights and respect and honour those of third parties. Intellectual property can include trade secrets, which is any information that gives the owner an economic advantage over its competitors and that the owner takes reasonable steps to keep confidential, as well as copyrights, trademarks and patents, and also includes inventions, innovations, discoveries and copyrighted material developed while employed by TC Energy. We must take steps to protect intellectual property rights. This includes keeping trade secrets confidential, consistently using TC Energy's trademarks solely as authorized, and respecting the intellectual property rights of third parties. TC Energy respects and honours intellectual property rights by: • Complying with the terms of license agreements that TC Energy has entered into with Contractors • Complying with copyright legislation • Not using improper means to obtain third-party information or trade secrets • Using confidential third-party information only for the purpose for which it was provided TC Energy – Code of Business Ethics Policy 42 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Use and protection of TC Energy's assets TC Energy assets that you have access to for the completion of your duties must be protected and only used for legitimate business purposes. You have an obligation to be a good steward of the assets that TC Energy provides to you in the course of your work and you must protect these assets from loss, theft, damage and misuse. Additionally, using Company facilities and/or equipment to work on your personal assets, for personal activities or to store personal assets is not allowed. Limited personal use of Company assets such as accessing Internet or printing is acceptable provided that it does not interfere with your job duties. TC Energy regularly monitors Company internet use, and individuals should not assume any right of privacy with respect to either their use of or data stored on TC Energy's computer systems. Any misuse of Company assets or services, including inappropriate use of TC Energy's computer equipment and systems, may lead to serious consequences including corrective disciplinary action up to and including termination. Ꝓ Acceptable Use Policy Ꝓ Corporate Security Policy QUESTION: I sometimes use my Company computer to access Facebook or Twitter during my lunch break and I post about my personal life. Is that allowed? ANSWER: Limited personal use of Company assets to access social media during a break is acceptable; however, you need to keep in mind that you are using a Company computer and accessing the Internet through a TC Energy IP address. Therefore, you must ensure that you do not post content that is inappropriate or could reflect poorly on TC Energy. The Company regularly monitors the use of its equipment and systems and you should not expect your personal use of TC Energy assets to be private. Any inappropriate or offensive use of Company assets by Personnel may result in disciplinary action. What is a Company asset? Company assets can include: • Equipment • Facilities • Furniture • Computers • Telephones • Supplies • Tools • Personal protective equipment • Corporate credit cards • Other resources What can Company assets NOT be used for? Company assets must not be used for: • Work on your personal assets or for personal activities • Engaging in hate-based activities • Downloading illegal material • Viewing pornography • Other inappropriate uses TC Energy – Code of Business Ethics Policy 43 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Have a question? We're here to help • Your responsibility and non-retaliation • Asking questions and reporting concerns TC Energy – Code of Business Ethics Policy 45 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Your responsibility Personnel must follow all applicable provisions and the spirit and intent of this corporate governance document and support others in doing so. Personnel must promptly report any suspected or actual violation of this corporate governance document through available channels so that TC Energy can investigate and address it appropriately. Personnel who violate this corporate governance document or knowingly permit others under their supervision to violate it, may be subject to appropriate corrective action, up to and including termination of employment or contract, as applicable, in accordance with the Company's corporate governance documents, employment practices, contracts, collective bargaining agreements and processes. Interpretation and administration The Company has sole discretion to interpret, administer and apply this corporate governance document and to change it at any time to address new or changed legal requirements or business circumstances. Non-retaliation TC Energy supports and encourages Employees and Contractors to report suspected violations of corporate governance documents, applicable laws, regulations, and authorizations, as well as hazards, potential hazards, incidents involving health and safety or the environment, and near hits. Such reports can be made through available channels. TC Energy takes every report seriously and investigates it to identify facts and, when warranted, makes improvements to our corporate governance documents and practices. All Employees and Contractors making reports in good faith will be protected from retaliation, and all Employees and Contractors must report if they or someone they know is being or has been retaliated against for reporting. Good Faith Reporting will not protect Employees and Contractors who make intentionally false or malicious reports, or who seek to exempt their own negligence or willful misconduct by the act of making a report. TC Energy – Code of Business Ethics Policy 46 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Asking questions and reporting concerns You are required to report in a timely manner any actual or potential non-compliance with COBE, any other TC Energy policies, or any legal obligation, as it applies to you or the Company, so it can be appropriately investigated and addressed. You can do so with confidence that your confidentiality and identity will be protected to the greatest extent possible and that retaliation for good faith reporting is prohibited. Ethics Help Line Although TC Energy has various reporting resources available for Personnel to report a concern or to seek guidance, there may be times when you are not comfortable raising concerns through those resources. TC Energy's Ethics Help Line is operated by an independent third- party service provider and reporting through the Ethics Help Line is confidential and may be done anonymously. Canada / U.S.: 1-888-920-2042 Mexico: 800-283-2783 (if calling from a cell phone) 0-800-283-2783 (if calling from a land line) TCEnergy.com/about/governance/code-of-business-ethics All calls to the Ethics Help Line are free of charge, and can be made in English, French, or Spanish 24 hours a day, seven days a week, 365 days a year. You may use the Ethics Help Line either to report any actual or suspected issues or to ask questions on topics such as: • Accounting irregularities • Alcohol and drug abuse • Conflicts of interest • Employee concerns • Employment practices • Engineering concerns • Environment concerns • Equitable treatment • Harassment • Safety • Theft and fraud • Workplace violence • Other improprieties If the issue raises an immediate threat to safety or security, you should contact Corporate Security, local police or other emergency services as appropriate. All reports are taken seriously Regardless of the means used to report, you can feel confident that the report will be taken seriously and that it will be investigated and addressed appropriately. If you are reporting anonymously through the Ethics Help Line, please make note of your key code for your case file as the investigator will only be able to contact you through your case file should they need to communicate with you for further information or clarification prior to initiating an investigation. Participation in investigations and audits Personnel, including directors and officers are required to participate in investigations and audits if, and as, requested. QUESTION: I suspect one of my colleagues has violated part of COBE, but I'm not sure my suspicions are correct. I'm concerned I'll be labeled a tattle-tale (or worse) if I report it. What should I do? ANSWER: If you suspect misconduct, you should report it in a timely manner so it can be investigated. If it turns out not to be an issue, there will be no harm done. However, violations of the law or COBE that are not reported, cannot be addressed, and that can seriously undermine the Company. If that happens, we all suffer. If you report the issue, your confidentiality and identity will be protected and if any retaliation is found to occur, it will be taken very seriously. TC Energy – Code of Business Ethics Policy 47 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Glossary Advisory Relationship means a relationship where one provides advice, counsel, suggestions, recommendations, intelligence, guidance or any other similar types of information or opinion. Confidential Information means all TC Energy non-public information that may be of use to competitors or harmful to TC Energy or its customers, suppliers, or other stakeholders, if disclosed. It can include, but is in no way limited to, information regarding TC Energy's business, operations, finances, strategies or business plans, projects, proposed mergers, acquisitions and divestitures, engineering designs and reports, legal proceedings, contracts, environmental reports, land, and lease information, technical and economic data, marketing information and field notes, sketches, photographs, electronic information assets (including emails, voicemails, SMS, and text messages), computer records or software, specifications, models, or other information which is or may be either applicable to or related in any way to the assets, business or affairs of TC Energy. Contingent Workforce Contractor (CWC) means an individual who: • is employed by a third party to work on behalf of TC Energy; • uses TC Energy's assets (e.g., workstation, email, phone) and corporate services; • is compensated on an hourly or daily rate basis (Canada and the U.S.) and monthly (Mexico); and • works under the direction of a TC Energy leader. Contractor means a third party hired by TC Energy to perform services for or supply equipment, materials, or goods to the Company. Contractors include, without limitation, Contingent Workforce Contractors and Excluded Contractors. Employee means full-time, part-time, temporary and student employees of TC Energy. Excluded Contractor means a third party or individual employed by a third party who: • delivers services, equipment, materials, or goods to the Company using their own tools and assets (e.g., work station, laptop, email, phone, PPE, vehicle); • does not increase TC Energy corporate headcount and overhead costs; • does not use TC Energy's assets and corporate services; and • directs their own work or receives direction from their employer. Family Relationship means relatedness or connection by blood, marriage or adoption and includes, but is not limited to: • a marriage/common law spouse; • parent and grandparent; • child and grandchild; • sibling; • aunt and uncle; • niece and nephew; • first cousin; and • any "step", "common law", or "in law" variations of the above relationships. Good Faith Reporting means an open, honest, fair and reasonable reporting without malice or ulterior motive. TC Energy – Code of Business Ethics Policy 48 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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Government Officials means any appointed, elected, or honorary official or any employee of a government, of a government owned or controlled company, or of a public or international organization. This definition encompasses officials in all branches and at all levels of government: federal, state/provincial or local. This definition also includes political parties and party officials and candidates for political office. Indigenous officials may also be considered Government Officials. A person does not cease to be a Government Official by claiming to act in a private capacity or by the fact that he/she serves without compensation. Examples of Government Officials relevant to TC Energy's business include: • government ministers and their staff; • members of legislative bodies or other elected officials; • officials or employees of government departments ; • employees of regulatory agencies; • judges and judicial officials; • employees of state-owned oil companies, or other government-owned or controlled corporations; • customs, immigration, tax, and police personnel; • Indigenous government officials; and • employees of public international organizations, such as the United Nations or World Bank. Intimate Relationship means any romantic and/or dating and/or sexual relationship, including casual encounters. Personal Relationship means all Family Relationships and Intimate Relationships and any other personal relationship that is sufficiently close to create a real or perceived conflict of interest. Personnel means full-time, part-time and temporary Employees and Contingent Workforce Contractors of TC Energy. Record means Information, however recorded or stored, providing evidence of activities performed or considered, and/or decisions made pursuant to legal obligations or in a transaction of Company Business. TC Energy or the Company means TC Energy Corporation and its wholly-owned subsidiaries and/or operated entities. TC Energy – Code of Business Ethics Policy 49 Home Table of contents Living our values Ethical business conduct Communication Assets and information Have a question? We're here to help

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July 2022 Making the right choices – doing the right thing .

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