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Key Concepts

• Bruce C Expansion: A proposed 4.8-gigawatt nuclear power expansion project at the Bruce Power complex.
• CANDU Technology: Canadian-designed nuclear reactors currently utilized at the Bruce Power site.
• Midstream Business: The segment of the energy industry involving the transportation, storage, and processing of oil and gas, which remains TC Energy’s primary business.
• Major Component Replacement (MCR): A program to refurbish existing reactors, effectively resetting their operational lifespan through 2064.
• Lump Sum Turnkey Contract: A project delivery method where a contractor agrees to complete a project for a fixed price, shifting the risk of cost overruns away from the owner.
• Return on Equity (ROE): A measure of financial performance calculated by dividing net income by shareholders' equity.

1. The Bruce C Expansion Opportunity

Spiro Dounas of Citi Research identifies the Bruce C nuclear expansion as TC Energy’s single largest growth opportunity. While the company is traditionally associated with oil, gas, and LNG, the Bruce Power complex—which currently supplies nearly one-third of Ontario’s electricity—is a critical, underappreciated asset.

• Scale: The project is estimated to cost $60 billion (CAD) for 4.8 gigawatts of power.
• Financial Impact: TC Energy’s net exposure is estimated at $7–$8 billion, equivalent to one year of the company’s total capital expenditure (CapEx).
• Strategic Importance: Ontario regulators project a need for 100 gigawatts of additional power by 2050, with 18 gigawatts specifically earmarked for nuclear. Bruce C is explicitly cited as an integral component of this strategy.

2. Financial Framework and Risk Mitigation

Dounas explains that despite the daunting nature of nuclear construction, the project is highly financeable due to government backing and long-term contracts.

• Financing Structure: The project is expected to utilize 70–80% leverage. Co-ownership with partners (such as OMERS) and potential government tax credits will further reduce the direct capital burden on TC Energy.
• Risk Management: To mitigate the industry-standard risk of cost overruns, TC Energy plans to:
  • Conduct a "Class 2" engineering report to lock in costs before breaking ground.
  • Utilize "lump sum turnkey" contracts to shift inflation and overrun risks to contractors.
  • Secure government guarantees to protect their Return on Equity (ROE).

3. Timeline and Technology

• Technology: While not finalized, the site currently uses CANDU reactors. Given the existing workforce's familiarity with this technology, it is the most likely choice for the expansion.
• Project Roadmap:
  • Current Phase: Impact assessment by regulators.
  • 2028–2030: Site preparation.
  • 2031: Expected Final Investment Decision (FID).

4. Valuation and Market Perspective

Citi Research maintains a neutral rating on TC Energy but has raised its price target to $95.

• Valuation Logic: Dounas notes that Bruce Power alone is worth approximately $20 per share. When this is isolated, the remaining midstream business appears to be trading at a "turn discount" compared to industry peers, suggesting the stock is undervalued.
• Market Momentum: TC Energy has benefited from broader investor interest in nuclear power, driven by the energy demands of AI data centers. The company has demonstrated strong execution, announcing $5 billion in power-related projects last year and targeting another $9 billion this year.

5. Long-term Asset Durability

A standout feature of TC Energy’s nuclear portfolio is the extreme duration of its contracts, which Dounas describes as "unheard of" in the midstream sector.

• Contract Tenure: The MCR program resets the operational clock for existing assets through 2064.
• Future-Proofing: The proposed Bruce C project is designed for a 60- to 100-year operational life, providing long-term, stable income with minimal re-contracting risk.

Synthesis

TC Energy is strategically pivoting toward nuclear power as a primary growth engine, leveraging the Bruce Power complex to meet Ontario’s long-term energy security needs. By utilizing a disciplined financial approach—characterized by high leverage, government-backed contracts, and risk-transferring construction agreements—the company aims to mitigate the inherent volatility of nuclear development. While the midstream business remains the company's core, the nuclear segment provides a unique, long-duration asset base that Citi Research believes is currently undervalued by the market.