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TC Pipelines L P (TCP) Q2 2019 Earnings Call Transcript

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TC Pipelines L P  (NYSE: TCP)
Q2 2019 Earnings Call
Aug. 01, 2019, 5:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Welcome to the TC PipeLines, LP 2019 Second Quarter Results Conference Call.

I would now like to turn the meeting over to Ms. Rhonda Amundson. Please go ahead, Ms. Amundson.

Rhonda Amundson -- Investor Relations

Thank you, and good afternoon everyone. Welcome to TC PipeLines' second quarter 2019 conference call. I'm joined today by our President, Nathan Brown; our VP and General Manager, Janine Watson; and our Principal Financial Officer, Chuck Morris.

Please note that a slide presentation will accompany their remarks and is available on our website at tcpipelineslp.com, where it can be found in the Investors section under the heading Events and Presentations. Nathan will begin the call today with a review of TC PipeLines 2019 second quarter results. Janine will provide a commercial update on the partnership's assets and our growth program, following which Chuck will provide a review of our financial results for the second quarter. Nathan will return and wrap up our remarks with a brief discussion of our growth strategies and close with some key takeaways. Following the prepared remarks, I will ask the conference operator to coordinate your questions.

Before we begin, I would like to remind you that certain statements made during this conference call will be forward-looking regarding future events and our future financial performance. All forward-looking statements are based on our beliefs, as well as assumptions made by and information currently available to us. These statements reflect our current views with respect to future events and are subject to various risks, uncertainties and assumptions as discussed in detail in our 2018 10-K as well as our subsequent filings with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize or if the underlying assumptions prove incorrect, actual results may differ materially from those described in the forward-looking statements.

Please also note that we use the non-GAAP financial measures EBITDA and distributable cash flow during our presentation. EBITDA is an approximate measure of our operating cash flow during the period and reconciles directly to net income. And distributable cash flow is presented to provide a measure of cash generated during the period to evaluate our cash distribution capability. These measures are provided as a supplement to GAAP financial results, and we provide a reconciliation to the most closely related GAAP measures in our SEC filings.

With that, I'll turn the call over to Nathan.

Nathan Brown -- President and Director

Thanks, Rhonda. Good afternoon, everyone, and thanks for joining us today. As outlined this afternoon in our news release and looking at Slide 4, I'm pleased to report TC PipeLines had a very good quarter with solid results and our portfolio of pipeline assets continued to perform as expected. We generated $55 million in net income during the second quarter of 2019, 25% lower than the $73 million we earned in the same period in 2018, largely due to the partial buyout of Bison's contracts in late 2018 together with lower rates on many of our pipelines following the 2018 FERC actions.

Our EBITDA is similarly lower year-over-year at $99 million for the quarter compared to $124 million in 2018. Our distributable cash flow was $70 million for the second quarter of 2019 compared to the second quarter in 2018 when our DCF was $101 million. The drivers for the decrease were our lower earnings and EBITDA, together with generally higher maintenance capital expenditures related to major compressor overhauls on GTN and pipe integrity costs on Tuscarora, North Baja, and GTN, all the result of higher natural gas transportation volumes. Northern Border's maintenance spending was lower this year quarter -- excuse me, lower this quarter year-over-year but expected to pick up as the year progresses.

All told, our results reflect the expected decreases from both our Bison contract payout as well as from the rate decreases resulting from the 2018 FERC action and higher maintenance costs, although a drag on distributable cash flow reflect a good news story of higher natural gas flows in our pipelines, and these costs will be added to rate base in due course and enjoy a return on capital for future rates.

We paid out $47 million in distributions to our unitholders during the quarter and this is same as we paid out in the second quarter of 2018. The partnership also declared a second quarter distribution of $0.65 per common unit, which is consistent with our first quarter 2019 distribution and for each quarter in 2018. We sized our distribution in 2018 to respond to the FERC actions last year and believe that maintaining it at its current level is prudent in order to continue building a healthy financial position and allow us to self-fund our organic growth as we move forward. Chuck will discuss our financial results in more detail a little later in the call.

As we reported last quarter, we continue to progress a number of organic growth projects. Phase 1 of our Portland XPress project was placed in service in November of last year and is contributing to our bottom line results. A number of PNGTS legacy contracts expired earlier this year, which has resulted in lower revenue at PNGTS in Q2 of this year, but revenues will increase to previous levels when Phase 2 comes into service later this year and increase again when Phase 3 goes into service in late 2020.

Westbrook XPress is moving forward as well with Phase 1 expected to be in service in November of this year, Phase 2 in late 2021 and Phase 3 in late 2022. Janine will discuss these and other commercial developments in more detail in a minute or two.

During the second quarter, looking at our financial position, we have continued to repay our outstanding debt balance with available cash such that our bank leverage ratio is now approximately 2.8 times. Our distribution coverage also remains very strong at approximately 1.5 times for the quarter ended June 30, 2019. These results are a testament to the resiliency of our asset portfolio and the continued success of our commercial strategies, which combine to create ongoing value to our unitholders.

Last week, S&P Global Ratings updated the Partnership's credit rating from BBB -- to BBB from BBB-. The rationale was based primarily on our strengthened credit profile.

I will now turn the call over to Janine Watson, our VP and General Manager, to provide additional color on our assets and these commercial developments together with our market outlook.

Janine M. Watson -- Vice President and General Manager

Thanks, Nathan, and good morning everyone or good afternoon everyone. Moving on to Slide 5. I will now drill a bit further into the continued solid operating performance of our assets. In the west, demand continues to be strong for transportation service on GTN pipeline, serving energy needs in California and the Pacific Northwest. GTN is effectively sold out of firm capacity in and after 2020 and continues to benefit from discretionary sales of Park and Loan and short-term firm services. In the northeast, PNGTS placed Phase 1 of its Portland XPress project into service on November 1st of last year, and we therefore benefited from additional revenue from this phase in Q1 and Q2 of 2019.

Looking to our equity investments, Northern Border continues to experience strong demand for its capacity, operating at very high levels of throughput. Its firm capacity was once again sold out in Q2 and our commercial team successfully generated incremental revenue by offering a seasonally available capacity on such short-term basis. Bakken receipts have climbed as high as 1.4 bcf per day and now account for more than half of the daily receipts on to this line. Demand for Great Lakes' transportation services continues to be strong, although there is some seasonality to its revenues and there were fewer opportunities to generate discretionary revenues on this asset in Q2 compared to this quarter last year. The remainder of our pipeline is operated as expected, generating solid results during the quarter.

Now we remain committed to our Bison pipeline and continue to explore both the natural gas line reversal and liquids repurposing development opportunities for this asset, seeking to take advantage of this pipeline's proximity to the Bakken. There is commercial interest in both options and we continue to advance both opportunities. I will discuss the gas reversal options in a bit more detail later in my remarks. Overall, we are confident that our assets are well positioned geographically with last mile connections into key market centers across North America. They are highly contracted, reflecting ongoing demand for their natural gas transportation services.

We have key connections out of the Western Canadian Sedimentary Basin, one of the most prolific supply basins in North America, through GTN, Northern Border and Great Lakes and through Iroquois and PNGTS at the eastern end of TC Energy's mainline system. We are very encouraged by the high utilization rates on our pipeline, which are driving solid revenues and cash flows. Now these high rates are necessitating maintenance and other capital spending on our assets, but also set TCP up for continue -- to continue to provide value for its stakeholders. We believe our portfolio of assets will continue to benefit from their connections between low cost supply sources and stable and growing demand centers. Our business development team is in the process of soliciting customer interest in several potential projects across TCP's footprint, designed to meet the demand for incremental transportation at competitive costs, and I will discuss those a little bit further on in the next slide.

Now turning to Slide 6. As Nathan touched on earlier, we are excited to provide an update on our PNGTS expansion projects. Our Portland XPress project is proceeding on time with Phase 1 in service last November and Phases 2 and 3 planned to be in service for November 1 of this year and 2020, respectively. This project is approximately $85 million in total capital costs and will add about 183,000 dekatherms per day of capacity to PNGTS.

We are also advancing our Westbrook XPress project at PNGTS. This is an approximately $125 million multi-phase expansion project designed to help serve markets in Northern New England and Atlantic Canada that have, until recently, been served by offshore gas production from Sable Island and Deep Panuke. Phase 1 of this project will be supported by pressure agreements with our upstream affiliated pipelines, allowing Portland to bring an initial 43,000 dekatherms a day into service in November of this year without the need for any construction. Phase 2 requires the addition of a compressor and associated facilities at an existing station on the Portland system and is also reliant on planned construction activities north of the border. This phase will bring a further 59,000 dekatherms of firm capacity to this pipeline system and is intended to be in service by November of 2021.

The Phase 3 expansion will provide capacity for an additional 18,000 dekatherms per day to be in service by November of 2022. The cost of these projects will be financed at PNGTS through its credit facility. Once both projects are fully in service, PNGTS' capacity will have almost doubled from 210,000 MDS per day at the beginning of 2018 to close to 400,000 dekatherms per day by the end of 2022.

Now looking forward, we continue to assess what other opportunities may arise to further take advantage of TCP's existing pipeline network. You can see on the map that we have highlighted five current opportunities being developed. As we noted in our Q1 earnings call, we are developing the North Baja XPress project, an estimated $90 million project to transport additional volumes of natural gas along North Baja's mainline system. The project was initiated in response to market demand to provide firm transportation services of up to approximately 495,000 dekatherms per day between Ehrenberg, Arizona and Ogilby, California.

A successful open season was conducted in April of 2019, with a potential in-service date as early as 2023. The project is still subject to various commercial and other conditions as we move forward. We are currently anticipating an FID decision on the project in about July of 2020.

Also of note is the potential expansion project on our Iroquois system, which we are referring to as Iroquois Enhancement by Compression or the ExC project. In early May, one of Iroquois customers, Con Edison announced that they had reached a precedent agreement to develop and seek to permit incremental pipeline delivery capacity into their service area in New York City. This project has the potential to optimize the Iroquois system to meet current and future gas supply needs of utility customers, while minimizing environmental impact through compressor enhancements at existing compressor stations along the pipeline. If successful, this project's total capacity is expected to be approximately 125,000 dekatherms per day with an estimated in-service date in November of 2023. Still subject to various approvals, the capital cost of this project is still to be determined as the optimal facility set is finalized during the course of the regulatory process. This project is intended to be 100% underpinned by contracts with 20-year term.

Now turning to the Bakken area. We note that there is a significant supply push seeking incremental gas takeaway capacity that could be met by our Northern Border and Bison pipeline. Our business development team continues to assess shipper support for two potential capacity expansions for natural gas deliveries out of this basin. The first development project contemplates a capacity enhancement project on Northern Border between the Bakken Connect -- Interconnect at Stateline/Watford City to Ventura, Iowa, potentially coming into service in two phases: the first in Q3 of 2021, and the second in Q4 of 2023.

The second project is our Bison reversal project, which contemplates a multi-lay supply path from Northern Border Stateline/Watford City receipt point down Bison for delivery onto third-party transported lines, destined for ultimate delivery to Cheyenne hub. This alternative could also potentially come into service in two phases: in Q3 of 2021, and in Q4 of 2022. Both of these alternatives remain in the early stages of development, but we are, nonetheless, pleased to be able to offer a diversity of solutions to Bakken producers as they seek a path to market. These routes have the potential to move approximately 400 MDS to 550 MDS per day of incremental firm capacity to market. We continue to refine and optimize each potential expansion path's design and cost.

And switching focus further to the west, GTN launched an open season yesterday for incremental capacity on its system. GTN is looking to rightsize a cost competitive compression-based expansion from Kingsgate to Malin and is holding its open season in conjunction with CC Energy's NGTL and Foothills systems to determine shipper interest in about a 250,000 dekatherms per day expansion project with a potential partial in-service date as early as 2022. This open season is scheduled to close on September 6th.

And finally, our business development team is focused on finding opportunities to offer seamless transportation service from Canada to US markets via several paths, which include our Great Lakes pipeline. During the second quarter of 2019, Great Lakes reached an agreement on the terms of a new long-term transportation capacity contract with its affiliates and our pipeline company. The contract is for a 15-year term from late 2021 to 2036 with a total contract value of $1.3 billion.

In summary, TC PipeLines management is pleased with our progress as we execute on our existing growth program, and we continue to work toward new incremental growth opportunities across TCP's footprint.

I will now turn the call over to Chuck Morris, our Principal Financial Officer, to discuss our second quarter financial results in more detail.

William C. (Chuck) Morris -- Vice President, Principal Financial Officer and Treasurer

Thanks, Janine, and good afternoon everyone. Moving on to Slide 7, I'll now review the Partnership's second quarter 2019 results. Net income in the second quarter was $55 million, down approximately 25% from $73 million in the second quarter of 2018. This equates to $0.75 per unit compared to $1 per unit in 2018. Several factors impacted our Q2 2019 results, the net effect of which led to the decrease year-over-year.

First, revenue from Bison was marketably lower as a result of the election of two of its customers in Q4 of 2018 to payout their transportation agreements. Second, as Nathan mentioned earlier, we saw rate reductions on several of our pipelines, emanating from the 2018 FERC actions. GTN had a scheduled 10% rate decrease on January 1st of this year as part of a settlement reached with its customers in 2018. Great Lakes and Northern Border also had 2% rate reductions in early 2019 related to the 2018 FERC actions. And Iroquois had a scheduled 3.25% rate reduction on March 1st of this year as a result of its 2019 settlement.

PNGTS' revenues were also lower this quarter as a result of the expiration of certain legacy contracts. However, revenues will increase later this year when Phase 2 of the Portland XPress project is scheduled to come into service. Partially offsetting these decreases was a reduction in financial charges due to the repayment of our $170 million term loan late in the year combined with continued debt repayment in the first six months of 2019. The Partnership paid distributions of $47 million to common unitholders in the second quarter, the same amount that was paid in Q2 of 2018.

And as Nathan mentioned earlier, we declared our second quarter 2019 distribution of $0.65 per common unit. This is consistent with the distribution declared in the first quarter of 2019 and for each preceding quarter in 2018. The Partnership's EBITDA was $99 million in the second quarter, 20% lower than in the same period in 2018. And distributable cash flows were $70 million in the second quarter of 2019, $31 million lower year-over-year. The decrease is due to the same factors impacting net income together with generally higher maintenance capital expenditures during the quarter as Nathan and Janine had mentioned earlier.

Turning to Slide 8. Revenues from our consolidated pipelines of $93 million were lower than in the same quarter last year for the same reasons that impacted our earnings, as I mentioned earlier. Equity earnings in the second quarter of 2019 were $6 million lower than in the same quarter of 2018, primarily due to rate reductions emanating from the 2018 FERC actions.

Operating, maintenance and administrative expenses during the second quarter were comparable to those in the same quarter of 2018. And depreciation expense was lower by approximately 21%, resulting from the asset impairment on Bison that we recognized during the fourth quarter of 2018. Financial charges were slightly lower in the second quarter of 2019 versus the same period in 2018 due to the repayment of the $170 million term loan in Q4 of 2018 and further reductions in our outstanding debt balance in the first and second quarter of this year.

Moving on to our financial position on Slide 9. Our solid financial position is reflective of the proactive measures that we have taken over the past 15 months. Our balance sheet is strong with a solid capital structure reflective of our high-quality energy infrastructure pipeline assets. Our investment-grade credit ratings provide us with the financial flexibility as we look to organically grow the portfolio in the future and we believe our ratings reflect our solid financial condition and outlook. As Nathan mentioned earlier, we received a one notch upgrade in our credit rating from S&P to BBB flat from our previous rating of BBB-. S&P cited our stable cash flow from our diversified portfolio of pipeline assets and our improved debt-to-EBITDA ratio as the rationale for the increased rating.

Our liquidity position remains strong. The Partnership has $500 million of undrawn and available borrowing capacity under our senior credit facility as of August 1st, 2019. Consistent with our self-funding model in order to build capacity for future organic growth, we continue to execute on our deleveraging program. In that regard, we have continued to use available cash to repay our indebtedness during the quarter, resulting in a bank leverage ratio of approximately 2.8 times. The bank leverage ratio is expected to migrate to the high 3s and low 4 times area as the impact of onetime items, including the Q4 2018 Bison contract payouts, roll through the calculation of the bank leverage ratio.

In response to the 2018 FERC actions, we have rightsized our distribution in 2018 and maintained it in 2019, resulting in a solid distribution coverage ratio of 1.5 times for the quarter ended June 30th, 2019. As Janine outlined earlier, we continue to execute on our organic growth program with both the PXP project and the Westbrook XPress projects proceeding on time and on budget. And we continue to use our steel-in-the-ground advantage across our entire pipeline system to explore additional growth opportunities.

That concludes my remarks on the second quarter financial results. I'll now turn the call back over to Nathan.

Nathan Brown -- President and Director

Thanks, Chuck. I'll now refer to Slide 10. As mentioned at the outset, we had a very good quarter this year and our assets continue to perform well, proving out the resilience and strong competitive position. Going forward, our cash flow will continue to be derived from our portfolio of critical natural gas pipeline infrastructure assets, underpinned by long-term ship-or-pay contracts of of credit-worthy shippers. We continue to prudently manage our financial position and believe our actions have resulted in a strong balance sheet. Our bank leverage ratio is currently approximately 2.8 times and our distribution coverage this quarter was a very healthy 1.5 times. Longer term, we're targeting to maintain our bank leverage ratio in the high 3 times to low 4 times area, and distribution coverage ratio of approximately 1.3 times to 1.4 times.

We reiterate that we do not need to access the equity capital markets to fund our current growth program. As Chuck noted, consistent with our self-funding model and in order to build capacity for organic growth, we continue to pay down debt levels and execute on our delevering program. Our focus remains on the optimization of our asset portfolio and will include organic growth over time, such as our current Portland and Westbrook XPress projects and our North Baja and Iroquois and GTN development opportunities. And we will continue to advance other options that fit within our geographic footprint and meet our return expectations.

Bottom line is, the FERC actions are behind us, we have rightsized our distribution, our metrics are healthy, and we are focused on executing our current and potential growth projects in order to drive long-term growth and continued value for our stakeholders.

I'll now turn the call back over to Rhonda.

Rhonda Amundson -- Investor Relations

Thanks, Nathan. I'd like to open the call up for questions. Operator, please go ahead.

Questions and Answers:

Operator

Certainly. Ladies and gentlemen, we will now take questions from the telephone lines. [Operator instructions]. And the first question is from Jeremy Tonet at JP Morgan. Please go ahead. Your line is now open.

Charles Barber -- JP Morgan -- Analyst

Good afternoon. This is actually Charlie on for Jeremy. I just wanted to go to the Bakken Solutions, specifically with Northern Border. Your partner had mentioned a kind of two to three-year range in terms of maybe potential expansion there. I was just curious if you could talk a little bit more on the time you just given. How full that pipe is currently running and especially with the BTU content, kind of where that stands today?

Nathan Brown -- President and Director

Yeah. Thanks for the question. I'd say, in terms of timing, we really do have to wait for all those factors to come together just right in order to move a specific project forward and then there is the permitting and construction time lines that we have. So we're not putting too fine of a point on exactly when that might happen, but we've certainly got options that we're moving forward along with same dynamics that our partner has mentioned.

Charles Barber -- JP Morgan -- Analyst

Great. And then in terms of debt, you talked kind of about the high 3s, low 4s target there. I was just curious what the near -- if there is kind of more of a near-term goal, just given that you want to have room for capacity to self-fund some of the future growth and just given the amount of projects you have in development. Is there any reason to think differently about kind of the next couple of years versus kind of that longer-term target?

Nathan Brown -- President and Director

Well, I'd say, we feel comfortable with where we are right now with the way that we've -- we're managing our balance sheet. The remainder of the Bison contract fall off at the beginning of 2021. So we're taking all of that and other moving parts into account as we focus through what our actual leverage metrics are going to be. So as things change, we think we're right sized and we're focused on the ability to build and execute on the growth programs that we have and we think we've got the capacity to do it. So really -- in terms of targets, we're focusing on the longer-term run rate. In the shorter term, we're just making sure we have the flexibility when the time comes.

Charles Barber -- JP Morgan -- Analyst

Great, thanks. That's it from me.

Operator

Thank you. The next question is from TJ Schultz at RBC Capital Markets. Please go ahead. Your line is now open.

TJ Schultz -- RBC Capital Markets -- Analyst

Great, thanks. Good afternoon. I think just first on Bison. At what point do you need to decide type of service there whether it gets liquid repurposed? I think some of the in-service for some of the options you indicated were in the late 2021 for some of the reversal. So just trying to back end to how much work would need to be done for some of these different options, potential cost to hit those in-service states? Just any color would be helpful. Thanks.

Nathan Brown -- President and Director

Yes. Thanks for the question. Unfortunately, we don't have a lot of specifics there to share with anybody right now. Clearly, the two options are mutually exclusive, and would be competing against one another. So as those develop kind of in parallel as we reach a critical point on one or the other then we can compare it, perhaps. But right now, I don't have anything to share.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay. Fair enough. On North Baja, is there any more information you can provide just on some of the conditions to reach FID? It seems like you have the project scope with the cost estimate and the open season was successful. So just trying to understand kind of what's left outstanding on the commercial conditions that you need?

Nathan Brown -- President and Director

Just waiting on counter-party commercial considerations on that one. So as mentioned, some time next summer is when we anticipate everything getting checked off, but really don't have any subsequent changes over the past quarter or now.

TJ Schultz -- RBC Capital Markets -- Analyst

Okay, great. Thanks.

Operator

Thank you. The next question is from Praneeth Satish at Wells Fargo. Please go ahead. Your line is now open.

Praneeth Satish -- Wells Fargo -- Analyst

Hi, good afternoon. In the Bakken, do you see enough demand for both the Bison reversal and the Northern Border expansion or do you think it will be one or the other?

Nathan Brown -- President and Director

Don't know right now if we've got kind of an engineering physical solution that would accommodate both. So we're going to take one at a time.

Praneeth Satish -- Wells Fargo -- Analyst

Okay. And then just touching on Northern Border, again, on the BTU value there. So it keeps creeping higher. Is there a point -- and Canadian gas keeps getting displaced. So is there a point where you just -- the BTU just gets too high and you just can't displace Canadian gas? Is there a cap there? And if so, when do you think that bottleneck will occur?

Nathan Brown -- President and Director

Certainly, there is a physical limit to what our system could have, but we work with our customers to make sure we're out ahead of that for happens. I don't think we're seeing that as imminent. So it's not a near-term concern. So sorry for those non-answer there. We don't really calibrate an amount or foresee it here in the near future.

Praneeth Satish -- Wells Fargo -- Analyst

Got it. And then just last question for me on the Iroquois gas project, I guess. What are the next steps to move forward with the project? And then just to clarify, will it be TCP that's handling the permitting and regulatory or will it be Con Ed that's doing it?

Nathan Brown -- President and Director

For the first, Janine on that one.

Janine M. Watson -- Vice President and General Manager

Iroquois will handle their own permitting, but I do believe that their customers will be there and supporting throughout the process. The next steps right now, they're in the middle of government and local community outreach and they're reaching out and talking to all related or affected counterparties along the line and are taking in feedback and likely would be looking to start to file for permits in Q1 or Q2 of next year.

Praneeth Satish -- Wells Fargo -- Analyst

Got it. Thank you.

Operator

Thank you. The next question is from Michael Lapides at Goldman Sachs. Please go ahead. Your line is now open.

Michael Lapides -- Goldman Sachs -- Analyst

Hey, guys. Just a question on PNGTS. Can you talk about how much more you could physically expand that system, meaning after you're done, and I know you're doing a lot with it right now. After you're done with the multistage and then when you're done with Westbrook, how are you thinking about what's left? How much physical more capacity you could actually add via compression?

Nathan Brown -- President and Director

I don't know if we've formalized it, but the current expansion that we have is contemplated to be accomplished through inside defense, additional compression work done in the existing facility. Outside of those shared facilities and what we've got going upstream, there is no midpoint compression yet on PNGTS. So if we can go through the process of adding additional compression, there is certainly a lot of additional capacity that's theoretically possible, but haven't seen any firm numbers modeled into it just yet to be able to quote to you kind of in specifics. But the capacity is there for additional midpoint compression on PNGTS. That's not yet being used. But going through a project like that, that's -- again, similar to what we just described with Iroquois is one that we want to step into very carefully to make sure we reach out to all the stakeholders who are interested in and go about that right way. But it's a good opportunity. It's a great asset that does have some expandability.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. And can you talk a little bit about [Indecipherable] you touched on it some in the prepared remarks about potentially upsizing GTN. Just trying to think about how much incremental capacity you could add and whether that's kind of inside the fence or whether it's something that's more complex from a siting and permitting process in kind of some of the Pacific Northwest States?

Nathan Brown -- President and Director

Yeah. So we're early days in our open season process here, and it's a bit of a longer story that involves upstream builds as well. So both our Foothills and NGTL systems affiliated with NTC Energy are working on that as well. And on the other side of this, we'll be able to see what kind of volumes come out, what kind of additional customer demand is there, and then we'll be able to answer those questions a little more specifically.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Thanks guys. Much appreciate it.

Operator

Thank you. [Operator instructions]. And the next question is from Marc Solecitto at Barclays. Please go ahead. Your line is now open.

Marc Solecitto -- Barclays -- Analyst

Hi, good afternoon. For the $50 million of revenues that you're expecting with the Portland XPress project, would you be able to confirm what that number would be net of the volumes that were recontracted?

William C. (Chuck) Morris -- Vice President, Principal Financial Officer and Treasurer

Don't have that handy, but maybe we would follow-up with you. Janine, you do?

Janine M. Watson -- Vice President and General Manager

Yeah. And I actually haven't got it. The C2C contracts are -- it's about 82,000 dekatherms. So it is about 20% of the total 400 a day that we're headed to. So that will give you a rough guide, but it is at a slightly lower rate.

Marc Solecitto -- Barclays -- Analyst

Got it. Okay. And then for the Great Lakes agreement with ANR, what is the volume commitment on that? Sorry, if I missed it.

Janine M. Watson -- Vice President and General Manager

I believe it's 800,000 a day.

Marc Solecitto -- Barclays -- Analyst

Great. Thanks.

Operator

Thank you. Ladies and gentlemen, this concludes the question-and-answer session. If there are any further questions, please contact Investor Relations at TC PipeLines LP. Ms. Amundson, I will now turn the call back over to you.

Rhonda Amundson -- Investor Relations

Great, and thank you, everybody for your participation today. We appreciate your interest in TC PipeLines, and certainly forward to speaking with you again soon. Thanks.

Operator

[Operator Closing Remarks].

Duration: 37 minutes

Call participants:

Rhonda Amundson -- Investor Relations

Nathan Brown -- President and Director

Janine M. Watson -- Vice President and General Manager

William C. (Chuck) Morris -- Vice President, Principal Financial Officer and Treasurer

Charles Barber -- JP Morgan -- Analyst

TJ Schultz -- RBC Capital Markets -- Analyst

Praneeth Satish -- Wells Fargo -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

Marc Solecitto -- Barclays -- Analyst

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