TC Energy Corporation

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) -- the Filer requested relief from the requirement under section 3.3 of NI 52-107 that financial statements be audited in accordance with Canadian GAAS -- the Filer is an SEC Issuer that is planning to spin off certain assets to a newly created company (SpinCo) -- the financial statements of the spin-out business and SpinCo in the circular will be audited in accordance with U.S. GAAS -- Spinco will not meet the definition of SEC Issuer in NI 52-107 at the time of the filing of the circular -- Spinco will meet the definition of SEC Issuer upon completion of the separation -- if SpinCo does not become an SEC Issuer, the Filer and SpinCo will immediately re-file the financial statements audited in accordance with Canadian GAAS.

Applicable Legislative Provisions

National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, s. 3.3.

Citation: Re TC Energy Corporation, 2024 ABASC 25

February 12, 2024

IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF TC ENERGY CORPORATION (the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each, a Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation), exempting the Filer from the following:

(a) in respect of the Spin-Out Financial Statements (as defined herein), the requirements in sections 3.2(1) and 3.14(1), as applicable, of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107), which provide, among other things, that certain financial statements must be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises; and

(b) in respect of the Annual Carve-Out Financial Statements (as defined herein), the requirement in section 3.3(1)(a) of NI 52-107, which provides, among other things, that certain financial statements must be audited in accordance with Canadian GAAS and accompanied by an auditor's report that includes certain prescribed items,

in each case, with respect to certain financial statements to be included in a management information circular of the Filer (the Circular) prepared in connection with a special meeting of the Filer's shareholders (the Meeting) to consider the Separation (as defined herein) (collectively, the Exemption Sought).

The Decision Makers have also received a request from the Filer for a decision that the Application, any supporting materials delivered in connection with the Application, and this decision (the Confidential Material) be kept confidential and not be made public until the earliest of: (i) 90 days from the date of this decision; (ii) the date on which the Circular is mailed to Shareholders (as defined herein); and (iii) the announcement or written confirmation by the Filer that it will not proceed with the Separation (the Confidentiality Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in respect of the Exemption Sought and the Confidentiality Relief in each of British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut; and

(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions, NI 52-107 and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation governed by the Canada Business Corporations Act.

2. The head and registered office of the Filer is located in Calgary, Alberta.

3. The Filer is a reporting issuer in each of the provinces and territories of Canada and is not in default of securities legislation in any jurisdiction of Canada.

4. The Filer's common shares are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).

5. The Filer is an "SEC issuer" as defined in NI 52-107.

6. The Filer's financial year end is December 31.

7. The Filer's financial statements are prepared in accordance with U.S. GAAP and are audited in accordance with U.S. PCAOB GAAS in accordance with sections 3.7(1) and 3.8(1) of NI 52-107, respectively.

8. The Filer operates in three core businesses: (i) Natural Gas Pipelines; (ii) Liquids Pipelines (the Liquids Business); and (iii) Power and Energy Solutions.

9. On July 27, 2023, the Filer announced its intention to advance a separation of its business into two independent reporting issuers through the "spinoff" of the Liquids Business into a new reporting issuer (SpinCo) by way of a plan of arrangement under the Canada Business Corporations Act (the Separation).

10. Pursuant to the Separation, holders of the Filer's common shares (Shareholders) will retain their existing ownership in the Filer's common shares and receive a pro rata allocation of common shares in SpinCo.

11. It is expected that SpinCo will be incorporated under the Canada Business Corporations Act in the first half of 2024.

12. Prior to the completion of the Separation, SpinCo will not be a reporting issuer in any province or territory of Canada (or the equivalent thereof in any other jurisdiction), nor will it carry on any business or have any assets or liabilities.

13. The head and registered office of SpinCo will be located in the Province of Alberta.

14. Completion of the Separation is subject to the receipt of certain approvals, including the approval of the directors of the Filer and the Shareholders at the Meeting.

15. In connection with the Meeting, the Filer will deliver to Shareholders the Circular, which will include certain disclosure with respect to the Separation, including: (i) audited financial statements of SpinCo prepared in accordance with section 32.2 of Form 41-101F1 Information Required in a Prospectus (Form 41-101F1) (the SpinCo Audited Financial Statements); (ii) pro forma financial statements of SpinCo prepared in accordance with section 32.7 of Form 41-101F1 (the SpinCo Pro Forma Financial Statements); (iii) annual carve-out financial statements for the Liquids Business prepared in accordance with section 32.2 of Form 41-101F1 (the Annual Carve-Out Financial Statements); and (iv) if applicable, interim carve-out financial statements for the Liquids Business prepared in accordance with section 32.3 of Form 41-101F1 (the Interim Carve-Out Financial Statements and, together with the Annual Carve-Out Financial Statements, the Carve-Out Financial Statements). The SpinCo Audited Financial Statements, SpinCo Pro Forma Financial Statements and Carve-Out Financial Statements are collectively referred to herein as the Spin-Out Financial Statements.

16. To ensure that Shareholders receive comparable, consistent, decision-useful disclosure in respect of the Separation, the Filer wishes to prepare the Spin-Out Financial Statements in accordance with U.S. GAAP, and to have the Annual Carve-Out Financial Statements audited in accordance with U.S. PCAOB GAAS.

17. Pursuant to section 3.2(1) of NI 52-107, the SpinCo Audited Financial Statements and the Carve-Out Financial Statements must be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises.

18. Pursuant to sections 3.2(1) and 3.14(1) of NI 52-107, the SpinCo Pro Forma Financial Statements must be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises.

19. Pursuant to section 3.3(1)(a) of NI 52-107, the SpinCo Audited Financial Statements and the Annual Carve-Out Financial Statements must be audited in accordance with Canadian GAAS and accompanied by an auditor's report that includes certain prescribed items.

20. Pursuant to section 3.7(1) of NI 52-107, despite section 3.2(1) of NI 52-107, certain financial statements of an SEC issuer may be prepared in accordance with U.S. GAAP.

21. Pursuant to section 3.8(1) of NI 52-107, despite section 3.3(1) of NI 52-107, certain financial statements of an SEC issuer may be audited in accordance with U.S. PCAOB GAAS and accompanied by an auditor's report that includes certain prescribed items.

22. An "SEC issuer" is defined in NI 52-107 to mean "an issuer that has a class of securities registered under section 12 of the 1934 Act or is required to file reports under section 15(d) of the 1934 Act..."

23. In connection with the Separation, application will be made to list the common shares of SpinCo on the TSX and the NYSE and a registration statement on Form 40-F will be filed with the SEC (the Registration Statement), which will become effective concurrently with the completion of the Separation.

24. The Filer anticipates that, upon the completion of the Separation or shortly thereafter, SpinCo will be an "SEC issuer"; however, at the time of filing the Circular, SpinCo will not qualify as an "SEC issuer".

Decision

Each of the Decision Makers is satisfied that the decision concerning the Exemption Sought meets the test set out in the Legislation for the Decision Makers to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that:

(a) the Filer prepares the Spin-Out Financial Statements in accordance with U.S. GAAP;

(b) the Annual Carve-Out Financial Statements are audited in accordance with U.S. PCAOB GAAS and accompanied by an auditor's report that includes the items prescribed by section 3.8(1) of NI 52-107;

(c) the Filer discloses in the Circular that it is relying on the Exemption Sought;

(d) the Filer files the Registration Statement with the SEC within two business days following the date on which the Circular is mailed to Shareholders;

(e) if the Separation is completed and SpinCo does not become an "SEC issuer" within 20 days following the completion of the Separation, the Filer and SpinCo will immediately re-file, on their respective SEDAR+ profiles (collectively, the Amended Documents): (i) the SpinCo Audited Financial Statements, which shall be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises, audited in accordance with Canadian GAAS and accompanied by an auditor's report that includes the items prescribed by section 3.3(1)(a) of NI 52-107; (ii) the SpinCo Pro Forma Financial Statements, which shall be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises; (iii) the Annual Carve-Out Financial Statements, which shall be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises, audited in accordance with Canadian GAAS and accompanied by an auditor's report that includes the items prescribed by section 3.3(1)(a) of NI 52-107; (iv) if applicable, the Interim Carve-Out Financial Statements, which shall be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises; and (v) the Management's Discussion & Analysis corresponding to each of the financial statements required under subparagraphs 1(e)(iii)-(iv) of this decision, prepared in accordance with Form 51-102F1; and

(f) the Filer and SpinCo will issue a news release upon re-filing the Amended Documents that explains the nature and purpose of the re-filings.

The decision of the Decision Makers under the Legislation is that the Confidentiality Relief is granted.

OSC File #: 2023/0506