South Bow Corporation

Thank you, Victor, and welcome, everyone, to South Bow's Fourth Quarter and Year-end 2025 Earnings Call. With me today are Bevin Wirzba, President and Chief Executive Officer; Van Dafoe, Senior Vice President and Chief Financial Officer, and Richard Prior, Senior Vice President and Chief Operating Officer.

Before I turn it over to Bevin, I'd like to remind listeners that today's remarks will include forward-looking information and statements, which are subject to the risks and uncertainties addressed in our public disclosure documents available under South Bow's SEDAR+ profile and in South Bow's filings with the SEC. Today's discussion will also include non-GAAP financial measures and ratios that may not be comparable to those presented by other entities.

With that, I'll turn it over to Bevin.

Thanks, Martha, and good morning, everyone. We appreciate you joining us today.

2025 was an important year for South Bow. It was a year that tested our organization, but ultimately a year that demonstrated the resilience of our business and the discipline of our decision-making.

We delivered financial results that were slightly ahead of expectations, advanced our first growth initiative to completion and most importantly, continue to operate safely. Safety remains the foundation of everything we do.

In a year of significant activity, we delivered a strong occupational safety record, reflecting the commitment of our employees and contractors, even under challenging conditions. We also made meaningful progress on our Milepost 171 remedial actions, continuing to prioritize system integrity and working toward returning Keystone to baseline operations.

Richard will speak to Milepost 171 shortly. Our focus on safety and operations goes hand-in-hand with South Bow's financial discipline.

Strong financial performance in 2025, supported by our highly contracted and predictable cash flows enabled us to deliver on our capital allocation priorities. Now turning to growth.

At our Investor Day last November, we outlined our ambitions to grow our business. Today, we see multiple potential paths to achieving those growth objectives.

This will include a combination of organic opportunities that leverage our existing infrastructure to support anticipated crude oil production growth in the Western-Canadian Sedimentary Basin as well as inorganic opportunities that diversify and enhance the competitiveness of our base business. The policy environment in North America is becoming more constructive, and we believe Canada has a tremendous opportunity to grow production and add incremental egress in the coming years.

Canadian producers aspire to materially grow their asset bases, and with our customer-led strategy, we are looking to put forward the most competitive solutions to meet their needs while aligning with our capital allocation principles and risk preferences. All growth at South Bow will be balanced with financial discipline.

This is nonnegotiable for our team and Board of Directors. We remain committed to maintaining a strong balance sheet, returning a meaningful and sustainable dividend to our shareholders, all while investing in growth.

That balance is central to our strategy. The Blackrod Connection project is a good example of how we think about organic growth at South Bow.

It builds on existing infrastructure and enables us to safely and reliably move Canadian crude to a desirable market at a competitive toll. A recent endeavor of ours, the Prairie Connector project has garnered some attention.

While currently in early stages, the project would provide firm transportation service from Hardisty, Alberta, leveraging and optimizing South Bow's pre-invested infrastructure and connecting to other systems downstream to deliver Canadian crude to U.S. refining and demand markets, including Cushing and destinations on the Gulf Coast.

An open season to determine commercial interest is currently underway, and we look forward to discussing this potential solution further in the future. With that, I'll now ask Richard and Van to provide an update on the operational, commercial and financial aspects of the business.

Go ahead, Richard.

Thanks, Bevin. I'll start by talking about our safety performance.

We had significant construction activity levels across our business last year from the Blackrod Project to the Milepost 171 response and restoration to executing a significant Maintenance and Integrity Program. The scope amounted to more than 2.5 million work hours, where we achieved 0 recordable safety incidents.

Our strong focus on safety supports the well-being of our workforce and the communities where we operate. Earlier this week, we placed The Blackrod Connection Project into commercial service less than 24 months from the time of sanctioning.

The project was on time, on budget and with exceptional safety performance. As our first growth initiative, this is a significant accomplishment for the organization and demonstrates that we have a highly capable team who can develop and execute organic projects and deliver competitive solutions to our customers.

Turning to Milepost 171. Last month, PHMSA posted the results of the independent third-party root cause analysis, which confirmed that the characteristics of the incidents were unique and that the pipe and wells met industry standards for design, materials and mechanical properties.

We began proactively addressing many of the recommendations after the incident occurred last April and have made significant progress on our remedial actions and integrity work with 11 in-line inspection runs and 51 integrity digs to investigate 68 pipe joints completed across the system so far. In parallel, we continue to work closely with our in-line inspection technology providers to enhance tool performance and detection capabilities.

We are operating the Keystone pipeline at a high system operating factor, which has enabled us to continue meeting our contracted commitments while under pressure restrictions. As we progress our remedial and integrity work and share our findings with the regulators, we expect pressure restrictions to be lifted in a phased manner.

The lifting of pressure restrictions would present an opportunity for a modest increase in spot movements later in 2026. With that, I'll turn it over to Van to walk through our financial performance and outlook.

Thanks, Richard, and good morning. First, I'll speak to our financial performance in 2025.

South Bow delivered solid results despite a challenging backdrop that included geopolitical and market uncertainty, tight pricing differentials and pressure restrictions following Milepost 171. South Bow delivered normalized EBITDA of $1.02 billion in 2025, slightly above our expectations of $1.01 billion, with a modest out-performance driven by our Marketing segment.

While 90% of our business is underpinned by high-quality cash flows generated from long-term contracts, our Marketing affiliate does make small contributions to our bottom line. Early last year, we took steps to reduce our risk exposure in the face of market volatility, and the team did a great job throughout the year to partially offset some of those losses.

Our tax team also did an exceptional job optimizing our tax position throughout the year. Reflecting these efforts, South Bow reported distributable cash flow of $709 million, in line with revised guidance and more than 30% above our original guidance.

This out-performance expanded our free cash flow position, enabling us to accelerate our de-leveraging priority. We exited 2025 with a net-debt to normalized EBITDA ratio of 4.7x, slightly better than the expected 4.8x.

All other items were in line with our 2025 guidance. After a solid year, South Bow is starting 2026 in a position of strength, and we are reaffirming our financial outlook for the year.

As Blackrod cash flows ramp in the second half of the year, we will continue to direct our free cash flow to strengthening our balance sheet, remaining on track to meet our leverage targets of 4x in the medium term. As we de-leverage, we also intend to allocate capital towards growth, and we will share our growth capital plans once we have sanctioned our next initiative.

Finally, the stability of our financial results enables us to deliver a meaningful return to our shareholders. In 2025, we returned $416 million or $2 per share through our sustainable dividend.

With that brief financial overview, I'll hand it back to Bevin for closing remarks.

Thanks, Van. Thanks, Richard.

To close, I'll come back to what defines South Bow. We operate critical and enduring energy infrastructure in a corridor that connects one of the strongest and most secure supply basins in North America to some of the most attractive refining and demand markets, and we have a growing set of customer-led opportunities that leverage our pre-invested infrastructure.

We plan to do that with a focus on safety, integrity and discipline, and you can trust that our growth will be paired with balance sheet strength and sustainable shareholder returns, that is fundamental to how we run this company. 2025 showed what South Bow can deliver.

We're confident in the foundation we've built and the path ahead offers even greater opportunity. You can expect us to execute it, the right way.

With that, I'll now ask the operator to open the line for questions.

With respect to the open season for the Prairie Connector Project. Can you discuss any early indications of commercial interest at this point, understanding that you are still very early on?

And then in general, how are you thinking about competition for U.S.-bound WCS egress from Enbridge and Energy Transfer as well as the impact of incremental Venezuelan barrels flowing to the U.S. Gulf Coast, potentially displacing WCS in PADD 3.

What do you see as Prairie Connector's key competitive advantages?

Thank you, Theresa. This is Bevin, and thanks for joining the coverage group.

So to direct our -- to your question on the Prairie Connector, we are in early stages, as I mentioned. We -- I did say in our remarks that we are a customer-led strategy, meaning that we had good alignment with our customers heading into the open season.

So that's as much as I can share with respect to the outcome of the open season at this time. Obviously, we -- in addressing your second question, the impacts of the other open seasons in Venezuela, my earlier remarks also focused on providing the most competitive solution for our customers.

And we believe what we've put forward is a very competitive offering that should attract the attention that we're looking for. So with respect to the other opportunities, owning and controlling the most competitive and direct path to the Gulf Coast has always been an advantage that South Bow has leveraged, and we will continue to do so.

And in relation to the existing Keystone system, after sharing the root cause analysis related to Milepost 171, can you talk about the timeline of lifting the pressure restrictions in a phased manner. Can you give some details around this?

What are your expectations for how much the pressure and hydraulic capacity could step up beginning in second half of 2026? And then within your annual guidance, how much of an impact is this, given expected capacity for higher spot movements, but also the expectations for tight differentials, nonetheless.

Can you help us reconcile this?

Yes. Thank you, Theresa.

Even initially after the incident, as Richard pointed out, we've been working very closely with our regulator and all the remedial efforts, and we've made tremendous progress on the digs and in-line inspections to-date. And early on, we did -- we were able to have some derates lifted already on the system as we progress.

And so what we've described in our release is that we intend to continue those remedial efforts at pace, here this year so that we could see a lifting of the correction action order by the end of this year. We're very -- we're in active dialogue with the regulator to ensure that what we're doing and what we're finding informs the plans as we go forward.

In terms of the capacity that would be realized, it would be returning back to the kind of operational capacity that we delivered in previous years, which was, I believe, in 2024 and early 2025, we were just north of 600,000 barrels a day of delivered capacity. With respect to your last part of the question, we -- our outlook in terms of our earnings and our guidance, the timing of this incident kind of occurred where arbs were quite tight with TMX coming on in the early part of 2024, the basin was long pipe by approximately 250,000 barrels a day.

In 2025, we saw the basin grow north of 100,000 barrels a day and continuing to grow here in 2026. So we believe that our guidance, while it includes the impact of not being able to move as many spot volumes as we had hoped, the market really -- doesn't really open for us until early 2027.

And at that point, we should be -- we're planning and targeting to have the derates lifted so we can take advantage of those arbs, as the basin grows and overtakes kind of the egress out of the basin.

Two questions on the Prairie Connector. Maybe first, just in terms of a follow-up on when you think incremental capacity will be needed out of the basin?

And then how would that mesh with what you would think would be a reasonable regulatory time frame and construction time frame if this project does proceed?

Thanks, Rob. One of the benefits of having a strategy that focuses on our pre-invested corridors is that we're in a position where our permits are in place in Canada for the Prairie Connector, and we're working close with the Canadian energy regulator to manage through that.

Obviously, it's early stages. So we're not going to share our timelines for a potential development timeline.

But I would suggest much like the Blackrod Project where, we were working within an existing corridor, our ability to advance construction quickly in a regulated environment is consistent with the Prairie Connector Project kind of objectives. With respect to time line of the need for the project, you can see that from our customer base that most are announcing or are suggesting that they have growth ambitions over the next 3 to 5 years of quite materiality.

And so being able to develop the project over the next -- in the midterm would be consistent with providing a competitive solution for our customers at the time frame of when they're intending to have their production growth.

All right. Appreciate that color.

And then maybe as a follow-up, as we take a look at the -- what the Prairie Connector would connect into in the U.S. and the path down to the Gulf Coast.

We've seen Bridger file already for some regulatory approvals there. But how do you envision working with partners to help get barrels down to the Gulf Coast?

Yes. Great question, Rob.

We won't speak on behalf of other developers. But what I can say is our team has learned through many previous projects that allocating risk appropriately amongst all stakeholders, our customers, ourselves as developers, partners is really critical.

And so the team has been working diligently on that front to ensure that we have the right alignment amongst all stakeholders to ensure that we have a project that could be advanced within our risk preferences, which, as I've stated, is critical. We will not sacrifice our capital allocation discipline through advancing any project.

If I can just ask about your growth initiatives. I'm just wondering, is there a preference?

Or do you -- how do you think about the role of joint ventures and partnerships versus just outright acquisitions kind of over and above the organic initiatives?

Yes. Thank you, Robert.

Within our strategy, we've always said that leveraging that pre-invested capital on the ground and organic allows us to develop projects at that 6x to 8x EV to EBITDA build multiple and Blackrod was demonstrated at the low end of that range. And so clearly, organic development that fits the needs of our customers with the same risk preferences that we've been able to achieve with even our base operations is far more accretive for our shareholders over the long term.

But as I pointed out in my remarks, to complement that organic strategy, there are opportunities that we believe we could leverage inorganically that provide the diversity and provide some additional synergies to the business. Now obviously, those aren't being -- those won't advance at that same EV to EBITDA build multiple, but the combination of an organic and inorganic strategy, we believe, can deliver the shareholder returns we're targeting.

And if I could just finish asking about the open season. There's some language there about asking potential shippers to demonstrate market demand for incremental egress opportunities.

So just wondering what we should take away from that specific wording. And then how should we think about this with respect to the existing Keystone capacity in your contract rollovers or expirations that would occur in roughly the same proximity as this initiative?

Two great points, Robert. First of all, the language is actually pretty benign in that, from a regulatory standard, we have to prove need and necessity for any development that happens.

That need and necessity on our existing permits was demonstrated years ago, and that need and necessity still exists today. And so by -- the language is really pointing to that, our customers are indicating to us if they support the open season that they have need and necessity, they have growth ambitions that require us to develop this this capacity.

On the second point, with respect to base Keystone operations and impact potential of re-contracting, the way we think about it is we're really developing a corridor. And the Prairie Connector would be in addition to that corridor, and it really serves the same customer base and the same demand markets.

And so we believe that the combination of the two would be an extremely competitive corridor going forward, and we believe that we can provide that competitive solution for customers going forward, making the corridor in and of itself the ideal solution for getting Canadian -- Western Canadian oil sands production down to the Gulf Coast.

Another open season question, but maybe from a different angle. Like are there any learnings to be had from what happened with the original Keystone XL, like especially on the U.S.

side, I mean, anything that went wrong on that project that's within your control to perhaps do differently with this one? I mean, obviously, the route will be different, and it's different in many ways.

But just curious like what gives you more confidence in this project its success where Keystone XL didn't?

Sam, great question. I was around and many of our team were around during that initial or the last attempt.

And so there are a tremendous amount of learnings. With subject to the permit that we have, we're developing it in a very consistent manner to that permit requirements.

But our conversations with our customers and how we can work with them through a commercial offering, we're leveraging a lot of those learnings and those commercial discussions that obviously are confidential at this time. Certainly, there were -- as I mentioned in my opening remarks, is that the policy environment in North America has been far more constructive.

The unfortunate events that are ongoing in Iran and what we've had in the tragic events in Ukraine really have demonstrated that energy security and establishing energy corridors is critical. And so those realities are a great backdrop for us to provide maybe a solution that increases energy security in North America between the great resource up in Canada to the strong demand markets in the U.S.

Gulf Coast.

Okay. Understood.

And then the -- like sort of tying on to that, like the Bridger proposal mentioned that presidential permits required to cross the border. So just curious, like that was obviously an issue with Keystone XL that everyone knows about.

But is there a point in time or a point in construction or some threshold met whereby the presidential permit is kind of iron clad and can't be revoked. And like just has anything changed with that dynamic since 2021 when Biden effectively put the kibosh on Keystone XL?

Yes. Per my earlier remarks, Sam, we're only going to talk to our component of a project, which is delivering service from Hardisty to the border and my comments around risk allocation and structuring and your earlier comment around lessons learned.

So there's a lot of things going into the commercial dialogue right now, amongst ourselves and then directly with our partners, and I'll leave our partners to speak to their own business. We've really focused on finding a solution that we can deliver for our customers, the allocation of risk that makes sense for all stakeholders in this approach.

If we're not able to achieve those, that risk allocation that we all believe that we need, then the project just won't advance.

I'm going to sneak in one more about the Prairie Connector, maybe just talking about your existing -- leveraging your existing corridor. I think we know that you guys have some pipe already in the ground in Canada.

But let's say things go to plan and the project moves forward, thinking about these barrels getting into Cushing and ultimately getting down to the Gulf Coast. I'm wondering if you could speak to what's needed on your U.S.

Gulf Coast infrastructure in order to be able to accommodate potentially 450,000 barrels a day going down to the coast? Would that be all on the existing Keystone system?

Or would you be looking to leverage other infrastructure as well? Any details you can provide there would be great.

Yes. A.J., the Keystone system in this corridor has been built in phases, Phase 1, Phase 2, Phase 3.

And Phase 2 and 3 was the extension of the Keystone System to Cushing and then to the Gulf Coast. And Phase 3 of the system, the Gulf Coast was sized and built for the original -- the expansion of that system, which is what we're now building into with our Prairie Connector.

And so it's just a continuation of that sequenced expansion of the broader Keystone system is what we're intending. There are some -- we did build capacity on that Gulf Coast section for increased volumes.

There will be some facility modifications through our base Keystone system that will occur. But this is all just a continuation of kind of that sequenced expansion of our base corridor.

Okay. And then maybe just one more, shifting to Marketing.

I realize it's a smaller portion of your business, but spreads have been on the move, particularly WCS Houston is trading pretty far back from Brent and WTI right now. Curious if you could speak to kind of what is going on at WCS Houston and if you're seeing any opportunities either in the short or medium term to potentially capture some upside there, either through marketing or maybe storage opportunities?

Yes. A.J., great question.

We're always in a dynamic crude oil market, as It appears in the last few years with some macro volatility earlier this year with Venezuela now with the war that's ongoing in Iran. We've taken a really risk-off strategy with our Marketing affiliate.

As we pointed out, last year, we went through a situation where early in the year, there were tariffs that caused volatility. That caused us to kind of reevaluate how we leverage our Marketing affiliate and again, back to a customer-led strategy.

The whole strategy around our Marketing affiliate is really to kind of reduce the overall operating costs and variable tolls for our customers. And so we don't try to take advantage purposely on any of the swings that we see down in Houston on the WCS.

We do manage and contract Marketlink because we still have capacity there. And so we have seen some movements, as you say, but it's really a nonmaterial part of our strategy.

We're focused on our -- 90% of our business is contracted and just managing that as best we can.

I guess I had my associate run this one. It's Aaron MacNeil here.

You guys highlighted Blackrod as a successful project in the context of the balance sheet in your prepared remarks. Maybe bigger picture, can you speak to how you may look to finance a potentially larger capital and longer duration project given the leverage and payout ratio profile of South Bow?

Yes. Thanks, Aaron.

At our Investor Day, we kind of laid out a number of the different financing strategies, whether it's financing a project at the asset level or whether it's partnering with other capital sources. We will look at the specifics of any kind of capital project to ensure that we manage the cost of capital as well as, match it to the execution risk.

I think the point I'd like to make, though, is when you think about us developing projects, going back to my comments around within our risk preferences means that when you're -- we're not going to take risks that wouldn't allow us to debt finance something, and that can be a base case for people to look at, is you have to have the conditions and the contract terms and the investment-grade counterparties and the risks mitigated to a level that can attract debt level financing that aligns with our risk preferences. Now that might not be the best way to finance it, but the principles around managing the risks are consistent with any kind of financing approach.

And so we wanted to make clear to our market in November that there's multiple solutions on that front. But I want to just remind that we go back to our risk preferences and making sure that anything we develop meets those criteria.

And Aaron, it's Van here. We'll also keep with our de-leveraging journey to get to 4x kind of by that midterm 2028.

So we're not deviating from that.

Okay. That's helpful.

And then switching gears a bit. we've been fielding a lot of questions on the Grand Rapids arbitration.

I can appreciate that you're not going to speak to the ongoing legal matter, but I was just hoping you could help with some clarifying items. So first, again, I assume the answer is no here, but is the Blackrod Connection Project included in the scope of a potential sale?

And then second, how should we be thinking about sanctioning new projects with connectivity to Grand Rapids while arbitration is ongoing?

Yes. So Aaron, Blackrod, we advanced as South Bow alone, PetroChina is not involved in that project.

They were offered an opportunity to participate in it. And that's as much as I can say as part of the partnership agreement when we do pursue growth, that's obviously the growth within the partnership frame, is open to all partners and whether or not our partners choose to capitalize into those projects is up to them.

Most of my questions have been exhausted here, but I'll take a shot in the dark to see if you're interested in putting out a potential capital number for the Prairie Connector Project should it make it through the open season and have enough commercial interest.

Yes, Robert, unfortunately, you're not going to bait me with that. I'll take a pass.

We're obviously in early stages. Our team has done a good amount of work, obviously, given it's an existing corridor, but we're not establishing any costs at this point in time.

Understood. And related to that, is there any ability or understanding that you can invest in some of the downstream pieces, whether it's Bridger's project or otherwise, should the project move forward?

We're really speaking to the Prairie Connector component is how we're looking to participate going forward, and we're still in commercial discussions ongoing. But as you could appreciate, with the scale of what would be contemplated in Canada, that's a very meaningful development for South Bow.

Just wanted to turn to Slide 19, if we could, with the Blackrod and project ramp there. If you could just, I guess, remind us what gives you confidence to the ramp.

As you laid out in the slide, it looks like the '27 contribution could be 3x to 4x the size of '26 with the project just online now. Wondering if you could walk us through that a little bit more?

Yes. Great question, Jeremy.

We did the final tie-in well earlier this year. So our systems are fully prepared for our customer to begin the ramp-up.

The sequence of events that we're not in control of are obviously on their end, whereby they would -- they've already been steaming their asset. Once the wells start producing, they'll fill their tankage and infrastructure, fill the pipeline and then fill our tankage.

And then that's when the production will actually start hitting the Grand Rapids corridor. So there's a buildup that takes to effectively get through commissioning and filling the existing infrastructure, and that happens through the balance of the last half of this year.

Now we have made comments in the market previously. I'll just remind folks that the commercial agreements that were agreed to between ourselves and our customer were to acknowledge that ramp in terms of their production growth.

And then in 2027, our outlook is that we'll have a full year contribution of that EBITDA given the commercial agreements.

Got it. Understood.

And if we think about '27 in totality, are there any other major moving pieces as we think about growth at that point in time?

Well, I'll refer to my previous remarks, Jeremy, where, we're working hard this year to move through the corrective action order and complete the remedial efforts, which would then allow us to have -- if those -- if the order is lifted, then we would return to being able to be full capacity on our base systems, which would give an opportunity for us to achieve that spot capacity out of the basin at a more material level than what we're experiencing. And just to remind you that, so 94% of our base system is take-or-pay, and we reserve 6% for spot capacity.

So that is the capacity we're targeting to leverage in 2027.

Just maybe back on the funding plan for Prairie Connector, assuming a successful open season here. Just wondering if you can confirm your desire for the Alberta government's involvement, if any?

Either as an equity partner or perhaps providing loan guarantees through construction just to help protect your financial guardrails along the way.

Thanks, Patrick. Certainly, you're kind of referring to the model that was pursued historically.

And I believe The Premier has been pretty clear that she wants private developers to develop projects. And so we're pursuing Prairie Connector as South Bow today.

As with respect to your question around loan guarantees and other commercial matters, I'll just refer back to my comments that we're looking at the risk framework and allocating risks appropriately amongst the customers and us as a developer and broadly other stakeholders. We feel that we're in a different environment today where we're able to have those discussions and ensure that we've got good alignment of where those risks should be allocated.

Got it. And then maybe on the 60-day review period following the March 30 deadline, how should we think about this period just in terms of the binding commitment?

Can they be nullified by any material change in policy such as the emissions cap, industrial carbon tax or any other developments that might come out of the MOU between Alberta and Ottawa? Or would these binding commitments basically be taking on the full stroke pen risk, so to speak, beyond March 30?

Well, as you point out, Patrick, there's a lot going on that, when I refer to a constructive policy environment, constructive also means a very active policy environment where our customers are working closely with not only ourselves on this open season, but considering the broader framework that the Federal and Alberta Government are putting together. And that is obviously consistent with the timeline of what we're pursuing.

I'm not able to speak to kind of those conditions or those discussions because not a part of them. But our time line with having a binding open season and the time frame there is just the regulated approach of how you develop a project.

And that's why we've really been thoughtful around making a competitive solution for our customers, acknowledging the significant commitment that they have to make over the time frame of the development to commit to a project like this. So these are not small decisions by anyone.

I think the basin customers have relayed that they're under the right policy environment, there is an ability for them to grow. And so we'll have to defer to them whether they feel that they have the confidence to grow into the capacity that we're we're offering.

Maybe to start off on potential acquisitions. Can [ you both ] provide an update on your appetite and observations on acquisitions since your Investor Day?

I'm also particularly interested in valuation levels on M&A versus organic growth?

Yes, Ben, I think as articulated in the Investor Day and even in my earlier remarks, we're pushing all the [ bots ] down the field, both organic and inorganic, certainly organic with leveraging our pre-invested corridors has better valuations. But to complement and diversify our business, we've been in active dialogues to try to move down the path on inorganic opportunities.

In both cases, as per even my last response to a previous question is, we can put forward the most competitive organic opportunities for our customers, but it still takes our customers to decide if they can commit. And on the inorganic side, we can provide a compelling potential solution for an acquisition, but it takes the counterparty to similarly view it as a good outcome.

So we're managing a kind of multipronged approach where we're advancing conversations on organic and inorganic in parallel.

And maybe just a quick follow-up on that. You haven't -- it sounds like you haven't seen just with the market valuations expanding meaningfully since your Investor Day that the spread between the two, they haven't widened since that time?

No. I think, obviously, we've seen a flight to the energy sector and in particular, to hard assets like infrastructure.

So many have moved. I think that has just kind of raised the confidence in shareholders in the space and the investment proposition that infrastructure has.

So I think it gives us more confidence in the equity capital markets if something did work on the inorganic side that it could be supported in a transaction. So yes, valuations have improved, but I think the strength and the thesis around infrastructure investment has strengthened as well.

So I think that's -- if anything, it's a slight tailwind for us.

Got it. And maybe a follow-up on the Prairie Connector and you had the Big Sky proposal about a year ago.

Are you able to maybe compare and contrast the two? Is it just simply more the downstream is changing, Canadian is unchanged?

And then secondarily on the Canadian permits, is that just simply a matter of reaffirming that with the CR? Is there -- you mentioned earlier in your commentary, I just want to clarify that portion of it.

Yes. So in contrast to Big Sky, I think the most important thing is the macro environment.

Obviously, at the time that we pursued Big Sky in January of '25, we had a Canadian Government that was going through a significant transition. We had a potential tariff environment that was very uncertain.

And we had a policy and regulatory framework that wasn't clear and didn't provide the signpost for our customers to legitimately view growth, any kind of meaningful growth as an alternative. So fast forward a year later, all those three things have materially moved in the favor of a more constructive environment to consider a development.

We did find out that our -- this Prairie Connector Project, getting barrels to the U.S. Gulf Coast is a very strategic advantage and leveraging that pre-invested corridor more broadly also provides advantages.

So that would be the comparison. With respect to the permitting situation, I mean, these are very complex developments.

The largest of the permit requirements, as you say, are held with the Canadian energy regulator. We have to work within those permits that have been awarded, and there are expectations and things that we have to do to maintain them as we -- if we're able to begin developing the project.

There are no other material permits that are required at this point in time.

I was just curious about how you mentioned that you materially exited the TSA with TC and were you able to see some workflow optimization? I was just curious about any specific examples of the optimization you could talk to?

Yes. Thanks, Sumantra.

Our team had three objectives last year in addition to always, table stakes of safe operations, and that was -- and one of those objectives was exiting the TSAs as soon as we could. And that ties to one of our key objectives this year in terms of now optimizing our business workflows and processes.

So we've already begun seeing some optimizations occur, even since October when we were effectively off of the TSAs. And we've got a number of work streams along that front in each of the areas.

And an easy example would be in terms of supply chain and procurement in utilizing the historical ERP system that we had until we stood up our own system, all those business processes around invoicing and procurement were done in the old way. And now we're able to establish new procurement.

We've got on financial planning and analysis and working on our systems, we've got a really good work stream on even building a new process around budgeting and real-time analysis of our financials and costs, giving the tools to our teams so that they can really run the business as efficiently as possible. So we see 2026 as a big year of standing up all those optimizations.

And there is obviously, we're leveraging the latest technology in AI where it's appropriate and where it can help us make those processes more efficient.

6 Got it. That's really helpful.

And I just wanted to shift towards capital allocation really quickly. I know you outlined your priorities in the release, but just wanted to ask about how you're looking at balancing dividend growth versus reducing the leverage?

So I'll start, but I'll turn it over to Van on our dividend policy. We're -- what I just want to remind folks is that we're going to stick to our capital allocation philosophy with respect to building out this business.

And when we spun, we were allocated a significant amount of debt and then a very meaningful and sustainable dividend, but at a very high level and at payout ratios maybe a bit higher than we'd like. But maybe, Van, you can talk through our journey on de-leveraging and dividend growth?

Sure. Yes.

Thanks, Bevin. Our payout ratios on a DCF basis and on an earnings basis were higher than what we would like.

We'd like them to be kind of on a DCF basis in the low 60s on a consistent basis and obviously under 100% on an earnings basis. So until that time, we would not even contemplate a dividend increase.

On top of that, our journey to get to 4x leverage, again, we wouldn't contemplate a dividend increase until we get to that point. And once we do, our plan would never be to forecast future dividend growth.

If we decide we are going to increase our dividend, we would state that, and that would be our new dividend level.

Thank you for joining us today and for your continued interest in South Bow. We look forward to connecting with you in a couple of months' time.

Have a great day.