Several Canadian midstream energy stocks offer investors a rare mix of value and growth visibility, even after recent sector gains, says a TD Cowen analyst. He points to catalysts such as project expansions, acquisitions and growing demand tied to AI and LNG exports.
BNN Bloomberg spoke with Aaron MacNeil, director of equity research at TD Cowen, who shared his top three energy picks: Keyera, Pembina Pipeline and TC Energy. He believes these companies combine strong fundamentals, predictable cash flow and long-term dividend growth potential.
Key Takeaways
- Keyera trades below its historical average despite strong fundamentals and an accretive Plains acquisition expected to close in March 2026.
- The company’s April 2026 business update could reveal new synergies and an extended growth outlook through 2028.
- Pembina’s upcoming project announcements and exposure to Alberta’s growing data centre power demand could boost long-term growth.
- TC Energy’s investor day is expected to extend its growth guidance and highlight visibility from major gas and power projects, including Bruce Power.
- Analysts see midstream firms benefiting from rising demand for natural gas and NGL exports tied to AI and global LNG expansion.
Read the full transcript below:
ROGER: Time now for our Hot Picks. Our next guest is focused on the energy sector and has Keyera as his top pick. He says Keyera is one of the few mainstream Canadian names trading at a discount to its historical average. Here to tell us more is Aaron MacNeil, director of equity research at TD Cowen. Aaron, thanks very much for joining us.
AARON: Thanks for having me on, Roger. As you mentioned, our top pick is Keyera within our Canadian midstream coverage. Industry fundamentals for Keyera are incredibly strong. That’s driven by local condensate demand as well as a growing West Coast NGL export opportunity.
As you mentioned, valuation-wise, Keyera trades at a full-turn discount to its historical average, which is quite rare in this peer group. It stands out.
There’s also a near-term catalyst: the transformative acquisition of the Plains Canadian NGL business. That transaction is expected to close in March, with a likely follow-on business update in April. That update will probably include a consolidated growth outlook, deal synergies and organic capital opportunities.
We see this event as unique. First, we expect a three-year growth outlook to 2028, which is important because the Caps pipeline expansion and a third fractionator will both come on stream that year. These are highly contracted and significant contributors to growth.
Second, the Plains deal is very accretive on a per-share growth basis, which should lift corporate growth rates. Overall, we expect an industry-leading growth profile. While we don’t anticipate a dividend increase immediately after the transaction closes, we do see dividend growth over time as strong performance continues. In the near term, management will likely prioritize debt reduction. We also see Keyera as a potential consolidator in the future, and I’d emphasize again its valuation discount, given its strong institutional following.
ROGER: It sounds like management there has a lot of confidence and a lot going on.
AARON: Absolutely. We recently travelled with management through several U.S. cities, and they’re confident in their ability to close the transaction and deliver on the opportunities ahead.
ROGER: Okay, let’s move on to Pembina. What are you liking there?
AARON: Our thesis for Pembina is similar to Keyera. Pembina is the market leader in the same NGL space, but it’s larger and more vertically integrated. The same fundamentals apply. Producers in this space are growing output by about five per cent a year, or even higher in some cases.
Like Keyera, Pembina trades at a discount to its historical average, while many peers trade at a premium. It also has visible catalysts. We expect new project announcements in the near term, possibly alongside Q3 results later this week, its December business update, or Q4 results early next year.
Two examples: first, about $1 billion in conventional pipeline projects already disclosed, which would allow more volume from northeast B.C. to flow to its Redwater fractionation hub. Second, a gas-fired power opportunity for Alberta’s leading data centre project, backed by Meta. That’s a $6-billion gross, $3-billion net capital project expected to come online in 2030.
It adds to other projects in progress, such as Cedar LNG (coming online in late 2028) and another fractionator in 2026. We believe the market is paying a premium for growth visibility, and the next several updates from Pembina could be an inflection point. It has a strong balance sheet, spends within cash flow and should support further dividend increases over time.
ROGER: Is there optimism about more data centres coming into Alberta, which would then help companies like Pembina?
AARON: Yes, I think so. Pembina already has its hands full, though there are many other players in that space. Still, a $6-billion project, with $3 billion net to Pembina, is a significant opportunity.
ROGER: Okay, let’s talk TC Energy.
AARON: Our last pick of the day is TC Energy, a pure-play natural gas and power company. It’s directly exposed to rising natural gas demand driven by AI and LNG export growth. Unlike our other picks, it trades at a premium, which we think is warranted.
TC will host a mini investor day tomorrow alongside its quarterly results. Typically, it provides a three-year outlook, but given its strong project visibility, we expect it to extend that guidance to five years. The company currently targets five to seven per cent annual growth, which we think will remain intact.
It currently guides to about $6 billion in annual capital spending, nearly all allocated through the end of the decade. With its strong project pipeline, spending could increase to $7 billion by 2028, though we don’t expect that disclosure tomorrow.
Few companies in North American midstream can offer that kind of sustained growth rate. We also expect TC to announce a few new projects. On the power side, it owns 48.4 per cent of Bruce Power. The Bruce A and B units are undergoing major refurbishments that will extend their life to 2032.
There’s growing talk from the Ontario government about a potential Bruce C expansion, which could begin after that and provide visibility through 2047. That would be a roughly $55-billion project, about $25 billion net to TC.
The company has raised its dividend every year for roughly 25 years and offers an attractive yield. We expect further dividend growth in the years ahead.
ROGER: All right, we’ll wrap it up there. Aaron, thank you very much for joining us.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| KEY TSE | N | N | Y |
| PPL TSE | N | N | Y |
| TRP TSE | N | N | N |
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This BNN Bloomberg summary and transcript of the Nov. 5, 2025 interview with Aaron MacNeil are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
