Enbridge Inc

First quarter 2021 financial results conference call. My name is Julie and I will be your operator for today's call. At this time, our participants are in a listen only mode. Following the presentation, we will conduct a question and answer session for the investment community. During the question and answer session, if you have a question, please press star one on your touch tone phone. Please note that this conference is being recorded. I will now turn the call over to Jonathan Morgan, Vice President, Investor Relations. Jonathan, you may begin.

Thank you, Julie. Good morning, and welcome to the Ember Jink first quarter 2021 earnings call. Joining me this morning are Al Monaco, President and Chief Executive Officer, Colin Grunding, Executive Vice President and Chief Financial Officer, Vern Yu, Executive Vice President, Liquids Pipelines, Bill Yardley, Executive Vice President, Gas Transmission and Midstream, Cynthia Hanson, Executive Vice President, Gas Distribution and Storage, and Matthew Ackman, Senior Vice President, Strategy and Power. As per usual, this call will be webcast, and I encourage those listening on the phone to follow along with the supporting slides. A replay of the call will be available later today, and a transcript will be posted shortly after the call. We will try to keep the call to roughly one hour this morning, and in order to answer as many questions as possible, please limit your questions to one plus a single follow-up if necessary. We'll be prioritizing calls from the investment community, so if you are a member of the media, please direct your questions to our communications team, who will be happy to respond. And as always, our investor relations team will be available for any detailed follow-up questions after the call. On to slide two, where I'll remind you that we'll be referring to forward-looking information on today's presentation and Q&A. By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We'll also be referring to non-GAAP measures summarized below. With that, I'll turn it over to Al Monaco.

Okay. Thanks, Jonathan. Hi, everybody. I'm going to start today with an update on our three priorities that you see on the slide here. Then Colin will recap our capital allocation priorities, review the results, and how we see the year shaping up. And as you saw, a good start with Q1. Before we do that, as usual, I'll spend a minute on the bigger picture industry context and how we're positioned. While the economic recovery is really gaining steam here, Global energy demand is accelerating and should exceed pre-pandemic levels next year. The vaccine rollouts globally have been slow but stronger in some areas with the U.S. leading the way. Massive stimulus is starting to take hold. Interest rates should remain in check but the threat of inflation is out there as you see but we're well protected there. Gasoline, diesel and pet chem demand is back and hitting beyond pre-COVID levels as is natural gas. The resiliency of our business was tested again with the Texas storm. Millions without power, heat and access to clean water. We had a few disruptions there, but we reliably supplied energy to the region when they needed it most. In the face of a global pandemic and the storm, our franchises withstood the test again, operating near max. Liquids volumes have been steadily climbing and we should hit roughly 2.8 million barrels a day on average this year. Winter gas transmission volumes were above 2020 level, which illustrates again the rock solid demand for space heating, commercial, industrial and power gen load in our markets. And same goes for our gas utility in Ontario. What this picture here shows is that the three franchises and the low-risk model that underpins them drive out highly predictable cash flows, even in the worst downturns. These businesses have great longevity in any energy scenario and are well positioned for the future. We've talked about our views on the pace of energy transition in the past, so let me focus on our strategy on that front. We see the transition as an opportunity on several fronts and here's why. First, global energy demand is going up, led by Asia and developing nations. We think that North America's tremendous low-cost resource potential, combined with a clear pathway to reducing emissions, will be a true differentiator in terms of supplying reliable energy to feed global energy growth. That's why we're focused on expanding export infrastructure. I'll come back to that later. For us, reducing emissions provides an opportunity by modernizing our assets. We've developed a strong renewables platform with a big portfolio of opportunity. We're excited about the next frontier of low carbon growth as well. And the one thing that's common to these opportunities on low carbon is transportation, distribution and storage. So our assets will remain critical. And the key to being a differentiated service provider in the future is leading on ESG, which is foundational to how we've operated the business for many years. Moving to the priorities update, starting with strengthening the base. Good progress on the regulatory front. The settlements we reached actually on the three largest gas pipes added roughly 160 million of EBITDA. And in Q1, we landed three more settlements. On the liquids mainline, we're through the evidentiary part of the CER's review, and oral hearings will begin on May 19th, so we expect a decision this year. We continue to have strong customer support, and that's because our offering provides the toll and capacity certainty that they want. In contracting, let's remember, we'll assure a strong demand pull for Western Canadian barrels for a long time. Another source of growth is productivity. Last year, we delivered on the $300 million we promised, and we're on track for another $100 this year. I think there's more to be had here, and digital technology will play a bigger role in unlocking more value. And recall that the vast majority of our revenues, we show this on a chart here, have inflation escalators or contracted toll growth, so there's further built-in EBITDA upsides. Our second priority is executing our secure capital program. So you see our updated chart here. We've got $17 billion underway, which drives $2 billion plus in annual EBITDA growth through 2023. Projects cover the gambit here from gas, liquids, and renewables with low commercial risk underpinnings. We expect to put roughly $10 billion in the ground this year, the largest project being Line 3 in the U.S., so 2021 which is the bottom line of this chart is really a pivotal year for us we'll put a major portion of our capital program behind us and we'll be in less capital intensive mode after that the capital will drive dcf and dps growth and we'll have a lot of financial flexibility to extend growth beyond 2023. on to the program itself and gas transmission $3 billion of our $5 billion three-year program is slated for this year, and most of that is in our BC system and Texas Eastern modernization. We've completed all five compressors now on the DCT South expansion, and the first two loops are done on Spruce Ridge. Both of those should be ready in Q4. In the gas utility, everyone knows that new home demand is up, so we're nicely on track to add 45,000 customers this year. On renewables, we're well into construction on our two large offshore wind projects in France. We're getting ready to stand up the first turbines on Saint-Nazaire and foundations are underway at FECOM. So good progress on those and those two wind firms should be in service in 22 and 23. On to liquids and line three. The Minnesota program as you know came in as planned and we paused construction now for spring thaw but the station work will continue. Pipeline construction will ramp back up in early June so we're on track to hit our Q4 in-service target. Community support continues to be very strong here and one of the success stories is the collaboration with local tribes on the cultural survey, environmental measures that we worked on with them, and our economic partnership. We've not only hired hundreds of local members to help build this segment, but the tribal business opportunities have hit $180 million, well, what we thought we would achieve. Once the U.S. segment is in service, we'll start collecting the 93.5 cent per barrel surcharge on mainline volumes. And that translates to about $200 million in Q4 this year, and that should ramp up further in 2022. Moving to Line 5 and the associated Great Lakes Tunnel. Now, it's important to remember how Line 5 originally came about. It was built in 1953 to avoid moving crude on the water. The 540,000 barrels per day that we move is essential to Michigan and the entire region. It heats homes, fuels airports, and provides pet can feedstock that industry and consumers ultimately rely on. And you get a sense of that with the picture we're showing here with all of the attachments to key markets. The pipeline is the safest way to get that energy to the region. There's no practical alternative, and that's been studied over and over by independent experts, including the state's own report in 2017. Even if they were available, adding trains, trucks, and barges doesn't make sense, especially from an environmental and safety point of view, not to mention reliability and higher consumer costs. We understand the need to protect the Great Lakes, and that's why we've committed to build a tunnel. reduce the risk to as near zero as humanly possible. And just to reiterate, we intend to continue to operate the line, and certainly we're in compliance with the easement and the law. PHMSA has validated the safety of the line, and both the court and the state have agreed with that as recently as last year. The courts are reviewing the state's challenge to the pipeline, and that's going to take a while, so no decisions in our view are imminent. Affected parties, including surrounding states, industry and governments, are supporting our position. And we've finally been able to re-engage the state through the court-ordered mediation. Now, the obvious solution here again is the tunnel, which we've been moving forward on diligently despite these challenges from the state. We filed regulatory applications on the tunnel, and we've received one, and the other two are in progress. We finalized the design, and we're now bidding out construction. The next slide brings all of what I've said so far together in our three-year outlook. Embedded revenue, productivity, and optimization measures will drive 1% to 2% annual DCF per share growth. The secure program adds another 4% to 5%, so call it 5% to 7% growth through 2023 on average. Beginning in 22, the increased EBITDA from these two categories should give us $5 to $6 billion of investable capacity annually. So that's the story through 2023, so let's summarize the growth hopper beyond that. This map you see here, inventories are organic opportunities set across the footprint. I won't go through each of these, of course, but there's two main takeaways here. First, our diversity and positioning of assets gives us multiple avenues to grow, whether it's liquids, gas transmission, gas utility, and gaining more traction in renewables. Second, a good chunk of our organic capital is rateable. Gas utility growth at $1 to $1.5 billion a year, gas transmission, call it $1 billion or more, and low capital intensity expansions on our liquid systems. There's enough organic opportunity in the hopper to absorb most of the $5 billion to $6 billion of capacity. On that, though, we'll be disciplined on how we allocate capital between businesses and other options, including share buybacks. Colin will take you through how we'll prioritize that in a minute. But here's a bit of a flavor for the opportunity set first. On exports, we've got great connectivity to low cost supply for both liquids and natural gas. On the crude side, our heavy oil full path from Western Canada to the Gulf allows us to capitalize on growing heavy demand and, of course, the declining global heavy supply outlook for heavy. We're developing a terminal to aggregate barrels and provide bundle full path service to the Gulf. interest is building on our houston terminal and we recently acquired prime storage assets that link to our cushion position and we'll leverage the seaway distribution system into the gulf refineries spot is moving along there's an anchor customer as you know and murad's approval is expected later this year On the gas front, we're very bullish, as you know, given its load-falling capability and base load capability, for that matter. But we also see it as a great enabler of society's lower carbon goals. Gas will be critical to achieving renewable targets, and with that, green hydrogen. We're already a major player in LNG exports, feeding Sabine, Freeport, and Cameron. Venture Global is progressing their Calcasieu PASS facility, which will feed through our Cameron extension, and that's on track for Q4. We're set to supply the Plaquemines project off TETCO once they FID. Next Decade has now differentiated their Brownsville project from an ESG perspective, and that was great to see. And they could reach FID on Rio Grande as early as this year. And, of course, we acquired the Rio Bravo pipeline project that will feed the terminal. Also in Brownsville, Texas LNG received their FERC approval recently. We're working with them on providing supply via Valley Crossing. Turning now to renewables. Over the last two decades, we've built up a solid renewables business with development and operating capabilities. We've got 3,600 megawatts gross of North American onshore and European offshore renewables. In addition to St. Nazaire and FECOMPT in construction, we've kicked off Calvados in Q1, so that's another 1,400 megawatts underway. Each of these should earn solid mid-teen equity returns. We also saw an opportunity to recycle some offshore wind capital by monetizing interest at good value to the Canadian Pension Plan, and they're a very strong partner for us. So we're focused on expanding the footprint in Europe, anchored by maple power development and our EDF partnership. There's over 3 gigawatts under development. You can see that in the chart here, including late-stage projects in France and a very large expansion of our ramping facility in the UK. We're also developing floating wind, which will be the next offshore frontier. France itself has big plans to grow offshore wind, and floating will be part of that. We're going to pilot actually the Provence project on the south coast of France, and it's moving through a regulatory process right now. Another growing part of our renewables business is self-powering in North America. This does excite us because it marries up our liquids and gas business with our renewable capability. A couple of weeks ago, we put Alberta's Solar One into service. That's a 10.5 megawatt plant, which will provide zero emission power to the main line. And earlier this week, we sanctioned phase two of our liquids program. So that's another four projects along our system in the US Midwest. And recall Texas Eastern, our Lamberville project went into service last year. And this month, Heidelberg Solar will go into operation. There's three more gas solar projects on Bill's system in the queue, which should FID later this year. So we're really pleased with how our renewables business has developed. We've got more than enough in the hopper where we don't need to chase projects in this frothy market. I'll close off my update on longer-term strategic investments in low-carbon assets. Now, this is not about taking flyers. It's about developing our capability, improving our technology within our low-risk business model. And our early start a few years ago in our utility has put us ahead of the curve. In Ontario, we're in the middle of a two-stage pilot. On stage one, we built a power-to-gas facility that converts off-peak renewable power to hydrogen to manage grid stability. Stage two, which we're now starting up, blends hydrogen into our gas stream. More recently in Quebec, we'll source renewable power to generate hydrogen and blend into the network there. On RNG, we have six projects in operation or in construction. And as you saw, we just entered a partnership with Comcore and Walker Industries to develop projects across Canada. Finally, the biggest opportunity may in fact be on CCUS. We're very encouraged by both the U.S. and Canadian government policy actions. It's a perfect example of where public and private partnerships can make a big dent in achieving climate objectives. We do have our eye on a potential CO2 trunk line in northern Alberta to support our customers capture efforts. So all in still in early stages on this one, but lots of interest. So I'll hand it over to Colin for the financial review.