Enbridge Inc

Welcome to the Enbridge Incorporated First Quarter 2022 Financial Results Conference Call. My name is Justin, and I will be your operator for today's call. At this time, all 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 questions, please press star 1 on your touch-tone phone. Please note that this conference is being recorded. I will now turn the call over to Jonathan Morgan, Senior Vice President, Capital Markets. Jonathan, you may begin.

Thank you. Good morning, and welcome to the EmberJink first quarter 2022 earnings call. Joining me this morning are Al Monaco, President and Chief Executive Officer, Vern Yu, Executive Vice President and Chief Financial Officer, Colin Grunding, Executive Vice President, Liquids Pipelines, Cynthia Hanson, Executive Vice President, Gas Transmission and Midstream. Michelle Herdins, Senior Vice President and President, Gas Distribution and Storage. And Matthew Ackman, Senior Vice President, Strategy, Power and New Energy Technologies. As per usual, this call will be webcast, and I encourage those listening on the phone to follow along with the supporting slides. We'll try to keep the call to roughly one hour. And in order to answer as many questions as possible, we will be limiting the questions to one plus a single follow-up as necessary. We'll be prioritizing questions from the investment community, so if you are a member of the media, please direct your inquiries to our communications team, who will be happy to respond. As always, our investor relations team will be available following the call for any follow-up questions. And on to slide two, where I'll remind you that we will 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 as summarized below. With that, I'll turn it over to Al Monaco. Good morning, everyone. Well, to start, what you see here is the first of 80 turbines being installed at our 480-megawatt St. Nazaire wind project off the west coast of France. Just to give you a sense of the magnitude of this infrastructure, the towers are 170 meters in height, and each blade is about the same as the wingspan of an Airbus 380. So pretty exciting time in our renewables business, and more on that later. First of all, recent events are very troubling. and we're all very concerned for the people in Ukraine. Many of our staff have connections to the region, and we're supporting them. What's happening is also we're dealing a lot about global energy markets. So I'll start off with how we're thinking about that, followed by our business update. And Vern will cover our financial results and outlook. Before that, this slide captures our Q1 highlights. It's been a good start to the year. All four businesses performed well, operating at or near capacity. That translated into strong Q1 members, and we're on track to achieve 22 guidance. The balance sheet's in good shape, and both S&P and Fitch reaffirmed our BBB high ratings. We've got 10 billion in projects in execution, with 4 billion slated for service this year. So far in 22, we've added another billion to our project backlog That'll support post-24 growth. And we'll update you on two carbon capture opportunities we're very excited about. More broadly, we're seeing a pickup in customer infrastructure, especially LNG export. Recall there's $5 to $6 billion a year of conventional and low-carbon opportunity enterprise-wide in the hopper. Those will go through our capital allocation filter, which Varen will also cover later on. So on to energy markets. Coming into the year, we saw growing demand and underinvestment in supply move energy prices higher. The Russian-Ukraine war has worsened the demand-supply gap, obviously, but it's also put energy back in the spotlight. Energy markets are an inflection point, and we're in an energy crisis. There are three things that come out of this. Any way you look at it, global energy supply will need to increase to address national security risks, affordability, and reliability. That means we'll now need an energy supply buffer and greater diversity of that supply to manage those risks. Europe's heavy reliance on Russia is driving this, of course, but the impacts are broader and global, regardless of when this war ends. Second is the energy transition. We'll need to accelerate low-carbon investments as well to meet demand, achieve emissions goals, and as part of the security buffer. To make that happen, we'll need to pick up the pace on proven ways to grow low-carbon fuels like RNG, hydrogen, and especially carbon capture. And that'll mean leveraging existing transportation and storage infrastructure more quickly like ours. It also means much more investment in natural gas to provide reliable, lower carbon base load power and to enable renewables. Third, North America will play a much larger role in the global energy market, and here's why. The North American energy advantage that we've been talking about is even more evident today. Massive, low-cost reserves and the technology to produce them with the lowest carbon intensity. And of the 10 largest global producers, Canada and the U.S. are number one and two on sustainability. You can see that with the ESG scores on this chart. North America will be the supplier of choice. You saw that already with the U.S.-EU announcement to work together. And Asian markets are also looking to secure long-term supply. The biggest opportunity in our view is natural gas exports with the potential for over 30 BCS a day. That's more than triple last year. And of course, crude exports are set to grow by 50%. All of this is very positive for infrastructure pointed at Tidewater. Remember as well that the North American grid is integrated. So growing global demand and exports is upside to Canada and the U.S., What you see here is underpinned by strong energy demand. We're going to need more supply of both conventional and low-carbon energy, and now that'll be needed faster. 80% of world demand comes from hard-to-abate industrial uses and heavy transport, and of course, pet can demand is growing. It's also clear today that natural gas will be essential to meeting demand. Even before the crisis, Europe amended its taxonomy for clean energy to include natural gas. On low carbon, $25 trillion will need to be invested with renewables, the largest component, along with RNG, hydrogen, and again, carbon capture. We are headed in the right direction as the tax credits in the Canadian government budget incentivize carbon capture, and there are U.S. proposals to expand 45Q. So what does all this mean for our strategy? This slide recaps the two-pronged approach we outlined for you at Enbridge Day. Our strategy is to invest in both conventional and low-carbon energy, and that makes even more sense today. On the conventional side, we'll focus on optimizing throughput and modernizing our systems. On low-carbon, we'll continue to align with the pace of transition, and through 2025, we see over $4 billion of low-carbon opportunities. Finally, any new investment, conventional or low-carbon, will need to meet our investment criteria, so that won't change. When you step back from all of this, we believe the two-pronged strategy approach makes even more sense today, where energy security is back in the spotlight and where demands for conventional and low-carbon energy supplies will continue to rise. Now to the business updates on gas transmissions. Very strong volumes with Texas Eastern hitting 16 of its top 25 peak days ever. We're on track to put U.S. $1.2 billion into service this year, and that's on top of the $2.4 billion last year. The lion's share of spending is on new compression or modernization more generally. And along with our solar self-power projects, we're lowering emissions. For example, our current modernization program will take out 182,000 tons of CO2 per year. We're also excited about more organic growth. We've got good optionality to support growing domestic demand, and it's pretty clear more capacity in the U.S. Northeast is needed to manage disruptions and peak demand. We all know what's happening with global gas prices, but it's not pretty for U.S. Northeast consumers either, with gas prices at roughly 5x Henry Hub. This situation screams for more infrastructure, especially given increased supply variability from offshore wind that's coming, and more displacement of coal, of course. We put Phase 1 of our Appalachian to Market project into service last year, and Phase 2 is in pre-construction. Building Greenfield is tough sledding, of course, these days, but these expansions are executable and cost-effective, and there's more that we can do. LNG exports is a big opportunity with momentum building across the U.S. Gulf and now more so in Western Canada. Our Texas Eastern system feeds LNG along the Gulf Coast. We supply four plants today with about two BCF a day. We've locked up capacity agreements with three more LNG projects that could add up to seven BCFs a day and over $2 billion of new investment. Plaquemines LNG is now fully contracted and likely going ahead, which will drive $400 million on our Venice extension project. Not in the secured category yet, but we expect it to be shortly. Texas LNG and Rio Grande LNG are also progressing often. In fact, earlier this week, you saw next decade landed a 15-year SPA with Engie to support Rio Grande. Seeing good momentum then here with both projects potentially reaching FID later this year. And by the way, on Rio Grande, that could drive FID on our Rio Bravo pipeline. Western Canada is another big growth region for us. Shifting fundamentals are bringing Western Canada to the fore once again. You've got a world-class, liquids-rich resource base that rivals the Marcellus and the Haynesville. And operators have done every bit as good a job unlocking reserves. We can see production grow 50% for LNG export here and regional demand growth. With growing demand in Europe for U.S. LNG, Western Canada can step in to fill the gap. Proximity to Asian markets provides two to four weeks reduced shipping time and lower emissions. LNG break-evens in Canada at roughly $6 to $8 in MMBTU rivals the U.S. Gulf Coast and looks very favorable if you look at East Asian LNG prices somewhere in the order of $30 for an MMBTU in Q1. LNG Canada is in construction, of course, and Wood Fibre is advancing early-stage construction activity. We're the main conduit out of the Montney and Beak Basin, so all of this bodes well for upstream expansion on our BC pipeline system. On that note, we launched a buy-new open season today for 400 million cubic feet on T-North. That'll be a $1 billion expansion. Wood fiber LNG is contracted on T-South with volumes currently flowing to the Pacific Northwest. Once they reach FID, we'll need to create new capacity to replace volumes currently moving south. And depending on wood fiber's FID, binding open season on T-South for later this year. And by the way, this could also require further upstream expansion So all of this is shaping up to be a big opportunity in multi-years, which again goes to prove the value of type in the ground.

Now, longer term, we also have pathways to the coast, the Pacific Trails and the West Coast Connector Corridors.