Enbridge Inc

Ladies and gentlemen, welcome to the Enbridge Incorporated fourth quarter 2022 financial results conference call. My name is Abby 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 a question, please press star one on your touchtone phone. Please note that this conference is being recorded. I will now turn the call over to Rebecca Morley, Director, Investor Relations. Rebecca, you may begin.

Thank you. Good morning, and welcome to the Enbridge Inc. fourth quarter and year-end 2022 earnings call. My name is Rebecca Morley, and I'm a Director on the Investor Relations team. Joining me this morning are Greg Ebel, President and CEO, Vern Yu, Chief Financial Officer and President of New Energy Technologies, and the heads of each of our business units. Colin Grunding, Liquid Pipelines, Cynthia Hansen, Gas Transmission and Midstream, Michelle Heritage, Gas Distribution and Storage, and Matthew Ackman, Renewable Power. As per usual, this call is being webcast, and I encourage those listening on the phone to follow along with supporting slides. We'll try to keep the call roughly to one hour. And in order to answer as many questions as possible, we'd appreciate you limiting your questions to one plus a single follow-up as necessary. We'll be prioritizing questions from the investment community, so if you're 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 additional questions. On to slide two, where I will remind you that we'll be referring to forward-looking information on today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions, and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed fully in our public disclosure filing. We'll also be referring to non-GAAP measures as summarized below. With that, I'll turn it over to Greg Ebal.

Well, thank you very much, Rebecca, and good morning, everyone. I'm excited to be here today to review our fourth quarter and our record full-year results. 2022 financial results. It was another solid quarter and year. So let me start off by doing a recap of our accomplishments in 2022, including, as you'll see on this slide, our St. Nazir project. This is France's first operational offshore wind farm, and it came into service in November on time and on budget at approximately 2.4 billion euros. It's providing 480 megawatts of electricity, enough to provide 700,000 people with electricity every year. I'll also spend a few minutes discussing some of the key strategic advancements from our four core franchises. And then Vern will walk you through the financial performance and outlook. And then I'll come back and close in a little bit on what you can expect to hear at our upcoming Investor Day. And of course, the Enbridge team is here to address any questions at the end. Before we get into the highlights, Let me spend a minute or two sharing why I'm excited to be leading this great company moving forward. For me, it starts with the people. As chairman, I had a great opportunity to get to know many of the Enbridge team that I had not previously known. And in the last few months, I've met with employees at all levels across the business. Their passion is evident in their delivery of life-giving energy that people depend on. And they do it every day, safely and reliably. I have no doubt we will build on this legacy, deliver top-tier performance, and continue to grow this great company. And like many of you, I'm passionate about the energy industry. We all know it is the backbone of our society. Access to safe, secure, affordable energy supports economic development and well-being. Today, the sector is at an inflection point. We must support the transition to a lower-carbon future, while at the same time ensuring we are delivering safe, secure, and affordable energy. Enbridge is right at the center of it. We are uniquely positioned to lead in the energy transition and continue to deliver reliable energy to our customers. As this slide demonstrates, we have an extensive asset footprint that allows us to realize synergies across our four core franchises. Our business is highly diversified and is underpinned by low-risk commercial frameworks. Our franchises are largely demand-pull, and we serve the best markets across North America and increasingly in Europe. And we've demonstrated over our history an ability to adapt, wisely allocate capital, and capitalize on evolving market fundamentals. Growing our natural gas franchise, investing more than two decades ago in what were then the emerging renewable energy technologies, of wind and solar. Our balance sheet is in great shape and we have good visibility to cash flow growth. Combined, this will allow us to continue to deliver strong risk-adjusted returns to our shareholders through all market cycles and allow us to build on our tremendous track record of steadily growing our dividend. I'm excited by the passion of our people, the strength of our company, and by the investment opportunities that we have in front of us. both on the conventional and lower carbon fronts. So let's move to our 2022 highlights. The year was indeed another solid one for Enbridge. We continued to lead on safety and reliability. In total, we invested over $1 billion on the integrity of our systems. Our balance sheet's in great shape, triple B plus rated, and comfortably within our debt to EBITDA range of 4.7 times. We placed $4 billion of growth capital into service and secured an additional $8 billion of new capital projects, including investing in liquefaction through our investment in the wood fiber telegy project. And we continue to be good stewards of capital, releasing close to $2 billion of asset value from our regional oil sands assets and DCP midstream. That brings us to $11 billion in capital recycling to help fund high-grade opportunities since 2018. We made great progress on our ESG goals, increasing diversity, establishing new Indigenous partnerships, and advanced mission reductions across the business. Now let's spend a few minutes on key accomplishments of each of our businesses, starting with liquids. Our liquids business delivered record utilization in 2022. with the Line 3 replacement project being put into service in late 2021. Our main line is running full. Average daily throughput was 2.96 million barrels a day for 2022. And February and January of 2023 will exceed that as we hustle to move every barrel we can for our customers. We continue to have constructive dialogue with our customers on a successor mainline incentive to owning agreement. As you know, these discussions take time, and we're working with a subgroup of shippers to land on a new framework. Once agreed upon, we would then take it to the broader shipper group for a vote on the proposed agreement before filing it with the CER. Now, should we be unable to come to an agreement, then we're fully ready to file a cost of service with the CER which would actually reduce our risk and make us even more utility-like. It's important to note that we've been factoring the impact of TMX into our financial and operational outlook for a long time. We expect the mainline will remain well-utilized once TMX is in service, and we're talking to our shippers about the impact of TMX, and it will be accounted for in either commercial tolling outcome. In addition, we expect to see growth in the basin between now and 2030, As the basin grows, our system will fill back up. In 2022, we extended our light oil strategy by increasing ownership to 68.5% in the gray pipeline through multiple transactions and increased Cactus II pipeline ownership to 30%, both of which helped connect the Permian Basin to our Ingleside terminal. We sanctioned another 2 million barrels of storage at Ingleside, which will unlock already built docks, loading capacity for further export. I think we're starting to see and to create a real value-added super system out of the Permian region for our customers. Beyond having the ability to move product for our customers on two pipelines, we have the number one export terminal and the capacity to let them access premium markets for their oil. We also advanced several exciting low-carbon opportunities, including the development of a hydrogen ammonia plant at the Ingleside Terminal, and the JV with OxyClean Carbon Ventures to develop a carbon capture hub in Corpus Christi. I think there are some really exciting times coming for our Gulf Coast connected liquid assets. These low carbon opportunities on the Gulf complement our CCS plans in Alberta, where we are leading the development of the Wabamon Carbon Hub with close to 4 million tons of CO2 already secured for sequestration. And we're advancing our self-power strategy with seven projects in construction at our pump stations with more on the way. Lastly, we executed a landmark transaction with 23 indigenous communities in northern Alberta, selling roughly 11% stake in the regional pipeline and storage assets. With this transaction, we've strengthened our relationship with neighboring indigenous communities and serve as strong value for reinvestment. We see this as an ideal framework for future partnerships and as a tool to recycle capital. More on that and our Gulf Coast retail plans at Enbridge Day in March. Moving to gas transmission, we had another excellent year. Our systems were highly utilized, in particular during the winter storm Elliott. We continued to demonstrate our reliability by reversing the flow of our Texas Eastern system to supply much-needed gas to the U.S. Northeast. The net swing of close to three BCF was instrumental to avoiding potentially devastating impacts to our customers and underlines our competitive advantage in serving customers in changing environments. During the year, we also achieved positive rate settlements on the TETCO and BC pipeline systems, And further underpinning the value of our pipeline system, all contracts up for renewal in 2022 were successfully recontracted. We placed $900 million into service, including modernization projects and our veto offshore pipeline system. Our natural gas export strategy continued to play out as we began construction on our Venice Extension project serving Plaquemines LNG. In addition, Our investment in wood fiber energy has helped spur new investment along our BC pipeline system, where we secured another $4.8 billion of expansions on TNorth and T7. As you will recall, these projects earn under a cost of service framework, and given that they consist of brownfield construction on existing right-of-ways, they have considerably lower capital cost risk. We see tremendous potential for North American LNG to meet global demand for secure, lower-carbon energy, and we're engaging with governments in the United States and Canada to advocate for permitting reforms to support development. We also further reduced our exposure to commodity prices by decreasing our economic interest in DCP and in favor of a higher interest in the gray oak pipeline that is highly contracted. This was another good example of recycling capital to lower volatility and better risk-reward investments. Turning to our gas utility, they had another strong year with approximately 46,000 new customers at it. We put $1.2 billion of expansion capital into service in 2022, which supports the continued growth of our rate base there. And we filed the new incentive rate application for the period 2024 to 2028. We have a long track record of working under incentive rate mechanisms that provide quality, safe service, and predictable rates for our customers, while also allowing us to achieve a premium return within the return parameters set annually by the LEB. Michelle will have more to say on this important initiative at our Enbridge Day in March. Our Dawn hub and transmission systems continue to perform well, particularly in December, as winter storm Elliott wreaked havoc on North American markets, our integrated Dawn Storage Hub was able to reliably provide gas to the market, which helped to stabilize prices. In fact, just before Christmas, it was able to deliver a record 6.1 BCF of gas to the market in a single day. The distribution team continues to progress our RNG strategy with two new projects sanctioned, bringing the total to eight in service or under construction in Ontario. We're also seeing encouraging performance from the 2% injection of hydrogen into the gas stream in Markham, which serves 3,600 customers with lower carbon natural gas. While we are still studying the impacts, we are also exploring the merits of extending this strategy to more customers. Looking at our renewables business, 2022 was a pivotal year for that segment. We placed the first of four offshore wind projects into service in France, on time and hit the 2.4 billion euro budget. Quite an accomplishment in this market. We have three self-powered solar projects in service and another 10 under construction, which will produce 113 megawatts of power for our liquids and gas transmission businesses, lowering scope to emissions. And we acquired a top renewable developer in North America, Tri-Global Energy. The acquisition brings near-term cash flow from the sale of 3.9 gigawatts of advanced projects over the next couple of years. And the power team has over 3 gigawatts of new development and progress that we expect to enter service between 2025 and 2028, with more beyond that time frame. The 3 gigawatts represent $3 to $5 billion of potential growth capital investment for Enbridge. Our combined expertise will help us accelerate our North American onshore renewable strategy, taking advantage of the incentives announced in the Inflation Reduction Act. So a really fine 2022 for all the business units, which translated into record financials and sets us up for future growth. So let me now turn it over to Vern, who will walk you through those financial results and outlook. Thanks, Greg, and good morning, everyone. A strong fourth quarter capped off a record year for us. We exceeded the midpoint of our DCF guidance range, and we finished at the top end of our EBITDA guidance range. Strong operational performance resulted in a 6% increase in EBITDA and a 7% increase in DCF per share quarter over quarter.

Our full year EBITDA increased by 11% over 2021, and our DCF per share was up 9%.

During the quarter, we saw record mainline volumes of 3.1 million barrels per day. Export volumes at Ingleside continued to grow throughout the year, and we continued to enhance our U.S.

Gulf Coast footprint with increased ownership in Grey Oak and Cactus II. Gas transmission utilization remained high, and we have increased our revenues with recent rate case settlements at Texas Eastern and at the B.C. Pipeline. Q4 also benefited with a full quarter of operations from our T-South and Spruce Ridge expansions.

The utility was up with strong customer growth, rate escalations, and some slightly colder weather. The renewable business was down slightly in the quarter due to lower U.S. wind resources, the timing of annual operating expenses, which was partially offset by strong European power prices. Energy services remain challenged in the quarter due to tight basis differentials and backwardation.

But as a reminder, we expect energy services to return to profitability this year.

The quarter also benefited from a stronger U.S. dollar. DCF in the quarter reflected higher distributions from our Alliance and Grey Oak Joint Ventures,

offset by higher interest expense, cash taxes, and the annual timing of maintenance capital.

Let's take a moment now to remind ourselves on how we built a business that's resilient in all market cycles. The financial markets continue to be extremely volatile. Inflation is driving central banks to raise rates, stoking the potential of a recession. Enbridge continues to be well-positioned to navigate through these risks. Our low-risk business model is built on minimizing our exposure to market price volatility and provides us with contractual protection against any of these movements. We have a proven track record of meeting our guidance despite volatile market conditions. This resiliency is once again demonstrated in our 2023 outlook. Let's move to that now. We are reaffirming our 2023 guidance that we provided last November. We expect the business to perform strongly in 2023 with high utilization across all of our systems. And we will benefit from the capital we placed into service in 2022 and the additional capital that we placed into service this year. Rising interest rates are a modest headwind in 2023, but this has already been reflected in our guidance. We enter the year with approximately 10% of our debt in floating rates. We're also substantially hedged on foreign exchange, so we're well protected here as well.

Our 2023 dividend increase of 3.2% marks our 28th consecutive annual dividend increase, and our dividend payout remains in the middle of our target range.

We continue to prioritize the balance sheet and are targeting to exit 2023 in the lower half of our 4.5 to 5 times debt to EBITDA range. At Enbridge Day, we'll provide more detail on our medium-term growth outlook, so please join us for that. I'm now going to move on to our Secure Growth Program. Today, our Secure Capital Program sits at $18 billion. We had $4 billion capital enter into service in 2022, which will drive cash flow growth in 2023 and beyond. We also added $8 billion to our growth capital program last year, where the majority of this capital comes into service between 2026 and 2028. Our $5 to $6 billion of annual investment capacity allows us to fund these projects under an equity self-financing model. Going forward, we have ample investment capacity for more organic growth, tuck-in M&A, debt repayment, and share buybacks. So with that, let's move to capital allocation. It all starts with balance sheet strength and financial flexibility. Recycling capital into new opportunities is just one part of our strategy to keep our leverage in check. Our balance sheet doesn't require us to do so, but we will continue to opportunistically evaluate future asset sales at attractive valuations. We continue to return capital to shareholders sustainably. We pay out about 65% of our distributable cash flow as a dividend. And as you know, we have a long record of growing that dividend. We renewed our $1.5 billion normal course issuer bid, which allows us to opportunistically repurchase shares. Buybacks will, of course, compete with any other capital allocation opportunities but they will also act as a benchmark for our business developers. We will prioritize low capital intensity and utility-like investments and then deploy any remaining investment capacity to the next available option. All of these opportunities fit our low-risk business model, exceed our risk-adjusted hurdle rates, have a strong strategic fit, and align with our ESG goals. The bottom line is we continue to be focused on maximizing shareholder value. Let me finish up with an ESG update. I'm truly proud of our ESG accomplishments in 2022, most of all by the work we've done on Indigenous reconciliation. We released our Indigenous Reconciliation Action Plan in September, which articulates and tracks our commitments, and progress with their Indigenous stakeholders. Through the East-West High Line, the Wabamon Carbon Hub, and the AII Regional Oil Sands Equity Partnership, we are setting the standard for economic participation with our Indigenous partners. We see further opportunities to continue to develop more of Indigenous partnerships on both sides of the border. We're finding innovative ways to reduce our GHG emissions and we're executing on our solar cell power strategy that supports both of our liquids and gas businesses. On governance, we're honored that Pamela Carter has been elected our first female chairperson. Finally, we issued another sustainably linked bond in the fourth quarter, bringing our total of sustainably linked financings to over $4 billion. With that, I'll turn it back to Greg. Well, thanks very much, Vern. And as we mentioned earlier, we're really looking forward to spending time with you at our Investor Days coming up in Toronto and New York in March. You will hear those days from our business unit leaders on the prospects for each of their businesses. They'll be providing you with views on the following questions. What are the near and long-term fundamentals of the business? How will we continue to drive efficiencies? How will we grow our core businesses and invest in new energy technologies while leveraging our existing business positions horizontally across the enterprise? How are we progressing on our ESG goals? In addition, you'll hear from myself and the team about the positive positioning of our business, our strategic priorities, our capital allocation discipline, and our medium-term financial outlook. We hope to see you there and look forward to a great discussion. Before we take questions, let me wrap up by saying that over the last decade, Al Monaco and the senior leadership team have transformed Enbridge to be the leading energy delivery company. Building off that strength, we've entered 2023 with a solid plan and a committed team to continue safely and reliably delivering energy across North America and beyond for our customers and our investors. 2022 was an inflection point for our industry and policymakers as energy security and high commodity prices from underinvestment in energy was put under the spotlight. The need for both conventional and lower carbon solutions to meet the growing demand for global energy will be critical, as will our ability to deliver both in an economic and environmentally sustainable way. for our customers, our investors, and stakeholders at large. Our business model is resilient and our low-risk value proposition should make us your first choice energy investment opportunity. We will demonstrate that at Enbridgement Day and show you how we will bridge to the energy future by meeting the needs of today, tomorrow, and beyond. Thank you for joining us today and now let's open up the lines for your questions.

Thank you. We will now begin the question and answer session. If you have a question, please press star one on your touchtone phone. If you wish to be removed from the queue, press star one again. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. And we will pause for just a moment to compile the Q&A roster. And we will take our first question from Robert Quan with RBC Capital Markets. Your line is open.

Good morning. Greg, I guess first question here for you just around the main line here. Have you changed the company's priorities, even if it's nuanced as just part of a potential deal? And specifically, as you think about transitioning the business over time, is there a desire to push for higher depreciation to both manage the residual value of the main line as well as releasing additional capital to rotate into lower carbon infrastructure?

Well, Robert, first of all, thank you. And Colin's on the line here too, but maybe I'll start. Yeah, I would not see the mainline negotiations as anything about changing the priorities of the company. You know, as I've tried to speak to the investment community today in one office, and we'll talk about this on March, I wouldn't read that into it. I mean, look, My strong belief continues to be that from a North American perspective, it's about going through and out of. And the liquids business is part of that, obviously, and a critical component. That will remain from a Western Canadian perspective as we serve those customers, not only in Canada, but also their desires to go south. And as we talked about a little bit in the opening comments, from the perspective of the Gulf Coast, we're building what I think is a really great super system there. So I don't think it's an either or, it's an and. So I definitely don't see the mainline negotiations as a change in any way in the priorities. This is a great business that earns about $9 billion in EBITDA and will continue to be the backbone of the corporation, which does not take away from the other business units. But Specifically, Colin, do you want to speak to some of the comments and questions from Robert?

Sure, Greg. Thanks for the question, Robert. Maybe just to build on Greg's comments, and I'll give you as much color as I can on the negotiations. It's obviously premature to dig into it too much and would be disrespectful to our counterparties. But here's what I can tell you. And Robert, you've been around the company industry for a while and you'll recognize that we've evolved through incentive tolling for 27 years now, seven vintages starting back right in the 90s. And each one of those arrangements matured, build on the previous one, added new features typically added not too many subtractions but added new features around risk and reward around speaking to ways we can maximize value for industry right these just to recap a little bit these have included initially cost envelopes then it evolved to batch quality it evolved to connectivity, and increasingly now it's including ESG stewardship and defense of the system and advocacy. Will we add new features to this one? Likely. It could include items like you're talking about. We're very mindful of the dynamic you surface there. and in light of increasing industry risk. So I'd say an incentive arrangement here remains the shipper's preference. That's why we're negotiating it. I'll add our bid-ask on the toll component of the arrangement has narrowed meaningfully. But I want to caution that we're not there yet. We've made progress, but we're not there yet, and we may not get there. And obviously, we've advanced and fully prepared the alternative cost link, cost of service pass-through model, which would be equally acceptable to us. We don't have comments on timeline. I don't think that's helpful, but we are making progress, and

either outcome here will be competitive for our customers and investors so i don't know i probably over answered that robert but um it's a good question great i appreciate the color uh if i can just finish on capital allocation or capital recycling um you had a good amount of activity in 2022 i'm just wondering how active you intend to be both on monetization funds but as well just on on acquisition You know, it's not new that you're focusing on tuck-ins, but the annual disclosures very specifically note tuck-ins. Just some thoughts as well as to how you might be approaching larger deals, or is it really the focus on tuck-ins when it comes to M&A?

Yeah, well, first and foremost, you know, I think the reason why we can even consider those types of things, Robert, is that that strong focus on the capital allocation starts with the maintenance of our balance sheet. and the equity self-financing model. And all that, of course, ultimately ends up in being able to increase that dividend on a steady basis. But, you know, you've seen us recycle capital over the last four or five years, $10 billion plus. That allows us, as well as some of the capacity on the balance sheet, to go out and do tuck-ins. We'll continue to look at those. And the next thing is for a company the size of Enris. with the self-equity financing model and the balance sheet capacity, tuck-ins for us are pretty substantial deals. I mean, we would refer to Ingleside as a tuck-in from that perspective. And as you know, it's in the $3 billion range. And look at the opportunities that then it created. Frankly, the management team, great job in getting a solution over the many years to DCP, and that leads to Grey Oak, and that leads to Cactus, some of the opportunities there. and I would even argue to the work we're now doing in the early stages with Oxy and pieces like that. So I think you can continue to watch for that. Continue to see us look at tuck-ins. I don't think we explicitly said in our 2023 guidance we wouldn't do that. That is part of the core of what we are able to do now, and you should expect to continue to see that. Again, smart stuff that we can fit in. and they can add incremental value, not just to the business that maybe it's coming to, but also that horizontal perspective of some of those tokens. And that includes on the new energy technology side. You know, look, Matthew and the team bringing in Tri-Global Energy, that's a great example and a whole variety of opportunities. And I know all the business units are looking at those types of things. Again, driven by the strong balance sheet, and the ability to act with your self-financed.

That's great. I appreciate the color. Thank you.

We will take our next question from Jeremy Tonette with JP Morgan. Your line is open.

Hi, good morning, and welcome. Al DeBest in retirement. Greg, looking forward to working with you going forward here. Sure. Just wanted to pivot towards, I guess, WCSB and, you know, expansion. really specifically construction risk going forward. We see a lot of projects out there. We see issues with cost overrun and we see pressure on the contractors, the strength of those companies. And so just wondering as you, you know, look at, you know, expansions with TESA, what have you, you know, how do you think about addressing, you know, project cost risk given the dynamics and what we've seen in the basin so far?

Yeah, look, it's a great question, and we're obviously very much focused on it. As you know, we're not new to building projects, but this is an interesting environment. Several things that I think probably put us in a bit of a unique situation, particularly in Western Canada, you know, so the projects that were just secured last year, first of all, they're long-existing right away. That is an important issue that cannot be underestimated in terms of us understanding what we're doing. And remember, we've been through one company or another that's been running that system since 1950-ish type timeframe with lots of expansions. Secondly, they're split up over a long period of time, right? So you're talking about brownfield projects in which the capital is spent over multiple years, and much of it not for several years ahead. So unless you believe there's going to be a very long time period of inflationary pressure on us. I think we should be in a good spot from an inflationary perspective. And then, of course, these are brownfield projects. I think it's very different when you're building brand new projects. And this is very similar to the whole system. Where there is a greenfield project, there's not a linear project. So Cynthia and the team, from a wood fiber perspective, obviously that's a a big project, but not a massive project, and it's not a linear project, and one that's been worked for the better part of 20 years and now coming to a good fruition. So I'd say, you know, not just in Western Canada. This is something we're focused on on all fronts. I know the power team's focused on that. Obviously, right across North America, this is something that we're hypersensitive to, but I like our positioning from the perspective, as I said, existing right-of-ways, largely brownfields, our timing and capital spend should put us in a better spot than maybe some others are dealing with right today.

Got it. Got it. That's helpful. Thanks. And just want to pivot towards, I guess, floating interest rate exposure. It seems like there's some locking in for this year, but just thinking on a longer term basis, is there any thoughts to kind of terming out more of that and reducing the amount of exposure to floating rates at a given point in time?

Yeah, good question, Jeremy. I'll turn to Vern for that. The other thing I probably should have mentioned, as you know, it's not the case in every location, but definitely in Western Canada, we are under a cost of service structure too, which is definitely different than a lot of other people in terms of their contract structures and infrastructure. But Vern, you want to speak to the floating rate debt issue? Okay, thanks, Greg.

Jeremy, as you know, we run our debt book with a percentage of floating rate debt in it each and every year. And over the long run, we create shareholder value by having some floating rate debt out there. Our target is to run between 10% to 20% of the book in floating rates.

And as you've seen, obviously interest rates go up. We've gone to the shorter or the smaller end of that target range.

We're highly hedged on new issuances as well. So there is obviously some interest rate exposure, but we'll carefully manage that. And I think you're right. There is some value in the shape of the curve right now. And that will be part of how we manage our debt portfolio as we go forward. Because obviously, in today's market, a five or 10 year bond is actually cheaper than floating rate debt.

So you've raised a good point. Got it. That's helpful. I'll leave it there. Thanks. Thanks, Jeremy.

We will take our next question from Rob Hope with Scotiabank. Your line is open.

Good morning, everyone. Maybe keeping with the BC theme, can you comment on the deferral of the T open season? Just given the commentary on producers are re-evaluating their long-term plans, is this commodity price driven or is this blueberry driven? Can you maybe add a little bit of color to that? Sure.

Cynthia's here, so maybe I'll ask Cynthia to chime in here.

Yeah. Thanks, Rob. I would say that it would be an opportunity for our customers to step back and confirm how they want to approach this. So it is both the blueberry and they may be looking at the inflationary pressures. But, you know, our West Coast customers, when they ask us to propose to postpone this to the second half of the year. It's basically just to allow them to assess what their development plans are and their gas transportation requirements. So with that blueberry decision, I think it's great that we're able to continue to progress. We're going to see more certainty. Certainty is always something that we like to see in that space. We've always had some, as Greg had mentioned, long relationships with indigenous people in that area. But our customers now will have this opportunity to really look at how the blueberry decision is going to allow them to continue to develop. So it's a combination of both.

Great. Thank you for that. And then Greg, you know, you've been in the chair, I guess, just over 40 days now. Can you give us an update on where you are on your 90 day plan, what you've been focusing on so far and what changes you've made? Sure.

So, um, several things, obviously getting the books closed for the year end, uh, just finished a board meeting, uh, all good on that front. But, uh, I've really been spending time, A, seeing investors, seeing a lot of investors, uh, getting out and seeing our employees. I've sat down with every vice president in the company, I think, for at least an hour and get their views on where things are, and also huge employee groups as well. And I've spent a lot of time, and this is going to be a big focus of mine, with policymakers too. Look, permitting is a huge issue. We said this off the front, but both Canada and the United States, this is an issue, and we're not really answering the calls. from a sustainability of fuel perspective globally, and we can do that in North America and look after ourselves well, helping the rest of the world. So I'm going to spend a lot of time on that front. I think you'll hear in March, and I'll ask you to wait until then, kind of some of the priorities going forward. But again, I would not expect to see significant change on the key areas, right? So the liquids business, we chatted about that as well. The gas business, look, the LNG side of things is absolutely a focus of mine, both here in Canada but also in the Gulf Coast in the United States. Those opportunities are big, and we've got to continue to do that. And then as well on the renewable side of things, how are we going to continue to grow out that business? We've bought Tri-Global. We've got to focus on that and make sure that the results we expect of that come in in the next few years, as well as advancing our RNG, our CCUS, and in the longer term, some of the hydrogen opportunities that are out there. And I will not forget the gas distribution business. I love the gas distribution business. I have been there to see employees there as well. That is a growing business, and, you know, it is – frankly, there is no future without natural gas. I don't care what anybody says. That's the reality of the situation, and obviously having a gas distribution business is an important element of that. So, you know, that's been my focus. We'll come out in March. I'll say I've pushed some authorities down to people to make decisions so that we can move a little quicker. I think that's going to be critical, making sure that we can react to our customers, but also the needs of investors going forward. And really starting to look at, look, I think we're in a good position for 23. Where are we going to go in 24, 25, and 26? And look forward to chatting with you about that in March.

Looking forward to it. Thank you. Thanks.

We will take our next question from Theresa Chen with Barclays. Your line is open.

Morning. I'm curious as to your longer-term strategy on the liquid side for the U.S. Gulf Coast given the series of acquisitions over time. Do you see more to do to shore up your portfolio there? What is your general outlook?

Yeah, well, Colin and I will speak about this in March, but the short answer is absolutely. Again, I think you can just see, since the acquisition of Ingleside just a little bit over a year or so ago, we've continued to kind of move the ball forward on that front. As I said, I think the future, both on the Canadian side and the U.S. side, is through and out of the continent. We've got to be a bigger player on the Gulf Coast, and I think we're set up to do that. So... If you'll give us a few weeks, we'll see you and we'll talk through this. I think it's pretty exciting, actually, what's going down there, which does not, and I want to be clear, does not take away from anything that what's going on in Western Canada as well. Particularly on the oil side, look, there's a lot of discussion about gas, but I think as China reopens and not enough money has been spent on restocking, if you will, the reserves on the oil front and on many commodity fronts, I think that's going to lead to some real opportunities and people being real careful with capital, which is the right thing to do. But as we go through the year, I think you'll start to see more upward pressure on the price of oil, particularly in international markets. And let's see three to six months from now where China is on the reopening. You know, sure, the economy is a little softer here, but outside of North America, I think you're starting to see a little bit of green shoots going on, and that's going to lead longer term to the need for more infrastructure on the Gulf Coast from my perspective. So we'll chat more about that, but that's my general comments.

Thank you.

Thanks, Teresa.

We will take our next question from Robert Cattelier with CIBC Capital Markets. Your line is open.

Hi, good morning. You partially answered this with respect to your answer, Robert Kwan, but I'm wondering if in the current cost environment, including inflation and higher interest rates, does that cause you to change your approach for rate request, specifically risk sharing, or is it more a matter of just ensuring proper tools are reflected so that you're covering your proper cost and maybe more frequent rate cases. So maybe you can answer more on the gas side, given your prior comments on liquids.

Sure. And I'll let Cynthia chime in here, too. But I think the answer to that is also yes. I mean, it was 20 years plus from the time we had a Texas Eastern rate case, and now those muscles have been toned again. So I think we're getting good at that. I think our customers recognize some of those costs. And the same thing on the distribution side of things, too. So maybe Cynthia and then maybe Michelle, you can both speak to that issue.

Sure. You know, for our gas systems, we have done a number of rate cases recently, two very successful settlements just last year, both with our Texas Eastern System and the BC Pipes. And we continually look at when is the right time to go in to a rate case settlement. And we look at all of those things, Robert. So it is our cost. our capital costs, the interest rates, all of those costs come into that. We do have that opportunity, as Greg was mentioning, to go back on a regular basis. So this is just part of our standard approach to making sure that we're getting the right return for the investments that we're making in the assets that we have. So you'll continue to see us go back when the time is right based on what the experience is. So with just having settled, though, both Texas Eastern and the BC system. It'll be a couple of years before we go back on those, but that's just a continual part of our approach now as we go forward.

Right, so really it's a question of timing and cost as opposed to changing something fundamental on the risk sharing.

Right. So when we go into those settlements, Robert, we do have those conversations about what the experiences have been, and we also look at what the right approach is for us to have in that risk environment. So the framework is flexible, and we continue to create that balance both for us and for our customers.

And there's some of that risk. Michelle, maybe just some commentary on your filing of the – at the OEB and how you're looking at that.

Sure, you bet, Greg. And Robert, at the OEB, it's a little more formulaic and structured. We go typically every five years. Now, what's unique here is it's the first rebasing application for both of the legacy utilities in about 10 years because we've been operating under the mergers framework for the last five years. So a very heavy lift to get that in, and it was in by the end of last year, which has us well on track to have new rates that will be effective for the 1st of January. And we're quite confident that we'll move forward with our performance-based regulatory model in a manner that is as effective as what we've seen in the past. And that really does allow us to continue to earn while we're driving our efficiencies. We pass those things on to the customers. And then post-2024, after we rebate, we'd expect some very attractive returns using that formulaic incentive rate setting mechanism.

Yeah. You know, most of our programs or most of our assets have some element of inflation tracking. And I think that's important. It's not instantaneous, but we shouldn't forget that because in this environment, I think that's unique. And we are looking at things, both on the gas side and definitely on the gas utility side, like depreciation. So if people have a view on risk, so do we. And so we'll continue to push those forward. In some cases, that means looking at thicker equity components as well. So all those are on the table. And I think we've got constructive mechanisms, both, you know, you've got your opponents, but from the customers, but even regulators. Again, back to gas infrastructure is absolutely critical, despite what you see sometimes in the papers.

Okay, that's very helpful. And then just a follow-up question on your mainline discussion, you know, as I'm inferring from your comments that obviously every negotiation takes on a life of its own and has its own character. But Greg, I'm wondering if you can comment, you know, when will you know when it makes sense to file a cost of service application? What has to happen for you to make that decision?

Well, first of all, as Colin said, look, I don't think creating artificial timeframes on these things is a wise idea. Because it is an artificial timeframe. We obviously continue to serve our customers. We want to get the solution as soon as possible. But I'd say if we came to a point where, as Colin pointed out, we just weren't making progress, then we are ready, prepared, and willing to go down that cost-of-service route. But as long as there is some progress and as long as there is goodwill between the parties, that doesn't seem like the way to go, and that's where we are right now. So understand the frustration sometimes on this, but I can assure you Paul and the team and our customers are very focused on this issue, and there is, again, good – good rapport between the players in trying to reach a solution. We may not get there, but we shouldn't create a false deadline to be able to pull that off. Colin, if you want to chime in, please do so.

That's well said. Thanks. Thank you very much.

I apologize.

As a reminder, it is star one if you would like to ask a question. And we will take our next question from Pranit Satish with Wells Fargo. Your line is open.

Good morning. I wanted to touch on the gas storage business. It seems like the value of storage is going up with the winter storms and some of the supply low gas prices that we're seeing. I guess, are you seeing any positive traction in storage rates? And then maybe can you remind us how much of your gas storage is third parties versus used by your utilities?

Sure.

I think both Michelle and Cynthia can speak to that a little bit. First of all, we have a huge storage position, both on the Gulf Coast, let's not forget, and in, obviously, the central part of the continent, so several hundred BCF. I think there's a variety of reasons why you're seeing an increase in the value. I don't know if I want to give you the specific rates and let Cynthia decide where I do it, but we're seeing markedly higher rates for recontracting. And LNG is playing a critical component of this. I've been waiting for this for a long time. But big ambient temperature swings are relevant issues for storage. And then also just things like, obviously, your standard winter and regional differentials are important, too. But, Michelle, I don't know. Well, maybe I'll turn to you, Cynthia, because I definitely see storage as one of those growth areas for us as well.

Yeah, Greg, I don't think I'll get specific as to what our renewal rates are, but we have seen a lot of opportunities to continue to look at whether it's recontracting with the existing customers or we've had a lot of inbound interest from others. And as you said, Greg, a lot of that ties into projects. both the incremental draw now for exports and creating some stability for that, as well as just the volatility that you're starting to see. So it has been good. Our teams are continuing to have lots of conversations, and we're seeing strong recontracting rates.

Yeah, and so on the U.S. side, on the Gulf Coast, all that would be third-party. Michelle, on the utility side, how much of the storage would be for you guys, and how much would be third-party?

Yeah, Greg, it roughly breaks down to about two-thirds that's preserved for our base, and then about one-third that is unregulated. And I do have to say and give that our Dawn Storage has some props. They've performed incredibly well through some of these really challenging winter conditions we've seen. And, in fact, what we're seeing is a trend towards them really propping things up in the mid-continent over the holidays when we saw extreme weather across North America. They were flowing. into the Ontario market for certain. They were backstopping things into the mid-continent, out towards the northeast. I mean, we've added a lot of flexibility into that storage system. We've invested over $100 million in it in the last 10 years to increase the rateability and performance out of it, and it's absolutely stepping up to do that. We're also seeing longer-term contracts being signed up to that unregulated storage system. And certainly our unregulated storage this year is sold out for 2023.

Yeah, that's great. And when you get these big swings in weather as well, let's not forget, if you move Texas Eastern both directions, now there's a different need where that storage is. Now customers drop on that. So just to be clear, storage contracts are still short. So storage contracts would be typically two to five years. So when we say they're getting longer, that means they're no longer spot. But still, That's a great spot for us to be in. So good question.

Thanks. Very helpful. And then just switching gears with your leverage now down to 4.5, 4.7, I think lowest it's been in a very, very long time. I guess what is the right leverage for your business as you look out over the next few years? And are you going to keep driving that lower or are you hitting a point where you can potentially pivot more of that free cash flow back to either back into the business or to equity holders? And then just tied to that, how do you think about leverage in the context of ESG recognizing the more oil-weighted asset base?

Well, you've asked a great question. I think we're quite comfortable where we are in the debt-to-eco-debt range. You have to remember that lots of our assets are highly regulated with highly regulated capital structures. So there's a limit on how far we can push the debt to EBITDA down.

But being in the lower half of the range provides us tons of flexibility to allocate capital to all kinds of great stuff.

More organic growth, tuck in M&A, share buybacks, and potentially a slightly lower leverage. But I think we're happy where we're at and we'll and we'll continue to try to be around this point in the debt to EBITDA range.

Yeah, I think the nice thing, and it's really important that I think our U.S. investors sometimes miss, and we maybe need to do a better job at the U.S. rating agencies, again, to Vern's point, when you've got 65% debt required by regulation in the utility and not a two-to-similar number on all the gas pipes in Canada, that's going to, by definition, give us a little larger number. But as Vern says, the way it's structured now and the way our DCF kind of comes through, you've got $5 billion to $6 billion of investment capacity annually that we can handle with the self-equity financing model and the balance sheet without making any negative change to our balance sheet. That's a really strong position and goes back to some of the comments about things like tuck-ins as well. So we're in a good spot right now.

Thank you.

And we will take our next question from Linda Ezergalas with PD Securities. Your line is open.

Thank you. Just a follow-up question on the main line to give us some more context around how this is progressing. In terms of the sticking points potentially, is everything still at play and being traded off, or are there a number of items largely settled, such as potentially like duration and off-ramps with just a few sticking points? Can you comment on what might be more versus less contentious? And would one of the sticking points still potentially be trading off competing customer priorities?

Linda, it's a good question. I'm going to let Colin jump in here. But until the negotiation is done, I don't think it's fair for us to kind of throw one off and assume we know exactly where the other side is until it's done. But, but Colin, with that, maybe you'd like to chime in.

Yeah, I agree. Uh, I can appreciate your curiosity here, Linda.

Uh, but yeah, I don't think it's, uh, it's appropriate to kind of pick or pull those apart. Um, more to come and we'll, we'll, we'll, we'll advance this as, uh, expeditiously as appropriate uh and i know i should mention too that we've got right our enbridge day approaching in three weeks um i'd like probably to manage your expectations that we may not have finality or much more color on this by then negotiations will continue actively likely through that period and remember too there's a there's a vote that's required by by industry so So, yeah, I appreciate the question. Sorry I can't help you too much more at this time.

No, I understand. And given the importance to the basin, it's good that everyone's taking a thoughtful process. Just as a quick follow-up, more from a financial lens, right now you've got less than 2% of cash flow at risk. You commented on interest rate exposure. You got some foreign exchange exposure. Can you talk about maybe where you are on commodity prices and your services business continues to lose money? Is there strategic value there? What's the outlook for that? And how might that business evolve over time?

Yeah, Linda, as you saw last year, we... traded our DCP position for a bit larger position than Crayo.

And that maturely reduces the amount of commodity price risk we have in our business. We still have some residual commodity price risk within the gas transmission business, primarily associated with Alliance and Oxable. We have some costs associated risk with power prices in liquids and the gas transmission business. But really, that's pretty much all the outright commodity price risk we have in a very, very large organization.

So there is a pretty de minimis amount of commodity price risk across all of our businesses. With respect to energy services, I think we've talked about in the past that it gives us a good lens on... basis differentials, which generally drive pipeline development. So it's good to continue to have a foot in that door to understand what our customers are seeing, both in natural gas and crude oil. I think we talked about previously that, yeah, 2022 was a very tough year for that business. Effectively, there was no basis differential across many pipeline systems. And in the crude oil markets, prices were backwarded pretty much for the entire year. So going forward, we're going to see some contracts roll off at energy services.

Some commitments will go away, and we expect the business to return to profitability this year. So that's a long-winded answer, but hopefully that gets you. I think well said, Vernon. Obviously, staying completely within all the regulatory confines, I think it's a fair focus where you take a look at it. How can energy services and title help create more value for the customers and making sure that they understand all the capabilities back and forth?

Definitely something to look at. Appreciate that.

Thank you. And we will take our next question from John McKay with Goldman Sachs. Your line is open.

Hey, everyone. Good morning. Thanks for the time. At risk of getting the answer that just wait for Toronto. I just wanted to follow up on Teresa's question on the Permian strategy. I mean, is there any interest at this point of reaching farther back and owning, let's say, something on the gathering side? And then similarly, kind of just staying in the Permian, now that you have bigger stakes in both the big corpus pipes, just any interest in potentially expanding those sooner rather than later? Thank you. Sure.

Look, never say never, but, you know, having just got out of a major gathering system on the other side, on the NGL side, I think our focus and what we're really good at is big pipes. And tied to the export side of things. So Colin, you may want to add to this. I guess if it, if it was really going to, we saw incremental value on the, on the, uh, export side of doing that, that something be open to. But at this point, I think the way we're building this out is bigger pipes and figuring out ways to really serve customers on that front. But Colin, you may want to add to that.

Yeah. Yeah. I agree on, on the gathering point. Um, less interested there for sure. Uh, and, uh, But, you know, exclamation marks behind the export strategy. And I think it's becoming quite clear that, you know, the corpus egress point out of the Permian is quite attractive. And we're building out and up from there, but only so far. It's initially an acquisition, Tuckian acquisition strategy here where we're deploying. risk-adjusted returns versus build that are relatively attractive given build risks. And then synergies along the integration value chain and potential expansions here. So yeah, that's the strategy in a nutshell, building out a light oil strategy to complement the top-notch heavy one that we've got further north.

All right, that's helpful. Thank you. I know we're at the top of the hour. I'll just ask one more quickly, and it's probably an easy answer. Any change in LNG export appetite that you're seeing either from your partners or kind of potential customers given the pullback in global prices recently?

No, I think people are looking at this from a long-term perspective. Again, I'll go back to there is no future without natural gas, and I think parties – one thing I'll say, I feel they've come back five or six years because there was a more practical approach the energy transition five years ago, we seem to get fat and happy on the fact of, you know, plentiful fuel and stuff like that. And I think people are realizing, unfortunately, due to the situation in Europe and elsewhere, that North America's energy is needed abroad. And the only way to do that is through export. So definitely don't see any pullback on the LNG side. However, these players on that side are, they've got a very long-term focus on the price of the commodity and who they're serving. So I think they're used to the quantity prices move up and down, but they've got that long-term focus as do we. So I don't think you'll see any pullback on that side. The biggest challenge on LNG continues to be permitting issues, right? And so some of our customers in the Gulf Coast, they need some real help out of the FERC. And, of course, up here, that's always an issue as well. So permitting, permitting, permitting, not commodity, commodity, commodity.

All right, that's clear. Appreciate the time. Thank you. Thanks.

We'll take our last question from Ben Pham with BMO. Your line is open.

Hi, good morning. Thanks. Going back to the main line, I was wondering if you do go to cost of service or you're following cost of service procedures, How long does it take to advance through the regulatory process?

Colin, I'll leave that to you.

I know it's less short than the negotiations, I can tell you that.

Yeah, that's right, Ben. And I think we've got some Gantt charts on some standing IR presentations where we've compared a contract process and timeline. I'd refer you to those. But yeah, generally... We would file a cost of service up. And by the way, the application is ready to go here. So if we need to pivot, we can quickly. But it is a longer process. It would take into, you know, probably late 2024, I think, probably to get clarity on that.

So, yeah, it's another thing to consider in the mix of our alternative.

Okay.

Thank you. And maybe a follow-up on that is in your prepared remarks, you mentioned hypothetically cost of service, move more towards utilities, de-risk cash flows. Is there maybe a, if that does happen, do you think it's warranted to move to an earnings per share guidance metric? And do you think that you can actually potentially take on a bit more leverage from a credit rating standpoint?

Well, look, I don't see the leverage piece being in that calculation. Yeah, maybe on the EPS. Some of them will give some thought to it. Look, I'm very focused on, the team's focused on delivering our cash earnings, right? It's all about cash all the time, and it should be. And so we really haven't crossed that Rubicon. Let's continue to see the negotiations move forward. As Colin said, we're ready to go on cost of service, and you're exactly right. That could change. you know, that makes it even more utility-like. So either is possible, but we're not going to cross the EPS comment today.

Okay, gotcha. And maybe one last one. Offshore wind markets have seen significant dislocation. Do you think it's better to buy offshore wind assets now than build, just within the capex risk that the industry is seeing?

Well, Matthew's sitting here happy that he's getting a question, so I'll turn it over to him.

Thanks, Ben, for the question. You know, we're really happy with our offshore wind position right now. There is a lot of moving parts over there right now in terms of, you know, I think some of the players are, there's a little bit of dose of reality coming in with some of the inflation impacts and timelines. We're in a great position because we've got the project we just brought into service. We've got two others in service, and then we've got a couple under construction that You know, it's never easy, but are going quite well now also. And then some in development that are advancing nicely and also have contracts attached to them. So, you know, we're not rushing into acquisitions in the offshore space, but it's something, Ben, that we always watch, and certainly opportunistically we look at that. But right now we're real happy with the position we have there.

Okay, great. Thank you.

And ladies and gentlemen, this concludes the question and answer session. I will now turn the call over to Rebecca Morling for final remarks.

Great. Thank you. And we appreciate your ongoing interest in Enbridge. As always, our investor relations team is available following the call for any additional questions that you may have. Once again, thank you and have a great day.

Thank you, ladies and gentlemen. We appreciate your participation. This concludes today's conference. You may now disconnect.