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.