Enbridge Inc

Good morning, and welcome to the Enbridge Inc. Second Quarter 2024 Financial Results Conference Call. My name is Rebecca Morley, and I'm the Vice President of the Investor Relations Team. Joining me this morning are Greg Ebel, President and CEO, Pat Murray, EVP and Chief Financial Officer, and the heads of each of our business units. Colin Grunding, Liquids Pipelines, Cynthia Hansen, Gas Transmission and Midstream, Michelle Herrodins, Gas Distribution and Storage, and Matthew Ackman, Renewable Power. 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press the pound key. Please note that this conference call is being recorded. As per usual, this call is being 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 questions to one plus a single follow-up if 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. On to slide two, where I will 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. And with that, I'll turn it over to Greg Ebel.

Well, thanks very much, Rebecca, and good morning, everyone. We appreciate you joining us on the call today. I'm pleased to be here to highlight the significant progress we've made on our strategic priorities and to discuss our strong second quarter results. I'll start by providing a mid-year update outlining the team's strong execution of our financial, operational, and growth priorities. We've accomplished exactly what we said we would, and then some, and look forward to continuing the momentum through the balance of the year. I'll give an overview on the utilities acquisition and highlight what the team has managed to accomplish since we announced the deal less than a year ago. I'll also provide an update on each of the businesses and highlight key developments there. And then before having Pat take us through the details of the financial results, I'll take the opportunity to share how we are seeing our scale and connectivity extending growth and providing opportunities across all our four business franchises. And more specifically, how we're seeing this play out in the market with growing power, natural gas, and oil demand. As some of you have heard me say, you can't run a full-time economy on part-time power, and Enbridge is in a position to serve our customers and their growing demand full-time through multiple service offerings. Once Pat wraps up, I'll close with a few key messages, and then our management team will be pleased to answer questions following our presentation. Before I jump into the progress we've made this year, I want to acknowledge everyone impacted by the ongoing wildfires in northern Alberta and British Columbia. We're committed to supporting our partners, customers, and communities during this challenging time. And while we've seen no impact on the operations to date, safety will be our number one priority as we continue to monitor the situation. Now onto the mid-year update. As you can see, we've achieved or made significant headway on the commitments we laid out at the start of the year. I'm pleased to share that the U.S. gas utilities acquisition funding is now fully complete. Moving forward, we don't see returning to the public markets for the equity portion of our capital needs, And consistent with that, we have now canceled our ATM program. I'm pleased to report our base business performance is very much on track through the first half of the year. Separately, you will see that we are recasting our full-year financial outlook by adding to that original 2024 guidance the expected contributions from the two U.S. gas utilities we have closed, the expected closing of PSNC, and all of the associated acquisition financings. Pat will talk more about this later in the call. Our balance sheet remains strong with debt to EBITDA well within our targeted range at 4.7 times, providing financial flexibility to execute on our capital allocation priorities. I'm really proud of the team's execution and focus on operational safety and excellence. So far this year, we've had strong asset performance with high utilization across our franchises. As an example, just look at what's happening in liquids. During the second quarter, we achieved record volumes on the main line and at our Ingleside export facility. As mentioned, we've closed two of the three U.S. gas utilities that we acquired representing what will ultimately be approximately 80% of the total annualized EBITDA and have reached a settlement in principle with the public staff for the North Carolina Utility Commission. PFNC remains on track to close in Q3. We're also pleased to have reached a prepackaged rate settlement on our Texas Eastern pipeline with customers. This reflects our continued focus on optimizing our return assets to ensure we are earning a reasonable return while delivering safe and reliable energy for customers. And I'm pleased to report that the FERC has now approved this customer settlement. On growth, we've made good progress executing opportunities in our development pipeline. We sanctioned the 130-megawatt Orange Grove solar project in Texas backed by a long-term PPA with AT&T. Through our Whistler joint venture, we have reached final investment decision for the Blackcomb pipeline, which will provide up to 2.5 BCF of much-needed natural gas egress for Permian shippers. And we sanctioned an expansion of our Gray Oak pipeline in our liquids business. With clear line of sight to the U.S. gas utilities acquisition Closing, let me take a moment to highlight our strong execution of that transaction. We're ahead in our plan to complete the $19 billion acquisition of these three gas utilities that we announced just last September. This reinforces our proven track record of effective M&A execution and highlights the strength of our relationships with all our stakeholders, including customers, regulators, and governments right across North America. Federal approvals were all received in due course with the closing of East Ohio Gas occurring well before our expectations in early March. We look forward to continuing to build long-term productive relationships with all stakeholders in Ohio as we integrate that premier utility business. Next, we announced the closing of Questar in Wexborough in early June. Again, our experience and relationships helped ensure timely regulatory approvals were obtained to welcome a growing multi-state utility into our Enbridge family ahead of expectations. Integration is going well so far, and we will continue to provide safe, reliable, and affordable energy for our customers throughout the transition. In North Carolina, we are on track to receive regulatory approval and close in Q3. The team's dedication to executing these transactions, completing the financing, and integrating these assets which diversify our business and enhance our stable cash flow and growth profile has been first rate. Now let's jump into the exceptional performance at each of the BU's. We saw high utilization across our liquid system once again this quarter. This highlights the demand pull nature of our systems and continued need for crude oil to fuel everyday life in North America and beyond. The mainline transported record second quarter volumes of 3.1 million barrels per day and has so far been apportioned for all months in 2024. July volumes are also expected to be strong, and we're expecting apportionment again in August. The utilization year-to-date and the great macro backdrop keeps us confident in our 3 million barrels per day estimate on the main line for 2024 and underpins discussions with customers for expansions in 2026 and beyond. I will also note that this marks our first full year under the new mainline tolling settlement. The agreement has proven to be a win-win-win for us, our customers, and the markets we serve. And as a reminder, we have annual toll inflators for operating expenses and power that were effective July 1st. We are also earning in the upper half of the ROE performance color. In the Permian, we sanctioned 120,000 barrel per day expansion of the gray oak pipeline. following a successful open season this quarter and expect this expansion will come fully online in 2026. The incremental volumes will serve growing demand at our Ingleside facility and we expect the expansion to be capital efficient with an EBITDA multiple below five times. We now have 18 million barrels of storage capacity at Ingleside with an additional two and a half million barrels under construction. Of note, Ingleside also set a quarterly record for exports and saw a single-day loading record of more than 2.3 million barrels. This again underscores our belief that cash flow from that asset will be sustainable and growing for many years to come. Now let's take a look at gas transmission. We optimized our assets and advanced our U.S. Gulf Coast strategy during the quarter. As mentioned on Texas Eastern, we reached and the FERC approved a negotiated settlement with shippers effective October 1st. Base rates are expected to increase by 6% through 2025, with an additional uplift of approximately 3% in 2026. In the Permian, we closed the previously announced acquisition of an interest in the Whistler JV, which brought into service the ADCC pipeline on July 1st. That asset will support US LNG exports to global markets. In addition, The JV recently reached FID for the Blackcomb pipeline after securing firm transportation agreements. When completed in 2026, Blackcomb is expected to add up to 2.5 billion cubic feet per day of desperately needed natural gas egress for our Permian customers. The Venice extension, another project serving LNG exports on the Louisiana coast through the Plaquemines LNG facility, is on budget and on track to enter service later this year. Now let's move on to our gas distribution segment. As I mentioned earlier, we closed the acquisition of Questar and Wexpro at the end of May, and we are well on our way to creating the largest natural gas utility in North America and expect North Carolina to close in the third quarter. As a reminder, each of these utilities have attributes that position us for long-term growth. Enbridge, Utah is a fully regulated gas utility that serves more than 1.2 million customers and we are excited about the data center opportunities we are seeing there. Utah's projected population growth is 5% annually through at least 2028, which we expect to drive rate-based growth for years to come. Enbridge Gas Utah rates are effective until 2026. In Ontario, we have almost 4 million customers and expect residential and industrial growth as well as system modernization will backstop ongoing rate-based growth in Ontario. In Ohio, we have another 1.2 million customers connected to our utility. We expect to continue growing rate-based through necessary investments, which will modernize existing infrastructure, ensuring reliable and affordable energy for our customers. Enbridge Gas Ohio has a rate case ongoing with new rates expected in 2025. All of our utilities, including PSNC, which we expect to close in the coming months, have attractive returns on equity and are located in natural gas supportive jurisdictions. That was turned to the renewables business and we made great progress on the growth commitments laid out at our investor day for that business. We previously announced a plan to develop the Seven Stars Wind Project in Saskatchewan with FID expected in 2025. This 200 megawatt wind farm will have greater than 30% indigenous participation and is backed by government loan guarantees. The project is expected to provide emissions-free power to more than 100,000 Schedule 1 homes and is a great example of how the cross-pollination of our business units is generating growth. Moving on to solar, we expect to complete our investment in Fox World Phase 2 and Q3. Similar to Phase 1, Phase 2 is backed by a long-term PPA with Amazon for 100% of the energy production. We also sanctioned the 130 megawatt Orange Grove solar project in Texas with an in-service expected in 2025. This project is backed by a long-term PPA with AT&T for 100% of the offtake. In our conversations, we're finding more and more that hyperscalers value the reliability, experience, and proven track record that Enbridge brings to the table as a truly diversified energy provider. And finally, FACOMP is now fully operational, supplying nearly 770,000 people with low-carbon electricity across the Seine-Maritimes region in France. With four growing franchises and gas utility acquisitions almost complete, let's take a look at Enbridge's collective offering and why we're positioned to benefit from growing global demand. Our asset footprint makes up North America's first choice energy provider. In fact, we don't just have assets, we have franchises. in each of the businesses where we're involved. Each of those franchises contain super systems, which are integrated value chains connecting the best supply basins in North America to key domestic demand markets and export terminals. Strong relationships with governments, regulatory, and tribal bodies makes us the first choice for energy delivery within the jurisdictions we serve. We have a strong track record of operational excellence, utilizing technology and innovation to drive efficiency. Diversification and asset interconnectivity makes us a one-stop shop, which attracts high-quality customers and partners like AT&T, Amazon, Exxon, BT, Suncor, and NextEra, to name but a few. Lower carbon optionality exists throughout our balanced conventional portfolio, and we plan to focus on investments that match the pace of global energy transition. And importantly, we believe all these growth opportunities can be equity self-funded and through our strong balance sheet and disciplined capital allocation. Scale and connectivity are key competitive advantages that are driving new growth opportunities, so let me touch on those briefly. Our large incumbent asset position allows us to provide differentiated service offerings that is driving value for our customers. It's still in the early innings for us, fully realizing the advantage of our vast position, but we're seeing growing opportunities across our footprint. due to increasing natural gas and renewable power demand and their interconnectivity. As an example, in our gas utility business, data center growth in Utah is being driven by the need for reliable and affordable energy. New this quarter we added 50 megawatts under contract and have numerous additional inquiries to provide natural gas for up to an additional 1.5 gigawatts of capacity. Throughout our utility footprint, we are engaged in additional early-stage discussions with data centers that we expect to translate into future growth. In gas transmission, our assets are ideally located and well-connected. We are within 50 miles of 45% of all natural gas power generation in North America. In fact, in July, we achieved seven of our highest-ever daily deliveries to U.S. power plants from our gas transmission system. We've had a range of customers in the U.S. Southeast expressed interest in securing approximately 700 million cubic feet a day of transmission capacity to serve up to 5,000 megawatts of new gas fired demand. In renewable power, our scale, financial, and execution capabilities are differentiators. Data centers need baseload power solutions, such as natural gas, to support the 24-7 energy demands of hyperscalers. But many customers are balancing that reliability requirement with their renewable energy commitment. It's not always possible to co-locate or develop behind-the-meter power solutions to support new data centers, so we are having discussions with large blue-chip customers to provide traditional and virtual long-term PPAs. Virtual long-term PPAs are where customers may look at signing long-term off-take agreements to support development of clean energy projects to offset emissions produced elsewhere in the business. We have over 2 gigawatts of regionally diverse wind and solar projects and development that we talked about at Investor Day, which are capable of serving new data center load with in-service expectations in 2026 and beyond. The collective strength of our franchises lends well to the growth opportunities in front of us, and I'm confident Enbridge will play an essential role delivering energy everywhere people need it. With that, I'll pass it over to Pat to walk through yet another strong quarter of financial results.

Thanks, Greg, and good morning, everyone. It's been a very strong quarter for Enbridge, and as Greg noted, we had continued high utilization across all of our franchises. Questar closed in May, and we've now brought in roughly 80% of the total annualized U.S. LDC EBITDA in-house. I'll be speaking to adjusted results on this slide, inclusive of the utility acquisitions. Year-over-year, second quarter adjusted EBITDA is up 8%, and DCF per share of 134 includes a higher share count from all the pre-funding of the U.S. gas utilities. Liquids volumes were high across the board, with the mainline transporting 3.1 million barrels per day, a second quarter record. Ingleside also broke its previously quarterly and daily records for export volumes. In GTM, lower operating costs, as well as the Aiken Creek and Tomorrow R&G acquisitions, more than offset the sale of Alliance and Uxable on April 1st. A full quarter of Enbridge Gas Ohio and partial contributions from our Quester acquisition added approximately $175 million of EBITDA as compared to Q2 in 2023. And in Canada, a higher distribution margin and customer additions over the last year helped offset the negative impact of warm weather at our Ontario utility. Below the line, higher financing costs on floating rate debt and new issuances and the higher share count that I mentioned before impacted per share metrics. As you can see at the bottom of the slide, the base business continues to deliver strong financial results. So let's look ahead to how the rest of the year is shaping up. With two gas utilities in the door, all the financing complete and a good line of sight to closing PSNC, we're pleased to be able to recast Enbridge's 2024 financial guidance. We're raising our 2024 EBITDA range to $17.7 to $18.3 billion. This increase reflects partial year contributions from each of the U.S. gas utilities and assumes we close PSNC mid-third quarter. Even with the partial years of EBITDA, and all of the funding completed for these transactions, we're still maintaining our DCF guidance range of $540 to $580 per share. I'm also reaffirming our near-term financial outlook of 7% to 9% EBITDA growth through 2026, 4% to 6% EPS growth, and approximately 3% DCF growth per share. All in all, it's shaping up to be another strong year with Bay's business performing well and great execution on both the closings and the full financing of the U.S. gas utilities. Now let's turn to the balance sheet. In reaction to closing Questar and the progress on the acquisition funding plan, DBRS and S&P took positive actions on our credit ratings during the quarter. DBRS upgraded Enbridge to a low and S&P removed the negative outlook, affirming Enbridge's BBB plus stable outlook. Fitch also reaffirmed our BBB plus rating. While not unexpected, we're pleased to see that the agency's share of you that our long-held leverage target of 4.5 to 5 times is a sweet swap for Enbridge. As we previously communicated, we expect leverage to peak after closing the PSMC acquisition and decrease throughout 2025 as we earn annualized EBITDA contributions from all the utilities. With that, let me move on to capital allocation. Our priorities remain unchanged and we're laser-focused on the balance sheet. We cancelled the remaining ATM this morning as we return to our equity self-funding model. We're well within our target debt-to-EBITDA range, despite only partially EBITDA contributions from our newly acquired US LDCs. The dividend remains a staple of our investment offering, and we're committed to extending our 29-year track record of responsible dividend growth by continuing to grow the business in a very sustainable manner. Our $24 billion of secured capital backlog, which is underpinned by low-risk commercial terms, will be funded entirely through internally generated investment capacity. We plan to deploy approximately 6 to 7 billion per year in growth capital, leaving us another 2 billion that can be allocated towards the next available opportunities, whether that be sanctioning new strategic projects, accretive tuck-in M&A, or debt reduction. With that, I'll pass it back to Greg to close off the call.

Great financial overview, Pat. Thanks very much. Now let me conclude with why we think we're a first-choice investment opportunity. We have a consistent track record of sustainably returning capital to shareholders supported by a visible growth pipeline. This has resulted in an annual total shareholder return of greater than 10% over the past 20 years, and we see no change to that proposition going forward. We expect cash flow to grow 5% over the longer term, and when coupled with a growing dividend, investors are positioned to realize an annual TSR of 10 to 12% for the foreseeable future, supported by our low-risk business model, which includes 98% of our cash flow is generated from either cost of service or take or pay contracts, a customer base that is over 95% investment grade, and 80% of the EBITDA earned from assets with protection against inflation, and our debt portfolio, which is less than 5% exposed to floating rate volatility. In short, we have diversified utility-like cash flows, a strong balance sheet, and visible growth opportunities across each business unit franchise, that will support and extend our 29 consecutive years of dividend increases. We remain committed to continuing this strong track record of returning capital to shareholders and believe it positions us as a first choice investment.

Thank you again, and operator, please open up the line for questions. Operator, please open up the line for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Rob Hope from Scotiabank. Your line is open.

Good morning, everyone. Thanks for taking my call or my question. Maybe to start off with, the Tetco rate case, can you walk us through what the key drivers of the change there are, whether there were some key roadblocks there, as well as what you think it does mean in terms of an EBITDA or income uplift in 2025 and 2026?

Thanks, Rob. It's Cynthia. The settlement, as you know, basically is a black box pre-packaged settlements. So there's a whole bunch of items that came into consideration. So our team at Enbridge looks at what capital we've spent, what our operating costs are, forecasting that out into the future. We also look at what our rates are going to be impacted, have lots of that kind of conversation. So a lot of stuff goes into determining what those components are. And we don't specifically identify any one thing, but what it does allow us to do is to continue to earn that fair return into the future. And basically, as was noted, that's a 6% increase as of October of this year, and then a further 2.75% in January of 2026. So with that rate all in, basically we're in a position to continue to get a fair return The next time we'll go back, we have a moratorium up until October of 27, but a comeback by Q3 of 2030. So we're just well positioned to continue to earn a strong return on those assets.

I appreciate that. And then maybe moving over to the 2024 recast EBITDA guidance range. Can you walk us through the puts and takes there? It does seem like H1 has outperformed expectations, especially on the liquid side, and layering in the Dominion assets gets us towards the upper end of the range. Just want to get a sense of whether or not you've adjusted the other businesses or just layered in Dominion, or are there some specific headwinds we should be looking for in H2?

Yeah, thanks, Rob. It's great. Yeah. This is solely just based on layering in the utilities and assuming that we get PSC here in the next couple of months and the related financing.

As has been our practice, we don't change mid-year the other business units, but you pointed it out well. Obviously, the base businesses are all doing really great utilization, volumes, et cetera, so super strong quarters. So

Yeah, obviously, if you were just looking at the base business, you'd be at that upper end.

All right. Appreciate that, Keller. Thank you.

Okay. Your next question comes from a line of Robert Cotelier from CIBC. Your line is open.

Hey, good morning. Just going to follow up on the utilities here. What drove the decision to use the ATM versus asset sales? And understanding that you're fully funded for the acquisitions, what do you expect in terms of any asset sales going forward, given that you have that ongoing capital recycling program?

Yeah, thanks, Rob. So thanks for the question on that. Here's how we looked at it. You know, obviously we had a super high level of confidence in terms of getting all the utilities closed even a little faster than we had expected. So with that in mind and the fact that we saw the – you know, better economics than what was even in our deal model. We moved quickly, confidently to get all the financing done. So that's done. It may not fit everybody's model, but definitely exceeded the deal's economic assumptions that we had. With that behind us, the ATM terminated. It's really about now focusing on the business, get it at a great price. And, you know, how do we keep moving this transaction forward and combine it with the rest of the assets? And And as you would recognize and definitely didn't overlook, even with all that financing and the way in which we did it, we're going to be well within our guidance range. And as we just talked about, the base business would even look like it's better than that. So great setup on that front. Asset sales, still very much part of what we look at. Let's not forget we did a large asset sale earlier this This year with Alliance and Oxable, but we're always looking at stuff. I wouldn't say there's anything near terms that we have to do, and I think that's the key component here. Balance sheet and get a good position, financing done, businesses all running well. If we do anything significant on the asset sale side, it'll be solely as a result of getting a great price on something.

Okay, thanks for that. And then just on the main line, clearly it's been a good quarter despite the onset of TMX. I have a couple of questions about the near term and the long-term outlook. First, just in the near term, I'm happy to hear your expectations of apportionment in August, but I'm just wondering what you're seeing in terms of risk of producer shut-ins in light of the forest fires. And then if you look longer term, the need for egress in post-2026, what level of political risk do you see there? In other words, do you think the producers are going to need that support that capacity, irrespective of what government is in place in Canada? Or do you think they're probably waiting for the Canadian federal election to get better clarity on carbon prices moving forward?

Hey, Robert. Yeah, it's Colin. Thanks for the question on the main line. Yeah, indeed, it's performing well. Business is good. We are apportioned in August. And I think Greg mentioned we're very comfortable with the 3.0 million barrels per day full-year guide. You know, we're probably... likely to exceed that, all things equal. But you did mention the risk of forest fires. I think that remains a present risk, maybe similar to last year or so. To date, really negligible impact on mainline volumes and basin production. There are active fires in the region, as you know. We're in close coordination with all our producers and have, I think, collectively, everyone's enhanced their investments in mitigation since 2016. But Mother Nature, you know, is there. So we'll watch that carefully through August, September here. But, you know, so far we're looking pretty strong for the year, all things equal. That's the near term. On the long term, I think on egress Greg mentioned, we're teeing up some insurance egress at a minimum. It's likely it will get used in the 2026, 2027 period. We're socializing that with industry. There's significant interest at this time. You know, I think if you look at each producer's book of supply optimization, debottle-necking, and modest kind of modular growth. I think that's all that's announced by each of them, and we track it bottom-up and top-down. It's likely to proceed kind of irrespective of any administration. It's all manageable and I think will fit within climate policies as stated. There's potentially upside to that, I think, if things change. and we'll be on top of that. I'm not really that concerned with egress, bottlenecking, a here-again industry, and collectively has a good beat on that and virtually there to serve as we've done the last couple of decades.

Okay, thanks for those answers.

Thank you. Our next question comes from a line of Ben Tham from BMO. Your line is open.

Hi, thanks. Good morning. It's all on the data center comments and that slide you had with the map and the blobs there. Could you comment on which business segment you expect to see the best risk-reward or highest investment opportunity? And are you indifferent somewhat to where you're allocating capital towards that growing opportunity?

Yeah, good question. I think they're all going to benefit, maybe not liquids as much, but it's got its own great opportunities. Probably the initial phase you see is GDS, and you saw we announced one today, and Michelle and the team there signed up a 50-megawatt lateral for a 50-megawatt plant there. So I think that's probably the easiest move right away. But gas transmission has a lot of opportunities, too. You know, as I mentioned during my open comments, there's 600, 700 a day of requests for capacity in the southeast. You know, some of that will be cool to gas changing, but a lot of it's data center driven. Things like storage, obviously, that exists both in GTM and in GDS. And then let's not forget Matthew's business on the power side. And obviously data centers, a lot of those folks are trying to meet, just like a lot of other folks, their lower emission goals. And so while they may like the gas for the reliability side, they'll help fund some of these projects with very long-term contracts, kind of like what you saw today. In terms of which ones get the capital... That's a classic risk-adjusted return basis. Obviously, very, very safe capital that goes into the distribution business. If you've got long-term power purchase agreements on the renewable side, same thing. And obviously, there's a tax kicker there that we like. And then GTM, same thing. So they all have great returns on the equity portion. And then it's a classic discussion of how fast, how quick-cycled the capital can be and the quality of the off-taker. So I think the key is, unlike anybody else, we have an opportunity to play in all elements of that. So when you look right across the entire system, liquids demand is up. Natty is up. Electrons are up. If you look at the supply side, the same thing. Liquids are up. Natty's up. Electrons are up. And if you've got linear infrastructure and all those pieces, you win. I think you'll increasingly see us use that interconnectivity to give exactly what our customers want and something that's a differentiated offering from what anybody else has, all of which is a great setup for us to allocate capital to those best opportunities.

That's great context. Thank you. And maybe a second question on the U.S. gas utility acquisitions out here. you're closing or soon to be closed, all of them. What's in your term focus or initiatives, those buckets? And can you comment on that 8% rate-based growth, the visibility or expectation on how long that could persist?

Sure. Michelle's here, so I'll let her respond. Sure. So, of course, initially, we're really focused on integrating the utilities into gas distribution and storage. We stood up at an organization to do that even before we announced the deal, and we've been very focused on it. We've brought in Ohio now in March. We've brought in Utah with that Idaho, Wyoming, and, of course, the Wexpro assets in June. And that comes with 2,500 employees. That comes with almost 2.5 million customers. And it's gone very, very smoothly so far. And you'll recall that we have a lot of experience in doing this with the union partners Enbridge Gas merger that we did in Ontario. So feeling good about that. We've got about 30 months to work through our TSA with Dominion Energy, so lots of support for them. Of course, the first thing we've been doing is we've been bringing these utilities in and being able to look under the hood a bit more is really testing and understanding those growth opportunities. And I've got to tell you, I still really love these utilities. I love the diversification of the growth that we get from these utilities. So I Ontario, and let's not forget about Ontario. Ontario is still going strong with its economic growth, about 40,000 customers a year that were signing up there. Utah, Greg mentioned it in his overview, top tier population growth, about 5% annually through 28. So they're attracting well over 20,000 customers a year. And then along with that rate-based growth, Utah has regulatory-approved rider programs that support things like rural expansion. And of course, we just talked about the data center growth that they're seeing along the Wasatch Front. Similarly, Ohio, great growth that's driven primarily through their rider-eligible modernization program. Lots of work to do there to upgrade those systems. But again, that's going along really smoothly. And I'm quite confident we'll be just as pleased with North Carolina. So the growth projections we've given, we feel very, very good about for the next several years.

Yeah, I think that 8% CAGR on the rate base through 27% doesn't really take into account the data center stuff, because that was all early days. So, you know, anything we get on that front will be additive. So, and I like, equally, so it's not just, the rate-based growth is different in each area, which I think underlines the ability, depending on where you are in the cycle, it might be modernization, it might be growth, it might be data center new builds, maybe changes from coal to gas, all of those pieces. And then

Where can we utilize gas transmission and or power to help the utilities or vice versa?

Okay, got it. Thank you.

Your next question comes from the line of Jeremy today from JP Morgan. Your line is open.

Hi, good morning.

Morning.

We've heard a lot about data centers south of the 49th parallel. I'm wondering if... Do you see anything percolating north of the 49th parallel that you could capitalize on?

Yeah, it's Michelle here. So let me talk about Ontario a little bit. And for some of you who may have seen it, I've been told that the grandfather of AI is out of the University of Toronto. And more recently, I heard a statistic that there are over 250,000 jobs in Ontario tied to AI, in fact, more than in Silicon Valley. Without question, there's a lot of inbounds going on in Ontario right now about data center growth. I think the ISO is taking a good hard look at things. We know there's a certain amount of, let's call it, forum shopping that's going on, seeing where they can get that. But certainly in the GTA, in particular the Southwest GTA, lots of inquiries about data centers. And given the timelines to build transmission and other support, they're absolutely going to be opportunities for behind-the-meter support that we can give on the gas distribution system.

Kind of analogous in Ontario to how we've seen the greenhouse business change over the last 20 years, right? Good land, good location, great access to obviously gas infrastructure, nearness to the border, et cetera. So I wouldn't be surprised to see maybe not the same kind of explosive growth that we've been able to see on the greenhouse side, but definitely a good setup.

Got it. That's very helpful there. Thanks. And then just looking at the main line and looking forward a bit more, just curious for any other color that you could share in particularly looking even later dated. I think in the release talked about conversations with regards to incremental egress opportunities. Just wondering if you could expand a bit more on what you see there.

Yeah, sure. Indeed, I think with with the strength in supply growth and appetite to get to U.S. markets continually and the bid pulling it that way. Industry is casting its eye to the future, like your question. Indeed, we are designing and socializing, as I mentioned, an expansion of the mainline In that late 26, 27 period, it would be very capital efficient as our historic expansions have been. This would be in right away, very brownfield, more optimization than expansion, so to speak. But we would be looking to add circa 150,000 barrels a day. I think it would be quite executable. and very economic for industry. So I think that's the next major tranche of egress expansion we have on deck there, but there's also continuing optimizations like we do every month and have for decades. So like I say, I think if you're looking at... you know, things like basis differentials and things, you know, I'm not that concerned that they're going to blow out again. I think there's going to be solutions at the ready here in time.

Got it. That's very helpful. Thank you.

Your next question comes from the line of Manav Gupta from UBS. Your line is open.

Thank you, guys, and positive updates on the data center side. Can you just go back and talk a little bit more about the that you announced last quarter, you know, with MPLX, Whitewater, and the benefits of that going ahead. Also, you guys have a track record of, you know, eventually becoming the operators of assets like Grey Oak. So would there be a desire to eventually operate this from the Enbridge side?

Thanks for that. It's Cynthia. Yeah, we're very pleased with the investment that we made in Whitewater. As you know, we have 19% of those assets, and of course that includes 100% of the Whistler pipeline that provides an incredibly important egress from the Permian, as well as 50% of the Oaxaca gas storage, and then 70% of the ADCC pipeline that just went into service on July 1st. You know, we have with the announcement of the Blackcomb expansion, that's the kind of expansion that we were really excited about and it's coming to fruition in a very short period of time. They're great assets, they're great operators, we're happy to be a part of that. We see future opportunities for growth, of course, you know, now that we're just a minority interest in that, but We have as part of that our Rio Bravo pipeline is now going to be operated and constructed through Whistler. So these are all great assets. We're happy to work with our partners on that. It allows us to fully participate in that Permian expansion, something that we've looked at for a long period of time. Now the future I think is very bright. We'll continue to have opportunities to participate there. and, you know, looking for future opportunities in that space.

Yeah, I think well said. You know, we're good JV operators, too. We've had a long history of working in JVs with great partners. Those are great partners.

So, you know, I think the future with the structure that exists there today is going to deliver a ton of value, and it's been a great job to team putting it together.

Thank you for the detailed response. I'll turn it over. Thank you.

Thanks.

Your next question comes from the line of Robert Kwan from RBC Capital Markets. Your line is open.

Thank you. Good morning. If I can just start with your strategic priorities and just what do you see as the top two or three over the next 12 to 24 months, but can you also specifically comment on whether there are any large projects that you haven't announced yet or other major asset bases or platforms that you feel are important to execute on your strategy that you need to action on that in that similar time frame?

Well, here's the first three I'd give you, Robert. So the first one is, as always, and we're doing it and you see we've made some adjustments this year, is getting most out of the base assets that we have. How do you get the return on the capital that you already have employed improved? That's exactly how you get a percent or so of growth out of constantly doing that. We've got a great track record and very focused on that. So that's number one. Number two, integrate the utilities that we've just bought, both from an operational perspective, but also what other opportunities could exist there commercially, et cetera. Number three, we get $25 billion of projects, which maybe gets to your second question as well. $25 billion of projects that we're executing, 18 or so of which are in the power and gas side, that's a huge element because that's all about future growth. And doing that all within our ability to keep the balance sheet between four and a half and five times, that's the primacy out there right now. So those are what I'd say the top three things to focus on right now, and that's a handful. We're always looking for additional new projects. I think as Colin's just laid out, as Cynthia's laid out, and even if you look at both the renewable backlog as well as the utility businesses, Those don't have massive projects. They've got real value-added projects at relatively low builds. So, you know, you're doing things in JVs, whether it's whitewater, whether you're adding incremental egress that is actually low multiple builds or things like the gray oak stuff we're doing on the Gulf Coast, or quick cycle capital that we're seeing at the utilities. You know, a billion and a half or so going to maybe $3 billion that you can turn quickly

that's better than actually focusing on a $10 billion project that may take 10 years to build.

And then, of course, Matthew's got the same thing. You know, got out and bought the TGE assets, and that actually accelerates the growth pattern for renewables and, you know, not having to wait the six or seven years there. So I think it's a lot of singles and doubles that add up to a big home run for the corporation.

Got it. Thanks. And if I can just finish to better understand or more color on your guidance. First, just on the main line, you mentioned 3 million barrels a day. You did 3.1 in the first half. So does that imply 2.9 in the second quarter? And you can also say just what you are moving right now or what you moved in July, but just also as you get to DCF per share. Can you just talk about any of the adjustments to your original guidance or can we just take the base business? reconciliation in the report and effectively annualize the quarter to get to some of the DCF changes.

Yeah, so Robert, it's Pat. I think on your volume question, I think Colin even mentioned that, you know, really confident with the 3 million barrels, probably even a little bit of upside there given where we're at today. Remember, there is a bit of seasonality in the main line and that heat restriction and stuff sometimes causes come down a little lower in that kind of July, August, September timeframe. So, We'll see a little bit of that. That has nothing to do with either demand, pull, or supply kind of push. It's just the way the pipeline operates. But feeling really good about that $3 million and even potential upward from there. I think the way to think about the new guidance or the recast guidance is that we really just layered on the utilities. So the EBITDA, the partial years of EBITDA from each of them, and then all of the financing that we did to kind of de-risk the funding plan over the last 12 months. So from a DCF perspective, it really is just taking the extra shares and the hybrids and debt that we issued and layering that onto the base plan. It's kind of as simple as that. And, I mean, I think it's a really good data point that, you know, we've mentioned, Greg mentioned we should be in that upper part of the EBITDA guidance, but that's what gives us a lot of confidence as well, that we'll be in that kind of midpoint of our new DCF guidance range, even with all the pre-funding we did. Because we knew... with partially your EBITDA, that that would bring that down a bit. So really pleased with the new guidance levels and the way the business is performing.

Okay. But just on your reconciliation, we can take the maintenance capex in the quarter for the most part and annualize it. It looks like there's absolutely no tax, incremental tax involved.

Yeah. No meaningful cash tax from the transaction, as I think we mentioned originally. And from a maintenance cap, it will be a little bit more in the back half because, of course, we didn't add Utah until, what, beginning of June. So we only have one month in the quarter for that. And then, of course, we're going to add PS&C. It's the smallest of the three utilities. We've already got, what, 80% of the cash flow in. But there will be a little bit more uptick in the back half of the year just because we'll have basically all three for almost the full back six months.

That's great. Thank you. Thanks, Robert.

Your next question comes from a line of Keith Stanley from Wolf Research. Your line is open.

Hi. Good morning and congrats on a smooth process getting the guest LDCs done. I wanted to ask on the Ohio rate case that you're in right now, just any impression of the staff rec that came out, and then your level of confidence and visibility on reaching a settlement and constructive outcome there?

Sure. It's Michelle here, Keith. So, as you noted, the staff filed their report in July. It's really not unusual for the regulator staff responses to be different than what we would file in our initial rate applications. As you note, I think the PUC in Ohio definitely has a preference to settle, and we certainly think that we should be able to do that with them, and we're looking forward to working with them on that agreement. I would say that we expect a final determination that will take several months to negotiate it. It should be something that gives us an opportunity to earn a fair return. And we definitely expect it to land within the model that we set for the transaction itself. So we're quite confident that we're going to get there.

Great. Thanks. And then in a prior question on strategic focus, I don't think you listed M&A as one piece of that strategic focus. Is that still on the back burner with the gas LDCs pretty much done now? Or do you think there'll be opportunities over the near term that could make sense?

Well, look, I mean, we always look at M&A. It's always, you know, given the size of the entity and how far and how many different businesses we're in, both on the buy and the sell side. But I didn't focus on it because I don't see anywhere, as you just stated, something like the utility acquisition. You know, that size of transaction, obviously, kind of once in a decade type opportunity. So, yeah, we'll look at that again, both on the buy and the sell. But I see that very much in the

the phrase that we use, the tuck-in size, that wouldn't be anywhere material like the utility side of things.

Thank you.

Your next question comes from the line of Theresa Chen from Barclays. Your line is open.

Good morning. Just to dig a little deeper on the block home discussion. So with the FID, can you remind us if there were any downstream synergies to tie into your existing Texas transmission or storage assets? And I understand you're a minority and a new partner or newer partner in this JV. Just looking at the future of the Permian, going back to some of Cynthia's comments, the visible gas growth and what seems to be a need for a greenfield pipe maybe every two years, can you share why you think Blackcomb was the winning project given many projects in competition, and with this commercial win, how the partnership is set up to grow in the outer years, given the visibility for additional gas and breath demand out of the basin.

Yeah, thanks, Teresa. As you mentioned, Blackcomb is one of the winners in that space. I think, you know, One of the reasons that the JV with Whistler is set up to be successful is that they have a really strong track record of delivering on-time, on-budget projects there. So I think that probably is something that's one of the reasons we were attracted to entering into the JV and I'm sure that that was a contributing factor for why they were successful or were successful with Blackcomb. You know, as you look at the timing of it, it's something that because it's an intrastate pipeline, they're able to execute quickly. So the completion date for Blackcomb is, you know, in the second half at 26. That's fantastic. You know, for commercial reasons, any specific questions need to be directed to Whitewater as to what their future is. But from our point of view, they're very well positioned to continue to expand in the Permian. For the infrastructure, as it ties into us, of course, we have a very significant presence in that Aquadulce area with their infrastructure there. And it's great just to see more and more investments and more volumes flow in. So I think that that all bodes well for our overall infrastructure in that area. But it is, again, one of the reasons why we are so excited to execute on this transaction and be part of the joint venture. There is a very strong operating history for Whistler, and they are very well positioned in the Permian to continue to expand.

You know, Teresa, I'd only add that this is kind of a copy-paste of the super system built on the liquid side, right? First entered into Hingleside and then a bunch of JVs and things like Grey Oak and Cactus 2 and stuff, all to feed back into what customers want, an integrated system back to the Permian. And I think as Cynthia just went, whether it's the JV or additional assets, it's optionality. And that's what we're trying to build down there. That's what customers want. And I think that's a winning combination, which you're seeing play out.

Thank you. And turning to the liquid side, the contribution from other systems seem pretty strong over the last two quarters. Real, you know, step up since last year. Is this a new normal range at this point? Are you still seeing, you know, strong utilization of ExpressPlax, for example, even with narrowing WCS during the quarter? And how should we think about that line?

Yeah, it's Pat here. Yeah, I think you're seeing really good performance out of assets like Express Plat, out of the Bakken system. You also have the Southern Lights in there and the new accounting around some of that. But generally, they've all been operating kind of in line with our expectations, but, you know, a little bit better than the prior year. So we continue to see that being, you know, around the track record. You see, I think, in fact, I think the sum of the two quarters is almost exactly the same. So that's a pretty good run rate as we move forward here. Colin, I don't know if you have anything to comment on Express additionally.

Yeah, I mean, business is good across all three basins we're in, Canada, the Bakken, and the Permian. I think records set kind of on a quarterly basis here again. Oil's on. And I think you can count on this generally We're not giving guidance today for next year, but it's strong.

Yeah, volume up, demand up, need for infrastructure up. We already got it in the ground.

I think you can continue to see that happen.

Thank you.

Thanks, Teresa.

Our next question comes from a line of Praneeth Satish from Wells Fargo. Your line is open.

Thanks, all. I guess first on data centers with the emerging opportunities in the LDC segment, just two questions here. First, how are you assessing the CapEx profile for the LDCs? Does the increase in demand for data center connections, does that impact the $1.7 to $2 billion per year of LDC CapEx that you previously highlighted? And then second, how do you see support for data centers evolving from both regulatory agencies and also just public perception as it relates to rates and grid stability.

From a capital profile, I think it's a little early to say that it's going to be significantly more than that in the next year or two here, but we see some more opportunities. There's probably upside to that number. I think the important part in my mind is that Greg and Michelle both talked about the diversity of capital and the way it grows. and the way that we can use riders to get the return on that as quickly as possible. I think this adds one more diverse growth factor in many of the regions we're in. So I don't think we're at the point yet where we would adjust up that guidance that we were speaking of, but I think there's an upward bias for sure as a result of what's going on. And maybe Michelle can speak about the cost and those discussions.

Yeah, you bet. I mean, it certainly is. We would see it as upside. It's not something that we had in our model. And I think it's important to note, too, Utah and North Carolina, Ohio, they do have extensive use of the riders. But Utah and North Carolina go in for rate cases every two to three years as well. So it's very quick cycle capital as that comes. And if things start to shift, we'll be able to get that capital in there. And there is, particularly in Utah and North Carolina, a lot of demand for data centers. Ohio, we're a little... a little on the edge of where the demand center growth is, but we would see that demand backing up into our regions as well. And then with Ontario, of course, we have our ICM, our Incentive Capital Module, that we're in the middle of working through the face-to-air rate case to work out right now. So all of them we would see as upside. In terms of what the regulators are thinking about it, I do think that the regulators are trying to understand what, if any, policy decisions they need to make with regard to data centers. It is a different type of growth and demand on the system in a world where there's all sorts of demand for that reliable energy and reliable electricity. So again, though, that's where our natural gas system really steps in to provide that support for that resilience and reliability and affordability that those data centers are looking for, not to mention, as we've talked about on the renewable side's as well, so we feel extremely well positioned with it.

Yeah, we may, you know, look, we often talk about being first choice for customers, but also for regulators and policymakers. I mean, one of the ways to deal with if there are concerns about that from a rate perspective is you do it through GTM, and, you know, you build a lateral there and storage, which is more on a contractual basis, as you know, doesn't hit others. I think the key here is you want to have lots of tools, and we have them, and you want to be in a lot of jurisdictions, I know a lot of discussion about Virginia being a great place for data set. That's true. It's also a highly dense population area where, you know, Utah and parts of North Carolina may not be the same and are also hugely known. You know, Utah is the Silicon Slope and obviously the technology triangle in North Carolina, too. So there are more places to be able to build, and if you're in those locations, you've got the opportunity. So I think it's what Colin often called the – the liquid system a bit of a tool and a, what do you call it, kind of knife? A Swiss Army knife, there we go. So I think that's the same thing right across the entire system. So yeah, game on for us.

Yeah, that makes a lot of sense. And just quickly on mainline, you know, with it being apportioned every month this year, can you help quantify how much headroom is remaining within the ROE collar? I know you said you're earning in the upper half, but I guess I'm just curious how close you are to the ceiling and whether you're on pace to hit the ceiling if current market conditions persist.

Yeah, thanks. So I think we are just above the midpoint of that in 2024. I think 2025, we're probably a little higher yet. And in 26, we're probably approaching the top. So it's all working kind of as intended. um, it's, it's a win for, for everyone here. We're moving a lot of volumes, keeping, um, keeping attractive economics for, for all our customers.

Got it. Thank you.

Your final question comes from a line of Patrick Kenny from national bank financial. Your line is open.

Yeah. Good morning. Uh, just to follow up on the discussion around further asset sales, um, outside of receiving an attractive financial... I'm just wondering if, more so from a strategic standpoint, if you're still actively pursuing additional minority sell-down opportunities with Indigenous groups, and if so, which regions or franchises might you be keen to execute partnerships for, similar to your deal that you did on your oil sands pipelines?

Yeah, for sure. Look, I think we've... One of the trailblazers on that front You just saw this quarter we announced not a sell-down, but a go-forward project in Saskatchewan that, you know, very much a collaboration between the renewables group and the liquids group. You know, we've always talked about other opportunities on the liquid side. I know Cynthia and her team are looking at that as well on the gas side. So I think right across the board, yeah, that's different than saying selling an asset is to raise funds. We don't need to do that. This is really, when you do those, it's about relationships, about doing the right thing. It's about future opportunities. And, you know, there's a lot of stakeholders to deal with. And we believe that, you know, if you do these transactions wisely, with respect and the heart of reconciliation, that's going to help you in the community overall. That's going to help you deliver on those projects, and all that is value-adding to Enbridge's proposition. I don't know, Tim, if there's anybody else that wants to... Well, yeah, we've said this before.

With all the work that we're doing in British Columbia, it's obviously an area that we're looking at. We have recently filed with the CER an opportunity to allow us to do that in British Columbia with our West Coast system. It's something that we're always actively looking at to make sure that we can support the indigenous economic reconciliation.

If you're keeping track, we've got four announced co-investment partnerships now, right? East-West Thailand and Ontario, Northern Alberta on a liquid system, the Carbon Hub near Edmonton, and the Weyburn. So that's lost track, but there's three or four different asset classes there. You're probably looking at it from a financial lens, but if you haven't checked it out, we've got a published Indigenous Reconciliation Action Plan on our website. Economic participation is a major tenant of that plan.

Okay, that's perfect. Thanks for that. And then maybe on Ingle's side and the record exports there in the quarter, just wondering if you could provide any information additional color on the contracting profile of the facility and perhaps an update on how your volumes might be protected from competing export terminals potentially coming online along the Gulf Coast, as well as how we should be thinking about further upside and throughput based on some of your near-term initiatives underway.

I'll try to abbreviate the answers a lot in there. Listen, I think we feel really good about our position there. It's the number one market share terminal in the U.S., and it's advantaged, as we've talked about, in many respects. So customers want to come there. We've been quite busy there recently. The trends are encouraging. There's another million barrels a day of Permian volume coming. I think we'll capture our share of that given that advantage. Here's a stat for you. The facility to date has moved 3 billion barrels of oil off the dock. It's a major and central part of the plumbing in the Permian. I think it's going to endure. We have life left on our contracts here. And, you know, as we look at, I guess, competitive situations there, and I'm not sure which competitors you're referring to, but essentially you're thinking about offshore bullies that, you know, are conceptually out there. I think we're going to compete fine with them. I think if they do come into play, I think the smaller, older... less advantaged terminals may lose some market share there. So we think we're in pretty good shape here. We're going to grow this. It is the Swiss Army knife, and we're also going to bring other commodities to this facility for the same advantages it has in crude.

That's great, Colin. Thank you very much.

And that concludes our question and answer session. I will now turn the call back over to Rebecca Morley for closing 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.

This concludes today's conference call. Thank you for your participation. You may now disconnect.