Enbridge Inc

Good morning, and welcome to the Enbridge Third Quarter 2024 Financial Results Conference Call. My name is Rebecca Morley, and I'm the Vice President of Investor Relations. Joining me this morning are Greg Ebel, President and CEO, Pat Murray, Executive Vice President and Chief Financial Officer, and the heads of each of our business units, Colin Grundy, Flixbus Pipeline, Cynthia Hansen, Gas Transmission and Midstreams, Michelle Heritage, Gas Distribution and Storage, and Matthew Ackman, Renewable Power. At this time, all participants are in 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 would like to withdraw your question, please press the pound key. Note that this conference is being recorded. As per usual, 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 to roughly one hour, and in order to answer as many questions as possible, we'll be limiting questions to one plus a single follow-up if 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 help you. As always, our investor relations team will be available following the call for any follow-up questions. On to slide two, where I'll remind you that we'll be referring to forward-looking information on today's presentation and Q&A. By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filing. We'll also be referring to non-GET measures summarized below. And with that, I'll turn it over to Greg Eagle.

Well, thank you, Rebecca, and good morning, everyone. Thanks for joining us on the call today, and I'm pleased to be here to recap another strong quarter. Before I get into the quarterly update, I want to acknowledge everyone affected by the devastating impacts caused by Hurricane Helene and Milton. We extend our sympathies to our partners, our customers, and the communities impacted and wish to reiterate Enbridge's commitment to support during this challenging time. While we've seen limited interruption of our operations and no material financial impact, safety remains our number one priority in ensuring communities have safe and reliable energy necessary for everyday activities. Now onto the quarter. I'm going to start by sharing some highlights for Q3, and I'd like to spend a minute or so highlighting Enbridge's value proposition and how we are positioned to return capital to shareholders. in all market cycles. I'll then review how Enbridge is ideally situated to serve increasing gas demand stemming from data centers, electric power, LNG, coal retirement, and industrial growth. I'll also provide updates from our business units before turning it over to Pat. Pat will walk you through our third quarter results, key drivers, supporting our reaffirmed financial outlook, and our capital allocation priorities. I will then close with a few key messages and highlight some important events coming up on the calendar. Following our presentation, the Enbridge management team will be pleased to answer any questions you may have. Throughout the third quarter, our assets again experienced continued strong utilization across the business, which drove solid financial results. We were well-positioned to deliver full-year results near the top end of our EBITDA guidance. On DCF per share, we continue to expect to be near the midpoint of the range, despite fully pre-funding the utilities acquisition before they're closing. Our leverage is within our target range of four and a half to five times that to EBITDA after closing PFSE, and we expect to trend down over the next few quarters. With the acquisitions closed and the funding completed, we have successfully concluded the acquisition of three US gas utilities, which perfectly fit Enbridge's low-risk business model, and so we have returned to an equity self-funded model. This has been a well-executed major transaction that investors will benefit from for years to come. In liquids, we closed the previously announced acquisition of additional docks and land adjacent to our state-of-the-art crude export facility at Ingleside. We continue to see high utilization and expect to unlock future growth opportunities there. the businesses, we're on track to place $5 billion of secured capital into service in 2024. On growth, the team has done a great job, and I'm pleased to highlight four new and creative investments in growth. In gas transmission, we further executed our Permian strategy by acquiring a 15% interest in the highly contracted TBR gathering system. The action to enhance our natural gas value chain and serve as a key feeder system for the Whistler pipeline. In renewable power, we sanctioned Sequoia Solar, an up to 815 megawatt project in Texas. Sequoia is backed by long-term PPAs with AT&T and Toyota for the vast majority of production. We're also excited to announce participation in the third and final phase of Fox World Solar, following its successful completion of the second phase during the quarter. In gas transmission, we also sanctioned offshore oil and gas pipelines to serve BP's new deepwater U.S. Gulf of Mexico development. All in all, we've added $7 billion to our secured growth program so far this year. As you can see, our scale and connectivity continue to provide competitive advantages in sanctioning new opportunities. This growth in our business continues to underpin our stable and growing dividends. At Enbridge, We have built a low-risk business that is designed to succeed in all market cycles. This is how we've been able to deliver growing dividends for 29 years, making us one of the very few dividend aristocrats. Looking longer term, we expect to steadily grow the business by 5% annually and will remain financially disciplined to support sustainably returning capital to shareholders. Enbridge offers an attractive dividend yield which sits above the returns of many alternative investments. The Canadian and U.S. 10-year treasuries are sitting at about 3% and 4% respectively, while broad equity indices like the TSX-60 and the S&P 500 are at approximately 3% and 1% respectively. It's worth noting key drivers that enable us to be considered a dividend aristocrat and underpin that 29 years of dividend growth. Our highly contracted cash flows experience minimal volatility, allowing us to predictably pay and grow the dividend. Investment grade credit ratings across the four major rating agencies highlight the strength of our balance sheet and the low-risk nature of our businesses. We have negligible commodity price exposure, which sets us apart from many of our midstream peers. And in Oniva dog growth, we expect that to be higher through the next few years at 79% due to base business performance, new assets entering the service, Kentucky M&A, and contributions from the acquired utility. Enbridge outpaces Canadian large peers by making up approximately 10% of the total dividends paid by the TSX-60 companies today. All told, our business is designed to succeed in all market cycles and deliver predictable results. Despite a volatile world, Enbridge is seeing increased visibility of our long-term growth, supported by strong energy infrastructure fundamentals, and in particular, rising power demand. Enbridge is well positioned to serve increased gas and power demand over the next decade. S&P is forecasting up to 20 BTF per day of incremental gas demand growth by 2030. We are ideally situated to participate in new growth opportunities related to this increased demand. Our gas footprint is within 50 miles of approximately 45%. of all gas-fired generation in North America today. Importantly for investors today, we are already sanctioning additional growth opportunities to support natural gas power demand, like our Tennessee Ridgeline project, where we're investing $1.1 billion U.S. to expand our East Tennessee pipeline to support TVA's planned retirement of nine coal-fired units in favor of 1.5 gigawatts of gas-fired generation. Our utilities are situated in high-growth power markets, with North Carolina being a top destination for onshoring due to its affordable power and favorable corporate tax rates. In that regard, Enbridge Gas North Carolina is investing $600 million U.S. to expand our gas line to serve Duke's Roxborough Gas Fire Generation Plan, which will have capacity of at least 1.4 gigawatts. We also have exciting developments within our renewable segment with over 2 gigawatts in development or under construction across the U.S. Beyond the electric power sector, we own over 620 PCF of strategically located natural gas storage, and this position is growing. Our portfolio represents 25% of U.S. Gulf Coast deliverability. And we own the only underground natural gas storage facility in British Columbia, which Of course, our great big storage position of 300 BCF at Dawn is a critical hub for North American natural gas users like power generators and utilities and continues to expand each year. Dawn represents over 20% of deliverability in the region. On the LNG front, our pipelines are strategically connected to more than 30% of existing and announced LNG export capacity and will continue to serve global demand growth. We also have a preferred interest in wood fiber LNG, which is expected to be the world's first net zero export facility through utilizing hydropower and is expected to produce 2.1 million tons per annum. Now let's jump into the exciting updates in each of the business units, starting with liquids. Mainline is on track to exceed our full year forecast of 3 million barrels per day. The system was in apportionment in July and August. And we continue to see strong customer demand, evidenced by the fact that the main line is back in apportionment for November. We're advancing discussions with customers for additional Western Canadian sedimentary basin pipeline capacity in 2026 and beyond. You should think of these as brownfield opportunities that would be very capital efficient and provide customers with critical insurance egress to deliver barrels to downstream markets. As producers grow into available egress out of Western Canada, we've also recently started advancing a number of capital-efficient, low-multiple expansion opportunities on our regional oil sands pipes. In the Permian, we continue to see strong volumes this quarter. At Ingleside, we set a single-day volume record of 2.6 billion barrels and a monthly average record of 1.2 billion barrels per day. It's noteworthy. Ingleside recently hit 3 billion, with a B, barrels of volumes exported, underscoring the competitive advantage of the facility and strong customer demand that attracted us to the purchase of the facility in 2021. We are seeing continued growth there, with 2.5 million barrels of storage under construction within service expected in 2025. We also closed the acquisition of new docks and adjacent lands at Ingleside, which will provide further growth opportunities and allow us to optimize existing dock capacity. Work is already underway to integrate these new assets. And now let's look a little bit deeper at our gas transmission business. I'm excited to highlight how we are connecting new supply to key demand centers and extending our Permian natural gas value chain. We thank you close to a billion dollars in offshore pipelines during the quarter to serve BP's new deep water development plans in the Gulf. These pipelines strengthen and diversify our offshore business while expanding our footprint in the region. Backed by long-term contracts, with in-service expected in 2029, adding secured capital to our backlog at the end of the decade. We acquired a 15% interest in the DVR system. It extends our natural gas value chain and further demonstrates strategic value and growth opportunity being unlocked through the Whistler JV we announced earlier this year. As a reminder, we also previously announced sanctioning the Blackcomb Pipeline, which will add up to 2.5 billion cubic feet per day of egress for our premium customers and serve growing natural gas demand in the area in 2026. We are progressing a development of 6.5 BCF expansion at our Trace Palacios gas storage facility, which we acquired in early 2023 at an attractive price. Demand for recontracting strategically located asset, providing accretion beyond our original model expectations. The Venice Extension Project, which serves Venture Global's Blackman's ONC export facility, is now flowing gas, and we expect it to be fully in service by year end. So now let's move on to our gas distribution segment. As I mentioned earlier, we have now welcomed all three U.S. gas utilities into Enbridge, and I couldn't be more proud of the team's dedication commitment to execution. We are now the largest natural gas utility in North America, delivering over 9 billion cubic feet per day and serving approximately 7 million customers. The team has been hard at work integrating each of the utilities, and we expect that to continue in the months ahead. But there are four utilities now in-house. I thought I'd spend a minute highlighting the key growth drivers across the franchise. In Ontario, We expect new customer hookups and additional power generation to drive growth, including new investment in storage and transmission. The utility has a strong track record of predictable growth and consistent returns. The Ontario government just released their long-term vision for the province's energy industry and future in response to the ISO's updated demand forecast, which predicts a 75% increase in electricity demand by 2050. We are pleased to see the Minister of Energy acknowledging the vital role natural gas plays in Ontario's first integrated energy resource plan to ensure customer affordability and reliability across industrial, residential, commercial, and agricultural sectors. In combination with the ISO's forecast, we believe that Enbridge Gas Ontario is primed to benefit from major tailwinds of gas demand. The province is procuring up to 1,300 megawatts of new gas fire generation and have reported that there are over 7,000 megawatts of data center interconnection inquiries across more than 30 unique sites. In Ohio, growth will largely be driven by pipeline replacement, modernization, and system enhancement under programs such as the Pipeline Infrastructure Replacement Plan. Over 80% of capital spent in Ohio is expected to be fixed cycle under these rider programs and provide attractive risk-addressing returns. That said, we are also evaluating opportunities to serve new demand related to data centers and natural gas power plant expansions. Growth in Enbridge Gas Utah will be driven by increased population, new data center power demand, and modernization of the system. We're excited about the data center opportunities we're seeing there so far. We've recently contracted supply to serve 200 megawatts of power for data centers and are evaluating inquiries for another 600 megawatts. Finally, Enbridge Gas in North Carolina has a very healthy population growth and will be expanding to serve Duke's 1.4 gigawatt Roxborough Gas Fire Generation Plant, which I mentioned a few minutes ago, and constructing a 2-PCF LNG facility for system reliability. as the state is positioned to be one of the primary beneficiaries of industrial growth from onshoring of manufacturing in the region. Overall, we see an average of 8% annual rate-based growth across our U.S. gas utilities over the coming years. Now let's turn to the renewables business. Our strategic and disciplined approach has resulted in sanctioning additional growth with Blue Chip Partners. We're excited to announce that we've completed Phase 2 Fox Coral Solar Project. Phase 3 is under construction and is expected to be in service by year end. Consistent with the other phases, Phase 3 is backed by a long-term PPA with Amazon for 100% of the energy production. We also sanctioned the approximately 800 megawatt Sequoia Solar Project in Texas with a staggered in-service date expected 25 and 26. This will be one of the largest solar facilities in North America by capacity and is backed by long-term PPAs with AT&T and Toyota for substantially all of the production. This marks further execution on the opportunities laid out at Investor Day as we develop two gigawatts of renewable projects in service days by the end of 2026. Our customer relationships and discipline track record development and contracts should allow us to continue delivering solid growth in this segment with strong risk-adjusted returns. With this, I'll turn it over to Pat to discuss our third quarter financial results.

Thanks, Craig, and welcome, everyone. Continued strong demand across our asset base drove record third quarter EBITDA, and we earned DCF per share of $1.19, which includes the impact of pre-funding of the U.S. gas utilities. Liquid EBITDA is up year over year, primarily due to the first of our annual off-ex inflation and power cost escalators, which increased the mainline toll. As a reminder, these take effect on July 1st of each year. Our gas transmission business is up compared to last year, despite the sale of our interest in Alliance and Oxable. This is driven by the acquisition of Tomorrow R&G, the 19% interest in the Worcester Joint Venture, and our gas storage assets outperforming. We continue to see solid demand for our gas storage, and benefit from elevated rates in the contracts we entered into since last year. I'm also happy to announce that we once again have recontracted 100% of our GTM Evergreen contract, illustrating the high demand for these great assets. Our gas distribution business includes a full quarter of EBITDA from both Enbridge Gas Ohio and Enbridge Gas Utah, which drove the majority of the step-up in 2023. Our renewables business earned development fees in the third quarter of 2023, can be lumpy, and their absence this quarter is driving the decrease year over year. Below the line, we have higher maintenance capital from the U.S. gas utility acquisitions, 12 higher interest expense and weighted average shares from the associated pre-funding of those same U.S. gas utilities. All in all, our third quarter results have set us up to achieve our guidance range for the 19th consecutive year. Let's dive a little deeper into that guidance. As a reminder, we recast our financial guidance in the second quarter include the U.S. gas utilities, and I'm pleased to reaffirm those ranges for both adjusted EBITDA and DCF per share. In fact, we expect to close 2024 with another quarter of strong operating performance, which would push Emirates near the top of our EBITDA guidance range. For DCF per share, we expect to finish the year around the midpoint of guidance, which is a great outcome when you consider the pre-funding of the utility acquisition we did this year while not benefiting from a full year of EBITDA. Looking ahead, Full-year utility contributions, coupled with continued operational excellence and in-footprint initiatives, should drive growth over the near and medium term. Our balanced and diversified secured backlog sits at $27 billion today, and we expect to place approximately $5 billion of that into service by the end of 2024. Both projects are expected to drive new EBITDA and underpin our near-term growth commitments through 2026. Now let's turn to our capital allocation priorities. Our capital allocation philosophy is guided by our financial guardrails, which remain firmly in place. Our target leverage of 4.5 to 5 times the sweet spot for Enbridge, and the DCF payout of 60% to 70% aligns with our cash flow-oriented view of the business. We're proud of our dividend aristocrat status. It's become a hallmark of our value proposition, and growing our dividend annually is a key consideration when deploying our $8 to $9 billion of annual growth investment capacity. For the next few years, We've earmarked approximately $6-7 billion in the form of low capital intensity expansion, modernization capital, and rate-based investment. The remaining $2-3 billion of investment capacity can be opportunistically deployed either into new and creative organic projects, tuck-ins, or debt reduction. Within that framework, we capitalize on the best available opportunities within our equity self-funding model. Our outlook and growth will continue to revolve around low-risk, long-life investments that support rateable dividend increases. I want to again thank the teams for the hard work this quarter, bringing in the last of the LDCs and ensuring another great operational and financial showing here at Enbridge. With that, I'll pass it back to Greg to finish off the presentation. Thanks very much, Pat.

Enbridge continues to be positioned to succeed in all market conditions with a low-risk business model and visible growth outlook. The scale and diversification of our business is driving key competitive advantages complimentary business franchise. Our businesses are already in front of and will continue to be in front of dramatic secular changes in power demand, both gas and renewables, re-industrialization in the key jurisdictions we serve in North America, and of course, growing energy exports from North America. Our industry-leading asset footprint and solid track record of execution has allowed us to take advantage of a trend rising global demand for energy. Returning capital to shareholders through a sustainable and growing dividend continues to be a core pillar of our value proposition and positions us as a first choice investment opportunity. Now, before I turn it over to the operator for a question, I'd like to share the dates of some exciting events coming up on the calendar. We expect to issue a news release with our 2025 financial guidance on December 3rd, 2024. And then on March 4th, 2025, we will be hosting our annual Investor Day in New York. And we hope that you can all join us in person. With that, I'd like to thank you all for listening.

And operator, please open the lines for questions. Stand by. We'll be prepared for the question and answer session.

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 a line of Jeremy Tonnet from JP Morgan. Your line is open.

Hi, good morning. Morning. Just want to start off, I guess, you know, looking down the future, you outlined some of the expansion potential for the mainline, but it seems like we've filled up pretty quick here.

Just wondering, I guess, what's possible on the egress front down the road as it seems like producers are eager to fill any basic by a good morning Jeremy it's Colin yeah I think your your read is right on this production is is ramping nicely. And yeah, we're back into apportionment here in November. I don't expect us to be in apportionment every month going forward. here but seasonally I think you're going to see a lot of demand for the mainline and we have commence commercial discussions with industry,

at the quarter engineering uh... the expansion to a more of an optimization i think it's not a trenching or a new path in in the right away in in in terminals uh... and and quite executable so uh... i'd say uh... early response from industry is is quite positive for obvious reasons greg said in his remarks uh... and i think it's a pretty knows the last barrel

egress prices all five million barrels in the base so it's very economically important that base is not constrained so we need to develop that I'd say it's trending the right direction and and I don't think we have any capital cost estimates for you at this point kind of refine those a little bit but

Looking at in-service dates in late 2016,