Enbridge Inc

Good morning and welcome to the Enbridge Inc. Second Quarter 2025 Financial Results Conference Call. My name is Rebecca Morley and I'm the Vice President of Investor Relations and Insurance. 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 Grunding, Liquids Pipelines, Cynthia Hattinson, Gas Transmission, Michelle Heritage, 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 would like to withdraw your question, press the pound key. Please note, this conference 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 will be referring to forward-looking information on today's presentation and Q&A. By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We'll also be referring to non-GAAP measures summarized below. And with that, I'll turn it over to Greg Ebel.

Well, thanks very much, Rebecca, and good morning, and thank you all for joining us on the call today. I'm excited to share another strong quarter and highlight the progress we've made across all segments of our business. Last quarter, I spoke about the importance of continued dialogue with policymakers and regulators to ensure North American energy independence and security. I'm optimistic about our ongoing conversations and the alignment we're seeing today on both sides of the border to advance projects and legislation that serve growing energy demand. And Enbridge continues to be in a great position to serve this growing demand with its large incumbent footprint across all four business units. We're going to start today with a mid-year check-in on financial performance, execution, and an update on our growth projects. I'll walk through how Enbridge is effectively navigating trade conflict, legislative change, and geopolitical volatility. I'll then touch on how Enbridge is capitalizing on rising power demand in North America before providing an update on each of our four core franchises. Pat will then review our financial results and reiterate our capital allocation priorities. And lastly, I'll close the presentation with a few comments on our first choice value proposition before we open the call for your questions. We've made significant progress on the commitments we laid out for you at the start of the year, and I'm proud of the work the team has done to execute our financial, operational, and growth priorities. We set another record for second quarter EBITDA, driven primarily by contributions from the acquired US gas utilities and successful rate settlements in our gas transmission business. Our strong first half of 2025 gives us confidence that we'll finish the year in the upper end of our EBITDA guidance range, and we are well on track to meet our GCF per share midpoint. The balance sheet is also in great shape. As of June 30th, we're at 4.7 times debt to EBITDA, primarily due to realizing another full quarter of earnings from the U.S. gas utility acquisitions that closed throughout 2024. Our assets remained highly utilized during the quarter, and the mainline transported 3 million barrels per day. That system has now been in apportionment for six of the first eight months of the year, including July and August. We closed an investment on our West Coast system by a consortium of 38 Indigenous groups backed by a loan guarantee provided by the Canadian government. This partnership provides sustained economic benefits to First Nations and is aligned with Enbridge's continuous goal of recycling capital at attractive valuations for shareholders. We also closed the previously announced acquisition of a 10% interest in the Matterhorn Express Pipeline in the Permian and upsized the Traverse Pipeline project from 1.75 BCF per day to 2.5 BCF per day, driven by strong customer demand. As a reminder, the Traverse Pipeline is part of the Whistler JV and is designed to transport natural gas between Albuquerque and the Katy area in Texas. Work on our planned liquids mainline optimizations is ongoing, and we're pleased to announce that our recent 100,000 barrel per day open season on Flanagan South pipeline was oversubscribed. We expect to reach FID on the first phase of the mainline optimization later this year. On the growth front, we sanctioned the $900 million Clear Fork project in Texas, located just outside San Antonio. The project is fully contracted under a long-term offtake agreement with Meta and will support its data center operations. Meta represents a new addition to our growing list of AI and data center related customers. In gas transmission, we sanctioned expansions of Texas Eastern and Aiken Creek gas storage to serve growing industrial power and LNG demand across North America. Together, these renewable and gas projects highlight the competitive advantage of our all of the above approach and our ability to serve increasing natural gas and power demand through multiple business units, services, and geographies. Now let's touch on the stability Enbridge continues to offer investors despite the ongoing volatility we are seeing today. The markets have been turbulent thus far in 2025, but the volatility has really showcased Enbridge's stable business model and the value of our low-risk commercial frameworks. Our size, diversity and disciplined capital allocation puts us in a great position to deliver predictable returns to shareholders in these conditions. Our exposure to tariffs is negligible across our operations, and importantly, Canadian oil and gas delivered to the US via our systems has not attracted tariffs. Roughly 80% of our EBITDA is generated by assets with revenue inflators or regulatory mechanisms for recovery, rising costs, which helps to backstop our rateable and growing dividend and earnings. On the tax policy front, the extension of bonus depreciation provides benefits to Enbridge's near-term growth, and our sanctioned or late-stage renewable projects are not expected to be impacted negatively by the One Big Beautiful Bill Act. The second quarter saw continued price volatility across commodity markets driven by geopolitical instability, but Enbridge's low-risk business model protected us from those dynamics with virtually no exposure to commodity prices and over 98% of EBITDA generated by assets with regulated returns or long-term take or pay contracts. Lastly, our footprint puts us in an ideal position to capitalize on growing energy demand in North America and beyond. We are connected to 100% of Gulf Coast operating LNG export capacity and our natural gas systems are located within 50 miles of 29 new data centers, 78 coal plants, and 45% of all North American natural gas power generation. Our gas distribution franchise is the largest natural gas utility business in North America, and we deliver reliable natural gas to over 7 million customers every day in geographies with growing gas demand. In the crude market, our incumbency positions us as the leading operator to provide new and expanded egress options for customers, something both producers and policymakers are in fact seeking. And our renewable power business is opportunistically providing power to some of the largest AI and data center players in the world, as the demand for energy across North America continues to grow. And let's take a couple of minutes to spotlight some of the investments we're making related to growing power demand. As you can see from this slide, Enbridge has already won and will continue to win power demand related opportunities by deploying our all of the above approach to energy in order to serve blue chip customers across various sectors. During our investor day in March, we shared four to five billion dollars of near term power generation opportunities across our gas and renewable businesses that we expected to begin announcing within six months. I'm pleased to say that we're ahead of schedule with over $1 billion of recently sanctioned projects between Clear Fork Solar in Texas and the Line 31 expansion in Mississippi. In addition, we can now confirm that Texas Eastern Transmission will be interconnected to the Homer City Redevelopment Generating Facility in Pennsylvania. We are working to commercialize opportunities to support data centers and hyperscalers in the state, further adding to our growth backlog. We've recently completed milestone projects for solar power backed by PPAs with Amazon and AT&T and continue to advance over $5 billion of power demand projects serving a combined six gigawatts of new generation. With that being said, We can't forget about the progress we're making across various exciting opportunities in our liquids business, which I'll get into now. Mainline volumes were strong again this quarter, delivering 3 million barrels per day on average for the quarter and 3.1 million barrels per day for the first half of 2025. At Investor Day, we announced up to $2 billion of investment in the mainline through 2028 to support continued high utilization of the system while also extending asset life and reliability. That investment is now underway, and we will earn attractive returns within the MTS agreement color of 11 to 14.5%. We also continue to advance mainline optimization phase one. Our full path FSP open season was oversubscribed and the team is now working towards FIDing the 150,000 barrel per day mainline expansion later this year. Additionally, we launched an open season for the Southern Illinois Connector, which will leverage our existing footprint and our interest in the ETCOP pipeline to provide full path optionality for our customers serving additional U.S. Gulf Coast demand. Mainline investments of this nature are permit-like, provide attractive economics, and will be sanctioned to meet our customers' increasing egress requirements. And lastly, down on the Gulf Coast, Our 120,000 barrel per day gray oak expansion has partially entered service with full COD expected in mid-2026. Now let's turn to gas transmission. We've got a number of exciting announcements this quarter spread out across our footprint. In Mississippi, we sanctioned the Line 31 expansion of Texas Eastern to serve rising industrial and power demand, all secured under 20-year take-or-pay agreements with a well-known investment-grade customer. This project was among the opportunities highlighted at Investor Day to serve growing gas demand. On the Gulf Coast, we've progressed optimization projects, including a $50 million expansion of SESH to serve the growing power generation needs of a major electric utility that's there serving data centers as well as an upgrade to the Trace Palacios Storage Facility in Texas. The storage upgrade is being done to increase injection and withdrawal rates and is part of a larger expansion opportunity we expect to realize later in the decade. In Canadian gas transmission, I'm pleased to announce a 40 BCF expansion of the Aiken Creek storage facility that will support the growing Canadian LNG market. That project will also optimize our other expansions underway on the West Coast system, providing customers with critical flexibility in a rapidly developing region, particularly on the LNG front. Lastly, we are updating our capital investment for wood fiber. As a reminder, Enbridge has a contract structure that provides us the ability to earn a low double-digit return, and we will now set that rate closer to the in-service date. We remain excited about the growing LNG market in Western Canada, as all of these projects are expected to enter service in the 2027 the 29 time period, extending and adding visibility to our long-term growth outlook. Now let's move on to our gas distribution business. We remain excited about the long-term growth outlook for our utility business and the foundational growth that helps to support the dividend. In Ontario, the Phase 2 rebasing process was completed, setting rates through 2028. And in Ohio, we received a decision on the rate case filed in 2023. While we didn't get all that we asked for, I'm encouraged by the almost 10% ROE and increased equity thickness, which remains among the strongest returns within our utility franchise. Of note, existing capital riders are a great and continuing feature, ensuring quick cycle capital returns, which was part of what attracted us to the investment back in 2023. Lastly, we filed for new rates in North Carolina and Utah this quarter and expect we'll have new rates in those jurisdictions by next year. And now I'll turn to the renewable power sector. Enbridge continues to advance its world-class renewable portfolio using our financial strength, supply chain reach, and construction expertise under a low risk, commercial model that delivers competitive returns. In July, we announced the Clear Fork Solar Project near San Antonio, Texas, a 600-megawatt facility that will support data center needs. All generation is sold under a long-term off-take agreement with Meta Platforms. And importantly, the project is expected to meet all the requirements to fully qualify for renewable tax credits under new U.S. legislation. Also in Texas, we are progressing the 815 megawatts Sequoia solar development. The project is on track to partially enter service in 2025 with full production coming online in 2026. Also of importance, the One Big Beautiful Bill Act is not expected to impact any of our sanctioned projects, but we'll continue to monitor future developments in this fast moving policy environment. It's our view that the recent US legislative changes makes our backlog of late stage development projects even more valuable. But now I'll pass it off to Pat to go over our financial performance.

Thanks, Craig, and welcome everyone. Strong utilization across our asset base has led to another solid quarter. We're posting record second quarter EBITDA despite continued trade uncertainty and geopolitical events. Compared to the second quarter of 2024, adjusted EBITDA is up 7%, earnings per share up 12%, while DCF per share is comparable. In our liquid segment, we saw strong volumes with the mainline transporting 3 million balers per day, although weaker results at FSP and Spearhead resulted in a slight decrease compared to 2024. In gas transmission, strong operational performance across our pipes and storage assets, in addition to revised rates on US GT assets, added to the segment year over year. Our Whistler JV and DBR system acquisitions, in addition to Venice Extension, entering service at the end of 2024, provided additional contributions. Gas distribution is up relative to last year, with the acquisitions of the U.S. gas utilities being the main driver. Higher rates, customers, and storage revenues at Enbridge Gas Ontario, in addition to the colder weather, also contribute to the strong results within the segment. In renewables, we saw lower contributions at our European offshore assets, which were partially offset by stronger wind resources in North America. For DCF per share and EPS, higher financing costs, current taxes, and maintenance capital, primarily driven by the US gas utilities acquisition, partially offset the higher EBITDA contributions. The per share metrics are of course impacted by the at-the-market issuances that were completed in the second quarter of 2024 to pre-fund the US utility. I'm pleased to reaffirm our 2025 guidance and growth outlook across all metrics. With our strong performance through the first half of 2025, we're in a great position to finish the year in the upper end of our guidance range for EBITDA. The resilience of our business model is really on display as we continue to deliver predictable returns through market volatility. The acquisition of a 10% interest in the Matterhorn Express, strong mainline volumes, and the strength of the US CAD exchange rate are all tailwinds to our full year guidance. but are partially offset by higher than expected U.S. interest rates. We remain confident in our ability to achieve our near-term and medium-term growth outlooks. Now let's touch base on our capital allocation priorities. As you would expect, we continue to be focused on disciplined capital allocation. Our balance sheet provides us with financial strength and flexibility, and our debt to EBITDA has decreased to below the midpoint of our target range over the past few quarters, as expected following the close of the U.S. gas utility acquisitions. We also extended our track record of recycling capital at attractive valuations. The investment by our First Nation partners in a 12.5% stake in the West Coast system, which closed in July, generated cash proceeds of $0.7 billion and demonstrated our ongoing commitment to economic reconciliation and partnership with Indigenous communities. One of the keys to our value proposition is to sustainably return capital to shareholders, and we prioritize being in the 60% to 70% range of DCF payout. Our dividend is underpinned by high quality, low risk cash flow growth, and continues to support our dividend aristocrat status. As a reminder, we've increased our dividend to shareholders for 30 consecutive years, and we expect to return approximately $40 to $45 billion over the next five years. In terms of further growth, we will continue to make disciplined investment decisions and prioritize low multiple, brownfield, and utility-like projects with our $9 to $10 billion of annual investment capacity. What I especially like about this quarter is that we've announced or made significant progress on opportunities in each of our four business units, and those opportunities are spread throughout the end of the decade, adding even more clarity to our growth plans. And with that, I'll pass it back to Greg for some closing remarks.