Enbridge Inc

Good morning and welcome to the Enbridge Fourth Quarter 2025 Financial Results Conference Call. My name is Marlon Samuel and I am the Vice President of Investor Relations and Insurance. 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, Liquid Pipelines, Matthew Ackman, Gas Transmission, Michelle Herdance, Gas Distribution and Storage, and Alan Capps, 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 investor community. Please note, this conference call is being recorded. As per usual, this call is being webcast and I encourage those listening to follow along with the supporting slides. We will 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 will be prioritizing questions from the investment community. So if you are a member of the media, please direct your inquiries to our communications team. We'll be happy to respond. As always, our investor relations team will be available following the call for any follow-up questions. Onto 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 risk and uncertainties outlined here and discussed more fully in our public disclosure filings. We will also be referring to non-GAAP measures summarized below. With that, I will turn it over to Greg Evel.

Thank you, Marlon, and good morning, everyone, and thanks for joining for Q4 Call. First off, let me welcome Matthew Ackman in his new role as EVP and President of Gas Transmission, and Alan Capps to his new role as Head of Corporate Strategy and President of Power, and introduce Marlon Samuel as the new VP of Investor Relations. Their backgrounds and experience have positioned them exceptionally well for success in these roles, and I know they look forward to working with you. Today, we'll recap another successful year, followed by an update on our opportunity set through the end of the decade, before providing updates on our four businesses since our last quarterly earnings call. Pat will then walk through our record financial results, capital allocation priorities, and give a refreshed view of our annual investment capacity. Lastly, I'll end the presentation with a few reminders on Enbridge's first choice value proposition before we open the line for any questions from the investment community. We had another great year of record financial results, exceeding the midpoint of our 2025 guidance for both EBITDA and DCF per share, marking the 20th year of achieving or exceeding our annual financial guidance. As we announced in December, we have now increased our dividend for 31 consecutive years, extending our status as one of the few dividend aristocrats in our sector. Our debt to EBITDA remains within our leverage range of four and a half to five times, maintaining our strong investment grade credit profile while growing our investment capacity. From a growth and execution standpoint, we sanctioned $14 billion of capital across all businesses and placed $5 billion of assets into service during the past year. Our growth backlog has grown 35% since our investor day last March, underlying the ongoing and extended business and earnings growth opportunity we have before us. We continue to develop our relationship with our Whistler JV partners, acquiring a 10% interest in the operating Matterhorn Express pipeline. We also announced a historic investment in our West Coast pipeline system by 38 First Nations groups, allowing Enbridge to create alignment with Indigenous communities and helping to advance economic reconciliation while actively recycling capital. Operationally, our assets remain highly utilized during the quarter with the mainline transporting approximately 3.1 million barrels per day on average. Our gas systems were also highly utilized in the quarter, and in recent weeks, we saw a number of all-time peak demand days for both our gas transmission and gas distribution and storage assets. To provide a couple of impressive stats, Texas Eastern recently hit new peak records, transporting over 15 BCF per day in January, and in our utilities, Enbridge Gas Ohio hit its third highest throughput day in the company's 128-year history. And in the severely energy infrastructure short New England, our Algonquin pipeline saw nine of its top 25 all-time volume days this winter, underlying the need for energy affordability, creating expansions of natural gas infrastructure in that region. At the utilities, we reached constructive settlements at both Enbridge Gas North Carolina and Enbridge Gas Utah, and filed a new rate case at Enbridge Gas Ohio. Lastly, we successfully extended contracts on a number of LP assets. And once again, our gas transmission assets had another 100% contract renewal rate with customers on our major pipelines. So now let's dive into exactly where we allocated our growth capital in 2025. Taking a look at the map, you can see we won more than our fair share of opportunities this past year, sanctioning over $14 billion of capital in 2025, putting us ahead of where we forecasted during last year's investor day. In liquids, we FID'd over $4 billion of project, locking in the majority of opportunities we laid out for the Western Canadian sedimentary basin growth within the year. In gas transmission, we sanctioned projects supported by natural gas fundamentals, including industrial and data center demand, the LNG buildup, our customer storage needs, and deep water offshore opportunities. Total capital secured in gas transmission during the year was approximately $4 billion. Making significant progress on the $3 to $5 billion of opportunities, we expected to sanction within 6 to 18 months of our investor date. In the utilities, we continue to invest approximately $3 billion of foundational capital per year to expand our systems and keep them safe and reliable. And finally, in renewable power, we've added $3 billion of capital to support technology and data center operations for companies like Meta. This places us well ahead of the timing we outlined at the Investor Day, where we showed $3 billion of late-stage opportunities with potential FIDs between 2026 and 2027. In total, our power and natural gas projects currently under construction or not completed support over 7 gigawatts of power generation across multiple businesses. I think it's safe to say that just under a year since Enbridge Day, we have made tremendous progress on the commitments we laid out and continue to work hard to advance additional accretive projects. Continuing the momentum from 2025, our teams are busy advancing opportunities from our unsanctioned backlog. With fundamental supporting expansion in each of our four businesses, we expect to reach FID on another $10 to $20 billion of growth projects over the next 24 months that will enhance energy security and affordability in North America and beyond. Gas transmission is the largest opportunity set of our core franchises, driven by industrial and power demand, along with growing LNG exports and storage. Potential projects include expansions on Vector, Valley Crossing, Texas Eastern, Algonquin, opportunities in the U.S. Southeast, and the Homer City redevelopment, as well as additional storage expansions at Trace Palacios. In liquids supported by the WCSB production growth and overall global demand, we continue to advance opportunities, including MLO 2 and 3, and expansions to our regional oil sand assets. We'll continue to invest about $3 billion a year in our gas utilities to support new customer connections, as well as opportunities driven by new power demand, including data centers. And in renewable power, we will remain opportunistic, advancing projects to support demand driven by hyperscalers and other large tech companies and are those seeking power from lower carbon sources. Now let's jump into the BU update, starting with the liquid segments. In light of recent geopolitical events, let's take a step back and remind everyone of our irreplaceable liquids footprint. Our main line is a vital connection between the growing production in the Western Canadian sedimentary basin and the refiners in Pad 2 and Pad 3, which are consistently drawing higher volumes of Canadian heavy crude. We saw a strong demand throughout the year on the mainline, which was apportioned for all but three of the last 12 months, delivering on average 3.1 million barrels per day. In fact, the mainline was also in double-digit apportionment in January and February of 2026. Given Enbridge's unique asset footprint and our expectation that the low-cost, Established WCSB production and demand continues to grow. We do not expect any material impact from the recent geopolitical events involving Venezuela. In Q4, supported by growing production, we sanctioned the first phase of mainline optimization, which will add 150,000 barrels per day of additional egress out of the basin. The project also includes a 100,000 barrel per day expansion on Flanagan South and is expected to cost US dollars 1.4 billion and enter service by the end of 2027. As part of ML01, the majority of our customers elected to extend their Flanagan South take or pay contracts beyond 2040. We're also commercializing mainline optimization phase two, which could add another 250,000 barrels per day of incremental egress in the 2028 timeframe. Customers remain very interested in moving this project ahead, and it showcases the benefit of existing assets in the ground as this project leverages underutilized capacity on assets such as Line 26, Dakota Access, and ChiCap. MLO 3 is also making progress, and although we're not in a position to provide much detail right now, the project will create further significant egress opportunities to support our customers well into the future. A quick update on Line 5. The U.S. District Court recently ruled in our favor preventing the state of Michigan from taking further action to shut down Line 5, and the U.S. Army Corps of Engineers issued their final EIS, another step in the right direction for the Line 5 tunnel project. In our Gulf Coast and Permian franchise, the 80,000 barrel per day expansion of gray oak pipeline entered service in 2025, and the remaining 40,000 barrel per day expansion is on track to enter service in the first half of 2026. Lastly, we continue to expand our storage footprint at the Enbridge Ingleside facility, as well as explore additional service offerings off the docks at Corpus Christi. Now let's turn to our gas transmission business. Our gas transmission franchise is well positioned to serve growing energy demand across the continent, and the team is currently working on a number of exciting projects. These opportunities will address a range of demand drivers, including electric and gas utilities, LNG exports, and emerging data center-powered needs. Currently, we're advancing over 50 potential data center opportunities that could require up to 10 BCF per day of natural gas. And we expect to begin sanctioning these additional projects throughout 2026 and more in 2027. In the Permian, our JV investments in natural gas infrastructure are set to offer over 11 BCF per day of long-haul capacity and are supported by over 2 BCF of storage capacity at Waha. We're announcing today that along with our partners, the sanctioning of Bayrunner, an extension of the Whistler Pipeline, which will supply gas to Rio Grande LNG facility in combination with previously announced Rio Bravo Pipeline for total capacity of up to 5.3 BCF per day. We have also upsized the Iger Express pipeline from 2.5 BCF per day to 3.7 BCF per day, driven by growing demand for natural gas transportation out of the Permian and supported by long-term customer contracts. Lastly, we're extending our U.S. gas transmission modernization program another year into 2029 and highlight that the Appalachia to Market 2 project is now in service. 2025 represented a milestone year for gas distribution and storage, as it was the first full year of operations for the U.S. gas utilities as Enbridge Gas. In Ontario, we continued to efficiently run Canada's largest natural gas distribution company with new rates in effect at the beginning of 2025. In Ohio, we received a somewhat disappointing rate case decision in the middle of the year, but maintained Enbridge Gas Ohio's allowed ROE at 9.8% on a slightly higher equity component. Since some time had passed since the original filing, we filed a new rate case at the end of 2025, updated with refreshed operating and financing costs. In Utah, we reached a supportive rate case settlement with rates in effect on January 1, 2026. And in North Carolina, we received a supportive outcome as well with rates in effect in November 2025 and welcome the addition of new major capital project riders to allow us to meet our customers' growing needs and realize a quicker return of capital for our investors. Finally, with growing power demand in all jurisdictions, we are finding increased need for access to low-cost gas feedstock for up to 5 BCF per day of power generation and associated demand growth. This will further grow our utilities well into the next decade. Now I'll move on to the renewable sector. Building on the Clear Fork Solar Project, which reached FID mid-2025, we are excited to extend our partnership with leading technology companies like Meta Inc., sanctioning Cowboy Phase One and Easter Wind, supplying over 500 megawatts of renewable power to support data center operations. Cowboy Phase 1 is a 365 megawatt solar and 135 megawatt battery energy storage project in Wyoming, with the output secured by a fixed offtake agreement and the battery component of the project secured by a fixed toll agreement. The full output has been secured by a Mag7 technology company. The battery system will be supplied and operated by Tesla, the leading supplier in North America, and can be expanded up to 200 megawatts after the approval from the utility, which is expected in the first half of 2026. This project's capex is U.S. dollars, $1.2 billion, and is expected to enter service in 2027. Easter is an onshore wind project being built near Amarillo, Texas, with a capacity of 152 megawatts. This $400 million U.S. project is secured by a renewable power purchase agreement with Meta. In total, our power partnership with Mag7 Companies is set to provide over 1 gigawatt of renewable generation to support operations and add new generation to the local grids. Looking ahead, we still have over one gigawatt of projects in the queue that we're advancing, remaining opportunistic while continuing to ensure these projects will realize mid-teen returns. Providing an update on two of our projects under construction, I'm happy to announce that the first phase of Sequoia Solar entered service in December, and our Corsair Wind project in Europe remains on track to enter service in 2027. With that, I'll now pass it over to Pat to go over our financial performance.

Good morning, everyone, and thank you, Greg. I'm pleased to report again record fourth quarter and full year EBITDA, DCF, and earnings per share. Compared to the fourth quarter of 2024, adjusted EBITDA is up 83 million. DCF is up 6 cents, and EPS increased 13 pennies. In liquids, strong mainline volumes, annual escalators, and lower power costs led to year over year increase in the segment, net of earnings sharing. We experienced a strong fourth quarter in our gas transmission business with incremental contributions from the acquisition of an interest in Matterhorn and placed the Venice extension into service. As well, we saw favorable spreads at Aitken Creek and had exciting recontracting on our US gas transmission assets. The gas distribution segment is up relative to last year, driven by rate escalation, customer growth, in addition to colder weather and strong storage results in Ontario. Higher rates in North Carolina and recovery of capital investments in Ohio also increased the EBITDA. In renewables, results were lower compared to last year due to the absence of investment tax credits relating to the Fox Squirrel solar project, which we put in service in Q4 of 2014. Lower maintenance costs due to increased buying power at our gas utilities and lower current income tax driven by investment tax credits and benefits from U.S. tax legislation changes further increase DCF per share year over year. I'm also pleased to reaffirm the 2026 guidance that we put out in early December. We continue to be confident that we'll achieve our full year EBIT expectations between 20.2 and $20.8 billion and DCF of between 570 and 610 per share. Our growth is driven by 8 billion of new assets expected to enter service throughout the year and across enterprise cost savings initiatives. So far, in 26, the mainline has been apportioned in January and February, as Greg noted, and we've experienced colder than normal weather in most of the eastern parts of North America, providing a strong start going into the year. As a reminder, Q1 and Q4 are typically our strongest quarters, primarily driven by the higher earnings attributable to our gas utility franchises during winter periods, the absence of heat restrictions on our liquids assets, as well as more peak days in gas transmission. Now let's discuss our capital allocation priorities, which also remain unchanged in 26. We're committed to continued equity self-funding and benefit from the natural stability of our regulated assets and predictable cash flow streams. On the leverage front, our balance sheet remains strong. Our debt to adjusted EBITDA sits at 4.8 and our four and a half to five times range remains unchanged. Core to our value proposition, we will continue to sustainably return capital to shareholders through dividends, with $40 to $45 billion of distributions expected to be paid out over the next five years, all underpinned by growing regulated and contracted cash flows. And our 60% to 70% VCF payout target range remains unchanged as well, with us sitting right around the middle of the range today. To fuel long-term growth, we'll continue to target accretive brownfield projects supported by strong energy fundamentals. With the project additions this quarter, our current backlog now sits at 39 billion and extends through 2033, highlighting our ability to execute on the opportunity set we laid out in front of investors back in last March. With that, let's look at our annual investment capacity and how that also continues to grow. As our cash flows grow, so does our annual investment capacity, which now sits between $10 to $11 billion annually, supporting investments in growth projects across all four of our core business units. Our balance sheet strength gives us the ability to pursue $6 to $7 billion of organic growth projects annually, in addition to the $4 billion of foundational capital that will support our utility growth programs, gas transmission modernization, and liquids mainline capital investment. We continue to realize improving returns, showcasing our efficient use and deployment of capital. That's evident in our improving return on capital employed, which has consistently tracked upward these past number of years via optimizations of our business, annual cost savings from scale and technology advances, and accretive M&A. These returns are further compounded by the project slate we sanctioned in 2025. On average, the growth projects have strong return on capital employed, with an average of approximately 11% across all organic projects. Securing strong return projects combined with cost and revenue optimizations on existing assets creates a compounding effect which will continue to grow our investment capacity into the future. With that, I'll turn it back over to Greg to close out the presentation. Well, thanks very much, Pat.