Enbridge, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Acknowledged impact of hurricanes Helene and Milton, with limited operational interruption and no material financial impact.
• Q3 was strong with assets experiencing continued strong utilization driving solid financial results, well positioned to deliver full year results near top end of EBITDA guidance.
• Enbridge's low-risk business model supports growing dividends for 29 years, with highly contracted cash flows, investment grade credit ratings, negligible commodity price exposure.
• Sanctioned various growth opportunities including offshore pipelines, solar projects, and expansions in gas distribution.
• Completed acquisition of three U.S. Gas utilities, now the largest natural gas utility in North America.

Segment Performance

• Liquids Pipelines: Mainline is on track to exceed the full year forecast of 3 million barrels per day. The system was in apportionment in July and August and is back in apportionment for November. Discussions are advancing with customers for additional Western Canadian Sedimentary Basin pipeline capacity in 2026 and beyond.
• Gas Transmission and Midstream: Sanctioned offshore oil and gas pipelines to serve bp's new deepwater U.S. Gulf of Mexico development. Acquired a 15% interest in the TBR gathering system. Gas storage assets outperformed with increased demand and elevated rates. The Venice Extension Project serving Venture Global's Plaquemines LNG export facility is flowing gas and expected to be fully in-service by yearend.
• Gas Distribution and Storage: Now the largest natural gas utility in North America, serving over 7 million customers. Growth drivers in various regions: Ontario expects new customer hookups and power generation growth; Ohio driven by pipeline replacement and modernization; Utah by population and data center power demand; North Carolina by population growth and expansion to serve gas-fired generation plants.
• Renewable Power: Sanctioned Sequoia Solar (up to 815 MW) and completed Phase 2 of Fox Squirrel Solar, with Phase 3 under construction. Over two gigawatts in development or under construction across the U.S.

Guidance

• Expect to close 2024 with strong operating performance, EBITDA near top end of guidance range.
• DCF per share expected to finish near midpoint of guidance despite pre-funding utilities acquisition.
• Balance and diversified secured backlog at $27 billion, expect to place ~$5 billion of that into service by end of 2024.
• Target leverage 4.5x to 5x EBITDA, DCF payout 60% to 70%, earmarked ~$6B to $7B for low capital intensity expansion, etc., with remaining ~$2B to $3B for new accretive projects or debt reduction.

Risks

• Regulatory risk: DC Circuit vacated FERC authorization for Rio Bravo Pipeline Project's liquefaction facility, but not materially impacting Enbridge guidance.
• Operational risk: Impact of hurricanes, but limited financial impact and safety remains priority.

Question and Answer

Q: Just wondering, what's possible on the egress front down the road as it seems like producers are eager to fill any space you can provide?

A: Colin Gruending says production is ramping nicely, back into apportionment in November, commenced commercial discussions with industry, expansion is optimization in right-of-way and terminals, early response from industry positive.

Q: How do you think about future growth in LDC side, organic vs inorganic?

A: Michele Harradence says focus on integrating acquired utilities, growth drivers in population, data centers, modernization, and decarbonization programs.

Q: Rate of capital deployment into onshore renewables, and update on asset sales to indigenous groups?

A: Matthew Akman says renewables have mid-teens returns, quick cycle capital; Colin Gruending says early innings on asset sales to indigenous groups, committed to reconciliation, patient with process.

Q: Details about Gulf of Mexico project supporting bp operations?

A: Cynthia Hansen says it's ~$700M investment, in service in 2029, ties into existing infrastructure, strong contracts providing long-term return.

Q: Outlook on Rio Bravo Pipeline Project after DC Circuit vacatur?

A: Cynthia Hansen says disappointed by vacatur, supporting JV work, FERC has track record, Next Decade focusing on keeping project on track for 2027 service.

Q: Data centers and U.S. gas pipeline assets discussions?

A: Cynthia Hansen says well situated with 45% of North American power generation within 50 miles, seeing inbounds for data centers and gas-fired generation, Colin Gruending adds actual projects are happening now.