Enbridge Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Second quarter EBITDA reached a record, driven by acquired U.S. gas utilities and rate settlements. Confident of finishing 2025 in the upper end of EBITDA guidance range.
• Growth Projects: Closed investment on West Coast system with indigenous groups and Canadian government loan guarantee, acquired 10% interest in Matterhorn Express pipeline, upsized Traverse Pipeline to 2.5 Bcf/day, and expect FID on Mainline Optimization Phase 1 later in 2025.
• Business Model: Stable business model with low-risk commercial frameworks, negligible exposure to tariffs, 80% of EBITDA from assets with revenue inflators.
• Capital Allocation: Focused on disciplined capital allocation, recycling capital at attractive valuations, and prioritizing low multiple brownfield/utility-like projects with $9-10 billion annual investment capacity.

Segment Performance

• Liquids Pipelines: Mainline transported 3 million barrels per day on average for the quarter, with the Flanagan South Pipeline open season oversubscribed. The Gray Oak expansion (120,000 bbl/day) has partially entered service, with full commercial operation expected in mid-2026.
• Gas Transmission: Sanctioned the Line 31 expansion of Texas Eastern to serve rising industrial and power demand, progressed optimization projects like a $50 million expansion of SESH, and sanctioned a 40 Bcf expansion of the Aitken Creek storage facility.
• Gas Distribution: Completed Phase 2 rebasing in Ontario setting rates through 2028, received a rate decision in Ohio (almost 10% ROE), and filed for new rates in North Carolina and Utah.
• Renewable Power: Sanctioned the 600-megawatt Clear Fork Solar project near San Antonio, Texas, and is progressing the 815-megawatt Sequoia Solar development. No impact from the One Big Beautiful Bill Act on sanctioned projects.

Guidance

• Confident of finishing 2025 in the upper end of EBITDA guidance range, on track to meet DCF per share midpoint.
• Tailwinds include Matterhorn Express acquisition, strong Mainline volumes, and CAD exchange rate; offset by higher U.S. interest rates.
• Continues to prioritize disciplined capital allocation and high-return projects across business units.

Risks

• Geopolitical Volatility: Impact on commodity markets and project timelines.
• Regulatory Uncertainty: Changes in policies and regulations affecting project returns.
• Interest Rates: Fluctuations affecting financing costs and capital allocation.

Question and Answer

Q: Just wondering if you might be able to frame a little bit more, I guess, opportunities you're seeing across your footprint as it relates to natural gas, expansion to serve incremental power demand and possibly data center demand growth as well.

A: Jeremy, maybe I'll start and then Cynthia can chime in, too, and maybe even -- I know not on the gas side, but maybe Matthew, too. So it's really all of the above. Like we -- in the GDS business and the GTM business and our renewable business, I was at that technology and economic summit you were talking about in Pennsylvania. And obviously, out of that came a press release of a big player using the Texas Eastern system to support Homer City in North Carolina and Mississippi and Georgia, we talked about on this call, Utah, all of those we're really starting to see things come in. I guess the point I would make, there is 2 elements here. There's one the utility element, which I would say is most of where we're picking up the opportunities, and you heard us talk about Line 31 just a few minutes ago as well as SESH, very much utility-based. But there's a nice smattering of behind-the-meter type stuff, which is what Homer City would look like. And then let's not forget about the renewable side. I know you're asking about gas. So it's right across the system. Haven't seen that much in Canada yet, but I think that's actually an opportunity that will come, too. Cynthia, do you want to add more from what we had laid out back at the Investor Day?

Q: I was hoping, Greg, you could discuss how you're seeing energy policy evolving in Canada. And if you could compare the prospects of a new pipeline to tidewater compared to some of the various incremental expansion opportunities that are available in the industry on the Liquids pipeline side.

A: Yes. Well, I think as you saw us announce today, and you've really seen us been going hard at this since January and last fall, our customers at this point in time, really want to go south, right? That's the premium market, which we're able to deliver to both PADD II and PADD III, think the Gulf Coast. And so Colin and his team have really put forward a number of really great incremental projects, and you can see those in the presentation. That's the first move. It's the most valuable market. It's the smartest way to do this. And then when that's done and as our customer production grows, that's when an opportunity could be created to go to the West Coast. And there's lots of discussion with governments on that. And as you know, Robert, we have been a proponent of such a project in the past. And in fact, invested several hundred million dollars to get there. So the issue isn't not one of there being a proponent. The issue is one of government policy setting the conditions for that investment to occur. Let's be honest, the government has not done that yet. And it's not clear they intend to, at least from our perspective, in particular, still an emissions cap in place for our customers, which really stifles their ability to grow oil production. And then secondly, the West Coast tanker ban remains in place that, frankly, as long as that's there, it would make building a pipeline to the West Coast being a pipeline to nowhere. So -- and nothing has been deemed in the national interest yet either. So lots of us to watch from an industry perspective. We're very active on that front. But we're continuing to find ways to serve our customers' needs by adding that incremental egress that they really want, which really means the Gulf Coast. So TBD. Meanwhile, as you're seeing south of the border, a lot of changes, accelerated permitting, we even start to see it in changes to the Army Corps of Engineers and a desire to actually build energy sovereignty and project power. And so hopefully, that will translate up here as the government gets its footing. And in the meantime, we'll continue to provide counsel and advice to folks like the premier of Alberta, who she continues to work to advance not only the province's interest, but I actually think Canada's energy interest and sovereignty via new energy infrastructure.