CALGARY, ALBERTA--(Marketwired - May 6, 2015) -
HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars unless otherwise noted)
Enbridge Inc. (Enbridge or the Company) (TSX:ENB)(NYSE:ENB) - "Enbridge delivered a solid first quarter of 2015, reflecting a combination of strong asset performance and the ongoing successful execution of our growth capital program," said Al Monaco, President and Chief Executive Officer. "Adjusted earnings for the first quarter of 2015 were $468 million or $0.56 per common share.
"Our results were in line with our expectations, and we remain on track to deliver full year adjusted earnings per share within our guidance range of $2.05 to $2.35," Mr. Monaco said. "Our resilient business model continues in the current business environment to deliver reliable and predictable earnings and cash flows to our investors.
"Throughput on Enbridge's liquids mainline remained strong. Over the first quarter our systems were very highly utilized, shipping an average 2.2 million barrels per day across the Canada/United States border," Mr. Monaco added. "We are now seeing the benefit of our system optimization through record volumes on our mainline. The full benefits of those efforts will be seen over the course of 2015.
"Enbridge continues to deliver solid earnings and strong returns to our shareholders. However, low commodity prices are challenging for our customers, so we are keenly focused on providing low cost, reliable transportation to the best markets for them," Mr. Monaco said. "We are pleased that stable tolls and our capacity optimization and market access initiatives that took place through 2014 are helping producers to maximize their netbacks and provide reliable feedstock for refiners."
Enbridge achieved key milestones on two of its liquids pipelines growth projects since reporting its year end results in February. During April, the Company brought into service - on schedule and under budget - a new 36-inch, 181-kilometre (112-mile) pipeline connecting its Edmonton and Hardisty Terminals. The $1.8 billion pipeline is a significant addition to the Company's mainline system and will initially have capacity to transport up to 570,000 barrels per day (bpd), but can be readily expanded to 800,000 bpd.
On April 13, 2015, a Minnesota Administrative Law Judge (ALJ) recommended that the Minnesota Public Utility Commission grant a Certificate of Need permit for the Company's proposed Sandpiper Pipeline Project (Sandpiper). The 965-kilometre (600-mile), US$2.6 billion project will transport Bakken crude from Enbridge's Beaver Lodge Station, south of Tioga, North Dakota, to Clearbrook, Minnesota through a 24-inch diameter pipeline. A 30-inch diameter pipeline will connect Clearbrook to Superior, Wisconsin. Subject to regulatory approval, the pipeline is expected to begin service in 2017. A review of the proposed pipeline route will follow a decision on the Certificate of Need.
"As we have said, our primary goal with this project is to ensure public safety and environmental protection. The ALJ recommendation is a positive step forward, and a reflection of the hard work our team did engaging communities, listening to people and addressing their concerns. We also thank the numerous stakeholders for their support of the project and helping us to make this an even better project," said Mr. Monaco. "Sandpiper is an important project for Bakken shippers and will add much needed pipeline capacity to enable them to reach key markets and improve netbacks.
"Looking ahead, our commercially secured portfolio of growth projects remains secure and is on track for execution," Mr. Monaco said. "We are positive on the longer-term fundamentals supporting our businesses and the development of infrastructure that our customers require and believe we are well positioned to continue to deliver industry leading earnings and dividend growth through 2018 and beyond. Our growth will continue to be supported by a disciplined approach to investment and project execution and attention to our number one priority - the safety and reliability of our systems."
In February, the National Energy Board (NEB) approved Conditions 16 and 18 of Enbridge's application for the reversal and expansion of Line 9B. The Company subsequently applied to the NEB for a Leave to Open to commence operation of the project. The pipeline is mechanically complete and awaiting the NEB's final approval.
"Line 9B is critical to ensuring that eastern Canadian refiners have access to reliable and cost effective feedstock and assuring the competitiveness of eastern Canada's petrochemical industry," said Mr. Monaco.
On March 31, 2015, Enbridge delivered a formal proposal (the Canadian Restructuring Plan) to a committee of independent members of the boards of Enbridge Commercial Trust (ECT) and Enbridge Income Fund Holdings Inc. (ENF) to transfer Enbridge's Canadian Liquids Pipelines business and certain renewable energy assets to Enbridge Income Fund (the Fund). The transaction is anticipated to provide Enbridge with low-cost funding to support the enterprise-wide $44 billion growth capital program and is expected to be accretive to adjusted earnings per share by approximately 10% per year on average from 2015 to 2018.
The transaction is also expected to transform the Fund and ENF through the acquisition of high quality assets that come with embedded growth. ENF's dividend is expected to increase by approximately 10% on closing, and by a further 10% at the beginning of 2016 and each year thereafter through to 2019. In conjunction with the Canadian Restructuring Plan, the Company also increased its quarterly common share dividend by 33% effective March 1, 2015 and introduced a new dividend payout policy range of 75% to 85% of adjusted earnings.
"This transaction is expected to deliver significant value to investors of both Enbridge and Enbridge Income Fund Holdings and it will even better position us to extend our industry-leading growth beyond 2018," added Mr. Monaco. "We expect the transaction to close mid-2015."
Operations
Adjusted earnings for the first quarter of 2015 were $468 million, or $0.56 per common share, compared with adjusted earnings of $492 million, or $0.60 per common share, for the first quarter of 2014.
In Liquids Pipelines, the throughput trends experienced in 2014 continued into the first quarter of 2015 and resulted in record throughput on Canadian Mainline. Furthermore, the impact of a strong United States dollar, which had a hedged and an unhedged component, compared with the Canadian dollar had a positive impact on Canadian Mainline earnings as the International Joint Tariff Benchmark (IJT) Toll and its components are set in United States dollars. However, these factors were more than offset by a lower quarter-over-quarter Canadian Mainline IJT Residual Benchmark Toll. Changes in the Canadian Mainline IJT Residual Benchmark Toll are inversely related to the Lakehead System Toll, which was higher due to the recovery of incremental costs associated with EEP's growth projects. Growing volumes on the system, together with the impact of an increase to the Canadian Mainline IJT Residual Benchmark Toll and applicable surcharges for system expansions are expected to drive strong revenue and earnings growth over the balance of 2015.
Within Sponsored Investments, Enbridge Energy Partners, L.P. (EEP) and the Fund both had strong first quarters of 2015, with each reflecting the favourable impact of drop downs from Enbridge. EEP adjusted earnings reflected higher volumes and tolls in its liquids business, as well as new assets placed into service. EEP earnings also reflected the incremental earnings from the acquisition of the 66.7% interest in Alberta Clipper previously held by Enbridge. The earnings increase from the Fund was attributable to the transfer of natural gas and diluent pipeline interests from Enbridge and higher preferred unit distributions received from the Fund.
Enbridge Gas Distribution Inc. (EGD) continued to deliver reliable results in the first quarter, although earnings were lower than the comparative period in 2014 due to the application of lower interim distribution rates in the first quarter of 2015. Any shortfall in revenues arising from the difference between interim and final 2015 rates will be recovered during 2015 and will not have an impact on full year results which are expected to be higher than the prior year.
Adjusted earnings were also impacted by higher preference share dividends in the Corporate segment, as well as higher interest expense across various business segments reflecting incremental preference share and debt issued to fund the Company's growth capital program.
The adjusted earnings discussed above exclude the impact of unusual, non-recurring or non-operating factors, the most significant of which are changes in unrealized derivative fair value gains and losses from the Company's long-term hedging program. See Non-GAAP Measures.
FIRST QUARTER 2015 OVERVIEW
For more information on Enbridge's growth projects and operating results, please see the Management's Discussion and Analysis (MD&A) which is filed on SEDAR and EDGAR and also available on the Company's website at www.enbridge.com/InvestorRelations.aspx.
DIVIDEND DECLARATION
On May 5, 2015, the Enbridge Board of Directors declared the following quarterly dividends. All dividends are payable on June 1, 2015 to shareholders of record on May 15, 2015.
| Common Shares | $0.46500 |
| Preference Shares, Series A | $0.34375 |
| Preference Shares, Series B | $0.25000 |
| Preference Shares, Series D | $0.25000 |
| Preference Shares, Series F | $0.25000 |
| Preference Shares, Series H | $0.25000 |
| Preference Shares, Series J | US$0.25000 |
| Preference Shares, Series L | US$0.25000 |
| Preference Shares, Series N | $0.25000 |
| Preference Shares, Series P | $0.25000 |
| Preference Shares, Series R | $0.25000 |
| Preference Shares, Series 1 | US$0.25000 |
| Preference Shares, Series 3 | $0.25000 |
| Preference Shares, Series 5 | US$0.27500 |
| Preference Shares, Series 7 | $0.27500 |
| Preference Shares, Series 9 | $0.27500 |
| Preference Shares, Series 11 | $0.27500 |
| Preference Shares, Series 13 | $0.27500 |
| Preference Shares, Series 15 | $0.27500 |
CONFERENCE CALL
Enbridge will hold a conference call on Wednesday, May 6, 2015 at 9:00 a.m. Eastern Time (7:00 a.m. Mountain Time) to discuss the first quarter 2015 results. Analysts, members of the media and other interested parties can access the call toll-free at 1-800-708-4539 from within North America and outside North America at 1-847-619-6396, using the access code of 39285337#. The call will be audio webcast live at http://edge.media-server.com/m/p/88t4gnim/lan/en. A webcast replay and podcast will be available approximately two hours after the conclusion of the event and a transcript will be posted to the website within 24 hours. The replay will be available toll-free at 1-888-843-7419 within North America and outside North America at 1-630-652-3042 (access code 39285337#) until May 13, 2015.
The conference call will begin with presentations by the Company's President and Chief Executive Officer and the Chief Financial Officer, followed by a question and answer period for investment analysts. A question and answer period for members of the media will then immediately follow.
Enbridge, a Canadian Company, is a North American leader in delivering energy and has been included on the Global 100 Most Sustainable Corporations in the World ranking for the past seven years. As a transporter of energy, Enbridge operates, in Canada and the United States, the World's longest crude oil and liquids transportation system. The Company also has significant and growing involvement in natural gas gathering, transmission and midstream businesses, and an increasing involvement in power transmission. As a distributor of energy, Enbridge owns and operates Canada's largest natural gas distribution company and provides distribution services in Ontario, Quebec, New Brunswick and New York State. As a generator of energy, Enbridge has interests in more than 2,200 megawatt (MW) (1,600 MW net) of renewable and alternative energy generating capacity and is expanding its interests in wind, solar and geothermal facilities. Enbridge employs more than 11,000 people, primarily in Canada and the United States and is ranked as one of Canada's Top 100 Employers for 2015. Enbridge's common shares trade on the Toronto and New York stock exchanges under the symbol ENB. For more information, visit www.enbridge.com. None of the information contained in, or connected to, Enbridge's website is incorporated in or otherwise part of this news release.
FORWARD-LOOKING INFORMATION
Forward-looking information, or forward-looking statements, have been included in this news release to provide the Company's shareholders and potential investors with information about the Company and its subsidiaries and affiliates, including management's assessment of Enbridge's and its subsidiaries' future plans and operations. This information may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as "anticipate", "expect", "project", "estimate", "forecast", "plan", "intend", "target", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information or statements included or incorporated by reference in this document include, but are not limited to, statements with respect to the following: expected earnings/(loss) or adjusted earnings/(loss); expected earnings/(loss) or adjusted earnings/(loss) per share; expected future cash flows; expected costs related to projects under construction; expected in-service dates for projects under construction; expected capital expenditures; estimated future dividends; the Canadian Restructuring Plan; and expected costs related to leak remediation and potential insurance recoveries.
Although Enbridge believes these forward-looking statements are reasonable based on the information available on the date such statements are made and processes used to prepare the information, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Material assumptions include assumptions about the following: the expected supply of and demand for crude oil, natural gas, natural gas liquids (NGL) and renewable energy; prices of crude oil, natural gas, NGL and renewable energy; expected exchange rates; inflation; interest rates; availability and price of labour and pipeline construction materials; operational reliability; customer and regulatory approvals; maintenance of support and regulatory approvals for the Company's projects; anticipated in-service dates; final approval of definitive transfer terms by Enbridge and ENF and the Fund with respect to the Canadian Restructuring Plan; receipt of all necessary shareholder and regulatory approvals that may be required for the Canadian Restructuring Plan; and weather. Assumptions regarding the expected supply of and demand for crude oil, natural gas, NGL and renewable energy, and the prices of these commodities, are material to and underlie all forward-looking statements. These factors are relevant to all forward-looking statements as they may impact current and future levels of demand for the Company's services. Similarly, exchange rates, inflation and interest rates impact the economies and business environments in which the Company operates and may impact levels of demand for the Company's services and cost of inputs, and are therefore inherent in all forward-looking statements. Due to the interdependencies and correlation of these macroeconomic factors, the impact of any one assumption on a forward-looking statement cannot be determined with certainty, particularly with respect to expected earnings/(loss) or adjusted earnings/(loss) and associated per share amounts, the impact of the Canadian Restructuring Plan on Enbridge, the adjusted dividend payout policy or estimated future dividends. The most relevant assumptions associated with forward-looking statements on projects under construction, including estimated completion dates and expected capital expenditures include the following: the availability and price of labour and pipeline construction materials; the effects of inflation and foreign exchange rates on labour and material costs; the effects of interest rates on borrowing costs; the impact of weather; and customer and regulatory approvals on construction and in-service schedules.
Enbridge's forward-looking statements are subject to risks and uncertainties pertaining to the Canadian Restructuring Plan, revised dividend policy, adjusted earning guidance, operating performance, regulatory parameters, project approval and support, weather, economic and competitive conditions, changes in tax law and tax rate increases, exchange rates, interest rates, commodity prices and supply of and demand for commodities, including but not limited to those risks and uncertainties discussed in this news release and in the Company's other filings with Canadian and United States securities regulators. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent and Enbridge's future course of action depends on management's assessment of all information available at the relevant time. Except to the extent required by applicable law, Enbridge assumes no obligation to publicly update or revise any forward-looking statements made in this news release or otherwise, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to Enbridge or persons acting on the Company's behalf, are expressly qualified in their entirety by these cautionary statements.
NON-GAAP MEASURES
This news release contains references to non-GAAP measures, including adjusted earnings/(loss), which represent earnings or loss attributable to common shareholders adjusted for unusual, non-recurring or non-operating factors on both a consolidated and segmented basis. These factors, referred to as adjusting items, are reconciled and discussed in the financial results sections for the affected business segments in the Company's MD&A. Adjusting items referred to as changes in unrealized derivative fair value gains and losses are presented net of amounts realized on the settlement of derivative contracts during the applicable period. Management believes the presentation of non-GAAP measures such as adjusted earnings/(loss) provides useful information to investors and shareholders as it provides increased transparency and predictive value. Management uses adjusted earnings/(loss) to set targets, including setting the Company's dividend payout target, and to assess the performance of the Company. Adjusted earnings/(loss) and adjusted earnings/(loss) for each of the segments are not measures that have a standardized meaning prescribed by accounting principles generally accepted in the United States of America (U.S. GAAP) and are not considered GAAP measures; therefore, these measures may not be comparable with similar measures presented by other issuers. The table below summarizes the reconciliation of the GAAP and non-GAAP measures.
NON-GAAP RECONCILIATIONS
| Three months ended | |||||
| March 31, | |||||
| 2015 | 2014 | ||||
| (millions of Canadian dollars) | |||||
| Earnings/(loss) attributable to common shareholders | (383) | 390 | |||
| Adjusting items1: | |||||
| Changes in unrealized derivative fair value loss2 | 977 | 190 | |||
| Make-up rights adjustments | 4 | 2 | |||
| Leak insurance recoveries | (9) | - | |||
| Colder than normal weather | (33) | (33) | |||
| Project development and transaction costs | 3 | - | |||
| Tax related adjustments | (6) | - | |||
| Out-of-period adjustment | (71) | - | |||
| Gains on sale of non-core assets and investment | - | (57) | |||
| Other | (14) | - | |||
| Adjusted earnings | 468 | 492 | |||
| 1 | The above table summarizes adjusting items by nature. For a detailed listing of adjusting items by segment, refer to individual segment discussions in the MD&A. |
| 2 | Changes in unrealized derivative fair value gains and losses are presented net of amounts realized on the settlement of derivative contracts during the applicable period. |
| HIGHLIGHTS | ||||
| Three months ended | ||||
| March 31, | ||||
| 2015 | 2014 | |||
| (unaudited; millions of Canadian dollars, except per share amounts) | ||||
| Earnings attributable to common shareholders | ||||
| Liquids Pipelines | (422) | 44 | ||
| Gas Distribution | 139 | 136 | ||
| Gas Pipelines, Processing and Energy Services | 16 | 191 | ||
| Sponsored Investments | 131 | 84 | ||
| Corporate | (247) | (111) | ||
| Earnings/(loss) attributable to common shareholders from continuing operations | (383) | 344 | ||
| Discontinued operations - Gas Pipelines, Processing and Energy Services | - | 46 | ||
| (383) | 390 | |||
| Earnings/(loss) per common share | (0.46) | 0.48 | ||
| Diluted earnings/(loss) per common share | (0.46) | 0.47 | ||
| Adjusted earnings1 | ||||
| Liquids Pipelines | 192 | 218 | ||
| Gas Distribution | 106 | 103 | ||
| Gas Pipelines, Processing and Energy Services | 41 | 59 | ||
| Sponsored Investments | 127 | 84 | ||
| Corporate | 2 | 28 | ||
| 468 | 492 | |||
| Adjusted earnings per common share | 0.56 | 0.60 | ||
| Cash flow data | ||||
| Cash provided by operating activities | 1,510 | 333 | ||
| Cash used in investing activities | (1,866) | (2,743) | ||
| Cash provided by financing activities | 225 | 2,465 | ||
| Dividends | ||||
| Common share dividends declared | 396 | 291 | ||
| Dividends paid per common share | 0.4650 | 0.3500 | ||
| Shares outstanding (millions) | ||||
| Weighted average common shares outstanding | 841 | 820 | ||
| Diluted weighted average common shares outstanding | 854 | 830 | ||
| Operating data | ||||
| Liquids Pipelines - Average deliveries (thousands of barrels per day) | ||||
| Canadian Mainline2 | 2,210 | 1,904 | ||
| Regional Oil Sands System3 | 815 | 671 | ||
| Spearhead Pipeline | 150 | 184 | ||
| Gas Distribution - Enbridge Gas Distribution (EGD) | ||||
| Volumes (billions of cubic feet) | 217 | 212 | ||
| Number of active customers (thousands)4 | 2,108 | 2,076 | ||
| Heating degree days5 | ||||
| Actual | 2,232 | 2,206 | ||
| Forecast based on normal weather | 1,784 | 1,777 | ||
| Gas Pipelines, Processing and Energy Services - Average throughput volume (millions of cubic feet per day) | ||||
| Vector Pipeline | 1,855 | 1,783 | ||
| Enbridge Offshore Pipelines | 1,146 | 1,371 | ||
HIGHLIGHTS
| 1 | Adjusted earnings represent earnings attributable to common shareholders adjusted for unusual, non-recurring or non-operating factors. Adjusted earnings and adjusted earnings per common share are non-GAAP measures that do not have any standardized meaning prescribed by GAAP. |
| 2 | Canadian Mainline includes deliveries ex-Gretna, Manitoba which is made up of United States and eastern Canada deliveries originating from western Canada. |
| 3 | Volumes are for the Athabasca mainline and Waupisoo Pipeline and exclude laterals on the Regional Oil Sands System. |
| 4 | Number of active customers is the number of natural gas consuming EGD customers at the end of the period. |
| 5 | Heating degree days is a measure of coldness that is indicative of volumetric requirements for natural gas utilized for heating purposes in EGD's franchise area. It is calculated by accumulating, for the fiscal period, the total number of degrees each day by which the daily mean temperature falls below 18 degrees Celsius. The figures given are those accumulated in the Greater Toronto Area. |
Forward-Looking Information and Non-GAAP Measures
This news release contains forward-looking information and references to non-GAAP measures. Significant related assumptions and risk factors, and reconciliations are described under the Forward-Looking Information and Non-GAAP Measures sections of this news release, respectively.
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