CALGARY, ALBERTA--(Marketwired - Nov. 5, 2014) - Enbridge Inc. (Enbridge or the Company) (TSX:ENB)(NYSE:ENB) -
HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars unless otherwise noted)
Enbridge Inc. (Enbridge or the Company) (TSX:ENB)(NYSE:ENB) - "Enbridge adjusted earnings continued to accelerate in the third quarter as we progressed the execution of our record growth capital program, and we are on track to achieve full year adjusted earnings per share within our guidance range of $1.84 to $2.04 per share," said Al Monaco, President and Chief Executive Officer. "We also rolled out our five-year strategic plan that now takes us through 2018 and includes our record $44 billion growth capital program, of which $33 billion is commercially secured and in execution. Projects secured over the past two years give us confidence in extending our anticipated average annual adjusted earnings per share growth rate of 10-12% to 2018 and provide visibility for continued growth beyond 2018."
In addition to the execution of the growth capital program, financing that growth is a key focus for Enbridge. In the third quarter, the Company issued $625 million in preference shares, bringing the total to $1.4 billion raised from the issuance of preference shares in 2014, and $2.4 billion of term debt financing for a total of $5.9 billion in 2014. The Company has also been active in utilizing its sponsored vehicles to support the funding program. In September, the Company announced a $1.8 billion transaction with Enbridge Income Fund (the Fund) to transfer a package of natural gas assets and diluent pipeline interests, which will provide a highly predictable cash flow stream to the Fund. This represents the largest transaction the Fund has undertaken since its inception in 2003. Enbridge also proposed to sell its 66.7% interest in the United States segment of the Alberta Clipper Pipeline to Enbridge Energy Partners, L.P. (EEP) for approximately US$900 million. EEP already owns the remaining 33.3% interest in the Alberta Clipper Pipeline. The proposed transfer and terms remain subject to review by an independent committee of EEP.
"These transactions with our sponsored vehicles create value for Enbridge as sources of low-cost funding for our growth program and by maximizing the value of strong cash generating assets," said Mr. Monaco. "Our sponsored vehicles are an important part of our overall financial strategy and we believe they will continue adding long-term value for our shareholders. The Fund has proven that it can raise capital on terms that are favourable to both Enbridge and the Fund. In the case of EEP, we expect this transaction to enhance its cash flow and help restore its effectiveness as a source of low-cost funding for Enbridge."
Enbridge advanced several projects in the third quarter as part of its objective of improving market access for western Canadian and Bakken crude. The Flanagan South Pipeline (Flanagan South), a key component of the $5.4 billion Western Gulf Coast Market Access program, is now mechanically complete and line fill arrangements have begun and will continue throughout November 2014. Flanagan South, along with the Seaway Crude Pipeline System twinning which was mechanically completed in July 2014, opens 585,000 barrels per day (bpd) of incremental capacity for Canadian and Bakken crude from Flanagan, Illinois to the key refining region at the United States Gulf Coast. The Company also advanced a key phase of its $3.2 billion Eastern Access program, with the completion of the Line 6B replacement and expansion project in September 2014. The project included replacing approximately 338 kilometres (210 miles) of existing pipeline in Indiana and Michigan and increased capacity in this section of the system to 500,000 bpd.
Timing for the in-service date for Enbridge's reversal and expansion of Line 9B has been delayed. The National Energy Board (NEB) had approved the project subject to conditions in March; however, the NEB has requested additional information from Enbridge relating to one of the conditions. That information has been provided. At this time, the Company is unable to estimate the length of the delay.
"Our objective with the Line 9B project has always been to meet, if not exceed, regulatory requirements and to assure our stakeholders of our commitment to operate our pipeline safely and protect the environment," said Mr. Monaco. "We have responded to the Board's request for clarification of our approach and additional information. We continue to work with the Board to understand and respond to its questions and to meet its requirements."
In July, the Ontario Energy Board (OEB) approved Enbridge Gas Distribution Inc.'s (EGD) five-year customized Incentive Rate (IR) application, with modifications. The customized IR application establishes the methodology for determining rates for the distribution of natural gas over a five-year period from 2014 through 2018 and will allow EGD to recover its expected capital investment amounts, as well as an opportunity to earn above the allowed return on equity.
"On the whole, we believe the Ontario Energy Board's decision is fair and balanced," said Mr. Monaco. "The incentive plan provides opportunities to earn over and above an allowed rate of return through efficiencies and cost savings, which are also beneficial to rate payers over the long-term. The plan also allows for the necessary capital investment critical to the safety and reliability that our customers depend on".
In October, the Company released its 2014 Operational Reliability Report, which outlines progress on the performance of the Company as it strives for 100% safety and zero incidents. "Safety and operational reliability remains Enbridge's number one priority," said Mr. Monaco. "Our Operational Reliability Report provides our stakeholders and the public with an open and transparent view of our Company's performance. We've made excellent progress on our operational risk management programs and the report highlights our progress towards our goal of industry leadership."
In September, Enbridge earned a place on both the 2014 Dow Jones Sustainability North American Index and the Dow Jones Sustainability World Index. Enbridge is one of only three energy industry companies on the World Index which overall includes just 11 companies from Canada out of 319 listed.
"We're very proud of this recognition as it confirms that Enbridge is on the right path in terms of corporate responsibility performance and reporting," said Mr. Monaco. "Our stakeholders look to us to deliver top notch financial, social and environmental performance. Being included on the Dow Jones indices is a significant accomplishment and acknowledgement that our business model and approach to managing the opportunities and risks that support the long-term sustainability of our Company are working."
Results of Operations
Enbridge 2014 third quarter adjusted earnings increased to $0.41 per share from $0.34 in the third quarter of 2013. Adjusted earnings for the nine months ended September 30, 2014 increased from $1.33 per share in the comparative 2013 period to $1.41 per share. The Company remains on track to deliver its 2014 full year adjusted earnings per share within its guidance range of $1.84 to $2.04 per share.
Third quarter adjusted earnings growth is predominately attributable to strong operating performance and the continued successful execution of the Company's growth capital program as demonstrated by new assets placed into service. This trend was particularly evident in Liquids Pipelines and Sponsored Investments. In Liquids Pipelines, Canadian Mainline continued its strong 2014 performance bolstered by higher throughput from growing crude oil supply in western Canada and higher downstream refinery demand, as well as successful efforts by the Company to optimize capacity and throughput and to enhance scheduling efficiency with shippers. Within Regional Oil Sands System, the Norealis Pipeline, which was placed into service in April 2014, and higher throughput on the Athabasca Mainline continued to be two key contributors of growth.
EEP provided strong adjusted earnings growth in the third quarter of 2014. New assets placed into service, primarily the Line 6B replacement and expansion, along with higher throughput on EEP's Lakehead and North Dakota systems were the primary growth drivers. Enbridge also benefitted from the completion of the Line 6B replacement and expansion through its 75% interest in the United States portion of the Eastern Access expansion projects held through Enbridge Energy, Limited Partnership (EELP).
The Company's other sponsored vehicle, the Fund, also contributed to adjusted earnings growth over the first nine months of 2014. However, the 2014 third quarter earnings decreased compared with the corresponding 2013 period due to higher income taxes.
EGD's five-year customized IR application was approved by the OEB in July 2014. EGD operated the first half of 2014 under OEB approved interim distribution rates. On August 22, 2014, an OEB rate order (the Rate Order) under the IR mechanism approved the final rates with an effective date of January 1, 2014. EGD earnings increased slightly as the Rate Order resulted in a lower depreciation expense under a new approach for determining depreciation and future removal and site restoration reserves. However, this positive effect was partially offset by reduced final rates requiring a refund of a portion of the previously collected interim rates to customers.
Energy Services third quarter adjusted earnings were unfavourable compared with the corresponding 2013 quarter. The unfavourable trends experienced in the first half of the year, including narrowing location spreads and less favourable conditions in certain markets accessed by committed transportation capacity, combined with associated unrecovered demand charges, continued to drive lower adjusted earnings. These unfavourable trends are expected to persist into the fourth quarter of 2014.
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 and gains on the disposal of non-core assets and investments, as well as certain costs and related insurance recoveries arising from crude oil releases. See Non-GAAP Measures.
THIRD QUARTER 2014 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 October 22, 2014, the Enbridge Board of Directors declared the following quarterly dividends. All dividends are payable on December 1, 2014 to shareholders of record on November 14, 2014.
| Common Shares | $0.35000 |
| 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 131 | $0.41290 |
| Preference Shares, Series 152 | $0.20790 |
| 1 | This first dividend declared for the Preference Shares, Series 13 includes accrued dividends from July 17, 2014, the date the shares were issued. The regular quarterly dividend of $0.275 per share will take effect on March 1, 2015. | ||
| 2 | The first dividend declared for the Preference Shares, Series 15 includes accrued dividends from September 23, 2014, the date the shares were issued. The regular quarterly dividend of $0.275 per share will take effect on March 1, 2015. |
CONFERENCE CALL
Enbridge will hold a conference call on Wednesday, November 5, 2014 at 9:00 a.m. Eastern Time (7:00 a.m. Mountain Time) to discuss the third quarter 2014 results. Analysts, members of the media and other interested parties can access the call toll-free at 1-800-708-4540 from within North America and outside North America at 1-847-619-6397, using the access code of 38270286#. The call will be audio webcast live at http://www.media-server.com/m/p/i49imvs7. 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 38270286#) until November 12, 2014.
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 Inc., 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 six years. As a transporter of energy, Enbridge operates, in Canada and the U.S., the world's longest crude oil and liquids transportation system. The Company also has a 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 1,800 megawatts of renewable and alternative energy generating capacity and is expanding its interests in wind and solar energy and geothermal. Enbridge employs more than 10,000 people, primarily in Canada and the U.S. and is ranked as one of Canada's Top 100 Employers for 2014. 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 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: 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; 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 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 and interest rates; the 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; and weather. Assumptions regarding the expected supply of and demand of 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, or estimated future dividends. The most relevant assumptions associated with forward-looking statements on projects under construction, including estimated in-service dates and expected capital expenditures, include: 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; and 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 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 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 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 or loss are presented net of amounts realized on the settlement of derivative contracts during the applicable period. Management believes the presentation of 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. See Non-GAAP Reconciliations for a reconciliation of the GAAP and non-GAAP measures.
| NON-GAAP RECONCILIATIONS | |||||
| Three months ended | Nine months ended | ||||
| September 30, | September 30, | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| (millions of Canadian dollars) | |||||
| Earnings/(loss) attributable to common shareholders | (80) | 421 | 1,066 | 713 | |
| Adjusting items: | |||||
| Liquids Pipelines | |||||
| Canadian Mainline - changes in unrealized derivative fair value (gains)/loss1 | 231 | (133) | 192 | 125 | |
| Canadian Mainline - Line 9B costs incurred during reversal | 2 | - | 6 | - | |
| Regional Oil Sands System - make-up rights adjustment | (5) | - | (5) | - | |
| Regional Oil Sands System - make-up rights out-of-period adjustment | - | 37 | - | 37 | |
| Regional Oil Sands System - leak insurance recoveries | - | - | (4) | - | |
| Regional Oil Sands System - leak remediation and long-term pipeline stabilization costs | 4 | 13 | 4 | 53 | |
| Regional Oil Sands System - long-term contractual recovery out-of-period adjustment, net | - | (31) | - | (31) | |
| Southern Lights Pipeline - changes in unrealized derivative fair value loss1 | 9 | - | 9 | - | |
| Seaway Pipeline - make-up rights adjustment | 11 | - | 11 | - | |
| Spearhead Pipeline - make-up rights adjustment | - | - | 1 | - | |
| Feeder Pipelines and Other - make-up rights adjustment | (1) | - | (3) | - | |
| Feeder Pipelines and Other - project development costs | 1 | - | 4 | - | |
| Gas Distribution | |||||
| EGD - warmer/(colder) than normal weather | 2 | - | (35) | 4 | |
| EGD - gas transportation cost cut-off-period adjustment | - | 56 | - | 56 | |
| Gas Pipelines, Processing and Energy Services | |||||
| Energy Services - changes in unrealized derivative fair value gains1 | (71) | (18) | (288) | (131) | |
| Offshore - changes in unrealized derivative fair value loss1 | 2 | - | 2 | - | |
| Offshore - gain on sale of non-core assets | - | - | (43) | - | |
| Other - changes in unrealized derivative fair value loss1 | 1 | 4 | 3 | 60 | |
| Sponsored Investments | |||||
| EEP - changes in unrealized derivative fair value loss1 | 6 | 6 | 9 | 3 | |
| EEP - make-up rights adjustment | - | - | 1 | - | |
| EEP - leak remediation costs | 12 | 5 | 17 | 35 | |
| EEP - leak insurance recoveries | - | - | - | (6) | |
| EEP - tax rate differences/changes | - | - | - | 3 | |
| The Fund - changes in unrealized derivative fair value gains1 | (3) | - | (3) | - | |
| The Fund - make-up rights adjustment | 1 | - | 1 | - | |
| The Fund - drop down transaction costs | 2 | - | 2 | - | |
| Corporate | |||||
| Noverco - changes in unrealized derivative fair value (gains)/loss1 | - | (5) | 5 | (4) | |
| Other Corporate - changes in unrealized derivative fair value (gains)/loss1 | 221 | (77) | 227 | 177 | |
| Other Corporate - gain on sale of investment | - | - | (14) | - | |
| Other Corporate - foreign tax recovery | - | - | - | (4) | |
| Other Corporate - impact of tax rate changes | - | - | - | (18) | |
| Adjusted earnings | 345 | 278 | 1,165 | 1,072 | |
| 1 | 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 | Nine months ended | |||||
| September 30, | September 30, | |||||
| 2014 | 2013 | 2014 | 2013 | |||
| (millions of Canadian dollars, except per share amounts) | ||||||
| Earnings attributable to common shareholders | ||||||
| Liquids Pipelines | (31) | 301 | 444 | 381 | ||
| Gas Distribution | (11) | (85) | 144 | 49 | ||
| Gas Pipelines, Processing and Energy Services | 88 | 68 | 386 | 257 | ||
| Sponsored Investments | 108 | 75 | 279 | 189 | ||
| Corporate | (234) | 62 | (233) | (163) | ||
| Earnings/(loss) attributable to common shareholders from continuing operations | (80) | 421 | 1,020 | 713 | ||
| Discontinued operations - Gas Pipelines, Processing and Energy Services | - | - | 46 | - | ||
| (80) | 421 | 1,066 | 713 | |||
| Earnings/(loss) per common share | (0.10) | 0.52 | 1.29 | 0.89 | ||
| Diluted earnings/(loss) per common share | (0.10) | 0.51 | 1.27 | 0.88 | ||
| Adjusted earnings1 | ||||||
| Liquids Pipelines | 221 | 187 | 659 | 565 | ||
| Gas Distribution | (9) | (29) | 109 | 109 | ||
| Gas Pipelines, Processing and Energy Services | 20 | 54 | 106 | 186 | ||
| Sponsored Investments | 126 | 86 | 306 | 224 | ||
| Corporate | (13) | (20) | (15) | (12) | ||
| 345 | 278 | 1,165 | 1,072 | |||
| Adjusted earnings per common share1 | 0.41 | 0.34 | 1.41 | 1.33 | ||
| Cash flow data | ||||||
| Cash provided by operating activities | 746 | 830 | 1,891 | 2,560 | ||
| Cash used in investing activities | (2,525) | (2,562) | (8,154) | (6,154) | ||
| Cash provided by financing activities | 1,594 | 1,175 | 6,549 | 2,326 | ||
| Dividends | ||||||
| Common share dividends declared | 296 | 261 | 880 | 774 | ||
| Dividends paid per common share | 0.3500 | 0.3150 | 1.0500 | 0.9450 | ||
| Shares outstanding (millions) | ||||||
| Weighted average common shares outstanding | 835 | 814 | 826 | 803 | ||
| Diluted weighted average common shares outstanding | 847 | 824 | 837 | 814 | ||
| Operating data | ||||||
| Liquids Pipelines - Average deliveries (thousands of barrels per day) | ||||||
| Canadian Mainline2 | 2,039 | 1,736 | 1,970 | 1,707 | ||
| Regional Oil Sands System3 | 690 | 578 | 697 | 490 | ||
| Spearhead Pipeline | 190 | 172 | 190 | 174 | ||
| Gas Distribution - Enbridge Gas Distribution (EGD) | ||||||
| Volumes (billions of cubic feet) | 44 | 44 | 332 | 299 | ||
| Number of active customers (thousands)4 | 2,076 | 2,040 | 2,076 | 2,040 | ||
| Heating degree days5 | ||||||
| Actual | 84 | 89 | 2,783 | 2,378 | ||
| Forecast based on normal weather | 61 | 54 | 2,299 | 2,420 | ||
| Gas Pipelines, Processing and Energy Services - Average throughput volume (millions of cubic feet per day) | ||||||
| Alliance Pipeline US | 1,660 | 1,514 | 1,694 | 1,569 | ||
| Vector Pipeline | 1,201 | 1,406 | 1,434 | 1,511 | ||
| Enbridge Offshore Pipelines | 1,501 | 1,458 | 1,485 | 1,420 | ||
| 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. |
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