CALGARY, ALBERTA--Enbridge Inc. today announced earnings
applicable to common shareholders for the six months ended June
30, 2002 of $546.4 million, or $3.45 per share, compared with
$353.9 million, or $2.25 per share, for the same period in 2001.
Increased earnings from Energy Transportation North and
International continue to generate growth for Enbridge's
shareholders. The warmer than normal weather experienced in the
Enbridge Consumers Gas franchise area during the first quarter of
the year continued in the second quarter, negatively affecting
results from Energy Distribution. First half earnings also
include an approximate $240 million gain, after tax, from the sale
of the Energy Services business. Prior year's earnings included
$58.5 million related to income tax rate reductions.
Earnings for the three months ended June 30, 2002 are $433.3
million, or $2.74 per share, compared with $270.4 million, or
$1.72 per share, for the three months ended June 30, 2001.
"Our low-risk approach continues to generate steady profitable
growth," said Enbridge President & Chief Executive Officer,
Patrick D. Daniel. "While many of our North American peers have
evolved into merchant energy traders, Enbridge remains focussed on
managing energy infrastructure assets that produce predictable and
transparent earnings. This business model has served us well as
our financial strength positions us to supplement organic growth
with selective acquisitions that expand our core business
platforms. We will continue to maintain our high quality asset
portfolio and our low risk profile."
The Enbridge Board of Directors today also declared quarterly
dividends of $0.38 per common share and $0.34375 per Series A
preferred share. Both dividends are payable on September 1, 2002,
to shareholders of record on August 9, 2002.
RECENT DEVELOPMENTS
Assets Held for Sale - Enbridge Midcoast Energy
As previously announced, the Company has entered into an agreement
to sell the United States assets of Enbridge Midcoast Energy to
Enbridge Energy Partners, L.P., conditional on the Partnership
obtaining necessary financing. Given current market conditions
and the second quarter performance of the Enbridge Midcoast Energy
assets, Enbridge and the Partnership are assessing the impacts of
these circumstances on the transaction. The Company expects to
agree to modified terms and that a transaction will proceed when
market conditions improve.
The Partnership plans to finance the acquisition through the
assumption of debt and the issuance of i-units, a new class of
limited partner interests to Enbridge Energy Management, L.L.C.
(EEM), a wholly-owned subsidiary of Enbridge. Enbridge, the
Partnership and EEM have filed a combined registration statement
with the United States Securities and Exchange Commission (SEC)
for an initial public offering by EEM of 10,000,000 shares
representing limited liability company interests with limited
voting rights. The registration statement is being reviewed by
the SEC. The proceeds from the offering will be used to purchase
the i-units from the Partnership. EEM will have no assets or
operations other than those related to the interest in the
Partnership. In connection with the offering, application will be
made to list the EEM shares on the New York Stock Exchange.
Upon closing of the sale, the Partnership will become the primary
vehicle for acquisitions of mature energy delivery assets in the
United States. The i-unit structure is expected to provide
increased financing flexibility and additional access to capital.
Enbridge expects to receive incremental earnings from its equity
investment in the Partnership through higher distributions to the
General Partner, a wholly-owned subsidiary of the Company.
Sale of the Energy Services Business
In May 2002, the Company closed the sale of its Energy Services
business for cash proceeds of $1 billion, subject to final working
capital adjustments.
Oil Storage Caverns
The Company has entered into a partnership to develop underground
cavern facilities to provide crude oil storage services. The
storage facilities are adjacent to the Enbridge System main
pipeline terminal at Hardisty, Alberta and provide a strategic and
economic complement to existing operations. Storage capacity is
expected to be approximately three million barrels for which third
party shipper interest is being pursued. Construction is
scheduled to commence in the fourth quarter of 2002 with
completion by the third quarter of 2003.
Emerging Energy Technologies
The SunBridge wind power project was officially opened in June
2002. The $22 million project, operated by Enbridge, was
developed through a 50/50 partnership with Suncor Energy Inc.
SaskPower is purchasing the wind-generated electricity for sale to
the Government of Canada and other customers in Saskatchewan.
FINANCIAL RESULTS
Earnings from continuing operations for the six months ended June
30, 2002 are $304.1 million, or $1.92 per share, compared with
earnings of $325.1 million, or $2.07 per share, for the same
period in 2001. Growth in earnings from Energy Transportation
North and International has been more than offset by warmer than
normal weather and the positive impact of income tax rate
reductions on earnings in 2001.
For the second quarter, earnings from continuing operations are
$199.1 million and $245.3 million in 2002 and 2001, respectively.
The decrease in earnings in 2002 is due to the warmer than normal
weather and the effect of income tax rate reductions recognized in
the second quarter of 2001, partially offset by growth in earnings
in Energy Transportation North and International.
Energy Transportation North
First half earnings are $112.9 million, an increase of $23.1
million over the first six months of 2001. The increase includes
incremental earnings from the multiphase Terrace expansion and a
higher contribution from the Enbridge Athabasca System due to the
construction of new facilities. In addition, the loss from the
Aux Sable facilities decreased in 2002, reflecting an improvement
in the differential between natural gas and natural gas liquids
prices.
Earnings for the three months ended June 30, 2002 of $55.5 million
are $8.5 million higher than the same period last year due to
systems expansions. This increase is partially offset by the
positive impact of the income tax rate reductions in the second
quarter of 2001.
Energy Transportation South
Earnings for the six months ended June 30, 2002 are $21.6 million,
in comparison with earnings of $23.4 million for the same period
last year. The 2002 results reflect higher earnings from the
Partnership, partially resulting from the acquisitions of the
North Dakota and East Texas Systems. This increase is more than
offset by lower earnings from Enbridge Midcoast Energy and the
loss of earnings from the North Dakota System, which was sold to
the Partnership in May 2001. The results from Enbridge Midcoast
Energy were negatively affected by weak commodity prices,
primarily for natural gas liquids, and lower volumes in the second
quarter. The results also include adjustments recorded in the
first quarter of 2002 related to the prior year.
Earnings of $7.4 million for the second quarter of 2002 are $11.0
million lower than the same period last year. A dilution gain of
$7.4 million on the Company's investment in the Partnership is
included in the 2001 second quarter results, whereas in 2002 a
dilution gain was realized in the first quarter. Enbridge
Midcoast Energy earnings are lower during the second quarter due
to weak commodity prices and lower volumes.
Energy Distribution
Earnings from Energy Distribution are $146.6 million, a decrease
of $78.7 million from the six months ended June 30, 2001. The
difference is attributable to the warmer than normal weather in
the Enbridge Consumers Gas (ECG) franchise area and the positive
impact of income tax rate reductions in 2001 amounting to $45.0
million. ECG earnings on a weather-normalized basis would
increase by $39.4 million for the six months ended June 30, 2002.
Gas distribution volumes are 11% lower than the prior year and
degree days, which are used as a measure of coldness, were 18%
lower than 2001 and 14% lower than the forecast based on normal
weather. Due to the seasonal nature of energy distribution
operations, quarterly earnings are not indicative of full year
results.
For the three months ended June 30, 2002, earnings are $130.3
million, compared with $184.7 million for the same three months in
2001. The decrease of $54.4 million is the result of the warmer
than normal weather, offset in part by lower operating and
maintenance expenses. The second quarter of 2001 included the
positive earnings effect of income tax rate reductions.
International
Earnings increased by $16.3 million to $34.0 million in the first
six months of 2002. The acquisition of CLH represents the growth
in International, as earnings from other operations approximate
last year. The operating results from CLH have been better than
expected.
Earnings for the three months ended June 30, 2002 are $17.5
million. The increase of $9.2 million from last year is due to
the acquisition of CLH.
Corporate
Corporate costs total $11.0 million, compared with $31.1 million
in 2001. Costs for 2002 include a gain on the sale of securities
of $17.8 million, realized in the first quarter of 2002. Other
corporate costs approximate last year.
Corporate costs for the three months ended June 30, 2002 are $11.6
million, compared with $13.1 million for the three months ended
June 30, 2001. The decrease reflects lower financing costs
partially offset by a reduced contribution from corporate
activities.
Discontinued Operations
Net earnings from discontinued operations for the six months ended
June 30, 2002 are $242.3 million, including a net gain of
approximately $240 million on the sale, in May 2002, of the Energy
Services business.
Earnings from discontinued operations, excluding the gain, for the
six months ended June 30, 2002 are $2.3 million, compared with
$28.8 million for the same period in 2001. Earnings in 2002 do
not include the months of May and June, which typically reflect
higher service and sales activity. Earnings in 2001 included
$14.3 million related to the positive effect of income tax rate
reductions.
The net gain of $240 million on disposition differs from the
estimate of $210 million, previously disclosed in January 2002.
The difference results from the actual net asset value at closing,
revised estimates of working capital and actual to estimate
adjustments of costs. Working capital is subject to a final
adjustment no later than five months subsequent to the close date.
Liquidity and Capital Resources
In May 2002, the Company received proceeds of $1 billion on the
sale of the Energy Services business which were used to reduce
debt.
The Company continues to generate sufficient cash from operations
to fund current operations, dividends, scheduled debt repayments
and planned capital expenditures. Net cash provided by operations
increased $645 million in 2002, compared with the same period in
2001, due mainly to reductions in operating assets. The reductions
include lower gas in storage, which reflects both seasonal
fluctuations and the lower commodity cost of gas in 2002, and
decreased accounts receivable due to the repayment of a loan by an
affiliated company.
Enbridge Midcoast Energy has been classified as held for sale on
the statement of financial position. Capital expenditures and the
acquisition of the Northeast Texas assets in the first quarter of
2002 have increased assets held for sale at June 30, 2002 from
December 31, 2001. Long-term investments include the 25% equity
investment in CLH, acquired in the first quarter of 2002. These
items, in addition to capital expenditures in Energy
Transportation North and Energy Distribution, represent the
majority of the cash used for investing purposes. Expenditures in
Energy Transportation North include construction of Athabasca
System facilities. Energy Distribution expenditures include core
maintenance and expansion of the Enbridge Consumers Gas
distribution system. In addition to the proceeds from the sale of
the Energy Services business, cash from investing activities
includes proceeds from the sale of securities.
Financing activities reflect reduction of debt using the proceeds
received from the sale of the Energy Services business as well as
a $200 million preferred securities issue.
Enbridge will hold a conference call at 2:15 p.m. Mountain time
(4:15 p.m. Eastern time) today to discuss the first half results.
The call will be broadcast live on the Internet at
www.enbridge.com/investor. A replay will be available shortly
thereafter.
Enbridge Inc. is a leader in energy transportation and
distribution in North America and internationally. As a
transporter of energy, Enbridge operates, in Canada and the U.S.,
the world's longest crude oil and liquids pipeline system. The
Company also has international operations and a growing
involvement in the natural gas transmission and midstream
businesses. As a distributor of energy, Enbridge owns and
operates Canada's largest natural gas distribution company, which
provides distribution services in Ontario, Quebec and New York
State; and is developing a gas distribution system for the
province of New Brunswick. The Company employs approximately 4,000
people, primarily in Canada, the U.S. and South America. Enbridge
common shares trade on The Toronto Stock Exchange in Canada and on
The New York Stock Exchange in the U.S. under the symbol ENB.
Information about Enbridge is available on the Company's web site
at www.enbridge.com.
When used in this press release, the words "anticipate", "expect",
"project", "believe", "estimate", "forecast" and similar
expressions are intended to identify forward-looking statements,
which include statements relating to pending and proposed
projects. Such statements are subject to certain risks,
uncertainties and assumptions pertaining to operating performance,
regulatory parameters, weather and economic conditions and, in the
case of pending and proposed projects, risks relating to design
and construction, regulatory processes, obtaining financing and
performance of other parties, including partners, contractors and
suppliers.
Enbridge Inc.Highlights(1)--------------------------------------------------------------------- Three months Six months ended ended June 30, June 30, ----------------------------(unaudited; millions of Canadian dollars,except per share amounts) 2002 2001 2002 2001 ---------------------------------------------------------------------FINANCIAL Earnings Applicable to Common Shareholders Energy Transportation North 55.5 47.0 112.9 89.8 Energy Transportation South 7.4 18.4 21.6 23.4 Energy Distribution 130.3 184.7 146.6 225.3 International 17.5 8.3 34.0 17.7 Corporate (11.6) (13.1) (11.0) (31.1)--------------------------------------------------------------------- Continuing operations 199.1 245.3 304.1 325.1 Discontinued operations 234.2 25.1 242.3 28.8 --------------------------------------------------------------------- 433.3 270.4 546.4 353.9 ------------------------------------------------------------------------------------------------------------------------------------------Cash Provided By/(Used In) Operating Activities Earnings plus charges/(credits) not affecting cash 270.3 280.0 442.3 446.6 Changes in operating assets and liabilities 244.7 (123.9) 399.4 (174.7) Cash provided by/(used in) operating activities of discontinued operations 12.9 30.4 28.6 (46.6)--------------------------------------------------------------------- 527.9 186.5 870.3 225.3 ------------------------------------------------------------------------------------------------------------------------------------------Common Share Dividends 62.2 56.9 124.2 113.6 Per Common Share Amounts Earnings from continuing operations 1.26 1.56 1.92 2.07 Earnings from discontinued operations 1.48 0.16 1.53 0.18 --------------------------------------------------------------------- 2.74 1.72 3.45 2.25 ------------------------------------------------------------------------------------------------------------------------------------------Dividends 0.38 0.35 0.76 0.70 ------------------------------------------------------------------------------------------------------------------------------------------Weighted Average Common Shares Outstanding (millions) 158.3 157.3 ------------------------------------------------------------------------------------------------------------------------------------------OPERATING Energy Transportation(2) Deliveries (thousands of barrels per day) 2,057 2,172 2,060 2,158 Barrel miles (billions) 175 181 350 357 Average haul (miles) 935 910 939 909 Energy Distribution(3) Volumes (billion cubic feet) 169 184 264 297 Number of active customers (thousands) 1,612 1,563 1,612 1,563 Degree day deficiency(4) Actual 1,690 1,936 2,507 3,041 Forecast based on normal weather 1,912 1,962 2,932 2,984 ---------------------------------------------------------------------
1. Highlights of Energy Distribution reflect the results of
Enbridge Consumers Gas and other gas distribution operations for
the three and six months ended March 31, 2002 and 2001.
2. Energy Transportation operating highlights include the
statistics of the 12.9% owned Lakehead System and other
wholly-owned liquid pipeline operations.
3. Energy Distribution volumes and the number of active customers
are derived from the aggregate system supply and direct purchase
gas supply arrangements.
4. Degree-day deficiency is a measure of coldness. It is
calculated by accumulating for each day in the 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 Toronto area.
Enbridge Inc.Consolidated Statements of Earnings Three months Six months ended ended June 30, June 30, ------------------------------(unaudited; millions of Canadian dollars; except per share amounts) 2002 2001 2002 2001 ---------------------------------------------------------------------Revenues Gas sales 1,158.0 1,182.2 1,848.2 1,651.9 Transportation 415.8 371.6 740.5 630.3 Energy services 80.2 55.4 146.9 95.8 --------------------------------------------------------------------- 1,654.0 1,609.2 2,735.6 2,378.0 ---------------------------------------------------------------------Expenses Gas costs 985.3 989.7 1,602.1 1,344.6 Operating and administrative 227.9 175.6 438.0 335.8 Depreciation 104.3 98.7 209.9 189.5 --------------------------------------------------------------------- 1,317.5 1,264.0 2,250.0 1,869.9 ---------------------------------------------------------------------Operating Income 336.5 345.2 485.6 508.1 Investment and Other Income 51.0 75.2 150.0 115.9 Interest Expense (103.3) (104.9) (214.1) (202.9)---------------------------------------------------------------------Earnings from Continuing Operations Before Income Taxes 284.2 315.5 421.5 421.1 Income Tax Expense (76.4) (64.0) (101.3) (83.9)---------------------------------------------------------------------Earnings from Continuing Operations 207.8 251.5 320.2 337.2 Earnings from Discontinued Operations 234.2 25.1 242.3 28.8 ---------------------------------------------------------------------Earnings 442.0 276.6 562.5 366.0 Preferred Security Distributions (7.0) (4.5) (12.7) (8.7)Preferred Share Dividends (1.7) (1.7) (3.4) (3.4)---------------------------------------------------------------------Earnings Applicable to Common Shareholders 433.3 270.4 546.4 353.9 ------------------------------------------------------------------------------------------------------------------------------------------Earnings Applicable to Common Shareholders Continuing Operations 199.1 245.3 304.1 325.1 Discontinued Operations 234.2 25.1 242.3 28.8 --------------------------------------------------------------------- 433.3 270.4 546.4 353.9 ------------------------------------------------------------------------------------------------------------------------------------------Earnings Per Common Share Continuing Operations 1.26 1.56 1.92 2.07 Discontinued Operations 1.48 0.16 1.53 0.18 --------------------------------------------------------------------- 2.74 1.72 3.45 2.25 ------------------------------------------------------------------------------------------------------------------------------------------Diluted Earnings Per Common Share Continuing Operations 1.25 1.53 1.90 2.04 Discontinued Operations 1.46 0.16 1.51 0.18 --------------------------------------------------------------------- 2.71 1.69 3.41 2.22 ------------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the unaudited consolidated financial statements. Enbridge Inc.Consolidated Statements of Retained Earnings--------------------------------------------------------------------- Six months ended June 30, -----------------(unaudited; millions of Canadian dollars) 2002 2001 ---------------------------------------------------------------------Retained Earnings at Beginning of Period 812.3 581.3 Earnings Applicable to Common Shareholders 546.4 353.9 Common Share Dividends (124.2) (113.6)Preferred Security Issue Costs (4.2) - Effect of Change in Accounting for Stock-based Compensation (5.4) - ---------------------------------------------------------------------Retained Earnings at End of Period 1,224.9 821.6 ------------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the unaudited consolidated financial statements. Enbridge Inc.Consolidated Statements of Cash Flows Three months Six months ended ended June 30, June 30, (unaudited; millions of ----------------------------- Canadian dollars) 2002 2001 2002 2001 ---------------------------------------------------------------------Cash Provided By/(Used in) Operating Activities Earnings from continuing operations 207.8 251.5 320.2 337.2 Charges/(credits) not affecting cash Depreciation 104.3 98.7 209.9 189.5 Equity earnings in excess of cash distributions (19.5) (1.5) (29.8) (11.4) Gain on reduction of ownership interest (0.3) (11.5) (10.0) (11.5) Gain on sale of securities - - (21.4) - Future income taxes 3.1 (42.1) 7.4 (30.6) Other (25.1) (15.1) (34.0) (26.6) Changes in operating assets and liabilities 244.7 (123.9) 399.4 (174.7) Cash provided by/(used in) operating activities of discontinued operations 12.9 30.4 28.6 (46.6)--------------------------------------------------------------------- 527.9 186.5 870.3 225.3 ---------------------------------------------------------------------Investing Activities Disposition of Energy Services business 993.3 - 993.3 - Long-term investments (20.6) (17.3)(448.8) (35.1) Acquisition of Northeast Texas assets - - (289.3) - Additions to property, plant and equipment (237.0) (112.3)(385.7) (219.5) Proceeds from sale of securities - - 110.5 - Changes in construction payable 7.5 (7.5) (15.5) (33.9) Acquisition of Midcoast Energy Resources, Inc. - (561.8) - (561.8) Other 4.5 1.8 4.1 (3.0)--------------------------------------------------------------------- 747.7 (697.1) (31.4) (853.3)---------------------------------------------------------------------Financing Activities Net change in short-term borrowings and short-term debt (863.9) 450.9 (829.3) 644.2 Long-term debt issues - 210.0 247.4 505.6 Long-term debt repayments (257.7) (37.7)(257.7) (347.8) Non-controlling interests (1.6) (0.6) (2.3) (1.8) Preferred securities issued - - 193.5 - Common shares issued 15.6 12.7 31.4 17.3 Preferred security distributions (7.0) (4.5) (12.7) (8.7) Preferred share dividends (1.7) (1.7) (3.4) (3.4) Common share dividends (62.2) (56.9)(124.2) (113.6)--------------------------------------------------------------------- (1,178.5) 572.2 (757.3) 691.8 ---------------------------------------------------------------------Increase in Cash 97.1 61.6 81.6 63.8 Cash at Beginning of Period 58.5 69.2 74.0 67.0 ---------------------------------------------------------------------Cash at End of Period 155.6 130.8 155.6 130.8 ------------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the unaudited consolidated financial statements. Enbridge Inc.Consolidated Statements of Financial Position--------------------------------------------------------------------- June 30, December 31,(millions of Canadian dollars) 2002 2001 ---------------------------------------------------------------------Assets (unaudited) (audited)Current Assets Cash 155.6 74.0 Accounts receivable and other 1,092.0 1,270.2 Gas in storage 163.5 665.6 Current assets of discontinued operations - 123.0 Current assets held for sale 197.4 148.9 --------------------------------------------------------------------- 1,608.5 2,281.7 Property, Plant and Equipment, net 6,877.4 6,817.5 Long-Term Investments 2,250.7 1,772.8 Deferred Amounts 295.3 289.9 Future Income Taxes 143.2 142.0 Long-Term Assets of Discontinued Operations - 750.0 Long-Term Assets Held for Sale 1,383.3 1,073.8 --------------------------------------------------------------------- 12,558.4 13,127.7 ------------------------------------------------------------------------------------------------------------------------------------------ Liabilities and Shareholders' Equity Current Liabilities Short-term borrowings 274.1 410.9 Accounts payable and other 479.3 679.9 Interest payable 119.1 100.2 Current maturities and short-term debt 867.2 1,810.2 Current liabilities of discontinued operations - 73.8 Current liabilities held for sale 174.0 125.3 --------------------------------------------------------------------- 1,913.7 3,200.3 Long-Term Debt 6,178.4 5,922.8 Future Income Taxes 657.3 691.7 Non-Controlling Interests 130.4 131.1 Long-Term Liabilities of Discontinued Operations - 118.6 Long-Term Liabilities Held for Sale 44.0 31.1 --------------------------------------------------------------------- 8,923.8 10,095.6 Shareholders' Equity Share capital Preferred securities 534.3 339.7 Preferred shares 125.0 125.0 Common shares 1,907.3 1,875.9 Retained earnings 1,224.9 812.3 Foreign currency translation adjustment (28.7) 7.4 Reciprocal shareholding (128.2) (128.2)--------------------------------------------------------------------- 3,634.6 3,032.1 --------------------------------------------------------------------- Contingency (Note 8) 12,558.4 13,127.7 ------------------------------------------------------------------------------------------------------------------------------------------
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles and should be read in conjunction with the consolidated
financial statements and notes thereto included in Enbridge Inc.'s
2001 Annual Report. These interim financial statements are
prepared on a consistent basis with those included in the 2001
Annual Report and follow the same accounting policies and methods
of application, except as described in Note 1.
Earnings for interim periods may not be indicative of results for
the fiscal year due to weather and other factors. Certain
reclassifications have been made to the prior period financial
statements to conform to the current year's presentation.
1. CHANGE IN ACCOUNTING POLICIES
Effective January 1, 2002, the Company adopted the new accounting
standard for stock-based compensation. The standard requires an
expense to be recognized for certain awards of stock-based
compensation. The standard, which requires retroactive
application for certain of the Company's awards as a charge to
opening retained earnings without restatement of prior periods,
resulted in a charge to opening retained earnings on adoption of
$5.4 million.
Effective January 1, 2002, the Company adopted the new accounting
standard for goodwill and other intangible assets. The standard
requires, among other things, that goodwill no longer be amortized
but will be tested for impairment at least annually. The standard
is being applied prospectively. Goodwill arising from the
acquisition of Midcoast Energy Resources, Inc. in May 2001,
included in long-term assets held for sale, was being amortized
over 30 years prior to the adoption of the new standard. Results
of operations for the three and six months ended June 30, 2001
included goodwill amortization of $1.5 million. This amortization
reduced both basic and diluted earnings per share by $0.01 for the
three and six months ended June 30, 2001.
Effective July 1, 2002, the Company adopted the new accounting
guideline for Hedging Relationships. The new guideline addresses
the identification, designation, documentation and effectiveness
of hedging relationships, for the purpose of applying hedge
accounting, and establishes certain conditions for the application
of hedge accounting. Since the Company is in compliance with SFAS
No.133, the United States standard for derivative instruments and
hedging activities, in the areas addressed by the guideline, the
adoption of the new guideline will not impact results.
2. SEGMENTED INFORMATION(millions of Canadian dollars)Three months ended June 30, 2002 (unaudited)---------------------------------------------------------------------- Energy Energy Transportation Distri- Inter- Consol- North South bution national Corporate idated----------------------------------------------------------------------Revenues 338.6 455.4 850.6 8.3 1.1 1,654.0Gas costs (156.8) (390.9) (437.6) - - (985.3)Operating and administration (64.5) (39.6) (116.6) (4.2) (3.0) (227.9)Depreciation (33.8) (11.7) (57.4) (0.5) (0.9) (104.3) -------------------------------------------------------Operating income/(loss) 83.5 13.2 239.0 3.6 (2.8) 336.5Investment and other income 15.7 7.8 18.7 13.7 (4.9) 51.0Interest and preferred equity charges (26.3) (10.1) (45.4) - (30.2) (112.0)Income taxes (17.4) (3.5) (82.0) 0.2 26.3 (76.4) -------------------------------------------------------Earnings/(loss) from continuing operations 55.5 7.4 130.3 17.5 (11.6) 199.1 ----------------------------------------------- -----------------------------------------------Earnings from discontinued operations 234.2 --------Earnings applicable to common shareholders 433.3--------------------------------------------------------------------------------------------------------------------------------------------Three months ended June 30, 2001 (unaudited)---------------------------------------------------------------------- Energy Energy Transportation Distri- Inter- Consol- North South bution national Corporate idated----------------------------------------------------------------------Revenues 182.2 210.3 1,207.7 6.8 2.2 1,609.2Gas costs - (169.9) (819.8) - - (989.7)Operating and administration (67.1) (17.5) (79.7) (5.2) (6.1) (175.6)Depreciation (32.9) (8.0) (56.5) (0.3) (1.0) (98.7) -------------------------------------------------------Operating income/(loss) 82.2 14.9 251.7 1.3 (4.9) 345.2Investment and other income 10.6 18.3 15.4 7.6 23.3 75.2Interest and preferred equity charges (25.0) (4.8) (40.1) - (41.2) (111.1)Income taxes (20.8) (10.0) (42.3) (0.6) 9.7 (64.0) -------------------------------------------------------Earnings/(loss) from continuing operations 47.0 18.4 184.7 8.3 (13.1) 245.3 ----------------------------------------------- -----------------------------------------------Earnings from discontinued operations 25.1 --------Earnings applicable to common shareholders 270.4-------------------------------------------------------------------------------------------------------------------------------------------- Six months ended June 30, 2002 (unaudited) ---------------------------------------------------------------------- Energy Energy Transportation Distri- Inter- Consol- North South bution national Corporate idated----------------------------------------------------------------------Revenues 635.2 771.4 1,313.0 13.1 2.9 2,735.6Gas costs (270.2) (648.9) (683.0) - - (1,602.1)Operating and administration (129.1) (72.9) (221.7) (7.1) (7.2) (438.0)Depreciation (68.9) (21.0) (113.5) (1.2) (5.3) (209.9) -------------------------------------------------------Operating income/(loss) 167.0 28.6 294.8 4.8 (9.6) 485.6Investment and other income 31.8 23.0 27.5 29.2 38.5 150.0Interest and preferred equity charges (50.3) (17.6) (85.2) - (77.1) (230.2)Income taxes (35.6) (12.4) (90.5) - 37.2 (101.3) ------------------------------------------------------- Earnings/(loss) from continuing operations 112.9 21.6 146.6 34.0 (11.0) 304.1 ----------------------------------------------- -----------------------------------------------Earnings from discontinued operations 242.3 --------Earnings applicable to common shareholders 546.4-------------------------------------------------------------------------------------------------------------------------------------------- Six months ended June 30, 2001 (unaudited) ---------------------------------------------------------------------- Energy Energy Transportation Distri- Inter- Consol- North South bution national Corporate idated----------------------------------------------------------------------Revenues 349.2 217.9 1,795.2 13.5 2.2 2,378.0Gas costs - (169.9)(1,174.7) - - (1,344.6)Operating and administration (128.3) (23.2) (164.0) (9.6) (10.7) (335.8)Depreciation (66.9) (9.9) (110.1) (0.6) (2.0) (189.5) -------------------------------------------------------Operating income/(loss) 154.0 14.9 346.4 3.3 (10.5) 508.1Investment and other income 22.7 26.3 29.1 15.0 22.8 115.9Interest and preferred equity charges (52.2) (5.2) (82.3) (0.1) (75.2) (215.0)Income taxes (34.7) (12.6) (67.9) (0.5) 31.8 (83.9) -------------------------------------------------------Earnings/(loss) from continuing operations 89.8 23.4 225.3 17.7 (31.1) 325.1 ----------------------------------------------- -----------------------------------------------Earnings from discontinued operations 28.8 --------Earnings applicable to common shareholders 353.9--------------------------------------------------------------------------------------------------------------------------------------------
3. ASSETS HELD FOR SALE
The Company has entered into an agreement to sell the United
States assets of Enbridge Midcoast Energy to Enbridge Energy
Partners, L.P. (the Partnership), owned 12.9% by the Company. The
general partner, a wholly-owned subsidiary of the Company, is the
operator of the Partnership. The sale is conditional on the
Partnership obtaining the necessary financing. Upon closing, the
Company will continue to exercise significant influence over the
assets sold and, therefore, results of operations have not been
segregated from continuing operations.
Selected financial information related to the net assets to be
sold is as follows.
Financial Position June 30, December 31,(unaudited; millions of Canadian dollars) 2002 2001----------------------------------------------------------------------Assets Current assets 197.4 148.9 Property, plant and equipment 1,009.5 729.3 Other assets 373.8 344.5---------------------------------------------------------------------- 1,580.7 1,222.7----------------------------------------------------------------------Liabilities Current liabilities 174.0 125.3 Future income taxes 44.0 31.1----------------------------------------------------------------------Net Assets Held for Sale 1,362.7 1,066.3--------------------------------------------------------------------------------------------------------------------------------------------
The net asset information does not reflect the assumption of
intercompany debt that will be assumed by the purchaser and
recharacterized as due from a related party upon closing of the
sale.
Earnings Three months Six months ended ended June 30, June 30,(unaudited; millions of Canadian dollars) 2002 2001 2002 2001----------------------------------------------------------------------Revenues 445.7 197.4 748.6 197.4Gas costs 390.5 168.8 648.4 168.8Operating and administrative 35.7 11.3 62.8 11.3Depreciation 9.4 6.1 17.1 6.1----------------------------------------------------------------------Operating income 10.1 11.2 20.3 11.2Investment and other income 2.1 - 1.3 -Interest expense (10.1) (4.0) (16.6) (4.0)Income tax expense (0.7) (2.1) (1.7) (2.1)----------------------------------------------------------------------Earnings 1.4 5.1 3.3 5.1--------------------------------------------------------------------------------------------------------------------------------------------
4. ACQUISITION
In March 2002, the Company acquired natural gas gathering and
processing facilities in Northeast Texas for cash consideration of
$289.3 million. The facilities and the goodwill are included in
the sale described in Note 3. All of the goodwill is expected to
be deductible for tax purposes. The results of operations have
been included in the consolidated statement of earnings from the
date of acquisition.
(unaudited; millions of Canadian dollars) ----------------------------------------------------------------------Fair Value of Assets Acquired Property, plant and equipment 242.3 Goodwill 56.2 Working capital deficiency (9.2)---------------------------------------------------------------------- 289.3 --------------------------------------------------------------------------------------------------------------------------------------------Purchase Price Cash 288.2 Transaction costs 1.1 ---------------------------------------------------------------------- 289.3 --------------------------------------------------------------------------------------------------------------------------------------------
5. DISCONTINUED OPERATIONS
The sale of the Company's business operations that provide energy
products and services to retail and commercial customers,
including the water heater rental program, closed in May 2002.
Selected financial information related to discontinued operations
is as follows.
Financial Position June 30, December 31,(unaudited; millions of Canadian dollars) 2002 2001----------------------------------------------------------------------Assets Current assets - 123.0 Property, plant and equipment - 584.2 Other assets - 165.8 ---------------------------------------------------------------------- - 873.0 ----------------------------------------------------------------------Liabilities Current liabilities - 73.8 Future income taxes - 118.6 ----------------------------------------------------------------------Net Assets of Discontinued Operations - 680.6 --------------------------------------------------------------------------------------------------------------------------------------------Earnings Three months Six months ended ended June 30, June 30,(unaudited; millions of Canadian dollars) 2002 2001 2002 2001----------------------------------------------------------------------Net gain on disposition 240.0 - 240.0 - Earnings/(loss) for the period (5.8) 25.1 2.3 28.8 ----------------------------------------------------------------------Net earnings from discontinued operations 234.2 25.1 242.3 28.8 --------------------------------------------------------------------------------------------------------------------------------------------Revenues 53.6 111.3 181.9 215.8Income tax expense/(recovery) 25.8 (14.8) 32.3 (11.4)Allocated interest expense 5.2 6.7 12.1 17.2
6. PREFERRED SECURITIES
In February 2002, the Company completed a public offering of $200
million, 7.8% Preferred Securities, for net proceeds of $193.5
million. The Preferred Securities may be redeemed at the
Company's option in whole or in part after the fifth anniversary
of issue. The Company has the right to defer, subject to certain
conditions, payments of distributions on the securities for a
period of up to 20 consecutive quarterly periods. Deferred and
regular distribution amounts are payable in cash or, at the option
of the Company, in common shares of the Company. Since the
distributions may be settled through the issuance of common shares
at the Company's option, the Preferred Securities are classified
into their respective debt and equity components. The equity
component of the Preferred Securities was $195.0 million at June
30, 2002.
7. STOCK-BASED COMPENSATION
The Company accounts for the issue of options under its stock
option plans as capital transactions when the options are
exercised. In 2002, 1.0 million stock options were issued at an
average exercise price of $43.77 under the Company's Incentive
Stock Option Plan. If the Company had used the fair-value based
method to account for stock-based compensation, earnings and
earnings per share would have been as follows.
Three months Six months ended ended (unaudited; millions of Canadian dollars) June 30, 2002 June 30, 2002----------------------------------------------------------------------Earnings from continuing operations As reported 199.1 304.1 Stock-based compensation expense 0.7 1.2 ----------------------------------------------------------------------Pro forma 198.4 302.9 Earnings applicable to common shareholders As reported 433.3 546.4 Stock-based compensation expense 0.7 1.2 ----------------------------------------------------------------------Pro forma 432.6 545.2 Earnings per share from continuing operations As reported 1.26 1.92 Pro forma 1.25 1.91 Earnings per share As reported 2.74 3.45 Pro forma 2.73 3.44
1. Pro forma earnings and earnings per share do not reflect
options granted prior to January 1, 2002, the date of adoption of
the new standard.
2. A binomial model was used to calculate fair value.
Significant assumptions include a risk-free interest rate of
5.33%, expected volatility of 25%, an expected life of 10 years
and an expected dividend yield of 2.72%. The weighted average
grant-date fair value of options granted during the six months
ended June 30, 2002 was $12.26.
8. CONTINGENCY
The Canadian Alliance of Pipeline Landowners' Associations and two
individual landowners have commenced an action, which they will be
applying to certify as a class action, against the Company and
TransCanada PipeLines Limited. The claim relates to restrictions
in the National Energy Board Act on the landowners' use of land
within a 30-metre control zone on either side of the pipeline
easements. The Company believes it has a sound defence and
intends to vigorously defend the claim. Since the outcome is
indeterminable, the Company has made no provision for any
potential liability.
----------------------------------------------------------------------Supplementary Financial Information Number of Shares ----------------Common Shares - issued and outstanding 164,058,294(voting equity shares)Preference Shares, Series A 5,000,000(non-voting equity shares)Total issued and outstanding stock options 6,586,905(3,845,153 vested)----------------------------------------------------------------------
The Company has a Shareholder Rights plan designed to encourage
the fair treatment of shareholders in connection with any takeover
offer for the Company. Rights issued under the plan become
exercisable when a person, and any related parties, acquires or
announces its intention to acquire 20% or more of the Company's
outstanding common shares without complying with certain
provisions set out in the plan or without approval of the Board of
Directors of the Company. Should such an acquisition or
announcement occur, each rights holder, other than the acquiring
person and related parties, will have the right to purchase common
shares of the Company at a 50% discount to the market price at
that time.
Supplementary information as at July 18, 2002.
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