July 26, 2000
earnings applicable to common shareholders for the six months
ended June 30, 2000, of $276.3 million, or $1.82 per share,
compared with $248.2 million, or $1.65 per share, for the same
period in 1999. The 11% increase in earnings reflects improved
operating results from the Energy Services and Gas Distribution
businesses and the reductions in the federal and Ontario corporate
income tax rates. This increase more than offset slightly reduced
earnings from the International and Gas Pipelines businesses and
higher financing costs.
Earnings for the three months ended June 30, 2000, were $193.7
million, or $1.27 per share, compared with $178.4 million, or
$1.18 per share, for the three months ended June 30, 1999.
Commenting on the results, Brian F. MacNeill, President & Chief
Executive Officer, said, "Second quarter results confirm that we
are on track for another year of double-digit earnings per share
growth. The core Liquids Pipelines and Gas Distribution
businesses continue to provide impressive results, despite lower
than expected deliveries of crude oil on our main pipeline system
and the third consecutive year of warmer than normal weather in
our Ontario gas distribution franchise. The results also reflect
a strong contribution from our other businesses - Gas Pipelines
and New Business Development, International and Energy Services.
Over the next several years, these areas are expected to provide
an increasing earnings contribution."
Mr. MacNeill added, "Enbridge has delivered superior returns to
shareholders through solid and consistent earnings growth. This
success has not come at the expense of the future as our strategy
to integrate vertically and horizontally along the energy value
chain positions us to capitalize on a rapidly changing energy
environment. Equally important, we are confident that we can
achieve our objectives without materially altering our low risk
business profile. The combination of profitable growth with
relatively low risk distinguishes Enbridge and forms the essence
of our shareholder value proposition."
The Enbridge Board of Directors today also declared quarterly
dividends of $0.3225 per common share and $0.34375 per Series A
Preferred Share. Both dividends are payable on September 1, 2000,
to shareholders of record on August 11, 2000.
CEO SUCCESSION PLANS
On July 11, Enbridge announced the upcoming retirement of Brian F.
MacNeill, President & Chief Executive Officer, effective January
1, 2001. As part of a phased succession, the Company also
announced the intention of the Board of Directors to appoint
Patrick D. Daniel, currently President & Chief Operating Officer,
Energy Delivery, to the position of President & Chief Executive
Officer upon Mr. MacNeill's retirement. Mr. MacNeill will remain
on the Board of Directors. The appointment of Mr. Daniel as
Enbridge's next CEO will ensure a seamless transition to new
leadership at Enbridge.
FINANCIAL RESULTS
LIQUIDS PIPELINES
First half earnings were $84.6 million, compared with $84.8
million in the first six months of 1999. Deliveries increased to
2.2 million barrels per day from 2.0 million barrels per day for
the same period in 1999. The increase reflects new volumes from
Line 9, which was placed in service in 1999.
While overall earnings are consistent with the prior year, the
contribution from the Lakehead System was lower by $1.6 million,
offset by a $1.5 million increase in earnings from the Enbridge
(Athabasca) System. Throughput levels on the Lakehead System
continue to be lower than in previous periods as the recovery of
crude oil production levels in Western Canada continues to lag
increases in oil prices. Throughput levels do not impact earnings
from the Enbridge System due to throughput protections in the
tolling agreement. The Enbridge (Athabasca) System earnings
reflect a higher average investment base in 2000 as a result of
construction of additional tankage facilities.
In June, the National Energy Board approved the Incentive Tolling
Settlement governing tolls on the Enbridge System for the years
2000 to 2004. The fundamentals of the extended agreement are
consistent with the previous agreement and confirm that Enbridge
and its customers will continue to share in cost savings.
GAS DISTRIBUTION
Earnings from the Gas Distribution business increased $17.1
million, or 12%, to $163.0 million for the first six months of
2000. The results include contributions from Enbridge Consumers
Gas for the six-month period ended March 2000, income from the
Company's 32% investment in Noverco and other gas distribution
operations. Due to the seasonal nature of the gas distribution
operations, six-month earnings are not indicative of full year
results.
The increased earnings of Enbridge Consumers Gas reflect higher
distribution volumes, lower operating and maintenance expenses
resulting from cost reduction initiatives, and lower income tax
expense due to corporate income tax rate reductions, partially
offset by the impact of unbundling the retail products and
services businesses. Distribution volumes have increased
primarily as a result of increased industrial uses and a larger
customer base, but the weather continues to be warmer than normal,
which has a negative impact on earnings. Using degree days as a
measure, the weather has been approximately 10% warmer than
normal. Enbridge Consumers Gas continues to increase its customer
base at expected rates. The contribution from Noverco has
decreased in the first six months due to the adoption of the new
accounting standards for income taxes and a one-time gain
recognized by Noverco in the first half of 1999.
INTERNATIONAL
Earnings from the International business decreased $1.9 million to
$10.3 million in the first six months of 2000, primarily because
of lower consulting fees after the completion of a significant
contract in Mexico in 1999. Earnings from the Company's OCENSA
investment in Colombia were comparable to the same period last
year. In May, the Company announced its intention to acquire an
additional 17.5% interest in the OCENSA pipeline, subject to the
rights of first refusal of the other partners, which expire in
August. In June, PDVSA, the Venezuelan state oil company,
announced that it was not extending the Jose Terminal interim
operating contract. Although disappointing, this will not have a
significant impact on earnings in 2000. In July, PDVSA announced
that it did not intend to sell the Jose Terminal to Enbridge and
its partners, notwithstanding the agreement entered into among the
parties. Meetings with PDVSA to discuss the terminal are ongoing.
GAS PIPELINES AND NEW BUSINESS DEVELOPMENT
Earnings from Gas Pipelines and New Business Development
activities were $15.3 million in the first six months of 2000,
compared with $16.1 million for the same period last year. A
higher allowance for equity funds used during construction (AEDC)
from the Alliance Pipeline Project was more than offset by reduced
current tax recoveries and higher future income tax expense. The
earnings of AltaGas Services Inc., which was acquired in the third
quarter of 1999, higher AEDC from the Vector Pipeline Project and
improved results from electrical utility operations partially
offset the decrease.
ENERGY SERVICES
Six-month contributions from Energy Services were $15.8 million,
an increase of $22.2 million over the same period in 1999. The
higher earnings were primarily due to the results from Enbridge
Services, which includes the retail energy products and services
business unbundled from the regulated operations of Enbridge
Consumers Gas, and lower income tax expense due to corporate tax
rate reductions. Enbridge Services has expanded and achieved
synergies in its Ontario operations subsequent to the unbundling.
During the second quarter, the Company decided to close its retail
store operations in British Columbia. The expected costs to
complete the closure have been reflected in earnings.
CORPORATE
Corporate costs totalled $1.6 million for the first half, compared
with $1.0 million in 1999. Higher financing costs were incurred
as a result of higher interest costs and the growth in new
ventures. In 2000, the Corporate segment reflects the positive
contribution from a central operations support group, which
provides services to various Enbridge companies and third parties.
In 1999, a gain related to a reduction in the Company's ownership
interest in the Lakehead System was realized.
CONSOLIDATED RESULTS OF OPERATIONS
Operating revenue increased by $162.3 million, or 10%, to $1,800.6
million for the first six months of 2000, compared with the same
period last year. Of the increase, $93.9 million was due to
higher transportation revenue generated from the Liquids Pipelines
business which was attributed to commissioning of Terrace
Expansion and the Enbridge (Athabasca) System, completion of the
Line 9 reversal and other feeder line expansions during 1999. An
increase of $35.3 million in gas sales and transportation revenue
was realized in Gas Distribution primarily from increased
distribution volumes, a higher equity rate of return and increased
gas costs. The results of this business continue to indicate a
trend towards increased transportation service gas supply
contracts rather than the traditional buy/sell gas supply
contracts. The remaining increase is the result of the expansion
of the Energy Services business.
Operating and administrative expenses increased $37.8 million to
$422.7 million in the first half of 2000 due to the commissioning
of Line 9 and the Enbridge (Athabasca) System and the larger
customer base in Energy Services. The higher balance of property,
plant and equipment gave rise to increased depreciation expense in
the quarter. Investment and other income decreased to $118.3
million from $126.3 million in 1999, caused primarily by lower
AEDC due to commissioning of the Enbridge (Athabasca) System and
the Terrace Expansion during 1999. The decrease in the effective
income tax rate is due primarily to the reduction in the federal
and Ontario income tax rates.
Enbridge Inc. is a leader in energy transportation, distribution
and services. 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 is involved in liquids
marketing and international energy projects, and has 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 gas in Ontario, Quebec and New York State; and is
involved in the distribution of electricity. In addition,
Enbridge provides retail energy products and services to a growing
number of Canadian and U.S. markets. The Company employs
approximately 5,500 people, primarily in Canada, the U.S. and
South America. Enbridge common shares trade on the Toronto Stock
Exchange in Canada under the symbol "ENB" and on The NASDAQ
National Market in the U.S. under the symbol "ENBR". Information
about Enbridge is available on the Company's web site at
When used in this news 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 will host a conference call at 4:45 p.m. EDT (2:45 p.m.
MDT) today to provide further information. The call will be
broadcast live and will be available for replay at the Enbridge
investor web site at www.enbridge.com/investor.
-------------------------------------------------------------------ENBRIDGE INCHIGHLIGHTS(1)------------------------------------------------------------------- Three months ended Six months ended(unaudited; Canadian June 30, June 30, dollars in millions, except per share amounts) 2000 1999 2000 1999-------------------------------------------------------------------FINANCIALEarnings Applicable to Common Shareholders Liquids Pipelines 42.2 43.4 84.6 84.8 Gas Distribution 129.9 125.5 163.0 145.9 International 4.5 5.5 10.3 12.2 Gas Pipelines and New Business Development 5.8 4.9 15.3 16.1 Energy Services 9.8 (2.9) 15.8 (6.4) Corporate 7.1 3.7 (1.6) (1.0) Preferred Security Distributions (3.9) - (7.7) - Preferred Share Dividends (1.7) (1.7) (3.4) (3.4)------------------------------------------------------------------- 193.7 178.4 276.3 248.2--------------------------------------------------------------------------------------------------------------------------------------Operating Revenue Liquids Pipelines 184.5 145.8 365.0 271.1 Gas Distribution 806.0 862.9 1,217.4 1,303.6 International 2.7 4.6 4.9 9.1 Gas Pipelines and New Business Development 13.1 21.8 29.3 28.6 Energy Services 94.2 14.8 184.0 25.9------------------------------------------------------------------ 1,100.5 1,049.9 1,800.6 1,638.3Cash Provided By Operating Activities Earnings plus charges (credits) not affecting cash 270.0 229.8 420.8 355.7 Changes in operating assets and liabilities 236.7 105.7 48.6 56.4------------------------------------------------------------------- 506.7 335.5 469.4 412.1--------------------------------------------------------------------------------------------------------------------------------------Common Share Dividends 49.1 47.2 96.4 92.0Per Common Share Amounts Earnings 1.27 1.18 1.82 1.65 Dividends 0.3225 0.3025 0.625 0.590Weighted Average Common Shares Outstanding (millions) 152.2 150.8OPERATINGLiquids Pipelines(2) Deliveries (thousands of barrels per day) 2,164 2,046 2,189 1,986 Barrel miles (billions) 179 174 360 347 Average haul (miles) 915 935 904 965Gas Distribution(3) Volumes (billion cubic feet) 182 178 284 274 Number of active customers (thousands) 1,507 1,457 1,507 1,457 Degree day deficiency(4) Actual 1,742 1,831 2,935 2,988 Forecast based on normal weather 1,932 1,993 3,256 3,355--------------------------------------------------------------------------------------------------------------------------------------
1. Highlights of Gas Distribution reflect the results of Enbridge
Consumers Gas and other gas distribution assets on a quarter lag
basis for the three and six months ended March 31, 2000 and 1999.
2. Liquids Pipelines operating highlights include the statistics
of the 15.3% owned Lakehead System.
3. Gas distribution volumes and the number of active customers are
derived from the aggregate of buy/sell and transportation service
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 STATEMENT OF EARNINGS-------------------------------------------------------------------(unaudited; Three months ended Six months endedCanadian dollars in millions, June 30, June 30,except per share amounts) 2000 1999 2000 1999-------------------------------------------------------------------Operating Revenue Gas sales 663.0 681.4 1,005.2 1,009.4 Transportation revenue 319.8 257.3 560.3 426.6 Energy services and other 117.7 111.2 235.1 202.3------------------------------------------------------------------- 1,100.5 1,049.9 1,800.6 1,638.3-------------------------------------------------------------------Expenses Gas costs 457.0 468.0 680.2 677.8 Operating and administrative 220.5 210.7 422.7 384.9 Depreciation 123.0 87.6 232.2 170.3------------------------------------------------------------------- 800.5 766.3 1,335.1 1,233.0-------------------------------------------------------------------Operating Income 300.0 283.6 465.5 405.3Investment and Other Income 74.9 72.4 118.3 126.3Interest Expense (102.5) (90.6) (205.9) (183.4)-------------------------------------------------------------------Earnings Before Income Taxes 272.4 265.4 377.9 348.2Income Taxes (73.1) (85.3) (90.5) (96.6)-------------------------------------------------------------------Earnings 199.3 180.1 287.4 251.6Preferred Security Distributions (3.9) - (7.7) -Preferred Share Dividends (1.7) (1.7) (3.4) (3.4)-------------------------------------------------------------------Earnings Applicable to Common Shareholders 193.7 178.4 276.3 248.2--------------------------------------------------------------------------------------------------------------------------------------Earnings Per Common Share 1.27 1.18 1.82 1.65--------------------------------------------------------------------------------------------------------------------------------------Weighted Average Common Shares Outstanding (millions) 152.2 150.8--------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the consolidated financial statements.-------------------------------------------------------------------ENBRIDGE INC.CONSOLIDATED STATEMENT OF RETAINED EARNINGS------------------------------------------------------------------- Six months ended June 30,(unaudited; Canadian dollars in millions) 2000 1999-------------------------------------------------------------------Retained Earnings at Beginning of Period 503.1 407.6Earnings Applicable to Common Shareholders 276.3 248.2Common Share Dividends (96.4) (92.0)Effect of Change in Accounting for Income Taxes (Note 1) (112.0) --------------------------------------------------------------------Retained Earnings at End of Period 571.0 563.8--------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the consolidated financial statements.-------------------------------------------------------------------ENBRIDGE INC.CONSOLIDATED STATEMENT OF CASH FLOWS------------------------------------------------------------------- Six months ended June 30,(unaudited; Canadian dollars in millions) 2000 1999-------------------------------------------------------------------Cash Provided By (Used In) Operating Activities Earnings 287.4 251.6 Charges (credits) not affecting cash Depreciation 232.2 170.3 Other (98.8) (66.2) Changes in operating assets and liabilities 48.6 56.4------------------------------------------------------------------- 469.4 412.1-------------------------------------------------------------------Investing Activities Additions to property, plant and equipment (141.7) (443.1) Long term investments (218.8) (93.8) Changes in construction payable (29.2) (43.1) Other (0.9) (7.8)------------------------------------------------------------------- (390.6) (587.8)-------------------------------------------------------------------Financing Activities Variable rate financing, net (722.6) 48.8 Fixed rate financing, net 539.8 150.0 Capital stock 162.8 4.6 Dividends and distributions (107.5) (95.4) Minority interest 18.1 - Other - (0.2)------------------------------------------------------------------- (109.4) 107.8-------------------------------------------------------------------Decrease in Cash and Cash Equivalents (30.6) (67.9)Cash and Cash Equivalents at Beginning of Period 53.6 124.9-------------------------------------------------------------------Cash and Cash Equivalents at End of Period 23.0 57.0--------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the consolidated financial statements.-------------------------------------------------------------------ENBRIDGE INC.CONSOLIDATED STATEMENT OF FINANCIAL POSITION------------------------------------------------------------------- June 30, December 31,(unaudited; Canadian dollars in millions) 2000 1999-------------------------------------------------------------------ASSETS Cash and cash equivalents 23.0 53.6 Accounts receivable and other current assets 944.1 678.5 Gas in storage 128.6 375.1------------------------------------------------------------------- 1,095.7 1,107.2 Long term investments 1,296.3 1,051.6 Deferred charges and other assets 374.3 278.7 Property, plant and equipment, net 7,121.9 6,770.7------------------------------------------------------------------- 9,888.2 9,208.2--------------------------------------------------------------------------------------------------------------------------------------LIABILITIES AND SHAREHOLDERS' EQUITY Short term borrowings 40.3 155.4 Accounts payable and other current liabilities 707.3 580.7 Current portion of long term liabilities 403.5 174.4------------------------------------------------------------------- 1,151.1 910.5 Long term debt 4,985.5 5,284.8 Deferred liabilities 106.5 157.8 Future income taxes 795.2 254.5 Non controlling interests 120.0 100.0 Shareholders' equity 2,729.9 2,500.6------------------------------------------------------------------- 9,888.2 9,208.2--------------------------------------------------------------------------------------------------------------------------------------See accompanying notes to the consolidated financial statements.
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
1999 Annual Report.
Earnings for interim periods may not be indicative of results for
the fiscal year due to weather variations and other factors.
Certain reclassifications have been made to the prior period
financial statements to conform to current year presentation.
1. CHANGE IN ACCOUNTING POLICIES
INCOME TAXES
Effective January 1, 2000, the Corporation adopted the Canadian
Institute of Chartered Accountants new recommendations for
accounting for income taxes. The recommendations have been
adopted retroactively without restatement of the prior year's
results. The new standard does not impact the accounting for
income taxes for the rate-regulated operations of the Corporation,
which use the taxes payable basis.
Under the new recommendations, income taxes for non-regulated
operations are accounted for using the liability method. Adoption
of the new standard resulted in a charge to retained earnings of
$112.0 million, of which $76.1 million related to the unbundled
rental assets, $22.4 million related to the tax effect of
differences between the carrying amount of investments and their
respective tax basis, and the remaining $13.5 million related to
other non-regulated assets. In addition, the tax effect of
differences between the assigned and underlying values of
identifiable assets in prior year's business combinations resulted
in an increase of $430.1 million in property, plant and equipment.
These adjustments, along with the recharacterization of deferred
credits and a future income tax liability to be recovered from the
ratepayers (specific to the unbundling transaction), resulted in a
cumulative adjustment of $634.1 million in future income tax
liabilities.
EMPLOYEE FUTURE BENEFITS
The Corporation has adopted the new recommendations for employee
future benefits, including pensions and post employment benefits,
for all operating segments on a prospective basis, except for the
Gas Distribution segment. The Gas Distribution business, conducted
primarily through a gas utility operation with a fiscal year end
of September 30, is not required to adopt the new accounting
recommendations until fiscal 2001. The adoption of the new
recommendations did not have a material impact on the
Corporation's results of operations.
2. SEGMENTED INFORMATIONSix months ended June 30, 2000-------------------------------------------------------------------(unaudited; Canadian dollars in millions) Liquids Gas Gas Pipe- Distri- Inter- Pipe- lines bution national lines-------------------------------------------------------------------Operating Revenue 365.0 1,217.4 4.9 29.3Operating Expenses 124.1 828.6 8.4 27.0Depreciation 81.5 101.8 -- 5.9Investment and Other Income 19.1 43.8 13.1 22.0Interest Expense 53.8 81.1 -- 1.8Income Taxes 40.1 86.7 (0.7) 1.3-------------------------------------------------------------------Earnings 84.6 163.0 10.3 15.3--------------------------------------------------------------------------------------------------------------------------------------Six months ended June 30, 2000-------------------------------------------------------------------(unaudited; Canadian dollars in millions) Energy Services Corporate Total-------------------------------------------------------------------Operating Revenue 184.0 -- 1,800.6Operating Expenses 125.9 (11.1) 1,102.9Depreciation 41.4 1.6 232.2Investment and Other Income 4.7 15.6 118.3Interest Expense 13.7 55.5 205.9Income Taxes (8.1) (28.8) 90.5-------------------------------------------------------------------Earnings 15.8 (1.6) 287.4------------------------------------------------------------Preferred Share Dividends And Preferred Security Distributions (11.1) -------Earnings Applicable to Common Shareholders 276.3--------------------------------------------------------------------------------------------------------------------------------------Six months ended June 30, 1999-------------------------------------------------------------------(unaudited; Canadian dollars in millions) Liquids Gas Gas Pipe- Distri- Inter- Pipe- lines bution national lines-------------------------------------------------------------------Operating Revenue 271.1 1,303.6 9.1 28.6Operating Expenses 108.9 876.7 8.2 27.8Depreciation 51.2 114.1 0.2 2.5Investment and Other Income 31.7 34.2 12.0 13.6Interest Expense 36.5 95.4 -- 0.7Income Taxes 21.4 105.7 0.5 (4.9)-------------------------------------------------------------------Earnings 84.8 145.9 12.2 16.1-------------------------------------------------------------------Six months ended June 30, 1999-------------------------------------------------------------------(unaudited; Canadian dollars in millions) Energy Services Corporate Total-------------------------------------------------------------------Operating Revenue 25.9 -- 1,638.3Operating Expenses 34.6 6.5 1,062.7Depreciation 1.2 1.1 170.3Investment and Other Income -- 34.8 126.3Interest Expense 0.2 50.6 183.4Income Taxes (3.7) (22.4) 96.6-------------------------------------------------------------------Earnings (6.4) (1.0) 251.6-------------------------------------------------------------Preferred Share Dividends (3.4) ------Earnings Applicable to Common Shareholders 248.2--------------------------------------------------------------------------------------------------------------------------------------
3. ISSUE OF COMMON SHARES
On May 26, 2000, the Corporation completed a public offering of
4.5 million common shares at $32.75 per common share. In
connection with the offering, the Corporation completed a private
placement of 600,000 common shares with Noverco at $32.75 per
common share. This transaction closed on June 6, 2000 and
maintains Noverco and its affiliates' ownership interest in
Enbridge at approximately 10%. Cash proceeds from the issues were
$167.0 million less after-tax issue costs of $3.5 million.
SUPPLEMENTARY FINANCIAL INFORMATION Number of Shares ----------------Common Shares - issued and outstanding 161,619,184(voting equity shares)Preference Shares, Series A 5,000,000(non-voting equity shares)Total vested and exercisable stock options 1,688,815
Pursuant to its Shareholder Rights Plan, Enbridge Inc. has issued
one right in respect of each of its outstanding common shares. The
number of common shares issuable on exercise of such rights is
undeterminable.
Supplementary information as at July 14, 2000.