Enbridge : (296 KB)

Corrected Transcript

05-May-2023

Enbridge, Inc. (ENB)

Q1 2023 Earnings Call

	Total Pages: 20
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Enbridge, Inc. (ENB)	Corrected Transcript
Q1 2023 Earnings Call	05-May-2023

CORPORATE PARTICIPANTS

Rebecca Morley	Colin K. Gruending
Director-Investor Relations, Enbridge, Inc.	Executive Vice President & President-Liquids Pipelines, Enbridge, Inc.
Gregory Lorne Ebel	Cynthia L. Hansen
Chief Executive Officer, President & Director, Enbridge, Inc.	Executive Vice President & President-Gas Transmission and Midstream,
Vern D. Yu	Enbridge, Inc.
Matthew A. Akman
Executive Vice President-Corporate Development, Chief Financial
Officer & President-New Energy Technologies, Enbridge, Inc.	Executive Vice President-Corporate Strategy & President-Power,
	Enbridge, Inc.

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OTHER PARTICIPANTS

Jeremy Tonet	Robert Hope
Analyst, JPMorgan Securities LLC	Analyst, Scotiabank
Linda Ezergailis	Praneeth Satish
Analyst, TD Securities, Inc.	Analyst, Wells Fargo Securities LLC
Theresa Chen	Ben Pham
Analyst, Barclays Capital, Inc.	Analyst, BMO Capital Markets Corp. (Canada)
Robert A. Catellier	Andrew M. Kuske
Analyst, CIBC World Markets, Inc.	Analyst, Credit Suisse Securities (Canada), Inc

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Enbridge, Inc. (ENB)	Corrected Transcript
Q1 2023 Earnings Call	05-May-2023

MANAGEMENT DISCUSSION SECTION

Operator: Ladies and gentlemen, welcome to the Enbridge, Incorporated First Quarter 2023 Financial Results Conference Call. My name is Brent and I will be your operator today. At this time, all participants are in a listen- only mode. Following the presentation, we will conduct a question-and-answer session for the investment community. [Operator Instructions] Please note that this call is being recorded.

I will now turn the call over to Rebecca Morley, Director-Investor Relations. Rebecca, you may begin.

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Rebecca Morley

Director-Investor Relations, Enbridge, Inc.

Thank you. Good morning and welcome to the Enbridge first quarter 2023 earnings call. My name is Rebecca Morley and I'm the Director of the Investor Relations team. Joining me this morning are Greg Ebel, President and CEO; Vern Yu, Chief Financial Officer and President of New Energy Technologies; and the heads of each of our business units; Colin Gruending, Liquids Pipelines; Cynthia Hansen, Gas Transmission and Midstream; Michele Harradence, Gas Distribution and Storage; and Matthew Akman, Renewable Power.

As per usual, this call is being webcast and I encourage those listening on the phone to follow along with the supporting slides. We'll try to keep the call to roughly one hour. And in order to answer as many questions as possible, we will be limiting the questions to one plus a single follow-up if necessary. We'll be prioritizing questions from the investment community. So if you're a member of the media, please direct your inquiries to our communications team who will be happy to respond. As always, our Investor Relations team will be available following the call for any possible questions.

On to slide 2, where I will remind you that we'll be referring to forward-looking information on today's presentation and Q&A. By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filing. We'll also be referring to non-GAAP measures summarized below.

With that, I'll turn it over to Greg Ebel.

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Gregory Lorne Ebel

Chief Executive Officer, President & Director, Enbridge, Inc.

Thank you, Rebecca, and good morning, everyone, and thanks for joining us. I'm excited to be here today to review our first quarter results and provide an update on our business. It was another great quarter, so I'll start off by recapping some key highlights that underpinned our strong performance. I'll then take you through some strategic advancements we made in our core franchises. Vern will walk you through the financial performance and outlook. And, lastly, I'll close with a few key takeaways. And as always, the management team is here to address any questions you may have.

First quarter saw strong financial performance, a little ahead of our expectations and we are on track to meet our full-year guidance and our balance sheet continues to be in great shape too. We exited the quarter at 4.6 times debt-to-EBITDA, near the bottom of our range, all of which supports our BBB+ credit ratings. In addition, we were extremely pleased to announce yesterday that we have reached a settlement in principle with our customers on the Mainline toll framework. This is great news for us and our customers and we will comment more on that in a

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Enbridge, Inc. (ENB)	Corrected Transcript
Q1 2023 Earnings Call	05-May-2023

moment. On the asset acquisition front, we signed an agreement to acquire Aitken Creek Gas Storage in British Columbia, which enhances our LNG export strategy in Canada. And we completed the acquisition of Tres Palacios, further improving our competitive position in natural gas storage along the Gulf Coast. We also signed an LOI with Yara to construct with Yara to construct a blue ammonia production facility at our Ingleside Energy Center, which is a great example of how our existing conventional asset base is leading to exciting low-carbon opportunities. In renewables, we were awarded the 1-gigawatt Normandy Offshore Wind Farm, along with our partners EDF and CPPIB, which adds to our visible growth profile. We saw strong utilization across all of our system and delivered our second consecutive quarter of record Mainline volumes. And of course, we remain committed to delivering excellent safety performance. Across the corporation, we continually target lowering our total recordable incident frequency every year and have a great track record of doing so. Vern will touch on our progress towards our ESG goals and highlight a few new areas we're focusing on. But I would note that you can expect to see our sustainability report out later this month. All-in-all, another strong quarter. The new Mainline tolling settlement and growth initiatives all support our near-term guidance and our strong multi-year outlook.

So, let's touch quickly on the financial highlights. First quarter EBITDA is up 8% and DCF is up 3%. These results speak to our strong operational performance and the resilient low-risk nature of our business model in all economic circumstances. Our strong balance sheet leaves us plenty of room to execute the tuck-in M&A deals you've seen us announce recently and still leaves ample space to continue to grow further.

Now, let's take a closer look at the Mainline tolling settlement. I'm very pleased with yesterday's announcement that we have reached a settlement in principle with our customers on the Mainline. This really is a win-win-win. Our customers will receive first-choice service standards at a competitive toll. Enbridge will earn attractive risk- adjusted returns and society will have access to safe, secure and affordable energy for years to come. From a scheduling standpoint, it's status quo. The Mainline will continue as a common carrier system available to all customers on a monthly nomination basis. Year-to-date, Mainline volume performance has been strong and Q2 is shaping up to be another solid quarter.

Going forward, our incentive to maximize barrels on the system, combined with our new, more competitive toll and our unparalleled market access increases the attractiveness of our pipeline compared to others and ensures the Mainline will be well utilized by our customers for decades to come. The new Mainline toll will be stable and components of the toll will be indexed to inflation and we'll earn an attractive return similar to the one earned during the CTS agreement. Overall, this is a good deal for everyone and is a result of thoughtful, inclusive and constructive negotiation. So, I'd like to thank our customers and the Enbridge team for working so diligently and constructively on this positive deal framework.

On the right-hand side of the page, you can see some of the specifics of the new settlement. We can appreciate that there's a lot to digest with this deal and we're here to answer all your questions. But the bottom line that I want everyone to take away from today is that this is a good outcome for all parties involved. The new toll is inline with our expectations and the provision we've been recording in our financial results. And looking ahead, our financial guidance and outlook are maintained under the new deal. And, finally, we're filing a settlement application with the CER and FERC and hope to have final approval before the end of the year.

So now, let's take a closer look at the other parts of our Liquids business. In Liquids Pipelines, we continue to advance our US Gulf Coast export strategy. We FID'd the initial phase of EHOT and expect to see operations begin in late 2025. We're about to launch a binding open season for Flanagan South to leverage available capacity of up to 95,000 barrels per day and provide additional market access to our customers. In addition to securing throughput on Flanagan South, the volumes would also secure long-haul demand on the entire Enbridge network. Subsequent to the end of the quarter, we took operatorship of the Gray Oak Pipeline and we will look for

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Enbridge, Inc. (ENB)	Corrected Transcript
Q1 2023 Earnings Call	05-May-2023

opportunities to optimize that system. Equally exciting is our low-carbon opportunity set which continues to grow. In March, we signed an LOI with Yara to jointly construct a blue ammonia production facility at the Ingleside Energy Center. This facility is expected to produce up to 1.4 million tonnes per year of blue ammonia backed by a long-term 100% offtake agreement.

We're also planning to construct a carbon capture and sequestration hub near Ingleside as part of our previously announced partnership with Oxy Low Carbon Ventures. So Ingleside is shaping up to be a one-of-a kind Swiss Army knife terminal with its world-class oil loading capacity, onsite storage and a suite of lower carbon developments and renewable power.

We're also continuing to advance our low-carbon plans north of the border where we are partnering with Capital Power and Heidelberg Materials to construct a carbon capture hub near Edmonton with phased-in service dates starting as early as 2026. And last but definitely not least, we also have seven solar self-power projects operating or under construction along the Mainline that reduces emissions and power cost exposure along our Liquids lines.

So, let's move on to some of the exciting developments in our Gas Transmission business. Last week, we announced that we're acquiring Aitken Creek Gas Storage from Fortis. This asset is well-positioned and will enhance our service offering to our customers and support our LNG export strategy. Also in Canada, we're looking to relaunch a binding open season for a second expansion of BC Pipeline's T-North in the second-half of this year. The engineering work on Woodfibre LNG is progressing on schedule. And of note, by using renewable hydroelectric power, Woodfibre will be the lowest-emission LNG export facility in the world.

In the US, we've just closed a successful open season on Texas Eastern in the Appalachia region and are pleased with customer interest. So, we'll look to sanction this expansion by the end of the year. And as mentioned earlier, we've recently closed our previously announced acquisition of Tres Palacios Gas Storage, adding 35 Bcf of gas storage which will support LNG along the Gulf Coast. Lastly, we're ready to proceed with the construction of the Rio Bravo pipeline once NextDecade reaches FID on its Rio Grande LNG, which should be by the end of June.

So now, let's take a closer look at Aitken Creek Gas Storage. Aitkin Creek is the only storage facility in BC that has connections to all the key egress pipelines, including Enbridge's West Coast and Alliance pipelines. The facility is uniquely positioned to support BC gas production in a volatile price environment. And with Western Canadian gas production expected to outpace demand and egress bottlenecks for the foreseeable future, Aitken Creek is well-positioned to create long-term value for Enbridge. We are acquiring the facility from Fortis for CAD 400 million plus customary closing adjustments. And we expect to earn a typical Enbridge return on the asset. Said another way, this is another strategic transaction with a single-digit acquisition multiple that should produce double-digit returns.

Now, let's move on to our latest announcement in our French offshore wind portfolio. In March, we were selected to develop France's largest offshore wind farm to-date with installed capacity of 1 gigawatt. Similar to our other French offshore wind farms, we've been awarded a long-term fixed price CfD indexed to inflation. We continue to demonstrate how we can grow the business with the same capital discipline and low-risk model that applies to our three other core businesses. This project will mark the sixth offshore wind project with our partners, EDF Renewables and CPP Investments, and plan to continue pursuing future awards in the region. Once complete, Centre Manche 1 will be located 32 kilometers off the coast of Normandy and is expected to supply electricity equivalent to the annual energy needs of 1.5 million people. Next steps for this project are planning, engineering and permitting, ahead of FID and we expect the project to be in operation around the end of the decade.

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