Enbridge : (331 KB) PDF

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Slug: 'Webcast'

Tape Id: 'Enbridge 2021 Investor Day'

[00:00:03;21] VIDEO: At Enbridge, we're bridging to a cleaner energy future. We deliver energy to millions of consumers. Conventional and renewable energy that's affordable and reliable. In 2021 we continue to deliver the energy people need safely. And we have executed on our strategic priorities.

[00:00:25;23] We've enhanced returns from our existing businesses. We're on track to bring 10 billion of capital into service this year, including the Line 3 replacement project. And we further advanced organic growth opportunities. We're extending that growth by modernizing our assets, advancing our export strategy with the Ingleside Energy Centre acquisition and connecting more Gulf coast LNG facilities, adding over 1.5 gigawatts of renewable generation including offshore wind capacity in France. Completing our first hydrogen blending facility and two more RNG facilities. And we formed a dedicated new energies team as strategic partnerships to develop future low carbon solutions.

[00:01:16;07] Our execution is grounded in our commitment to ESG leadership. We're reducing our emissions, enhancing diversity and inclusion at all levels of the organization. And we've tied our compensation and 3 billion in sustainable financing to achieving our ESG goals.

[00:01:33;23] We're also on track to meet our 2021 financial guidance. We expect even stronger performance in 2022. We're excited about Enbridge's future with each of our businesses positioned for long-term growth. Life takes energy and at Enbridge we deliver it.

[00:02:06;24] JONATHAN MORGAN: Good morning and welcome. I'm Jonathan Morgan, head of Investor Relations at Enbridge. And it's my pleasure to kick off our 2021 Investor Day. First, I'd like to acknowledge that the land we're meeting on today is the traditional territory of the many Indigenous Nations that have called this home for centuries.

[00:02:28;18] We're pleased to be hosting today's event live in Toronto as well as virtually by a video webcast. Thanks to all of you who are joining us in person today as well as those of you that are participating online.

[00:02:43;23] Each year we look forward to this opportunity to update you on our strategic plan and how our leadership is growing the business and positioning it for the future.

[00:02:55;00] As you know by now, our practice at Enbridge is always to begin each meeting with a safety moment. And so I'll use this opportunity to cover our evacuation procedures for the building in the event that we need to use them, as well as Covid procedures for those of you here in the room.

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[00:03:12;19] First, should there be a fire you'll hear an alarm. And if necessary this will be followed by an announcement to leave or evacuate the building. So, please exit via the doors on the righthand side here or on the left, for those of you in the room. Then turn right and follow the staircase B which will lead you to an emergency exit and down to Simcoe Park where you can wait for further instruction.

[00:03:38;16] Second, I'd like to ask each of you here in the room to continue to wear your mask if you're not eating or drinking. And if you're asking questions during the Q&A sessions we ask that you also keep your mask on for that portion of the event. Thank you.

[00:03:56;27] In terms of agenda, we'll start with Al Monaco who will provide an overview of our outlook and strategic priorities, followed by a short Q&A with just Al. Following that, our business unit leaders will walk you through updates on their respective areas of the business. And lastly, Vern, you will provide an update on our financial outlook.

[00:04:19;24] Following this, we'll do another Q&A session with the entire management team. And during those sessions, we'll be taking your questions both here in person as well as via the video webcast.

[00:04:32;09] For those of you online, you can submit your questions using the form at the bottom of the screen and please be sure to include your name and your firm.

[00:04:42;26] Lastly, on slide 3 the legal team would like me to remind you that our comments today may refer to forward looking statements and non-GAAP measures. And with that, I'll pass it on to Al Monaco.

[00:05:02;06] AL MONACO: Thanks, Jonathan. Good morning, everybody. It's great to be here in Toronto with many of you in the room and to connect with the broader virtual audience. And we're looking forward to our meetings tomorrow in New York as well.

[00:05:16;22] So our theme today is bridging to a cleaner energy future by capitalizing on the conventional runway we see and lower carbon opportunities that will extend that growth. The world is moving to a lower carbon economy and our assets are going to play a key role in that transition.

[00:05:37;25] The photos you see here illustrate how we're evolving our business, expanding our footprint, modernizing our assets and our net zero plan, pointing our infrastructure to tide water to capture export growth, and developing renewables and new energy technology.

[00:05:57;07] I'm going to start with the broad strokes of this morning's announcement and our value proposition, our approach to the transition and then our priorities. And then how we'll grow and allocate capital in the future.

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[00:06:10;02] The business leaders are going to talk about their conventional and low carbon opportunities and then Vern will tie things together at the end with his financial review.

[00:06:20;24] Before we do that, let me speak to the recent CER decision. Now recall we proposed the contract offering on our liquids main line because a large majority of our customers want guaranteed access and fixed tolls on the system. Given the CER decision we're now moving forward with either a CTS like tolling deal or a cost of service.

[00:06:46;26] A new CTS would make a lot of sense for us. But either option is attractive to us as well and here's why. We've been operating under an incentive tolling framework for the last 25 years. That's aligned us really well with our customers because of the value our system brings to them and how we manage that system. We provide critical egress from Western Canada to the best markets with low cost predictable tolls.

[00:07:16;20] We're incentivized to maximize capacity and keep operating, power costs in check as well as capital cost management. CTS incentivized us to add egress, 700,000 barrels per day of new capacity and de-bottlenecking another 400,000. Nobody else has been able to do that.

[00:07:38;29] Providing this value and managing those risks gives us a chance to earn returns above the cost of service. Customers haven't really been keen on cost of service, given how tolls fluctuate and they like how we're aligned with them. From our perspective though, cost of service still offers an attractive return and it does come with lower risk, volumes cost for example.

[00:08:06;10] We're now re-engaging the customers with the goal of deciding which option makes the most sense for them and us likely and hopefully by year end is when we'll decide which route to go.

[00:08:18;25] Finally, it's our job to manage variability and we'll do that here. We've incorporated an allowance for a lower toll in our 22 guidance and three year outlook. So let's get to the Enbridge story.

[00:08:32;25] First, 2021, as you heard in the video, has been strong. Solid business performance, so we're in very good shape to hit the guidance and putting $10 billion into the ground. We've nicely accelerated our export low carbon strategies and sanctioned $2 billion, including the 1 billion you saw earlier.

[00:08:55;18] For 2022 we expect nice upticks in EBITDA and DCF, about 10% DCF per share growth over the midpoint for this year. That will support 5 to 7% expected (CAGR) through 2024, so we're extending essentially for another year.

[00:09:15;23] We're increasing the dividend by 3%. That marks the 27th consecutive increase. And that should land the payout in about the middle of the policy range, roughly 65%. So ratable dividend growth and conservative payout is the game plan here.

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[00:09:33;22] And we've added a $1.5 billion share buyback program. Our 3 year secured capital program is 9 billion. And there's a large organic inventory we can choose from beyond that. But those projects will now compete against alternatives..

[00:09:51;05] The balance sheet is strong. We expect to be at the low end of the 4 and a half to 5 range and that gives us a lot of flexibility.

[00:09:59;26] Annual investable capacity will be roughly 5 to 6 billion going forward and we'll be very disciplined in how we put that to work.

[00:10:09;25] The 2 billion in new projects illustrates strong organic growth across the business and they're right down the middle of our commercial fairway. We'll get into these in the broader opportunity set through the morning including our new CCUS JV with Capital Power and a potential 2 and a half billion dollars expansion of the (T-South) system in B.C.

[00:10:34;25] So let's get going with the value proposition,. Now everybody puts up a map right? But here's what's unique about ours. Gas transmission, distribution and liquids are all demand pull franchises. We serve the best industrial and end use markets. And our scale drives highly competitive tolls to those markets.

[00:10:58;04] The assets you see here are going to be needed for a very long time in any transition scenario we can imagine. The commercial underpinning of this map though is also a big part of our value proposition.

[00:11:15;02] We're diversified with over 40 sources of revenue. The vast majority of EBITDA is contractor or cost of service so cash flows are highly predictable. On top of that, we closely manage financial risk. Ninety percent of our customers are all investment grade and 80% of EBITDA is inflation protected and that's really important in this environment.

[00:11:40;15] All of this translates, in our view, to the lowest risk business model in the sector. The stability and predictability of our cash flows really did shine through in the face of Covid. We not only hit our original numbers but we continued to grow.

[00:11:58;04] At our recent ESG forum here, now moving to the next topic, we laid out the full story. And I encourage everybody to go back and look at the replay. But here is the basic takeaway.

[00:12:11;16] ESG has always been and will be part of how we manage our business and our goal is to lead the industry. Our first priority is world class safety. You can see how our extensive integrity program here on the lefthand chart is translating versus our peers.

[00:12:31;18] We set emissions targets and reduced Scope 1 and 2 already by 32 and 14 percent and we're tracking Scope 3.

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[00:12:42;00] Now today, and this is important, every potential new investment that we look at must exceed a carbon adjusted hurdle rate and have a plan to achieve net zero or we don't do it. On the S, we've raised the bar on community and indigenous engagement and DNI. And on the G, we've tired ESG targets to compensation. And we have a strong board diversity, oversight and independence.

[00:13:12;04] Our ESG capabilities are part of what we call being a differentiated energy provider. So what does that mean? Well, we think the upstream and downstream customers will eventually all insist on top tier ESG performance from infrastructure providers like us.

[00:13:33;21] Line 3 is a good example of what it's going to take. We work extremely hard to build trust with indigenous groups. That led to a better route and extraordinary environmental measures to minimize right-of-way impact. In other words, their engagement made this project better.

[00:13:54;19] And our economic partnerships created 900 million - 900 million - in indigenous business opportunities. We are extremely proud of that.

[00:14:05;26] Before our Ingleside acquisition, we tested it against a range of transition scenarios and we committed to net negative emissions by developing a 60 megawatt solar far onsite, much more than what we needed to offset emissions from the facility. And its location and proximity to industrial facilities position it for hydrogen and CCUS in the Gulf coast. That's what we mean by differentiated approach.

[00:14:37;03] Last on this, we pride ourselves on identifying and taking action on surfacing value and that will continue to be front and centre for us. The best way to do that of course is by generating zero or low capital intensity EBITDA. For example, the 400,000 in liquids capacity that we added at minimal capital which was great for customers when they needed it and it was good for us. Another example of the alignment.

[00:15:06;10] Since 2017 we've captured $1.2 billion synergies from the Spectra acquisition, lower power cost, numerous efficiency drives and applying digital technology. And digital is going to be the next big opportunity for us to apply to our massive asset base.

[00:15:27;14] We constantly look at upgrading the portfolio. We sold 9 billion of assets, as you know, at great value. On the right you can see here we prioritized capital efficient expansions first. You can tell by the multiples as a proxy for return. And while we're not serial acquirers we look at tuck-in where they come within (better growth) and you saw that in the Ingleside deal.

[00:15:55;11] You can see how all of that is translating to boosting of ROCE and how we've reduced leverage while growing the business at the same time. In fact, we expect to reach the low end of the target range.