Enbridge : (340 KB)

Corrected Transcript

04-Nov-2022

Enbridge, Inc. (ENB)

Q3 2022 Earnings Call

	Total Pages: 26
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Enbridge, Inc. (ENB)	Corrected Transcript
Q3 2022 Earnings Call	04-Nov-2022

CORPORATE PARTICIPANTS

Rebecca Morley	Colin K. Gruending
Director-Investor Relations, Enbridge, Inc.	Executive Vice President & President-Liquids Pipelines, Enbridge, Inc.
Albert Monaco	Cynthia L. Hansen
President, Chief Executive Officer & 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, Enbridge, Inc.	Senior Vice President-Strategy, Power & New Energy Technologies,
	Enbridge, Inc.

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OTHER PARTICIPANTS

Robert Kwan	Brian Reynolds
Analyst, RBC Dominion Securities, Inc.	Analyst, UBS Securities LLC
Jeremy Tonet	Ben Pham
Analyst, JPMorgan Securities LLC	Analyst, BMO Capital Markets Corp. (Canada)
Robert Hope	Linda Ezergailis
Analyst, Scotiabank	Analyst, TD Securities, Inc.
Theresa Chen	Praneeth Satish
Analyst, Barclays Capital, Inc.	Analyst, Wells Fargo Securities LLC
Robert A. Catellier
Analyst, CIBC World Markets, Inc.

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Enbridge, Inc. (ENB)	Corrected Transcript
Q3 2022 Earnings Call	04-Nov-2022

MANAGEMENT DISCUSSION SECTION

Operator: Welcome to the Enbridge Inc. Third Quarter 2022 Financial Results Conference Call. My name is Brent and I will be your operator for today's call. 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 conference 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 Inc. third quarter 2022 earnings call. My name is Rebecca Morley and I recently joined Enbridge as a Director on the Investor Relations team.

Joining me this morning are Al Monaco, President and CEO; Vern Yu, Chief Financial Officer 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 and New Energy Technologies.

As per usual, this call is being webcast, and I encourage those listening on the phone to follow along 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'd appreciate you limiting your questions to one with a single follow-up if necessary. We'll be prioritizing questions from the investment community. So, if you are 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 additional questions.

Onto slide 2, where I will remind you that we'll be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed fully in our public disclosure filings. We'll also be referring to non-GAAP measures as summarized below. With that, I'll turn it over to Al Monaco.

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Albert Monaco

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

Okay. Thanks, Rebecca. Good morning, everyone. I'll start with the third quarter highlights and our business update. Vern will then review the results and the outlook, capital allocation, and the usual ESG update.

Before that, a couple of comments on the current energy and economic landscape. That landscape is characterized by volatility we haven't seen for a long time, high inflation and tightening monetary policy, energy supply shortages and a looming recession. Those challenges appear set to continue through next year. Energy- wise, the situation in Europe has brought security and reliability back into focus while ensuring we're on track to reduce emissions. The investment required to meet energy demand for both conventional and low carbon supply is only half of what we need, which has led to sustained high prices.

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Enbridge, Inc. (ENB)	Corrected Transcript
Q3 2022 Earnings Call	04-Nov-2022

For our part, we've proved through COVID and many times before, our business model is built to weather storms like this. Our premier Natural Gas, Liquids, and Renewables businesses are well diversified, and we deliver energy to the best markets at very low cost. Our commercial underpinnings give us resiliency and predictability of cash flows through all market cycles, and our balance sheet is strong. And you've seen again this quarter, we have an increasing inventory of quality organic investments that will drive growth well into the future. So, Enbridge is well-positioned not just to withstand volatility but to grow and thrive in any environment. And Vern is going to expand on this a little bit later.

So, onto the highlights. In a nutshell, excellent progress on our priorities this quarter. Safety and operations wise, we performed well and utilization was high across all systems. That translated to strong Q3 numbers and we're on track to achieve our full year guidance. At this point, we expect EBITDA to come in above the midpoint of our guidance range and DCF per share about the middle.

On project execution, we have roughly $3.8 billion slated for in-service this year, which drives cash flow in 2023 and beyond. More good news this quarter on organic growth, tuck-in M&A and capital recycling. We secured another $3.8 billion of projects, the lion's share being our T-South expansion in B.C. I'll come back to this later.

That brings newly secured growth this year to $8 billion, which illustrates the embedded opportunities we've been talking about within our four franchises. We'll do smaller scale M&A where it makes sense. And we executed two excellent deals this quarter totaling $0.5 billion. Lastly, we'll continue to surface value by monetizing assets at good valuations over $1.6 billion this quarter. That adds to our financial flexibility. And in the case of the P66 joint venture, we reduced our G&P exposure, which is now de minimis.

To put the business update in context, this slide recaps our two-pronged strategy and the optionality we have in our businesses. Prong one is to continue to invest in conventional businesses. The fundamentals of our core franchises are stronger than ever, especially in the context of energy security, reliability, and affordability concerns.

To ensure we're aligned with our emissions reductions goals, we're modernizing our assets, self-powering with renewables and ensuring new investments have a plan to hit our targets. At the same time, we're ramping up low carbon investments. As you can see, we're focused on proven low carbon strategies that leverage our existing assets. Our conventional businesses are each progressing those opportunities on commercial terms that fit our low risk model.

Any way you look at things, low carbon energy will need two things to happen: transportation and storage. We have a lot of that. Having pipe in the ground will be valuable in any transition scenario we can see. A great example is CCS, which is a must in meeting our emissions goals, and that presents an excellent growth opportunity for us along with hydrogen, RNG, and of course wind and solar.

Onto the business update. In Gas Transmission, we've got roughly $10 billion of projects in execution, including our annual modernization program and recently secured projects. Gulfstream Phase VI is now in service. We reached a rate settlement on our B.C. System and a good TETCO customer settlement. We're seeing strong throughput throughout our systems, and we recently re-contracted capacity on the Southeast Supply Header at very good rates.

In Gas Distribution, we've got $3.5 billion underway and we'll have 5 of the 27 new community expansions done by year-end. Earlier this week, we filed a utility rebasing application that'll establish rates through 2028. You can think of this as carrying on under incentive rates. And we sanctioned two new RNG projects in Ontario.

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Enbridge, Inc. (ENB)	Corrected Transcript
Q3 2022 Earnings Call	04-Nov-2022

Renewables is performing well. We have $2.9 billion in execution, including 10 solar self-power projects. In Liquids, Mainline volumes recovered nicely in the quarter. We expect good utilization through year-end and 2023. On our Wabamun CCS project, we signed our evaluation agreement with the Alberta government and we expect to drill two wells in 2023 to prove out the geology there. And on the Corpus Christi carbon hub, we're in discussions with our customers.

So, let's get into the exciting growth projects in our Gas business. First, here's how we see the fundamentals and our opportunity set. Not much doubt that global gas demand will grow given its abundance, security benefits and lower emissions. We see Gas continuing to be a critical part of the energy supply mix well into the future. North America's Gas advantage will lead to growth in global market share with LNG exports tripling to over 30 Bcf by 2040. We're really pleased with how we're situated to capitalize on these fundamentals. So, here's what that looks like.

Now, there's a lot in this picture here, but it illustrates well the reach of our systems and our growing LNG footprint. Domestically, we feed the best markets totaling around 170 million people. We see growing residential, commercial, and industrial load, and gas will be critical to replacing 84 gigawatts of coal. And we're in discussions now with our customers in the US Northeast to develop solutions that address price and reliability concerns, which are only getting worse. And I think the price pressures and reliability issues are really starting to sink in.

Another big prize is LNG. We serve four plants in the Gulf Coast, soon to be five, and we make up 20% of US LNG exports through our pipes. We've also secured precedent agreements with two more LNG facilities that are pending FID, that's Rio Grande and Texas LNG, and there could be more after that. If those do go ahead, we could see our LNG export market share rise to 30% or above. Related to that in the Gulf, we're also very focused on upstream expansion opportunities to connect growing Haynesville supply of LNG via Texas Eastern. So, think of that as an upstream strategy in our pipes. And of course, we've just landed an investment in Woodfibre LNG on the west coast of Canada.

In B.C., last quarter, we sanctioned a $1.2 billion expansion of our T-North system at Aspen Point, and launched a binding open season on T-South, so let me update you on that. The results of the open season was strong, ensuring long term volume commitments. So, we've now sanctioned and are proceeding with a 300 million cubic feet a day expansion which is comprised of looping and compression. This effectively replaces capacity currently moving volume to the Pacific Northwest which will be utilized to feed Woodfibre LNG when it goes into service. Pacific Northwest demand is also expected to grow. So, this expansion assures reliability in the region. Our preliminary capital estimate is up to $3.6 billion. We'll finalize the cost once we have completed environmental and routing work. Importantly, we'll be engaging and listening to stakeholders and communities and seeking their expertise and look to form economic relationships there. The T-South commercial structure, is cost of service and we expect to file a regulatory application in 2024.

Continuing with B.C., today, we also announced a binding open season for further expansion on T-North. Given the outlook for Western Canadian supply, we're seeing strong customer interest from more egress for LNG exports and downstream access, so in addition to Aspen Point then there is now an opportunity to expand T- North by another 500 million cubic feet a day.

This also includes looping and compression at a cost of roughly $1.9 billion with an expected 2028 ISD. Again, this is cost of service model which generates stable cash flows and good return. The open season will run to January 10, so we'll see what that reveals and go from there.

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