Enbridge reports Q3 2014 adjusted earnings of CAN$ 345 million

Q3 2014 highlights

• Third quarter loss was CAN$ 80 million and nine months earnings were CAN$ 1.066 billion, both including the impact of net unrealised non-cash mark-to-market gains and losses.
• Third quarter and nine months adjusted earnings were CAN$ 345 million and CAN$ 1.165 billion, respectively, or CAN$ 0.41 and CAN$ 1.41 per common share, respectively.
• John Whelen became Chief Financial Officer of Enbridge Inc. on 15 October 2014.
• Enbridge Inc. continued the execution of its sponsored vehicle strategy, with an agreement to transfer a package of assets and interests to Enbridge Income Fund for proceeds of CAN$ 1.8 billion and also announced a proposed drop down of assets to Enbridge Energy Partners, L.P. for consideration of US$ 900 million.
• The company raised approximately CAN$ 1.1 billion through a combination of public debt and preference share issuances and a further CAN$ 2 billion of private note placements in support of its long-term financing plan during Q3 2014.
• Enbridge is acquiring additional interests for CAN$ 225 million in the Lac Alfred and Massif du Sud wind projects.
• The company released its 2014 Operational Reliability Report.
• Enbridge Inc. is named to 2014 Dow Jones Sustainability North American and World indices.

"Enbridge adjusted earnings continued to accelerate in the third quarter as we progressed the execution of our record growth capital programme, and we are on track to achieve full year adjusted earnings per share within our guidance range of CAN$ 1.84 to CAN$ 2.04 per share," said Al Monaco, President and Chief Executive Officer. "We also rolled out our five-year strategic plan that now takes us through 2018 and includes our record CAN$ 44 billion growth capital programme, of which CAN$ 33 billion is commercially secured and in execution. Projects secured over the past two years give us confidence in extending our anticipated average annual adjusted earnings per share growth rate of 10 – 12% to 2018 and provide visibility for continued growth beyond 2018."

In addition to the execution of the growth capital programme, financing that growth is a key focus for Enbridge. In the third quarter, the company issued CAN$ 625 million in preference shares, bringing the total to CAN$ 1.4 billion raised from the issuance of preference shares in 2014, and CAN$ 2.4 billion of term debt financing for a total of CAN$ 5.9 billion in 2014. The company has also been active in utilising its sponsored vehicles to support the funding programme. In September, the company announced a CAN$ 1.8 billion transaction with Enbridge Income Fund to transfer a package of natural gas assets and diluent pipeline interests, which will provide a highly predictable cash flow stream to the Fund. This represents the largest transaction the Fund has undertaken since its inception in 2003. Enbridge also proposed to sell its 66.7% interest in the US segment of the Alberta Clipper Pipeline to Enbridge Energy Partners, L.P. (EEP) for approximately US$ 900 million. EEP already owns the remaining 33.3% interest in the Alberta Clipper Pipeline. The proposed transfer and terms remain subject to review by an independent committee of EEP.

"These transactions with our sponsored vehicles create value for Enbridge as sources of low-cost funding for our growth programme and by maximising the value of strong cash generating assets," said Monaco. "Our sponsored vehicles are an important part of our overall financial strategy and we believe they will continue adding long-term value for our shareholders. The Fund has proven that it can raise capital on terms that are favourable to both Enbridge and the Fund. In the case of EEP, we expect this transaction to enhance its cash flow and help restore its effectiveness as a source of low-cost funding for Enbridge."

Enbridge advanced several projects in the third quarter as part of its objective of improving market access for western Canadian and Bakken crude. The Flanagan South Pipeline, a key component of the CAN$ 5.4 billion Western Gulf Coast Market Access programme, is now mechanically complete and line fill arrangements have begun and will continue throughout November 2014. Flanagan South, along with the Seaway Crude Pipeline System twinning which was mechanically completed in July 2014, opens 585 000 bpd of incremental capacity for Canadian and Bakken crude from Flanagan, Illinois, to the key refining region at the US Gulf Coast. The company also advanced a key phase of its CAN$ 3.2 billion Eastern Access programme, with the completion of the Line 6B replacement and expansion project in September 2014. The project included replacing approximately 338 km (210 miles) of existing pipeline in Indiana and Michigan and increased capacity in this section of the system to 500 000 bpd.

Timing for the in-service date for Enbridge's reversal and expansion of Line 9B has been delayed. The National Energy Board (NEB) had approved the project subject to conditions in March; however, the NEB has requested additional information from Enbridge relating to one of the conditions. That information has been provided. At this time, the company is unable to estimate the length of the delay. "Our objective with the Line 9B project has always been to meet, if not exceed, regulatory requirements and to assure our stakeholders of our commitment to operate our pipeline safely and protect the environment," said Monaco. "We have responded to the Board's request for clarification of our approach and additional information. We continue to work with the Board to understand and respond to its questions and to meet its requirements."

In July, the Ontario Energy Board (OEB) approved Enbridge Gas Distribution Inc.'s (EGD) five-year customsed Incentive Rate (IR) application, with modifications. The customised IR application establishes the methodology for determining rates for the distribution of natural gas over a five-year period from 2014 through 2018 and will allow EGD to recover its expected capital investment amounts, as well as an opportunity to earn above the allowed return on equity. "On the whole, we believe the Ontario Energy Board's decision is fair and balanced," said Monaco. "The incentive plan provides opportunities to earn over and above an allowed rate of return through efficiencies and cost savings, which are also beneficial to rate payers over the long-term. The plan also allows for the necessary capital investment critical to the safety and reliability that our customers depend on".

In October, the company released its 2014 Operational Reliability Report, which outlines progress on the performance of the company as it strives for 100% safety and zero incidents. "Safety and operational reliability remains Enbridge's number one priority," said Monaco. "Our Operational Reliability Report provides our stakeholders and the public with an open and transparent view of our company's performance. We've made excellent progress on our operational risk management programs and the report highlights our progress towards our goal of industry leadership."

In September, Enbridge earned a place on both the 2014 Dow Jones Sustainability North American Index and the Dow Jones Sustainability World Index. Enbridge is one of only three energy industry companies on the World Index which overall includes just 11 companies from Canada out of 319 listed. "We're very proud of this recognition as it confirms that Enbridge is on the right path in terms of corporate responsibility performance and reporting," said Monaco. "Our stakeholders look to us to deliver top notch financial, social and environmental performance. Being included on the Dow Jones indices is a significant accomplishment and acknowledgement that our business model and approach to managing the opportunities and risks that support the long-term sustainability of our company are working."

Adapted from press release by Rosalie Starling

Read the article online at: https://www.worldpipelines.com/business-news/06112014/enbridge-reports-q3-2014-adjusted-earnings-of-us-345-million-986/