Enbridge Reports Strong Third Quarter 2024 Financial Results, Executes on Business Priorities, and Reaffirms Financial Guidance and Outlook
CALGARY, AB, Nov. 1, 2024 /PRNewswire/ - Enbridge Inc. (Enbridge or the Company) (TSX:ENB) (NYSE:ENB) today reported third quarter 2024 financial results, provided a quarterly business update, and reaffirmed its 2024 financial guidance and outlook.
Highlights
(All financial figures are unaudited and in Canadian dollars unless otherwise noted. * identifies non-GAAP financial measures. Please refer to Non-GAAP Reconciliations Appendices.)
Third quarter GAAP earnings of $1.3 billion or $0.59 per common share, compared with GAAP earnings of $0.5 billion or $0.26 per common share in 2023
Adjusted earnings* of $1.2 billion or $0.55 per common share*, compared with $1.3 billion or $0.62 per common share in 2023
Adjusted earnings before interest, income taxes and depreciation and amortization (EBITDA)* of $4.2 billion, an increase of 8%, compared with $3.9 billion in 2023
Cash provided by operating activities of $3.0 billion, compared with $3.1 billion in 2023
Distributable cash flow (DCF)* of $2.6 billion, in line with 2023
Reaffirmed 2024 full year financial guidance; the Company expects to finish 2024 near the top end of the EBITDA range of $17.7 billion to $18.3 billion, and around the midpoint for DCF per share
Closed the acquisition of Public Service Company of North Carolina, Incorporated (PSNC) from Dominion Energy, Inc. on September 30, 2024 for a purchase price of approximately US$3.2 billion (including US$1.3 billion of assumed debt)
Closed the previously announced acquisition of additional docks and land adjacent to the Enbridge Ingleside Energy Center (EIEC) for ~US$0.2 billion
Sanctioned the Canyon System Pipelines, a ~US$0.7 billion project which will deliver crude oil and natural gas from BP Exploration & Production Company's (bp) recently sanctioned Kaskida development in the Gulf of Mexico
Acquired a 15% interest in the Delaware Basin Residue (DBR) pipeline system in West Texas from I Squared Capital, extending the Permian strategy and customer service offering
Sanctioned the 815 MW Sequoia Solar project in Texas, a US$1.1 billion development substantially underpinned by long-term power purchase agreements with AT&T and Toyota
Announced participation in the 177 MW third phase of the Fox Squirrel Solar project following completion of the second phase in August 2024
CEO COMMENT
Greg Ebel, President and CEO commented the following:
"This quarter, we concluded the successful acquisition of the three U.S. natural gas utilities first announced in September 2023 (the "Acquisitions"). The assets are a perfect fit within Enbridge's existing low-risk business model, offer reliable cash flow, and come with embedded quick-cycle growth opportunities. I am very proud of our team's commitment to execution and ongoing integration efforts and look forward to working with our new colleagues and stakeholders to deliver safe, reliable, affordable energy to over 7 million Gas Distribution customers in North America.
"Across the business, we saw strong utilization of our assets which drove another solid quarter of financial results, positioning us to achieve full-year guidance for the 19th year in a row. We expect to be near the top of our 2024 EBITDA range, and close to the mid-point of our original DCF per share guidance range. The macro-outlook for energy infrastructure demand and the value of incumbency has never been higher. Enbridge is uniquely positioned to take advantage of this opportunity and capitalize on future growth across the business. Electricity demand for data centers, natural gas demand for industrial growth and onshoring, and renewable power demand to help customers meet emissions targets are driving unprecedented customer conversations. In addition, domestic and international oil demand highlight the necessity of integrated infrastructure, and Enbridge is there to provide it. Together, our four core businesses provide a highly diversified and valuable portfolio for both customers and investors.
"We have positioned Enbridge's business model to succeed in all market conditions. Our four core franchises deliver high-quality cash flow and predictable growth, underpinning our sustainable return of capital to shareholders. For 29 years, Enbridge has grown its dividend, making us one of a few dividend aristocrats in our industry and providing shareholders with a first-choice investment opportunity - now and into the future.
"In Liquids, demand for the Mainline remains strong and our volumes for 2024 are expected to exceed 3 million barrels per day. Growth in the Western Canadian Sedimentary Basin (WCSB) and the demand-pull nature of the system is driving discussions with customers for additional WCSB egress in 2026 and beyond. In the Permian, strong Gray Oak volumes continue to support high utilization at our state-of-the-art Ingleside crude export facility which saw single day and monthly average volume records during the quarter. We closed our previously announced acquisition of additional dock space and adjacent land to Ingleside and expect the transaction to unlock future low multiple optimization and expansion opportunities.
"In Gas Transmission, we sanctioned the construction of two new pipeline systems to support bp's Kaskida development in the Gulf of Mexico, which further extends our secured growth program in the latter half of the decade. We also enhanced our Permian gas value chain through the acquisition of an interest in highly contracted natural gas pipelines that are a key feeder system to the Whistler Pipeline and deliver critical energy to serve U.S. Gulf Coast demand. This announcement follows the in-service of ADCC Pipeline and sanctioning of Blackcomb Pipeline, demonstrating the strategic value and growth opportunities being unlocked through the Whistler Parent JV announced earlier this year.
"In Gas Distribution, we now operate the largest natural gas utility in North America delivering approximately 9.3 billion cubic feet of natural gas per day to over 7 million customers. The acquired U.S. utilities have a rate base compound annual growth rate of approximately 8% through 2027 and are located in supportive regulatory jurisdictions. Opportunities to deliver affordable energy from growing gas demand is expected to accelerate that growth and increase the visibility of our long-term outlook.
"In Renewable Power, we continue to execute on our disciplined growth strategy. The 250 MW second phase of Fox Squirrel Solar entered service in August 2024 and construction of the third phase is underway with in-service expected by year-end. We also sanctioned the Sequoia Solar development in Texas, which has long-term power purchase agreements with AT&T and Toyota for the majority of production. The facility is expected to enter service in two phases, in 2025 and 2026, with a capacity of 815 MW.
"Looking forward, our industry-leading footprint and world-class execution puts us in a great position to benefit from increasing demand and serve new and growing customer bases. We remain committed to disciplined investment, maintaining a strong balance sheet and growing our dividend. Financial discipline combined with our low-risk business model and visible growth backlog are expected to drive strong shareholder returns in all market cycles and position Enbridge as a first-choice investment opportunity."
FINANCIAL RESULTS SUMMARY
Financial results for the three and nine months ended September 30, 2024 and 2023 are summarized in the table below:
Three months ended September 30,
Nine months ended September 30,
2024
2023
2024
2023
(unaudited; millions of Canadian dollars, except per share amounts; number of shares in millions)
GAAP Earnings attributable to common shareholders
1,293
532
4,560
4,113
GAAP Earnings per common share
0.59
0.26
2.12
2.02
Cash provided by operating activities
2,973
3,084
8,938
10,389
Adjusted EBITDA1
4,201
3,871
13,490
12,347
Adjusted Earnings1
1,194
1,274
4,397
4,380
Adjusted Earnings per common share1
0.55
0.62
2.05
2.15
Distributable Cash Flow1
2,596
2,573
8,917
8,535
Weighted average common shares outstanding
2,177
2,048
2,147
2,033
1
Non-GAAP financial measures. Please refer to Non-GAAP Reconciliations Appendices.
GAAP earnings attributable to common shareholders for the third quarter of 2024 increased by $761 million, or $0.33 per share, compared with the same period in 2023. This increase was primarily due to:
a non-cash, net unrealized derivative fair value gain of $112 million ($92 million after-tax) in 2024, compared with a net unrealized loss of $782 million ($591 million after-tax) in 2023, reflecting changes in the mark-to-market value of derivative financial instruments used to manage foreign exchange, interest rate and commodity price risks;
the absence in 2024 of a provision adjustment of $124 million ($95 million after-tax) related to a litigation matter; and
operating performance factors discussed below.
The period-over-period comparability of GAAP earnings attributable to common shareholders is impacted by certain unusual, infrequent factors or other non-operating factors which are noted in the reconciliation schedule included in Appendix A of this news release. Refer to the Company's Management's Discussion & Analysis for the third quarter of 2024 filed in conjunction with the third quarter financial statements for a detailed discussion of GAAP financial results.
Adjusted EBITDA in the third quarter of 2024 increased by $330 million compared with the same period in 2023. This was due to higher revenue on the Mainline system from higher tolls, higher contributions from U.S. Gulf Coast natural gas storage assets, and contributions from recently acquired assets including Enbridge Gas Ohio, Enbridge Gas Utah, additional Hohe See and Albatros offshore wind interests, Tomorrow RNG and the Whistler Parent JV. These impacts were partially offset by the absence of contributions from Alliance Pipeline and Aux Sable due to the sale of our interests in these investments in April 2024.
Adjusted earnings in the third quarter of 2024 decreased by $80 million, or $0.07 per share, compared with the same period in 2023, primarily from higher financing costs due to higher debt principal and rates mainly attributable to the acquisition of Enbridge Gas Ohio and Enbridge Gas Utah, and higher depreciation expense from assets acquired and placed into service last year, partially offset by higher adjusted EBITDA contributions discussed above.
DCF for the third quarter of 2024 increased by $23 million compared with the same period in 2023, primarily due to the higher adjusted EBITDA contributions discussed above, partially offset by higher financing costs from higher debt principal and rates mainly attributable to the acquisition of Enbridge Gas Ohio and Enbridge Gas Utah, higher maintenance capital related to acquired assets, and higher U.S. Corporate Alternative Minimum taxes.
Per share metrics in 2024, relative to 2023, are impacted by the significant prefunding activities for the Acquisitions, including the bought deal equity issuance in the third quarter of 2023 and at-the-market (ATM) issuances in the second quarter of 2024 as part of the financing plan for the Acquisitions.
Detailed financial information and analysis can be found below under Third Quarter 2024 Financial Results.
FINANCIAL OUTLOOK
The Company reaffirms its 2024 financial guidance for EBITDA and DCF, recast for the Acquisitions on August 2, 2024. Results for the first nine months of 2024 are in line with the Company's expectations and Enbridge anticipates that its businesses will continue to experience strong capacity utilization and operating performance through the balance of the year. The Company expects to finish the year near the top end of the EBITDA guidance range and around the midpoint of the DCF per share guidance range.
The company also reaffirms its 2023 to 2026 near-term growth outlook of 7-9% for adjusted EBITDA growth, 4-6% for adjusted earnings per share (EPS) growth and approximately 3% for DCF per share growth.
FINANCING UPDATE
On August 19, 2024, Enbridge issued $1.8 billion of senior notes consisting of $600 million of 5-year senior notes, $800 million of 10-year senior notes, and $400 million of 30-year senior notes. Proceeds from these offerings were used to pay down existing indebtedness, to fund capital expenditures, and for general corporate purposes.
The company exited the third quarter with a Debt-to-EBITDA metric of 4.9x. Enbridge expects annualized EBITDA contributions from the closing of the Acquisitions to strengthen its debt-to-EBITDA position throughout 2025 while continuing to fund its secured capital growth program within its equity self-funding model.
SECURED GROWTH PROJECT EXECUTION UPDATE
During the quarter, the second phase of the Fox Squirrel Solar facility was placed into service, and it has been removed from the secured growth program. New to the backlog this quarter are the Canyon Systems Pipelines, the Sequoia Solar project and the third phase of Fox Squirrel.
The Company's secured growth backlog now sits at $27 billion and is underpinned by commercial frameworks consistent with Enbridge's low-risk model. Financing of the secured growth program is expected to be provided entirely through the Company's anticipated $8-9 billion of annual growth capital investable capacity.
BUSINESS UPDATES
Liquids Pipelines: Closed Acquisition of Land and Docks adjacent to EIEC
On October 24, 2024 Enbridge closed its acquisition of two additional docks and land adjacent to EIEC from Flint Hills Resources for a total purchase price of ~US$0.2 billion. Onsite integration work and additional construction at the docks is underway, with expected completion in 2025. The acquisition enables optimization of EIEC's existing docks by increasing Very Large Crude Carrier windows on the primary facility docks. In addition, the new docks and land help unlock valuable growth opportunities at EIEC.
Gas Transmission: DBR Equity Investment
Enbridge has acquired a 15% interest in DBR, a Permian natural gas system serving as a key supply conduit for the Whistler Pipeline, from I Squared Capital. The system is highly contracted with investment grade counterparties under long-term agreements. The DBR system includes the Agua Blanca Pipeline, Waha Connector Pipeline, Carlsbad Gateway Pipeline, and a 50% interest in Waha Gas Storage. The transaction is expected to be accretive to Enbridge's per share metrics and support ongoing growth connecting Permian Basin natural gas supply to growing LNG and other U.S. Gulf Coast demand.
Gas Transmission: Sanctioned Canyon System Pipelines
Enbridge has sanctioned the construction of two new offshore pipelines to deliver natural gas and crude oil from bp's Kaskida offshore play. The development includes a new 24/26" oil pipeline which will connect to Shell Pipeline Company LP's Green Canyon 19 Platform and a 12" gas pipeline connecting to Enbridge's existing Magnolia Gas Gathering Pipeline. Enbridge's total investment is expected to be approximately US$700 million, with an anticipated in-service date of 2029.
The project expands the Company's offshore business and is underpinned by long-term contracts which are consistent with Enbridge's low-risk business model. The agreements contain options which bp may elect to exercise to connect potential future production from its emerging Paleogene portfolio into the newly developed pipelines. Both the Canyon Oil Pipeline and the Canyon Gas Gathering System are being designed to accommodate connections from nearby discoveries.
Gas Distribution and Storage: Closed Acquisition of Public Service Company of North Carolina
On September 30, 2024, Enbridge closed its acquisition of PSNC for a purchase price of approximately US$3.2 billion, inclusive of US$1.3 billion of assumed debt. Going forward PSNC will conduct business as Enbridge Gas North Carolina. The utility serves approximately 600,000 customers and owns 13,000 miles of transmission, gathering and distribution pipelines.
The closing of this acquisition marks the successful completion of the strategic acquisition of three U.S. based gas utilities first announced in September 2023.
Renewable Power: Sequoia Solar Project
Enbridge announced today it has sanctioned the Sequoia Solar project, a two phase 815MW solar farm approximately 150 miles west of Dallas, Texas. Upon completion, Sequoia will be one of the largest solar projects in North America. The construction is significantly de-risked by preliminary equipment and procurement contracts, with key permits and purchase orders already executed. The project is substantially contracted under long term fixed-price power purchase agreements with strong investment grade counterparties, including AT&T and Toyota. Enbridge's estimated capital cost for the project is ~US$1.1 billion, with phased project completions expected in 2025 and 2026.
Renewable Power: Fox Squirrel Solar Project
The second phase of the Fox Squirrel Solar project entered service in the third quarter and is now delivering 250MW of electricity into the PJM grid. With the successful completion of the second phase, Enbridge has elected to participate in the development of the third and final phase of Fox Squirrel Solar, in partnership with EDF Renewables. Enbridge will fund US$168 million towards the final phase, which is expected to enter service in late 2024 and generate 177MW of renewable power. All three phases of the project are supported by 20-year-fixed-price power purchase agreements with Amazon.
THIRD QUARTER 2024 FINANCIAL RESULTS
GAAP Segment EBITDA and Cash Flow from Operations
Three months ended
September 30,
Nine months endedSeptember 30,
2024
2023
2024
2023
(unaudited; millions of Canadian dollars)
Liquids Pipelines
2,325
2,164
7,179
6,944
Gas Transmission
1,146
973
4,506
3,220
Gas Distribution and Storage
522
271
1,854
1,354
Renewable Power Generation
102
30
497
295
Eliminations and Other
295
(602)
(502)
(10)
EBITDA1
4,390
2,836
13,534
11,803
Earnings attributable to common shareholders
1,293
532
4,560
4,113
Cash provided by operating activities
2,973
3,084
8,938
10,389
1
Non-GAAP financial measure. Please refer to Non-GAAP Reconciliations Appendices.
For purposes of evaluating performance, the Company makes adjustments to GAAP reported earnings, segment EBITDA and cash flow provided by operating activities for unusual, infrequent or other non-operating factors, which allow Management and investors to more accurately compare the Company's performance across periods, normalizing for factors that are not indicative of underlying business performance. Tables incorporating these adjustments follow below. Schedules reconciling EBITDA, adjusted EBITDA, adjusted EBITDA by segment, adjusted earnings, adjusted earnings per share and DCF to their closest GAAP equivalent are provided in the Appendices to this news release.
Adjusted EBITDA By Segment
Adjusted EBITDA generated from U.S. dollar denominated businesses was translated to Canadian dollars at a higher average exchange rates (C$1.36/US$) in the third quarter of 2024 when compared with the same quarter in 2023 (C$1.34/US$). A significant portion of U.S. dollar earnings are hedged under the Company's enterprise-wide financial risk management program. The hedge settlements are reported within Eliminations and Other.
Liquids Pipelines
Three months ended
September 30,
Nine months endedSeptember 30,
2024
2023
2024
2023
(unaudited; millions of Canadian dollars)
Mainline System
1,348
1,306
4,003
4,096
Regional Oil Sands System
223
246
693
726
Gulf Coast and Mid-Continent Systems1
364
374
1,227
1,140
Other Systems2
408
373
1,336
1,108
Adjusted EBITDA3
2,343
2,299
7,259
7,070
Operating Data (average deliveries, thousands of bpd)
Mainline System volume4
2,961
2,998
3,056
3,036
Canadian International Joint Tariff5 ($C)
$1.75
$1.65
$1.68
$1.65
U.S. International Joint Tariff5 ($US)
$2.59
$2.57
$2.58
$2.57
Line 3 Replacement Surcharge6 ($US)
$0.76
$0.76
$0.76
$0.79
1
Consists of Flanagan South Pipeline, Seaway Pipeline, Gray Oak Pipeline, Cactus II Pipeline, Enbridge Ingleside Energy Center, and others.
2
Other consists of Southern Lights Pipeline, Express-Platte System, Bakken System, and others.
3
Non-GAAP financial measure. Please refer to Non-GAAP Reconciliations Appendices.
4
Mainline System throughput volume represents Mainline System deliveries ex-Gretna, Manitoba which is made up of U.S. and Eastern Canada deliveries originating from Western Canada.
5
Tariff tolls, per barrel, for heavy crude oil movements from Hardisty, AB to Chicago, IL. Effective July 1, 2023 the Company began collecting a dual currency, international joint tariff set within the negotiated settlement for tolls on the Mainline pipeline system. Excludes abandonment surcharge.
6
Effective July 1, 2022, the Line 3 Replacement Surcharge (L3R), exclusive of the receipt terminalling surcharge, is determined on a monthly basis by a volume ratchet based on the 9-month rolling average of ex-Gretna volumes. Each 50 kbpd volume ratchet above 2,835 kbpd (up to 3,085 kbpd) applies a US$0.035/bbl discount whereas each 50 kbpd volume ratchet below 2,350 kbpd (down to 2,050 kbpd) adds a US$0.04/bbl charge. Refer to Enbridge's Application for a Toll Order respecting the implementation of the L3R Surcharges and CER Order TO-003-2021 for further details.
Liquids Pipelines adjusted EBITDA increased $44 million compared with the third quarter of 2023, primarily related to:
higher Mainline system tolls from annual escalators, effective July 1, 2024;
higher contributions from Southern Lights Pipeline due primarily to the discontinuation of rate-regulated accounting as at December 31, 2023; and
the favorable effect of translating U.S. dollar earnings at a higher average exchange rate in 2024, as compared to 2023; partially offset by
lower Regional Oil Sands System volume throughput.
Gas Transmission
Three months ended
September 30,
Nine months endedSeptember 30,
2024
2023
2024
2023
(unaudited; millions of Canadian dollars)
U.S. Gas Transmission
946
864
2,786
2,600
Canadian Gas Transmission
101
