Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Enbridge Inc (ENB, Financial) reported strong second-quarter results with record volumes on the mainline and Ingleside export facility.
- The company successfully closed two of the three US gas utilities acquisitions, which are expected to contribute significantly to annualized EBITDA.
- Enbridge Inc (ENB) achieved a prepackaged rate settlement on the Texas Eastern pipeline, reflecting its focus on optimizing return assets.
- The company sanctioned several growth projects, including the 130 MW Orange Grove PPA with AT&T and the Blackcomb pipeline for natural gas egress.
- Enbridge Inc (ENB) maintains a strong balance sheet with a debt to EBITDA ratio well within the targeted range, providing financial flexibility for capital allocation priorities.
Negative Points
- Ongoing wildfires in Northern Alberta and British Columbia pose a potential risk to operations, although no impact has been seen to date.
- Higher financing costs on floating rate debt and new issuances impacted per-share metrics.
- The company faces regulatory challenges, such as the ongoing Ohio rate case, which may take several months to negotiate.
- There is a potential risk of producer shut-ins due to forest fires, which could impact mainline volumes.
- The integration of newly acquired US gas utilities presents operational challenges and requires significant focus and resources.
Q & A Highlights
Q: Can you walk us through the key drivers of the change in the tanker rate case and what it means in terms of an EBITDA or income uplift in 2025 and 2026?
A: Cynthia Hansen, EVP and President, Gas Transmission and Midstream: The settlement is a black box prepackaged settlement, considering various factors like capital spend and operating costs. It allows us to continue earning a fair return into the future, with a 6% increase in rates effective October this year and an additional 2.75% in January 2026.
Q: Can you explain the 2024 recast EBITDA guidance range and whether there are any specific headwinds we should be looking for in H2?
A: Gregory Ebel, Group Executive and CFO: The recast guidance is based solely on layering in the utilities and assuming the closing of PSMC. The base businesses are performing well, and if you were just looking at the base business, you'd be at the upper end of the range.
Q: What drove the decision to use the ATM versus asset sales, and what do you expect in terms of any asset sales going forward?
A: Gregory Ebel, Group Executive and CFO: We moved quickly to get all the financing done due to high confidence in closing the utilities. Asset sales are still part of our strategy, but there's nothing near-term that we have to do. Any significant asset sales will be based on getting a great price.
Q: What are your expectations for the mainline in terms of apportionment and potential producer shut-ins due to forest fires?
A: Colin Gruending, EVP and President, Liquids Pipelines: We are apportioned in August and comfortable with the 3 million barrels per day estimate for the full year. So far, forest fires have had negligible impact on mainline volumes and basin production.
Q: Can you comment on the data center opportunities and which segment you expect to see the best risk-reward or highest investment opportunity?
A: Gregory Ebel, Group Executive and CFO: The initial phase will likely benefit Gas Distribution and Storage (GDS). Gas Transmission and Midstream (GTM) also has opportunities, especially in the Southeast. Renewable power will also play a role as data centers balance reliability with renewable energy commitments.
Q: How are you assessing the CapEx profile for LDCs with the emerging data center opportunities, and how do you see regulatory support evolving?
A: Patrick Murray, EVP and CFO: It's early to say if it will significantly increase CapEx in the next year or two, but there's an upward bias. Regulatory agencies are trying to understand policy decisions needed for data centers, and natural gas systems can provide the necessary reliability and affordability.
Q: Can you provide more color on the Ohio rate case and your confidence in reaching a settlement?
A: Michel Inheritance, EVP and President, Gas Distribution and Storage: The staff report is not unusual, and we expect to reach a settlement that allows us to earn a fair return. We are confident it will land within the model set for the transaction.
Q: Are there any large projects or major asset bases that you feel are important to execute on in the next 12 to 24 months?
A: Gregory Ebel, Group Executive and CFO: Our focus is on optimizing base assets, integrating the new utilities, and executing our $25 billion project backlog. We are always looking for new projects, but the focus is on singles and doubles that add up to a big home run for the corporation.
Q: Can you provide additional color on the contracting profile of the Ingleside facility and how it might be protected from competing export terminals?
A: Colin Gruending, EVP and President, Liquids Pipelines: Ingleside is the number one market share terminal in the U.S. with significant advantages. We expect to capture our share of the additional million barrels per day of Permian volume. We are also looking to bring other commodities to the facility.
Q: Are you still actively pursuing additional minority sell-down opportunities with indigenous groups?
A: Gregory Ebel, Group Executive and CFO: Yes, we are always looking at opportunities for indigenous partnerships. This is about relationships, doing the right thing, and future opportunities. We have announced several partnerships and are looking at more, especially in British Columbia.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
