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ENBRIDGE INC Annual Report (Amendment), Year Ended Dec 31, 2005

Filing Date
Filed November 24, 2006
Period End
December 31, 2005
In the record · 2016–202610-K1810-Q268-K238

ENB filed 18 annual reports (10-K), 26 quarterly reports (10-Q) and 238 current reports (8-K) between 2016 and 2026.

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01—Abstract

Summary

Summary of the 40-F/A filed November 24, 2006. Cited figures are marked; the original filing is the authoritative source.

This filing is Amendment No. 1 to Enbridge Inc.'s Form 40-F for fiscal year 2005, filed November 24, 2006.

Its purpose is narrow: it replaces the audited financial statements exhibit (Exhibit 99.7) because the auditor's report and pages 50-51 were inadvertently omitted from the original March 2006 filing. The amendment does not update or restate any other information. The financial statements show Enbridge reported 2005 revenues of C$8,453.1 milliona (up 8% from C$7,807.8 million), net earnings applicable to common shareholders of C$556.0 million (down from C$645.3 million in 2004), and diluted EPS of C$1.63 versus C$1.91.

The decline was driven largely by the absence of a 2004 gain on the AltaGas disposal (C$121.5 millionb pre-tax) and lower income from equity investments, partly offset by higher transportation revenue and growth in Gas Pipelines and Liquids Pipelines. Balance sheet growth was substantial. Total assets rose to C$17.2 billion from C$14.9 billion, mainly because consolidating the Enbridge Income Fund (EIF) under the new VIE guidance added about C$1.7 billion of assets and about C$1.3 billion of liabilities.

Long-term debt plus non-recourse debt increased meaningfully, and goodwill grew to C$367.2 millionc from C$31.5 million. Operating cash flow was C$903.5 million, while capital expenditures on property, plant and equipment were C$680.6 million, and common dividends paid were C$361.1 million (C$1.04 per share). The company also disclosed a pending late-payment-penalty class action, a Bloor Street explosion prosecution, a CAPLA landowner class action, and an IRS challenge to a subsidiary's tax position that could reduce earnings by up to about US$60 million.

02—Key points

Key Highlights

  1. Filing purpose: Amendment No. 1 to the 2005 Form 40-F, filed solely to add the omitted auditor's report and pages 50-51 of the audited financial statements; no other information was updated.
  2. Revenue grew 8.2% to C$8,453.1 million in 2005, led by commodity sales (C$6,193.5 million) and transportation (C$1,938.1 million).
  3. Net earnings applicable to common shareholders fell 13.8% to C$556.0 million; diluted EPS dropped to C$1.63 from C$1.91, reflecting the non-recurring 2004 AltaGas gain.
  4. Consolidating Enbridge Income Fund under new VIE accounting lifted total assets to C$17.2 billion (from C$14.9 billion) and goodwill to C$367.2 million (from C$31.5 million).
  5. Capital spending rose to C$680.6 million, and long-term debt reached C$6,279.1 million, plus C$1,619.9 million of non-recourse long-term debt.
  6. Dividends paid rose to C$1.04 per common share (from C$0.92), with about 348.9 million common shares outstanding at year-end.
  7. Key contingencies include an EGD late-payment penalty class action (about C$74 million billed), a Bloor Street explosion prosecution (up to C$5 million in fines), and an IRS dispute that could reduce earnings by up to about US$60 million.

03—Questions

Frequently Asked Questions

  1. Why was this amended 40-F filed in November 2006?

    The original Form 40-F, filed March 7, 2006, inadvertently omitted the auditor's report and pages 50 and 51 of the audited financial statements. Amendment No. 1 replaces the financial statements exhibit with a complete version that includes them. The amendment does not restate or update other content.

  2. Why did Enbridge's earnings decline in 2005 despite higher revenue?

    Earnings applicable to common shareholders fell to C$556.0 million from C$645.3 million. The main drivers were the absence of the C$121.5 million pre-tax gain from the 2004 AltaGas disposal, lower income from equity investments (C$116.8 million versus C$160.3 million), and higher interest expense (C$539.2 million versus C$525.3 million). Higher operating and depreciation costs also contributed, partly offset by growth in transportation revenue.

  3. What drove the large increase in Enbridge's total assets and goodwill?

    Total assets rose to C$17.2 billion from C$14.9 billion. Enbridge began consolidating Enbridge Income Fund on January 1, 2005 as a variable interest entity, which added roughly C$1.7 billion of assets, including about C$308 million of goodwill. Goodwill also increased from the U.S. Oil and Leader Wind acquisitions.

  4. What legal or financial risks do investors should be aware of?

    Notable risks include an Ontario class action over late payment penalties (roughly C$74 million billed, with an unquantified portion potentially repayable), charges related to the 2003 Bloor Street explosion (maximum fine C$5 million), a CAPLA landowner class action with no provision recorded, and an IRS challenge to Midcoast's 1999 acquisition tax treatment that could reduce earnings by up to about US$60 million. The company also faces commodity price and foreign exchange exposure, which it hedges with derivatives.

04—Continue

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