Skip to content
AnalystLens

ENBRIDGE INC Annual Report, Year Ended Dec 31, 2006

Filing Date
Filed February 27, 2007
Period End
December 31, 2006
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.

  1. FY2018 annual report10-K · Feb ’19Feb ’19
  2. Leadership change8-K · Jan ’22Jan ’22
  3. Leadership change8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 40-F filed February 27, 2007. Cited figures are marked; the original filing is the authoritative source.

Enbridge Inc. (NYSE/TSX: ENB) reported 2006 earnings applicable to common shareholders of C$615.4 milliona, or C$1.81 per share, up from C$556.0 million (C$1.65) in 2005.

Revenue rose 26% to C$10.64 billionb, driven largely by Gas Distribution and Services, which contributed most of the top line. Earnings growth was supported by the Enbridge crude oil mainline (higher Terrace and ITS earnings, lower oil loss costs), strong results at Enbridge Energy Partners and Aux Sable, and a C$48.9 million benefit from 2006 tax rate reductions. These gains were partly offset by a weather-driven decline at Enbridge Gas Distribution (EGD), where warmer-than-normal 2006 weather cut earnings by about C$36.9 million.

The company is in a heavy capital-spending phase, with about C$1.58 billionc invested in 2006 and roughly C$2.5 billion budgeted for 2007. Major growth projects include Southern Access, Alberta Clipper (C$1.5 billion Canadian segment), Southern Lights (US$1.3 billion), Waupisoo, and the Hardisty Terminal. Management projects organic growth of 6% to 9% annually over the next five years and targets a dividend payout of 60% to 70% of adjusted operating earnings.

Dividends per common share were C$1.15d in 2006, and the board subsequently raised the quarterly dividend to C$0.3075. Investors should note several risk items: Moody's placed Enbridge's ratings under review for possible downgrade, EGD cannot issue new long-term debt until it meets an interest coverage test, the Canadian government's Tax Fairness Plan could reduce income trust distributions from 2011, and the company completed a C$581 million equity raise in February 2007 to fund growth. The filing is a Form 40-F, and the financial statements are prepared under Canadian GAAP with a U.S. GAAP reconciliation in the notes.

02—Key points

Key Highlights

  1. Earnings applicable to common shareholders rose to C$615.4 million (C$1.81 per share) in 2006 from C$556.0 million (C$1.65) in 2005, a 10.7% increase.
  2. Revenues increased 26% to C$10.64 billion, primarily from Gas Distribution and Services, which grew to C$8.98 billion, largely from Tidal Energy's U.S. expansion and higher commodity prices.
  3. Warmer-than-normal weather reduced EGD earnings by about C$36.9 million, and EGD's allowed return on equity fell to 8.74% in 2006.
  4. Capital expenditures reached about C$1.58 billion in 2006, with roughly C$2.5 billion planned for 2007 across pipeline expansions, terminals, and the Ontario Wind Project.
  5. Major growth projects include Alberta Clipper (expected in service in late 2009 or 2010), Southern Access (400,000 bpd), Southern Lights (US$1.3 billion), and the Hardisty Terminal (7.5 million barrels).
  6. A C$581.2 million equity issuance closed in February 2007, and the quarterly dividend was raised to C$0.3075 from C$0.2875.
  7. Moody's placed Enbridge's credit ratings under review for possible downgrade in December 2006, and EGD does not currently meet its trust indenture test for issuing new long-term debt.

03—Questions

Frequently Asked Questions

  1. How did Enbridge perform financially in 2006?

    Earnings applicable to common shareholders were C$615.4 million, or C$1.81 per diluted-adjusted share (C$1.79 diluted), compared with C$556.0 million (C$1.65) in 2005. Adjusted operating earnings were C$592.9 million (C$1.74 per share). Results were supported by the crude oil mainline, EEP, and Aux Sable, partly offset by weak weather at EGD.

  2. What are the main growth drivers for Enbridge?

    Management targets annual organic growth of 6% to 9% over five years. The main drivers are the Canadian mainline expansions (Southern Access, Alberta Clipper, Southern Lights), oil sands upstream pipelines (Waupisoo, Athabasca expansions), contract terminaling (Hardisty, Stonefell), East Texas Clarity at EEP, and a Gulf of Mexico offshore expansion. Acquisitions are also pursued opportunistically.

  3. Is the dividend sustainable, and how much is it growing?

    Enbridge targets a payout of 60% to 70% of adjusted operating earnings. The 2006 common dividend was C$1.15, up from C$1.0375 in 2005, and the quarterly rate was increased to C$0.3075 in early 2007. Given the large 2007 capital program, growth in the dividend depends on continued earnings growth and access to financing.

  4. What risks should investors be aware of?

    Key risks include weather sensitivity at EGD, regulatory outcomes for the Enbridge System ITS and EGD rate cases (including the move to incentive regulation in 2008), execution and cost escalation on large projects, the Tax Fairness Plan affecting Enbridge Income Fund after 2011, the possible credit rating downgrade under Moody's review, and litigation including the Bloor Street explosion charges and a CAPLA class action.

04—Continue

← View all 10-K filings