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ENBRIDGE INC Annual Report, Year Ended Dec 31, 2009

Filing Date
Filed February 19, 2010
Period End
December 31, 2009
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 19, 2010. Cited figures are marked; the original filing is the authoritative source.

Enbridge Inc. (ENB) reported 2009 earnings applicable to common shareholders of C$1,555 milliona, or C$4.27 per common share, up from C$1,321 million (C$3.67) in 2008.

The increase is flattered by non-recurring items: a C$329 millionb gain on the sale of its OCENSA interest and a C$25 million gain on NetThruPut, and by unrealized derivative and foreign exchange gains. Adjusted earnings, the company's non-GAAP measure, rose to C$855 million, or C$2.35 per share, from C$677 million (C$1.88). Revenue fell to C$12.5 billion from C$16.1 billion, mainly because lower natural gas and crude prices reduced commodity sales.

The company describes its business as low-risk, with over 85% of earnings from regulated businesses and over 80% of revenues volume-protected. The main investment story is growth. Enbridge completed more than C$4.8 billionc of growth projects in 2007–2009, has C$7 billion of commercially secured projects due in 2010–2011, and sees about C$30 billion of further opportunities under development.

Capital expenditures were C$3.2 billiond in 2009, and expected 2010 spending is about C$2.5 billion. Major projects include Alberta Clipper (in-service targeted April 1, 2010), Southern Lights, and the Woodland and Northern Gateway projects. Operating cash flow rose to C$2.0 billion from C$1.4 billion.

The company is funding growth with debt, and its debt-to-capitalization ratio was 63.6%, within its 60–70% target. Ratings are A- (S&P), Baa1 (Moody's), and A (DBRS). Key risks include regulatory and toll-setting uncertainty, including the pending Incentive Tolling Settlement extension and a shipper petition against the Alberta Clipper US tariff.

Other risks are project execution and cost overruns, Aboriginal opposition to Northern Gateway, and the ongoing Bloor Street explosion matter at EGD. Note that the filing is a Form 40-F prepared under Canadian GAAP in Canadian dollars, and the figures above are not U.S. GAAP.

02—Key points

Key Highlights

  1. Earnings applicable to common shareholders rose 18% to C$1,555M (C$4.27/share), but this includes a C$329M OCENSA gain and about C$340M of unrealized derivative and FX gains.
  2. Adjusted earnings grew 26% to C$855M (C$2.35/share), a cleaner measure of operating performance than reported GAAP earnings.
  3. Dividend per share rose to C$1.48 in 2009, and the quarterly dividend was raised 15% to C$0.425 effective March 1, 2010, with a 60–70% payout target of adjusted earnings.
  4. Growth pipeline of over C$7B commercially secured for 2010–2011 in service, including Alberta Clipper (April 2010) and Southern Lights (2010), with about C$30B of further opportunities under development.
  5. Operating cash flow rose to C$2,017M from C$1,372M, while total revenue fell to C$12,466M from C$16,131M, reflecting lower commodity prices.
  6. Balance sheet is leveraged, with a 63.6% debt-to-capitalization ratio and total long-term debt of C$12.7B; the company holds C$2.0B of net available liquidity.
  7. Sold OCENSA (Colombia) for C$512M in March 2009 and CLH (Spain) in 2008; minimal international operations remain.

03—Questions

Frequently Asked Questions

  1. Why did reported earnings rise, and how much of that is sustainable?

    Reported earnings rose to C$1,555M from C$1,321M, but the increase was helped by one-time items such as the C$329M OCENSA gain, the C$25M NTP gain, and unrealized derivative and foreign exchange gains. Adjusted earnings, which exclude these items, rose 26% to C$855M, a better gauge of sustainable performance.

  2. What is the outlook for dividends?

    The board raised the quarterly common dividend 15% to C$0.425 (C$1.70 annualized) effective March 1, 2010. Management targets a payout of 60–70% of adjusted earnings and expects 2010 to be near the midpoint. The company has increased its dividend every year since its public listing in 1953.

  3. What are the main growth drivers and risks to them?

    The main drivers are Alberta Clipper (expected in service April 2010), Southern Lights, and oil sands gathering projects such as Woodland and Fort Hills. Risks include execution and cost overruns, shipper challenges to tariffs (such as the FERC petition against the Alberta Clipper US tariff), and regulatory delays. Northern Gateway faces Aboriginal opposition and is not expected in service before about 2016.

  4. How leveraged is Enbridge and how secure are its credit ratings?

    Debt is substantial, with about C$12.7B of long-term debt and a 63.6% debt-to-capitalization ratio, which is within the 60–70% target range. Ratings are A- (S&P), Baa1 (Moody's), and A (DBRS), all with stable outlooks. The company says its risk profile is low because most earnings come from regulated businesses and most revenues are volume-protected.

04—Continue

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