10-KPeriod: FY2017

ENBRIDGE INC Annual Report, Year Ended Dec 31, 2017

Filed February 16, 2018For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. (ENB) reported its 2017 fiscal year-end results in its February 2018 10-K filing. A major event for the company was the completion of its merger with Spectra Energy Corp. on February 27, 2017. This significantly expanded Enbridge's North American energy infrastructure footprint, particularly in natural gas transmission and midstream assets. The company's strategy focuses on growing its core pipeline and utility assets, while monetizing non-core businesses. Enbridge generated substantial operating revenues and highlighted strong performance in its Liquids Pipelines segment due to increased throughput and new assets. The company continues to execute a significant capital program, with $22 billion in secured projects expected through 2020, including major pipeline replacements and expansions. Enbridge also emphasized its commitment to safety, operational reliability, and strengthening its financial position, including efforts to accelerate deleveraging. Despite facing various regulatory and market risks common in the energy infrastructure sector, Enbridge maintained its commitment to delivering shareholder value through dividends.

Key Highlights

  • 1Completed the significant merger with Spectra Energy Corp. in February 2017, creating a larger, more diversified North American energy infrastructure company.
  • 2Focused strategy on growing core pipeline and utility assets, with a plan to sell or monetize non-core assets.
  • 3Maintained strong operational performance in the Liquids Pipelines segment, driven by higher throughput and optimization initiatives.
  • 4Executing a substantial capital program with $22 billion in secured growth projects through 2020 across its business segments.
  • 5Strengthened financial position and flexibility through strategic actions, including deleveraging efforts and equity issuances.
  • 6Demonstrated a commitment to shareholder returns by announcing a 10% increase in its quarterly dividend.
  • 7Experienced a significant goodwill impairment related to certain US Midstream assets classified as held for sale, resulting in a substantial loss for the period.

Frequently Asked Questions

The merger with Spectra Energy, completed in February 2017, significantly expanded Enbridge's asset base, particularly in natural gas transmission and midstream. It created North America's largest energy infrastructure company. Operationally, it integrated Spectra Energy's extensive natural gas network with Enbridge's liquids pipeline business, offering greater diversification and scale. Financially, it resulted in a substantial increase in assets, revenues, and debt, as reflected in the 2017 financial statements. The merger also led to significant integration costs and goodwill impairment charges.

Enbridge's strategy, as outlined in its 2018-2020 Strategic Plan, centers on growing its core businesses: liquids pipelines, gas transmission and storage, gas distribution, and renewable power generation. The company plans to invest approximately $22 billion in secured growth capital projects through 2020. Concurrently, it aims to monetize non-core assets to further strengthen its balance sheet and support its growth initiatives. Key priorities include project execution, cost management, and maintaining financial strength and flexibility.

Enbridge operates in highly regulated environments and is subject to various federal, provincial, and state laws governing its operations. The filing mentions ongoing regulatory reviews for projects like the Line 3 Replacement Program (L3R Program) in the US, which faced challenges related to environmental impact statements. The company also highlighted compliance with environmental regulations, including those related to air emissions and greenhouse gases, and noted potential impacts on operating costs and project timelines. Additionally, Enbridge is involved in legal proceedings and settlements related to past operational incidents, such as the Line 6B crude oil release, which incurred significant costs and insurance recoveries.

Enbridge employs a comprehensive long-term economic hedging program using derivative financial instruments to mitigate risks associated with fluctuations in interest rates, foreign exchange rates, and commodity prices. The company aims to reduce volatility in cash flows and earnings. For interest rate risk, it utilizes interest rate swaps to manage both short-term and long-term debt exposures. Foreign exchange risk is managed through derivative instruments hedging foreign currency-denominated earnings and net investments. Commodity price risk is managed through financial and physical derivative instruments that fix a portion of variable price exposures. The company's risk management policies are designed to align with its strategic priorities and maintain financial strength.