10-QPeriod: Q2 FY2018

ENBRIDGE INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 3, 2018For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. reported mixed financial results for the three and six months ending June 30, 2018. While total operating revenues saw a slight decrease in the three-month period compared to the prior year, they increased for the six-month period. Earnings attributable to common shareholders increased year-over-year for the three months, reaching $1,071 million ($0.63 per share), but saw a slight decrease for the six months, totaling $1,516 million ($0.90 per share). The company has been active in asset monetization, completing the sale of Midcoast Operating, L.P. and Renewable Energy Generation Assets. Additionally, significant progress was made on major pipeline projects like the Line 3 Replacement Programs in both Canada and the US. Despite some impacts from derivative fair value adjustments and asset impairment charges related to divestitures, Enbridge maintained a strong liquidity position with substantial available credit facilities.

Key Highlights

  • 1Total operating revenues for the six months ended June 30, 2018, increased to $23,471 million from $22,262 million in the prior year period.
  • 2Earnings attributable to common shareholders for the three months ended June 30, 2018, rose to $1,071 million ($0.63 per share) from $919 million ($0.56 per share) in the prior year.
  • 3The company completed the sale of Midcoast Operating, L.P. for approximately US$1.1 billion and Renewable Energy Generation Assets for $1.75 billion.
  • 4Construction continues on major projects, including the Canadian and U.S. Line 3 Replacement Programs, with expected in-service dates in the second half of 2019.
  • 5Enbridge Inc. maintained strong liquidity with $12,070 million in available committed credit facilities as of June 30, 2018.
  • 6Asset impairment charges of $1,072 million were recorded in the six months ended June 30, 2018, primarily related to the sale of Midcoast Operating, L.P. and Line 10 crude oil pipeline.
  • 7The company refined its corporate structure by converting Incentive Distribution Rights (IDRs) in Spectra Energy Partners, LP (SEP), increasing Enbridge's ownership in SEP to approximately 83%.

Frequently Asked Questions

Earnings were impacted by several factors. For the three months ended June 30, 2018, earnings attributable to common shareholders increased primarily due to stronger contributions from the Liquids Pipelines segment, new asset contributions, and increased earnings from equity investments in Gas Transmission and Midstream. This was partially offset by higher interest expenses and a non-cash, unrealized derivative fair value loss. For the six months, a significant factor was an asset impairment loss of $913 million related to the Midcoast Operating, L.P. divestiture and a derivative fair value loss, which were partially offset by contributions from new assets and a deferred income tax recovery related to renewable energy assets.

The company completed the sale of Midcoast Operating, L.P. and its Renewable Energy Generation Assets. The sale of Midcoast Operating, L.P. resulted in an asset impairment loss of $913 million recorded in the six months ended June 30, 2018, due to fair value adjustments. The sale of renewable assets led to a deferred income tax recovery of $258 million in the same period.

The Line 3 Replacement Program in Canada is under construction with an expected in-service date in the second half of 2019. In the U.S., the Wisconsin portion is in service, and the Minnesota portion is in pre-construction, also with an expected in-service date in the second half of 2019, pending final permits.

Enbridge maintained a strong liquidity position as of June 30, 2018, with total committed credit facilities of $21,357 million, of which $12,070 million was available. This, along with cash from operations, provides ample resources to meet financial obligations and fund capital expenditures.