10-QPeriod: Q2 FY2021

ENBRIDGE INC Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 30, 2021For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. (ENB) reported a solid financial performance for the six months ended June 30, 2021, with earnings attributable to common shareholders increasing significantly year-over-year, driven by operational improvements and the absence of major impairments seen in the prior year. Total operating revenues saw a substantial increase, primarily due to higher commodity sales and transportation services, reflecting a recovery in energy demand. The company highlighted strong contributions from its Liquids Pipelines and Gas Distribution and Storage segments, bolstered by higher volumes, improved tolls, increased distribution charges, and customer base growth. Capital expenditures remain robust, focused on growth projects like the Line 3 Replacement Program, which is progressing on schedule. Enbridge also successfully executed several debt issuances and refinancings, strengthening its liquidity position and extending debt maturities, underscoring its financial discipline and access to capital markets. The company's credit ratings were also upgraded by Moody's, reflecting its financial strength.

Key Highlights

  • 1Total operating revenues increased to C$10.95 billion for Q2 2021 and C$23.09 billion for the first six months, up from C$7.96 billion and C$19.97 billion in the prior year periods, respectively.
  • 2Earnings attributable to common shareholders were C$1.39 billion for Q2 2021 and C$3.29 billion for the first six months, a significant increase compared to C$1.65 billion and C$0.22 billion in the prior year periods, impacted by prior year impairments and derivative fair value adjustments.
  • 3The Liquids Pipelines segment showed strong performance, with EBITDA increasing due to higher throughput, improved tolls, and better foreign exchange hedge rates.
  • 4The Gas Distribution and Storage segment also saw improved EBITDA, driven by higher distribution charges, rate increases, and customer growth.
  • 5Enbridge completed several debt issuances and refinanced credit facilities, enhancing liquidity and extending debt maturities, with total committed credit facilities of C$20.9 billion.
  • 6Moody's upgraded Enbridge's credit ratings to Baa1 from Baa2 with a stable outlook, reflecting the company's financial strength.
  • 7The Line 3 Replacement Program in the US is progressing on schedule, with an expected fourth-quarter 2021 in-service date, despite ongoing legal and regulatory reviews.

Frequently Asked Questions

For the six months ended June 30, 2021, Enbridge reported a significant increase in earnings attributable to common shareholders, reaching C$3.29 billion, up from C$0.22 billion in the same period of 2020. This improvement was largely due to the absence of a substantial impairment loss recognized in the prior year related to its investment in DCP Midstream, as well as favorable changes in the mark-to-market valuation of derivative financial instruments. Total operating revenues also increased to C$23.09 billion from C$19.97 billion in the prior year.

The Liquids Pipelines segment demonstrated strength with increased EBITDA, driven by higher throughputs and improved tolls. The Gas Distribution and Storage segment also showed growth in EBITDA due to higher distribution charges from rate increases and customer base expansion. The Gas Transmission and Midstream segment's EBITDA saw a substantial increase for the six months, primarily due to the absence of impairments recorded in the prior year, although it experienced a slight decrease for the quarter. Renewable Power Generation and Energy Services segments faced some headwinds, with EBITDA declining for the periods reported, impacted by weaker wind resources and compressed market differentials, respectively.

The United States Line 3 Replacement Program is a key growth project and is progressing on schedule, with an expected in-service date in the fourth quarter of 2021. While the project continues to advance, it is subject to ongoing legal and regulatory reviews, including a recent affirmation of approvals by the Minnesota Court of Appeals, with further review sought by several parties at the Minnesota Supreme Court. Enbridge is actively managing these processes.

Enbridge has proactively managed its financial position by issuing new debt, including sustainability-linked notes, and renewing its credit facilities. As of June 30, 2021, the company had C$8.5 billion in available committed credit facilities, in addition to unrestricted cash and cash equivalents. The company's debt management strategy, coupled with strong operational cash flows and credit rating upgrades from Moody's, indicates a robust liquidity position and financial flexibility to fund its capital program and meet its obligations.