10-QPeriod: Q3 FY2023

ENBRIDGE INC Quarterly Report for Q3 Ended Sep 30, 2023

Filed November 3, 2023For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. reported its third-quarter 2023 financial results, demonstrating resilience and strategic progress. The company's total operating revenues for the quarter were $9.84 billion, a decrease from $11.57 billion in the prior year, primarily due to lower commodity sales. However, operating income remained strong at $1.79 billion, and earnings attributable to common shareholders were $532 million, or $0.26 per share, compared to $1.28 billion, or $0.63 per share, in Q3 2022. This decrease was largely attributable to the absence of a significant gain from a joint venture merger transaction in the prior year and impacts from derivative revaluations. Operationally, Enbridge continues to execute its growth strategy, highlighted by the announced acquisition of three U.S. gas utilities from Dominion Energy for $19.1 billion, expected to close in 2024. The company also reported progress on its Mainline tolling agreement, which is expected to provide greater stability. Despite a challenging comparative period due to non-recurring items, Enbridge's core operations remain robust, and its financial position is strengthened by recent equity and debt financings aimed at supporting strategic growth initiatives.

Key Highlights

  • 1Announced acquisition of three U.S. gas utilities from Dominion Energy for $19.1 billion, a significant step in expanding its natural gas footprint.
  • 2Total operating revenues for the third quarter were $9.84 billion, down from $11.57 billion in Q3 2022, mainly due to lower commodity sales.
  • 3Earnings attributable to common shareholders were $532 million ($0.26 per share) for the quarter, down from $1.28 billion ($0.63 per share) in Q3 2022, largely due to the absence of a prior-year joint venture merger gain and derivative revaluation impacts.
  • 4Generated $10.39 billion in net cash from operating activities for the nine months ended September 30, 2023, demonstrating strong operational cash flow generation.
  • 5Successfully closed a $4.6 billion common share offering and secured significant debt financing to support the pending U.S. gas utility acquisitions.
  • 6Reached an agreement in principle for a new Mainline pipeline tolling settlement, expected to provide stability and predictable returns through 2028.
  • 7Continued capital expenditures on growth projects, with $2.35 billion invested in the third quarter across its various segments.

Frequently Asked Questions

Enbridge announced the acquisition of three U.S. gas utilities from Dominion Energy for $19.1 billion. This acquisition is expected to create North America's largest natural gas utility platform. The company has already raised $4.6 billion through an equity offering and secured significant debt financing to support the cash portion of the transaction. The acquisition is expected to close in 2024, subject to regulatory approvals.

The decrease in earnings attributable to common shareholders was primarily due to the absence of a significant gain of $1.076 billion recognized in Q3 2022 from a joint venture merger transaction involving Gray Oak Pipeline LLC and DCP Midstream, LP. Additionally, fluctuations in the mark-to-market value of derivative instruments and a litigation provision adjustment also impacted earnings. While reported earnings were lower, core operational performance remained solid.

Enbridge maintains a strong liquidity position with $20.4 billion in net available liquidity as of September 30, 2023, comprising available credit facilities and unrestricted cash. The company has actively managed its debt by issuing new long-term debt and repaying existing debt. Recent financing activities, including equity and debt offerings totaling over $4.6 billion and $2.0 billion respectively, are intended to fund the pending acquisitions and maintain financial flexibility.

Enbridge has reached an agreement in principle on a negotiated settlement for tolls on its Mainline pipeline system, covering both Canadian and U.S. portions. This settlement, expected to last seven and a half years through the end of 2028, includes an International Joint Toll (IJT) and toll escalations tied to U.S. consumer price and power indices. The agreement provides incentives for Enbridge to optimize throughput and costs, aiming for returns of 11% to 14.5%. The expected financial outcome aligns with previous reporting, providing greater stability for this key asset.