8-K

ENBRIDGE INC 8-K Report (Jan 6, 2012)

Filed January 6, 2012For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. filed a Form 6-K on January 6, 2012, to provide supplemental United States Generally Accepted Accounting Principles (US GAAP) disclosures for the period ending June 30, 2011. This filing is particularly relevant as it is incorporated by reference into various Enbridge registration statements, offering investors additional insight into the company's financial position beyond its primary Canadian GAAP reporting. The disclosures cover key balance sheet items like accounts receivable, inventory, and accounts payable, as well as detailed information on earnings per share calculations and, significantly, the company's extensive use of derivative financial instruments. Investors can find granular data on how Enbridge manages market price risks (foreign exchange, interest rates, commodity prices, and equity prices) through these derivatives, including their classification, maturity, and fair value. This transparency is crucial for understanding potential impacts on earnings and cash flows.

Key Highlights

  • 1Enbridge Inc. filed supplemental US GAAP disclosures for June 30, 2011, via Form 6-K, which are incorporated into various SEC registration statements.
  • 2The filing provides detailed breakdowns of "Accounts Receivable and Other," "Inventory," and "Accounts Payable and Other" in millions of Canadian dollars.
  • 3Information on weighted average shares outstanding and the impact of dilutive options on Earnings Per Share is provided, noting a retroactive restatement for a two-for-one stock split effective May 25, 2011.
  • 4Extensive disclosures are made regarding Enbridge's management of Market Price Risk, including Foreign Exchange, Interest Rate, Commodity Price, and Equity Price risks.
  • 5The company utilizes a combination of qualifying and non-qualifying derivative instruments to mitigate various financial risks, with detailed tables showing the balance sheet location and carrying value of these instruments.
  • 6Maturity and notional principal/quantity outstanding data for derivative instruments (U.S. dollar forwards, interest rate contracts, commodity contracts) are presented as of June 30, 2011, and December 31, 2010.
  • 7The impact of derivative instruments on the Statements of Earnings and Comprehensive Income, including amounts reclassified from Accumulated Other Comprehensive Income (AOCI) to earnings and unrealized gains/losses on non-qualifying derivatives, is detailed.

Frequently Asked Questions

This Form 6-K filing serves to provide supplemental United States GAAP disclosures for Enbridge Inc. as of June 30, 2011. It is incorporated by reference into various Enbridge registration statements, offering additional financial information to U.S. investors that might not be fully detailed in Canadian GAAP reporting.

Enbridge actively manages several types of financial risks through derivative instruments, including foreign exchange risk (primarily related to U.S. dollar denominated investments and revenues), interest rate risk (on variable rate debt and anticipated fixed rate debt issuances), commodity price risk (from ownership interests in assets and energy services subsidiaries), and equity price risk (related to stock-based compensation).

Enbridge categorizes its derivative instruments into three levels based on the observability of inputs used in their valuation: Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs directly or indirectly, such as quoted forward prices or broker quotes), and Level 3 (less observable or unavailable inputs, often requiring models or extrapolation of observable data).

The filing states that Enbridge manages liquidity risk by forecasting cash requirements and relies on funds from operations, commercial paper, credit facilities, and long-term debt. For credit risk, the company mitigates counterparty default risk by transacting with investment-grade institutions, setting credit limits, and using netting arrangements for derivative counterparties. Credit risk for trade receivables is managed through exposure limits, credit rating assessments, and, where applicable, recovery through the ratemaking process.