8-K

ENBRIDGE INC 8-K Report (Nov 30, 2017)

Filed November 30, 2017For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. (ENB) filed an 8-K on November 29, 2017, primarily announcing strategic initiatives and financial outlook following its merger with Spectra Energy. The company detailed its plan to rationalize its asset mix towards a pure regulated pipeline and utility business model, identifying approximately $10 billion in non-core assets for sale or monetization, with at least $3 billion slated for disposal in 2018. This strategic shift aims to enhance focus on core businesses like liquids pipelines, gas transmission, and gas utilities, which are characterized by low risk and strong growth potential. Financially, Enbridge announced a C$1.5 billion private placement of common shares and outlined a three-year financial outlook (2018-2020) projecting 10% compound annual growth in Adjusted Cash Flow From Operations (ACFFO) per share and dividends. The company also declared a 10% increase in its quarterly dividend for 2018, marking its 23rd consecutive annual dividend increase. These actions are part of a broader plan to fund a $22 billion capital program through 2020, strengthen the balance sheet with a target Debt to EBITDA of 5.0x by the end of 2018, and reduce reliance on common equity issuances for future funding.

Key Highlights

  • 1Enbridge announced a C$1.5 billion private placement of common shares to reduce short-term indebtedness and fund capital projects.
  • 2The company unveiled a strategic plan to focus on a pure regulated pipeline and utility business model, divesting non-core assets valued at approximately $10 billion.
  • 3A three-year financial outlook (2018-2020) projects a 10% compound annual growth rate (CAGR) for ACFFO per share and dividends.
  • 4Enbridge declared a 10% increase in its quarterly common share dividend for 2018, continuing its history of dividend growth.
  • 5The company plans to fund a $22 billion capital program through 2020 using a combination of internally generated cash flow, equity issuances, hybrid securities, and asset sales.
  • 6Enbridge aims to strengthen its balance sheet, targeting a Debt to EBITDA ratio of 5.0x by the end of 2018.
  • 7The company is proposing to exchange its incentive distribution rights (IDRs) and general partner economic interests in Spectra Energy Partners (SEP) to reduce SEP's cost of capital.

Frequently Asked Questions

The C$1.5 billion private placement of common shares is intended to pay down short-term indebtedness pending investment in capital projects, thereby strengthening Enbridge's short-term liquidity and financial flexibility.

This means Enbridge is focusing its business strategy on its core, low-risk, and high-growth segments: liquids pipelines and terminals, natural gas transmission and storage, and regulated natural gas utilities. It involves identifying and planning to sell or monetize assets that do not fit this core focus, such as certain unregulated gas midstream and onshore renewable businesses.

Enbridge expects to continue its track record of dividend increases, announcing a 10% dividend increase for 2018 and projecting a 10% annual dividend growth through 2020. Financially, the company aims for strong investment-grade credit metrics, targeting a Debt to EBITDA ratio of 5.0x by the end of 2018, and projects a 10% compound annual growth rate in ACFFO per share through 2020.

According to the filing, Enbridge believes its financing plan, which includes internally generated cash flow, planned hybrid securities, asset sales, and existing dividend reinvestment programs, is sufficient to fund its secured growth program through 2020. The company explicitly states that no further follow-on Enbridge Inc. common equity is required to support the current financing plan.