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ENBRIDGE INC 8-K Report, Material Agreement (Mar 8, 2024)

Filed March 8, 2024For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. announced a significant development regarding its Mainline Tolling Settlement (MTS), which has received approval from the Canada Energy Regulator and is effective through December 31, 2028. This settlement governs the tariffs for crude oil and liquids shipments originating in Western Canada and destined for delivery across North America. The approval is a crucial step in providing long-term rate certainty for a key segment of Enbridge's business. The MTS includes provisions for an international joint tariff for heavy crude oil movements, toll escalations tied to relevant cost indices, and a dual currency system. Importantly, it incorporates a financial performance collar designed to incentivize Enbridge for operational efficiency and cost management while also offering downside protection against unforeseen market or operational disruptions. This agreement provides a stable framework for Enbridge's Mainline operations and is retroactively effective from July 1, 2021.

Key Highlights

  • 1Canada Energy Regulator approves Enbridge's Mainline Tolling Settlement (MTS) through December 31, 2028.
  • 2MTS establishes tariffs for crude oil and liquids shipments from Western Canada across North America.
  • 3Agreement includes an international joint tariff (IJT) for heavy crude oil from Hardisty to Chicago.
  • 4Tolls will escalate based on U.S. consumer price and power indices for operation, administration, and power costs.
  • 5Tolls remain distance and commodity adjusted, utilizing a dual currency IJT.
  • 6Financial performance collar implemented to incentivize throughput/cost optimization and provide downside protection.

Frequently Asked Questions

The MTS is an agreement that sets the tariffs for crude oil and liquids shipments on Enbridge's Mainline system, which is a critical piece of energy infrastructure. Its approval by the Canada Energy Regulator provides long-term rate certainty for Enbridge and its customers, ensuring stability for the transportation of vital energy resources through December 31, 2028.

The MTS was approved on March 4, 2024, and is effective through December 31, 2028. It is retroactively effective from July 1, 2021, meaning the terms apply to shipments dating back to that period.

The MTS includes an international joint tariff for heavy crude oil, toll escalation mechanisms tied to U.S. consumer price and power indices, a dual currency IJT, and a financial performance collar. This collar aims to reward Enbridge for efficient operations while providing a safety net against extreme market volatility or operational cost issues.

The MTS incorporates a financial performance collar. This mechanism incentivizes Enbridge to optimize throughput and control costs. Simultaneously, it offers downside protection to Enbridge in scenarios of severe supply or demand disruptions, or unexpected increases in operating costs, thereby mitigating certain business risks.