Did Enbridge's profitability decline in Q1 2024?

On a GAAP basis, yes. Earnings attributable to common shareholders fell to C$1.42B ($0.67/share) from C$1.73B ($0.86/share), mainly due to a non-cash unrealized derivative loss of C$677M and a C$105M severance charge. On an adjusted basis, earnings rose 13% to C$1.96B, and adjusted EPS increased 8% to $0.92, which management considers the better measure of operating performance.

Are the recent acquisitions affecting the 2024 guidance?

No. The U.S. gas utility acquisitions are not included in the 2024 financial guidance. Management reports 'Base Business' results excluding them: Base Business adjusted EBITDA grew 8% to C$4.85B and Base Business DCF grew 8% to C$3.44B. Management expects the acquisitions to add annualized EBITDA once they close, and the remaining closings are targeted for 2024.

How is Enbridge funding the acquisitions, and is leverage at risk?

Enbridge has pre-financed about C$10B of the C$12.8B (US$9.4B) cash consideration through a C$4.6B common share issuance, US$2.0B and C$1.0B of hybrid notes, and proceeds from the Alliance/Aux Sable sale, with further funding expected from senior notes, hybrids, capital recycling, and a possible at-the-market equity program. Debt-to-EBITDA was 4.7x at quarter-end, and management expects it to remain within the 4.5x-5.0x target range after the acquisitions contribute EBITDA.

Is the dividend at risk, and what does shareholder return look like?

The Board declared a common dividend of C$0.915 per share on April 23, 2024, payable June 1, 2024 to holders of record on May 15, 2024. Management cites roughly C$34B of common dividends paid over the past five years and more than C$40B expected over the next five years. DCF of C$3.46B in Q1 covers the common dividend with room to spare. Dividend coverage will depend on whether acquisition-related DCF growth materializes as expected.

What are the main regulatory and execution risks to watch?

Key items include the Ontario Energy Board's Phase 1 rate decision for Enbridge Gas, which the company has challenged through an appeal and a motion to review, with an outcome expected later in 2024; the proposed Ontario 'Keeping Energy Costs Down Act' (Bill 165), which could reverse part of that decision; the regulatory approvals needed to close the remaining acquisitions and the Permian JV, expected in Q2 2024; and the timing of the Tennessee Ridgeline in-service date (late 2026). Management said the Ontario rate decision is immaterial to 2024 guidance.

ENBRIDGE INC 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed May 10, 2024. Cited figures are marked; the original filing is the authoritative source.

Enbridge Inc. (TSX/NYSE: ENB) reported record first quarter 2024 results on May 10, 2024, with GAAP earnings attributable to common shareholders of C$1.42 billion^a ($0.67 per share), down from C$1.73 billion ($0.86 per share) a year earlier.

The GAAP decline was driven largely by non-cash unrealized derivative losses of C$677 million^b, a C$105 million one-time severance charge, and the absence of a prior-year litigation settlement gain. On an adjusted basis, which management views as the better gauge of underlying performance, adjusted EBITDA rose 11% to C$4.95 billion and adjusted earnings rose 13% to C$1.96 billion, or $0.92 per share (up 8%). Distributable cash flow (DCF) increased 9% to C$3.46 billion.

Excluding the U.S. gas utility acquisitions, which were not included in 2024 guidance, adjusted EBITDA grew 8% to C$4.85 billion^c and DCF grew 8% to C$3.44 billion. Management reaffirmed full-year 2024 guidance and its medium-term outlook. Growth and portfolio activity were significant during the quarter.

Enbridge closed the US$6.6 billion^d acquisition of The East Ohio Gas Company (Enbridge Gas Ohio) on March 6, 2024, and closed the C$3.1 billion sale of its Alliance Pipeline and Aux Sable interests to Pembina on April 1, 2024. The company also signed a definitive agreement to form a Permian Basin natural gas joint venture with WhiteWater/I Squared and MPLX (expected to close in Q2 2024), sanctioned the US$1.1 billion Tennessee Ridgeline Expansion, and approved additional Gulf Coast liquids infrastructure. Regulatory progress included CER approval of the Mainline Tolling Settlement, a positive development for the company's largest segment.

Balance sheet and financing items are central to the investment case. Debt-to-EBITDA ended the quarter at 4.7x, within the 4.5x to 5.0x target range, and management expects leverage to remain within that range after the acquisitions close and contribute annualized EBITDA.

Enbridge has pre-financed roughly C$10 billion of the acquisition consideration through common equity, hybrid notes, and asset sale proceeds, and issued US$3.5 billion of senior notes in April 2024. Management also highlighted a C$25 billion secured growth backlog and roughly C$40 billion in expected shareholder returns over the next five years, while noting that the Ontario Energy Board rate decision remains an open item.

02—Key points

Key Highlights

GAAP EPS fell to $0.67 from $0.86, mainly due to a C$677M non-cash unrealized derivative loss and a C$105M one-time severance charge; these items are excluded from adjusted results.
Adjusted EPS rose 8% to $0.92 and adjusted EBITDA rose 11% to C$4.95B, with DCF up 9% to C$3.46B; excluding the U.S. gas utility acquisitions, adjusted EBITDA grew 8%.
2024 full-year EBITDA and DCF guidance were reaffirmed, and the medium-term outlook was maintained; the acquisitions are excluded from 2024 guidance.
Closed the US$6.6B East Ohio Gas (Enbridge Gas Ohio) acquisition on March 6, 2024, and closed the C$3.1B Alliance/Aux Sable divestiture to Pembina on April 1, 2024.
Debt-to-EBITDA of 4.7x sits within the 4.5x-5.0x target range; management expects leverage to stay in range after remaining acquisitions close.
Approximately C$10B of the C$12.8B acquisition cash consideration has been pre-financed, including a C$4.6B common equity issuance and US$2.0B plus C$1.0B of hybrid notes.
Growth pipeline advanced: Tennessee Ridgeline Expansion (US$1.1B) reached FID, a Permian gas JV with WhiteWater/I Squared and MPLX was signed (expected to close Q2 2024), and the C$25B secured growth backlog was reaffirmed.

03—Questions

Frequently Asked Questions

Did Enbridge's profitability decline in Q1 2024?
On a GAAP basis, yes. Earnings attributable to common shareholders fell to C$1.42B ($0.67/share) from C$1.73B ($0.86/share), mainly due to a non-cash unrealized derivative loss of C$677M and a C$105M severance charge. On an adjusted basis, earnings rose 13% to C$1.96B, and adjusted EPS increased 8% to $0.92, which management considers the better measure of operating performance.
Are the recent acquisitions affecting the 2024 guidance?
No. The U.S. gas utility acquisitions are not included in the 2024 financial guidance. Management reports 'Base Business' results excluding them: Base Business adjusted EBITDA grew 8% to C$4.85B and Base Business DCF grew 8% to C$3.44B. Management expects the acquisitions to add annualized EBITDA once they close, and the remaining closings are targeted for 2024.
How is Enbridge funding the acquisitions, and is leverage at risk?
Enbridge has pre-financed about C$10B of the C$12.8B (US$9.4B) cash consideration through a C$4.6B common share issuance, US$2.0B and C$1.0B of hybrid notes, and proceeds from the Alliance/Aux Sable sale, with further funding expected from senior notes, hybrids, capital recycling, and a possible at-the-market equity program. Debt-to-EBITDA was 4.7x at quarter-end, and management expects it to remain within the 4.5x-5.0x target range after the acquisitions contribute EBITDA.
Is the dividend at risk, and what does shareholder return look like?
The Board declared a common dividend of C$0.915 per share on April 23, 2024, payable June 1, 2024 to holders of record on May 15, 2024. Management cites roughly C$34B of common dividends paid over the past five years and more than C$40B expected over the next five years. DCF of C$3.46B in Q1 covers the common dividend with room to spare. Dividend coverage will depend on whether acquisition-related DCF growth materializes as expected.
What are the main regulatory and execution risks to watch?
Key items include the Ontario Energy Board's Phase 1 rate decision for Enbridge Gas, which the company has challenged through an appeal and a motion to review, with an outcome expected later in 2024; the proposed Ontario 'Keeping Energy Costs Down Act' (Bill 165), which could reverse part of that decision; the regulatory approvals needed to close the remaining acquisitions and the Permian JV, expected in Q2 2024; and the timing of the Tennessee Ridgeline in-service date (late 2026). Management said the Ontario rate decision is immaterial to 2024 guidance.

04—Continue

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