Highlights- Third quarter adjusted earnings increased 78% to $152 million- Third quarter earnings increased 105% to $304 million- Nine month adjusted earnings increased 30% to $616 million, or $1.70 per common share- Nine month earnings increased 19% to $
CALGARY, ALBERTA, Nov. 4, 2009 (Marketwire) --
CALGARY, ALBERTA -- (Marketwire) -- 11/04/09 -- Enbridge Inc. (TSX: ENB) (NYSE: ENB) "Enbridge's nine month performance continues to reflect strong operational performance across our liquids pipelines and natural gas businesses," said Patrick D. Daniel, President and Chief Executive Officer. "Given this performance and our outlook, we are revising our guidance range for the full year to $2.30 to $2.36 adjusted earnings per share, which will represent an increase of more than 20% over last year."
In July and early October, Enbridge announced two new ultra deep water pipeline projects in the Gulf of Mexico, further advancing the Company's growth objectives in its natural gas and crude oil pipeline systems.
"The Walker Ridge Gas Gathering System and the Big Foot Oil Pipeline confirm Enbridge's strong competitive position in the Gulf of Mexico and, in particular, our expertise in constructing and operating pipeline infrastructure in ultra deep water," said Mr. Daniel. "Notably, these two projects, which represent an investment of approximately US$0.8 billion, also highlight how Enbridge is enhancing the risk-return profile of our offshore assets to align more closely to our crude oil pipeline system. Enbridge currently moves 50% of offshore deep water gas production through our systems in the Gulf and we're well positioned for further expansion."
"Elsewhere, on the natural gas side, the growth opportunities for Enbridge are also favourable. Our existing asset base, which is adjacent to shale gas plays in Texas and Louisiana and the emerging shale plays in northeastern B.C. and the Bakken Formation in Saskatchewan and North Dakota, gives us very strong competitive positioning."
"In our liquids pipelines business, we're encouraged by increasing signs of renewed activity in the oil sands as commodity prices recover," continued Mr. Daniel. "Enbridge is the largest operator of regional crude oil pipelines serving the oil sands and we have the ability to offer producers the widest range of flexible, timely and scalable transportation solutions to meet their near and longer-term needs. We see significant growth opportunities in the oil sands both in regional pipeline infrastructure and in extending access to new markets for Canadian crude oil and further improving netbacks for our customers."
In October, Enbridge announced a step forward in its green energy strategy with the 20-megawatt Sarnia Solar Project, located in Ontario.
"The Sarnia Solar Project will be a key component of Enbridge's strategy to invest in renewable and alternative energy sources that complement our core operations and provide environmental benefits compared with traditional power generation. At the same time, this project has risk and return characteristics that are fully consistent with Enbridge's low-risk business model, and is very similar to our crude oil pipeline business," said Mr. Daniel. "We plan to continue to develop further renewable energy investments which have similar risk and return characteristics, including potential additional investments in Ontario."
Within sponsored investments, Enbridge Income Fund (EIF) announced a proposed corporate restructuring on November 2, 2009. "Enbridge has advised that it is not considering acquiring the public's interest in EIF. The Company believes the proposed restructuring will preserve value for unitholders and permit EIF to continue to prosper, access additional capital and increase distributions on the strength of its excellent organic growth opportunities", commented Mr. Daniel.
"Looking ahead, we have more than $12 billion of commercially secured projects and have identified another $30 billion of organic growth opportunities. We will remain focused on effective capital management and discipline in evaluating projects so as to continue delivering on our unique investor value proposition of growth and income, supported by a low risk business model."
Third Quarter 2009 Project Highlights
For more information on Enbridge's growth projects, please see the Recent Developments section of the Management's Discussion and Analysis.
- On November 2, 2009, Enbridge, as administrator of EIF, recommended to EIF's Board of Trustees a proposed restructuring of EIF to take effect prior to the January 1, 2011 SIFT tax. Following the proposed restructuring, EIF would cease to be a SIFT and would not be subject to the SIFT tax. The proposed restructuring would involve the exchange by public unitholders of their trust units, which collectively represent a 28% economic interest in EIF, for shares of a taxable Canadian corporation to be called Enbridge Income Fund Holdings Inc., plus a small amount of cash. The Company would maintain its overall 72% economic interest in EIF. A committee of independent Trustees of EIF, assisted by independent legal and financial advisors, has been established to review the administrator's recommendation in light of potential alternatives and provide its recommendations to public unitholders. The restructuring would be subject to approval by unitholders at the EIF annual meeting in May 2010.
- On October 5, 2009, the Company entered into a Letter of Intent (LOI) with Chevron USA, Inc., Statoil Gulf of Mexico LLC and Marubeni Oil & Gas (USA) Inc. to construct and operate an oil pipeline from the proposed Big Foot ultra deepwater development in the Gulf of Mexico. This announcement followed the signing, in July 2009, of an LOI with Chevron USA, Inc. to construct the Walker Ridge Gas Gathering System (WRGGS), which will provide natural gas gathering services for the proposed Chevron-operated Jack, St. Malo and Big Foot fields. The estimated cost of the Big Foot Oil Pipeline, which will be located about 274 kilometres (170 miles) south of the coast of Louisiana, is approximately US$0.3 billion. The estimated cost of the WRGGS is approximately US$0.5 billion, subject to finalization of scope and definitive cost estimates.
- On October 2, 2009, Enbridge announced an agreement with First Solar Inc. (First Solar) to develop a 20 MW solar energy project near Sarnia, Ontario. The Sarnia Solar Project is expected to be completed by the end of 2009 and be the largest photovoltaic solar energy facility in operation in Canada, and one of the largest in North America. At 20 MW, Enbridge expects the project will generate enough power to meet the needs of about 3,200 homes and help to save the equivalent of approximately 6,600 tonnes of CO2 per year. Enbridge's investment in solar energy is expected to be approximately $0.1 billion in 2009.
- On July 20, 2009, Enbridge and Enbridge Energy Partners (EEP) entered into a joint funding agreement under which Enbridge will effectively fund two-thirds of the US$1.2 billion United States segment of the Alberta Clipper crude oil pipeline project. Under the terms of the agreement, Enbridge will participate in the debt financing that EEP raises for the project, and will fund 66.67% of the project's equity requirements. Enbridge will be entitled to 66.67% of the earnings and cash flow which are generated from the base project. Enbridge and EEP will each have a right of first refusal on each other's investment in the project, and EEP will retain the right to fund up to 100% of any expansion, and dilute Enbridge's interest down correspondingly.
Dividend Declaration
On November 4, 2009, the Enbridge Board of Directors declared quarterly dividends of $0.37 per common share and $0.34375 per Series A Preferred Share. Both dividends are payable on December 1, 2009 to shareholders of record on November 16, 2009.
CONSOLIDATED EARNINGS
Three months ended Nine months ended
September 30, September 30,
(millions of Canadian dollars, -------------------------------------
except per share amounts) 2009 2008 2009 2008
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Liquids Pipelines 116.5 74.1 304.4 226.5
Gas Pipelines 17.4 12.6 52.4 39.7
Sponsored Investments 30.3 27.4 104.6 80.5
Gas Distribution and Services (1.5) 35.8 153.0 173.9
International (1.1) 6.7 331.7 600.9
Corporate 142.2 (8.2) 308.8 (64.1)
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Earnings Applicable to Common
Shareholders 303.8 148.4 1,254.9 1,057.4
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Earnings per Common Share 0.83 0.41 3.45 2.94
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Diluted Earnings per Common Share 0.83 0.41 3.43 2.92
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Earnings applicable to common shareholders were $303.8 million for the three months ended September 30, 2009, or $0.83 per common share, compared with $148.4 million, or $0.41 per common share, for the three months ended September 30, 2008. This increase primarily reflected higher allowance for equity funds used during construction (AEDC) in Liquids Pipelines, a higher contribution from EEP as well as unrealized fair value gains on derivative financial instruments used to risk manage commodity, foreign exchange and interest rate variability.
Earnings applicable to common shareholders were $1,254.9 million for the nine months ended September 30, 2009, or $3.45 per common share, compared with $1,057.4 million, or $2.94 per common share, for the same period in 2008. Included in earnings for the nine months ended September 30, 2009 was a $329.0 million gain related to the sale of the Company's investment in Oleoducto Central S.A. (OCENSA) and a $24.9 million gain related to the sale of NetThruPut (NTP). Earnings for the nine months ended September 30, 2008 included $556.1 million related to the sale of the Company's investment in CLH. Excluding the impact of these dispositions, earnings for the nine months ended September 30, 2009 were $399.7 million higher than for the nine months ended September 30, 2008. The increase in earnings resulted from similar factors as for the three months results.
Non-GAAP Measures
This news release contains references to adjusted earnings/(loss), which represent earnings applicable to common shareholders adjusted for non-recurring or non-operating factors on both a consolidated and segmented basis. These factors are reconciled and discussed in the Financial Results sections for the affected business segments. Management believes that the presentation of adjusted earnings/(loss) provides useful information to investors and shareholders as it provides increased transparency and predictive value. Management uses adjusted earnings/(loss) to set targets, assess performance of the Company and set the Company's dividend payout target. Adjusted earnings/(loss) and adjusted earnings/(loss) for each of the segments are not measures that have a standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and are not considered GAAP measures; therefore, these measures may not be comparable with similar measures presented by other issuers. See Non-GAAP Reconciliations section for a reconciliation of the GAAP and non-GAAP measures.
ADJUSTED EARNINGS
Three months ended Nine months ended
September 30, September 30,
(millions of Canadian dollars, -------------------------------------
except per share amounts) 2009 2008 2009 2008
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Liquids Pipelines 119.2 74.1 313.1 226.5
Gas Pipelines 17.4 10.3 50.9 36.9
Sponsored Investments 41.2 22.8 112.3 72.9
Gas Distribution and Services (14.5) (19.9) 151.3 129.9
International (1.1) 6.7 2.7 44.8
Corporate (9.9) (8.2) (14.1) (36.8)
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Adjusted Earnings 152.3 85.8 616.2 474.2
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Adjusted Earnings per Common Share 0.42 0.24 1.70 1.32
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Adjusted earnings were $152.3 million, or $0.42 per common share, for the three months ended September 30, 2009, compared with $85.8 million, or $0.24 per common share, for the three months ended September 30, 2008. Adjusted earnings were $616.2 million, or $1.70 per common share, for the nine months ended September 30, 2009, compared with $474.2 million, or $1.32 per common share, for the nine months ended September 30, 2008.
The following factors impacted adjusted earnings for both the three and nine months ended September 30, 2009:
- AEDC on both Alberta Clipper (within Enbridge System) and Southern Lights Pipeline.
- Increased adjusted earnings from Enbridge Offshore Pipelines (Offshore) due to higher volumes.
- An increased contribution from EEP resulting from higher crude oil delivery volumes, tariff surcharges for recent expansions, the Company's increased ownership interest and a more favourable exchange rate.
- Increased adjusted earnings from Energy Services due to higher volumes and the impact of realizing favourable storage and transportation margins.
- Decreased earnings from International as a result of the sale of OCENSA in the first quarter of 2009 and CLH in the second quarter of 2008.
Liquids Pipelines
Three months ended Nine months ended
September 30, September 30,
-------------------------------------
(millions of Canadian dollars) 2009 2008 2009 2008
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Enbridge System 79.6 45.6 203.6 147.0
Athabasca System 18.7 17.5 52.0 46.3
Spearhead Pipeline 5.1 3.9 10.8 9.3
Olympic Pipeline 1.5 1.7 5.7 6.5
Southern Lights Pipeline 16.7 7.5 44.2 16.4
Feeder Pipelines and Other (2.4) (2.1) (3.2) 1.0
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Adjusted Earnings 119.2 74.1 313.1 226.5
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Athabasca System - leak
remediation costs (2.7) - (8.7) -
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Earnings 116.5 74.1 304.4 226.5
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While under construction, certain regulated pipelines are entitled to recognize AEDC in earnings. These amounts will contribute to earnings and will be collected in tolls once the pipelines are in service. The earnings impact of AEDC for the Enbridge System was $19.0 million (2008 - $4.0 million) for the three months ended September 30, 2009 and $49.4 million (2008 - $10.2 million) for the nine months ended September 30, 2009. The earnings impact of AEDC for the Southern Lights Pipeline was $9.1 million (2008 - $7.5 million) for the three months ended September 30, 2009 and $28.8 million (2008 - $16.4 million) for the nine months ended September 30, 2009.
- Enbridge System earnings reflect lower financing costs as well as higher AEDC on Alberta Clipper and on Line 4 until it was placed into service in April 2009. These positive impacts were partially offset by higher operating costs, including compensation, and costs related to leak remediation. Earnings for the nine months ended September 30, 2009 also included increased tolls resulting from a higher rate base due to the Line 4 Extension Project.
- The increase in Athabasca System adjusted earnings for the first nine months of 2009, compared with the same period of 2008, reflected contributions from the Waupisoo Pipeline that went in service in June 2008 and the positive impact of terminal infrastructure additions. The increase in earnings was partially offset by higher operating costs.
- Higher Southern Lights Pipeline earnings reflect AEDC recognized on a growing capital base while the project continued to be under construction as well as earnings from the new light sour pipeline which became operational during the first quarter of 2009.
- The decrease in earnings in Feeder Pipelines and Other is due to increased business development costs.
Liquids Pipelines earnings for the nine months ended September 30, 2009 were impacted by an $8.7 million after-tax expense resulting from clean up and remediation costs related to a valve leak within the Enbridge Cheecham Terminal on the Athabasca System in January 2009, which is expected to be an abnormal and non-recurring event given the relative new condition of the terminal.
Gas Pipelines
Three months ended Nine months ended
September 30, September 30,
-------------------------------------
(millions of Canadian dollars) 2009 2008 2009 2008
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Alliance Pipeline US 6.8 6.1 19.9 18.0
Vector Pipeline 2.8 3.1 12.1 10.1
Enbridge Offshore Pipelines (Offshore) 7.8 1.1 18.9 8.8
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Adjusted Earnings 17.4 10.3 50.9 36.9
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Alliance Pipeline US - shipper
claim settlement - - - 2.8
Offshore - property insurance
recoveries from hurricanes,
net of costs incurred - 2.3 1.5 -
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Earnings 17.4 12.6 52.4 39.7
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- Offshore adjusted earnings for the three and nine months ended September 30, 2009 reflect increased volumes, including contributions from Shenzi, since its in-service date in April 2009, and Thunder Horse as well as favourable foreign exchange. Offshore adjusted earnings for 2009 included $3.8 million in insurance proceeds collected during the second quarter, which was an interim partial reimbursement for business interruption lost revenues and operating expenses associated with Hurricane Ike in 2008. Earnings for the nine months ended September 30, 2008 included approximately $2.0 million from business interruption proceeds related to lost revenue in 2005 and 2006 as a result of the 2005 hurricanes.
Gas Pipelines earnings were impacted by the following non-recurring or non-operating adjusting items:
- Earnings for the nine months ended September 30, 2008 were impacted by $2.8 million in proceeds received by Alliance Pipeline US from the settlement of a claim against a former shipper which repudiated its capacity commitment.
- Earnings for the nine months ended September 30, 2009 included insurance proceeds of $1.5 million related to the replacement of damaged infrastructure as a result of the 2008 hurricanes. Earnings for the three and nine months ended September 30, 2008 included insurance proceeds of $2.3 million reimbursing repair costs incurred during the second quarter of 2008 related to the replacement of damaged infrastructure as a result of the 2005 hurricanes.
Sponsored Investments
Three months ended Nine months ended
September 30, September 30,
-------------------------------------
(millions of Canadian dollars) 2009 2008 2009 2008
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Enbridge Energy Partners 28.5 13.2 76.6 41.9
Enbridge Energy, Limited
Partnership - Alberta Clipper US 1.5 - 1.5 -
Enbridge Income Fund 11.2 9.6 34.2 31.0
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Adjusted Earnings 41.2 22.8 112.3 72.9
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EEP - unrealized derivative fair
value gains 1.3 4.6 1.4 1.8
EEP - Lakehead System billing
correction - - 3.1 -
EEP - dilution gain on Class A unit
issuance - - - 4.5
EEP - asset impairment loss (12.2) - (12.2) -
EIF - Alliance Canada shipper claim
settlement - - - 1.3
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Earnings 30.3 27.4 104.6 80.5
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- EEP adjusted earnings increased due to the Company's higher ownership interest in EEP resulting from the December 2008 Class A unit subscription; an increased contribution due to higher crude oil delivery volumes and tariff surcharges for recent expansions; higher incentive income; and a more favourable foreign exchange rate.
- In July 2009, the Company committed to fund 66.67% of the cost to construct the United States segment of the Alberta Clipper Project. Enbridge Energy, Limited Partnership (EELP) - Alberta Clipper US earnings are the Company's earnings from its investment in EELP which is undertaking the project and represent AEDC recognized while the project is under construction.
- EIF adjusted earnings reflected a year-over-year increase in the monthly distributions received from the preferred unit investment in EIF, primarily due to increased cash flow from expansion of the Saskatchewan System.
Sponsored Investment earnings for the three and nine months ended September 30, 2009 and 2008 were impacted by the following non-recurring or non-operating adjusting items:
- Earnings from EEP included a change in the unrealized fair value on derivative financial instruments in each period.
- Earnings from EEP for the nine months ended September 30, 2009 included a Lakehead System billing correction of $3.1 million (net to Enbridge) related to services provided in prior periods.
- EEP earnings for the nine months ended September 30, 2008 included dilution gains because Enbridge did not fully participate in EEP Class A unit offerings. Enbridge's ownership interest in EEP decreased from 15.1% to 14.6% as a result of the offering in the first quarter of 2008.
