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Enbridge Inc. reports strong fourth quarter and full year 2018 results

"It was a strong year for Enbridge, both from a financial and strategic perspective," commented Al Monaco, President and Chief Executive Officer of Enbridge.
"It was a strong year for Enbridge, both from a financial and strategic perspective," commented Al Monaco, President and Chief Executive Officer of Enbridge.

Enbridge Inc. reported fourth quarter and full year 2018 financial results and provided a quarterly business update.

"It was a strong year for Enbridge, both from a financial and strategic perspective," commented Al Monaco, President and Chief Executive Officer of Enbridge.

"Financially, record operating performance across our natural gas and liquids businesses translated into full year DCF per share results near the top of our guidance range. We are pleased with the 20% DCF per share increase over last year, which reflects strong contributions from each of our core businesses driven by operating performance, optimization of throughput on existing assets, synergy realization from the Spectra acquisition and successfully bringing $7 billion of new projects into service in 2018.

"Strategically, we achieved the key priorities laid out in our three year business plan that was rolled out at the end of 2017, ahead of schedule. In addition to delivering strong cash flow and earnings per share growth, we executed significant non-core asset sales, accelerated balance sheet de-leveraging and simplified the corporate structure.

"We've received close to $6 billion of proceeds from the $7.8 billion of non-core asset sales announced through 2018. These sales allowed us to fully focus attention on our low risk pipeline and utility assets. The proceeds were applied to debt repayment so that at year-end, our consolidated Debt to EBITDA metric was down to 4.7x, well ahead of our original target of 5.0x.

"In addition, in the fourth quarter we completed the buy-in of all four of our sponsored vehicles. This now brings all of our core assets together under the Enbridge roof which allows us to retain more cash flow to re-invest in the business and for financial flexibility, as well as significantly enhancing our credit profile.

"It was another successful year for project execution, $7 billion of pipeline and utility assets were brought into service, including the Nexus and the Valley Crossing natural gas pipelines. Both are supported by long term take or pay contracts with strong customers and are perfect examples of our low-risk pipeline and utility model.

"We made great progress on the Line 3 replacement project. Construction is nearing completion in Canada, and with key approvals now received from the MPUC, we've moved into the permitting phase of the project in Minnesota. We continue to expect to bring the full project into service before the end of 2019. This critical integrity enhancement project will support reliable energy supply to local and regional refiners and restore much needed additional pipeline egress for Western Canadian producers.

"Lastly, the $1.8 billion of new secured growth projects that we announced at our investor conference in December illustrates the types of opportunities available across our businesses. We expect to capitalize on strong global energy fundamentals to extend and expand our networks, particularly in support of North American energy exports.  In fact, post 2020 we expect to be able to deploy $5-6 billion per year on organic growth on a self-funded basis while maintaining prudent debt metrics. However, we'll continue to take a disciplined approach to investment decisions, comparing each to alternative capital allocation options in order to maximize shareholder value.

"In summary, we're pleased with the accomplishments we made on our key strategic priorities in 2018. We ended the year as a much stronger, lower risk, and simpler company than where we started the year. We're now well positioned to drive the business forward beyond 2020 as the lowest risk company in our sector with a strong balance sheet, reliable cash flows and a very attractive longer-term growth outlook," concluded Mr. Monaco.


(all financial figures are unaudited and in Canadian dollars unless otherwise noted)

  • GAAP earnings of $1,089 million or $0.60 per common share for the fourth quarter of 2018 and $2,515 million or $1.46  per common share for the full year 2018, both including the impact of a number of unusual, non-recurring or non-operating factors
  • Adjusted earnings were $1,166 million or $0.65 per common share for the fourth quarter of 2018 and $4,568 million or $2.65 per common share for the full year 2018, compared to $1,013 million or $0.61 per common share in the fourth quarter of 2017 and $2,982 million or $1.96 per common share for the full year 2017
  • Adjusted earnings before interest, income tax and depreciation and amortization (EBITDA) were $3,320 million for the fourth quarter of 2018 and $12,849 million for the full year, compared to $2,963 million in the fourth quarter of 2017 and $10,317 million for the full year 2017
  • Cash Provided by Operating Activities was $2,503 million for the fourth quarter of 2018 and $10,502 million for the full year 2018, compared to $1,341 million for the fourth quarter of 2017 and $6,658 million for the full year 2017
  • Distributable Cash Flow (DCF) was $1,863 million for the fourth quarter and $7,618 million for the full year 2018, compared to $1,741 million for the fourth quarter of 2017 and $5,614 million for the full year 2017
  • Reaffirmed financial guidance for 2019 and 2020, with the midpoint of the DCF per share guidance range of $4.45per share and $5.00 per share respectively
  • Increased the dividend by 10% for 2019 and reaffirmed expected dividend growth of 10% in 2020; guided to a longer term 5-7% DCF per share CAGR post-2020
  • Brought $7 billion of new projects into service in 2018, including the US$1.5 billion NEXUS/TEAL gas pipeline projects in October and the US$1.6 billion Valley Crossing gas pipeline project in November
  • Reached significant milestones on the Line 3 Replacement Project, including: Regulatory approval by the Minnesota Public Utilities Commission (MPUC); initiated Federal and Minnesota state permitting process, and made significant progress on construction in Canada
  • Announced $1.8 billion of secured growth projects in the fourth quarter across both the natural gas transmission and liquids pipelines businesses
  • Announced an additional $0.3 billion of secured growth capital projects consisting of a regulated electricity transmission line in Ontario and a long-term contracted pipeline adjacent to the Nexus Pipeline
  • Amalgamated the Company's Ontario based natural gas utilities effective January 1, 2019, following approval of an incentive based regulatory framework by the Ontario Energy Board
  • Simplified the Company's corporate structure with the buy-in of the public interest of Enbridge's four sponsored vehicles
  • Implemented changes to the Company's debt funding structure through a series of actions to reduce structural subordination, enhancing the credit profile of the parent corporation and reducing the cost of debt capital
  • Announced $7.8 billion of non-core asset sales, $5.7 billion of which have closed; proceeds used to accelerate planned deleveraging and strengthen balance sheet
  • Suspended the Dividend Reinvestment Program (DRIP) effective with the December 1, 2018 dividend payment, moving Enbridge to a fully self-funded growth model
  • On January 25, 2019, Moody's upgraded Enbridge Inc.'s senior unsecured debt rating from Baa3 to Baa2 with a positive outlook

GAAP earnings attributable to common shareholders increased by $882 million or $0.47 per share for the fourth quarter of 2018 and decreased by $14 million or $0.20 per share for the year ended 2018 compared to the same periods in 2017. In addition to the factors discussed in Adjusted Earnings below, the year-over-year and fourth quarter-over-quarter comparability of GAAP earnings attributable to common shareholders were impacted by a number of unusual, non-recurring or non-operating factors, which are noted in the reconciliation schedules included in Appendix A of this news release.

Adjusted earnings in the fourth quarter of 2018 increased by $153 million or $0.04 per share compared to the same period in 2017. The increase was primarily driven by strong operating results and operating cost efficiencies across many of the Company's business units, new projects coming into service in the Liquids Pipelines, Gas Transmission and Midstream, Green Power and Transmission and Gas Distribution segments since the fourth quarter of 2017 and synergy realization from the Spectra Energy acquisition.

Adjusted earnings for the year ended 2018 increased by $1,586 million or $0.69 per share compared to the same period in 2017. The increase is in large part due to the timing of the merger with Spectra Energy Corp (the Merger Transaction) which closed on February 27, 2017.

DCF for the fourth quarter of 2018 was $1,863 million and for the year ended 2018 was $7,618 million, increases of $122 million and $2,004 million respectively over the comparable prior periods in 2017, driven largely by the same factors noted above.

Detailed segmented financial information and analysis can be found below under Adjusted EBITDA by Segments.


In 2018, the Company completed $7 billion of growth projects, substantially on time and on budget. These were comprised of almost a dozen projects across all business units, including expansions to the existing Canadian and US gas transmission systems, the Company's first European offshore wind project and ongoing capital investment to support customer growth within the utility franchises. Most recently in the fourth quarter, the US$1.3 billion (Enbridge's share) NEXUS and the associated US$0.2 billion TEAL natural gas pipeline projects were brought into service, providing much needed export capacity out of the Marcellus and Utica basins into the upper Midwest and Eastern Canadian markets. In addition, the US$1.6 billion Valley Crossing natural gas pipeline project entered service on October 31. All of these pipeline projects are underpinned by long-term take-or-pay transportation contracts.

Enbridge continues to make good progress executing the remainder of its secured growth capital program. The Company has a $16 billion inventory of secured projects at various stages of execution which are scheduled to come into service between 2019 and 2023. The individual projects that make up the secured program are all supported by long-term take-or-pay contracts, cost-of-service frameworks or similar low-risk commercial arrangements and are diversified across a wide range of business platforms and regulatory jurisdictions, the largest being the Line 3 Replacement Project as discussed below.


The $9 billion Line 3 Replacement Project is a critical integrity replacement project that will enhance the safety and reliability of the Enbridge Liquids Mainline System and provide incremental export capacity to Western Canadian producers and increased security of supply for key refining markets along the Mainline system as well as to markets further downstream.

Several important milestones were achieved in 2018. In Canada, the entire 1,100 kilometers of pipeline has now been laid and remaining construction activities on pump stations and terminal tie-ins are on schedule for completion by mid-2019. In the U.S., the pipeline replacement work in Wisconsin was completed and has been placed into service.

In Minnesota, the MPUC approved the Certificate of Need and Route Permit and denied petitions to reconsider the decisions. All related Certificate conditions have been finalized and are being addressed. In addition, agreement was reached with the Fond du Lac Band of Lake Superior Chippewa granting a new 20 year easement for the entire Mainline including the Line 3 Replacement Project through their Reservation. The remaining permit applications have been submitted to the various federal and state agencies, including the U.S. Army Corps of Engineers, the Minnesota Department of Natural Resources, the Minnesota Pollution Control Agency and other local government agencies in Minnesota. The Company anticipates that the agencies will process all of these applications in the coming months, and with timely approvals continues to expect an in-service date for the project before the end of 2019.


On October 15, 2018, the Company announced that it was moving forward with the amalgamation of Enbridge Gas Distribution Inc. and Union Gas Limited, its two natural gas utility franchises in Ontario. The amalgamation, under the terms of a new Ontario Energy Board approved incentive rate regulation framework, took effect January 1, 2019. This will enable significant efficiencies in operations benefiting both ratepayers and shareholders while maintaining a focus on the safe and reliable distribution of energy.

On December 11, 2018, the Company announced $1.8 billion of new accretive growth capital investments:

  • Gray Oak Pipeline - Enbridge will invest US$600 million for a 22.75% interest in the Gray Oak Liquids Pipeline, which will deliver light crude oil from the Permian Basin to Corpus Christi and other markets. Gray Oak, currently under construction, is expected to begin service in late 2019, contribute to the post-2020 growth outlook and is an important component of Enbridge's broader emerging U.S. Gulf Coast liquids infrastructure strategy.
  • Cheecham Terminal & Pipeline - Enbridge has acquired existing liquids pipeline and terminal assets connected with Athabasca Oil Corporation's Leismer SAGD oil sands assets for $265 million. The assets are synergistic as they are connected with Enbridge's existing terminal and pipeline assets in the region.
  • Gas Transmission Expansions - Enbridge will invest approximately $800 million on four Gas Transmission expansion projects coming into service in the 2020-23 timeframe. The Vito Offshore Pipeline will provide service to Shell's offshore Gulf Coast operations. The Cameron Lateral expansion project will connect Texas Eastern with Gulf Coast LNG export facilities. In addition, the Gulfstream and Sabal Trail Pipelines into Florida will both undergo additional expansion (Phase VI and Phases 2 & 3 respectively). All of these expansion projects are underpinned by long-term take-or-pay commercial arrangements.

In January 2019, the Company secured an additional $0.3 billion of attractive and low-risk pipeline and utility growth capital projects:

  • East-West Tie Transmission Project (EWT) - Enbridge has partnered with an industry leading transmission developer to construct a transmission line that will add capacity between Wawa and Thunder Bay to support electricity supply to Northeast Ontario. The EWT project recently received the exclusive right from the Province of Ontario to proceed to construct and also received the leave to construct approval from the Ontario Energy Board in February 2019. Enbridge currently has a 25% equity interest in EWT and plans to invest approximately $0.2 billionfor its share of the project. The project is supported by a cost of service framework and is expected to be in service in late 2021.
  • Generation Pipeline - Enbridge, through its investment in Nexus, announced an attractive investment to acquire Generation Pipeline, a 355 million cubic feet a day pipeline that will interconnect with Nexus. Enbridge's share of the acquisition is approximately US$0.1 billion and the pipeline is fully contracted with long term arrangements. This acquisition offers additional opportunity to expand the Company's footprint to supply natural gas to power generation and industrial customers in Northern Ohio.


In the fourth quarter, the Company acquired, in separate combination transactions, all of the outstanding equity securities of Enbridge Income Fund Holdings Inc. (ENF), Enbridge Energy Partners, L.P. (EEP), Enbridge Energy Management, L.L.C (EEQ), and Spectra Energy Partners, LP (SEP) not beneficially owned by Enbridge. The buy-ins are strategically and economically attractive Enbridge shareholders and provide substantial benefits, including:

  • Increased ownership in its core businesses and further enhancement of its industry-leading, low-risk profile
  • Significant advancement of Enbridge's strategy to simplify and streamline its corporate structure which further increases the transparency of its strong cash generating assets
  • Higher retention of cash generated from the assets, which will support continued strong dividend coverage and self-funded growth
  • An improved Enbridge credit profile due to the elimination of sponsored vehicle public distributions as well as the reduction of the structural subordination of Enbridge's parent company debt
  • Significant benefits to Enbridge's post 2020 outlook primarily due to tax optimization synergies


The Company reached agreements to sell over $7.8 billion of non-core assets in 2018, well in excess of the $3 billiontargeted in the financing plan. The Company has now received proceeds from asset sales of approximately $5.7 billion, with the balance expected by mid-2019. These proceeds will provide the Company with significant additional financial flexibility to further strengthen the balance sheet and fund the secured growth program. As of the end of the year, the Company's consolidated Debt to EBITDA ratio was 4.7x on a trailing twelve month basis. This is in line with its updated long term target credit metric range of 4.5x to comfortably below 5.0x Debt to EBITDA.

On January 25, 2019, Moody's Investors Service announced that it had upgraded Enbridge Inc.'s senior unsecured debt rating to Baa2 with a positive outlook. Each of Standard & Poors, Fitch and DBRS have recently reaffirmed Enbridge Inc.'s senior unsecured debt rating at BBB+, BBB+ and BBB High, respectively.

Given the progress on leverage reduction, the Company announced in the fourth quarter that it would suspend its DRIP effective with the dividend payment on December 1, 2018, which was earlier than originally contemplated. With this action, the Company has now moved to a fully self-funded financing model and will no longer require external equity to support its growth program going forward.

The sponsored vehicle buy-ins have also provided an opportunity to simplify the Company's debt financing structure and strategy. A number of actions have been taken:

  • Completion of a debt exchange on December 21, 2018 whereby $1.6 billion of term debt securities issued by Enbridge Income Fund (the Fund) were exchanged for notes of Enbridge Inc. with identical coupons and terms to maturity; the Company intends to discontinue external debt financing by the Fund
  • The amendment of certain covenants in the EEP and SEP trust indentures and entry into a subsidiary guarantee agreement on January 22, 2019 to implement a "cross guarantee" arrangement whereby remaining outstanding senior term debt obligations of EEP and SEP are guaranteed by Enbridge Inc. and each of SEP and EEP correspondingly guarantee Enbridge Inc.'s senior term debt obligations; the Company intends to discontinue external debt financing by both EEP and SEP
  • The redemption of US$400 million of EEP junior subordinated notes which is expected to be completed by the end of February 2019

The Company believes that these changes to its debt funding structure and financing strategy has substantially reduced structural subordination, will further enhance the credit profile of the consolidated Enbridge group and reduce its cost of capital over the longer term.


At its December 2018 investor conference, Enbridge highlighted that its key strategic priorities for 2019 and beyond remain largely unchanged:

  • Focusing on the safety, operational reliability and environmental performance of the systems and ensuring cost effective and efficient transportation for our customers;
  • Ensuring strong execution of the secured capital program that will drive DCF per share growth through 2020;
  • Concentrating on growth of core businesses through extensions and expansions of the liquids pipeline, natural gas transmission and gas utility franchises to extend growth beyond 2020;
  • Maintaining a strong financial position and flexibility as secured growth projects are brought on line;
  • Continuing to exercise rigorous capital allocation to maximize shareholder value

The Company further re-iterated its guidance for the mid-point of the projected range of 2019 and 2020 DCF per share of $4.45 per share and $5.00 per share, respectively. With this robust outlook, Enbridge has announced a 10% dividend increase for 2019 and anticipates another 10% increase for 2020. The 2019 quarterly dividend of $0.738 per share will be payable on March 1, 2019, to shareholders of record on February 15, 2019.

Beyond 2020, Enbridge is targeting to achieve annual DCF per share growth in the range of 5%-7%, driven by an attractive suite of organic growth prospects within its three core businesses that can be self-funded using available cash generated by these businesses and managing leverage within targets designed to maintain strong investment grade credit ratings.

Company info

200, Fifth Avenue Place
425 - 1st Street S.W.
Calgary, AB
CA, T2P 3L8


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