CALGARY, ALBERTA — (Marketwire) — 02/15/13 — HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars unless otherwise noted)
Enbridge Inc. (TSX: ENB) (NYSE: ENB) – “Enbridge finished 2012 with a solid fourth quarter and full year results that again achieved our guidance for the year,” said Al Monaco, President and Chief Executive Officer. “For the three months ended December 31, 2012 adjusted earnings totaled $327 million, or $0.42 per common share. This brings our full year 2012 adjusted earnings to $1,249 million, or $1.62 per common share, an 11% year-over-year increase. This increase is particularly noteworthy in light of the significant prefunding which we completed in the year for future growth projects.”
Operations
Enbridge–s strong performance in 2012 reflects a stable and diversified mix of operating businesses. Liquids Pipelines delivered record earnings, largely on the strength of a full year operating under the mainline Competitive Tolling Settlement (CTS), with both increased volumes and tolls. Liquids Pipelines also benefited from higher volumes on the Spearhead Pipeline and from the Seaway Crude Pipeline System (Seaway Pipeline) initial reversal phase which commenced mid-year. The Gas Distribution business delivered its usual steady contribution under the final year of Enbridge Gas Distribution–s (EGD) five year incentive tolling regime, with incentive earnings more than offsetting the new regulations affecting Enbridge Gas New Brunswick (EGNB).
Within Gas Pipelines, Processing and Energy Services, the United States portion of Alliance Pipeline and Vector Pipeline delivered steady results consistent with their regulatory and contractual business model. Enbridge Offshore Pipelines (Offshore) stabilized at a small loss. The Aux Sable natural gas processing plant benefited from favourable natural gas liquids (NGL) prices locked in during the prior year, while Energy Services had a good year as a result of the arbitrage opportunities provided by wide location and crude grade differentials, though not to the same extent as the prior year. Within Sponsored Investments, the contribution from Enbridge Income Fund (the Fund) increased significantly as a result of the drop down of $1.2 billion of renewable assets in late 2011, more than offsetting a decrease from Enbridge Energy Partners, L.P. (EEP). The performance of EEP–s liquids pipelines assets benefited from higher volumes and tolls but its gathering and processing assets experienced lower natural gas and NGL prices.
2012 earnings reflected changes in unrealized mark-to-market accounting impacts related to the comprehensive long-term economic hedging program Enbridge has in place to mitigate exposures to interest rate variability and foreign exchange, as well as commodity prices. The Company believes that the hedging program supports the generation of reliable cash flows and dividend growth.
Enbridge–s strong and stable growth enabled the Company to announce a 12% increase in its common share dividend in December 2012.
Mr. Monaco commented, “The safety, reliability and environmental sustainability of our operations are our top priority. Our Operational Risk Management Plan is designed to position Enbridge as the industry leader on a number of important fronts. To that end, we continue to implement enhancements in key operational areas such as pipeline integrity, control centre operation, leak detection capability, environmental protection and response. Since 2011, we have conducted what we believe has been the most extensive integrity management program in the history of the North American pipeline industry. We also attach the greatest importance to the health and safety of our employees. During 2012, we had no serious injuries and in every business unit our safety record compares favourably to the industry.”
Mr. Monaco cited Enbridge–s Neutral Footprint plan as another example of how the Company is delivering on its commitment to its stakeholders. “Our Neutral Footprint plan is designed to counteract the Company–s environmental impact where it is felt most: on the trees we remove to build our facilities, the natural habitat we disturb, and the impacts associated with the electricity we buy to power our operations. At year-end 2012, Enbridge has planted close to 100% of the trees it has removed, conserved many times over the number of acres we have disturbed and has the capacity to generate renewable energy well in excess of our forecasted growth in power consumption from operations. We report our progress quarterly on our website.
“Our commitment to sustainability resulted in Enbridge being recognized in January 2013 as one of the Global 100 Most Sustainable Corporations in the World for the fifth year in a row,” said Mr. Monaco. “We are honoured to be one of ten Canadian companies acknowledged to be leaders in their ability to deal with key social and environmental factors while delivering the best returns for their shareholders.”
New Capital Initiatives
Earlier today, Enbridge announced an agreement with Energy Transfer Partners, L.P. (Energy Transfer) for joint development of the first pipeline transportation option for transportation of crude oil to the eastern Gulf Coast from the United States midwest. The project will involve the conversion of one of three pipelines of the existing Trunkline system, currently 100% owned by Energy Transfer, from natural gas transmission service to crude oil service, and is subject to approval by the Federal Energy Regulatory Commission (FERC) of the removal of the one line from gas service.
“The Gulf Coast is one of the largest refinery centres in the world, and the eastern Gulf market makes up more than a third of that capacity at over three million barrels per day,” said Mr. Monaco. “It is both a heavy and a light crude oil market where barrels receive premium pricing. Up until now, this market has not been directly accessible to western Canadian and Bakken crude producers. As the project takes advantage of existing pipe in the ground, we can get it flowing to market sooner, and at a lower cost, than a new build.”
In Liquids Pipelines, growth initiatives will continue to be driven by producers– needs for greater capacity and access to new markets and refiners– needs for secure, reliable and cost-competitive supply. Over the fourth quarter of 2012 and into January 2013, Enbridge announced investments in more than $9 billion of new commercially secured expansion projects as well as progress in advancing previously announced projects across the Company–s three broad market access initiatives: Eastern Access, Gulf Coast Access and Light Oil Market Access.
“Anticipating the infrastructure needs of energy producers and consumers – and developing strategies to meet those needs – is central to our business,” said Mr. Monaco. “Western Canadian and United States north western crude oil production is facing significant market access constraints. As a result, price discounting of this oil production relative to global pricing continues to be a major industry concern. Enbridge–s market access strategies are responses to rapidly changing North American supply and demand fundamentals and will create significant value for our customers by helping to close these differentials and enhancing refinery access to supply.”
Mr. Monaco noted that the design, construction and operation of its expansion projects will be guided by Enbridge–s commitment to industry leadership in safe, reliable and environmentally sustainable operational performance. “We–re committed to ensuring we build and operate our facilities safely, reliably and with respect for local communities and the environment. Importantly, our market access strategies utilize existing energy corridors and pipelines to the greatest extent possible so we will minimize disruption to the environment and lessen the industry–s footprint.”
Also announced in the fourth quarter was the Heidelberg Lateral Pipeline (Heidelberg), a crude oil pipeline in the Gulf of Mexico to connect the proposed Heidelberg development, operated by Anadarko Petroleum Corporation (Anadarko), to an existing third-party pipeline system. Enbridge will build, own and operate the pipeline which is expected to be operational by 2016 at an approximate cost of US$0.1 billion. Construction of the pipeline is subject to finalization of definitive agreements and sanction of the development by Anadarko and its project co-owners.
In gas transportation, Enbridge continued to execute its Canadian midstream strategy through a midstream services relationship with Encana Corporation (Encana) to develop gas gathering and compression facilities in the Peace River Arch (PRA) region in northwestern Alberta. Enbridge has agreed to acquire from Encana certain sour gas gathering and compression facilities in the PRA region currently in service and under construction on terms consistent with the Company–s investment in the Cabin Gas Plant (Cabin). Enbridge is also working exclusively with Encana on facility scoping for further development of additional major midstream facilities in this region. This announcement followed the deferral of both the commissioning of Phase 1 and the construction of Phase 2 of Cabin in October 2012.
“This new opportunity establishes a broader footprint for Enbridge in the liquids rich and prolific Montney play complementing our existing interest in the Alliance Pipeline and Aux Sable NGL plant,” said Mr. Monaco. “We are pleased to be extending our midstream interests and look forward to working with producers and all stakeholders in this region.”
In green energy, Enbridge added to its renewable energy asset base with the securement of a 50% interest in the development of the 150-MW Massif du Sud Wind Project (Massif du Sud) in Quebec. The project went into service in January 2013.
“Enbridge continues to look for opportunities to expand our portfolio of renewable infrastructure in Canada and the United States,” said Mr. Monaco. “Enbridge today is Canada–s largest player in generating solar power and second largest in wind power. We see renewable energy playing an important role in our longer-term strategy of developing a more diversified asset base as we move towards a future energy economy with lower reliance on hydrocarbons.”
In December, Enbridge completed the transfer of a group of crude oil storage, wind and solar power assets at a price of $1.2 billion to the Fund. The Company also issued $400 million in preference shares.
“The drop down of assets to the Fund provided $0.8 billion of net funding for our large growth capital investment program, including further front end bolstering of our equity base,” said Mr. Monaco. “This funding complements the conventional capital markets funding that, for the year as a whole, totals approximately $6 billion and helps ensure ample liquidity to execute on our capital program.”
Looking ahead, Mr. Monaco concluded, “Our positive results in 2012 reflect both our focus on operations and the disciplined execution of our growth strategy. Based on the number of opportunities we were able to secure over the course of the year, and the opportunities ahead of us, we have confidence that we will be able to maintain our industry leading growth through 2016 and well into the latter half of the decade,” concluded Mr. Monaco.
FOURTH QUARTER 2012 OVERVIEW
For more information on Enbridge–s growth projects, please see the Management–s Discussion and Analysis (MD&A) which is filed on SEDAR and EDGAR and also available on the Company–s website at .
Earnings attributable to common shareholders were $610 million, or $0.79 per common share, for the year ended December 31, 2012 compared with $820 million, or $1.09 per common share, for the year ended December 31, 2011. In total, the Company has delivered significant earnings growth from operations over the course of the last year, as discussed below in Adjusted Earnings; however, the positive impact of this growth was reduced by a number of unusual, non-recurring or non-operating factors, the most significant of which are changes in unrealized derivative fair value and foreign exchange gains or losses. The Company has a comprehensive long-term economic hedging program to mitigate exposures to interest rate, foreign exchange and commodity price exposures. The unrealized mark-to-market accounting impacts from this program create volatility in short-term earnings but the Company believes over the long-term it supports reliable cash flows and dividend growth.
Earnings for 2012 and 2011 were also negatively impacted by the impact of asset transfers between entities under common control of Enbridge. Intercompany gains realized as a result of these asset transfers for both years have been eliminated for accounting purposes; however, income taxes of $56 million and $98 million for the years ended December 31, 2012 and 2011, respectively, incurred on the related capital gains remain as charges to consolidated earnings.
Another significant item impacting the comparability of earnings year-over-year were costs and lost revenues, net of the related insurance recoveries, associated with the Lines 6A, 6B and Line 14 crude oil releases. Earnings for the years ended December 31, 2012 and 2011 included the Company–s after-tax share of EEP–s costs and lost revenues, before insurance recoveries and excluding fines and penalties, of $9 million and $33 million, respectively, related to these incidents. Insurance recoveries recorded for the years ended December 31, 2012 and 2011 were $24 million and $50 million after-tax net to Enbridge, respectively, related to the Line 6B crude oil release.
Earnings attributable to common shareholders for the three months ended December 31, 2012 were $146 million compared with $159 million for the three months ended December 31, 2011. Fourth quarter earnings drivers are largely consistent with year-to-date trends and continued to include changes in unrealized fair value derivative gains and losses. Aside from operating factors discussed in Adjusted Earnings, factors unique to the fourth quarter of 2012 included a $105 million after-tax asset impairment relating to Stingray and Garden Banks assets within Offshore, $56 million of income taxes on the intercompany gain on sale to the Fund not eliminated for accounting purposes and the favourable impact of a $63 million gain arising on recognition of a regulatory asset related to other postretirement benefits (OPEB) within EGD.
Earnings for the comparable fourth quarter of 2011 reflected the discontinuance of rate-regulated accounting at EGNB, which resulted in a write-off of certain regulatory balances totaling $262 million, after tax.
NON-GAAP MEASURES
This news release contains references to adjusted earnings/(loss), which represent earnings or loss attributable to common shareholders adjusted for unusual, non-recurring or non-operating factors on both a consolidated and segmented basis. These factors, referred to as adjusting items, are reconciled and discussed in the financial results sections for the affected business segments. Management believes 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 accounting principles generally accepted in the United States of America (U.S. 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 for a reconciliation of the GAAP and non-GAAP measures.
Adjusted earnings for the year ended December 31, 2012 were $1,249 million, or $1.62 per common share, compared with $1,100 million, or $1.46 per common share, for the year ended December 31, 2011, an increase of 11% in adjusted earnings per common share. The increase in adjusted earnings over the prior year was predominantly attributable to strong operating performance from the Company–s Liquids Pipelines assets, as well as contributions from new assets placed into service. An increase in volumes most notably impacted adjusted earnings from mid-2011 onward when the CTS on the Canadian Mainline took effect. In 2012, the Company also began realizing earnings from its 50% interest in the Seaway Pipeline, which commenced southbound service from the United States midwest to the Gulf Coast in May 2012. The start-up of Seaway Pipeline also had a positive earnings impact on Spearhead Pipeline in 2012 as it also benefited from producers– desire to move crude onward to Gulf Coast markets in order to capture attractive price differentials. In addition to the Seaway Pipeline, other new assets commencing operations and contributing to adjusted earnings growth included the Cedar Point Wind Energy Project (Cedar Point) in late 2011 and the Silver State North Solar Project (Silver State) in 2012. Areas of the Company–s operations which realized year-over-year declines in adjusted earnings included EEP due to declines in natural gas and NGL prices, as well as higher operating and administrative costs, specifically pipeline integrity costs, personnel costs and higher property taxes, and Energy Services where changing market conditions gave rise to fewer margin opportunities in crude oil and NGL marketing. Increased preference share dividends for the year ended December 31, 2012 also negatively impacted earnings due to the Company–s increased activity in the capital markets to prefund future growth projects.
Adjusted earnings were $327 million, or $0.42 per common share, for the three months ended December 31, 2012 compared with $273 million, or $0.36 per common share, for the three months ended December 31, 2011. The primary drivers of adjusted earnings growth period-over-period included strong volumes on the Company–s liquids pipelines assets both in Canada and the United States, including contributions from new assets such as the Seaway Pipeline, growth in the Company–s renewable energy portfolio and customer expansion at EGD. Partially offsetting these increases were lower adjusted earnings from Energy Services, where margin opportunities in liquids marketing remained tempered relative to the prior period and increased costs within Offshore.
Liquids Pipelines earnings were impacted by the following adjusting items:
Gas Distribution earnings were impacted by the following adjusting items:
Gas Pipelines, Processing and Energy Services earnings were impacted by the following adjusting items:
Sponsored Investments earnings were impacted by the following adjusting items:
Corporate costs were impacted by the following adjusting items:
NON-GAAP RECONCILIATIONS
CONFERENCE CALL
Enbridge will hold a conference call on Friday, February 15, 2013 at 9 a.m. Eastern Time (7 a.m. Mountain Time) to discuss the 2012 annual results. Analysts, members of the media and other interested parties can access the call toll-free at 1-888-771-4371 from within North America and outside North America at 1-847-585-4405 using the access code 34177918. The call will be audio webcast live at . A webcast replay and podcast will be available approximately two hours after the conclusion of the event and a transcript will be posted to the website within 24 hours. The replay will be available at toll-free 1-888-843-7419 within North America and outside North America at 1-630-652-3042 (access code 34177918) until February 22, 2013.
The conference call will begin with a presentation by the Company–s Chief Executive Officer and Chief Financial Officer followed by a question and answer period for investment analysts. A question and answer period for members of the media will immediately follow.
Enbridge Inc. is a North American leader in delivering energy and has been included on the Global 100 Most Sustainable Corporations in the World ranking for the past five years. As a transporter of energy, Enbridge operates, in Canada and the U.S., the world–s longest crude oil and liquids transportation system. The Company also has a significant and growing involvement in natural gas gathering, transmission and midstream businesses, and an increasing involvement in power transmission. As a distributor of energy, Enbridge owns and operates Canada–s largest natural gas distribution company, and provides distribution services in Ontario, Quebec, New Brunswick and New York State. As a generator of energy, Enbridge has interests in close to 1,300 megawatts of renewable and alternative energy generating capacity and is expanding its interests in wind, solar and geothermal. Enbridge employs more than 10,000 people, primarily in Canada and the U.S., and is ranked as one of Canada–s Greenest Employers and one of Canada–s Top 100 Employers for 2013. Enbridge is included on the 2012/2013 Dow Jones Sustainability World Index and the Dow Jones Sustainability North America Index and is also a constituent of the 2012/2013 FTS4Good Index Series. Enbridge–s common shares trade on the Toronto and New York stock exchanges under the symbol ENB. For more information, visit .
Forward-Looking Information
Forward-looking information, or forward-looking statements, have been included in this news release to provide the Company–s shareholders and potential investors with information about the Company and its subsidiaries and affiliates, including management–s assessment of Enbridge–s and its subsidiaries– future plans and operations. This information may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as “anticipate”, “expect”, “project”, “estimate”, “forecast”, “plan”, “intend”, “target”, “believe” and similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information or statements included or incorporated by reference in this document include, but are not limited to, statements with respect to: expected earnings/(loss) or adjusted earnings/(loss); expected earnings/(loss) or adjusted earnings/(loss) per share; expected future cash flows; expected costs related to projects under construction; expected in-service dates for projects under construction; expected capital expenditures; estimated future dividends; and expected costs related to leak remediation and potential insurance recoveries.
Although Enbridge believes these forward-looking statements are reasonable based on the information available on the date such statements are made and processes used to prepare the information, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Material assumptions include assumptions about: the expected supply and demand for crude oil, natural gas, NGL and green energy; prices of crude oil, natural gas, NGL and green energy; expected exchange rates; inflation; interest rates; the availability and price of labour and pipeline construction materials; operational reliability; customer and regulatory approvals; maintenance of support and regulatory approvals for the Company–s projects; anticipated in-service dates; and weather. Assumptions regarding the expected supply and demand of crude oil, natural gas, NGL and green energy, and the prices of these commodities, are material to and underlie all forward-looking statements. These factors are relevant to all forward-looking statements as they may impact current and future levels of demand for the Company–s services. Similarly, exchange rates, inflation and interest rates impact the economies and business environments in which the Company operates, may impact levels of demand for the Company–s services and cost of inputs, and are therefore inherent in all forward-looking statements. Due to the interdependencies and correlation of these macroeconomic factors, the impact of any one assumption on a forward-looking statement cannot be determined with certainty, particularly with respect to expected earnings/(loss) or adjusted earnings/(loss) and associated per share amounts, or estimated future dividends. The most relevant assumptions associated with forward-looking statements on projects under construction, including estimated in-service date and expected capital expenditures include: the availability and price of labour and construction materials; the effects of inflation and foreign exchange rates on labour and material costs; the effects of interest rates on borrowing costs; and the impact of weather and customer and regulatory approvals on construction schedules.
Enbridge–s forward-looking statements are subject to risks and uncertainties pertaining to operating performance, regulatory parameters, project approval and support, weather, economic and competitive conditions, exchange rates, interest rates, commodity prices and supply and demand for commodities, including but not limited to those risks and uncertainties discussed in this news release and in the Company–s other filings with Canadian and United States securities regulators. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent and Enbridge–s future course of action depends on management–s assessment of all information available at the relevant time. Except to the extent required by law, Enbridge assumes no obligation to publicly update or revise any forward-looking statements made in this news release or otherwise, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to Enbridge or persons acting on the Company–s behalf, are expressly qualified in their entirety by these cautionary statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SEGMENTED INFORMATION
(1) Includes allowance for equity funds used during construction.
Contacts:
Enbridge Inc. – Media
Jennifer Varey
(403) 508-6563 or Toll Free: 1-888-992-0887
Enbridge Inc. – Investment Community
Jody Balko
(403) 231-5720