Enbridge Reports 2013 Results

February 14, 2014

CALGARY, ALBERTA--(Marketwired - Feb 14, 2014) - Enbridge Inc. (Enbridge or the Company) ( ENB.TO )( ENB ) -

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

  • Fourth quarter loss was $267 million; earnings for the full year were $446 million, including the impact of net unrealized non-cash mark-to-market gains and losses
  • Fourth quarter adjusted earnings were $0.44 per common share, or $362 million
  • Full year adjusted earnings were $1.78 per common share, an 11% increase over 2012
  • Enbridge Inc. executed on its growth capital plan, placing 17 projects totalling $5 billion into service
  • Enbridge Inc. to proceed with $3.2 billion in regional oil sands projects including the $1.6 billion extension of the Wood Buffalo Pipeline, the $1.4 billion Norlite Pipeline System, a new industry diluent pipeline, and the $0.2 billion Sunday Creek Terminal Expansion
  • Enbridge Inc. secured the development of the 110-megawatt Keechi Wind Project in Texas for an approximate investment of US$0.2 billion
  • Midcoast Energy Partners, L.P., an Enbridge Energy Partners, L.P. subsidiary, completed its initial public offering for proceeds of US$355 million
  • Marathon Petroleum Corporation named anchor shipper and partner in the US$2.6 billion Sandpiper Project, and will fund 37.5% of the project
  • Quarterly dividend will increase by 11% to $0.350 per common share effective March 1, 2014
  • The Joint Review Panel recommended that the Government of Canada approve the Northern Gateway project, subject to 209 conditions
  • Enbridge Inc. continued to execute on its long-term financing plan during 2013, raising approximately $5 billion through a combination of debt and equity and also increasing its enterprise-wide general purpose credit facilities to approximately $17.6 billion
  • Guidance for 2014 adjusted earnings is $1.84 to $2.04 per common share

"Enbridge once again delivered strong performance in 2013 and achieved our annual adjusted earnings guidance for the year," said Al Monaco, President and Chief Executive Officer. "Adjusted earnings for 2013 were $1.4 billion or $1.78 per common share, an 11% increase over last year. This earnings per share growth was achieved despite a very large amount of financing, including significant equity prefunding to support our longer term growth plan.

"In 2013, we made excellent progress on our three key corporate priorities: focusing on the safety and operational reliability of our systems; executing on our growth capital program; and, extending and diversifying that growth well into the future.

"On our number one priority, safety and operational reliability, we advanced our operational risk management program and have undertaken the most extensive maintenance, integrity and inspection program in the history of the North American pipeline industry.

"In terms of executing our capital program, we placed approximately $5 billion of infrastructure projects into service this year. Of the 17 projects we completed, nearly all were brought in on-time and on-budget. An equally important accomplishment was the prudent low-cost funding of our capital program thereby retaining our strong financial position.

"Third, the strategic positioning of our assets and strong market fundamentals continue to generate excellent short and long-term opportunities," said Mr. Monaco. "In 2013, we secured another $6 billion of attractive growth projects and expanded our growth capital inventory to $29 billion. These commercially secured projects will be placed into service over the next four years and drive our expected annual average adjusted earnings per share growth rate of 10 to 12% through 2017."

In conjunction with the Company's growth objectives, the Company has entered into a comprehensive long-term economic hedging program to mitigate exposures to interest rate variability and foreign exchange, as well as commodity prices. The comparability of the Company's earnings period-over-period will be impacted by the unrealized mark-to-market accounting impacts related to this long-term economic hedging program. However, the Company believes that the hedging program supports the generation of reliable cash flows and dividend growth.

Enbridge also released its expectation for 2014 growth, providing an adjusted earnings guidance range of $1.84 to $2.04 per share.

"Our success in 2013 reflected a business model which has brought past success and which will be the foundation for future growth," Mr. Monaco said. "We continue to focus on our operations and disciplined execution of our growth strategy."

Forward-Looking Information and Non-GAAP Measures

This news release contains forward-looking information and references to non-GAAP measures. Significant related assumptions and risk factors, and reconciliations are described under the Forward-Looking Information and Non-GAAP Measures sections of this news release, respectively.

Operations

Enbridge's strong 2013 performance reflected the strength of its existing businesses, but also the positive impact of new projects coming into service. The most significant contribution to year-over-year earnings growth came from the Liquids Pipelines segment. Canadian Mainline performance was driven by higher throughput, supported by strong supply from the oil sands region and downstream refinery demand for Canadian crude. New Liquids Pipelines assets placed into service in recent years included the Woodland and Wood Buffalo pipelines which, along with an expanded Seaway Crude Pipeline System (Seaway Pipeline), were significant contributors to adjusted earnings growth in 2013. New growth platforms continued to be an important component of Enbridge's strategy to diversify and sustain longer-term earnings growth. In 2013, Enbridge placed into service three wind farms, commenced operations of its first power transmission project and recorded its first full year of earnings from entry into the Canadian natural gas midstream infrastructure space.

Enbridge's sponsored vehicles, Enbridge Energy Partners, L.P. (EEP) and Enbridge Income Fund (the Fund), also contributed to year-over-year adjusted earnings growth. The Fund benefitted from an expanded asset base following the execution of drop down transactions in both 2011 and 2012, as well as completion of the Bakken Expansion Project, a project undertaken jointly with EEP. In addition to expanding its North Dakota regional infrastructure, EEP was also successful in completing several other organic growth projects, including the Texas Express NGL System joint venture and the Ajax Cryogenic Processing Plant.

Energy Services earnings increased in 2013 as changing market conditions gave rise to a greater number of and more profitable margin opportunities, while adjusted earnings from Aux Sable's processing operations declined in 2013 on lower fractionation margins and lower ethane volumes as depressed market prices resulted in ethane rejection during the year. Strong growth in adjusted earnings from Enbridge's underlying businesses was offset to a degree by higher preference share dividends as the Company was active in capital markets to fund its inventory of growth projects.

The 2013 earnings discussion above excludes the impact of unusual, non-recurring or non-operating factors, the most significant of which are changes in unrealized derivative fair value gains or losses from the Company's long-term hedging program, certain out-of-period adjustments recognized in 2013, as well as the costs and related insurance recoveries from crude oil releases.

Key Developments

Enbridge continued to advance and execute its $36 billion growth capital program, of which $29 billion is secured. Since the end of the third quarter of 2013, the Company announced investments in more than $3 billion of projects to improve service to the oil sands. This includes both the Norlite Pipeline System (Norlite) and the extension of the Wood Buffalo Pipeline (Wood Buffalo Extension), which further reinforce Enbridge's leading position in the oil sands region. The projects are part of $6 billion in planned regional infrastructure projects with in-service dates stretching from now until 2017.

Enbridge also advanced previously announced projects, including the Company's three major market access initiatives: Eastern Access, Gulf Coast Access and Light Oil Market Access. "Our market access initiatives are meeting producers' needs for greater capacity and access to new markets, along with helping to satisfy refiners' needs for secure, reliable and cost-competitive supply," Mr. Monaco said.

In November, Enbridge and EEP announced through their subsidiary, North Dakota Pipeline Company LLC, that Marathon Petroleum Corporation will be the anchor shipper on the Sandpiper Project (Sandpiper) and will be a funding partner in the project. Sandpiper has an expected in-service date in the first quarter of 2016 and an estimated cost of US$2.6 billion. The project is a key component of Enbridge's light oil market access initiative to match Bakken and western Canadian light oil production with refining markets in both eastern Canada and the United States.

In January 2014, Enbridge announced the securement of the 110-megawatt (MW) Keechi Wind Project (Keechi), located in Jack County, Texas. The project, which is supported by a long-term power purchase agreement, represents an investment of approximately US$0.2 billion. Keechi is expected to go into service in 2015 and brings Enbridge's interests in renewable generating capacity up to more than 1,800 MW.

"Keechi adds to our significant investments in renewable power generation," said Mr. Monaco. "We are the number one producer of solar energy in Canada and second largest producer of wind power. With operations in both Canada and the United States, our renewable energy investments play an important role in developing new platforms for growth."

Enbridge continued in the fourth quarter to bolster funding and liquidity support for the Company's growth plan. During the quarter, Enbridge raised $250 million through a preference share issuance and increased its entity-wide general purpose credit facilities by $1.6 billion, bringing the total facilities to $17.6 billion. In November 2013, Midcoast Energy Partners, L.P. (MEP), a subsidiary of EEP, also completed an initial public offering, raising US$355 million through the issuance of common units to the public.

"MEP serves as EEP's primary vehicle for owning and growing its natural gas and NGL midstream business in the United States," said Mr. Monaco. "It is expected to provide EEP with another source of funding, help to lower its cost of capital and serve to enhance the strategic focus of our United States gas gathering and processing operations."

In December, a federal Joint Review Panel (JRP) recommended that the Canadian federal government approve the proposed Northern Gateway Project (Northern Gateway), subject to 209 conditions. The government is expected to make a final decision on the project by June 2014.

"Regulatory approval is a very important element of the project, but it's just one step in the process," said Mr. Monaco. "We will be carefully reviewing the JRP's report and the conditions, and we will continue to work to meet those conditions and those set out by the Government of British Columbia for heavy oil pipeline development while we wait for the federal government's decision. We remain committed to the goal of providing market access by building a safer and better pipeline and ensuring the environment is protected."

In January 2014, Enbridge appointed C. Gregory (Greg) Harper as President, Gas Pipelines and Processing, effective January 30, 2014. Mr. Harper brings deep operational, commercial and development experience in the natural gas industry.

During the fourth quarter Enbridge released its 2013 Corporate Social Responsibility Report, in which the Company details its social, environmental and governance performance in 2012, as well as significant developments in the first half of 2013. Enbridge also released its first Operational Reliability Report, which provides a broad overview of the Company's efforts to ensure its operations are as safe as possible for the public, the environment and Enbridge employees and contractors.

"Safety and operational reliability is Enbridge's top priority," Mr. Monaco said. "In 2013 alone, we invested significant capital to further enhance the safety of our system. We constantly strive to be an industry leader in this area and continue to see this as the necessary foundation for how we do business."

The Company's commitment to sustainability performance was acknowledged when, for the sixth year in a row, Enbridge was named by Corporate Knights as one of the Global 100 Most Sustainable Corporations.

"Being named to the Global 100 list confirms we are on the right path in building a responsible, sustainable organization and confirms the value that a balanced approach brings to everyone, including our shareholders," Mr. Monaco said.

FOURTH QUARTER 2013 OVERVIEW

For more information on Enbridge's growth projects and operating results, 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 www.enbridge.com/InvestorRelations.aspx . We further draw your attention to Note 4, Revision of Prior Period Financial Statements, to the Consolidated Financial Statements as at and for the year ended December 31, 2013, which discusses a non-cash revision to comparative financial statements. The discussion and analysis included in this news release is based on revised financial results for the three months and year ended December 31, 2012.

  • On January 29, 2014, Enbridge announced it will construct additional facilities at its Sunday Creek Terminal, located in the Christina Lake area of northern Alberta, to support production growth from the Christina Lake oil sands operated by Cenovus Energy Inc. and jointly owned with ConocoPhillips Canada Resources Corp. The expansion includes development of a new site adjacent to the existing terminal, construction of a new 350,000 barrel tank with associated piping, pumps and measurement equipment, as well as civil work for a future tank. The existing Sunday Creek Terminal was put into service in August 2011. The estimated cost for the expansion is approximately $0.2 billion with a targeted in-service date of 2015.
  • On January, 6, 2014, Enbridge announced it had entered into an agreement with Renewable Energy Systems Americas Inc. (RES Americas) to own and operate the 110-MW Keechi project, located in Jack County, Texas, at an investment of approximately US$0.2 billion. RES Americas is constructing the wind project under a fixed price, engineering, procurement and construction agreement. Construction on the project commenced in December 2013, with expected completion in 2015. Upon attaining commercial operation, MetLife, Inc. will provide tax equity financing for the project. Keechi will deliver 100% of the electricity generated into the Electric Reliability Council of Texas, Inc. market under a 20-year power purchase agreement with Microsoft Corporation.
  • On December 19, 2013, the JRP recommended that the Government of Canada approve Northern Gateway, subject to 209 required conditions. The JRP stated: "After weighing all the oral and written evidence that Canada and Canadians would be better off with the Enbridge Northern Gateway Project than without it." The Government of Canada is expected to render its final decision on Northern Gateway by June 2014.
  • On October 30, 2013, Enbridge announced that it was selected by Suncor Energy Inc., Total E&P Canada Ltd. and Teck Resources Limited (the Fort Hills Partners), as well as the Suncor Energy Oil Sands Limited Partnership (Suncor Partnership), to develop a new pipeline to transport crude oil production to Enbridge's mainline hub at Hardisty, Alberta. The proposed Wood Buffalo Extension will extend Enbridge's existing Wood Buffalo Pipeline and include the construction of a new 450-kilometre (281-mile) 30-inch pipeline from Enbridge's Cheecham Terminal to its Battle River Terminal at Hardisty, as well as associated terminal upgrades. The completed project will provide capacity of 490,000 barrels per day (bpd) of diluted bitumen to be transported for the proposed Fort Hills Partners' oil sands project (Fort Hills Project) in northeastern Alberta and Suncor Partnership's oil sands production in the Athabasca region. Subject to regulatory approvals, the project is expected to be completed in 2017 at an estimated cost of approximately $1.6 billion.
  • On October 30, 2013, Enbridge announced it will develop Norlite, a new industry diluent pipeline to meet the needs of multiple producers in the Athabasca oil sands region. Under the currently envisioned scope, a 20-inch diameter pipeline with an approximate ultimate capacity of up to 280,000 bpd, depending on final scope and hydraulic design, will be anchored by throughput commitments from both the Fort Hills Partners for production from the proposed Fort Hills Project and from Suncor Partnership's proprietary oil sands production. Norlite will involve the construction of a new 489-kilometre (303-mile) pipeline from Enbridge's Stonefell Terminal to its Cheecham Terminal with an extension to Suncor Partnership's East Tank Farm, which is adjacent to Enbridge's existing Athabasca Terminal. If Enbridge is successful in securing additional long term commitments on the Norlite system, the scope of the project could be increased to a 24-inch diameter pipeline system as well as include a potential lateral pipeline to Enbridge's Norealis Terminal. Subject to regulatory and other approvals, Norlite is expected to be completed in 2017 at an estimated cost of approximately $1.4 billion. If upsized to a 24-inch diameter pipeline, it will provide capacity to transport up to 270,000 bpd of diluent from Edmonton into the Athabasca oil sands region, with the potential to be further expanded to approximately 400,000 bpd of capacity with the addition of pump stations. Norlite has the right to access certain existing capacity on Keyera Corp. (Keyera) pipelines between Edmonton and Stonefell and, in exchange, Keyera may elect to participate in the new pipeline infrastructure as a 30% non-operating owner.
  • In the fourth quarter, the Company completed the following financing transactions:
    • On December 12, 2013, Enbridge completed an offering of 10 million Cumulative Redeemable Preference Shares, Series 7 for gross proceeds of $250 million.
    • On November 22, 2013, Enbridge issued medium-term notes of $200 million with a 7-year maturity and $200 million with a 30-year maturity, through its subsidiary Enbridge Gas Distribution Inc. (EGD).
    • On November 13, 2013, MEP, an EEP subsidiary, completed an initial public offering of common units for proceeds of US$355 million.
    • On October 2, 2013, Enbridge issued medium-term notes of US$800 million with a 10-year maturity and US$350 million with a 3-year maturity.
    • In the fourth quarter of 2013, Enbridge increased its enterprise-wide general purpose credit facilities to $17.6 billion, including the securement of a US$850 million facility by MEP.
  • On December 12, 2013, Enbridge completed an offering of 10 million Cumulative Redeemable Preference Shares, Series 7 for gross proceeds of $250 million.
  • On November 22, 2013, Enbridge issued medium-term notes of $200 million with a 7-year maturity and $200 million with a 30-year maturity, through its subsidiary Enbridge Gas Distribution Inc. (EGD).
  • On November 13, 2013, MEP, an EEP subsidiary, completed an initial public offering of common units for proceeds of US$355 million.
  • On October 2, 2013, Enbridge issued medium-term notes of US$800 million with a 10-year maturity and US$350 million with a 3-year maturity.
  • In the fourth quarter of 2013, Enbridge increased its enterprise-wide general purpose credit facilities to $17.6 billion, including the securement of a US$850 million facility by MEP.
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CONSOLIDATED EARNINGS
Three months ended Year ended
December 31, December 31,
2013 2012 2013 2012
(millions of Canadian dollars, except per share amounts)
Earnings attributable to common shareholders
Liquids Pipelines 46 130 427 697
Gas Distribution 80 127 129 207
Gas Pipelines, Processing and Energy Services (325 ) 32 (68 ) (377 )
Sponsored Investments 79 72 268 283
Corporate (151 ) (136 ) (314 ) (129 )
Earnings/(loss) attributable to common shareholders from continuing operations (271 ) 225 442 681
Discontinued operations - Gas Pipelines, Processing and Energy Services 4 (79 ) 4