Enbridge (ENB) Q4 Results - Feb 9

[dan_s]

Enbridge Reports Record 2023 Financial Results, Reaffirms 2024 Financial Guidance and Advances Strategic Priorities

ENB with a market-cap over $72US billion, is now the largest company in our High Yield Income Portfolio. Current dividend yield is 7.9%

Highlights in Canadian Dollars

Full year GAAP earnings of $5.8 billion or $2.84 per common share, compared with GAAP earnings of $2.6 billion or $1.28 per common share in 2022

Adjusted earnings* of $5.7 billion or $2.79 per common share*, compared with $5.7 billion or $2.81 per common share in 2022

Adjusted earnings before interest, income taxes and depreciation and amortization (EBITDA)* of $16.5 billion, an increase of 6%, compared with $15.5 billion in 2022

Cash provided by operating activities of $14.2 billion, compared with $11.2 billion in 2022 < Beat my forecast of $12.4 billion.

Distributable cash flow (DCF)* of $11.3 billion, an increase of $0.3 billion, compared with $11.0 billion in 2022

Achieved financial guidance for the 18th consecutive year, demonstrating the stability and predictability of Enbridge's business

Reaffirmed 2024 full year financial guidance for EBITDA and DCF. The gas utilities acquisitions announced on September 5, 2023 (the "Acquisitions") are expected to close at different times during 2024 and are not included in the 2024 financial guidance

Increased the 2024 quarterly dividend by 3.1% to $0.915 ($3.66 annualized) per share reflecting the 29th consecutive annual increase < DCF of $5.48 per share allows room for more dividend increase in the future.

Announced the sale of the Company's 50% interest in Alliance Pipeline (Alliance) and its 42.7% interest in Aux Sable to Pembina Pipeline Corporation, at an attractive valuation, for $3.1 billion

Filed applications for all key required federal and state regulatory approvals to complete the pending Acquisitions and secured approximately 85% of the financing for the aggregate purchase price

Filed the industry approved Mainline Tolling Settlement (MTS) with the Canada Energy Regulator (CER) on December 15, 2023

Concluded the fully subscribed upsized Flanagan South Pipeline (FSP) binding open season for 110 kbpd of committed full-path Mainline to U.S. Gulf Coast delivery service

Announced and concluded an oversubscribed open season on Southern Lights Pipeline for 165 kbpd of committed service through 2030 on existing capacity

Announced definitive agreement to participate in the construction and operation of the first phase of the Fox Squirrel solar project, through a 50% interest in a joint venture with EDF Renewables

Exited 2023 in a strong financial position with Debt to EBITDA of 4.1x, below the target range of 4.5x to 5.0x reflecting substantial equity pre-funding prior to closing the Acquisitions

CEO COMMENT
"I'm pleased to report another year of strong safety, operational and financial performance across the enterprise. While geopolitical instability, persistent inflation and rising interest rates impacted the North American energy industry, Enbridge achieved its financial guidance for the 18th year in a row. Our stable, low-risk, diversified business remains well positioned to grow earnings and dividends for shareholders for years to come." said Greg Ebel, President and CEO of Enbridge.

"The Enbridge team worked hard to execute our strategic priorities. In 2023, we announced approximately $23 billion of attractive acquisitions, placed $2 billion of secured capital into service and sanctioned $10 billion of new organic projects. In addition, we announced $3.1 billion of asset sales at attractive valuations and secured approximately 85% of the $19.1 billion of required financing for the gas utility acquisitions.

"We adhered to our capital allocation priorities as we continued to grow the company while maintaining our target leverage ratio and returning capital to shareholders through a sustainable and growing dividend.

"In Liquids Pipelines, we saw high utilization across our systems and set multiple throughput records. The Mainline transported annual average volumes of 3.1mmbpd anchored by December's exit rate of 3.26mmbpd. The industry approved MTS settlement announced in May will help to ensure high utilization and first-choice service standards for years to come. In the U.S. Gulf Coast, both Enbridge Ingleside Energy Center (EIEC) and Gray Oak set annual records for throughput. Enbridge's U.S. Gulf Coast infrastructure provides customers with the most cost-effective path from the Permian to tidewater and we are well positioned to take advantage of growing Permian production.

"In Gas Transmission, we continue to expand our existing infrastructure to support the growing demand for safe, reliable and affordable natural gas. We added over 100 bcf of combined gas storage between Aitken Creek in B.C. and Tres Palacios in the U.S. Gulf Coast. In the U.S. Northeast we concluded an open season on Algonquin Pipeline to expand deliveries to New England. Finally, we closed the first six acquisitions of the landfill-to-RNG facilities from Morrow Renewables.

"In Gas Distribution, we announced a once-in-a-generation opportunity to acquire large-scale gas utilities at historically attractive multiples. The assets operate in gas supportive jurisdictions and are expected to be accretive in their first full year of ownership. Our pro-forma gas distribution business will deliver approximately 9.3 Bcf/d of natural gas to 7 million customers, making it North America's largest natural gas utility platform. These acquisitions are expected to balance Enbridge's earnings mix to approximately 50% Natural Gas and Renewables and 50% Liquids.

"In Ontario, EGI connected approximately 46,000 new customers to our network. We also received the Ontario Energy Board decision on Phase One of our 2024 rebasing application. We are actively working with the government of Ontario to address issues we see with the decision around affordability, consumer choice and reliability of gas to Ontario communities and industry.

"In Renewables, our scale continues to allow Enbridge to find select accretive projects. In 2023, we closed the acquisition of additional economic interests in the Hohe See and Albatros German offshore wind projects and announced the joint construction and operation of Fox Squirrel Solar. These projects are expected to be immediately accretive to DCF per share and complement both our growth outlook and energy transition contributions. Offshore in France, 50% of turbines have been installed at Fécamp and the 497MW project is expected to achieve commercial operation in the coming months.

"Our value proposition is underpinned by our disciplined approach to investment and balanced financial outlook. Looking to the future, we will continue to expand and modernize our infrastructure, driving growth and reducing emissions from our business. We believe that our balance sheet strength, secured growth backlog, proven execution capability, and growing dividend will drive value for our shareholders.

"Enbridge is committed to being the first-choice for our customers, communities, shareholders, regulators, policy makers and our employees. I'm proud of everything we accomplished this year and I look forward to building on those successes as we continue positioning Enbridge as the first-choice energy provider and investment opportunity."

[Cliff_N]

Dan, that dividend is in Canadian dollars: The company's next dividend payment will be CA$0.915 per share. Or .68 USD

Cliff

[dan_s]

I have updated my forecast/valuation model for ENB and posted it to the EPG website.

My valuation stays at $40US per share ($54Cdh) because Enbridge is generating more than enough DCF to maintain their dividend and likely to keep raising it in 2024 and 2025.

There is upside to my forecast because the gross profit margin on their Gas Distribution Sales is growing at a much faster rate than their Commodity Sales which have a gross profit margin under 5%. Distributable Cash Flow (DCF) of $11.3 billion is fantastic.