Enbridge Executive Insights: Funding Requirements, Equity

On Wednesday, Enbridge, Inc. (NYSE:ENB) reported its first quarter earnings and discussed the following topics in its earnings conference call.

Funding Requirements

Linda Ezergailis – TD Newcrest: I have some questions with respect to – follow-up questions with respect to your Slide 16 funding requirements. When I look at the $4.8 billion growth in risk capital since your Enbridge Day and your latest Q4 guidance on that, where might we expect or where do you think most likely we will see any announcements over the next 12 to 24 months with respect to geography whether it’s Canada, U.S., the international or business segment whether it’d be Power, Liquids, or maybe Gas Midstream and then how might we think of your views on the attractiveness of building assets, buying assets or potentially doing a corporate transaction?

Patrick D. Daniel – CEO: That’s a very broad question, Linda. Let me take a quick run at it and Al, feel free to step in and supplement it. I’m going to be cautious because I don’t want to preannounce, because you’re asking us to kind of look forward and say where the growth will be coming. As we indicated in the script, we are working right now on Eastern Access and improving access to both existing Montreal refineries and possibly to the East Coast at some point for Canadian crude oil. So I think you can expect that to continue to be a strong area of development and growth for us. We are very active in the corridor from Fort McMurray down to Edmonton, both in terms of crude movements out and a diluent supply in. So I think you could expect some new business development through there. At this point, based on what we see, we have announced everything that in the foreseeable future for Gulf Access. So that kind of covers off the Liquids side of the business. There will be some ancillary possibly storage and other initiatives associated with that. When we turn to the Gas side of the business, we continue to be very aggressively pursuing other midstream opportunities in Canada as a result of the successful win on the Cabin Project, so you could potentially see something there. Our Anadarko area continues to grow very significantly in the U.S., so gathering and processing associated with those liquids-rich streams. The renewables side, I think it’s fair to say that our focus is primarily in the U.S. right now, but I think it’s quite possible you are going to see something coming along there. Al, what have I missed?

Al Monaco – President: Well, that pretty much covers it Pat. I think maybe just to emphasize what you said about Eastern Access, as I said in my remarks that the first couple of steps in our strategy there have already been announced and there’s a few more shoes to drop, so probably emphasize that. We’ve got good focus on the oil sands corridor, which Pat mentioned. Maybe just out on a couple of things on the gas distribution front as well, I think that’s probably the only one that you missed there Pat. We’ve got some good opportunities there in terms of enhancements to the system, so that continues to be favorable. I might just make a comment, I think, one of your questions Linda was around any potential for corporate transactions. I think pretty clear that we look at absolutely every opportunity out there. We’ve got everything modeled up and we’re very focused on keeping track of what’s out there. I will say though that every time we look at opportunities in that area where you’re looking at a corporate deal, it becomes very difficult for us simply because the base plan that we have is so robust in terms of our growth rate, that most things that we look at would end up diluting that growth rate. So we’re very cautious on that, not to say that we’re not always on the lookout for good opportunities that might come up, but very hard to make some of those larger deals work without diluting our growth rate. So, I think that addresses what you’re getting at in the second part.

Linda Ezergailis – TD Newcrest: Yeah, also – so does that mean that the probability of a mainline expansion would be lower for the Liquids business over the next 24 months and I guess maybe you can also comment on international?

Patrick D. Daniel – CEO: Well, first of all, with regard to mainline expansions, those will be kind of in proportion to the extensions that we do. As we extend to the Gulf we have to expand the mainline to accommodate the volumes similarly Eastern Access. Then, sorry, what was the second part of that question, Linda?

Linda Ezergailis – TD Newcrest: International?

Patrick D. Daniel – CEO: International, the only reason why I didn’t mention international is that we wouldn’t see anything imminent. Your question implied something a little more short-term, but we are very pleased with the way things are going on this project we’re evaluating in Colombia that we’ve mentioned before, looking at moving production from the Llanos area out to the Pacific Coast by a pipeline. We’re working with the Consortium down there sharing the development cost, but there’s nothing imminent. There is fair bit of work yet to be done in that project.

Linda Ezergailis – TD Newcrest: Just a quick follow-up just to close off on this slide. How would you rank the attractiveness of your various financing options for your equity over the next little while in terms of your rate reset preferred shares, asset monetizations or common equity?

Patrick D. Daniel – CEO: Richard, do you want to rank those?

J. Richard Bird – EVP, CFO & Corporate Development: Yeah. I don’t know that I would rank them in any particular order, Linda. They are all tools that are available to us. I think given the very attractive opportunities that we have in front of us any or all of them could make good economic sense.

Equity

Juan Plessis – Canaccord Genuity: Richard, you talked about having bolstered the flexibility on the debt and equity sides of the balance sheet. You have a small equity requirement over the next couple of years. Is it safe to say that you’d be looking still to strengthen the balance sheet – or the equity side of the balance sheet in the near term or have the actions you’ve taken so far this year been sufficient to make you comfortable?

J. Richard Bird – EVP, CFO & Corporate Development: I think it’s fair to say that you will see additional equity bolstering actions and additional other liquidity bolstering actions as we move ahead. We do need a little more equity as the chart indicates, we’ve got lots of alternatives to source that which you can expect to see us move ahead on that and we won’t wait a long time for that, we’ll continue to try and move ahead with that on a measured pace.

Juan Plessis – Canaccord Genuity: Just as a follow-up here, the cost estimates for the Montana-Alberta Tie-Line went up a little bit, can you comment on what’s going on there?

Patrick D. Daniel – CEO: I don’t think the cost estimate there has gone up by any material amount that I’m aware of, what are you referring to in particular?

Juan Plessis – Canaccord Genuity: I believe the CapEx went up from $0.3 billion to $0.4 billion.

J. Richard Bird – EVP, CFO & Corporate Development: Oh my goodness, that’s probably just a rash – just a rounding thing, so it’s pretty – there has been virtually no change in the capital cost estimate of that project, it might have moved up by a very small amount just in normal course, but nothing significant.