Q2 2020 Enbridge Inc Earnings Call
[music].
Hello, and welcome to be Enbridge, Inc. second quarter 2020 financial results Conference call. My name is Jonathan and I will be your operator for today's call. At this time all participants are to listen only mode. Following the presentation. We will conduct a question and answer session for the investment community. During the question and answer session. If you.
A question. Please press Star then one and you touched on telephone. Please note that this conference is being recorded I would now like to turn the call over to Jonathan Morgan Vice President Investor Relations, Jonathan you may begin.
Thank you good morning, and welcome to the Enbridge Inc. second quarter 2020 earnings call.
Joining me. This morning are how Monaco, President and Chief Executive Officer, calling grinding executive Vice President and Chief Financial Officer, Vern, You Executive Vice President liquids pipelines, and Bill Yardley Executive Vice President and gas transmission midstream.
As per usual this call is webcast and I encourage those listening on the phone to follow along with the supporting slides.
A replay of the call it will be available today and.
And a transcript will be posted on the website shortly thereafter.
We'll try to keep the call to roughly one hour and in order to answer as many questions as possible will be limiting questions to one plus the single follow up as necessary.
We'll be prioritizing calls from the investment community. So if you're a member of the media. Please direct your questions to our communications team, who will be happy to respond.
As always our Investor relations team is available for any detailed follow up questions. After the call.
Onto slide two where I'll remind you that we'll be referring to forward looking information on todays call.
By its nature. This information contains forecast assumptions and expectations about future outcomes, which are subject to risks and uncertainties outlined here and discuss more fully in our public disclosure filings will also be referring to non-GAAP measures summarize below and with that covered I'll turn it over to al Monaco.
Okay, Thanks, Jonathan and good morning, everybody.
It's not much of a secret that the energy space is going through a challenging time, we've all seen that through the recent events. So I'm going to start today with how we're thinking about that and our long term perspectives on energy infrastructure.
Will then review the usual business update, including perhaps a bit of a deeper dive on crude oil fundamentals that we started last quarter.
Colin will take you through the results in full year outlook and I'll come back within midyear checkpoint on the priorities.
So we're all acutely aware of how the energy landscape is changing the long term energy transition for one opposition to what we do and the challenging regulatory and permitting environment to say the least that's been compounded of course by a covert induced economic contraction that.
Severely disrupting energy markets, that's going to take some time to work through.
But the bigger picture backdrop, we're not losing sight of is that the fundamentals are intact.
The fact is that a low cost reliable energy underpins the global economic engine and it's going to be critical to the recovery.
The factors leading to future energy demand increases haven't changed either.
Relation growth urbanization, and an expanding middle class Theres no serious disagreement that many credible forecast on that.
North America his ability to provide low cost energy should drive an increased share of global energy markets and that means more infrastructure and modernizing energy systems here.
When you look at the challenges we're living through today through the lens of the undeniable need for more energy, we believe that the value of infrastructure and pipe in the ground will increase.
Course, you're not seeing that reflected today, yet, but thats, what the fundamentals are telling us.
So what does that mean for enbridge.
So we believe we're well positioned to be winner in this environment.
We've got a highly strategic and diversified asset base that moves energy to the best markets and our scale provides a low cost advantage to those markets.
Our assets are underpinned by strong commercial constructs and 95% of our customers are investment grade.
We've got a world class project execution capability.
Pleading 30 billion of projects since 2016.
It hasn't been straight forward by any means but we are getting things done.
On the balance sheet were strong as our credit ratings, we sold 8 billion and assets reduce costs and simplified the corporate structure.
As you can see by the chart, our resilient pipeline utility model has delivered predictable cash flows and strong dividend growth through all cycles, and that's showing up again today.
So we believe will not only survive these industry challenges, but thrive and win.
Just to put that assertion to the test. The next slide is going to illustrate the transparency the near term growth.
Through 2022, we expect average annual DCF per share of 5% to 7% growth.
About 1% to 2% comes from embedded revenue growth optimization and cost efficiencies.
Now this part of the equation is zero or what we call minimal capital intensity to Enbridge, which is what we like to see.
Another 4.5% to 5% is driven by the 11 billion of projects, we have an execution, including completion aligned three and the others that you see here on the list.
That program should give us two and a half billion or so and incremental EBITDA.
So the combination of these two gives us confidence through 2022, and remember we don't need any external equity to achieve that.
After 2022, the same two buckets will drive growth, but we'll push harder on the embedded growth part of the equation here. So the goal is to try to elevate the 1% to 2% on that part of the equation.
On the capital bucket, we have organic opportunities in the hopper, which we've talked to you, but before and the teams are working on.
So in some here, we see long term growth continuing from these two sources.
So thats, how we think about the big picture today and were Enbridge is that now let me shift to the second quarter highlights.
We responded to the cobot challenges earlier.
Adding health and safety measures to make sure people were protected and continued to deliver energy without disruption in fact, we didnt really miss a beat on that front.
We weathered the storm well, but we're monitoring the signposts very carefully to make sure we keep it that way.
Results Wise as you saw we had a strong quarter.
Despite the unprecedented downturn mainline volumes, our businesses picked up the slack and credit to our people on the job they did through this quarter.
We had good utilization and gas transmission and distribution at higher rates kicked in on the Texas Eastern system.
The rest of the liquids business performed well, which offset some of the mainline volume decline that we're talking about.
Good energy services performance this quarter, even though we're living with compress differentials are prime storage assets captured good contango gains in Q2.
All of this translated to $1.21 and DCF per share, which caps off a pretty strong first half.
While there are headwinds in the second half and call will take you through that we expect to be within the guidance range in the cost savings we talked about last quarter were enabled in late Q twos, so that should help in the second half.
As well as through two to 2021.
Our balance sheet and liquidity are in good shape. The 2020 funding plan is done now and we've got ample liquidity through 2021.
And finally, good progress on priorities, we sanctioned another billion of new projects that was good to see.
Good outcomes on our rate cases and line three is moving forward as mainline contracting review and I'll come back to those specifically in a few minutes.
So the takeaway here is that although 2020 has been tough year for our sector in the industry, we're managing it well here at Enbridge.
The next couple of slides update you on the crude oil outlook.
Starting with product demand the big driver courses gasoline consumption, which has come back as economies opened up but as you can see we're still below normal.
Diesel improved a bit and jet fuel, though is still way office personal and business travel are low.
Overall, the pace of recovery was a little bit better than we thought in Q2 with the rising infection rates that we're seeing today, we're cautious on the timing of a full return.
Our refreshed crude out like outlook is on the right hand side here since April North American demand came back by almost 3 million today, but we see more gradual pace of recovery from here.
For us what's most important is the regional picture, though so here's what happened on that front.
As product demand came back overall refinery utilization picked up significantly and thats shown in the grey circles here throughout North America.
But of course these markets are not homogenous the purple boxes here show the uptick in our main line utilization into our core markets, which is now approaching pre cold that levels.
It's really shows well the resiliency of the refining centers, we deliver into and therefore the mainline.
So the Midwest and Gulf Coast refineries as everyone knows are the most complex terms or what they process. So as demand came back they ramped up quicker.
As you can see pad to heavy margins doubled from about six to $12. So those refineries and our system.
Our first to recover.
We saw good pull as well on Canadian heavy barrels into the Gulf, which helps our Flanagan and seaway pipes.
Light crude demand in eastern Canada, still lags a bit which is why we have some space left on our like lines, but we expect this to increase as Ontario, and Qubec continued to reopen.
The next prior to the story shows the upstream effects of all this into western Canada, and our outlook for second half.
In Q2 Western came in supply was off about 1.1 million barrels per day.
The mainline and Q2 actually averaged 2.44 million barrels per day, which was roughly 400000 barrels per day lower than our pre cobot forecast at the beginning of the year. That's the Blue line that you see on the right there showing the 2.85 original line.
So obviously, we came in at the favorable end of the four to 600, we talked about on the Q1 call for decline. This year. So that was a good outcome.
And with stabilize prices, we've seen heavy volumes come back actually if you look at July heavy capacity is being fully utilized again.
Barring another shutdown of the economy, we expect mainline throughput closer to where we were in Q1 by year end.
The way we're looking at the remaining six months, we're estimating an average throughput of about 2.6 million barrels per day or roughly 250000 lower than that Blue line that we forecast originally in 2020.
We expect to exit this year with some excess like capacity, but that should fill up in the first part of 2021.
While all of this is going on we continue to think about what's next in optimize capacity on the system for volumes coming back. We're currently focused on low capital intensity revenue enhancements. So in Q2, we added another 50000 barrels per day on the mainline and the first phase of our express expansion at 25.
5000 barrels barrels per day, so good job by Vern and the team on that we've added so far than a 175000 barrels of E dress in the last year with minimal capital.
And that brings us to about 400000 barrels per day over our 10 year Cts agreement that we've added this is a very good outcome, obviously for us, but particularly for our customers who needed that capacity during this phase.
The full replacement of line three of course will restore more capacity so let's get to the line three update now in the next slide.
This is our usual milestones chart with the Pcs written order that you would have seen about 10 days ago now the regulatory track on this slide is done as the petitions for reconsideration on the Eas.
The certificate of need and the route permit were rejected by the PC.
On permitting them.
The focus is on the for a one right now the pollution control agency. They run the permitting process here issued their draft in February.
And it basically said that our construction plans met what they needed.
However, after they reviewed it and received public comments, they decided to whole what they call. It contested case to finalize the permit.
And as a reminder, before a one covers construction methods and scope of work rather than whether the project is needed or the route and the PC of course as I said has approved those items.
Importantly, the pollution control agency has set November 14th to finalize the issuance of the permit and Theyve also as you see in the slide put in a couple of interim data share around hearing in the hail Jay.
So that that's good in that those milestones are set.
The DNR in the US core Army Corps are continuing to work there permit in parallel.
So again, we've said this before I know, but we when we do have clarity on the final timing of those permits will provide our.
SD estimate for the US portion of line three and again a reminder, it should take six to nine months after we get the permits in our hands.
Finally.
Maybe just an overall comment on line three of course, we're disappointed with the delay in the four one that came about last quarter, but I think in this case, we think it improves further.
The permits and certainly solidifies it even more than already with them.
Onto line five now and the Great Lakes tunnel.
There's a lot of information on this slide that we'd like you to take away, but maybe I'll make just two broad points about the project.
First of all.
Line five is absolutely critical to the entire region.
It provides over 500000 barrels per day of feedstock that provides refined products to Michigan, Ohio, and part of Central Canada.
Without line five Michigan would be short three quarters of 1 million gallons, a day of propane and a lot of that is for winter heating and theyre in the upper peninsula.
Michigan would also be at least 45% short of gasoline diesel and jet and that's about half the regional supply and it uses everyday and of course, let's not forget Detroit Airport fuel supply would be at risk.
All of this impacts people thousands of refining and related skilled trades fuel shortages across the state and of course higher consumer energy prices.
There is no viable alternative for line five that's already been determined by the state owned study.
And every refiner will tell you the same thing.
The bottom line is that Michigan in the region would be short the energy they need to keep this economy, moving especially bringing ourselves out of cold it.
Second point on this even though the current crossing is entirely safe again thats been confirmed.
By third parties in more than one on occasion, we're replacing it with the state of the our tunnel 100 feet below the lake that.
We're doing that because we want to provide Michigan Anderson added measure comfort.
A couple of years ago now we reached an agreement with the state constructor tunnel.
The courts have now twice confirmed the agreements and the state isn't appealing that decision further.
We've completed the Geotech work and design as well and filed our application.
Just one final comment on this I think one thing that's important and as often missed in this equation is that people support the tunnel.
75% of the legislature Democrats and Republicans like.
Voted for it last month.
23 counties formally endorsed it and a strong majority of Michigan Anders want it to get going.
Slide 14, as a brief update of the mainline contracting.
So again this offering is the combination of a two year effort to negotiated deal that makes sense for our customers and as well the entire industry.
In may the CR landed on the process and timing to review or application.
It's good thing because it's a single step process and we are now fully into that responding to information request back and forth.
The process runs through April next year, followed by an oral hearing.
And remember our shippers here support the offering greater than 70% of our throughput and the point of that is that there will be active in the regulatory process.
Just to reiterate the benefits contracting the mainline really revolve around what's good for customers and the entire industry.
First and foremost priority access had predictable stable and competitive tolls thats, what they told us they wanted to see.
Contracting secures a very much needed source of long term demand pull for W. CSP supply from a highly competitive refinery complex that we just talked about.
And that will be good for the basin and it supports future upstream investment.
Perhaps the most important element of this and often forgotten is that contracting is going to support higher netbacks for producers and maximize provincial revenues.
Thats, because WCS be crude crisis off the marginal transportation cost to move for the last barrel in the basin and contracting ensures that producers and the province benefit from the lowest marginal transportation cost in all scenarios.
We're expecting a CR decision in 2021, but we'll likely need now to extend interim rates for a period of time in the Cts.
Prescribes the tolls during that period.
So on the gas transmission now it's been a very busy year on the regulatory front and we're very pleased with the outcomes there as our customers.
For us what this does assure we earn a reasonable return, particularly as we enhance and monetize the system.
By getting three proceedings done this year, we've covered off above $12 billion and rate base.
Locked down, Texas Eastern in Q1, and we're now down Don on both Algonquin and the BC system.
The combined revenue impact of those three is an increase in the order of 150 million annually.
We also filed on Alliance East, Tennessee, and Maritimes and settlement discussions with customers will follow later this year.
On to slide 16.
Bill and his team has done a good job getting projects in place and execution is ongoing here and these projects are going to contribute to the two and a half billion in EBITDA that I mentioned earlier.
The four billing system expansions and extensions is going to keep the team busy through 2023.
These projects by the way have good returns and are underpinned by solid commercial models and high quality Counterparties.
So Sable trail phase two went into service in May and on the 1 billion P. South project construction is progressing well.
And by the way as a side note on this indigenous affiliated companies have won $30 million and business. So far on this project.
And recall as well going back to line three there is a very big opportunity for tribes in Minnesota as well.
Lastly, we got FERC approval for the Cameron extension supplying venture Globals, Kalamazoo LNG facility and construction will start on that later this year.
As you know, we recently won projects to feed LNG facilities on the Gulf. These are progressing but not surprisingly given coded and the demand decline globally for gas.
In LNG in particular, those will likely move at a slower pace now.
We're managing the near term spend on those but we will be ready to go when those facilities are sanctioned coming up.
Moving now to our gas utility utility as you've heard me say before is a true Jim in our portfolio. It fits so well with our low risk value proposition.
But it's also one of the fastest growing in North America.
Cynthia and team are making great progress on synergy capture from the combination of the two Ontario utilities. This is helping drive a very good.
Are we from this business, especially when you think about the low interest rate environment. We're in.
This quarter, we sanctioned another 300 million or inorganic projects for 21 22 in service that's on top of the community expansion and reinforcements we have in flight.
Aside from that we continue to add 40 to 50000, a year and new customers and there is opportunity bring gas to new communities and system modernization. So combined this translates into over 1 billion a year of rate base growth. So this is a a franchise that just keeps on giving on many fronts.
On the next slide we will wrap up the business review with.
With renewables course renewables is not as large as the other businesses within the Enbridge context, but it's progressing really well.
Built at gradually with the same utility like commercial structure as the rest of our businesses.
We've grown our development operational and construction capability. Most recently in European offshore, where we've been focused mostly in the last for a while.
We have a good growth hopper here supported by good fundamentals in Europe, and well developed supply chains, and that's probably been the biggest factor in bringing down power costs in Europe.
In the last three years, we've put three large offshore wind farms into service totaling about a gigawatt of capacity and over the last year. We identified the two new investments in France. Our most recent fee comp is a 500 megawatt wind farm located about 30 miles off the north northwest France Charlotte.
Fine and we'll start seeing cash flow from these new projects between 22 in 23.
The three French projects by the way come with long term PPA days and some added protections which are unique here in these types of projects for wind variability.
So again very solid project slate here and we have a very good partner in F.
Finally on this one we've been focused on further enhancing our returns and we have another partnership here with the caning pension plan, which is helping us do that and it gives us spoke to grow this business with less capital intensity again.
So without review I'll pass it to colon to go over the financial results.
Thanks, Alan Good morning, everyone I'll take you through our financial results financial position in our outlook for the full year slide 19 summarizes our results.
I want to start by saying that I'm very proud of our performance all things considered we've worked hard over the years at strengthening our business and in the past few months have taken further actions to bolster the business.
It's consistently being a conservative approach serving us well I think it's a point of differentiation.
As you can see on the slide second quarter, adjusted EBITDA and DCF were both up year over year on strong underlying performance.
Adjusted EBITDA 3.3 billion in the quarter and DCF of 2.4 billion.
Thats $1.21 per share DCF, seven cents better than last year.
What's that out to me during the quarter, where the following items, we had strong reliable performance.
From a number of our businesses gas transmission, our utility and the power business.
All performed well but.
Materially unaffected by.
By the Coca disruption I think this is the diversity point.
We had growth from recently completed projects the German offshore wind projects and Grail. So we're still getting things done.
We had a stronger us dollar benefiting our significant to us dollar cash flows and.
We had also some opportunistic storage profits in our energy services segment.
Finally, we also little help from delayed maintenance capital related to covert spend but all come back to that in a minute.
If we drill down to the segment EBITDA performance on slide 20.
We can see that liquids pipelines was down only 1% or 22 million, there's a decent outcome in the conditions.
On average our mainline was approximately 85% utilized during the quarter delivering 2.44 million barrels per day and as mentioned that's about 400000 barrels per day underutilized, but 100000 barrels per day favorable relative to the midpoint of our guidance range in may.
However, more than offsetting this under utilization was a higher mainline toll, including a 20 cents surcharge on line three Canada.
And a stronger US dollar has mentioned.
Our Gulf Coast in mid Con systems were down period over period due to lower light spot volumes.
On the Bakken pipeline and the Seaway legacy system, largely as a result of reduced demand for lighter crudes in the Gulf in the quarter.
Recall that we are mostly take or pay down these contracted systems, but do you have a little bit of spot capacity to.
On the other hand heavy deliveries into the Gulf for very strong offsetting some of that weakness.
Flanagan South pipeline utilization is a good example, atlas.
Gas transmission EBITDA was up $39 million another good outcome, despite the Canadian gathering and processing asset sale last year, which contributed about $40 million per quarter historically.
Two main positive drivers here. The first is continuing strength from our us gas systems headlined by Texas, Eastern and primarily ongoing contributions from its recent rate settlement.
We expect Texas Eastern is new rates to contribute an incremental 125 million Canadian of full year EBITDA on a run rate basis.
The second drivers the contribution from assets placed into service last year, namely Stratton Ridge and phase two of Atlantic Bridge.
This business segment continues to drive stable and predictable results with virtually all of our cash flows coming from reservation based revenue contracts.
Looking forward I should mention another item, we're working through and integrity program in this business and we'll have some capacity restrictions in place while we do that.
That's going to limit throughput a little during the summer shoulder months. So we can focus on getting back to full capacity by the winter heating season.
Financially that's going to mean about $12 million per month of lost EBITDA.
The second quarter reflects one month of this June.
We will likely have a few more months of this.
The third quarter really until full capacity restoration.
Turning to other business segments gas distribution EBITDA was up 16 million compared to last year. This reflects higher index distribution rates more synergies as al mentioned.
And stronger utilization from colder spring weather.
Similarly, the power business was up 50 million for the quarter. This was driven by stronger wind resources that are us when facilities and contributions from the German offshore wind farms put into service has mentioned.
Energy services was relatively flat over last year over both this year and last can be characterized as stronger than usual results for this segment.
This year, well publicized contango spreads in the crude market allowed us to capture profitable storage margins on a small portion of the company's storage fleet primarily in Cushing.
Looking ahead, we have seen differentials tightening and most of the contango opportunity is now behind us. So second half results are looking much less robust in the segments.
Finally, eliminations and other was 23 million favorable to the second quarter of last year. Most of this improvement is from lower cost as we began to realize enter what enterprise wide cost reductions.
About 60 million of targeted cost reductions were realized in the quarter and we'll realize the balance of the 300 million dollar cited.
Program in the second half.
Moving to slide 21 for other components of cash flow performance.
A significant portion of our our DCF growth came from the strong EBITDA performance I just mentioned.
Financing costs maintenance costs and taxes collectively are trending as expected for the full year with some timing difference is showing up in the quarter.
As mentioned maintenance capital was light in the quarter as we experienced a slowdown in discretionary field work due to cobot 19 restrictions.
In fact, we spent about 100 million less than expected. However, we do expect these capital expenditures to ramp up in the second half of the year inline with our full year guidance.
Finally on this slide our cash distributions from joint venture investments benefited from new projects coming into service in late 2019.
So in summary, we had another very good quarter. Despite the challenges and next a few words on our financial position on slide 22.
Overall, our financial position is relatively strong.
We've been conservatively reinforcing the balance sheet and our liquidity to help us whether this downturn.
Our 2020 needs have now been fully funded and Weve, even prefunded some of our 2021 capital requirements.
As shown here in terms of 2020 sources, our net cash flows are tracking to plan.
We also bank some proceeds in the quarter from our continuing asset sales program. We're again the objective is to enhance returns by recycling capital.
Five and a half billion dollars of term debt has been issued so far this year at attractive rates.
Both underlying rates and.
Reasonable credit spreads.
In addition, we issued $1.4 billion hybrid security in early July.
This is in keeping with our conservative approach and represents opportunistic prefunding of 2021 in the context of our line three us construction timeline firming up.
And our forward looking capital markets uncertainty.
The hybrid market is seldomly fully constructive so we seized the opportunity at a good tax deductible coupon.
The 50% equity credit from the hybrid bolsters, our financial position, which we view as a non regret action in this environment.
In terms of capital uses our capital program for the year remains in the range of five to five and a half billion dollars inclusive of maintenance capital.
Of course that reflect some line three spending shift into the first half of 2021.
Offset by a stronger US dollar end some announced project wins.
On the liquidity front, we exited.
The quarter with over $14 billion of available liquidity, that's a little higher in July after the hybrid instruments.
Sufficient by design to get us through all of 2021 absent further capital market access.
Our leverage remains firmly in triple B, plus territory and continues to trend in 2020, well within our 4.5 to five times target range.
So the balance sheet is in great shape, and Thats contributed to several agencies reaffirming their ratings recently in which I think is noteworthy.
Let's move find a slide 23 in our financial outlook for the rest of the year.
While uncertainties remain our business is resilient and diverse.
These points and our first half results provide confidence in our full year outlook as always there is some tailwinds and headwinds to consider in the second half against our original guidance.
I think on both buckets, we've talked about all of them Tailwinds include lower interest rates stronger us dollar gas transmission rate settlements and further cost reductions which are now enabled.
For those should be likely more than offset by headwinds, namely mainline volume utilization ketchup and maintenance capital in line with the full year guidance fewer opportunities and energy services Q3 capacity availability on Texas Eastern as mentioned and finally lower contributions from our small commodity sensitive businesses DCP.
Sable.
Looking at all these puts and takes for the remainder of the year along with positive first half results. We remain confident that will be within an original DCF per share guidance range of fourq of two to 480 per share.
So in some two messages for me number one we're managing the business excuse me conservatively from a financial perspective and to the diversity of the business is shining through.
And with that I'll hand, it back to you will.
Okay. Thanks Colin.
If we rewind back to Enbridge day, you'll recall, we set some priorities for ourselves in 2020. So this is basically a wrap up with the mid year checkpoints. It's turned out obviously to be more difficult year for industry than anybody imagined, but if there was there a time to have a low risk business model. It's now.
We were spent responded well operationally keeping our people safe as well and our resiliency paid off so we had a good start to the year as Colin just went through.
To protect against the prolonged and deeper recession, we took some actions on liquidity and completed our funding early for the year and at the same time capitalized on the some good rates in those financings.
Well diversified stream of cash flow is helping us mitigate the impact of lower mainline volumes throughput is coming back, but we're watching the recovery carefully and we're certainly not going to get ahead of ourselves.
We took action to cut costs, and we reaffirm the guidance and assuming we can get there that'll be a very good outcome in this kind of year.
Online three while the pollution control agencies contested case has delayed things a bit I think we're coming to the end of this process now so we're looking forward to that.
Finally, we continue to secure new growth for the future.
Lastly.
On the my remarks today and before we get to the Q and aim many of you know John Wieland, our Chief development officer in previous to that CFO.
After 28 years with Enbridge, Shawn has decided to retire he's been a key leader at Enbridge over many years, bringing his financial expertise and judgment to our growth and our evolution someone who's really exemplified our values and approach to the business as a company.
John It's taken a lot of pride in developing people and as you know succession planning is a big focus at Enbridge, Matthew Akman, who looks after strategy and power will report to me as we'll Allen caps, leading corporate development and energy services.
John has been a friend over this period and not having around will be an adjustment for us, but on behalf of Enbridge and I know many of you on the phone as well, we wish John and his family the very best in the future.
And with that we'll turn it over back to the operator for the acuity.
Thank you we will now begin the question and answer is actually if you have a question. Please press Star then one on you touched on telephone if you wish to remove yourself like you. Please press the pound or Heskey, if you're using a speaker phone you may need to pick up the handset first before prosigna numbers. Once again, if you have a question. Please press Star then one.
And you touched on telephone.
And our first question comes in the line of Robert.
Catellier from the IVC your question please.
Hi, Good morning. Thank you for your comments this morning, I've a couple of questions about capital allocation.
You, partly you touched on in your prepared remarks, but.
Obviously, it's increasingly difficult environment yet.
Pipeline projects developed so I'm wondering how that's impacting your capital allocation strategy. So maybe you can now in your answer specifically address look to importance is having on hurdle rates and project selection.
But also the role to the attractiveness of other.
Perhaps even new parts of the value chain, you might consider or other jurisdictions outside of North America.
Okay.
Okay, well I'll go first Robert Thanks for the question. It's a good win in this environment and then calling can fill in.
I think you know us well in terms of the amount of effort, we put into the capital allocation process, we've got a pretty in depth framework here.
And we put a lot of work into attend more so even these days.
I think if you go to hurdle rates.
Specifically, we've always taken the approach of developing those from the bottom up and they're very much project specific.
So I guess, maybe if you look at the overall weighted average cost of capital just intuitively, it say well bond yields or lower.
Obviously betas have been higher that we've seen so those two factors are a play in either direction, but in terms of the what we're seeing out there today and the risks that you're pointing to what we try to do as reflect each one of the risks.
Around project challenges in the hurdle rate so the simple way to look at it from the way we approach. It is we we do the basic hurdle rate based on those things I mentioned, but we essentially take adders. If you want to column that based on how we see the variability depending on what risk you're talking about so.
So for example.
Today.
If you're entering a new newbuilds.
You'd have to say, whether or not you think shared drilling costs will come in as you predicted so we do our best to come up with those estimates and then we run a bunch of scenarios around to see what happens to the equity return. It sheds will say is delayed and that shut.
Increases your costs inevitably so with when we do that we can kind of assess what sort of adder, we need to apply depending on what the.
What the type of sensitivity is that you're looking at and we do that.
Robert for essentially every element of.
The risk profile of a project. So it's a very in depth and pedantic review of of hurdle rate, but.
It really is to the essence I think of of what we're all about which is making sure that when we put capital to work and we put a lot of its work in this business.
You've got to have a pretty good feel four.
Ensuring you can generate value above that hurdle rate.
Otherwise.
Right, so you're not really doing much to add any value at all so that's how we looked at the process that we go through here, maybe more than what you want it but that's that's what we do.
As to the other part of your question around.
Other parts of the value chain.
I think our view is always extending the value chain whenever we can as something that we always strive to do a good example of that would be.
The liquids business, where you've seen us extend that value chain from.
Pipes and then.
All the way down to the terminal side of it in export in that and the realm of exports that you saw in the Gulf Coast. For example, I think as long as we can do that on the same type of commercial model.
That we have today I think were good on that front.
So those are the kind of things that we would look at as priorities with respect to I think you said something about.
I guess you implied international.
Certainly on the face of at what we do and the capabilities. We have could be exported if you want to look at it that way.
But again, we go through a pretty distinctive process, there, where we look at what the hurdle rates would need to be for international investments. We don't have anything other than the European business right now for wind.
That's really imminent, but certainly.
I suppose it could be an opportunity in the future, but you'd have to really make sure that the country risk and the other factors within the risk profile fit with the rest of the business model. So anyway. That's the that's the broad answer to your question I don't know comments you want to that.
Okay. So.
Let's move on them.
Yes.
Very helpful anticipate the last question related to cost and capital it doesnt seem to really.
Ill be limiting your access to capital at all here, but you've seen some if see trends impacting capital markets.
Some suppliers.
Regarding north London fossil fuel related industries, including oil sands, so well despite the fact that you're still some pretty good.
So as to capital how are you addressing the availability.
Capital for me as Jay point of view.
Well, we've done some transactions recently so maybe.
Calling you can.
Touched base on how debt investors are looking that.
Yes, Hey, Robert Good morning, So I think I've, obviously, we're very focused on MSG and.
When it continued to be a leader in that space.
And I think thats, well recognized in our outings and the capital market and.
We continue to have access to.
Supply chain.
Fulsomely, including insurance markets and all that stuff so.
I feel good about that.
On that so maybe on the equity side of things.
Robert which is I'm not sure Thats, where you were going specifically, but you know we sent a lot of time on this and I think you might recall at Enbridge that we sort of went through how we stack up the rest of the group and Theres a lot of.
Good work being done I think in our industry generally on this front.
We've at least according to the independent sources.
Then ahead of the game here, but to move back to your other question I mean, obviously MSG and.
How investors are looking this comes into the hurdle rate as well. So we're we're trying to include that as well in our capital allocation.
And investment review process. So overall.
We're seeing the trends.
If you look at the numbers were pretty good on all of those three marker so.
Well, we'll have to see where we go from here and continue to build on that I think this area is going to develop further over the next little while and we should be well positioned relative to the rest of the group.
Okay. Thank you were very fulsome responses.
Okay, Robert Thank you.
Thank you. Our next question comes on line of Jeremy Tonet from JP Morgan Your question. Please.
Hi, good morning.
Okay.
Just wanted to start off with quick question and with the caveat being not of legal expert and not in a great position opine on this but if for some reason Dakota access pipeline.
Were to be shut down for some period of time.
Just wanted to see what the reaction could be from your network of pipelines given you have a lot of assets in that area.
In potentially things to Enbridge could do things to help based knee grass, but just wondering if you could share any thoughts on that.
Maybe will last for has been doing lot of thinking about that so.
Good morning.
So obviously a shutdown.
DAPL would be bad for North Dakota, and all the users of that.
On crude oil coming from the Bakken.
But as you mentioned, we obviously have a very broad and diverse network of crude oil pipelines. We have a couple ways to get Bakken crude into our system. So we're doing a lot of work on contingency planning should the court's shutdown.
The dapple pipeline I think we're it's fair for us to say that we think we can we will be able to provide more progress than than we do today and we should be able to mitigate a good chunk of.
Any lost revenue or EBITDA coming from doubtful.
So I think Jeremy where.
I think as he is saying we can mitigate and we should be in in generally good shape. Although you know on a broader sense, where we're obviously as vern alluded to.
Concerned about it and it again as I said on round line five for example.
It's easy to talk about shutting down systems, but it really does have a detrimental effect not just to north Dakota in this case, but consumers and the entire region and so.
It's a serious issue that we're watching closely but.
At least where it we're in pretty good position.
That's very helpful. Thank you and then maybe shifting gears a little bit just wanted to touch on Enbridges appetite for I guess, maybe more green investments over time.
It seems hydrogen has been getting more kind of attention.
Could be later data at the state, but given your Nat gas pipeline network imagine you'd be well position to capitalize on that and then as far as offshore wind is concerned you guys have been very involved in the European side and the supply chain isn't quite stood up as well on the U.S. side. So maybe your expertise could be an advantage. There just wondering overall appetite.
The green investments and specifically those two avenues, if you see opportunities there overtime.
Okay I'll start off and then maybe bill I'd like build to comment too on this because the reality is that.
The renewable side of things in terms of power generation.
Really does link up with natural gas so maybe he can address that part.
Overarching that though I think from a strategic point of view Jeremy the way, we're looking at the renewable space this year and as as I mentioned, we've been gradually building. This.
You know we know the supply profile is going to change globally for energy.
It's not going to be a quick transition by any stretch but slowly.
Renewables will be bigger portion at the same time, we're going to see conventional fields growing as well, especially natural gas. So we think it makes sense strategically from.
The point of view of diversifying our capability to have a portion of the assets and renewables and that said, we've we've built that slowly you mentioned hydrogen and it's a good question because it's quite a it's quite prominent issue today I will say that Cynthia and her team in the utility had been doing a very good job.
In getting ahead of the curve on this and I think we're well advanced on a on a couple of ideas and so we're going to look forward to too.
Looking at that especially as it relates to to natural gas all of this of course.
Again going back to.
Robert's question.
Comes back to the commercial fit and whether or not we can make a good risk adjusted return before I hand, it to Bill you mentioned the supply chain I think you're right about that in the us context and.
You got to remember here I think you know us offshore wind is certainly an attractive.
Opportunity, but as you point out the supply chains or are not as developed yet.
And frankly, nor the regulatory environments as developed as Europe. So.
It's probably the biggest reason why we're not involve us offshore yet, but maybe bill you can comment on the interaction with natural gas.
Yes.
Yes, so and Jeremy you probably heard me talk about once or twice in the past, but if you look at our regions that especially our pipeline serves.
We have a.
Great partnership with renewables, So today's a great example.
Took the opportunity look on that on the ISO web site, while while our stock in yen wind is what is 30 megawatts natural gases 10200.
You could quadruple the amount of wind as they are projecting and it's just on the peak hours. It's just not there nothing else as either so we've got a really good opportunity just with our gas side to be.
Especially where we operate in the northeast to be a.
Very good partner for long time, and then you mentioned hydrogen I think hydrogen is very interesting. So both our utilities cynthia's business and ourselves in the natural gas side, we have been studying this it's extremely expensive.
Is it green Hydrogenics at Blue hydrogen how does it interacts with the pipelines and the actual steel in the pipeline and that takes a lot of engineering.
Well look at but.
Youre right the network and this has decades from now is would be well positioned if hydrogen.
Transition from that.
Shiny object that is.
Potentially a solution to to a reality.
I don't know if that's what you're looking for our Jeremy but that's that's a couple of comments there.
Thanks Bill.
That's helpful. Thank you.
Thank you. Our next question comes the line of hope from Scotiabank. Your question. Please.
Good morning, everyone and John will divesting retirement.
First question on the mainline looks it looks like Q2 played out a little bit better than we expected. The yet you did keep your age to look.
Can you just kinda give some puts and takes there, especially given the fact that heavies fully utilized right. Now are you assuming that you do see some heavy degradation in the back half the year is all light or is it looking towards the upper end of your volume, but look there.
Hi, Rob its vern hair.
I think we're purposely being a little bit conservative.
Obviously, the wildcard is whether theres a second wave coven, we should continue to see.
See some more demand destruction on the refined product side of things I think we believe the worst is behind us, but we remain cautiously optimistic on mainline throughput over the rest of the year.
Our expectation is if things remain that way or they are that we will be fully utilized on the heavy side for the balance of the here.
You know, Rob we talked about there's quite a bit actually.
I think this is the appropriate approach because even if you just look at the last couple of weeks.
Some of the driving numbers and you've seen these have sort of stabilized a bit, whereas we run a on a big roll before before that and then of course, if you look at the diesel numbers, which we talked about and certainly a jet fuel they're just they're just not moving so I think the appropriate approach here as far as how we look at the rest of the year.
Here is to be.
I guess suspect until we see some signposts, which churn and his team look at pretty carefully so I think thats the.
The right way to go here.
Okay. Appreciate the color and then secondly, just a follow up on capital allocation question, just given your allocation of capital as well as how enbridges shares have performed versus the us peers or have you reevaluated your view on M&A, whether that's on the corporate side or using this as an opportunity to.
To acquire single assets that could be contiguous with your system.
Yeah, I think on the latter one.
I think thats right, we would certainly not hesitate if we saw something.
In a single asset category that.
That made sense in either of those three businesses and then I'll add the power business and there. So I think it to the extent that we can see value and how it enhances the existing franchise on single assets I think thats, probably the prime area in terms of larger scale M&A, it's it's not on the priority.
List right now I think we've done repositioning we need to do we've got very good embedded growth and some hoppers that are filling up in each of the businesses.
The balance sheets and very good shape. So we want to make sure we're not messing with that.
It's true that maybe this is where you're going it's true that the midstream valuations are.
I guess attractive relative to where they were but every time, we look through those we run up against there.
Value proposition issue I'll call it where.
Theres theres not a pure match with the stability and predictability of our cash flows with some of the some others out there I'm not saying.
They are bad it's just that they are different than than what we shoot for so I would say low price priority.
All right. Thank you.
Okay. Thank you.
Thank you. Our next question comes from the line predicts that these from Wells Fargo. Your question. Please.
Good morning can you give us an update with your negotiations with the bad Riverbend reservation with respect to line five I just asked because there was that theres a pipeline in the Bakken that was also to shutdown earlier this month.
Well it seems to be similar circumstances. So just curious on your thoughts there.
Okay, well I'll take that question.
I think.
Job one for US is to continue to operate the line safely and do the work necessary on the reservation to have that happen job to for US is to progress to reroute I think the tribe is really asked us to move the pipeline off of their their lands and we're on the process.
Doing that.
Weve filed for all of the environmental permits and the.
He has been permits necessary to do that night, we believe that regulatory process will take about 12 to 18 months to complete and once we've done that we'll be able to meet the wishes the tribe and remove.
The pipeline from the reservation, where we've been following that Bakken pipeline situation quite closely.
I know at first class it looks like and analogous fact pattern, but when you really deep dig deeper into it. The fact patterns are in fact quite different where we've been doing constant negotiation with the a lot fees on our easement and we have not seen.
I mean, the bureau of Indiana fares get involved in our pipeline.
Situation with that river ban so while at first they may look similar I think when you really.
Deep dive on the fact patterns are quite different.
Okay. Thanks.
And then in your prepared remarks, you mentioned that you'd push harder on the 1% to 2% embedded growth in kind of the 2022 plus timeframe.
And just elaborate what you mean by that and some of the levers that you eventually have to pull there.
Hey, pretty Thats cone, yes, great questions is something were.
Actively on you can see it.
For the simplest examples of star.
Our cost.
Pursuit.
I'm sure everyone industry is doing this as well, but we're all over that I think thats.
A positive vector relative to history in this in this bucket I.
I think.
Secondly.
You've seen us incorporate in push on.
Indexed rates are inflators in our tariffs that is continuing and we'll be more of that.
Thirdly, and I put in this category.
Some of the kind of embedded rate base growth that you see in our utility ask investments, where I think al talked about this where were going to be Aston.
We will proactively look to ourselves renew and modernize systems and that is effectively utility esque.
Boring growth, but I think those are all all factors that play into that kind of plus emphasis on the 1% to 2%, yes, maybe the only other example, pennies just to give you feel Ford we talked about this in terms of let's use the liquid system.
The size and scale of it.
Whatever it is going to be I guess over 3 million barrels per day since line three gets done.
That's sure gives you a lot to work with and if you can add.
50000 here 25000, there of capacity by doing things like adding DRA for example, Ben.
Thats, a very low capital intense type of revenue line improvements. So those are the kinds of things I mean, the team already does this but for example can we use technology in a different way to further optimize the system or how we move volumes through or terminals for exam.
But we have a massive.
Liquids terminal system and is there more efficient way to move volumes around those terminals to get.
Revenue quicker so it's those kinds of things generally aside from the things that Collins mentioned.
Hi.
Thanks Frank.
Thank you. Our next question comes in Milan, Robert Kwan from RBC capital markets. Your question. Please.
Hey, good morning.
Server Lineside sway and capital items can you talk about what's embedded in guidance.
In terms of downtown or potential downtime and are you able to provide EBITDAR cashel sensitivity.
For potential to Santa monthly basis.
Any offsets.
In volumes coming off the double the slowing on your whole summer editor Deborah.
Hi, Robert it's over.
Maybe I'll start with line five.
Obviously, the Westlake is running right now.
The stray crossing is a dual pipeline network, where for a period of time, one leg in service or requirements downstream that illustrates we expect to have the east leg up and running hopefully within the next few weeks, we've obviously been working with our credit.
Will regulator to demonstrate that pipeline has spread for service.
And the regulators working through that right now so once that's complete will.
They can application to the court to have the temporary restraining order amended will allow for the start up with the leg, which will then provide.
Redundancy online five.
So I don't think Theres any real magic there from an EBITDA perspective.
On dapple.
Prior.
With that downturn and Bakken volumes, we do have some space on our legacy North Dakota line that runway to Clearbrook and we are and we also have some space on our Bakken expansion project that runs up up from the Bakken back into Canada.
At Cromer.
I think ballpark wise, we can handle.
Couple of hundred thousand barrels a day of incremental flows very easily and then more working on incremental optimizations to allow your even move more crude should that be required. So I think.
We're in pretty good shape.
To be able to take to.
To offset a lot of the production coming out at the Bakken and then obviously if that those barrels hit our system. We will then benefit from.
The downstream pipeline takeaway.
Throughput that takes those volumes to other markets.
Hey, Paul.
Also we just get your just to confirm that so at a high level and because burns, saying, we don't we don't see any material impact.
From these in the back half of the year, so that that's what's embedded in our guidance.
I think on Dakota access pipeline.
Just high level sensitivity there.
On a full year basis doubtful represents.
About $250 million to $300 million year of EBITDA, which is about 2% of consolidated EBITDA on I think as burn mentioned.
While we don't want to see it out of service there are avenues to substantially mitigate that on our system.
Thank you and just finished so.
Mentioned, the energy transition earlier, it's been a lot of questions and the cost grounds.
Your strategy around asset mix and capital allocation.
And.
With the asset mix and sustainable infrastructure, whether it's right or wrong got negative bars can you your pipeline business, including circles gas infrastructure. So with that what are your thoughts on harvesting free cash flow some pipeline business can accept getting less attractive returns and renewable energy or.
Just take the view that your assets are what they are you do the best you can.
Genability.
Marketing again, she appears to just into your disciplines have invested capital highest risk adjusted returns regardless of where those opportunities.
Yes, I think it's the latter.
I mean, just given the comments before on capital allocation and how we look at future investment into in terms of the asset mix today.
I think when we repositioned.
The asset mix to almost 50, 50 im going to call it between natural gas and liquids businesses with a little bit in there for.
Renewables I think we were kind of happy with the mix there you've got to there's certainly energy transition in play here, but in the end, it's going to come down to the competitiveness of assets.
To each of the key markets and that's where I think we're going to be really strong whether its liquids, whether its natural gas utility or transmission and.
The reason I'm, saying that is because in the end, it's going to come down to the fundamentals and if you can be the most competitive system into each one of these markets.
The transitions happening, but certainly not going to happen.
Over a short period of time, so we think we're pretty solid on each of the businesses for decades to come.
If we do see something where we can.
I think you called it harvest.
Or sell then we would look at that but at this point, we're pretty happy with the asset base. We've we've kind of done the monetizations in sales that we thought were most important so that's how we're looking at this at a high level that if I haven't gotten to the crux of what you're getting at let me know no. That's that's great.
Very much okay. Thank you.
Thank you. Our next question comes in the line if there's any from UBI ask your question. Please.
Hi, Good morning, everyone happy to hear that everyone is safe and well.
Maybe to start off a broad capex type of question like three is kind of delayed at this point right now at the same time, you've announced a couple new projects that Youve secured how does capex shift around.
In terms of the delay in terms and as well as the announcements does capex potentially come down a little bit. This year does it go up next year.
How should we think about the total capex number as we think about 2020 and 21 and with respect to the new projects that that were added to the backlog.
Can you confirm that the utility type projects that are tantamount to rate base type expansion opportunity in is that the priority going forward.
Hey, generics call on yes. Good question. So I think on on online travel alluded to this in my remarks so.
We've got approximately Canadian 2 billion left to spend on line three us here and Weve.
We've earmarked.
Proximately, one and a half billion of that to next year, we just just moved it.
So as I noted this year's Capex is lower than than guided in December of 2019.
So.
Have a little more next year, but overall the Capex budget is is declining as we go forward here, what should help us generate free cash flow and and you're right I think.
Marrying your question maybe with.
Robert's at the beginning.
Our capital allocation framework and adders risk Premia are are indeed, channeling us towards lower beta projects if you like.
In core door expansions extensions modernizations.
Executable projects.
So indeed, our and.
If you need to listed them, they're basically outlined in that 11 billion dollar.
Secured project listening that we've been carrying.
On that 1 billion.
Sure.
300 million of that let's call it.
Conventional utility capital, it's basically reinforcements and and so that is very.
Very much right down the middle of the fairway. The other part is the renewable project that we sanctioned offshore France.
I'd have to say that one is at least is good in terms of the risk profile as I mentioned in my remarks.
That one is we've got this other feature where.
The wind variability that you typically see in these projects is actually quite limited because there is theres a color on it.
And then in terms of the size of it.
Remember that project will be.
Project financed in terms of.
How it's.
How its funded so we will actually put quite a bit less equity into that relative to the.
The overall debt equity split within within the company. So thats, how hopefully that answers what you're getting it.
No no it does.
Really appreciate the color into detail on that.
Maybe as a follow up question I know, there's been a lot of questions today about capital allocation and in terms of projects, our free cash flow harvesting and so forth I was wondering if maybe we can pivot a little bit and talk about the balance sheet.
You know rates out there right now are are extremely low one of the U.S. peers issue debt. This this week.
It's fairly low levels in terms of rates.
You've prefunded you funded 20, you've started Prefunding 21.
What are the thoughts around extending the maturity profile as you as you are in the market right now.
Sort of Teekay take advantage of and capitalize on the current rate environment.
Yes sure its Colin Thanks for that question as soon in indeed rate rates are our our low and attractive and indeed, we have been.
Capitalizing on that trend ourselves.
Anytime you can issue.
And your tenure dead in the mid two range is probably a non regret move on tax deductible basis.
So we've observed this we're participating in it.
And we have been extending our our maturity through this process as well so.
I think our average maturity is about.
17 years now so we're happy with that it matches, our long lived asset base. So it's a good point I agree with it.
Alright, perfect well. Thank you very much dice really appreciate all the color today and have a safe. Thanks.
Okay engineer. Thank you.
Thank you. Our next question comes from long Linda Ezergailis from TD Securities. Your question. Please.
Good morning.
[music].
Looking at their long term growth beyond 2022.
It's great to see reaffirming the 5% to 7% DCF per share growth and providing some visibility on enhancing the 1% to 2% and.
Based optimization beyond 2022 can you help me understand what the possibilities are in terms of magnitude could you add double that two three to four present and implicitly.
Should we assume that maybe you that's being done to maintain that 5% to 7% growth rate prospectively.
Suggesting that the secured growth contribution to growth might decelerate a little bit.
Okay, when thats out here.
First of all I think you'd expect growth overall to be slowing down in the industry I mean.
Thats just a reality I think in this environment, you've got a major disruption does.
And then specifically you have.
And you see the numbers.
The better than we do the economic contraction overall going on is undeniable.
I think we're going to probably be really well position, though in this downturn.
With respect to continuing growth.
Well, we'll look at other things to do with capital as well in case, we can't find the opportunities that we've been focused on in pretty good at so I think to get here. The root of your question, though I wouldn't want to.
Specify that.
Distinctly what the the first bucket would be if we can add another percentage to it I think we'd be pretty happy.
And the way I look at it is if we can add more there.
It certainly would offset some of the things that we might not see coming and secured growth beyond 2022.
[music].
So thats sort of how we're looking at it when we see the you'll recall back at Enbridge day, we said.
Now to generate that additional 4% to 5%, we probably need span roughly $5 billion a year in new project execution.
Sounds like a big number and it is.
But when you break it down by business.
Bills got lots going on I mentioned, the over $1 billion, just energy and GTSP utility power Scott some projects liquids can optimize and frankly, if if we can get more of the growth rate with these low capital intensive optimizations expansions.
Or modernizations of assist them in bills as good example of that bills area. Then I think we can we can see ourselves getting pretty darn close to that so although generally the markets.
Less growth going forward I think thats, a reality I think we should be in good shape to to get pretty darn close.
That's helpful context, Thank you and just as a follow up I guess one of the other Lee if anything has is that the growth aspirations are on a per share basis.
I'm wondering.
What might trigger consideration of the share buyback and also to the extent that you don't.
We need to partner or sell assets to pension funds and other financial investors I'm. Just wondering if you approached with a very compelling offer to do further jvs like you have recently with your offshore wind.
Another lever that you would seriously consider balancing off I guess that the complexity.
With that potentially.
Yes, it's a good observation end to end the short answer is yes, because I think if I mean, we've got some great franchises and Theres certainly core to us so we wouldn't want to see them necessarily.
Just be sold off but if if somebody's presenting compelling value and you've got some good reinvestment opportunities.
Then we'd have to look at that I mean, we have big businesses. So it would obviously be constrained to pieces and gene JV. So that's probably what you're getting at.
I guess linked to that which was the other part of your question had to do with buybacks.
We're going to look at that pretty carefully I think we've said before.
We will make sure that thats part of our capital allocation review.
And I would say Linda at this price, it's a pretty obvious source of growth. If you want to look at that on a per share basis like you were mentioning.
Other considerations, though.
Aside from the fact that the assets that we have our core to our growth and they've got a lot of embedded growth in them.
We already return.
A boatload of capital through the dividend I think quantum will correct me, it's probably in the six and a half billion range annually.
The other thing to Linda as we tend to look at these.
On a full cycle basis, so, whereas yes, we can make something accretive by buying back shares we tend to compare that to not just short term accretion, but what are we going to get out of the buyback in the longer term and so we look at.
What else, we could do with that if we had growth opportunities. So.
I think really this comes down for us to more of a timing thing.
We'll certainly look at buybacks, especially at this price.
Once we get line three and I think until that we're still in pretty heavy capital investment mode. Here. So I think thats, how the to look at it in general terms.
That's helpful. Thank you.
Thank you. Our next question comes the line of Patrick can from National Bank Financial Your question. Please.
Hi, Good morning, guys, just all the mainline contracting.
I know, it's still early days, but.
Given the value of pipe in the ground as you mentioned Dell and the mounting challenges and getting new pipe capacity Bill.
Are you starting to see additional commercial support coming from shippers.
It looks like 70% support number hasnt changed yet.
But.
Competing projects continue to be challenged to say the least.
That not alone bring in further support for your mainline offerings over the coming quarters or do you think you're at the point, where you would need to refine the terms in order to achieve a level of support well above 70%.
I'll make a quick comment then I'll turn it to Brent.
On your point about.
Additional support I think at this phase of where we're at.
Having filed the application I wouldn't see necessarily somebody coming out and say oil we changed our mind I think while we're in this application process.
We're probably not going to see much change in that and the focus would be on making sure that everybody is still with us. So.
I wouldn't to have expected anybody to be added to the list at this point, but I don't offer and if you want to expand a bit on us question.
I think you've hit most of it now I think the only.
Nuance I would make is that we continue to talk to the producing community here in calendar, who were the primary opponents to mainline contracting those people are.
Differing views on why this may not be the best thing for them. Some just don't like the toll they've just believe it's too high others are waiting to see how is the competing pipelines play out and then finally in the smaller producers who are quite frankly are just coming up the learning curve on how all this all works and.
We focused most of our attention to see if we can get a few more of those people into our camp and I will continue to do that as we go through this year process I think the one thing that the application has helped though is.
The question and answer part of that I think it's starting to maybe gel a little bit and this is not an easy thing to really.
Absorb.
At 100000 feet, you got to kind of get into what the value drivers are in and I think as I mentioned in here it really comes down to.
The predictability of those tools and Thats really what I think will be the key value driver.
But I wouldn't sell short the fact that having locked in demand from the best market in North America is another key factor along with this concept for the marginal total economics that again, I think starting to to get some headway with.
People, who are really actually now starting to look at how is this going to affect them I think it's easy to say, while we don't want to do this or that but I think.
People are starting to get a bit of that story I think.
Okay. Appreciate the color and then just a quick follow up on the dapple situation if I could.
I know you're not in the driver's seat there, but can you clarify wins you expect the court decision on.
Hi, being shut down or not is.
30 by next week before that initial.
Yes, this deadline reasonable or could this drag on for another few weeks here.
I think it's best for energy transfer to comment on how the court proceedings are going to play out I think its and all I can say in front of that US Court of Appeals right now.
Got it okay. Thanks, guys.
Okay. Thanks.
Thank you. Our next question comes in lineup and Pam from BMO. Your question. Please.
Okay. Thanks, good morning.
Election, as opposed to correct and Biden when when you think impacted on the business if any.
Assets project.
Construction by three anything else tax rate.
That's worth commenting on.
Well.
I guess then it's a good question I mean, that's certainly something on everybody's mind I think.
Specifically the last part.
There's nothing different that we didn't expect on line three.
I think the fundamental there is it's a state process.
And we're we're right into.
Working with Minnesota's you know for for quite Awhile, So im not sure that one really.
Plays into the change in administration, if in fact that happens it's always something we contemplate and look at whenever you have a potential administration change I think the point as.
Frankly, we worked pretty well with all administrations, even even the previous one.
On on many fronts I think it's probably a little too early to tell honestly been what the policy implications will be and what it means to infrastructure.
But certainly we don't see any major change.
And really that's because in the end as I said earlier, it's pretty clear that our assets are going to be critical to.
The economic growth in North America, a lot of as I said, what we do falls into that state regulatory and permitting camp and.
I guess by the waiver and we don't have any.
I guess, we're not seeking any federal cross border permits at this point so all in I don't see there's a big factor we're watching it obviously band, but generally we think we'll be in good shape.
Okay. Thanks, then maybe a follow up on earlier questionable hydrogen in response.
The next that's still early days that's quite expensive.
Are you at the point.
12 month.
Put some dollars into some pilot investments on and then also curious is is the studying as it is it more to gas utilities wondering are you also popping will contain the answer is more brought on exploring hydrogen on on pilots and more of a broader discussion in studying the hydrogen.
Okay.
It's probably two fronts I would say the more imminent certainly in the utility.
16 or team are working diligently on this you heard bill's comment about how that might work through the.
The gas transmission side. This is all I think in the realm of.
Paul a blue hydrogen.
Intensity question I think yes, we're at the point, where we could certainly see putting in small amounts of capital.
To prove prove out our our understanding of this and I think.
We've got a pretty good headstart on this people have been working on it in the company for quite Awhile and I think we'll be in good shape, so that when we put in.
Some amounts to us things out, which I think it's appropriate for us.
Then we will have pretty good confidence around that not huge amounts mind, you Ben but.
Yes, I think we can start to do some pilot investing for sure.
Alright Thats great.
Okay and then.
Thank you we have reached our time limit and are not able to take any further questions. At this time I will now turn the call over to Jonathan Morgan for final remarks.
Thank you and thanks, everyone for taking the time to join US. This morning as always we appreciate your continued interest in Enbridge and and following the call Investor Relations is available to address any follow up questions. You may have so once again, thank you and have a great day.
Thank you ladies and gentlemen, we appreciate your participation. This concludes today's conference you may now disconnect.
Mike.
[music].
Mike.
[music].
Right.
[music].
Mm.
Mike.
[music].
[music].
No.
[music].
Yeah.
[music].