Q1 2024 Enbridge Inc Earnings Call
Good morning, and welcome to the Enbridge, Inc. First quarter 2024 Conference call. My name is Rebecca Morley and I'm, the Vice President of Investor Relations.
Joining me. This morning are Gregg <unk>, President and CEO, Pat Murray Executive Vice President and Chief Financial Officer.
And the heads of each of our business units.
Liquids Pipelines', Cynthia Hansen gas transmission, and midstream Michel inheritance gas distribution and storage and Matthew Ackman renewable power.
At this time all participants are in listen only mode. Following the presentation, we will conduct a question and answer session for the investment community.
I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
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Please note that this conference is being recorded.
As per usual this call is being webcast and I encourage those listening to follow along with the supporting slides.
We will try to keep the Cogs roughly one hour and in order to answer as many questions as possible, we will be limiting the questions to one plus a single follow up if necessary, we'll be prioritizing questions from the investment community. So if you are a member of the media. Please direct your inquiries to our communications team, who will be happy to respond.
<unk>.
As always our Investor relations team will be available following the call for any follow up questions.
On slide two where I'll remind you that we'll be referring to forward looking information on today's presentation and Q&A.
Its nature. This information contains forecasts assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings well.
Well also be referring to non-GAAP measures summarized below.
With that I'll turn it over to Greg.
Thanks, very much Rebecca and good morning, everyone. Thanks for joining us for this call I am pleased to be here today to report record financial results for the quarter driven by strong operational performance and strong energy fundamentals I'll provide a quick recap for Q1 and update you on each of our businesses.
I'll speak further to our financial performance capital allocation priorities and future growth.
And as always the management team is here to answer any questions that the investment community has following our presentation.
I am pleased to report adjusted EBITDA is up 11% year over year, and we're well on our way to meeting our financial guidance for 2024.
We saw high utilization rates across our systems and safety, which remains a top priority was also excellent during the quarter.
As you know the acquisition of East, Ohio gas closed on March six which further diversifies our business extends our growth outlook and enhances the stable cash flow profile of our asset base. As a reminder, we've already secured over 85% of the required financing for the U S gas utility acquisitions and we will.
The remainder using a combination of alternatives, which may include hybrid or bond issuances capital recycling and ATM issuances.
We have the capacity to utilize any and all of these sources of funding and so that we can be in a position to optimize market conditions youll see us updating and preparing security filings to preserve this funding flexibility and ensure we complete all the utility acquisition funding well in advance of year end.
We closed the alliance on Sable divestiture in April continuing our track record of recycling capital at attractive multiples.
The mainline tolling agreement was recently approved as filed by the Canadian Energy regulator. The mainline continues to operate at or near capacity and we are ready to add additional egress as our customers need it.
We had exciting growth announcements in the U S Gulf Coast with our recent Whistler JV, the sanctioning of spirit of pipeline and the acquisition of two marine docks and adjacent land at our Ingleside export facility.
We've also recently progressed to full on.
On the Tennessee Rich line expansion project.
Knowing the TVA is decision to construct a new natural gas combined cycle plant in Kingston, Tennessee.
This project further underlines the criticality of pipelines and fueling lower carbon power via gas generation.
Today, we published our 2000 <unk> annual sustainability report, which highlights our performance in approach to environmental social and governance goals.
Now before I touch on these developments further let me take a moment to highlight what really was the first rate financial performance in the quarter.
That will be getting into this in more detail later, but we're going to be presenting side by side results those being adjusted actuals and the base business, we guided against <unk>.
We believe this transparency will let you see our base business against our 2004 guidance as well as the Orlando, which included a partial month of owning east, Ohio gas and all of our utility financings to date.
Starting with all in our EBITDA is up 11% and DCF per share up 4% from last year, primarily due to strong asset performance across liquids gas transmission that renewables as well as a partial month contribution from EOG.
Our balance sheet remains well positioned ahead of the closings of westar at TSMC at four seven times debt to EBITDA.
Since this number is as of March 31st these leverage numbers don't yet include the beneficial proceeds from the sale of alliance and Akshay.
Touching briefly on the base business, we are very much on track with our financial guidance in fact, our base business EBITDA and DCF per share of 8% and debt to EBITDA is at four six times.
Under both views, we've had a record financial quarter, and we look forward to keeping that momentum going.
Our industry, leading business risk supports our long held leverage target of four five to five times Enbridge has virtually no commodity price exposure and over 98% of our earnings are generated from either cost of service or take or pay contracted assets and 80% of our EBITDA is earned from assets with protection again.
The installation.
And we are well hedged against interest rate volatility with less than 5% of our debt portfolio exposed to floating rates now.
Now, let's take a look at the notable highlights as I mentioned earlier from each of our businesses starting with liquids.
Liquids pipelines delivered high utilization levels once again.
The mainline transported over $3 1 million barrels per day during the first quarter and we continue to expect average throughput of 3 million barrels per day for the year.
As I mentioned earlier, the Canadian energy regulator approves the mainline tolling settlement, which we view as a win win win for Enbridge, our customers and the industry.
Switching gears to the U S. Gulf Coast, we acquired two strategic docs and nearby land adjacent to Ingleside for $200 billion U S.
This acquisition will optimize existing operations in the area by increasing VLCC dockings windows at Ingleside and will help set the stage for Ingalls side to realize its ultimate potential as the industry, leading multi products export terminal in North America.
In the Permian, we've launched our open season to expand gray oak capacity by up to 120000 barrels per day pending a successful open season.
Recently, we finished constructing for new storage tanks at Eagle side, bringing total storage capacity to 18 million barrels there and we've already sanctioned that additional five tanks to add another $2 5 million barrels of storage capacity by 2025.
Now, let's take a deeper look at gas transmission.
In Canada with fiber is progressing well and we expect to reach the 60% engineering milestone in the second half of 2024.
In the United States, we announced the formation of the Enbridge Whitewater MPLX joint venture.
This transaction will be immediately accretive to DCF per share and our balance sheet metrics and allows us to establish a natural gas footprint in the Permian basin.
The Tennessee Ridge line expansion project has progressed to full.
This is the natural gas pipeline, we announced a few years back that will deliver gas to the Tennessee Valley authority as new natural gas combined cycle plant and emissions friendly replacement of their existing coal fired power.
Construction will begin in 2025 with an expected in service date of Q4 2026.
We also sanctioned the construction of offshore pipelines to service shell and <unk> U S Gulf Coast operations now.
Now before I discuss our strategic joint venture in more detail, let me take a moment to comment on the topic Du jour.
In addition to the growing demand for natural gas to feed LNG terminals. The build out of data centers and generative AI is forecasted to require immaterial increase in power generation.
This new power generation will be fed by a combination of natural gas and renewables and supports our view that the world needs all forms of energy.
As the sector evolves enbridge is well positioned to serve this increased demand through the vast footprint of our assets connected to key supply basins.
And with Enbridge as asset base, we can offer customers access to permanent power by fueling natural gas generation and renewable power. It is a competitive advantage that we have to offer jurisdictions throughout North America we.
We expect this trend of serving data centers will take some time to ramp up but are ready to serve our customers and their energy needs through our integrated infrastructure network.
Now, let's take a deeper dive into our whitewater joint venture.
Our March 26, we announced the formation of the Whistler pipeline, JV, which will own the gas pipeline and storage network connecting the Permian basin to the growing U S Gulf coast demand.
This transaction further extends our access to the U S Gulf Coast, LNG terminals, adding a connection to Cheniere Corpus Christi terminal there.
There are four assets within the JV, the Whistler pipeline Wockhardt natural gas storage, which are currently in operation. The ADC pipeline, which is expected to come into service in Q3, and the Rio Bravo pipeline, which will enter service in 2026.
Folio of assets is highly contracted and backed by predominantly investment grade counterparties, which aligns perfectly with our low risk commercial model.
Beyond that the system has embedded future growth opportunities, which will support growing LNG export volumes. This new JV is a strategic move into the prime gas supply basin, bringing together three key Texas midstream partners, and an extremely attractive and financially beneficial manner.
So now, let's take a closer look at gas distribution and storage.
As I mentioned earlier, we closed the Enbridge gas, Ohio acquisition on March six and we are making great progress on the remaining U S gas utilities acquisitions.
Gration teams are working hard and we look forward to continuing to deliver safe reliable and affordable natural gas to millions of residents and businesses.
The Ohio gas utility serves one 2 million customers and includes rate structures that decoupled revenue from volumes reducing earnings seasonality.
In addition over 80% of the capital subject to recovery riders, which allows enbridge gas, Ohio to recover on that capital in a matter of months rather than years.
We continue to work collaboratively with Westar and TSMC is regulatory bodies and expect to close those acquisitions later this year.
Turning to our Canadian gas utility, we filed a court of appeal and submitted a motion, but the OSB to review their December rate re basing decision for UGI.
The court has been placed in abeyance until the review is complete which we expect could be during the third or fourth quarter of this year.
The province of Ontario is enacting the keep energy costs down.
And we're encouraged that the government of Ontario is taking positive steps to preserve customer choice and affordability.
In the meantime, we will continue to focus on delivering safe and reliable energy to our growing customer base in Ontario, and the second phase of the Rebase proceedings.
On the operation side, our dawn hub continues to serve nearby markets with about 290 Bcf of networking storage capacity roughly a third of which is not regulated and available to benefit from improved storage rates.
So let's jump into the renewable section as mentioned at Investor Day, we like offshore wind in France, because of the solid risk adjusted returns strong partnerships and long term government backed off take agreements. This focal point as exhibited through the three French projects, we have coming into service shortly with phase <unk>.
And calibrate us.
They comped all 71 turbines have been installed and the wind farm has begun generating electricity powering the equivalent of more than 400000 homes at prevalence ground large all turbines and the floaters have been installed now, let's pivot to our ESG progress outlined in our 2023 sustainability report.
Today, we published that 23rd annual sustainability report and I am pleased to report great progress towards our environmental social and governance goals. Since 2018, we've reduced our <unk> emissions intensity by 37% and we're well on our way to net zero emissions by 2050, having reduce.
Our absolute emissions by 20% and our methane emissions by 40% since 2018.
Our diversity, we've already met and exceeded our board targets and have increased our workforce representation in all measurable areas. Since this time last year.
Safety remains our highest priority of course, and we continue to drive industry, leading standards and achieved a 10% improvement over our previous three year average total recordable incident rate.
Sustainability is core to Enbridge and were committed to meeting the needs of our customers investors and society as we continue to provide energy and our planet friendly way everywhere people need it.
So now let me turn things over to Pat to walk you through our quarterly financial results, our capital allocation priorities and our growth.
Thanks, Greg and good morning, everyone. We're off to a great start in 2024, it's been another strong quarter operationally and I'm proud of the teams for successfully closing the acquisition of the Enbridge gas, Ohio on March six utilization.
Utilization was high across all franchises showcasing continued demand for assets.
Im going to speak primarily about the actual results today. We've also broken out what we referred to as our base business results, which exclude the contribution from and the related financings of U S gas utilities, and we'll continue to report our base business results for comparison against financial guidance.
In the supplemental materials posted on our website, we've provided a reconciliation between the two for transparency purposes.
Now onto the results of the business.
Year over year first quarter, adjusted EBIT was up 11% and DCF per share up four inclusive of share issued last September to fund the U S gas utilities and liquids continued demand for our full path system drove strong results, particularly on the mainline and our mid continent and Gulf Coast assets, specifically, our Flanagan South line and the Ingleside.
Export facility.
Gas transmission had another quarter of high utilization and favorable re contracting on storage and transmission assets as well as benefiting from the acquisition of our gas storage facilities Tres Palacios in Eastern Creek, and the new Tomorrow R&D portfolio.
Despite significantly warmer weather in Ontario, which impact first quarter results by almost $80 million <unk> results were consistent year over year as the Canadian utility benefited from higher rates and increased customer base.
Enbridge gas, Ohio as I noted closed at the beginning of March and contributed about $50 million of EBITDA in the 24 days of ownership.
The renewables business benefited from increased OTC, an albatross ownership.
Founded by strong International wind resources on those same assets as well as contributions from our investments in Fox World as a result of the generation of investment tax credits.
As a reminder, our energy services segment is now embedded into the business units. So you will not see it as a standalone segment anymore. This change has no impact on our segments in 2024 financial guidance.
Eliminations and others up in 2024, owing to the higher investment income and lower operating and administrative costs within the quarter.
Below the line in DCF per share higher EBITDA was partially offset by higher interest rates impacting both floating rate and new debt.
And finally, the additional share count from the equity issuance in September of last year also impacted our per share measures.
Today, we're also reaffirming base business financial guidance, and we expect to be well within the range.
We were able to close the <unk> acquisition within the second quarter as we expect we will look to update the full year guidance inclusive of the utility acquisitions on our Q2 call.
Before I move on I want to remind the investment community that our results have implicit seasonality.
The first and fourth quarters are typically our strongest financial quarters gas consumption at the Ontario utility and gas transmission on our gas pipelines increases during colder months, while refinery turnarounds typically take place in the spring and summer, which means our liquid deliveries or lower during these periods with that let's turn to our growth drivers.
This slide drives a bit deeper into our secured capital program and optimization opportunities providing visibility so 45% of our overall medium term growth outlook as mentioned our secured growth program now sits at $25 billion.
The backlog is heavily weighted towards our gas transmission and utility business and the diversity of projects. Both in terms of scope and geography reduces our exposure to inflation or regulatory risk.
Also worth pointing out is that our share of capital and Rio Bravo has been reduced in line with our lower interest in the pipeline as outlined in our joint venture press release in March.
On cost savings, we continue to evaluate opportunities to reduce overhead and improve productivity and incorporates inflation protection into our commercial agreements ongoing basis.
Asset optimization cost management and contract negotiations have historically generated 1% to 2% of annual growth for Enbridge and will remain important drivers of our business going forward.
Lastly, I'll touch on our capital allocation priorities that we spoke about at Enbridge days.
With the remaining LDC closes insight I'd like to reiterate our continued commitment to balance sheet strength and sustainable capital returns our leverage guardrails and four five times to five times debt to EBITDA remain in place and are supported by our industry, leading low risk business model.
The sale of our interest in livestock stable reinforces the balance sheet and ensures continued financial flexibility ahead of the quest start and TSMC closings this year.
As I noted last quarter and emphasize that our focus remains grounded in capital prudency, our value proposition has always been underpinned by our ratable growing dividend.
Distributed $34 billion to our shareholders over the past five years alone and looking ahead, we expect that figure to grow to roughly $40 billion over the next five years, while maintaining our 60% to 70% DCF payout range.
To achieve that thanks for the visibility and duration of our multi year growth outlook.
We plan to spend $6 billion to $7 billion per year on our secured growth program and while we have additional capacity, we don't need to spend it to achieve our growth targets with that I'll pass it back to Greg to wrap things up.
Well, thanks, very much Pat that's a really nice summary of a very successful first quarter to start the year and of the great progress we've made across all of our businesses.
Decisions, we're making today are setting the stage for Enbridge to continue growing our dividend and sustainably returning capital to our shareholders for years to come over the last 20 years, we've generated an industry, leading average GSR CAGR of 12% through a balance of capital appreciation and dividend growth.
Value drivers are unchanged unrivaled and quite unique in the midstream sector. We have diversified utility like cash flows and a strong balance sheet that has supported 29 years of dividend increases and we maintain an attractive risk adjusted growth outlook, we benefit from lower carbon optionality throughout or conventional <unk>.
<unk>, which will support affordable and responsibly paced global energy transition our strong value fundamentals are expected to continue delivering attractive shareholder returns, making enbridge your first choice investment opportunity.
Thank you and now let's open the line for questions.
Please standby, while we prepare for the Q&A session.
If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star. One again, if you are called upon.
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Your first question comes from the line of Robert <unk> from CIBC. Your line is open.
Sure.
Hey, good morning, everyone I wondered if you could give us your updated view on financial markets and adds until markets.
And.
How are you weighing.
Capital recycling versus other options for funding of utility acquisitions, notably.
The ATM.
Yes, Robert maybe I'll start and maybe Pat will want to add here look I think you've seen lots of asset sales.
<unk> adjusted to higher interest rates.
And you can see what I would argue a more robust market today for asset sales and as you know we've done.
Well excess of $10 billion in asset sales since 2018, so thats always on the table I think we want to make sure and I think what we're doing is making sure that we've got maximum flexibility maximum optionality and preparedness to complete the last 10% or so.
Of the financing so no.
No decisions have been made but obviously everything on the table and we think that probably gives us the best opportunity given the markets.
Given we're not exactly sure when the transactions are going to close so.
All that being said highly confident we will get that all close in fact, I guess, if you had regulatory approval today you could actually just closed small right now too. So I think we're set up with everything still on the table maximum flexibility and thats going to create the best opportunity to maximize value.
Okay. My next question just.
I'm wondering if you could update us on how the U S Gulf Coast crude.
Export market is evolving.
Specifically.
The short to medium term here, we have a number of impacts refinery maintenance in Europe, less Mexican exports and the indirect impacts from the startup of Pemex.
Yeah sure Robert calling here so it.
Sounds like Youre on top of it.
Okay.
<unk>.
Yes.
So a pretty robust certainly the delight export market as you can see that Permian supplies and.
We're seeing strong throughput off the dock.
And likewise on the heavy export market.
Even just maybe even further upstream a little bit just heavy into the U S Gulf market itself.
It's still robust like you said, we're seeing Mexican oil staying home and it's just creating more room for the Canadian heavy barrel, which.
We're a strategy we've worked on for a long time, and we're going to bring on hot here soon to help our plumbing in that area. So.
We're watching that closely it sounds like you are too it remains pretty robust.
Okay. Thanks, everyone.
Thanks Robert.
Your next question comes from the line of Rob Hope from Scotiabank. Your line is open.
Good morning, everyone wanted to follow up on morning.
I wanted to follow up on the commentary in the prepared remarks on increasing gas demand related to data centers.
How large of an opportunity would this be for your gas pipeline systems, and specifically kind of when do you think you can start to see some expansions being required.
Sure well you know what I'll turn it over to Cynthia I guess lots of numbers out there for sure Robert.
Lots of predictions I think it's early to be quite honest.
But in any event, it's going to be positive from a power and gas demand perspective, so whether it's on the power side half to one 5% increase through 2030 or I've seen numbers from five Bcf up to 16 Bcf I think we're well situated.
Just the pipelines, but I'll turn it over to Cynthia maybe last Michelle in and Matthew to make come to.
Thanks, Rob.
Rob we are excited by this opportunity obviously to help build out.
<unk> infrastructure for for the natural gas generation to support AI data centers, our GTS assets are really well located within 50 miles of 45% of all the natural gas power generation in North America. So we are going to be in a position to build that out.
And as you look to timeline, just like Greg said there'll be some opportunities in the near term just depending on what your capacity and availability is in location and so we look forward to that and then the longer term it seems to be really positive Michelle.
Sure.
Rob.
We're finding as we're speaking to customers about data centers as they are typically looking for reliable and affordable electricity in locally supportive jurisdiction. So the jurisdictions. We currently are certainly the ones, we will operate in whether that Utah, and North Carolina or Ohio. They offer that really very much hand in hand with gas fired generation.
That there is data growth in those regions. We certainly expect there will be data center growth in those regions will certainly play a role.
Yes, hi, its Matthew just quickly on renewables demand for for renewables is already very strong and I think.
The data center stuff, just enhances that large tech companies.
Really our kind of customers and I think where they're kind of developer we've got a reliable offering we can deliver.
We've got interconnection agreements ready to go in and the capabilities. So just adds another tailwind for our renewable business.
Good setup, and we Didnt mentioned storage, but given people will want to jump on SAP. So obviously as you know, we get 600 bps or so of storage across the continent, that's going to be powerful too.
Okay.
Alright, I appreciate that and then maybe just switching over the the heavy in the crude oil system interesting, we're talking about expansion of those trends.
It's ramping up.
Even still it does seem like there is an increasing pool of heavy to the Gulf coast. So.
How have discussions with shippers.
Fourth regarding kind of the next phase of expansions of heavy capacity out of.
Out of Alberta, and what do you think the pacing or timing will be at your phased expansions of the mainline.
Sure Hey, Robert Yes, so indeed now that we've got the.
Multiyear.
Tolling deal done, it's kind of cleared the way and the.
Table for discussions with shippers on the next series of things to do in the job jar expanding.
The system.
Or even just continuing to optimize the system, which we've been doing over and over again are on the table right. Now we are in discussions with shippers.
Currently and we've got some offerings in front of them that are relatively capital efficient.
Executable permitting wise with a view to keeping some open egress here through the whole piece.
So that.
Prices are are higher so that's the that's the objective timing wise.
Youre going to see optimizations continue from us serially here, a month to month quarter to quarter and then chunk.
<unk> expansions and the 100000 a day category.
And the next two years, which would pair up pretty well with I think the forecast we had been.
Conveying around Sis.
System refilling within that period of time, so that's the that's.
That's the current discussion and plan, which is consistent with what we've had for the last year or two.
Thank you.
Thank you.
Our next question comes from the line of Benjamin Pham from BMO. Your line is open.
Hi, Thanks, good morning.
Benjamin Pham: On the recent copper powered shell, they're the Ccs projects.
How does that impact you or.
And any way for your Washington.
Project.
Ben It's Colin I can take that yeah. So thats.
That's disappointing.
And I think as capital power noted the projects technically viable, but economically unviable for it from it for a number of reasons.
Including.
Governmental support for it.
Benjamin Pham: Notwithstanding we've got a a kind.
Kind of a sister project at <unk>.
Hub with Heidelberg materials for their cement plant in northwest Edmonton.
Benjamin Pham: So that project has garnered some more financial support and we'll be working with with them too.
Benjamin Pham: Consider <unk>.
Benjamin Pham: Later later this year.
Benjamin Pham: So robin open access hub.
Benjamin Pham: We will generally continue.
We've incurred some very modest capital cost and preparing for capital power, but we have a reimbursement.
Benjamin Pham: Our reimbursement agreement with them so it's.
Yes.
That'd be recovered so that's our update on that but more broadly we remain keenly interested in growing our carbon capture and transportation and sequester business.
Across North America, and we've got a couple of other projects under development as you know in the states, namely, namely, Texas. So.
That's a broad update Ben it's an interesting one because I think it's a good example of.
Even in some of these new technologies, where there appears to be lots of government support there going to be highly competitive alright, as Colin said, the Heidelberg project looks quite good.
And then you know you're going to compare jurisdictions, we sure do and I think capital power sounds like they are too and.
This is the NPV of tax benefits in the Canada, Canada versus the U S for <unk>, it's just more attractive down south so.
We're real careful how we do with this as Colin said, we've got reimbursement agreement there, but we're going to keep pursuing Nathan I think.
That's like a lot of other things will probably fewer of these than more than obviously the proposals that are out there we're going to do this really disciplined and it sounds like they are as well.
Okay. Thanks for that.
And then.
And maybe on English side, just going back to that in the strong volumes the windows that you're talking about.
What do you think your expectation is in terms of capital deployment each here.
Going forward in <unk>.
And then maybe just an update on specific developments axon, where generation ammoniac sport.
Anything thats been notable in Alaska last quarter or two.
Sure Ben So yeah, I think they considered at Ingleside is that kind of a Swiss army knife multi product ambition currently just crude but over time all of the advantages that.
Support crudes advantage off that dock, our portable to other products purity.
<unk>.
Hello, ammonia, which we are developing so.
We have.
Announced a couple of expansions at Ingleside now alright, this for storage and we've got headroom, there with boats permitting for storage and docs.
As you know we acquired <unk>.
Now so we have to close that yet later this year, but the docs next door, which youre going to basically double the windows and we can immediately optimize the loading of smaller vessels at the neighboring docs and reserve our legacy docs for Vlccs and by the way we have.
We've.
Deepened our doctor to 54 feet now so we can fully not fully load, but one 6 million barrels a day up 2 million barrel VLCC. So.
That's pretty efficient capital deployment.
To your question over time, we'd like to.
Two copy paste that model, if you like to other other products.
We're still looking at the Blue ammonia.
Project with with Euro and.
That would be on that would be over a year away yet but that.
That'd be a chunkier.
Capital deployment, but.
The commercial models, we're looking at would be.
Utility like and.
Strong strong.
Margins over our hurdle rate so.
Hopefully that gets to your question.
It doesn't call okay. Thank you.
Thanks Pat.
Your next question comes from the line of Theresa Chen from Barclays. Your line is open.
Good morning, Thank you for taking my questions.
First on the gas transmission side.
To the <unk> JV acquisition.
Curious on how you think about optimizing our how this optimizing your portfolio over time and.
And related to the mentioned nonorganic growth opportunities.
This clearly we're seeing very tight Permian egress, right now and the need for additional capacity at the Baja do you view on additional expansion opportunities on Whistler with likely or would you be willing to take part as had another greenfield egress solution.
Yeah Theresa.
Cynthia Thanks for that question, we're really excited about this opportunity with the strength and share. It is as you mentioned very strategic Permian has an opportunity to grow to support all the activity in the U S Gulf coast, including that the LNG.
Terminals there.
We see a.
Right now, obviously Rio Bravo with our contribution there will be and you build out to support that the LNG.
So that will eventually have an opportunity to take incremental.
Gas out of the Permian.
Now there will be opportunities, both brownfield and greenfield.
And so we'll continue to look at that and.
We'll look at.
We think we'll be able to get attractive returns and help extend that footprint, even more but again it will have to meet our threshold and that's further out but yes, it's a great opportunity for us to continue to build out and enhance what we believe is our super system already by having that incremental connectivity and now of course with the waste.
Sure.
JV will be tied to all.
The existing LNG facilities, because we get that connection to Cheniere Corpus Christi LNG facility, Yes, I guess, we'd also look at opportunities outside the JV as well as they come along rate areas.
Areas like Port Arthur and stuff like that so I think we're open to any of it I think it actually creates good optionality down into the corpus area et cetera, with the JV and then we're continuing to look at other opportunities because frankly, we haven't been as deep into the Permian as some other players and we do have as Greg noted.
Season, right now from Permian Deb Deibert your fighter.
That's going to close on May 20th then we have a lot of interest.
It's a great opportunity to support the development there.
Got it and then maybe turning back to the liquid segment.
I wanted to follow up on the line of questioning related to <unk> ramping up and how the things tracking within your internal budget as we look to second quarter right. So you had the line fill happening right now and then you have seasonal producer maintenance at St <unk>.
Over quarter given to.
Strong earnings not just on your mainline system in the first quarter, but also express class M D.
System South of mainline would we expect to see some alleviation or a decrease in volumes from dosing even as my language.
<unk> remains a portion just at a lower level, how should we think about the evolution of that through the year.
<unk> III is to call and yes, I guess, we would normally reserve to Ola.
Late June to update you on volumes for Q2, but maybe sneak a peek here.
So line feels complete I think on <unk>, it's flowing.
But what we can tell it looks like that was all line filled from inventory.
Elevated inventories anticipated going into it so.
We've not really seen a blip on our system here.
Through April or May.
And likewise, our downstream pipes remain pretty robust so.
I think.
The the thesis we have been.
Offering here is unfolding.
We thought it would so.
I'll stop short of giving you a volume numbers, but as a general.
Trend.
Speaker Change: Thank you.
Thank you.
Your next question comes from the line of Linda <unk> from TD Cowen Your line is open.
Thank you I'm wondering as we see economic demand increasing from.
Data centers, and onshoring of industrial demand et cetera, and the.
The supply response, working as hard as it can to meet that I'm wondering when you look.
Through your system and see any pinch points, along the transportation value chain.
How important is it for your customers.
Whether it be producers or end users like utilities are in the future data centers to have full path solutions from you.
On the gas side.
You don't have upstream gathering so I'm wondering if that might be an extension of your value chain consideration as we see kind of more complexity in terms of these molecules traversing through the system and then similarly on the liquid side.
Are your shippers sophisticated enough to navigate all the steps in the value chain or are you seeing increasingly.
Demand and interest in bundled services full path morpho path.
Linda maybe I'll start and then maybe a colon and sit there on a time and see you look I mean, we're seeing incredible utilization of the assets alright, So Stephen take a place like British Columbia.
We've just seen unbelievable elements of peak days.
I've gone through there.
The West Coast.
Almost 600 BS of gas in 2023, which is 6% more than a year ago and 99 of our top 100 days on T cells have occurred since November 'twenty. Two so people are looking for that path. As you know we're looking to develop that Theyre also look into storage as you know we bought Aitken Creek.
Yes.
Not in the gathering side in a big way now, but if we could do that in a way that's consistent with our low risk model. That's something we would definitely look at and then yeah on the liquid side I mean, not only our customers plenty sophisticated to look at this I think we're doing a great job with the customer team and Collins group are figuring out ways that we can bring in innovative.
<unk> to them full path right, so and you see that with the number of whether its open seasons in the Gulf coast or our efforts.
Flat again, and et cetera, and obviously the mainline toll agreement. So yes, I think on all fronts, where we see they want a full path and we see they want lots of Optionality and I would I would even include the utilities now in that regard too and look at a place like Ohio, where we've got all of those assets available.
Whether it's renewable gas liquids and you've got data center activity and stuff. So I think we've got the full suite of tools and that's exactly what we're trying to be able to do to benefit them and ourselves and our investors, obviously don't simply a collar.
I think Linda your observations right value chains are getting longer.
We can see that with <unk>, we see that with heavy down at the Gulf. So customers are sophisticated for sure. But there are there are you know that last mile element that is in.
Call it increasingly foreign territory, where we can help navigate that with the facilities or integrated tools think about something like E hot or even something like the seaway docks down in South Texas. Those are incrementally kind of new to the equation over the last couple of years.
Yeah, I would just reinforce the point that we're always looking to listen to what our customers want and having new customers come in on the AI data Center space will look at how we can evolve that but they are very sophisticated and there are other players in that space marketers that can help build out that full.
<unk> Chengdu, but.
Our assets are in great locations and will be well positioned to take advantage of that.
Thank you.
Okay.
Your next question comes from the line of Jeremy Tonet from Jpmorgan. Your line is open.
Hi, good morning.
Morning.
I just wanted to pick up on that last point, I guess a bit more.
<unk> closed the Ohio LDC acquisition.
I'm just wondering if you could talk a bit more I guess on specific opportunities we see for growth in your footprint.
As such as Nexus running through the state and it seems like there is some capacity to expand there and.
The LDC I was just wondering if you could walk us through that a bit more.
Sure.
Starting to take a look at it its been about two months, it's gone really well and.
Ohio is very very well served with its position in terms of having that access and availability of the gas. We also have about <unk>.
<unk> Bcf of storage just in Ohio and of course access to the Dawn hub, we think theres quite a few opportunities. We're also looking for where we have.
Similar customers. So for example, whether that's steel manufacturing, that's using and converting to natural gas in order to reduce their emissions and that sort of thing. So I think we think there are quite a few opportunities.
Speaker Change: The team has been going in pretty deep to look for them remember Jeremy also.
Interesting in that a lot of the growth there isn't so much about load, although we'll see how that goes and got believer in it. It's a lot about replacement too which is structured in their rates and stuff in there. There's a lot of capital to go in that regard so.
Anything incremental on these commercial synergies, we're talking and which we fully expect we'll be able to realize this was not something we had assumed in our acquisition assumptions. So all of that will be upside.
Speaker Change: Got it that's very helpful and as you start to close these LDC acquisitions, just wondering if you could talk a bit more I guess on how you think about your LDC portfolio and if our Agi <unk>.
And then deliver the mechanisms that are as attractive as maybe some of your other jurisdictions I guess the potential two wheel capital around to where you see the best opportunities.
Yeah, absolutely I think it's exactly the same way now with multiple jurisdictions and geographies. The same way, we look at gas transmission on the renewable side and on the liquid side.
We only you only have so much capital a and B, we want to put that capital to work where it attracts the best returns.
I am confident that particularly with the support from the Ontario government in ensuring that consumers have choice that we'll have our opportunities, Ontario, but youre exactly right just given things like population growth and penetration in places like Utah and North Carolina.
That's going to be highly competitive and Fortunately, we've got the resources backing to be able to meet all of those so yes, that's exactly what we want to be able to do and again, we see it on the liquid side as well.
We redeployed a lot of capital into the Gulf Coast, where we Werent and at the same time now we've got egress opportunities, which I'm not sure. Many people were seeing two years ago, but once again the good old mainline in Western Canadian sedimentary basin is proving a robust area and then yes of course on the gas transmission side, whether it's on the on.
The LNG side, a lot of our capital I would say has moved south in the last few years. Eventually in the northeast is going to have to do something and that will create opportunities too so and obviously in and around the great Lakes I mean, it is the benefit of the portfolios are not all jurisdictions are going to be the most attractive at the time, but when you have got assets in 43.
<unk> zinc provinces in five countries, you can make those capital allocation decisions with great discipline.
Got it very helpful. Thank you.
Thanks, Jeremy.
Your next question comes from the line of Robert Kwan from RBC capital markets. Your line is open.
Thank you good morning.
I can just start off.
On the Dominion funding side of things and you made a comment that you expect to exit the deal funded well within the four five to five times I'm just wondering if you can.
Square that up I think at the outset of the deal you were targeting being.
At the midpoint or even in the lower half of the range and just didnt, achieving what I heard the target is now.
Do you think you can do that within the leverage that avoids the usage of the ATM.
Well I think Robert.
Gregg said.
We'll look at all the levers that we have to complete what is really just about 10% 15% of the overall funding for that acquisition.
Really the goal behind in getting some of that big.
A big chunk of that.
Financing done early on in the process will allow us as much flexibility as we have to kind of do what we need to do throughout 2024 to close off the rest of the funding so.
Speaker Change: I think we're really comfortable that we can.
Fund this in a way that maintains our us well within that four five to five times.
So that's how we'll move forward on the funding.
Okay.
As you all.
Also just finished you on capital allocation and just your approach to thinking about your payout.
When you look at your earnings profile.
Really focus more on DCF payout versus earnings payout.
Or the accounting measures that deferred sustainably over the long term.
Versus your view of the true economics underlying your assets and specifically <unk> got about $1 billion of maintenance Capex, how much of that is coming from the gas distribution segment.
So I think about half of the current maintenance capital is coming from the distribution.
It will go up a bit as we acquire these three utilities in the U S. As we go around I think if you're asking kind of what the difference between EPS and DCF as it really is that primarily that difference between depreciation and.
And what we would call maintenance capital, but I think the important thing to know about with our assets of course is that if you maintain your assets appropriately like we believe we do.
<unk> life is almost.
Non ending.
So as a result, you can utilize these assets for a very long period of time. So when we look at our payout what we're really looking at is that cash flow generation and how sustainable that is and therefore make kind of dividend increase decision based on that that's why we've been guiding for a number of years now that we're going to grow that dividend in line with how we grow cash flow. So.
I think cash is king in our mind within this business and so we make sure that Thats sustainable and then we make our dividend recommendations based on that and our plan would be to continue to grow the dividend in line with cash flows.
That's great. Thank you.
Your next question come the line of <unk> Satish from Wells Fargo. Your line is open.
Thanks, Good morning, so as it relates to the funding for the LDC acquisitions, you mentioned the levers that you have but I mean, it looks like Q1 was incrementally strong. So is there a scenario here, where you generate more EBITDA than expected this year, and therefore get to where you need to be from a leverage perspective.
Avoid having to sell more assets or ATM issuance or is it too early to think that just just trying to think through the dynamics there.
Yes, I think it's a little early I think what we're really trying to study this making sure. We've got that maximum flexibility again, we havent come to any inclusions, where you're right very strong quarter.
As you know we've got some seasonality in our in our first quarter in the fourth quarter always much stronger.
What we'll do is as Pat mentioned in his early com.
Commentary I believe that as we get.
The assets in the door here and I expect Youll see this as we announced second quarter.
Gives you a good outlook further for the full economics of the.
The transaction, if you will and what the full year will look like on a fully loaded basis. So I think that'll give you a good view at this time, yes, I mean look we came into the year stronger finished stronger than we thought we've started the fourth the first quarter stronger than than a lot of people were looking for and we.
Felt we would have a strong start and I believe we've been able to execute both on the funding to date and in getting these assets in the house.
Much quicker than we thought from the energy fundamentals perspective, I've mentioned some of the things going on the gas side.
I think you got to give it to us that the <unk> team had been bang on their expectations of what would happen with volumes and stuff and we're now in those so yes optimistic start to the year, but we will come back and talk to you in August exactly how the full year will look.
Okay, that's very helpful.
And then on Gray oak so.
See the open season started there do you think producers, though or are waiting to see the outcome of some of these potential offshore.
The LCC docs like spot before committing more barrels to corpus and then I guess just broadly how do you think about the risks to your corporate footprint, if one of those offshore projects get sanctioned.
Maybe how much of your volume flowing into Ingleside is is backed by take or pay contracts.
Yeah. Thanks for the question so as you know.
The basin is tightening.
<unk> kind of serially here every every quarter.
More production comes on.
And by the way corporates I think is trading at 30 or 40 premium to Houston.
Distance.
Floating advantages. So there is a structural advantage to corpus.
The timing of this open season, and we have found to customers.
It's going to fit fit their pistol.
I think with your question with respect to offshore boys.
I think yes.
That were to go ahead or one of them go ahead I think.
The competitors that would suffer most of the smaller probably Houston based chip channel less economic docks.
Whereas I think the corpus stocks will remain advantaged so.
We see a pretty.
Positive outlook for Gray oak in.
And Ingalls side I think you asked a question about take or pays.
Ingleside is take or pay for us entirely and it's fed by.
And connected to all five types.
From the Permian.
And shippers typically have.
I'll take or pay on that one of them scale, which which we own most of it.
It's basically a take or pay model for us all the way to the dog.
Got it thank you.
Thank you.
Your next question line of Zack <unk> from T. H. Your line is open.
Perfect. Thanks for taking my question guys just to follow up on Gray oak when that open season wraps.
How fast will that volume come online.
Yeah. Thanks, So open season scheduled to close June 28.
And we will.
Bringing the capacity on in two tranches two thirds of it.
In the second quarter of 2025.
They're a piece of it.
A number of months later so.
That's how we see it coming on relatively quickly.
It's a very capital efficient low multiple.
Expansion, perhaps mostly drag reducing agents.
A couple of tanks.
Pretty executable.
Perfect that makes sense and then maybe flipping to the gas side on your Venice project.
You guys delivered a little bit of gas to the Gator Express pipeline, maybe an update on the timeline for that facility or that project to be online.
Yeah. Thanks for the question Zack.
It's under construction now and we're working to get that in by the end of the year.
Perfect Thats, all I had thanks guys.
Thanks, Eric.
Your next question comes from the line of Patrick Kenny from National Bank Financial Your line is open.
Thank you and good morning, everybody.
Just maybe on your power business on the back of the tenancy rich line expansion.
As you talked about this new demand profile for more reliable base load capacity, whether it's from.
From data centers or other industrial customers I'm curious if you might be open to integrating combined cycle or other gas fired opportunities now within your power segment.
Assuming you can maintain your your long term utility like contracted profile.
Hey, Pat it's Matthew Thanks for the question, it's not really on our radar to expanded a gas fired right now.
We.
We think that Youre right that the data centers and a lot of these customers, obviously want reliable 24, seven power, but they also want the renewable credits. So youll see gas fired will be I think a real important part.
Meeting this increased electricity demand, but but so will renewable and then the customer will take sort of that combined bundled $24 seven power plus Rex off.
The grid. So we're very focused on building out as we talked at our Investor day, our our late stage projects that.
That have interconnection agreements.
And we will work with the gas fired and obviously with with Cynthia's business in order to to make sure our customers get the product that they need I think longer term.
Youre right there is a potential.
Fourth potential for gas fired but again, we're not really focused on it right now and it would have to.
It would have to meet our commercial model utility like contract, but again not a focus right now probably the biggest pop youre going to see from power generation on the gas side will be incentives business and remember a lot of gas fired generation is still 50%, 60% utilization could definitely go up.
A lot of gas fired generation does not have long term contracts that could happen.
And yes, because typically it's been a it's been.
We haven't had as long of utilization full year for the pipelines now we do so there is probably going to be a requirement for some of the gas fired generation folks to firm up and that is around storage as well, but yes, we'll keep our eyes open and I don't think there's any doubt.
Speaker Change: Electricity demand is going up.
Yeah, that's great and Greg maybe just to follow up on your comments around gas storage.
Speaker Change: Just curious in light of the extreme cold of west here in the quarter and perhaps a view towards more.
Extreme highs and lows in terms of temperatures going forward.
If you are seeing incremental demand from customers for more storage capacity.
And how youre thinking about this opportunity from a brownfield green.
Greenfield or perhaps M&A standpoint.
Speaker Change: Yes, maybe taking your last one first.
We did I think the team was on it and ahead of the game when we picked up assets on the storage side last year, both trace in Aitken Creek and others have stepped in there now and yeah, we continue to add additional.
Additional cavern space, where we can from a brownfield perspective, I would say also on the distribution side, we see that and let's not forget a third of our distribution storage in Ontario as market base. So since you want to make any comments on what youre seeing from a pricing or even term perspective, yeah. So we've seen our <unk>.
Contracting prices go up from 100% to 150%. So there's really strong demand for that we're bringing on a little bit or this year with trace Catherine force that will be on by the end of the year, we continue to get inbounds flour.
Looking at what we can do brownfield and even Greenfield I mean, I'd have to be a big demand to get across that and that would take more time, but we will look to optimize the existing structures that we have.
Sure Okay, that's great.
Thanks.
Alright.
Oh I was just going to say on the GDS side, we're seeing very similar things to what Don let Cynthia quoted in terms of not just the re contracting rates, but a lot of customers who previously maybe we're just a couple of years that they were signing up for are going up to four even five years.
Speaker Change: Okay. That's perfect. Thanks again.
Speaker Change: Thanks.
Your next question comes from the line of Manav Gupta from UBS. Your line is open.
Just one question what should we the Capex cadence once you get into this once you close your utility acquisitions, what would be the capex cadence.
Manav Gupta: For 2025 or so.
Yes, we've kind of guided to the fact that we have.
Run rate of $6 $7 billion of growth Capex on an annual basis get a little more capacity than that but we'll be very selective in how we use that so that is our growth capex number that we've been talking about all of which is consistent with equity self financing.
Which is important to us and I know this to investors as well.
Speaker Change: Thank you so much.
That concludes our question and answer session I will now turn the call back over to Rebecca for some final remarks.
Great. Thank you and we appreciate your ongoing interest in Enbridge as always our Investor Relations team is available following the call for any additional questions that you may have once again, thank you and have a great day.
Yeah.
Thank you ladies and gentlemen, we appreciate your participation. This concludes today's conference you may now disconnect.
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