Enbridge Inc. Q3.26 Earnings Call - ENBRIDGE ENERGY PARTNERS LP

Explicit Guidance:

• FY 2026: Reaffirmed guidance with expectations to finish at the midpoint of the range; 21st consecutive year of achieving full-year guidance.
• Capital Investment (Sanctioned): Targeting up to $20 billion in sanctioned projects for 2026–2027; backlog has increased 50% since the last investor day.
• Long-Term Growth: Anticipating 5% annual growth through the end of the decade.
• Dividends: Expecting $40–$45 billion in total shareholder returns via dividends over the next five years (following $39 billion returned in the prior five years).
• Balance Sheet Metrics: Maintaining a target debt-to-EBITDA ratio of 4.5x–5.0x; Q3 2026 ratio was 5.1x driven by FX, expected to remain within target on a run-rate basis as acquisitions close.
• Capital Allocation: Continuing equity self-funding of the organic growth backlog; annual investment base of $10–$11 billion, with flexibility added via capital recycling (KKR/Apollo JV) and $3 billion equity offering.
• Specific Project Timing: Long Lake expansion costing $200 million entering service in 2028; BC pipeline toll settlement expected by year-end or early 2027; Enbridge Gas Ohio rate case increases to be effective in early 2027.

Business-Segment Outlook:

• Liquids Pipelines: Anticipating significant growth in Western Canadian Sedimentary Basin (WCSB); updated prediction for supply growth out of western Canada to reach 1 million barrels by 2035 (potentially too low). Expecting continued expansion of Alberta regional oil sands assets, diluent supply, and carbon sequestration/transportation. Mainline system operating at or near capacity with steady volume increases; confidence in capacity growth alongside supply.
• Gas Transmission: Expecting strong demand across North America (BC, US Northeast, US Southeast, Gulf Coast) driven by LNG and power generation. 90 BCF of natural gas storage projects already sanctioned. Texas Eastern seeing strong customer demand for incremental capacity. West Coast toll settlement expiring year-end with new agreement targeted for early 2027. US Northeast and Midwest utility franchises seeing robust opportunities beyond initial 2023 forecasts.
• Gas Distribution & Storage (GDS): Expansion of natural gas supplies in Utah (Laramie acquisition) to improve affordability. Wyoming and Ohio rate cases progressing with expected effective dates in early 2027. Growth in franchise areas driven by population growth and power demand.
• Renewable Power: Portfolio exceeds 8 gigawatts with >2 gigawatts under construction, including 1.4 gigawatts for Meta. Focus remains on disciplined, customer-backed growth with hyperscalers and blue-chip customers.

Market and Competitive Outlook:

• Demand Trends: Population growth, manufacturing investment, and electrification driving rising power and energy infrastructure demand globally and in North America. Natural gas remains a top growth area due to power, industrial, and LNG needs.
• Supply & Infrastructure: North American resources increasingly vital to global energy security, supporting oil and LNG export demand. Significant egress opportunities for WCSB beyond MLO1, with Flanagan South open season completed and Southern Access Extension trending toward FID by next quarterly call.
• Pricing & Rates: Expecting higher returns on new gas transmission projects (e.g., BC assets) while maintaining competitive tolls for customers. Ohio utility rates remain the lowest cost-to-serve, providing a competitive commodity advantage.
• Share Shifts: Enbridge views itself as the "partner of choice" across crude, gas, utility, and renewables, leveraging scale to capture growth regardless of governance or commodity cycles.

Macro / Industry Outlook:

• Economy & Energy Security: Macro backdrop described as "very constructive," with demand for reliable/affordable energy growing. North America's role in global energy security is strengthening.
• Policy & Regulation: Canada's policy alignment expected to provide certainty for WCSB growth; improved market in Canada expected following government actions. US jurisdictions (e.g., Ohio, Massachusetts) showing pragmatism and support for infrastructure to meet data center and power demands.
• Geopolitics: Strategy emphasizes resilience across different governance stripes ("all-of-the-above" energy), positioning to win regardless of political changes.
• Interest Rates: Acknowledges higher US interest rates as a headwind impacting outlook, partially offset by strong commercial execution.

Strategic Initiatives:

• Acquisitions (Liquids): Completed acquisition of Tallgrass's crude transportation business (Pony Express, Powder River Gateway) and Salt Creek Midstream gathering assets to expand Permian and Rockies footprint.
• Acquisitions (GDS): Agreement to acquire Laramie Energy's gas assets to support Enbridge Gas Utah.
• Joint Ventures: Closed $2.7 billion JV with KKR and Apollo for financial flexibility; closed $3 billion common equity offering.
• Project Sanctions: Long Lake expansion (2028 service), Aspen Point (in service), Flanagan South (open season closed), Trace Palacios storage expansion (25 BCF/day), Bay Runner pipeline (mechanically complete).
• Succession: Greg Ebel retiring end of 2026; Michelle Heritage appointed CEO effective January 1st, 2027.
• Carbon & Emissions: Developing carbon pipe solutions for the oil sands region with indigenous partners.

Risks and Headwinds to Outlook:

• Macroeconomic: Exposure to higher US interest rates impacting financing costs.
• Market Dynamics: Lower liquid market access contributions due to high PAD2 utilization and market pricing dynamics; reduced throughput on Flanagan South.
• Regulatory & Policy: Policy uncertainty in Canada affecting upstream mainline investment timing (e.g., MLO2 sequencing); reliance on regulatory approvals for rate cases and asset acquisitions.
• Construction & Execution: Potential construction challenges on specific projects (e.g., Tennessee Ridgeline); volume risk on greenfield projects (though focus is on brownfield/contracted assets).
• FX Sensitivity: CAD/USD spot rate spikes can impact leverage ratios (e.g., Q3 2026 ratio driven to 5.1x).

Management Tone on the Future:

• Confidence Level: Highly confident in the "all-of-the-above" strategy, the $38 billion backlog, and the ability to deliver reliable results amid macro uncertainty.
• Continuity: Michelle Heritage emphasizes grounding future strategy in historical discipline, safety, and reliability, promising to maintain dividend aristocrat status and low-risk growth.
• Strategic Shift: Transitioning from "crawl-walk-run" to "run" in the Permian and WCSB, with a focus on integrating acquisitions to build "super systems" and optionality.
• Optimism: Describes the industry outlook as "increasingly constructive," with a belief that current production growth forecasts for 2035 may be conservative.

Miscellaneous:

• ESG/Sustainability: Strong alignment with Indigenous partners in oil sands and carbon pipe projects; focus on affordable energy as a key ESG differentiator.
• Leadership Transition: Greg Ebel cites four completed priorities (customer focus, investor experience, geographic expansion, succession) before retiring; confident in the board and successor team.
• Data Center Impact: Recognizing data centers as a significant growth driver in Ohio (10 GW opportunity), but viewing it as a "gravy" component on top of a $4 billion modernization program.