Enbridge Inc. · TSX:ENB
Enbridge — Investor Presentation (October 2011)
54 slides from Enbridge's investor presentation, October 2011
Slide 1: Investment Community Presentation
Investment Community Presentation October 2011 Investment Community Presentation 1 October 2011
Slide 2: Legal Notice
Legal Notice This presentation includes certain forward looking information (FLI) to provide Enbridge shareholders and potential investors with information about Enbridge and management's assessment of its future plans and operations, which may not be appropriate for other purposes. FLI is typically
Slide 3: Proven Investment Value Proposition
Proven Investment Value Proposition Proven formula with substantial valuation upside Visible Growth Reliable Growing Business Income Model Stream • Visible Growth $10+ Billion of projects placed into service in 2009/2010 $9.5 Billion of commercially secured projects to come into service by 2015
Slide 4: Significant Value Creation
Significant Value Creation Total Return Index Compound Average Dec. 1999 = $100 Annual Return $700 17.9% $600 $500 $400 $300 $200 5.1% $100 $0 Dec-99 Sep-11 Enbridge S&P/TSX Composite Index Note: Returns incorporate the reinvestment of dividends • Outperformed TSX by over 12% per year on average • S
Slide 5: Strategic Position
Strategic Position Norman Wells Zama Fort McMurray Edmonton Hardisty Quebec City Clearbrook Montreal Portland Superior Toronto Casper 2010 Toronto 2010 Salt Lake City Chicago Adjusted Adjusted Patoka Earnings Earnings Cushing 16% Houston 65% Liquids Gas Distribution Wind Power Generation Solar Power
Slide 6: Dominant Transporter of Canadian Crude Oil to the US
Dominant Transporter of Canadian Crude Oil to the US US Imports 20101 MMbpd Canada 2.0 Enbridge 1.1 Others2 0.8 Mexico 1.1 Saudi Arabia 1.1 Alberta Oilsands Nigeria 1.0 Fort McMurray Venezuela 0.9 Trans Mountain Edmonton 11% Hardisty Enbridge Iraq 0.4 W Corridor 67% Angola 0.4 6% Express Colombia 0.
Slide 7: Liquids Pipelines Recently Completed Growth Projects
Liquids Pipelines Recently Completed Growth Projects Regional Infrastructure Cost Fort McMurray Mainline Expansions Southern Access Expansion C$ 2.4B Edmonton Alberta Clipper C$ 3.7B Hardisty Line 4 C$ 0.3B Kerrobert Regional Pipelines Regina Waupisoo C$ 0.6B Cromer Athabasca C$ 0.2B Gretna Mainline
Slide 8: Alberta Regional Infrastructure
Alberta Regional Infrastructure Existing Suncor Athabasca Waupisoo (Firebag) Pipeline Pipeline Suncor (MacKay River) Service to Hardisty Edmonton Fort Opti-Nexen Opti-Nexen Current McMurray (Long Lake) (Long Lake) Capacity 325 320 Cheecham Terminal (kbpd) ConocoPhillips (Surmont) Ultimate Cenovus Ca
Slide 9: Alberta Regional Infrastructure Secured Expansions – Project Details
Alberta Regional Infrastructure Secured Expansions – Project Details Capital Full Life In- Upside from 3rd Return Project Expenditure Equity Capital Cost Risk Service Party Volumes Profile ($ millions) Return Christina Lake low to mid 250 Q3 2011 N/A Tilted Partial – Shared Expansion teens Woodland
Slide 10: Liquid Pipelines Growth Opportunities: Bakken
Liquid Pipelines Growth Opportunities Bakken Regional Infrastructure 1,800 1,800 Enbridge Mainline System Other Proposed Rail Export Projects 1,600 1,600 Alliance Pipeline 1,400 1,400 Saskatchewan Saskatchewan System (ENF) North Dakota System (EEP) 1,200 1,200 Bakken Expansion Project 1,000 Other Pr
Slide 11: New Market Access: East and Gulf Coast
New Market Access East Montreal Westover 3 Sarnia 2 Chicago/ Flanagan 1 Future Opportunities 1. Line 17 expansion to Toledo 2. Line 9A reversal to Westover 3. Access markets in Montreal and beyond • Total potential capital ~$1B New Market Access Gulf Coast Chicago/ Flanagan 2 2. Spearhead Twinning •
Slide 12: New Market Access: Mainline Expansion and Northern Gateway
New Market Access Mainline Expansion Requirements Clearbrook Enbridge Liquids System Superior Alberta Clipper Expansion Line 5 Expansion Southern Access Expansion Sarnia Line 62 Twin Toledo Line 6B (36” GT to SK) replacement Chicago Flanagan Line 6B (30” SK to SA) replacement Patoka • Total potentia
Slide 13: Gas Distribution
Gas Distribution EGDI Historical ROE 12% 10% 8% ROE % 6% 4% 2% 0% 2001 2003 2005 2007 2009 Allowed ROE Incremental Utility ROE under IR Enbridge Gas Distribution Inc. • Largest Canadian gas distribution franchise • 1.9 Million Customers Adding 30,000 – 50,000 customers each year • 2011 – 4th year
Slide 14: Gas Transportation and Processing
Gas Transportation and Processing Asset Positioning and Strategic Priorities Establish Canadian Capitalize on Midstream Position Alliance & Vector Fort St. John Fort McMurray Attract liquids-rich Edmonton gas Regina Montreal Toronto Chicago Salt Lake City Expand NGL Position ENB Gas Pipelines Optimi
Slide 15: Enbridge Offshore
Enbridge Offshore Near & Medium Term Growth Opportunities • Leverage footprint to capture new gas export opportunities • Capture related oil pipeline opportunities Tubular Bells • Commercial terms to be consistent with traditional business model Kaskida Big Foot • Advantages Tiber Lucius Stones – Pr
Slide 16: Green Energy Footprint
Green Energy Footprint Secured Renewable Capacity (MW) 900 600 300 0 2005 2006 2007 2008 2009 2010 2011 • Green Energy business fits Enbridge’s risk/return profile • Shareholder approval obtained to transfer $1.23B of assets (identified below) to Enbridge Income Fund Holdings to maximize capital eff
Slide 17: Green Energy Business Model
Green Energy Business Model Risk Category Green Energy Capital Cost Risk Fixed price EPC contracts Market Price Risk Long-term fixed price PPA’s Volume Risk Limited Counterparty Credit Risk Low – Regulated Power Authorities Operating Cost Risk Low – Fixed price O&A agreements Return on Equity Low to
Slide 18: Extensive Attractive Investment Opportunities
Extensive Attractive Investment Opportunities $48 Billion Growth Capital Investment Opportunity Set 30 Risked Development Success (2011 – 2015) Commercially Secured (2011 – 2015) 20 $ Billions 10 0 Liquids Pipelines Gas Pipelines & Electric Power, Gas Distribution Processing International & Other Un
Slide 19: Reliable Business Model
Reliable Business Model Price & Volume Risk High El Paso ONEOK Price Spectra Risk TransCanada Enbridge Low Low Volume High Risk Source: Goldman Sachs Research • Volume Risk 85% of earnings come from rate regulated businesses 60% of the remaining earnings come from long term take-or-pay contracts
Slide 20: Financial Strength & Flexibility
Financial Strength & Flexibility Strong Investment Grade Credit Ratings Agency Unsecured Debt DBRS A (low) Enbridge Inc. S&P A- Moody’s Baa1 DBRS A Enbridge Pipelines Inc. S&P A- DBRS A (mid) Enbridge Gas Distribution Inc. S&P A- DBRS BBB Enbridge Energy Partners S&P BBB Moody’s Baa2 DBRS BBB (high)
Slide 21: Continued Industry Leading EPS Growth
Visible Growth Continued Industry Leading EPS Growth $3.00 CTS CTS $0.00 2010 2015e Note: Adjusted EPS • 2009 EPS: $1.18 – 25% higher than 2008 • 2010 EPS: $1.33 – 13% higher than 2009 • 2011 Guidance Range: $1.375 - $1.475 • 10% Average EPS CAGR forecast into the middle of this decade • 10 year Com
Slide 22: Growing Income: Dividend Growth
Visible Growth Income 16% 12% Dividend Growth CAGR 11.3% 10.4% 8% 4% 0% 2001-2006 2006-2011 2010-2015 • Range of dividend growth rates for 2010-2015 assumptions: o Low end: maintaining payout rates at midpoint of target range (60-70% of earnings) o High end: payout increase underpinned by cash flow
Slide 23: Summary
Summary • Reliable business model • Prolific attractive investment opportunities • Strong balance sheet • Advantageous cost of capital • Exceptional and transparent EPS growth • Dividend growth upside based on cash flow strength • Substantial valuation upside Investment Community Presentation 23 Oct
Slide 24: Appendix: Liquids
APPENDIX: LIQUIDS 24 Investment Community Presentation October 2011
Slide 25: Oil Sands Growth
Fundamentals Oil Sands Growth 5.0 2011 CAPP Forecast 4.0 2011 Enbridge Forecast Synthetic Light Million barrels per day 3.0 Synthetic Heavy SynBit 2.0 Dilbit 1.0 Conventional Light Conventional Heavy 0.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: CAPP June 2011 forecast, Enbridge 2011
Slide 26: Oil Sands Cost Curve; Recently Completed Growth Projects
Oil Sands Cost Curve Source: Goldman Sachs Research Liquids Pipelines Recently Completed Growth Projects Capital Expenditure Full Life Equity Project In-Service Volume Risk Capital Cost Risk Debt/ Equity ($ billions) Return Mainline Expansions Southern Access Expansion U.S. * US $2.1 2009 12% floati
Slide 27: Mainline Competitive Position
Mainline Competitive Position Post Keystone XL Pricing Equilibrium Edmonton Hardisty $98.65 Net Price (Chicago) $93.20 Net Price (Gulf Coast) Chicago $102.50 Gulf Coast $100* * Maya Heavy Crude – Pricing as at March 2011 PADD II (US Midwest) will remain the premium market for Canadian heavy crude oi
Slide 28: Contract Terminaling & Storage
Projects Under Development Contract Terminaling & Storage Existing Terminals • Athabasca – 4.1 mmbbls • Hardisty – 10.6 mmbbls • Patoka – 0.5 mmbbls • Cushing – 14.9 mmbbls • El Dorado – 1.2 mmbbls Potential Terminals • Superior • Flanagan 28 Investment Community Presentation October 2011
Slide 29: Pipeline Safety & Integrity
Pipeline Safety & Integrity Number of spills Barrels released per 1000 miles of pipe per billion barrel-miles 1 12 10.7 0.79 0.45 4.3 0 0 Enbridge Industry Enbridge Industry Source: U.S. Department of Transportation Top 10 Enbridge Mainline Shippers BP ExxonMobil Flint Hills Imperial Oil PDV Midwest
Slide 30: Appendix: Natural Gas
APPENDIX: NATURAL GAS 30 Investment Community Presentation October 2011
Slide 31: Why Natural Gas?
Why Natural Gas? • Abundant, low cost supply US Natural Gas Proven Reserves • Highly responsive to demand 300 • Preferred fuel for generation 250 – Intermediate / Peak load capacity 200 – Load balancing for renewables – Siting advantages Tcf 150 • Clean 100 50 0 Source: EIA, Enbridge Positive Supply
Slide 32: Positive Shale Gas Economics
Positive Shale Gas Economics Enbridge is positioned in low cost, prolific natural gas basins $6 Average Development Breakeven* Enbridge infrastructure served shale plays $5 (US$/mcf) $4 $3 $2 * Breakeven: NYMEX price needed to cover costs from drilling to market, including a 10% equity IRR and basis
Slide 33: Shale Production Forecast; Gas Transportation
Shale Production Forecast Supply from major North American shale plays is expected to grow by 100%+ in the next five years. 30 25 20 bcfd 15 10 5 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: Wood Mackenzie Gas Transportation West to East Pipeline Corridor Alliance: • Fully contra
Slide 34: U.S. Gathering & Processing; Natural Gas Storage
U.S. Gathering & Processing • Focused on gathering, processing, treating and transportation in 3 prolific producing regions • Positioned for growth in the Shales & Granite Wash Texas Shales 16 Anadarko Basin Granite Wash Haynesville 12 Shale bcf /d 8 Fort Worth Basin 4 Barnett Shale 0 2009 2014 2019
Slide 35: Appendix: Green Energy
APPENDIX: GREEN ENERGY Investment Community Presentation 35 October 2011
Slide 36: Wind and Solar Strategy
Wind and Solar Strategy • Establish a sustainable Green energy business • 10 –15% earnings contribution over time • Achieve risk adjusted returns consistent with other Enbridge businesses • Establish beachhead for other electricity investments Green Energy Drivers • State/Provincial Legislation – Re
Slide 37: Green Energy Areas of Focus
Green Energy Areas of Focus • Target Regions – Strong wind/solar resources – Attractive, long-term PPAs – Supportive Green Energy policies – Good transmission access – Expansion opportunities RPS Target States State Amount Year Colorado 30% 2020 Illinois 25% 2025 Michigan 10% 2015 Minnesota 25% 2025
Slide 38: Sarnia, Amherstburg and Tilbury Solar
Sarnia Solar • Largest PV solar facility in the world Project Information Capacity 80 MW Thunder Bay Sarnia Solar Project Construction Fixed Price EPC contract Toronto Energy Purchaser OPA (20 year fixed price PPA) Phase 1 (20 MW) Completed Completion Phase 2 (60 MW) Q4 2010 Operating and Fixed Pric
Slide 39: Talbot Wind and Greenwich Wind
Talbot Wind • Recently brought into service Project Information Capacity 100 MW Thunder Bay Construction Fixed price EPC contract Toronto Energy Purchaser OPA (20 year) Talbot Wind Project Completion December 2010 Operating and 5 year operating & Maintenance maintenance contract Capital Cost $285 mi
Slide 40: Cedar Point Wind; Waste Heat Recovery & Fuel Cell
Cedar Point Wind • Cedar point is one of the largest utility scale wind farms in North America Project Information Capacity 252 MW Construction Fixed price EPC contract Energy PSCo (20 year fixed price Purchaser PPA) Completion Late 2011 Operating and 5 year fixed price operating & Maintenance maint
Slide 41: Carbon Dioxide Areas of Focus
Carbon Dioxide Areas of Focus • CO2 Components – Transportation – Slurry transportation – Sequestration Fort St. John Fort McMurray Edmonton Hardisty • Geography – Alberta Montreal – Saskatchewan Superior Portland Toronto • Economics Salt Lake City Chicago – Tariffs similar to Patoka hydrocarbon tra
Slide 42: Appendix: Finance
APPENDIX: FINANCE 55 42 Investment Community Presentation October 2011
Slide 43: Projects Under Construction; Funding Requirements
Projects Under Construction In-Service Dates and Capital Costs Waupisoo $0.6 billion Ontario Wind $0.5 billion Southern Access Expansion $2.4 billion Line 4 $0.3 billion Spearhead Expansion $0.1 billion Contract Terminaling $0.9 billion Sarnia Solar $0.4 billion Alberta Clipper $3.7 billion Southern
Slide 44: Capital Management for Shareholder Value
Capital Management for Shareholder Value Avoidance of substantial/recurring equity issuances, especially at prices below internal valuation. Enbridge 5 Year Capex Program and Associated Equity Issuances / Asset Sales $4 $ Billions $0 2006 2007 2008 2009 2010 Capex Equity Issued Asset Sales Sponsored
Slide 45: Sponsored Vehicle Return Supercharger; DCF Valuation
Sponsored Vehicle Return Supercharger Typical infrastructure investment project returns Pro Forma Return on Equity 1. Project Level Return 12% 2. Enbridge Corporate Return 14% 3. Through EIF – 25% ENB Participation 20% 4. Through EEP – 25% ENB Participation 24% Discounted Cash Flow Valuation of 2011
Slide 46: ENB Analyst Estimates – October 2011
ENB Analyst Estimates – October 2011 2011e Growth Target Analyst Company EPS 2011e vs. 2010a Price Rating Richard Gross Barclays $1.43 7.5% $32.00 Hold *Analyst Transition* BofA / Merrill Lynch N/A N/A N/A N/A Carl Kirst BMO $1.46 9.8% $33.00 Hold Juan Plessis Canaccord $1.45 9.0% $35.00 Hold Paul L
Slide 47: Appendix: Enbridge Energy Partners
APPENDIX: ENBRIDGE ENERGY PARTNERS Investment Community Presentation 47 October 2011
Slide 48: EEP Investment Thesis
EEP Investment Thesis Annual Distribution $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 2010e 2012e 2013e 2004 2005 2006 2007 2008 2009 2011e Chicago Wood River Patoka Cushing Houston EEP Liquids Systems EEP Gas Systems EEP Low Risk Business Model EBITDA Gross Margin Hedged 100% 90% 80% 70% Natura
Slide 49: Shale Plays Production Forecast; Texas Gathering and Processing
Shale Plays Production Forecast 25 Barnett Fayetteville 20 Woodford Haynesville Marcellus 15 Bcf/d 10 5 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Supply from US Shale Plays is expected to almost double in the next five years Source: Wood Mackenzie Texas Gather
Slide 50: Gathering & Processing – Elk City Acquisition; East Texas Expansion
Gathering & Processing – Elk City Acquisition • Capitalizes on growth of liquids rich gas in the Granite Wash • Synergies with existing Anadarko system Texas Oklahoma East Texas Expansion • Expansion taps growth in Haynesville gas shale • 0.9 bcf/d of gathering Texas capacity • $152 million spent in
Slide 51: Appendix: Other Information
APPENDIX: OTHER INFORMATION Investment Community Presentation 51 October 2011
Slide 52: Enbridge Inc. - History
Enbridge Inc. - History ENB Toronto (TSX) New York (NYSE) Established 1949 – incorporated as Interprovincial Pipe Line (IPL) 1953 – became a publicly traded company 1988 – acquired Home Oil Company Limited and was renamed Interhome Energy Inc. 1991 – Home Oil became a separate publicly traded compan
Slide 53: Asset Ownership; Enbridge Securities
Asset Ownership Norman Wells Zama Fort St. John Fort McMurray Edmonton Hardisty Regina Seattle Saint John Clearbrook Superior Montreal Ottawa Portland Toronto Buffalo Casper Sarnia Toledo Chicago Salt Lake City Patoka Wood River Cushing Enbridge Inc. Enbridge Energy Partners Enbridge Income Fund Hou
Slide 54: Non GAAP Reconciliation
Non GAAP Reconciliation 2010 Segmented Earnings Gas Pipelines, Liquids Gas Processing and Sponsored $ millions Pipelines Distribution Energy Services Investments Reported Earnings 512 155 121 137 Adjusting Items 0 12 2 72 Adjusted Earnings 512 167 123 209 Note: Operating segment earnings, excludes C