Enbridge Inc. announced its 2022 financial guidance and dividend, and provided an update on its strategic priorities, which will be further discussed at the Company's investor conference in Toronto. A virtual broadcast of the event is also available for registered participants.
• Reaffirmed 2021 full year guidance range for adjusted earnings before interest, income taxes and depreciation (EBITDA) of $13.9 billion to $14.3 billion and distributable cash flow (DCF) per share of $4.70 to $5.00
• Announced 2022 financial guidance for EBITDA of $15.0 to $15.6 billion and DCF per share of $5.20 to $5.50, reflecting midpoint growth of 9% and 10% respectively, relative to 2021 guidance
• 5-7% average annual DCF per share growth outlook extended through 2024
• The Company declared its 27th consecutive annual common share dividend increase, raising it by 3% to $0.86/quarter ($3.44 annually), effective March 1, 2022
• Announced its intent to establish a normal course issuer bid program, allowing for the repurchase of up to $1.5 billion of its outstanding its common shares
• Sanctioned $1.1 billion of new capital projects adding to its organic growth capital backlog, which is expected to drive significant EBITDA generation through 2024
• Up to $6 billion per year of highly visible conventional and low-carbon organic growth opportunities support post-2024 cashflow growth
• Entered into a Memorandum of Understanding with Capital Power to develop a carbon capture and sequestration hub in Alberta
Commenting on the Company's outlook, Al Monaco, President and CEO of Enbridge, noted the following:
"Strong execution of our strategic priorities in 2021 provides a solid foundation for next year and our 3-year outlook. Our assets have been highly utilized, reflecting strong end-user demand and the critical role they play in delivering reliable and affordable energy. Recent global energy shortages have confirmed again that our assets will remain essential, while our early low-carbon energy investments illustrate how our assets will be a bridge to a cleaner energy future.
"Last year, we set new ESG goals to reduce emissions to Net Zero and improve diversity. This year, we've lowered emissions, increased workforce and Board diversity, and integrated our ESG goals into enterprise-wide business plans and compensation to drive future performance.
"This year, we've placed $10 billion of growth capital into service, which will generate significant cash flow growth in 2022. This is also expected to drive our leverage metric to the lower end of our 4.5-5.0x debt-to-EBITDA target range, providing us with additional financial capacity to grow the business. Going forward, our value proposition will continue to emphasize a strong balance sheet and return of capital to shareholders.
"We are pleased to be growing our 2022 dividend by 3%, marking our 27th straight year of increases. This is consistent with our objective to grow dividends ratably up to the level of our medium-term average annual DCF per share growth outlook of 5 to 7% (through 2024), while targeting the midpoint of our payout range of 60-70%.
"We've also announced our intent to file a notice of intention to make a normal course issuer bid before year end. Implementing a normal course issuer bid will provide flexibility to repurchase up to $1.5 billion of our common shares and create an additional avenue to supplement the return of capital to shareholders, while increasing per share earnings and distributable cash flow.
"One of our mantra's at Enbridge is the disciplined deployment and allocation of capital. Looking forward to our 3-year planning horizon, we expect to have $5-6 billion of annual investment capacity, of which $3-4 billion is prioritized to core low capital intensity and utility-like investments. The remaining $2 billion will be deployed to the next best alternatives and benchmarked against share repurchases.
"Our organic growth will be focused on enhancing existing asset returns, modernizing our assets, and low capital intensity opportunities within our conventional businesses to serve growing domestic and export market demand. We also plan to continue to invest in low-carbon opportunities that leverage our existing assets and provide a platform for future growth.
"Today's announcement of $1.1 billion of newly sanctioned growth projects, along with the $1 billion announced earlier this year, demonstrates the size and quality of our opportunity set, and how we're advancing our growth strategies across the business.
"We're confident that our assets will be an integral source of energy supply for decades to come and are excited by the future low-carbon investment opportunities that we see. Through 2024, our secured capital program along with embedded revenue escalators and continued focus on productivity improvements provide us with confidence that we can grow DCF per share by 5-7% per year on average.
"We believe that our strategic plan continues to provide investors with a compelling total shareholder return value proposition, which combines highly predictable cash flows, an attractive organic growth outlook and a ratable return of capital to shareholders."
Strategic Priorities and Three-Year Financial Outlook
The Company's 2022 Strategic Plan priorities continue to reinforce the resilience, longevity and organic growth potential of its cash flows over the long-term. Enbridge's 3-year plan priorities include:
• Ensure safe and reliable operations while providing cost-efficient transportation solutions for Enbridge's customers;
• Execute on ESG goals to lower emissions and increase workforce diversity;
• Maintain sector leading balance sheet strength and financial flexibility
• Maximize asset returns and deliver on the secured capital program, to drive cash flow growth through 2024;
• Disciplined investment of $5-6 billion of investment capacity to maximize shareholder value, prioritizing low-capital intensity and utility investments.
2022 Financial Outlook
Enbridge is providing 2022 guidance for EBITDA of $15.0 billion to $15.6 billion and DCF per share of between $5.20 to $5.50 per share.
Performance drivers in 2022 include: continued volume recovery on the Liquids' Mainline System; a full year of the full Line 3 Replacement surcharge; a full year contribution from the Ingleside Energy Center acquisition; contributions from Gas Transmission projects brought into service in 2021; customer additions in the gas utility; and continued but moderating losses in Energy Services.
Separately, Enbridge announced that the quarterly dividend for 2022 will be increased from $0.835 to $0.86 per share, commencing with the dividend payable on March 1, 2022, to shareholders of record on February 15, 2022.
New Sanctioned Growth
Today, the Company announced that it has sanctioned $1.1 billion of new capital projects adding to its organic growth capital backlog, which is expected to drive EBITDA generation through 2024, consistent with its low-risk commercial model. The announcement includes:
• $0.5 billion expansion to the Valley Crossing Pipeline to serve 0.72bcf/d of natural gas supply to the proposed Texas LNG export facility in Brownsville, Texas, subject to a final investment decision on the export facility;
• $0.3 billion Dawn-to-Corunna expansion of the Dawn to Parkway system, ensuring reliable regional natural gas supply;
• $0.2 billion investment in six new solar self-powering facilities across the liquids and natural gas pipelines, which will generate strong equity returns and lower emissions, and
• $0.1 billion floating offshore wind project off the southern coast of France, reflecting the Company's commitment to renewable leadership and innovation.
Memorandum of Understanding with Capital Power
Last week, Enbridge and Capital Power agreed to jointly evaluate and advance a carbon capture and sequestration (CCS) project, with Enbridge as the transportation and storage service provider and Capital Power as the CO2 provider, subject to the Government of Alberta's competitive carbon hub selection process and a future final investment decision.
The proposed project would serve Capital Power's Genesee Generating Station near Warburg, Alberta which currently provides over 1,200 megawatts of baseload electricity generation to Albertans. Capital Power is currently repowering the Genesee 1 and 2 units, to create North America's most efficient natural gas combined cycle power generation units, positioning it to deliver reliable and affordable electricity for generations to come. The Genesee CCS Project is expected to capture up to 3 million tonnes of CO2 annually from the repowered units, which would be transported and stored through Enbridge's Open Access Carbon Hub that could also serve several other local industrial companies. Subject to the award of carbon sequestration rights and regulatory approvals, the proposed project could be in service by late 2026 or early 2027.
Normal Course Issuer Bid
The Company intends to file a notice of intention to make a normal course issuer bid by the end of the year to repurchase up to $1.5 billion of its common shares.
The establishment of a normal course issuer bid is intended to supplement the Company's dividend program. Repurchases made pursuant to the Company's normal course issuer bid are expected to be opportunistic and will be predicated upon maintaining a strong balance sheet and the availability and attractiveness of alternative capital investment opportunities.