Tres Palacios also owns an integrated 62-mile natural gas header pipeline system, with eleven inter and intrastate natural gas pipeline connections, including Enbridge's Texas Eastern Pipeline
Enbridge announces $3.3bn new accretive investments. (Credit: Verne Equinox/Wikimedia Commons)
Enbridge Inc. (Enbridge or the Company) (TSX: ENB) (NYSE: ENB) is providing an update on its strategic priorities and financial outlook, which will be further discussed at the Company’s investor conference today in Toronto. A virtual broadcast of the event is also available for registered participants.
Highlights
- Four growing businesses with best-in-class first-choice franchises
- Visible $3+ billion of annual investment in natural gas infrastructure, $1+ billion in liquids infrastructure, and $1+ billion in renewable power generation
- New Energy Technology team advancing contracted infrastructure in Renewable Natural Gas (“RNG”), Carbon Capture and Sequestration (“CCS”) and Hydrogen in the U.S. and Canada
- Expected average annual growth rate of 4%-6% in EBITDA and earnings per share (“EPS”) and ~3% DCF per share over the 2022-2025 Plan period
- Expected average annual growth rate of ~5% post 2025 for EBITDA, DCF and EPS
- Internally generated financial capacity for investment after dividends of ~$6 billion per year on average over the Plan period, while maintaining a strong balance sheet
- Announced $3.3 billion of new accretive investments including:
- Adding $2.4 billion of new gas transmission modernization and utility capital to our secured capital program which will be added to rate base and drive earnings and cash flow growth
- Announced the intention to undertake a binding open season for up to 95 kbpd on our Flanagan South Pipeline system (“FSP”) which is expected to begin in March
- In combination with the FSP open season, Enbridge today announced plans to construct the Enbridge Houston Oil Terminal (“EHOT”) for a capital cost of US$240 million which is expected to have an initial capacity of 2.5 MMbbls of storage with potential to expand capacity up to 15 MMbbls
- Entered into an agreement to acquire 35 Bcf of premium Gulf Coast gas storage assets (“Tres Palacios”) for US$335 million, further supporting our customers and our U.S. Gulf Coast LNG export strategy
- Entered into an agreement to invest US$80 million in a leading RNG infrastructure company – Divert Inc.
- Gas Distribution and Storage is moving forward with a plan to build a pipeline to supply ArcelorMittal Dofasco in Hamilton, Ontario with natural gas, supporting the largest GHG emissions reduction project in the province
CEO Comment
Commenting on the Company’s outlook, Greg Ebel, President and CEO of Enbridge, noted:
“Our asset positions, cost advantages and, increasingly, our ability to deliver integrated conventional and lower-carbon solutions makes Enbridge the first-choice for energy delivery by our customers. Above all, our leading track record on operational safety and reliability differentiates us and will always be our top priority. This relentless focus, along with our premium growth and low-risk business model, also positions us as the first-choice investment opportunity among our peers.
“The world continues to navigate the energy trilemma of reliability, sustainability and affordability and our premier franchises across the energy system increasingly play a critical role in balancing these objectives.
“As we look to the future, absolute energy demand of all types is expected to grow for decades. We continue to build on our integrated ‘super system’ to serve today’s and tomorrow’s growing domestic and export market demand. Our extensive footprint uniquely positions us to capture ongoing growth in conventional energy infrastructure including renewable power, while also playing a leadership role in New Energy Technology investments and the energy transition.
“With today’s announcement of $3.3 billion of new accretive investments, we have further advanced our strategy. This includes expanding our USGC footprint through investments in oil and gas storage and furthering our RNG strategy by investing in Divert Inc., a leading RNG infrastructure company. It also includes another year of modernization on our Gas Transmission systems including the East Tennessee Natural Gas System Alignment Program as well as extending our growth program at our Gas Distribution and Storage business by another year. In combination with the $8 billion of new projects in 2022, our secured backlog now stands at $17 billion across all four businesses and 15 discrete, highly executable projects.
“Through 2025, we expect to grow EPS and EBITDA by a compound annual growth rate (“CAGR”) of 4-6% driven by new contributions from our secured capital program, embedded revenue escalators and continued focus on productivity enhancements. Based on current cash tax assumptions, annual DCF per share growth is expected to grow less rapidly than other metrics, averaging ~3% through 2025. Importantly, this outlook will allow us to comfortably extend our long track record of ongoing annual dividend growth.
“Our financial position has never been stronger, and we expect to continue to have approximately $6 billion of annual investment capacity. We’ll deploy this prudently, maintaining our disciplined capital allocation. We expect the majority will be targeted towards our capital efficient and utility-like investments within our four core businesses but we will continue to maintain the flexibility to execute on other accretive, value-enhancing activities such as tuck-in acquisitions and returning additional capital to shareholders.
“We’re well positioned for the energy transition and our demonstrated leadership on ESG helps to support the base business and future growth. In 2020, we established a number of ESG goals including reducing operational emissions to Net Zero by 2050, and improving the diversity of our workforce, Board and supply chains. Our people have rallied around these commitments and our early results reflect a focus on continuous improvement and alignment across enterprise-wide business plans.
“We believe that our strategic and financial plan continues to provide investors with a first-choice investment opportunity combining highly predictable cash flows, an attractive growth outlook, and a predictable return of capital to shareholders.
“The strength of our core businesses, disciplined approach to capital allocation and strong balance sheet places us in a great position to meet growing energy demand safely, reliably, affordably and sustainably. At Enbridge, Tomorrow is On!”
NEW GROWTH PROJECTS AND INVESTMENTS
Flanagan South Open Season and EHOT construction further export strategy
In support of growth in our Liquids business, Enbridge is progressing negotiations with shippers for incremental contract capacity on the Flanagan South Pipeline system. Enbridge expects to leverage available capacity on FSP to secure up to 95kbpd of commitments through an open season scheduled to be held later this month. Not only would these new volumes increase secured throughput on Flanagan South, they would also secure long-haul demand on the entire Enbridge network out of Western Canada.
In addition, to facilitate the additional commitments on FSP, along with other FSP shippers, Enbridge has decided to proceed with the construction of the Enbridge Houston Oil Terminal for an initial capital cost of $240 million. The greenfield terminal, located adjacent to the terminus of the Seaway Pipeline, will provide shippers with a premier full-service storage terminal primarily focused on heavy crude. The facility will have access to the Houston region refining complex and export opportunities through the Seaway docks at Freeport and Texas City, as well as future access to Enterprise Products Partner L.P.’s Sea Port Oil Terminal (“SPOT”) (subject to that project proceeding). Initial build of EHOT is expected to have 2.5MMbbls of storage, with an ultimate capacity of 15MMbbls once fully built out and will be underpinned by long-term take-or-pay contracts. The terminal will further Enbridge’s U.S. Gulf Coast strategy and create additional optionality for Enbridge and its customers, while further strengthening the Mainline/FSP/Seaway value chain.
Enbridge to acquire Tres Palacios Gas Storage, advancing U.S. Gulf Coast strategy
Enbridge announced today that the Company has entered into a definitive agreement with Brookfield Infrastructure Partners (NYSE:BIP) and Crestwood Equity Partners LP (NYSE:CEQP) to acquire Tres Palacios Holdings LLC for US$335 million. The transaction is expected to be accretive in its first full year of ownership.
Tres Palacios is strategically located in the U.S. Gulf Coast region and its critical natural gas infrastructure serves Texas gas-fired power generation and increasing LNG exports, as well as the growing market need in Mexico. Tres Palacios also owns an integrated 62-mile natural gas header pipeline system, with eleven inter and intrastate natural gas pipeline connections, including Enbridge’s Texas Eastern Pipeline.
Tres Palacios is comprised of three natural gas storage salt caverns with a total FERC-certificated working gas capacity of approximately 35 Bcf, as well as an expansion project in execution for a fourth cavern that will increase working gas capacity by approximately 6.5 Bcf, which is fully contracted and in the permitting phase.
The transaction is expected to close in the second quarter of 2023, subject to receipt of customary regulatory approvals and closing conditions.
Enbridge invests in leading RNG company, Divert Inc.
Enbridge is acquiring a 10% stake in Divert Inc, a leading food waste management company expanding into RNG to help major food retailers manage their waste more sustainably, for US$80 million. The agreement includes further investment opportunities to develop wasted-food-to-RNG projects across the US providing line of site to greater than $1 billion of new capital growth which will be underpinned by long-term take-or-pay contracts.
Enbridge expects to close the transaction in March 2023.
Hamilton Growth Project
Enbridge is planning to build a 14km natural gas pipeline to support ArcelorMittal Dofasco’s plan to change the way it makes steel, eliminating coal as a fuel for ironmaking. This is the largest GHG emissions reduction project underway in Ontario and is expected to reduce emissions by 60% from today. In 2024, Enbridge plans to file a Leave to Construct application with the Ontario Energy Board.
Source: Company Press Release