Through our consistently strong financial performance, we have steadily generated solid returns to shareholders for more than six decades. At the same time, we’ve also created positive economic impacts and opportunities that have benefited many other stakeholders, including our customers, suppliers, community members and organizations, employees and governments.
2 performance objectives:
Enbridge is the largest energy infrastructure company in North America, with consolidated assets totaling over $160 billion as at December 31, 2017, covering the most important and growing energy demand markets and supply basins.
We continually look for ways to improve our business and leverage our strengths, which is critical to remaining competitive in today’s environment. Following the close of our merger with Spectra Energy in February 2017 we undertook a comprehensive review of our expanded asset base, business environment and competitive position, with the goal of assessing where best to allocate capital and to establish a new strategic plan.
In November 2017, we announced the finalization of our three-year strategic plan and outlook. We are focused on rationalizing our asset mix to a pure regulated pipeline and utility business model, which emphasizes low-risk businesses and strong growth in our three core businesses: liquids pipelines and terminals; natural gas transmission and storage; and natural gas utilities. These franchises represent critical energy infrastructure with unparalleled competitive positions, highly predictable cash flows and embedded growth. Through our strategic review, we have identified a total of $10 billion of assets that are non-core to Enbridge. In 2018, we've announced $7.5 billion of certain unregulated gas midstream and onshore renewables businesses will be sold or monetized, which was higher than our original 2018 target of $3 billion.
We are currently engaged in a $22-billion commercially secured growth capital program through which we are building the infrastructure that North America needs to address its energy challenges. We expect this growth program, which is almost entirely organic and stems from the strategic positioning of our assets, will enable us to deliver highly visible, ongoing dividend growth of 10 percent per year through 2020.
Our plan sets out 6 strategic priorities
We will remain focused on transforming how we do business by optimizing systems and processes and driving cost efficiencies to ensure we remain highly competitive and effective in the future.
We actively engage with our investors who, in 2017, expressed interest in the following areas (among others):
Enbridge Inc./Spectra Energy Corp Combination: On February 27, 2017, Enbridge Inc. and Spectra Energy combined, making Enbridge the largest energy infrastructure company in North America with a diverse set of low-risk businesses comprised of a best-in-class network of crude oil, liquids and natural gas pipelines, a large portfolio of strong, regulated gas distribution utilities and a growing renewable power generation platform.
How We Will Execute on Enbridge’s $22-billion Commercially Secured Growth Capital Program: We are currently executing a $22-billion commercially secured growth capital program of low-risk projects that are scheduled to come into service through 2020 and that will enhance shareholder value through growing cash flows. In 2017, we brought a total of 16 major projects with a combined value of $12 billion into service. We are on track to bring another $7 billion into service in 2018.
Securing Funding for our Capital Program while Deleveraging the Balance Sheet: In 2017, we raised about $14 billion of capital across the Enbridge group of companies on favorable terms and sold $2.6 billion of non-core assets. We have designed a prudent financing plan for 2018-2020 that provides flexibility of sources of capital, that initially included sales or monetization of at least $3 billion of non-core assets in 2018. By early July 2018, we had announced asset sales of $7.5 billion, significantly exceeding our original target. The additional sales provides us substantial financial flexibility to execute the remainder of our financial priorities.
Cash Flow Growth, Dividend Growth and Payout Policy: In November 2017, our Board of Directors approved a 10-percent increase to the 2018 dividend, which was the 23rd consecutive annual dividend increase and is on top of a 15 percent increase in 2017. These increases reflect the confidence we have in our company’s outlook, underpinned by the strength of our businesses, our industry-leading growth program and our sound financial position. We expect to continue to grow dividends at a 10-percent Compound Annual Growth Rate (CAGR) through 2020. Beyond that, our strategic footprint will provide opportunities to invest in new, value-add projects to support a continued strong growth outlook.
How we integrate ESG factors into our business strategy: Over the past year, we have continued an active dialogue with investors, providing them with direct access to our business leaders and subject matter experts, including our Chief Sustainability Officer, to respond to issues and to share ideas on sustainable investment practices. This report is core to our disclosure and complemented by enhanced disclosure on Indigenous rights and relationships and later in 2018, a separate report on climate-related risks and opportunities of our businesses.
For more information, please see our 2017 Management Disclosure & Analysis and financial disclosures.
2017 was an important transition year for Enbridge. The acquisition of Spectra Energy, which closed on February 27, 2017, significantly diversified our asset base and opportunity set, and repositioned Enbridge for the future, particularly with respect to natural gas, which we see as having excellent fundamentals and opportunities going forward.
Beyond the transaction, we put $12 billion of new assets into service in 2017, a record achievement in a single year. These projects are expected to provide strong cash flows and earnings for decades to come.
In our core businesses, we delivered strong operational performance including moving record volumes on our liquids Mainline System, which came from a combination of oil sands supply growth and capacity optimization initiatives that benefited our customers and industry. Our expanded gas transmission business operated very well and delivered the results we expected from the Spectra transaction. In our gas distribution businesses, we added approximately 50,000 customers and brought a major expansion into service.
Another area of focus was to secure funding for our capital program and to ensure a strong balance sheet. We raised approximately $14 billion of capital across the Enbridge group of companies and sold $2.6 billion of non-core assets. We took steps in 2017 to simplify our corporate structure and in May 2018, announced a proposed restructuring through the roll-up of our sponsored vehicles. This transaction, if completed, would bring all of our core liquids and gas pipeline assets under the umbrella of one single listed entity, Enbridge Inc. The transaction is subject to review by independent committees and shareholder approval of each sponsored vehicle. Corporate simplification will be a continued focus in 2018.
With the combined strength and earnings power of our core businesses, contributions from new projects and cost synergy capture, distributable cash flow per share was $3.68, which was within the 2017 financial guidance range communicated to investors, despite only getting a partial year contribution from Spectra assets due to the timing of the merger close. We increased our dividend by 15 percent in 2017, our 23rd consecutive year of dividend hikes. Strong financial results for the first quarter of 2018, including an increase in both distributable cash flow per share and adjusted earnings per share of 40%, respectively. This demonstrate the quality of the assets, predictability of cash flows and the accretive nature of the Spectra Energy merger.
Despite our teams’ best efforts, there were some disappointments including shareholder returns that underperformed the expectations of management and our shareholders. We strongly believe that as our team continues to deliver on the benefits of the Spectra merger, our capital expansion projects and financial targets, our shareholders will enjoy strong total shareholder returns.
As described in “Management Approach”, we have set a course for the next three years that will increase our competitiveness and grow our business. We’re confident the successful execution of this plan will generate approximately 10 percent compound annual distributable cash flow per share growth through 2020, which supports our ability to grow our dividend by 10 percent per year over the same period.
Our 2017 financials reflect our first year as a combined company following the closure of the Enbridge and Spectra Energy merger on February 27, 2017.
|Year ended December 31 (unaudited)||2015||2016||2017|
|Earnings attributable to common shareholders||(37)||1,776||2,529|
|Earnings per share||(0.04)||1.95||1.66|
|Adjusted earnings per common share||2.20||2.28||1.96|
|Distributable Cash Flow (DCF) 1,2||3,154||3,713||5,614|
|DCF per common share2||3.72||4.08||3.68|
|Weighted average common shares outstanding||847||911||1,525|
|Dividends paid per share||1.86||2.12||2.12|
1 Includes adjustments for unusual, non-recurring or non-operating factors. Schedules reconciling adjusted EBITDA, adjusted earnings, adjusted earnings per common share and distributable cash flow (DCF) are available at Enbridge.com.
2 Formerly referred to as Available Cash Flow From Operations (ACFFO). Calculation methodology remains unchanged.
Enbridge plays a significant role in local and regional economic development by providing access to natural gas and crude oil that provide vital energy supplies to these areas.
We also contribute to local economic growth through the jobs we provide, the goods and services we purchase, and the taxes we pay.
As we expand our business and place larger, more complex projects into service, the economic and social value we provide to communities in which we live and operate increases, too.
We’re proud to deliver economic benefits in the U.S. states and the Canadian provinces where we do business. To learn more about the ongoing tax revenue, local and regional economic stimulation, community investments, and workforce salary provided by Enbridge in your area, search by state or province on Enbridge.com
Union Gas has served customers in Ontario for over 100 years, providing a significant ongoing boost to local economies. In 2014, as the province completed the phase-out of coal-fired electric generation plants, we played a significant role in providing clean and affordable natural gas that enabled a seamless phase-out.
Overall, clean and affordable natural gas is delivering approximately $5 billion in annual savings to Ontario families, businesses and industry—savings that are being reinvested into the economy. Ontario residential natural gas customers have, on average, $400 more in discretionary spending today than they did in 2007 due to the shrinking commodity costs brought on by new, vast supplies of North American natural gas.
Union Gas’s Dawn Hub, near the municipality of Chatham-Kent in southwestern Ontario, is the largest integrated natural gas storage facility in Canada and one of the largest in North America. It offers customers—such as power generators, distribution and pipeline companies, and energy marketers—an important link in the movement of natural gas from key supply basins to markets in Ontario, Quebec and the northeastern U.S.
Union Gas is partnering with Chatham-Kent, as well as other municipalities, to promote industrial growth opportunities. Union Gas works with economic development officials to attract businesses requiring large quantities of natural gas, such as for combined heat and power or as a feedstock for processes like nitrogen-based fertilizer production.
We also seek to build constructive, long-lasting and mutually beneficial partnerships with our local and diverse suppliers, including Aboriginal businesses—working together to create economic development opportunities for these communities.