Enbridge Inc T.ENB.PF.K

ENB Upgraded to Pfd-2(low) by DBRS POSITIVE!

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ENB Upgraded to Pfd-2(low) by DBRS

June 28th, 2024

DBRS Limited has announced that it:

upgraded Enbridge Inc.’s (ENB or the Company) Issuer Rating and Senior Unsecured Notes rating both to A (low), Preferred Shares rating to Pfd-2 (low), and Commercial Paper rating to R-1 (low).

ENB has made material progress on closing the Acquisition and the associated financing plan. The acquisition of EOG and Questar, which together account for the largest contribution to earnings from the Acquisition, closed in March 2024 and June 2024, respectively, with no material changes in terms and conditions from when the Acquisition was announced. ENB expects the acquisition of PSNC to close in Q3 2024. ENB’s financing plan is also now largely complete with the purchase price of $12.8 billion funded with equity and asset sales totaling approximately $6.2 billion and the issuance of Subordinated Notes for approximately $3.7 billion. Morningstar DBRS expects the balance to be raised from a mix of the recent issuance of the New Subordinated Notes, at-the-market equity issuance program, and/or asset sales.

Morningstar DBRS views the planned acquisition of the regulated gas utility businesses as providing a more stable source of cash flow generation with lower risk compared with ENB’s existing business risk profile. The Acquisition is expected to double the contribution of ENB’s regulated gas distribution businesses to approximately 23% of total adjusted EBITDA (Morningstar DBRS estimate for 2025) from 13% currently. ENB will benefit from greater geographic and regulatory diversification with higher regulatory returns on equity and thicker deemed equity. Finally, ENB will stand to potentially gain from synergies, as the Acquisition would form the largest natural gas distribution utility in North America, by volume, with a rate base exceeding $27 billion serving approximately 7 million customers in Canada and the U.S.

EARNINGS OUTLOOK
Morningstar expects EBITDA in 2024 and 2025 to grow at around 8% primarily because of the Acquisition and commercially secured projects that are expected to come into service over the next two years.

FINANCIAL OUTLOOK
Morningstar DBRS expects cash flow from operations to also trend higher as a result of higher earnings. While overall debt levels are expected to increase as the Company funds a part of its secured capital program from debt, Morningstar DBRS expects the Company to stay within its target Debt/EBITDA range of 4.5 times (x) to 5.0x.