- Enbridge is outlining strategic priorities, new investments and an enhanced growth outlook through 2026
- The company is extending its forecasted average annual growth rate of 7-9 per cent for adjusted EBITDA, 4-6 per cent for earnings per share, and up to 3 per cent for distributable cash flow per share, for the next three calendar years
- Enbridge supplies millions of customers with North American natural gas, oil and renewable power networks
- Enbridge stock is down by 9.71 per cent year-over-year, and remains flat since 2019
Enbridge (TSX:ENB) is outlining strategic priorities, new investments and an enhanced growth outlook through 2026.
The company is extending its forecasted average annual growth rate of 7-9 per cent for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), 4-6 per cent for earnings per share (EPS), and up to 3 per cent for distributable cash flow (DCF) per share, for the next three calendar years. The increase in EBITDA growth is driven by C$19 billion in U.S. gas utilities acquisitions expected to close throughout 2024, creating the largest natural gas utility franchise in North America.
Enbridge is reaffirming an average annual growth rate of approximately 5 per cent after 2026 for adjusted EBITDA, DCF per share and adjusted EPS, as well as its 2024 full-year guidance for EBITDA and DCF per share.
Over the next three years, the company expects to generate annual investment capacity – defined as free cash flow, plus debt-to-EBITDA, minus dividends – of up to C$9 billion, while maintaining target leverage between 4.5x-5x. The company intends to invest about C$3 billion annually in natural gas utility infrastructure and C$6 billion-C$7 billion annually on secured projects.
Enbridge believes its C$25 billion secured growth backlog and U.S. gas utilities acquisitions will drive growth throughout this decade, according to Wednesday’s news release.
New investments to drive shareholder value
The company is planning to expand its Gray Oak Pipeline by up to 120,000 barrels per day, which will increase crude capacity throughout its Permian super system. It will also add 2.5 million barrels of sanctioned storage capacity at its Ingleside Energy Center (IEC), the largest crude oil storage and export terminal by volume in the United States, bringing overall storage capacity to about 20 million barrels by 2025. Both of these projects will require a combined US$100 million in capital expenditures.
Enbridge has also agreed to acquire two marine docks and nearby land adjacent to IEC from Flint Hills Resources for approximately US$200 million. The transaction, expected to close in Q3 2024, will allow the company to integrate the waterfront between IEC and the new docks, adding crude oil export capacity and streamlining existing operations.
The ultimate goal behind these investments is to further integrate the company’s U.S. Gulf Coast infrastructure, while building the IEC into North America’s leading multi-product export terminal.
In the area of gas transmission, Enbridge and Shell Pipeline have formed a joint venture to invest in Gulf of Mexico offshore plays. The new vehicle, known as Oceanus Pipeline Co., will build a 60-mile, 18-inch oil pipeline and a 15-mile, 10-inch gas pipeline to serve Shell and Equinor’s offshore Sparta development, both under long-term fixed payment contracts. Enbridge will invest about US$200 million, with both pipelines expected to come online in 2028.
Management insights
“Global demand for affordable, reliable and sustainable energy continues to rise and North America has a critical role to play. Abundant, cost-competitive and sustainable conventional and lower-carbon energy sources provide people with the energy they need while supporting countries and communities in meeting global emission targets. At Enbridge, we’re building out our integrated infrastructure super systems to enable the continued delivery of energy in a planet-friendly way, everywhere people need it,” Greg Ebel, Enbridge’s president and chief executive officer, said in a statement.
“We will continue to prioritize operational excellence, safety and reliability, and integrated conventional and lower-carbon solutions, making Enbridge the first-choice energy delivery company for our customers. Our scale and diversity provide an advantageous position for Enbridge to mirror the pace of the global energy transition. Each of our four premier franchises has an incumbent position with lower-carbon optionality, enabling Enbridge to play a critical role in meeting global energy demand, while providing investors with growing earnings and dividends,” Ebel continued.
“Our business model has led to 29 consecutive years of dividend increases, and 18 years of meeting financial guidance. Looking forward, we are confident that our growth profile, industry-leading execution and disciplined capital allocation will continue to provide investors with strong total returns and make Enbridge the first-choice investment opportunity,” he concluded.
Enbridge supplies millions of customers with North American natural gas, oil and renewable power networks, while growing its European offshore wind portfolio and advancing new technologies in hydrogen, renewable natural gas, and carbon capture and storage.
Enbridge stock (TSX:ENB) is up by 0.91 per cent trading at C$47.72 per share. The stock is down by 9.71 per cent year-over-year, and remains flat since 2019.
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