Welcome to the Enbridge Inc. Second Quarter 2022 Financial Results Conference Call. My name is Sylvia, and I will be your conference operator for today's call. Please note that this conference is being recorded. And now I would like to turn the call over to Jonathan Morgan, Senior Vice President, Capital Markets. Jonathan, you may begin.

Thank you. Good morning, and welcome to the Enbridge Inc. Second Quarter 2022 Earnings Call. Joining me this morning are Al Monaco, President and CEO; Vern Yu, Chief Financial Officer; and the heads of each of our business units: Colin Gruending, Liquids Pipelines; Cynthia Hansen, Gas Transmission and Midstream; Michele Harradence, Gas Distribution and Storage; and Matthew Akman, Renewable Power and New Energy Technologies. As per usual, this call will be webcast, and I encourage those listening on the phone to follow along with the supporting slides. We'll try to keep the call to roughly 1 hour. In order to answer as many questions as possible, we'd appreciate you limiting your questions to one, plus a single follow-up as necessary. We'll be prioritizing questions from the investment community. If you are a member of the media, please direct your inquiries to our communications team, who will be happy to respond. As always, our Investor Relations team will be available following the call for any additional questions. On to Slide 2, where I'll remind you that we'll be referring to forward-looking information on today's presentation and in the Q&A. This information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We'll also be referring to non-GAAP measures as summarized below. With that, I'll turn it over to Al Monaco.

Thanks, Jonathan, and hello, everyone. I'll start off this morning by discussing how we're doing on our key priorities midyear. I'll then cover our business update, including the new investments announced today that further accelerate our natural gas strategy. Vern will recap our capital allocation framework and review our financial results, the future outlook, and ESG performance. Before we do that, let me begin with the bigger picture and the two-pronged strategy we laid out at Enbridge Day. It's clear we're in a global energy crisis, and we need all sources of supply to meet demand with affordable, sustainable, and secure energy. North America is extremely well positioned with a globally competitive, reliable, and sustainable supply. Given the inflection point in energy markets we've experienced, our two-pronged strategy is proving to be the right one – continuing to invest in the best conventional opportunities while ramping up our low-carbon infrastructure over time. Our focus in the last few years has been to build out our export infrastructure, and that's even more relevant today. Acquiring the Ingleside export facility fits perfectly within our Gulf Coast liquid strategy and is already opening up low-carbon export opportunities. With our natural gas systems along the Gulf Coast and in British Columbia, we’re capitalizing on global LNG demand growth. We've got a multitude of low-carbon development opportunities in progress that leverage our existing assets and fit our low-risk model. We see renewables, RNG, hydrogen, and carbon capture gaining traction and bolstering growth. Now, here's the midyear check against our priorities. Our number one priority will always be safety, and we're tracking well this year. Operationally, we performed well in Q2—strong utilization, record gas transmission delivery days, and solid wind resources. In terms of results, we had a solid quarter, and we're on track to achieve our full year EBITDA and DCF per share guidance, putting us in good shape on our three-year, 5% to 7% DCF per share CAGR target through 2024 off of 2021. The balance sheet is strong, and we're on track to exit '22 at the low end of our leverage range. This year, we've secured $4.5 billion of new investments that align perfectly with Enbridge’s focus, including the expansion of our BC system and a 30% stake in Wood Fiber LNG. Our post-2024 secured growth pipeline is filling up nicely. On capital allocation, we'll continue to be disciplined by optimally deploying growing free cash flow. Part of that is returning capital through a steadily increasing dividend, and we've initiated share buybacks as you've seen. Regarding the business update, beginning with liquids, after an extended upstream and downstream turnaround season, Mainline volumes are ramping up, and we're on track for a full year average of 2.95 million barrels per day. In Gas Transmission, we've had four of the top five power plant peak delivery days in the last five years, and we reached record LNG and Mexico export deliveries at 3 Bcf a day in April. Recently, we reached an agreement in principle on the Texas Eastern rate case, which is good news. We're also progressing on $7 billion of capital in execution. In the utility sector, there’s another $3 billion in progress, including adding 40,000 customers this year and three more RNG projects. Finally, in renewables, we're in heavy construction mode with four offshore wind projects and ten solar cell power projects totaling almost $3 billion. The project in Saint-Nazaire, France is on schedule to start generating cash flow later this year. Now, let’s shift to liquids fundamentals and Mainline tolling. The global energy inflection we mentioned earlier is driving improved North American oil fundamentals. First, the historically long turnaround season has concluded. WCSB production is ramping back up, and the Mainline is ready for August deliveries. Permian supply remains strong, with growth this year expected to be around 500,000 barrels a day. Given OPEC constraints, embargoed barrels, and a return of Asian economic growth, the natural outlet for light barrels is exports to Europe. Over time, we'll see inventories rebuild, including the U.S. strategic petroleum reserves, particularly as current inventory levels are extremely low. These shifting fundamentals are positive as we are well positioned on both light and heavy barrels. As for Mainline tolling, we continue discussions with our customers, and the process has been constructive. We are working toward an incentive-based model, as it has proven effective for both our customers and us over the past 25 years. However, we're prepared to shift to a cost-service model if needed, as both options are acceptable to us as we’ve previously stated. In the next month, you can expect some required pre-filing CER notices. We're motivated to finalize an agreement that works for our customers while ensuring a reasonable risk-return profile for us. Timing-wise, we plan to decide which option to proceed with by the end of summer. Let's now shift to our LNG strategy, starting with the fundamentals and how we're positioned. Natural gas is becoming an increasingly exciting opportunity and a long-term growth driver for us. North American LNG exports are expected to reach 30 Bcf per day, backed by lowering prices and rising global demand. Our assets are critical for achieving this, particularly our U.S. Gulf Coast and BC Mainline systems, which serve as the essential connections to growing low-cost supplies in Appalachia, the Permian, the Haynesville, and Montney, matched with export market demand. We currently supply four operational LNG plants in the Gulf and are soon to have five. Today, we account for roughly 20% of North American exports, with connections supported by long-term take-or-pay contracts. The precedent agreements we signed for two more LNG facilities pending FID could see our market share increase to 30%. Though our primary focus is pipeline connections, we are open to liquefaction investments that meet our investment criteria. To elaborate on our LNG strategy, we recently initiated the VENICE extension, a solid USD 400 million investment with a 20-year contract. Additionally, we secured another $1.6 billion with the pending new build and Valley Crossing expansion, with associated LNG plants pending FID in the next decade. We are also exploring opportunities with other LNG proponents. A recent open season revealed considerable customer interest in upstream access to our headers to connect growing Haynesville supply to LNG. We're currently designing potential expansion options for Texas Eastern and Valley Crossing. Moving to BC and our T-North system, we anticipate strong WCSB supply growth in the coming years. We've received a lot of positive feedback from our customers, evidenced by Alliance's contract extensions. The basin is well-positioned to meet growing regional and global demand with natural gas. Our BC Mainline will be critical in getting gas to market, particularly to facilitate LNG exports. We've completed a highly successful open season and have sanctioned a 535 million cubic feet per day expansion at T-North, which is larger than we initially projected. This 1.2B expansion is primarily compression and commercially falls under a cost-of-service regime. The next step involves engaging stakeholders and filing a regulatory application, with a targeted ISD of late 2026. We also launched a binding open season to expand T-South, driven by the recent FID of Wood Fiber LNG, which would replace capacity currently directing volumes to the Pacific Northwest and will support Wood Fiber LNG on the West Coast upon completion. Our preliminary estimate for this project is $2.5 billion, also categorized under the cost-of-service model, with a projected ISD of 2028. Should T-South proceed, we could consider further T-North expansion opportunities, which illustrates the strategic positioning of our system for low-cost access to growing markets.

Thanks, Al, and good morning, everyone. Before I review this quarter's results, I want to remind you of how we're thinking about our low-risk business model. We've designed our business to withstand all market cycles, and it has proven effective repeatedly. The best example of this was during 2020 when we were able to meet our financial guidance despite the significant impact COVID-19 had on global energy demand. This resilience stems from serving demand-pull markets with strong long-term contracts supported by conservative financial policies. Approximately 80% of our EBITDA has built-in toll escalators or cost-recovery mechanisms. The majority of our debt portfolio remains fixed-rate, mitigating the impacts of rising interest rates. Our cash flow stability allows us to be confident in our financial results and provides us with considerable flexibility. We expect to generate growing cash flows this year, reflecting a 9% increase over 2021, which supports our $5 billion-$6 billion of annual investment capacity. Our balance sheet remains in strong condition, and we anticipate being at the lower end of our debt-to-EBITDA range by year's end. Each of the four credit rating agencies has reaffirmed our BBB+ stable ratings this year. We've continued to grow the dividend steadily, showcasing a 3% increase this year supplemented with opportunistic share buybacks. To date, we have added $4.5 billion of new growth projects in 2022, providing excellent visibility for our cash flow growth beyond 2024. All of these projects adhere to the same low-risk model I just described and are expected to deliver attractive returns. Let's move on to our financial performance. Our second-quarter results show a significant increase over 2021, due to impressive operational performance across all our businesses, and we are benefiting from the $14 billion capital invested last year. Overall, our results are tracking our plan with few variances across the businesses. In liquids, the Mainline transported just under 2.8 million barrels per day in Q2, aligning with our expectations, despite upstream and downstream maintenance activities. Gas Transmission utilization remained solid, while the $1.4 billion expansion to our BC pipeline system contributes positively to growth. In Q2, we saw promising contributions from DCP, benefitting from strong commodity prices, albeit they represent less than 2% of our EBITDA overall. The utility segment continued along its usual path with minimal impact from last year's sale of Noverco assets. Our renewable business continues to thrive due to the favorable wind resources, but Energy Services remained below expectations due to tight basis differentials in commodity prices. That said, we expect results in this sector to improve next year. Rising interest rates have slightly impacted our financing costs as well, but overall, it was a solid quarter. Now, moving on to our full-year outlook, we expect highly utilized systems for the rest of the year. Mainline volumes are rebounding post-Q2 customer maintenance, ready for August. Gas Transmission’s strong commodity prices are benefiting our investments. We anticipate that utilities and renewables will meet guidance expectations. Energy Services, on the other hand, will continue to face headwinds for the remainder of the year. In terms of DCF per share, maintenance spending is projected to increase in the second half, aligned with our guidance, and interest expenses will rise slightly due to higher rates. This emphasizes the dependability of our business model. Our secured capital program currently stands at over $13 billion, and plans are on track with $4 billion of capital projected to enter service this year, driving cash flow growth in 2023. The capital spend is mostly secured under fixed-price contracts that offer excellent inflation protection. We have also added several new secured projects to our backlog this quarter, and these needs can easily be managed within our $5 billion to $6 billion annual investment capacity while retaining our equity self-funding model, as most announced capital will be spent beyond 2024. In terms of how this capital program fuels our growth story, our secured capital plan enables us to achieve a visible 5%-7% DCF per share CAGR through 2024. This growth builds upon a solid revenue base from 2021, and we anticipate a consistent 1%-2% annual growth from contractual escalators and productivity enhancements. The secured capital program will contribute another 4%-6%. All cash flows will be generated under a low-risk commercial framework, ensuring superb visibility toward our 3-year plan ending in 2024.

Looking ahead, we are continuing to identify robust investment opportunities across all our businesses, and we're observing a surge in development activities within both our conventional and low-carbon platforms. As previously noted, we have a $5 billion-$6 billion annual investment capacity supported by growing free cash flow and a solid balance sheet. We will prioritize rate base growth in our gas sector alongside low capital intensity optimizations and expanding our teams across our regions. These low-risk investments present high execution potential with attractive returns, which should lead to a base capital program exceeding $3 billion yearly. Consequently, this leaves roughly $2 billion annually of discretionary investment capacity for the next best alternatives, including organic growth, share buybacks, tuck-in M&A, or debt repayment. Even with the capital announced today—that will be spread out over several years—we maintain considerable investment capacity throughout our current 3-year plan. We will remain disciplined, evaluating all new investment opportunities in relation to our capital allocation alternatives. Before I hand it back to Al, let me update you on our ESG priorities and the substantial progress we are making. At the end of June, we released our 21st annual sustainability report, and we believe that ESG is foundational to our business. We take pride in our performance. In 2020, we set ambitious ESG goals with clear pathways to achieve them. In 2021, we established the organizational framework to facilitate these goals, creating specific plans across our businesses and aligning compensation and financing costs to our ESG performance. Our current focus is on executing these strategies to reach our objectives, and we're making commendable progress. Regarding safety, we’ve achieved a 29% reduction in our TRIF rate and invested over $6 billion in pipeline integrity during the past three years. This underscores our dedication to providing industry-leading safety and reliability. Our emission performance remains on track—we’ve attained a 27% reduction in emissions intensity since 2018 and a 20% reduction in methane emissions within our Gas Transmission business. On diversity, we’re progressing towards our inclusion goals through enhancements to our recruiting process and mandatory training to reduce bias and combat racism, which is translating into tangible improvements across all company levels, including our Board of Directors. Ultimately, we believe our ESG approach aligns us with stakeholders including customers, investors, and communities, which will afford us long-term strategic advantages. With that, I’ll hand it over to Al for the conclusion. Thank you, Vern. To conclude, our operations are progressing well, and we are on track to meet our financial targets. The global emphasis on reducing emissions highlights the critical need for energy security and affordability, further validating our focused strategy to invest in conventional and low-carbon infrastructure. We are effectively executing our capital program, advancing our export strategies in gas and liquids, and securing new investments to support our growth beyond 2024. We will continue to exercise disciplined capital allocation, protect our balance sheet, and uphold our ESG commitments. Now, I will open the floor to questions.

Your first question is from Rob Hope at Scotiabank.

The first question is about the Wood Fiber project and the investment in the LNG liquefaction facility. This seems like a unique situation where you have a preferred interest that limits commodity risk. Can you speak to future opportunities—if you become comfortable investing in LNG liquefaction facilities—would you be open to taking some commodity exposure if it leads to additional upstream opportunities? Also, are you currently having discussions with proponents regarding other facility investments?

Thanks, Robert. To address your first question regarding the willingness to accept additional risk, the short answer is probably not. We explored a variety of opportunities and ultimately chose this one because it met our criteria. One of the key criteria is maintaining predictable cash flow, and we intend to maintain that in future endeavors. Regarding your second question, yes, we are in discussions with others, particularly in the Gulf Coast region, which has abundant developmental opportunities. We are very disciplined with our investment criteria moving forward.

Just a follow-up. Concerning the Mainline recontracting efforts, it seems relatively flat from the producer community right now. Can you elaborate on the main sticking points in negotiations? The investment community seems somewhat aligned in their outlook that a negotiated settlement will eventually be reached.

I'll pass it to Colin, but generally, Rob, discussions are progressing well. There are various interests to balance among 38 potential shippers, which complicates a unified public perspective, but behind the scenes, our discussions are very active. A lot of information is being shared to promote transparency regarding our performance under Mainline tolling over the last decade. Quality service has provided solid value for our customers, allowing us to move forward constructively. Colin, do you have additional insights?

Yes, briefly, Robert. Historically, discrepancies arose from the contracting proposal itself. We’ve set that issue aside, leading to a consensus among the industry regarding their wants and needs. While there is alignment on the direction, we cannot yet guarantee a negotiated settlement, as we have alternatives that remain equally appealing.

I want to delve deeper into Wood Fiber and the preferred structure you established. Could you elaborate on the specific risk versus reward parameters or hurdles you’re considering? Were you always looking for a preferred equity structure, and is there any possibility for conversion to common stock in the future?

No, the structure we have is not convertible. Regarding upside potential, we see integration with upstream projects as a main driver of opportunity. Our search was driven by risk mitigation, which we succeeded in achieving with this arrangement. We seek predictable cash flows, and that's fundamental to our investment approach. Cynthia, do you want to add anything?

Thanks, Al. To reiterate, this partnership provides us with assured cash flows while allowing us to strengthen the relationships we already have in British Columbia.

Moreover, we appreciate the significant emission reductions associated with this project, utilizing a modular design that complements our existing infrastructure. The financial structure enables us to secure the economic landscape and aligns with our goals, ensuring we penetrate the LNG space responsibly. We’re optimistic about its potential.

I appreciate that insight. Additionally, given the discussion around natural gas logistics, I wanted to highlight the growth within Haynesville. Could you speak specifically to how Haynesville growth might impact Enbridge's future?

Cynthia can provide the details here. We recently conducted an open season and were impressed by the interest in accessing our system. Our customers have expressed increasing demand. We anticipate seeing some activity later this year as a natural lead into Gulf Coast LNG projects. Cynthia, would you like to elaborate?

Indeed, we are working through details with customers, gauging demand from LNG exports alongside industrial users. Strengthening our connectivity within existing infrastructure allows us to offer competitive solutions, and we are excited about the potential ahead.

This competitive landscape provides an opportunity to solidify our position regarding costs while enhancing existing relationships to provide the best service. The advantages we hold are significant in this growth-oriented market.

I appreciate your insights on the inflation protection for existing projects. However, as you sanction new projects, like Wood Fiber, how do you balance inflationary risks against returning capital for buybacks or meeting growth targets?

This is a relevant question, Ben. Let me have Vern discuss the protections in place, while I comment broadly on investment considerations given current pressures. Over the last two years, we've executed a significant share of our secured program, including Line 3, with most revised projects sized smaller than our earlier mega projects. Today, we are largely on time and on budget. However, our major project execution process, inclusive of scalable strategies and ensuring recovery mechanisms, helps mitigate costs. We've invested considerable diligence into the Wood Fiber project costs upfront.

To add on the capital side, we aim to lock in costs when sanctioning projects, using fixed-price, EPC contracts wherever feasible. Our scale grants us leverage in negotiating supply chain contracts, and most new agreements provide mechanisms to recover costs in the event of increases. On the OpEx side, as mentioned, approximately 80% of our EBITDA has protections against inflation, generated via fixed revenue escalators or cost-recovery avenues. Although we face limited exposure to O&M costs, power prices and labor are areas we monitor closely.

Looking towards LNG, do you view this endeavor with Wood Fiber as a learning opportunity before deciding on further investments, or do you have an appetite for other projects ahead?

We have an appetite for more, but on one hand, it's a new area for us. On the other, we have a history of substantial infrastructure investments totaling roughly $100 billion over the last decade. This project aligns with our infrastructure focus, maintaining our pursuit of predictable cash flows. We believe we've managed to ensure its viability, offering potential for strong performance based on built-in mitigations from the project's developer.

Congratulations on the recent success of the Alberta ride for cancer. I have one question—what potential role does Enbridge see in owning pipeline infrastructure in Europe, given the shift away from reliance on Russian gas?

Thanks for highlighting the ride, Mat. As for Europe, with the fundamental shift in gas sourcing, there's certainly an opportunity for us. We always need to examine risk-reward profiles for any investments, but our past experience in Europe, alongside our current renewable efforts, positions us well for potential opportunities if they align with our commercial model and expected returns.

With the two-pronged strategy of capital allocation focusing on growing gas and targeting lower carbon solutions, how do you envision potential changes in your capital allocation priorities given these growing opportunities?

To give a quick overview, we're not changing our capital allocation framework. We're satisfied with the opportunities it presents and how we rank projects to maximize value. We maintain our annual investment capacity of $5 billion to $6 billion, with approximately $3 billion focused on growth in sectors like utilities and gas transmission. This allocation allows us a range of options, such as new organic projects and share buybacks. Currently, the fusion of announced projects aligns well with the slate we've mapped out, maintaining a superb mix of flexibility.

Absolutely, and importantly, our ability to maintain a broad spectrum of opportunities across both sectors will help us balance our investments. We're set for future growth with both conventional and low-carbon expected trajectories, which we anticipate will ramp over time.

A point regarding your low-carbon strategy: you significantly scaled back on North American onshore wind investments when returns diminished. What perspective do you have on the current state of the European offshore wind market in relation to other low-carbon platforms you've indicated?

Those conditions do shift, and I recognize the difference in development modes currently influencing both offshore and onshore. While we previously exited some onshore projects, there’s now apparent revival with solar and onshore wind in North America. Meanwhile, in Europe, we must emphasize disciplined investment towards profitable initiatives alongside our contracts and construction projects. There’s significant demand for greenfield projects, which we are keenly observing.

Indeed, the recent uptick emphasizes the need for strategic discipline across our renewable engagements, aligning with our existing land and load capabilities. We have over 1 gigawatt of greenfield projects, providing us with a strong position amid substantial demand in onshore markets.

We have reached our time limit and cannot take any further questions. I will turn the call over to Jonathan Morgan for final remarks.

Thank you, and we appreciate your ongoing interest in Enbridge. Our Investor Relations team is available for any additional questions you may have following this call. Thank you once again, and have a great day.

Thank you. Ladies and gentlemen, this concludes your conference call for today. Thank you for attending, and please disconnect your lines. Have a good weekend.