Enbridge Inc Q3 FY2022 Earnings Call

Welcome to the Enbridge Inc. Third Quarter 2022 Financial Results Conference Call. My name is Brent, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session for the investment community. Please note that this conference is being recorded. I will now call over to Rebecca Morley, Director Investor Relations. Rebecca, you may begin.

Thank you. Good morning and welcome to the Enbridge Inc. third quarter 2022 earnings call. My name is Rebecca Morley, and I recently joined Enbridge as a Director on the Investor Relations team. 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 Grinding, Liquid 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 is being 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 one 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. So 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 will remind you that we'll be referring to forward-looking information in today's presentation and in the Q&A. By its nature, this information contains forecasts, assumptions, and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed 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.

Okay. Thanks, Rebecca. Good morning, everyone. I'll start with the third quarter highlights and our business update. Vern will then review the results and the outlook, capital allocation, and the usual ESG update. Before that, a couple of comments on the current energy and economic landscape. That landscape is characterized by volatility we haven't seen for a long time: high inflation and tightening monetary policy, energy supply shortages, and the looming recession. Those challenges appear set to continue through next year. Energy-wise, the situation in Europe has brought security and reliability back into focus, while ensuring we're on track to reduce emissions. The investment required to meet energy demand for both conventional and low-carbon supply is only half of what we need, which has led to sustained high prices. For our part, we've proved through COVID and many times before that our business model is built to weather storms like this. Our premium natural gas, liquids, and renewables businesses are well-diversified, and we deliver energy to the best markets at very low cost. Our commercial underpinnings give us resiliency and predictability of cash flows through all market cycles, and our balance sheet is strong. And you've seen again this quarter we have an increasing inventory of quality organic investments that will drive growth well into the future. So Enbridge is well-positioned not just to withstand volatility but to grow and thrive in any environment. And Vern is going to expand on this a little bit later. So on to the highlights. In a nutshell, excellent progress on our priorities this quarter. Safety and operations-wise, we performed well, and utilization was high across all systems. That translated to strong Q3 numbers, and we're on track to achieve our full-year guidance. At this point, we expect EBITDA to come in above the midpoint of our guidance range and DCF per share above the middle. On project execution, we have roughly $3.8 billion slated for in-service this year, which drives cash flow in 2023 and beyond. More good news this quarter on organic growth, tuck-in M&A, and capital recycling. We secured another $3.8 billion of projects, the lion's share being our key South expansion in BC. I'll come back to this later. That brings newly secured growth this year to $8 billion, which illustrates the embedded opportunities we've been talking about within our four franchises. We'll do smaller-scale M&A where it makes sense. And we executed two excellent deals this quarter totaling $0.5 billion. Lastly, we continue to create value by monetizing assets at good valuations, over $1.6 billion this quarter. That adds to our financial flexibility. And in the case of the P66 joint venture, we reduced our G&P exposure, which is now de minimis. To put the business update in context, this slide recaps our two-pronged strategy and the optionality we have in our businesses. Prong one is to continue to invest in conventional businesses. The fundamentals of our core franchises are stronger than ever, especially in the context of energy security, reliability, and affordability concerns. To ensure we're aligned with our emissions reduction goals, we're modernizing our assets, self-powering with renewables, and ensuring new investments have a plan to hit our targets. At the same time, we're ramping up low-carbon investments. You can see, we're focused on proven low-carbon strategies that leverage our existing assets. Our conventional businesses are each progressing those opportunities on commercial terms that fit our low-risk model. Any way you look at things, low-carbon energy will need two things to happen: transportation and storage. We have a lot of that. Having the pipe in the ground will be valuable in any transition scenario we can see. A great example is CCS, which is a must in meeting our emissions goals, and that presents an excellent growth opportunity for us along with hydrogen, RNG, and of course wind and solar. On to the business update. In Gas Transmission, we've got roughly $10 billion of projects in execution, including our annual modernization program and recently secured projects. Gulfstream Phase 6 is now in service. We reached a rate settlement on our BC system and a good TETCO customer settlement. We're seeing strong throughput throughout our systems, and we recently recontracted capacity on the Southeast supply header at very good rates. In Gas Distribution, we've got $3.5 billion underway, and we'll have five of the 27 new community expansions done by year-end. Earlier this week, we filed our utility rebasing application that will establish rates through 2028. You can think of this as carrying on under incentive rates. And we sanctioned two new RNG projects in Ontario. Renewables is performing well, and we have $2.9 billion in execution, including 10 solar cell power projects. In Liquids, mainline volumes recovered nicely in the quarter, and we expect good utilization through year-end and '23. On our Wabamun CCS project, we signed our evaluation agreement with the Alberta government, and we expect to drill two wells in '23 to prove out the geology there. And on the Corpus Christi carbon, we're in discussions with our customers. So let's get into the exciting growth projects in our gas business. First, here's how we see the fundamentals and our opportunity set. Not much doubt that global gas demand will grow, given its abundance, security benefits, and lower emissions. We see gas continue to be a critical part of the energy supply mix well into the future. North America's gas advantage will lead to growth in global market share with LNG exports tripling to over 30 Bcf by 2040. We're really pleased with how we're situated to capitalize on these fundamentals. So here's what that looks like. Now, there's a lot in this picture here, but it illustrates well the reach of our systems and our growing LNG footprint. Domestically, we feed the best markets, totaling around 170 million people. We see growing residential, commercial, and industrial load, and gas will be critical to replacing 84 gigawatts of coal. And we're in discussions now with our customers in the US Northeast to develop solutions that address price and reliability concerns, which are only getting worse. And I think the price pressures and reliability issues are really starting to sink in. Another big prize is LNG. We serve four plants in the Gulf Coast, soon to be five, and we make up 20% of US LNG exports through our pipes. We've also secured precedents agreements with two more LNG facilities that are pending FID. That's Rio Grande and Texas LNG, and there could be more after that. If those do go ahead, we could see our LNG export market share rise to 30% or above. Related to that in the Gulf, we're also very focused on upstream expansion opportunities to connect growing Haynesville supply to LNG via Texas Eastern. So think of that as an upstream strategy on our PUDs. And of course, we just landed an investment in wood fiber LNG on the West Coast of Canada. In BC, last quarter, we sanctioned a $1.2 billion expansion of our T-North system at Aspen Point and launched a binding open season on T-South. So let me update you on that. The results of the open season were strong and carry long-term volume commitments. So we've now sanctioned and are proceeding with a 300 million cubic feet a day expansion, which is comprised of looping and compression. This effectively replaces capacity, currently moving volume to the Pacific Northwest, which will be utilized to feed wood fiber LNG when it goes in service. Pacific Northwest demand is also expected to grow, so this expansion ensures reliability in the region. Our preliminary capital estimate is up to $3.6 billion. We'll finalize the cost once we have completed environmental and revenue work. Importantly, we'll be engaging and listening to stakeholders and communities and seeking their expertise and look to form economic relationships there. The T-South commercial structure is cost of service, and we expect to file a regulatory application in 2024. Continuing with BC, today we also announced a binding open season for a further expansion on T-North. Given the outlook for Western Canada supply, we're seeing strong customer interest for more egress for LNG exports and downstream access. So in addition to Aspen Point then, there's now an opportunity to expand T-North by another 500 million cubic feet a day. This also will include looping and compression at a cost of roughly $1.9 billion with an expected 2028 ISD. Again, this is a cost of service model, which generates stable cash flows and good returns. The open season will run to January 10, so we'll see what that reveals and go from there. Now, these BC system expansions that I just went through represent about $7 billion of high-quality organic investment that are right down the middle of the Enbridge fairway. And they really illustrate the power of our strategically positioned system for low-cost egress to growing markets. Moving now to Liquids starting with Mainline cooling. We're continuing to ship in discussions on a new commercial agreement that works for our customers and Enbridge. So that's positive. Given the importance of the deal to industry and us it makes sense to take a little bit more time to make a final call on which path we'll proceed on, a CTS-like incentive tolling deal or cost of service. As a reminder, we've been on incentive tolling now for 25 years, and it's worked out well for the industry and ourselves. If we can't land on a reasonable deal, then of course we'll proceed with the cost of service application, which is ready to go and updated for the current inflationary environment. From a financial and commercial perspective, either of the two options are acceptable to us, as we said before. In fact, once we land on a commercial framework, we've got several cost-effective expansions that can give customers added egress. We're also accelerating our US Gulf Coast strategy, which builds on last year's anchor investment of the Ingleside export facility in Corpus Christi. Good news here; we're seeing an uptick in export volumes out of Ingleside now, with 10 record loading days in October. We've also now sanctioned a two million-barrel storage expansion at Ingleside, which allows us to attract more export barrels to the terminal, and it's shovel-ready. We've increased our ownership in two key Permian pipelines serving the region and at the side being Gray Oak and Cactus II. The increase in rail came from our new P66 joint venture, which I'll come back to, and we acquired another 10% of Cactus II, so that brings us to 30% with claims. Both deals bolster our US Gulf Coast position and are financially accretive. Now to renewables. Just like natural gas, it's clear that renewables will be a bigger part of the global energy supply mix. Our European offshore wind business is growing nicely, and we've got strong commercial and execution teams in place and great partners. In fact, we've got the Saint-Nazaire project coming on later this month with First Power. But there's another big opportunity to accelerate our North American business driven by a host of factors, including renewables targets, and policy actions we've seen lately. Our North American strategy has evolved quite a bit on a couple of fronts from primarily acquiring late-stage projects in years past to now leveraging our own assets land positions and load. And second, capitalizing on our development, construction and operating experience built over the last 20 years. The acquisition of Tri Global Energy brings our capabilities and strategy to yet another level. The Tri Global team fills in what I call the front end of our renewables value chain and gives us extensive origination capability being resource assessment, site prospecting, land and environment, and great interconnection. TGE brings a great development track record in a variety of markets, having monetized 6 gigawatts or 24 projects. The TGE front end is highly synergistic with our commercial, EPC, and operating capability. What we really like is that TGE allows us to quickly exploit our own lands and existing development opportunities. The deal also comes with a contracted revenue stream on monetized projects, so good early cash flows. And the big prize is 3 gigawatts in late-stage development projects slated for in-service between 2024 and 2028, and many of those overlap with our existing operations. Permitting and environmental reviews on those is advanced and in the interconnection queue, which is a big advantage given the time it takes to get through great connection in today's market. Those development projects alone could drive over $3 billion of investment. That triples our North American near-term development portfolio, and there's even a larger early-stage backlog. So the Tri Global deal drives outsized value for us. It not only accelerates growth in our Renewables business, but it moves the overall Enbridge growth yield. To put that in perspective, this slide shows the size and diversity of our renewables business today. We've got 47 facilities in operation or construction across four countries in North America and Europe. We built a solid business here, generating close to 6 gigawatts of gross capacity. We have fully resourced development teams in North America and Europe. With the TGE acquisition, our global development portfolio has more than doubled now to roughly 7 gigawatts with even more coming behind that. Before I turn it over to Vern, I'll speak to how we're keeping our eye on surfacing value from our assets and increasing financial flexibility. Over the last five years, we've recycled $11 billion of capital at good valuations, while further strengthening our low-risk model. Our P66 joint venture is a great example, providing a trifecta benefits. One, we reduced our exposure to DCP, and this is a well-managed G&P business, but not fully aligned with our business model; two, we increased our ownership in and became operator of GRAIL, which is a key element of our Permian egress and U.S. Gulf Coast port strategy; and three, the deal generated $600 million in equity to redeploy within our capital allocation framework. An equally important transaction is our regional oil sands deal, which establishes a solid economic partnership with 23 indigenous groups in Alberta. You can see the dots on the map here show the breadth of participation of indigenous communities along the entire rights of way. This corridor is highly strategic to our customers and Enbridge. So this deal demonstrates the importance we place on alignment with First Nations. Part of that is gaining partners with in-depth knowledge of the land, water, and environment, which we place a high value on. The deal also releases over $1 billion in equity at attractive valuation, again to redeploy to other opportunities. In the bigger picture, we think this is an ideal model for how energy infrastructure will be developed and owned in the future: a model that fully aligns safety, environmental, and economic interests with indigenous groups and one that we hope will be applied across our asset base on both sides of the quarter. And now over to Vern.

Thanks, Al. Good morning, everyone. Before we review this quarter's results, I'd like to follow up on Al's comments regarding the uniquely challenging macroeconomic conditions we are facing. The financial markets have been very volatile. Inflation is driving interest rates up and weakening the Canadian dollar. In addition, society's climate change ambitions and the war in Ukraine are driving up energy prices, creating challenges for households globally. Enbridge is well-positioned to navigate through these risks, and I'll cover that off now. Typically, with recession, you see demand destruction. But we are continuing to see strong energy fundamentals with tight supply and demand dynamics. Supply-wise, we expect further tightening given the recent OPEC+ production cuts, the ban on Russian oil, and the wind down of SPR releases. Demand-wise, Enbridge has connected the best demand pull markets for both crude oil and natural gas. In addition, we have strong commercial underpinning that drives predictable cash flow, and global energy security concerns are leading to more investment opportunities for us. Inflation has resulted in the most significant monetary policy tightening that we've seen in the last 40 years, but we're still in pretty good shape here. We have built in inflation protection for about 80% of our EBITDA, with total escalators or the ability to capture higher cost increases through rate filings. On interest rates, we have about 90% of our debt in fixed rates. Rising rates are a headwind to our floating rate debt program; we're actively managing this risk with our hedging program. The energy transition is creating a lot of exciting growth opportunities, and the recently announced IRA is providing a real catalyst for low-carbon investments. Finally, we're well-positioned to leverage our existing infrastructure to transport more North American energy to global markets. Let's go review the quarter. Our third quarter results were up notably over 2021 with strong operational performance across all of our businesses. We're now seeing the full benefit of the $14 billion of capital that we brought into service last year. In Liquids, the Mainline moved over 2.9 million barrels today. This is in line with our expectations following the completion of customer maintenance in Q2. Gas transmission utilization was high, and we continue to see growth driven from our 2021 capital investments such as the $1.4 billion expansion of our BC Pipeline system. In addition, we've begun recognizing higher rates on Texas Eastern with our unopposed settlement that we reached with our shippers this quarter. The utility continues to perform as expected with summer gas use lower than normal due to seasonality. Strong wind resources and high energy prices in Europe, where we have a small amount of spot exposure, have made a positive contribution to our renewables business. Energy Services remains below expectations due to narrow basis differentials and price backwardation. Finally, financing costs were up as a result of rising interest rates. Benchmark rates have risen almost 4% beginning of this year. Q3 was a very strong quarter and the business continues to operate well. Let's move to our full-year financial outlook. As we head into the end of the year, we expect to come in at the top half of our EBITDA guidance range and just above the midpoint of the DCF per share guidance. Our systems have been highly utilized in 2022, and we expect that to continue for the rest of the year. Mainline volumes strengthened in Q3, and we are on track to meet our 2022 volume outlook of 2.95 million barrels per day. Timing of the maintenance capital should provide about a $100 million tailwind this year, and we expect that work to slide into next year. The utility is tracking the guidance, and the renewables business is tracking to slightly above guidance on good wind resource and higher European power press. From a financial perspective, the US dollar strengthening has provided a slight tailwind. In contrast, we expect Energy Services to remain a headwind for the balance of the year. Additionally, we're seeing some pressure from higher power costs driven by both higher throughputs and higher power prices. We'll provide our 2023 guidance later this month, but I'll provide a brief overview on how that's shaping up now. We expect the business to remain strong in 2023, and the capital we've deployed this year will drive EBITDA growth. We'll benefit from customer growth and higher rates at utility. Our capital program within gas transmission will add EBITDA. We'll have the full year benefit from the recent Texas Eastern rate settlement. Energy Services should improve in 2023, as we'll see a number of our legacy contracts expire. A stronger US dollar is providing an opportunity for us to layer on additional hedges for 2023 and beyond at very attractive rates. As we've already mentioned, we'll continue to see higher power prices next year. Interest rate-wise, about 10% of our debt next year is subject to floating rates. Given today's inflationary environment, it makes sense for us to be at the lower end of our 10% to 25% floating rate debt range, and we're actively managing our residual floating rate exposure. Interest rates have been a headwind this year, and we expect that to continue next year. We're also expecting some pressure in cash taxes from legislative changes in Canada and the US. At this point, we're waiting on clarity on certain aspects of the alternative minimum tax in the US, so we don't want to go into great detail on that now. Our initial estimate is mainly that it's purely a timing issue, as we expect to pay less cash taxes in the future as a result of this. Overall, we expect this to be NPV neutral over the decade. Overall, we believe we're in a strong position to navigate a challenging macroeconomic environment and deliver continued growth to our shareholders. Let's move over to the secured capital program. Today our secured capital program sits at just over $17 billion. We have almost $4 billion of capital entering service this year, which will drive cash flow growth in 2023 and beyond. As Al mentioned in his remarks, we've grown our backlog by adding a number of exciting new projects to the secured bucket this quarter. These new capital requirements fit well within our self-funded model, where we live within our means. Going forward under our self-funded model, we still have ample investment capacity available for further organic growth, tuck-in M&A, debt repayment or even share buyback. Now let me remind you how we approach capital allocation. Our priority share remains unchanged. A strong balance sheet is still job one. We have continued to recycle capital into new opportunities to the tune of $11 billion since 2018 and $2.8 billion since the middle of last year. We continue to return capital to shareholders in the form of the dividend, where we paid $7 billion this year. We've used $150 million of our approved $1.5 billion in our share buyback program. We have sanctioned $8 billion in new organic growth capital this year, and our secured capital program now sits at $17 billion. All of these opportunities have met our low-risk business model, exceeded our risk-adjusted hurdle rates, have a strong strategic fit, and align with our emission reduction goals. As always, we'll continue to evaluate opportunities to selectively recycle capital and further bolster our financial flexibility. So I'm now going to finish up with our quarterly ESG update. Our newly created regional oil sands partnership is a win-win transaction for both us and the 23 indigenous communities along that right of way. Our relationships with the indigenous communities along all of our rights of ways is something that I've always been very proud of, and we plan to continue to be a leader in indigenous engagement, indigenous economic persistence and patience, and reconciliation. We released our indigenous reconciliation action plan in September, which articulates and tracks our progress against our commitments. The plan built on our success we've had working with communities through the construction of Line 3 and the East West Tie-Line which entered into service earlier this year. We're also very excited about the Wabamun Carbon Hub, and we see further opportunities to develop our economic partnership across our entire asset footprint. Our commitment to the communities where we live and where we work will always be a huge part of our success. With that, I'll turn it back to Al.

Okay. Thanks, Vern. As you know, I'll be retiring as CEO at the end of the year, and Greg Ebel will take over leadership on Jan 1. Just for background, I informed the Board at the beginning of this year that I may wish to retire from Enbridge, which kicked off a nine-month-long process to identify the next CEO. Since the announcement, Greg and I, along with the management team, have implemented a transition plan to ensure a smooth changeover and maintain momentum and consistency, and that's well underway. As usual, we'll deliver 2023 guidance at the end of November and speak to our dividend, so the timing there is normal. We'll follow that with Enbridge Day on March 1 and March 2, so after the Q4 results, where Greg and the team will lay out management's priorities and outlook. Please save the dates and join in either Toronto or New York. Over my time at Enbridge the last 11 years in CEO, I'm proud of what our team has accomplished, but I believe the best is yet to come. I'd be honored to lead Enbridge, and I'm confident that Greg and the management team will continue to grow the business well into the future. Before we open to questions, let me close like we always do with a few takeaways. The business is well positioned, and our low-risk model provides resilience in all market cycles. This downturn is a great example of that as we continue to deliver strong results and execute our strategies. The last several months have seen significant volatility in global energy markets. I think it's really proven that our two-pronged strategy to focus on both conventional and low-carbon investments is the right one. As Vern noted, our capital allocation priorities are unchanged, and we'll continue to be disciplined in putting capital to work. With that, I thank you for your continuing support of our management team at Enbridge and especially our highly skilled professional and very dedicated workforce.

Thank you. We will now begin the question-and-answer session. Your first question is from the line of Robert Kwan with RBC Capital Markets. Your line is open.

Hi. Good morning. If I can start on the Mainline. So at a minimum, we've seen an increase in the cost of capital parameters which, on a flow-through basis, is putting upward pressure on tolls. So I'm just wondering if it's that or just something else what's transpired since August that's made you more optimistic about the settlement? And have there been any changes in the provision that you've been booking on the Mainline?

Okay. I'll start, and then Colin can add. No changes in the provision, Robert. Of course, we look at that provision continually, and our assessment is that no change is required at this time. I think maybe rather than phrasing it as what's happened since August, I think we continue to talk, and we've got our pencils up rather than down, which is good. Both sides, I think, are working hard. And I think it's really just a matter of finding a deal that works for both if that can happen, which, as you heard us say before, we prefer to continue on and try to arrange a deal here rather than file cost of service. But that option is always there. And as you point out, there's been an inflationary environment since around August, I guess. And so that's going to be incorporated into our filing if we need it. And so that's sort of where we are. I don't know, Colin, if you want to add anything to that?

I think you mostly got it, Al. I would amplify, Robert, your point about the extra time here and maybe it's not extra relative to historic negotiation processes, which often take about a year. But the extra time here, I think, will allow us to capture, if you like, the various rate-making parameters inherent in an inflationary environment: interest rates, taxes, indexation mechanisms, etc. So I think what I would say is either path will contain an appropriate modern set of rate-making parameters that reflect the macro environment.

Okay. That's great. And if I can ask and finish on a capital allocation-related question. You've got your excess cash flow, and it's allowed you to pick up some assets here and there, modest-sized deals to bolt-on that you feel is accretive to the strategy and your growth. So just – if you think market weakness is to persist and valuations moderate, do you see that being a greater part of the capital allocation strategy? And then how do you frame that against another thing just if we have market weakness notwithstanding the market today? If you've got a lower share price, how do you frame that against buyback to be more attractive?

Do you want to cover that, Vern?

Sure. Thanks, Robert. I think as we've talked about, job one is always the balance sheet. So having the flexibility to use the balance sheet for opportunistic opportunities is always the most important thing for us. And you rightly pointed out that we have been opportunistic in looking at certain assets where we can acquire them at very attractive valuations. I think what we're seeing though is that there are very strong fundamentals for energy, particularly for exports in North American energy to global markets. So we're weighing some good opportunities and some very strong organic growth opportunities against M&A transactions on smaller scale. And, of course, against being able to pay down some debt in the higher interest rate environment. So from my perspective, we see some great opportunities across the whole capital allocation spectrum, and it's great to have the optionality to pick and choose which one of these levers we pull.

Robert, with a strong balance sheet to start with, like Vern said, and you add on the fact that free cash flow is going to be growing. And don't forget we've obviously demonstrated some opportunities to recycle capital. So you've got a lot of cash to work with there. And then finding and deciding between those opportunities that Vern is talking about. I mean, obviously, we've executed on some very large organic opportunities that are right down the middle of the fairway, as I said. The M&A opportunities in the tuck-in variety is certainly an opportunity. And then as you're pointing out too, there are other options around share buybacks, particularly at this valuation, could make more sense. So I think it's a whole plethora of opportunity here, given that we have a very good outlook for free cash and the ability to recycle more capital.

That's great. Appreciate the answers. And Al, all the best in retirement.

Thank you.

Hi, good morning.

Hi Jeremy.

Al, I just want to start with the CEO transition. Congratulations on retirement there after a successful career at Enbridge here. Just wondering how we should think about the process at this point. Should we expect any changes in strategy that you can point to at this point, or might be open for revisiting? We're just curious because we didn't see, I guess, some of the forward DCF CAGR language in the slides that we did in the past. And so just curious if we should be looking for any changes on future strategy?

Okay. Maybe on the last part first, and then I'll get back to strategy. So first of all, there's no change in our outlook. We feel very comfortable with the growth in the business going forward. As we mentioned, and Vern covered as well, 2023 guidance is coming at the end of this month. And then, of course, we'll talk about the medium-term outlook at Enbridge Day when Greg has a chance to lay out the priorities, and the management team will be there as well, of course. But the business is performing very well. In fact, as Vern pointed out, next year looks very strong, and we don't expect any real change in our outlook. As to strategy, one thing to keep in mind here is that Greg has been part of the Board and chairing for, I guess, five or six years now. And at Enbridge, just to take you back a little bit, we engage heavily with our Board on strategy. In fact, we update that every quarter and talk about where the business is going and what we're seeing fundamentally. So we're essentially very close with the Board in terms of where we're headed as a company and our strategy and our priorities. So I don't expect any changes, and I certainly heard him say that through the transition process several times when engaging with management and our employees here. So that's how we see it, Jeremy.

Got it. That's great to hear. I would like to discuss the crude oil export strategy. It seems that Gray Oak integrates well into that and creates synergies on the platform. I also noticed the spot information in the slides. Are you interested in that area, or do you see other organic or inorganic opportunities to grow the crude oil export aspect in the Gulf Coast?

Okay. Well, maybe Colin can speak to that; he's close to it.

Good morning, Jeremy. Thank you for the question. We're really excited about this strategy, which we've been discussing for a few years now. It’s starting to become clearer to us, and the pieces are coming together. We've been patient, as you know, and there are two key elements. One involves our heavy strategy, which will likely extend from Seaway into the Gulf region, and that's where spot pricing could be relevant. We're also looking to develop our Houston terminal to serve as a hub for Heavy Canadian crude and potentially create a liquid pricing point, which would be beneficial. On the light oil side, we're focusing on a direct route south from the Permian. We have interests in two key pipelines, Gray Oak and Cactus II, both of which are integrated and focused on light oil. We expect to be operational at Gray Oak in the second quarter of next year. We're enthusiastic about both strategies, as we have a strong positive outlook on exports. Al mentioned some record loadings at Ingleside recently, highlighting several opportunities for success in our export strategy.

Got it. That’s helpful. I'll leave it there. Thanks.

Thanks, Jeremy.

Good morning, everyone. Maybe a follow-up question on the LNG strategy. We've seen you talk about the numerous opportunities to feed the US Gulf Coast. But when you think about getting supplies down into that region, how does your network potentially, how could your network potentially be expanded for Texas to further move additional volume to the Gulf Coast? And what constraints do you see there?

Okay. Well, I'll start off, Robert. And I think Cynthia, if you want to add on. If you just visualize Texas Eastern, which is essentially a massive header system on the Gulf Coast, which is the reason why we've been able to position so well with LNG exports. I think, the reality is sometimes people forget this gas has got to come from somewhere. And certainly, the Haynesville is increasing, and we're a natural player there just given our position geographically, but also from a cost perspective. So, a very cost-effective way to get those volumes into LNG areas, further south into the Gulf. There are opportunities as well to move volumes south from the Marcellus given our position there, and there are also opportunities, frankly, to move more volumes into Florida. So you've got this ideally positioned header system that's very low in cost, that's ideally positioned to get supply. So this is what I was referring to in – when I mentioned the upstream part of our strategy related to LNG. So I think that's the high tree top level. I'm sure Cynthia may want to add something here.

Thanks, Rob, and thanks, Al. I would just build on what Al said by reminding everyone that we did go out and have that exploratory open season on the eastern for the Louisiana area. And we've had some great inbound interest from the customers that we're working through. So we hope to be in a position over the next couple of quarters to really come out with a project that helps support that.

Thanks for that. And then as a follow-up question, more broadly in the inflationary environment and one where we've seen interest rates move up, has that altered the commercial framework or how you're looking at new capital investments to ensure that risk and return are openly figured out?

Okay. I don't know, Vern, do you want to speak to that?

Well, as you see inflation and interest rates go up, obviously, our low-risk commercial model is designed to take that into account. So, generally, with new investment opportunities, we look for cost recovery on pretty much everything that we are exposed to. And then as rates go up, obviously that impacts the underlying risk-free rate, and that causes our hurdle rates to go up. So all-in-all, I think it just raises the bar on some of these projects we're looking at.

Thank you. And I guess, finally, Al, congratulations on all that you've accomplished, and all the best in the next endeavor.

Thanks, Rob.

Good morning. Congratulations Al on your pending retirement, and to Greg on the new role. So, I wanted to ask about the utilization on Mainline per your comments about good utilization through year-end and 2023. And in light of TMX coming online, how much volumes do you think could move off your system following the in-service date of that project? And how long do you think it would take to recover to full utilization as you look at your producer plans and your customers’ plans on the base case? And then within this development, I guess, one wrinkle is that just given the large naphtha cut inherent in WCS and elevated naphtha inventories in Asia, which would be the natural destination for many of these barrels off of that pipe and coupled with ongoing pet chem demand weakness and looming global recession per your earlier comments, Al, wouldn't the at least near to medium-term natural home for WCS barrel as TMX comes online, wouldn't that be the US Gulf Coast anyway, where we have some of the most complex and flexible refining facilities, which should result in continued front utilization of Mainline?

Yes. I think you got it, Theresa, on that last point. So maybe Colin should address that one.

Yes, I want to agree with what you mentioned, Theresa. Currently, utilization is nearly at full capacity, especially in the third and fourth quarters, which are typically more occupied compared to the second quarter. Your question seemed to focus on longer-term projections. Right now, we are fully booked and expect to maintain that in 2023. Our expectations are aligned with the public service dates provided by TMX, and we have always structured our plans around those timelines. If we are at 90% to 95% utilization through 2023, we anticipate a slight decline, likely around 10 percentage points, across all competing egress alternatives for a few years. Although we foresee modest growth in the basin, that should eventually replenish all egress options in the coming years. Additionally, I believe the Mainline will have a valuable future focus on our PADD II and PADD III markets, which have substantial demand and are home to important global refineries. Overall, I concur with your assessment.

Thank you.

Thanks, Theresa.

Hey, good morning, and congratulations Al on your retirement here, and specifically for staying as active as the company has been in the last little while. And in particular, I wanted to follow up on that, on the current M&A environment. We've seen a lot of activity here. So, I'm curious if this has been a bulge or if you expect opportunities to continue at this rate? And where are you finding the best opportunities to fit your strategy both on the tuck-in acquisition point of view, as well from a capital recycling point of view?

Yes. Well, I think broadly speaking, Robert, the market looks pretty good. I mean the transactions that we've done remind you, we've been pretty selective in what we're looking at. We found to be reasonably well-priced. If you start back from mingle side, and then we sort of tucked in at TGE and a couple of others here recently Cactus, they've done a reasonable valuation. So I think the market is pretty reasonable at this time and we'll pick off those opportunities as we see them where they fit our strategy and specifically where we can build out the business. And again, TGE is a good example of, as I said earlier, an outsized impact. So, we're seeing them across the businesses: gas transmission, liquids, and of course in renewables. So, I think it's just a positive environment for that, let's call it singles, doubles maybe even triples in the next two to three years. That's how we're looking at it. I don't know, Vern, do you want to add anything to that?

I think you've covered it off, Al. I think having the balance sheet capacity is giving us more opportunities than we've seen in a long time. We're very happy to be in this free cash flow positive position.

Okay. And my follow-up here has to do with the renewables. You've obviously added to the North American onshore with Tri Global. And I just wondered what your current thinking is on the value in expanding to other markets both onshore and offshore.

Okay. Well, maybe Matthew you can chime in on that one please?

Sure. Hi Robert, thank you for your question. We believe we're in a strong position across all our markets with opportunities for organic growth. As you know, you've been closely following us. In Europe, particularly offshore, we have several gigawatts of potential developments, with some projects already underway and many under construction. We are optimistic about those markets and will continue to expand in them. Western Europe is concentrating on long-term contracts with visible power purchase agreements with our partners. In North America, we are pleased with our position with TGE and the portfolio. There are several gigawatts of optionality that enhance our previous capacity of over one gigawatt. We will carefully select the best projects to pursue based on timing to optimize our risk-adjusted returns while maintaining capital discipline. We have plenty of opportunities in both markets, and we feel well-positioned in offshore Europe and North America. Our plan is to continue expanding in those areas while upholding our discipline. Currently, we do not see any need to enter other markets.

Robert, we get invited to a lot of stuff, and we see a lot of opportunities globally. And so, as Matthew said, I think we're pretty happy with where we are in Europe, given all we have going on there. We get a lot of opportunity as well in the U.S. Northeast offshore, which, as you've heard us say before, has been just too frothy and uncertain with respect to timing the cash flow on those projects. So again, we've got so much going on onshore North America and offshore Europe, but we've got a long runway here of development opportunity to keep us going for quite a while.

Okay, thanks everybody.

Thanks, Robert.

Hi, good morning everyone. Maybe to talk about the future liquids expansion and just the acquisition of Tri Global. Can you just talk about how you see this acquisition as complementary and maybe essential to liquid expansion. I'm curious if you could provide any commentary on how shippers are looking at potential tolling arrangement and how they receive the deal?

Okay. Sorry, are you referring to Tri Global in the first part? Yes, I mentioned this in my earlier comments. I believe we have strong capabilities in commercial arrangements, construction, and operation of renewable energy. We've developed this expertise over the past 20 years or more. However, what we lacked was strength in the initial stages, specifically in origination. In the renewable sector, a significant amount of work is needed for prospecting, identifying suitable wind resources, and determining how to connect to transmission grids, which is quite a complex process. This acquisition fills that gap for us, enabling us to have a complete value chain of capabilities. We are genuinely excited about this. As I mentioned earlier, the Tri Global team will expedite our development opportunities. We also have solar and cell power on our own lands, and this team can help advance those projects more quickly, which is a major advantage. If there was another part to your question, could you please repeat it?

I guess just ultimately how the shippers are ultimately viewing it in the greater context of potential Mainline tolling arrangement.

Okay. So you're talking about renewables being solar powered and how it relates to the Mainline? I think that's your question.

Hi, Brian. It's Colin. Yes, thanks for that question. And we are mindful that we're looking to get our own emissions done right as part of our ESG pledges. And I think as Al mentioned, we've got about 10 self-solar projects in flight right now. Many of them will be on the liquids system. We're a major power draw in jurisdictions we operate. If we can sell power, we can free that power up for other uses, and we can also green it up. So we're prepared pretty closely with Matthew's power business to see if we can accelerate that further. It's our intent. And it also manages the economic exposure as well. So it's kind of a two-for that way for us.

You know, Brian, these days in this environment, it's not just mainline customers. I think all of our customers, whether it's upstream of us or downstream of us, they're looking for service providers that are very much focused on ESG, and emissions being a big part of it. So I think in today's environment it's almost table stakes that you have to focus on reducing emissions, whether you're in the midstream, upstream, or downstream part of the value chain. So they're looking to us to make sure we're well-advanced on reducing emissions, and that's going to be critical for all energy providers going forward.

Great. Thanks. And just as one follow-up, curious if you could just talk about how you view the ultimate ownership of BCP at this time. In your prepared remarks, you talked about the appetite for a little bit less commodity exposure. And just given the evolving NGL strategy out of Corpus, just curious if there are any opportunities within DCP's asset base that could also be exchanged for that ultimately less commodity exposure?

Yes. To be honest, prior to our joint venture with P66, the GP component of our business was quite small. With the joint venture, it's even smaller now. This is why I mentioned that commodity exposure is minimal. I don't see any reason to change our approach going forward. I believe we are in a good position, and I don't think it's wise to speculate on potentially workable assets in the US Gulf Coast. You raised a valid point, Brian, but there is nothing imminent on that front.

Fair enough. Appreciate the color. Enjoy the rest of your morning.

Okay. Thanks, Brian.

Hey. Thanks. Good morning.

Good morning.

Hey, good morning. On the renewables side with the Inflation Reduction Act, isn't the outlook in the US renewables better than the development pipeline you have in Europe?

Well, I don't know, Matthew do you want to chime in on that first?

Certainly. We believe we have timed our projects well with the Inflation Reduction Act coming into effect, which should enhance the economic viability of these initiatives. The outlook for North America is very promising, and we appreciate the flexibility we have. As mentioned earlier, we are currently managing numerous projects in both Western Europe and North America, allowing us to select the best opportunities. Capital discipline and our risk profile remain priorities at Enbridge, and having a diverse portfolio provides us with excellent options. While we are enthusiastic about our developments in Europe, the current situation in the US is particularly appealing. With the 3 gigawatts from TGE and over 1 gigawatt from internal front-of-meter projects, we anticipate favorable conditions and strong customer demand. Overall, we are very optimistic about North America and value the choices available to us.

I think, Ben, it's important to find balance here. Matthew mentioned that this gives us many options to select the best projects. We shouldn't overlook Europe either, as they typically have strong PPA structures. Their process for connecting to grids, especially from onshore offline locations, is very efficient. The regulatory processes are also quite smooth. Overall, it's beneficial to have choices in two solid markets.

Okay, great. And then, my second question, the fall update from the Canadian government yesterday and maybe some of that's expected, maybe some of it is. And what are your initial thoughts on implications in your Canadian business and outlook?

Yes. At a high level, it seems that this is intended to close the gap with the US IRA, which is important because it's recognized that competitiveness is crucial. This initiative aims to ensure that we capture our share of investment dollars in Canada. Overall, the tax credits for wind and solar will support our operations here. There are also references to financial insurance related to carbon pricing, which should benefit carbon capture advocates in Canada. As mentioned earlier, this represents a significant opportunity. There are investment tax credits available for hydrogen, applicable to both green and blue hydrogen, though we will need to explore the specifics further. Additionally, there are indigenous benefits sharing arrangements for major projects. My initial assessment is that this will be appealing for business, enhancing Canada's ability to attract capital, and is positive for our specific business interests.

Okay. That's excellent. And all the best through retirement, Al.

Yes. Thanks, Ben.

Thank you, and I want to add my congratulations very sincerely Al to you.

Thank you.

Could you provide more clarity on the mainline process for next year and beyond? It seems there are two potential paths. If you consider the settlement route, I believe it might be a quick process. Could you share how long you expect that to take beyond this year? Alternatively, if you opt for a cost of service approach, how much longer do you anticipate that process will be? Additionally, I'm interested in the topic of risk sharing. Historically, producers valued toll certainty, which Enbridge has provided while absorbing that risk. However, you've also mentioned inflationary indices. Could you elaborate on what risks you might be less willing to take on this time, including volume risk?

Do you want to take that one?

Sure, thank you, Linda. You're correct in pointing out that different approaches may lead to varying timelines for regulatory follow-up. A settlement might be resolved more quickly, while a comprehensive cost of service application could take a year or more. Everyone seems to be factoring that into their understanding of the entire situation. I’d like to emphasize the term "package" because your next question delved into specific considerations. If a settlement occurs, it will indeed be a package deal. Historically, shippers have preferred certainty regarding tolls, and we have accepted multiple risks in exchange for a risk premium in those tolls. The discussion ultimately revolves around determining the right premium for these risks. This additional time allows us to ensure we accurately assess the new macroeconomic conditions. I believe everyone has enough visibility to make an informed decision on the appropriate risk premium. We would again consider toll indexation, which Vern mentioned is a key aspect of our commercial model. The main issue will be determining the index level. In the end, feedback suggests that shippers appreciate the service and the alignment model that Al described over 25 years. It promotes cooperation, and we are in sync. Therefore, the core question remains about finding the right toll that reflects this understanding.

I think the only thing I'd add, Colin, I think you mentioned volume risk, Linda. And as Colin said, we've managed that in a whole bunch of other things over the years, and we're comfortable doing that but it will come down to risk versus reward and getting an appropriate return to manage that volume risk. But embedded in that as well as – and I think you're pointing to it in the past, that the shippers have preferred full certainty. And that's one of the big benefits of what we've provided. We started with the toll, and we may escalate it depending on what the arrangement might be there. But certainly, in a cost of service, you don't have that certainty on toll, and that's been one of the factors that is in the discussion.

Okay. Thank you. And just as a housekeeping question, would you be able to provide the actual day you're going to be giving 2023 guidance later this month and the scope of what would be included in that beyond maybe DCF per share guidance and EBITDA guidance given that your Investor Day has been pushed to March?

Vern, do you want to speak to that?

Our plan right now is to provide that on November 30. We'll provide a full suite of information on 2023 at that time.

Yes, I think we'll do the usual notice, Linda, maybe a one or two weeks out just to make sure that we've got that day right. I think Vern's got it. Yes. So that's the process.

Thank you.

Okay. Thank you.

Thanks. Good morning. On T-South, I think on the last earnings call, you had pegged the cost of the project, or at least the initial cost, to be $2.5 billion, but now it looks like it's $3.6 billion. So I guess what's changed? And maybe can you help us understand the cadence of CapEx spending, which years would see the most of the CapEx to be deployed? And then finally, are there any stretches of the project that could be challenging either from a construction standpoint or permitting? And that's all I have. Thank you.

Okay. Thank you. Maybe we'll turn this one over to Cynthia.

Thanks, Al, and thanks, Praneeth. So with the T-South project, our original cost estimate – we've had an opportunity now to build in some of the inflationary pressures that we've seen recently. So that is a more of a comprehensive estimate associated with that. And that's still an order of magnitude estimate; we're going to be going through and doing the detailed design work and environmental impact to estimate type work in the Enbridge. But that will be done, and we'll have a more detailed estimate in Q1 of 2024 to support the 2024 filing. As I look at the other parts of your question what's going to be critically important for us as we go forward with the permitting and the approval of this process through the regulatory is to make sure we engage with the indigenous communities. So that's a critical part of our ongoing outreach and how we're going to be successful in moving that project forward, as well as looking at our mission impact. So focusing in on electric drive. When it comes to the actual right of way, again, this is an area that we're familiar with; it's not a greenfield project, so that's a good start but we will do that detailed assessment. From the overall permitting process, this fits into kind of the middle category. So we're very familiar with the activities. Having said that though, as I mentioned, it's going to be critically important that we engage with all our stakeholders to put us in a really good position to move forward through that permitting and approval process.

Maybe I can just follow on to answer about the capital – the capital – the large bulk of the capital does not get spent until you get through the regulatory process. And Cynthia mentioned that the regulatory process is scheduled to start in 2024. So if you envision a 2028 in-service date, the bulk of the capital is getting spent in that 2027, 2028 time frame.

Got it. Thank you, appreciate it.

Thank you.

This concludes the question-and-answer session. I will now turn the call over to Rebecca Morley for final remarks.

Great. Thank you, and we appreciate your ongoing interest in Enbridge. As always, our Investor Relations team is available following the call for any additional questions you may have. And once again, thank you and have a great day.

Thank you, ladies and gentlemen. We appreciate your participation. This concludes today's conference. You may now disconnect.