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CALGARY, ALBERTA--(Marketwired - Feb. 19, 2016) -
HIGHLIGHTS
(all financial figures are unaudited and in Canadian dollars unless otherwise noted)
-- Fourth quarter earnings were $378 million and full year loss was $37
million, both including the impact of a number of unusual, non-recurring
or non-operating factors
-- Fourth quarter and full year adjusted earnings were $494 million and
$1,866 million, respectively, or $0.58 and $2.20 per common share,
respectively
-- Fourth quarter and full year available cash flow from operations (ACFFO)
were $876 million and $3,154 million, respectively, or $1.03 and $3.72
per common share, respectively
-- Enbridge delivered record volume throughput on its liquids mainline
system for the month of December
-- Enbridge continued to successfully execute its growth capital program,
bringing 14 projects with a combined value of $8 billion into service
during 2015
-- Enbridge expanded its renewable power generation portfolio in the fourth
quarter through the acquisition of an onshore wind power project in West
Virginia, United States and an interest in an offshore wind farm
development in the United Kingdom
-- Enbridge announced the $0.5 billion acquisition of operating natural gas
processing plants and associated pipelines in the Montney region of
northeastern British Columbia
-- Enbridge raised its quarterly dividend by 14 percent to $0.53 per common
share ($2.12 per share on an annualized basis) effective with the
dividend payable on March 1, 2016
-- Enbridge provided its 2016 guidance for ACFFO of $3.80 to $4.50 per
share, and adjusted earnings before interest and taxes of $4.4 to $4.8
billion
-- Enbridge was named to Canada's Top 100 Employers and Canada's Top
Employers for Young People for 2016, and included in the Global 100 Most
Sustainable Corporations for 2016
Enbridge Inc. (Enbridge or the Company) ENB ENB today reported fourth quarter adjusted earnings of $494 million, or $0.58 per common share, and annual adjusted earnings for 2015 of $1,866 million, or $2.20 per common share. ACFFO was $876 million, or $1.03 per common share, in the fourth quarter of 2015 while full year 2015 ACFFO was $3,154 million, or $3.72 per common share. Full year adjusted earnings per share and ACFFO per share increased by 15.8% and 23.2%, respectively, over the comparative full year period.
"Despite one of the most dramatic downturns in the energy sector in decades, we delivered very strong adjusted earnings and cash flow growth for our shareholders that were in line with our expectations," said Al Monaco, President and Chief Executive Officer. "Our fourth quarter actually came in a bit stronger than we anticipated late last year due to stronger performance from the Canadian liquids business in December and lower overall operating and administrative costs. Our ability to deliver strong and predictable earnings and cash flow growth in the current environment is a reflection of the resilience of our low risk business model, which is built to withstand this type of downturn. The fundamentals for our business remain strong; we have minimal direct commodity price and volume exposure across our asset base, our financial position is strong and we maintain good access to capital."
Mr. Monaco continued, "In the current low commodity price environment, we remain keenly focused on providing our customers with safe, low-cost and reliable transportation to key markets to ensure they receive the best netbacks. In 2015 we were able to leverage the scale and reach of our systems to increase capacity on our mainline by 230,000 barrels per day during the year and achieved new record deliveries ex-Gretna and on the Lakehead System of nearly 2.5 million and 2.6 million barrels per day, respectively, in the month of December."
During the course of the year Enbridge completed and brought into service 14 development projects worth $8 billion, the majority of which were placed into service on time and on budget. "Executing projects well in today's environment is no small feat so we are very pleased with this result," said Mr. Monaco.
Completed liquids pipelines projects included the reversal and expansion of Line 9B, the Southern Access Extension Project and the expansion of Enbridge Energy Partners, L.P.'s (EEP) Lakehead System between Flanagan, Illinois and Griffith, Indiana, all of which came into service during the fourth quarter. Enbridge also completed and placed into service its Heidelberg Oil Pipeline in January 2016, ahead of schedule. This offshore pipeline project has a capacity of 100,000 barrels per day and connects the Heidelberg development, operated by Anadarko Petroleum Corporation, to an existing third party system.
The Company also made significant inroads on its key strategic priority to extend and diversify growth beyond 2019 through continued development of its renewable power and natural gas pipelines and processing businesses. In the fourth quarter of 2015, the Company acquired the 103-megawatt (MW) New Creek Wind Project (New Creek) in West Virginia and a 24.9% interest in the 400-MW Rampion Offshore Wind Project (Rampion Project) in the United Kingdom (UK). In January 2016, Enbridge announced the $0.5 billion acquisition of two operating natural gas plants (Tupper Main and Tupper West gas plants) and associated pipelines in the Montney region of northeastern British Columbia from a Canadian subsidiary of Murphy Oil Corporation. These renewable energy and natural gas midstream assets are all underpinned by long-term contracts and align well with the Company's low risk business model.
In early 2016 Enbridge received written orders (the Orders) from the Minnesota Public Utilities Commission (MNPUC) for the Minnesota portions of the proposed Sandpiper Pipeline (Sandpiper) project and the Line 3 Pipeline Replacement (L3R) project. The Company believes that the directions from the MNPUC in most of the decisions set out in the Orders were consistent with expectations and provide clarity on process matters; however, the Orders require that a final Environmental Impact Statement (EIS) for these pipeline projects be completed prior to the commencement of the Certificate of Need and Route Permit processes. Management continues to review the impact of the Orders on the project schedule and cost estimates. Based on the Orders and Management's preliminary assessment, if upheld, the process set out in the Orders is likely to delay the planned start of construction, which would cause a shift in the in-service dates to early 2019 and increase costs for the L3R and Sandpiper projects. The delay in construction would have the effect of deferring approximately $5 billion of planned capital expenditures in 2016 and 2017 to primarily 2018.
The secured component of the Company's 2015-2019 growth capital program is currently approximately $26 billion, of which approximately $8 billion has already been funded and brought into service through the end of 2015. The Sandpiper and L3R projects are components of this secured capital program. The Company's updated projections, which take into account the expected delay in the execution of the L3R and Sandpiper projects, indicate that the commercially secured project portfolio alone will, in combination with existing operations, generate ACCFO per share growth of approximately 12% to 14%, supporting dividend growth in the range of 10% to 12%.
"Looking beyond our commercially secured program, in the current environment we see plenty of opportunity to further grow and diversify our asset base," noted Mr. Monaco. "We will continue to pursue new investment in assets that fit our business model and align with our longer-term strategies and we are developing access to cost effective funding to capitalize on those opportunities. Successful execution of these investment opportunities would be expected to further enhance ACFFO and dividend growth beyond that associated with the secured only program over the current planning horizon."
In December, Enbridge announced an increase in its quarterly common share dividend to $0.53 per share (or $2.12 per share on an annualized basis) marking the twenty-first consecutive year in which the Company has raised its dividend.
Mr. Monaco added, "The dividend increase reflects the very strong growth in earnings and ACFFO we have delivered from our core businesses and some $18 billion in capital projects that we have placed into service in the last two years along with the confidence we continue to have in our outlook. Equally important, our dividend growth has not come at the expense of our dividend coverage, which still remains very robust at approximately two times."
In 2015, the Company directly and through its affiliates collectively raised over $1.7 billion of equity capital and $3.7 billion of term debt capital.
"We believe the amount of capital required to support our commercially secured growth program is very manageable given the strong cash generating capability of our assets, our diversified sources of capital, solid investment-grade credit ratings and available liquidity of over $10 billion as of the end of 2015," noted Mr. Monaco. "We will be focused on the execution and funding of our very attractive secured growth program, while maintaining the balance sheet strength needed to support our longer term business plans."
FOURTH QUARTER 2015 OVERVIEW
For more information on Enbridge's growth projects and operating results, please see the Management's Discussion and Analysis (MD&A) which is filed on SEDAR and EDGAR and also available on the Company's website at www.enbridge.com/InvestorRelations.aspx.
-- Earnings for the fourth quarter of 2015 were $378 million or $0.44 per
common share compared with earnings of $88 million or $0.11 per common
share in the fourth quarter of 2014. Refer to Consolidated Earnings on
page 5 for discussion.
-- Adjusted earnings for the fourth quarter of 2015 were $494 million or
$0.58 per common share compared with adjusted earnings of $409 million
or $0.49 per common share in the fourth quarter of 2014. Refer to
Adjusted Earnings on page 7 for a detailed discussion.
-- Enbridge ACFFO for the fourth quarter of 2015 was $876 million or $1.03
per common share compared with ACFFO of $610 million or $0.73 per common
share in the fourth quarter of 2014. Refer to Available Cash Flow from
Operations on page 9 for a detailed discussion.
-- On January 27, 2016, Enbridge announced the $0.5 billion acquisition of
the Tupper Main and Tupper West gas plants (the Tupper Plants) and
associated pipelines from a Canadian subsidiary of Murphy Oil
Corporation. The Tupper Plants have a combined total licensed capacity
of 320 million cubic feet per day and are located within the Montney gas
play, adjacent to Enbridge's existing Sexsmith gathering system and
close to the Alliance Pipeline which is 50% owned by the Fund Group
(comprising Enbridge Income Fund, Enbridge Commercial Trust, Enbridge
Income Partners LP (EIPLP) and the subsidiaries of EIPLP). These assets,
which are currently in operation, are underpinned by long-term take-or-
pay contracts. The purchase price will initially be funded from
available sources of liquidity and the close of the transaction is
subject to regulatory review and approval.
-- In early 2016 Enbridge received the Orders from the MNPUC confirming its
direction regarding the process to review the applications for a
Certificate of Need and Route Permit for the Minnesota portions of the
proposed Sandpiper project being undertaken by EEP's affiliate, the
North Dakota Pipeline Company, and the L3R Project, which is being
jointly undertaken by EEP and Enbridge. The directions in the Orders are
in most respects consistent with Enbridge's position and expectations
and provide clarity with respect to the MNPUC's envisioned regulatory
review and approval process for these projects, preserving the
evidentiary record established in the Certificate of Need proceedings
for Sandpiper and confirming that the Certificate of Need and Route
Permitting Processes for the L3R Project will be managed concurrently
rather than sequentially and also directing that a single EIS process be
conducted by the Minnesota Department of Commerce (the State) to address
both the Sandpiper and L3R projects. Enbridge has already completed a
thorough environmental analysis for both of these projects which will
support the work to be completed by the State's independent
environmental contractor. However, the Orders require that a final EIS
for these pipeline projects be completed prior to the commencement of
the Certificate of Need and Route Permit processes. Enbridge believes
that the requirement to have a final EIS prior to beginning the
Certificate of Need and Route Permit processes is unprecedented and
contrary to Minnesota law. Enbridge and its affiliates have filed
Petitions for Reconsideration of this aspect of the Orders relating to
these projects.
-- On November 25, 2015, Enbridge announced it had acquired a 100% interest
in the 103-MW New Creek, located in Grant County, West Virginia, from
EverPower Wind Holdings, LLC. Enbridge's total investment is expected to
be approximately US$0.2 billion. The project, comprised of 49 Gamesa
turbines, will be constructed under a fixed-price engineering,
procurement and construction (EPC) agreement, with a target in-service
date of December 2016. Gamesa will provide turbine operations and
maintenance services under a five-year fixed price contract. The project
is backed by renewable energy credit sales and medium and long-term
fixed price offtake agreements.
-- On November 5, 2015 Enbridge announced the acquisition of a 24.9%
interest in the 400-MW Rampion Project in the UK, located 13 kilometres
(8 miles) off the UK Sussex coast at its nearest point. The Company's
total investment in the project through construction is expected to be
approximately $0.8 billion (GBP 0.37 billion). The Rampion Project was
developed and is being constructed by E.ON Climate & Renewables UK
Limited, a subsidiary of E.ON SE (E.ON). Construction of the wind farm
began in September 2015 and it is expected to be fully operational in
2018. The Rampion Project is backed by revenues from the UK's fixed
price Renewable Obligation certificates program and a 15-year power
purchase agreement. Under the terms of the agreement, Enbridge became
one of the three shareholders in the Rampion Project with the UK's Green
Investment Bank plc holding a 25% interest and E.ON retaining the
balance of 50.1% interest.
-- In the fourth quarter, the Company completed the following financing
transactions:
-- On November 6, 2015, the Company's affiliate Enbridge Income Fund
Holdings Inc. (ENF) successfully completed an equity offering of
21.5 million common shares at a price of $32.60 per share for gross
proceeds of $700 million. Concurrent with the closing of the equity
offering, Enbridge subscribed for 5.3 million common shares at a
price of $32.60 per share, for total proceeds of $174 million, on a
private placement basis to maintain its 19.9 percent ownership
interest in ENF.
-- On October 6, 2015, EEP issued US$1.6 billion of senior unsecured
notes: US$500 million with a five-year maturity; US$500 million with
a 10-year maturity; and US$600 million with a 30-year maturity.
CONSOLIDATED EARNINGS
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
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(unaudited; millions of Canadian
dollars, except per share amounts)
Earnings attributable to common
shareholders
Liquids Pipelines(1) 36 19 (224) 463
Gas Distribution 46 69 222 213
Gas Pipelines, Processing and
Energy Services(1) 44 185 218 571
Sponsored Investments(1) 297 140 479 419
Corporate (45) (325) (732) (558)
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Earnings/(loss) attributable to
common shareholders from
continuing operations 378 88 (37) 1,108
Discontinued operations - Gas
Pipelines, Processing and Energy
Services - - - 46
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378 88 (37) 1,154
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Earnings/(loss) per common share 0.44 0.11 (0.04) 1.39
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Diluted earnings/(loss) per common
share 0.44 0.10 (0.04) 1.37
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1 Effective September 1, 2015, Enbridge transferred its Canadian Liquids
Pipelines business and certain Canadian renewable energy assets to the
Fund Group within the Sponsored Investments segment under the Canadian
Restructuring Plan. Losses from the Canadian Liquids Pipelines assets
prior to the date of transfer of $403 million in the year ended December
31, 2015 (2014 - earnings of $320 million) and earnings from the
Canadian renewable energy assets within the Gas Pipelines, Processing
and Energy Services segment prior to the date of transfer of $1 million
in the year ended December 31, 2015 (2014 - loss of $2 million), have
not been reclassified into the Sponsored Investments segment for
presentation purposes. Additionally, a loss of $29 million and earnings
of $6 million for the three months ended December 31, 2014, related to
Liquids Pipelines segment and Gas Pipelines, Processing and Energy
Services segment, respectively, have not been reclassified into the
Sponsored Investments segment for presentation purposes.
Loss attributable to common shareholders was $37 million ($0.04 loss per common share) for the year ended December 31, 2015, compared with earnings of $1,154 million ($1.39 earnings per common share) for the year ended December 31, 2014. The Company has continued to deliver strong earnings growth from operations over the past two years as discussed in Adjusted Earnings. However, the positive impact of this growth and the comparability of the Company's earnings are impacted by a number of unusual, non-recurring or non-operating factors that are listed in Non-GAAP Reconciliations and discussed in the results for each reporting segment, the most significant of which are changes in unrealized derivative fair value gains and losses. The Company has a comprehensive long-term economic hedging program to mitigate interest rate, foreign exchange and commodity price risks which create volatility in short-term earnings. Over the long term, Enbridge believes its hedging program supports the reliable cash flows and dividend growth upon which the Company's investor value proposition is based.
The comparability of the Company's year-over-year operating results was also impacted by the transfer of assets between entities under common control of Enbridge. On September 1, 2015, Enbridge completed the transfer of its Canadian Liquids Pipelines assets and certain renewable power generation assets to the Fund Group within the Sponsored Investments segment (the Canadian Restructuring Plan or the Transaction). In connection with this transfer, the Company recorded $351 million of one-time charges, mainly related to the de-designation of interest rate hedges and a write-off of a regulatory asset in respect of taxes.
In addition, the 2015 loss attributable to common shareholders reflects a goodwill impairment charge of $440 million ($167 million after-tax attributable to Enbridge) recognized in the second quarter of 2015 related to EEP's natural gas and natural gas liquids (NGL) businesses. The prolonged decline in commodity prices has reduced producers' expected drilling programs and negatively impacted volumes on EEP's natural gas and NGL pipelines and processing systems, which EEP holds directly and indirectly through its partially-owned subsidiary, Midcoast Energy Partners, L.P. (MEP).
Loss for 2015 and earnings for 2014 were also negatively impacted by taxes recognized on the transfer of assets between entities under common control of Enbridge. Intercompany gains realized as a result of these transfers for both years have been eliminated for accounting purposes. However, as these transactions involved the sale of partnership units, all tax consequences have remained in consolidated earnings and resulted in charges of $39 million and $157 million in 2015 and 2014, respectively.
Earnings attributable to common shareholders for the three months ended December 31, 2015 were $378 million, or $0.44 per common share, compared with earnings of $88 million, or $0.11 per common share, for the three months ended December 31, 2014. Fourth quarter performance drivers were largely consistent with year-to-date trends and earnings continued to be impacted by changes in unrealized fair value derivative and foreign exchange gains and losses. Aside from the operating factors discussed in Adjusted Earnings on page 7, factors unique to the fourth quarter of 2015 included the impact of employee severance costs in relation to the Company's enterprise-wide reduction of workforce, which resulted in a net charge of $25 million to earnings across business segments.
NON-GAAP MEASURES
This news release contains references to adjusted earnings/(loss) and ACFFO. Adjusted earnings/(loss) represents earnings or loss attributable to common shareholders adjusted for unusual, non-recurring or non-operating factors on both a consolidated and segmented basis. These factors, referred to as adjusting items, are reconciled and discussed in the financial results sections for the affected business segments in the Company's MD&A. Adjusting items referred to as changes in unrealized derivative fair value gains and losses are presented net of amounts realized on the settlement of derivative contracts during the applicable period.
ACFFO is defined as cash flow provided by operating activities before changes in operating assets and liabilities (including changes in regulatory assets and liabilities and environmental liabilities) less distributions to noncontrolling interests and redeemable noncontrolling interests, preference share dividends and maintenance capital expenditures, and further adjusted for unusual, non-recurring or non-operating factors.
Management believes the presentation of adjusted earnings/(loss) and ACFFO provide useful information to investors and shareholders as they provide increased transparency and insight into the performance of the Company. Management uses adjusted earnings/(loss) to set targets, and to assess the performance of the Company. Management also uses ACFFO to assess the performance of the Company and to set its dividend payout target. Adjusted earnings/(loss), adjusted earnings/(loss) for each segment and ACFFO are not measures that have standardized meaning prescribed by accounting principles generally accepted in the United States of America (U.S. GAAP) and are not U.S. GAAP measures. Therefore, these measures may not be comparable with similar measures presented by other issuers. The tables below summarize the reconciliation of the GAAP and non-GAAP measures.
NON-GAAP RECONCILIATION - EARNINGS/(LOSS) TO ADJUSTED EARNINGS
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
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(unaudited; millions of Canadian
dollars)
Earnings/(loss) attributable to
common shareholders 378 88 (37) 1,154
Adjusting items(1):
Changes in unrealized derivative
fair value loss(2) 45 164 1,380 320
Canadian Restructuring Plan - - 351 -
Goodwill impairment loss - - 167 -
Make-up rights adjustments 30 11 30 17
Leak remediation costs, net of
leak insurance recoveries (13) (9) (17) 8
Warmer/(colder) than normal
weather 16 (1) (11) (36)
Gains on sale of non-core assets
and investment, net of losses - (14) (46) (71)
Asset impairment losses 13 2 13 2
Employee severance costs 25 1 25 1
Valuation allowance on deferred
income tax assets - - 32 -
Project development and
transaction costs - 8 14 14
Tax on intercompany gains on sale
of partnership units - 157 39 157
Out-of-period adjustments - - (71) -
Other - 2 (3) 8
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Adjusted earnings 494 409 1,866 1,574
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1 The above table summarizes adjusting items by nature. For a detailed
listing of adjusting items by segment, refer to individual segment
discussions.
2 Changes in unrealized derivative fair value gains and loss are presented
net of amounts realized on the settlement of derivative contracts during
the applicable period.
ADJUSTED EARNINGS
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars, except per share amounts)
Liquids Pipelines(1) 64 199 691 858
Gas Distribution 58 68 210 177
Gas Pipelines, Processing and Energy
Services(1) (5) 30 89 136
Sponsored Investments(1) 369 123 859 429
Corporate 8 (11) 17 (26)
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Adjusted earnings(2) 494 409 1,866 1,574
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Adjusted earnings per common
share(2) 0.58 0.49 2.20 1.90
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1 Adjusted earnings from the Canadian Liquids Pipelines assets prior to
the date of transfer of $508 million in the year ended December 31, 2015
(2014 - $688 million) and adjusted earnings from the Canadian renewable
energy assets within the Gas Pipelines, Processing and Energy Services
segment prior to the date of transfer under the Canadian Restructuring
Plan of $6 million in the year ended December 31, 2015 (2014 - loss of
$3 million), have not been reclassified into the Sponsored Investments
segment for presentation purposes. Additionally, adjusted earnings of
$146 million and $1 million, for the three months ended December 31,
2014, related to Liquids Pipelines segment and Gas Pipelines, Processing
and Energy Services segment, respectively, have not been reclassified
into the Sponsored Investments segment for presentation purposes.
2 Adjusted earnings and adjusted earnings per common share are non-GAAP
measures that do not have any standardized meaning prescribed by
generally accepted accounting principles. For more information on non-
GAAP measures refer to Non-GAAP Measures.
Adjusted earnings for the year ended December 31, 2015 were $1,866 million, or $2.20 per common share, compared with $1,574 million, or $1.90 per common share, for the year ended December 31, 2014. The adjusted earnings growth was a reflection of the strength of Enbridge's existing asset portfolio combined with the continuing execution of its large growth capital program, which resulted in a number of new assets placed into service.
As a result of the Canadian Restructuring Plan, after August 31, 2015, the adjusted earnings of the assets transferred were reported in the Sponsored Investments segment; prior to this date they were reported in the Liquids Pipelines and Gas Pipelines, Processing and Energy Services segments. The table below is provided to help facilitate a review of the full year performance of the significant transferred assets and an understanding of the performance of the segments as reported.
--------------------------------------------------
Three Four
Eight One month months months
months ended ended ended Year ended
ended September December December December
August 31 30 31 31 31
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(unaudited; millions of
Canadian dollars)
2015
--------------------------------------------------
Transferred assets - Liquids
segment Pipelines Sponsored Investments
--------------------------------------------------
Canadian Mainline 395 69 201 270 665
Regional Oil Sands
System 108 20 39 59 167
Other 5 1 (2) (1) 4
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508 90 238 328 836
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2014
--------------------------------------------------
Transferred assets - Liquids
segment Pipelines Sponsored Investments
--------------------------------------------------
Canadian Mainline 361 39 100 139 500
Regional Oil Sands
System 125 9 47 56 181
Other 6 2 (1) 1 7
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492 50 146 196 688
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As noted in the table above, growth in consolidated adjusted earnings was largely driven by stronger contributions from the Canadian Mainline. Stronger contributions were primarily attributable to higher throughput that resulted from strong oil sands production in western Canada combined with strong downstream refinery demand, as well as ongoing efforts by the Company to optimize capacity utilization and to enhance scheduling efficiency with shippers. These positive factors were partially offset by a lower year-over-year average Canadian Mainline International Joint Tariff (IJT) Residual Benchmark Toll. In 2015, the Company also benefitted from the full-year of earnings from the Flanagan South and Seaway Twin pipelines, both of which commenced in late 2014. Adjusted earnings from Regional Oil Sands System, however, decreased in 2015 due to a reduction in contracted volumes on the Athabasca Mainline.
The past two years also reflected positive contributions from EEP mainly due to higher throughput and tolls in EEP's liquids businesses, as well as contributions from new assets placed into service in 2014 and 2015, the most prominent being the expansion of the Company's mainline system completed in July 2015 and the replacement and expansion of Line 6B completed in 2014.
Enbridge Gas Distribution Inc. (EGD), which operates under a five-year customized Incentive Rate Plan (IR Plan) approved in 2014, generated higher adjusted earnings in 2015 primarily attributable to an increase in distribution charges that resulted from an increased asset base, as well as customer growth during the year in excess of expectations embedded in rates.
Within Gas Pipelines, Processing and Energy Services, lower fractionation margins and the loss of a producer processing contract at the Palermo Conditioning Plant have contributed to lower Aux Sable earnings over the past two years. Partially offsetting the decrease in 2015 were higher take-or-pay fees on Canadian Midstream assets and higher contributions from Energy Services. Energy Services benefitted from more favourable tank management opportunities in the first half of 2015 resulting from strong refinery demand for blended crude oil feedstock, partially offset by the effects of less favourable conditions which persisted over the past two years in certain markets accessed by committed transportation capacity involving unrecovered demand charges.
Within the Corporate segment, Other Corporate adjusted loss for the year ended December 31, 2015 decreased compared with 2014, reflecting lower net Corporate segment finance costs in the first half of 2015 and lower income taxes, partially offset by higher preference share dividends reflecting additional preference shares issued in 2014 to fund the Company's growth capital program.
With respect to the fourth quarter of 2015, many of the annual trends discussed above were also the factors in driving adjusted earnings growth over the fourth quarter of 2014. Within Gas Distribution, although EGD adjusted earnings increased on a year-over-year basis, the timing of higher income taxes and operating and administrative expenses recorded in the fourth quarter of 2015 drove a decrease in quarter-over-quarter adjusted earnings. In Energy Services, the absence of tank management opportunities in the fourth quarter combined with conditions in certain markets as noted above resulted in an adjusted loss in the fourth quarter of 2015 compared with adjusted earnings in the comparable 2014 period.
The adjusted earnings discussed above exclude the impact of unusual, non-recurring or non-operating factors, as listed in Non-GAAP Measures.
NON-GAAP RECONCILIATION - AVAILABLE CASH FLOW FROM OPERATIONS
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(millions of Canadian dollars,
except per share amounts)
Cash provided by operating
activities - continuing operations 806 656 4,571 2,528
Adjusted for changes in operating
assets and liabilities(1) 474 470 688 1,777
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1,280 1,126 5,259 4,305
Distributions to noncontrolling
interests (179) (140) (680) (535)
Distributions to redeemable
noncontrolling interests (34) (24) (114) (79)
Preference share dividends (74) (71) (288) (245)
Maintenance capital expenditures(2) (200) (312) (720) (970)
Significant adjusting items:
Weather normalization 16 (1) (11) (36)
Project development and
transaction costs 2 15 44 19
Realized inventory revaluation
allowance(3) (52) - (474) -
Hydrostatic testing 23 - 72 -
Employee severance costs 30 6 30 6
Other items 64 11 36 41
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Available cash flow from operations
(ACFFO) 876 610 3,154 2,506
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Available cash flow from operations
per common share 1.03 0.73 3.72 3.02
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1 Changes in operating assets and liabilities include changes in
regulatory assets and liabilities and environmental liabilities, net of
recoveries.
2 Maintenance capital expenditures are expenditures that are required for
the ongoing support and maintenance of the existing pipeline system or
that are necessary to maintain the service capability of the existing
assets (including the replacement of components that are worn, obsolete,
or completing their useful lives). For the purpose of ACFFO, maintenance
capital excludes expenditures that extend asset useful lives, increase
capacities from existing levels or reduce costs to enhance revenues or
provide enhancements to the service capability of the existing assets.
3 Realized inventory revaluation allowance relates to losses on sale of
previously written down inventory for which there is an approximate
offsetting realized derivative gain in ACFFO.
ACFFO was $876 million, or $1.03 per common share, for the three months ended December 31, 2015 compared with $610 million, or $0.73 per common share, for the three months ended December 31, 2014. ACFFO was $3,154 million, or $3.72 per common share, for the year ended December 31, 2015 compared with $2,506 million, or $3.02 per common share, for the year ended December 31, 2014. The Company experienced strong quarter-over-quarter and year-over-year growth in ACFFO which was driven by the same factors as those impacting adjusted earnings across the Company's various businesses, as discussed in Adjusted Earnings above.
Also contributing to the period-over-period increase in ACFFO were lower maintenance capital expenditures in 2015 compared with the corresponding 2014 periods. Over the last few years, the Company has made a significant investment in the ongoing support, maintenance and integrity management of its pipelines and other infrastructure and in the preservation of the service capability of its existing assets. The period-over-period decrease in maintenance capital expenditures is due to the completion of specific maintenance programs in 2014. The Company plans to continue to invest in its maintenance capital program to support the safety and reliability of its operations.
The period-over-period increase in ACFFO was partially offset by distributions to noncontrolling interests in EEP and Enbridge Energy Management, L.L.C. and to redeemable noncontrolling interests in the Fund. Distributions were higher in 2015 compared with the distributions in 2014 mainly as a result of higher noncontrolling interests and redeemable noncontrolling interests. Also, the Company's payment of preference share dividends increased period-over-period due to preference shares issued in 2014 to fund the Company's growth capital program. Finally, the ACFFO for each period was also adjusted for the cash effect of certain unusual, non-recurring or non-operating factors as discussed in Non-GAAP Reconciliations.
LIQUIDS PIPELINES
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars)
Canadian Mainline - 100 395 500
Regional Oil Sands System - 47 108 181
Seaway and Flanagan South Pipelines 40 35 103 74
Spearhead Pipeline 10 4 34 31
Southern Lights Pipeline 2 12 11 49
Feeder Pipelines and Other 12 1 40 23
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Adjusted earnings 64 199 691 858
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Canadian Mainline - changes in
unrealized derivative fair
value loss - (178) (819) (370)
Canadian Mainline - Line 9B costs
incurred during reversal - (2) (5) (8)
Canadian Mainline - write-off of
regulatory asset in respect of
taxes - - (88) -
Canadian Mainline - impact of tax
rate changes - - 9 -
Regional Oil Sands System - make-
up rights adjustment - 1 9 6
Regional Oil Sands System - leak
insurance recoveries - 4 9 8
Regional Oil Sands System - leak
remediation and long-
term pipeline stabilization costs - - (5) (4)
Regional Oil Sands System - impact
of tax rate changes - - (31) -
Regional Oil Sands System - loss
on disposal of non-core assets - - (7) -
Regional Oil Sands System - prior
period adjustment - - 16 -
Seaway and Flanagan South
Pipelines - make-up rights
adjustment (27) (14) (35) (25)
Spearhead Pipeline - make-up
rights adjustment (2) 1 1 -
Spearhead Pipeline - changes in
unrealized derivative fair value
gains/(loss) - 1 (1) 1
Southern Lights Pipeline - changes
in unrealized derivative fair
value gains - 9 - -
Feeder Pipelines and Other - gain
on sale of non-core assets - - 44 -
Feeder Pipelines and Other - make-
up rights adjustment 1 - (3) 3
Feeder Pipelines and Other -
project development costs - (2) (5) (6)
Feeder Pipelines and Other -
impact of tax rate changes - - (4) -
----------------------------------------------------------------------------
Earnings/(loss) attributable to
common shareholders 36 19 (224) 463
----------------------------------------------------------------------------
----------------------------------------------------------------------------
-- Liquids Pipelines adjusted earnings for the year ended December 31, 2015
are impacted by the September 2015 transfer of the Canadian Mainline and
Regional Oil Sands System under the Canadian Restructuring Plan
effective September 1, 2015. Following the transfers to the Fund Group,
the results of these assets are no longer reported in the Liquids
Pipelines segment, but are captured in the results of the Fund Group
which are reported within Sponsored Investments. The table on page 8
provides a breakdown of the adjusted earnings for the transferred
Liquids Pipelines assets by segment.
-- Prior to the closing of the Canadian Restructuring Plan on September 1,
2015, Canadian Mainline adjusted earnings increased compared with the
corresponding 2014 periods. The period-over-period increase reflected
higher throughput from strong oil sands production combined with strong
refinery demand in the midwest market partly due to a start-up of a
midwest refinery's conversion to heavy oil processing in the second
quarter of 2014. Higher throughput in the third quarter of 2015 was also
achieved from the expansion of the Company's mainline system completed
in July 2015 and through continued efforts by the Company to optimize
capacity utilization and to enhance scheduling efficiency with shippers.
Although throughput increased relative to the comparative periods in
2014, further throughput growth in 2015 was hindered by upstream plant
maintenance in Alberta during the second and third quarters which
impacted light volumes, and an unplanned shutdown of a midwest refinery
that impacted the takeaway of heavy volumes in the third quarter. Other
factors contributing to an increase in adjusted earnings were higher
terminalling revenues and the impact of a stronger United States dollar
as the IJT Benchmark Toll and its components are set in United States
dollars. The majority of the Company's foreign exchange risk on Canadian
Mainline earnings is hedged; however, the average foreign exchange rate
at which these revenues were hedged was higher during the eight month
period ended August 31, 2015 compared with the same period in 2014.
These trends continued into the month of September and in the fourth
quarter of 2015, although the throughput impacts related to the upstream
plant maintenance and shutdown of a midwest refinery noted above were
alleviated towards the latter part of the fourth quarter of 2015. In
addition, Canadian Mainline fourth quarter of 2015 adjusted earnings
also reflected one month of revenues from Line 9B which was placed into
service in December 2015. Canadian Mainline adjusted earnings for the
month of September and the fourth quarter of 2015 are reflected in the
Fund Group reported within Sponsored Investments, whereas adjusted
earnings for the comparative 2014 periods were reflected in Liquids
Pipelines.
-- Partially offsetting the positive factors noted above for the eight
month period ended August 31, 2015 was a lower average Canadian Mainline
IJT Residual Benchmark Toll, although this impact lessened commencing
the second quarter of 2015 as effective April 1, 2015, this toll
increased by US$0.10 per barrel to US$1.63 per barrel. Changes in the
Canadian Mainline IJT Residual Benchmark Toll are inversely related to
the Lakehead System Toll, which was higher due to the recovery of
incremental costs associated with EEP's growth projects. Also mitigating
the impact of a lower Canadian Mainline IJT Residual Benchmark Toll were
new surcharges related to system expansions, including a surcharge for
the Edmonton to Hardisty Expansion pipeline completed in April 2015.
Other factors which negatively impacted adjusted earnings were higher
power costs associated with higher throughput, higher depreciation
expense due to an increased asset base and higher interest expense
resulting from higher outstanding debt to support increased business
activities. These trends also continued into the month of September and
in the fourth quarter of 2015.
-- Prior to the closing of the Canadian Restructuring Plan on September 1,
2015, Regional Oil Sands System adjusted earnings were lower compared
with the corresponding 2014 period and reflected a reduction in
contracted volumes on the Athabasca Mainline, which was mitigated in
part by higher uncommitted volumes on this pipeline. Higher depreciation
expense from a larger asset base and higher interest expense also
contributed to a decrease in period-over-period adjusted earnings. These
negative effects were partially offset by higher earnings from assets
placed into service in 2014 and 2015, including the Sunday Creek
Terminal and Woodland Pipeline Extension projects that were placed into
service in the third quarter of 2015 as well as Norealis Pipeline which
was completed in April 2014. These trends continued into September as
well as the fourth quarter of 2015. Regional Oil Sands System adjusted
earnings for the month of September and the fourth quarter of 2015 are
now reflected in the Fund Group, whereas adjusted earnings from these
assets for the corresponding 2014 periods were reflected in Liquids
Pipelines.
-- The increase in adjusted earnings from Seaway and Flanagan South
Pipelines reflects a full year of operations from the Flanagan South
Pipeline and Seaway Pipeline Twin, both of which were placed into
service in late 2014. During the first half of 2015, as a result of
Canadian Mainline apportionment, throughput on Seaway and Flanagan South
Pipelines was lower than the throughput committed on these pipelines.
However, this upstream apportionment was partially alleviated in the
second half of 2015 through the expansion of the Company's mainline
system completed in July 2015. When committed shippers on Flanagan South
are unable to fulfill their volume commitments due to apportionment,
they are provided with temporary relief to make up those volumes during
the course of their contracts or the apportioned volumes are added on to
the end of the contract term.
-- Spearhead Pipeline increase in adjusted earnings for both the full year
and fourth quarter of 2015 reflected higher tariff rates and expiry of
deficiency credits in the fourth quarter of 2015, as well as lower power
costs. These positive factors were partially offset by lower throughput
which was more prominent in the first nine months of 2015 due to
upstream apportionment, refinery maintenance, unscheduled shutdown and
power outages.
-- Southern Lights Pipeline adjusted earnings for both the full year and
fourth quarter of 2015 decreased as the majority of the economic benefit
derived from Southern Lights Pipeline was reflected in earnings from the
Fund Group following the Fund Group's November 2014 subscription and
purchase of Southern Lights Class A units. The Class A units provide a
defined cash flow stream from Southern Lights Pipeline. In addition, as
part of the Canadian Restructuring Plan, effective September 1, 2015,
Enbridge transferred all Class B units of Southern Lights Canada to the
Fund Group. Following the closing of the Transaction, the Fund Group
holds all the ownership, economic interests and voting rights, direct
and indirect, in Southern Lights Canada. Enbridge continues to
indirectly own all of the Class B Units of Southern Lights US.
-- The increase in Feeder Pipelines and Other adjusted earnings for 2015
compared with 2014 was attributable to higher earnings from Eddystone
Rail Project completed in April 2014, incremental earnings from certain
storage agreements, higher tolls and throughput on Toledo Pipeline and
contributions from Southern Access Extension which was placed into
service in December 2015. Partially offsetting the increase in adjusted
earnings were higher business development costs not eligible for
capitalization in the first quarter of 2015, lower average tolls on
Olympic Pipeline and higher property taxes relating to Toledo Pipeline
in the third quarter of 2015.
Additional details on items impacting Liquids Pipelines earnings include:
-- Canadian Mainline earnings/(loss) for 2015 and 2014 reflected changes in
unrealized fair value losses on derivative financial instruments used to
manage risk exposures inherent within the Competitive Toll Settlement
(CTS), namely foreign exchange, power cost variability and allowance oil
commodity prices.
-- Canadian Mainline earnings/(loss) for 2015 and 2014 included
depreciation and interest expenses charged to Line 9B while it was idled
and undergoing a reversal as part of the Company's Eastern Access
initiative.
-- Canadian Mainline loss for 2015 included a write-off of a regulatory
asset in respect of taxes resulting from the transfer of assets between
entities under common control of Enbridge in support of the Canadian
Restructuring Plan.
-- Regional Oil Sands System earnings for 2015 and 2014 included make-up
rights adjustments to recognize revenues for certain long-term take-or-
pay contracts rateably over the contract life. Make-up rights are earned
by shippers when minimum volume commitments are not utilized during the
period but under certain circumstances can be used to offset overages in
future periods, subject to expiry periods. Generally, under such take-
or-pay contracts, payments are received rateably over the life of the
contract as capacity is provided, regardless of volumes shipped, and are
non-refundable. Should make-up rights be utilized in future periods,
costs associated with such transportation service are typically passed
through to shippers, such that little or no cost is borne by Enbridge.
For the purposes of adjusted earnings, the Company reflects
contributions from these contracts rateably over the life of the
contract, consistent with contractual cash payments under the contract.
-- Regional Oil Sands System earnings for 2015 and 2014 included charges,
before insurance recoveries, related to the Line 37 crude oil release,
which occurred in June 2013.
-- Regional Oil Sands System earnings for 2015 and 2014 included insurance
recoveries associated with the Line 37 crude oil release, which occurred
in June 2013.
-- Earnings/(loss) for Canadian Mainline, Regional Oil Sands System and
Feeder Pipelines and Other included the impact of a corporate tax rate
change in the province of Alberta on opening deferred income tax
balances.
-- Feeder Pipelines and Other earnings for 2015 and 2014 included certain
business development costs related to Northern Gateway Project that are
anticipated to be recovered over the life of the project.
GAS DISTRIBUTION
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars)
Enbridge Gas Distribution Inc. (EGD) 49 58 180 158
Other Gas Distribution and Storage 9 10 30 19
----------------------------------------------------------------------------
Adjusted earnings 58 68 210 177
----------------------------------------------------------------------------
EGD - (warmer)/colder than normal
weather (16) 1 11 36
EGD - changes in unrealized
derivative fair value loss - - (3) -
EGD - employee severance cost
adjustment 4 - 4 -
----------------------------------------------------------------------------
Earnings attributable to common
shareholders 46 69 222 213
----------------------------------------------------------------------------
----------------------------------------------------------------------------
-- EGD operating results for both years reflected rates as established
under its customized IR Plan. Higher adjusted earnings for the 2015 full
year were primarily attributable to an increase in distribution charges
that resulted from an increased assets base, as well as customer growth
during the year in excess of expectations embedded in rates. Despite the
positive year-over-year results, EGD experienced a quarter-over-quarter
decrease driven by higher income taxes in the fourth quarter of 2015
resulting from the timing of lower postretirement benefit contributions,
as well as the timing of higher operating and administrative expenses.
-- Other Gas Distribution and Storage earnings for the full year reflected
the absence of a loss that Enbridge Gas New Brunswick Inc. (EGNB)
incurred in 2014 under a contract to sell natural gas to the province of
New Brunswick. Due to an abnormally cold winter in the first quarter of
2014, costs associated with the fulfilment of the contract were higher
than the revenues received. Excluding the impact of the above noted
contract which expired in October 2014, EGNB adjusted earnings increased
slightly in 2015 due to higher distribution revenues.
GAS PIPELINES, PROCESSING AND ENERGY SERVICES
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars)
Aux Sable (5) 8 (7) 28
Energy Services (11) 8 42 35
Alliance Pipeline US - 5 - 41
Vector Pipeline 5 3 16 15
Canadian Midstream 12 6 41 23
Enbridge Offshore Pipelines
(Offshore) (1) 1 (2) (2)
Other (5) (1) (1) (4)
----------------------------------------------------------------------------
Adjusted earnings/(loss) (5) 30 89 136
----------------------------------------------------------------------------
Aux Sable - accrual for commercial
arrangements (9) - (19) -
Energy Services - changes in
unrealized derivative fair value
gains 60 138 152 424
Canadian Midstream - impact of tax
rate changes - - (3) -
Offshore - gain on sale of non-
core assets - 14 4 57
Other - changes in unrealized
derivative fair value
gains/(loss) (1) 3 - -
Other - impact of tax rate changes (1) - (5) -
----------------------------------------------------------------------------
Earnings attributable to common
shareholders 44 185 218 617
----------------------------------------------------------------------------
----------------------------------------------------------------------------
-- Aux Sable incurred losses in both the full year and the fourth quarter
of 2015 primarily due to lower fractionation margins resulting from a
weaker commodity price environment, absence of contributions from the
upside sharing mechanism and the loss of a producer processing contract
at the Palermo Conditioning Plant. Aux Sable 2015 results were also
negatively impacted by costs associated with feedstock supply.
-- Energy Services adjusted earnings increased for the full year,
reflecting strong refinery demand for blended crude oil feedstock
leading to more favourable tank management opportunities in the first
half of 2015. Energy Services incurred an adjusted loss in the fourth
quarter of 2015 compared with adjusted earnings in the comparable 2014
period resulting from less favourable conditions in certain markets
accessed by committed transportation capacity involving unrecovered
demand charges, combined with an erosion of the favourable tank
management opportunities experienced in the first half of 2015 due to a
reduction in refinery demand for blended crude oil feedstock and an
increase in offshore crude supply in the Gulf Coast. Energy Services
adjusted earnings are dependent on market conditions and results
achieved in one period may not be indicative of results achieved in
future periods.
-- The absence of Alliance Pipeline US earnings reflected the impact of the
transfer of Alliance Pipeline US to the Fund Group in November 2014.
-- Vector Pipeline earnings for both the full year and fourth quarter of
2015 reflected positive effects of lower operating expenses and lower
interest costs due debt repayment. However, these positive impacts were
offset by lower year-over-year transportation revenues as unusually high
demand for natural gas and uncommitted capacity on the Vector system as
a result of abnormal winter weather conditions was experienced in the
first quarter of 2014.
-- Canadian Midstream higher earnings reflected an increase in take-or-pay
fees on the Company's investment in Cabin, Pipestone and Sexsmith.
Pipestone earnings also increased as a result of higher volumes that
exceeded take-or-pay levels and due to full year of incremental earnings
from the final phase of this project which was placed into service in
June 2014.
-- Offshore adjusted earnings/(loss) for both the full year and fourth
quarter of 2015 were comparable with the corresponding 2014 periods.
Offshore operating results for each period reflected persistent weak gas
volumes due to decreased production in the Gulf of Mexico. Offshore
adjusted losses for 2015 and 2014 also reflected the absence of earnings
from the disposals of certain non-core assets that were finalized in
March and November 2014, respectively. For the 2015 full year, Offshore
also incurred losses from equity investments in certain joint venture
pipelines. Partially offsetting these negative effects in 2015 were
earnings from the Jack St. Malo portion of Walker Ridge Gas Gathering
System that was completed in December 2014.
-- Other adjusted loss in both the full year and fourth quarter of 2015 is
impacted by the effects of the Canadian Restructuring Plan. Following
the close of the Canadian Restructuring Plan on September 1, 2015, the
results of the Lac Alfred, Massif du Sud, Blackspring Ridge and Saint
Robert Bellarmin wind projects are no longer reported in the Gas
Pipelines, Processing and Energy Services segment, but are captured in
the results of the Fund Group within Sponsored Investments. Prior to
September 1, 2015, adjusted earnings from Other increased compared with
the corresponding 2014 period, reflecting contributions from new wind
farms including the Wildcat and Magic Valley wind farms acquired at the
end of 2014 and incremental earnings associated with the purchase of
additional interests in the Lac Alfred and Massif du Sud wind projects,
which closed in the fourth quarter of 2014, partially offset by higher
business development costs not eligible for capitalization.
Additional details on items impacting Gas Pipelines, Processing and Energy Services earnings/(loss) include:
-- Energy Services earnings/(loss) for each period reflected changes in
unrealized fair value gains and losses related to the revaluation of
financial derivatives used to manage the profitability of transportation
and storage transactions and the revaluation of inventory.
-- Energy Services adjusted earnings for 2014 excluded a realized loss of
$117 million incurred to close out certain forward derivative financial
contracts intended to hedge the value of committed physical
transportation capacity in certain markets accessed by Energy Services,
but were determined to be no longer effective in doing so.
-- Other loss for 2015 included the impact of a corporate tax rate change
in the province of Alberta on opening deferred income tax balances.
SPONSORED INVESTMENTS
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars)
The Fund Group 287 34 509 125
Enbridge Energy Partners, L.P. (EEP) 45 40 231 197
Enbridge Energy, Limited Partnership
(EELP) 37 49 119 107
----------------------------------------------------------------------------
Adjusted earnings 369 123 859 429
----------------------------------------------------------------------------
The Fund Group - make-up rights
adjustment (2) 1 (3) -
The Fund Group - changes in
unrealized derivative fair value
gains/(loss) (67) - (174) 3
The Fund Group - unrealized
intercompany foreign exchange
gains 14 - 43 -
The Fund Group - drop down
transaction costs - - (3) (2)
The Fund Group - gain on sale - - 5 -
The Fund Group - impact of tax
rate changes - - (6) -
The Fund Group - write-down of
regulatory balances - - (3) -
The Fund Group - prior period
adjustment (3) - (16) -
The Fund Group - employee
severance costs (10) - (10) -
The Fund Group - Line 9B costs
incurred during reversal (1) - (1) -
The Fund Group - leak insurance
recoveries 13 - 13 -
EEP - transfer of contracts - - (1) -
EEP - changes in unrealized
derivative fair value
gains/(loss) (2) 14 (6) 5
EEP - make-up rights adjustment - - 1 (1)
EEP - goodwill impairment loss - - (167) -
EEP - asset impairment loss (11) (2) (11) (2)
EEP - employee severance costs - (1) - (1)
EEP - valuation allowance on
deferred income tax assets - - (32) -
EEP - leak remediation costs - 5 - (12)
EEP - hydrostatic testing (3) - (9) -
----------------------------------------------------------------------------
Earnings attributable to common
shareholders 297 140 479 419
----------------------------------------------------------------------------
----------------------------------------------------------------------------
-- The Fund Group significant increase in adjusted earnings for both the
full year and fourth quarter of 2015 is largely attributable to the
transfer of the Canadian liquids business and certain Canadian renewable
energy assets from Enbridge as well as Enbridge's overall economic
interest in the Fund Group, which increased to 91.9% on September 1,
2015, following the closing of the Canadian Restructuring Plan. Adjusted
earnings from assets transferred under the Canadian Restructuring Plan
were impacted by the same reasons as discussed under Liquids Pipelines
and Gas Pipelines, Processing and Energy Services segments. Also
positively impacting adjusted earnings from the Fund Group for the
fourth quarter and full year 2015 were earnings from natural gas and
diluent pipeline interests transferred by Enbridge to the Fund Group in
November 2014. Partially offsetting the increase in adjusted earnings in
2015 were higher financing costs associated with debt raised to acquire
the natural gas and diluent pipeline interests and higher income taxes.
-- EEP adjusted earnings increased for both the full year and fourth
quarter of 2015, reflecting higher throughput and tolls in EEP's liquids
business, as well as contributions from new assets placed into service
in 2014 and 2015, the most prominent being the expansion of the
Company's mainline system completed in July 2015 and the replacement and
expansion of Line 6B completed in 2014. In addition, EEP adjusted
earnings reflected incremental earnings from the transfer on January 2,
2015 of the remaining 66.7% interest in Alberta Clipper previously held
by Enbridge through EELP. Partially offsetting the increase in adjusted
earnings in EEP's liquids business were higher operating and
administrative costs, incremental power costs associated with higher
throughput and higher depreciation expense from an increased asset base.
Also contributing to higher earnings in 2015 were distributions from
Class D units and Incentive Distribution Units which were issued to
Enbridge in July 2014 under an equity restructuring transaction and from
Class E units which were issued in January 2015 in connection with the
transfer of Alberta Clipper. Finally, the 2015 results reflected lower
volumes within EEP's natural gas and NGL businesses primarily as a
result of reduced drilling programs by producers. EEP holds its natural
gas and NGL businesses directly and indirectly through its partially-
owned subsidiary, MEP.
-- EELP adjusted earnings increased for the full year due to contributions
from assets recently placed into service, most notably the expansion of
the Company's mainline system completed in July 2015 and the expansion
of Line 6B completed in phases during 2014 as part of the Company's
Eastern Access Program. Partially offsetting the increase in 2015
earnings was the absence of earnings from EELP's interest in Alberta
Clipper which was transferred to EEP on January 2, 2015. EELP adjusted
earnings for the fourth quarter of 2015 reflected the same positive
trends as the full year; however, the quarter-over-quarter decrease in
adjusted earnings mainly reflects the absence of earnings from Alberta
Clipper noted above.
Additional details on items impacting Sponsored Investments include:
-- The Fund Group earnings for 2015 reflected changes in unrealized fair
value losses primarily on derivative financial instruments used to risk
manage exposures inherent within the CTS, namely foreign exchange, power
cost variability and allowance oil commodity prices.
-- The Fund Group earnings for 2015 included employee severance costs in
relation to Enbridge's enterprise-wide reduction of workforce.
-- The Fund Group earnings for 2015 included the impact of a corporate tax
rate change in the province of Alberta on opening deferred income tax
balances.
-- The Fund Group earnings for 2015 included insurance recoveries
associated with the Line 37 crude oil release, which occurred in June
2013 - refer to Liquids Pipelines.
-- EEP earnings for 2015 included a goodwill impairment charge related to
EEP's natural gas and NGL businesses due to a prolonged decline in
commodity prices which has reduced producers' expected drilling programs
and negatively impacted volumes on EEP's natural gas and NGL systems.
-- EEP earnings for 2015 reflected an asset impairment charge of US$63
million ($11 million after-tax attributable to Enbridge) related to
EEP's Berthold rail facility due to contracts that have not been renewed
beyond 2016.
-- EEP earnings for 2014 included charges related to estimated costs,
before insurance recoveries, associated with the Line 6B crude oil
release.
-- Earnings from EEP for 2014 included employee severance costs triggered
by redundancies in EEP's natural gas and NGL businesses.
CORPORATE
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars)
Noverco 22 21 50 43
Other Corporate (14) (32) (33) (69)
----------------------------------------------------------------------------
Adjusted earnings/(loss) 8 (11) 17 (26)
----------------------------------------------------------------------------
Noverco - changes in unrealized
derivative fair value loss (2) - (9) (5)
Other Corporate - changes in
unrealized derivative fair
value loss (33) (151) (520) (378)
Other Corporate - loss on de-
designation of interest rate
hedges in connection with the
Canadian Restructuring Plan - - (247) -
Other Corporate - transaction
costs relating to the Canadian
Restructuring Plan - - (16) -
Other Corporate - deferred income
tax out-of-period adjustments - - 71 -
Other Corporate - impact of tax
rate changes - - 44 -
Other Corporate - drop down
transaction costs - (6) (6) (6)
Other Corporate - asset impairment
loss (2) - (2) -
Other Corporate - tax on
intercompany gains on sale of
partnership units - (157) (39) (157)
Other Corporate - gain on sale of
investment - - - 14
Other Corporate - employee
severance costs (19) - (19) -
Other Corporate - prior period
adjustment 3 - (6) -
----------------------------------------------------------------------------
Loss attributable to common
shareholders (45) (325) (732) (558)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
-- Noverco Inc. (Noverco) adjusted earnings included returns on the
Company's preferred share investments, as well as its equity earnings
from Noverco's underlying gas and power distribution investments through
Gaz Metro Limited Partnership (Gaz Metro). The increase in year-over-
year adjusted earnings reflected stronger operating earnings from Gaz
Metro due to a favourable United States/Canada foreign exchange rate on
Gaz Metro's United States based business and incremental earnings from
new assets.
-- Other Corporate adjusted loss decreased in 2015 and reflected lower net
Corporate segment finance costs and lower income taxes, partially offset
by higher preference share dividends from an increase in the number of
preference shares outstanding and higher operating and administrative
costs.
Additional details on items impacting Corporate loss include:
-- Other Corporate loss for each period included changes in the unrealized
fair value losses on derivative financial instruments related to forward
foreign exchange risk management positions.
-- Other Corporate loss for 2015 included an out-of-period adjustment to
reduce deferred income tax expense related to intercompany preferred
dividends.
-- Other Corporate loss for 2015 included the impact of a corporate tax
rate change in the province of Alberta on opening deferred income tax
balances.
-- Other Corporate loss for 2015 included employee severance costs in
relation to the Company's enterprise-wide reduction of workforce.
CONFERENCE CALL
Enbridge and ENF will hold a joint conference call on Friday, February 19, 2016 at 9 a.m. Eastern Time (7 a.m. Mountain Time) to discuss the 2015 annual results. Analysts, members of the media and other interested parties can access the call toll-free at 1-800-708-4540 from within North America and outside North America at 1-847-619-6397 using the access code 41445190#. The call will be audio webcast live at http://edge.media-server.com/m/p/cvp6cnfq. A webcast replay and podcast will be available approximately two hours after the conclusion of the event and a transcript will be posted to the website within 24 hours. The replay will be available at toll-free 1-888-843-7419 within North America and outside North America at 1-630-652-3042 (access code 41445190#) for seven days after the call.
The conference call will begin with a presentation by the Company's President and Chief Executive Officer and Chief Financial Officer, followed by a question and answer period for investment analysts. A question and answer period for members of the media will immediately follow.
Enbridge, a Canadian Company, exists to fuel people's quality of life, and has done so for more than 65 years. A North American leader in delivering energy, Enbridge has been ranked on the Global 100 Most Sustainable Corporations index for the past seven years. Enbridge operates the world's longest crude oil and liquids transportation system across Canada and the United States and has a significant and growing involvement in natural gas gathering, transmission and midstream business, as well as an increasing involvement in power transmission. Enbridge owns and operates Canada's largest natural gas distribution company, serving residential, commercial and industrial customers in Ontario, Quebec, New Brunswick and New York State. Enbridge has interests in nearly 2,000 MW of net renewable and alternative generating capacity, and continues to expand into wind, solar and geothermal power. Enbridge employs nearly 11,000 people, primarily in Canada and the United States, and is ranked as one of Canada's Top 100 Employers for 2016. Enbridge's common shares trade on the Toronto and New York stock exchanges under the symbol ENB. For more information, visit www.enbridge.com. None of the information contained in, or connected to, Enbridge's website is incorporated in or otherwise part of this news release.
FORWARD-LOOKING INFORMATION
Forward-looking information, or forward-looking statements, have been included in this news release to provide information about the Company and its subsidiaries and affiliates, including management's assessment of Enbridge and its subsidiaries' future plans and operations. This information may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as "anticipate", "expect", "project", "estimate", "forecast", "plan", "intend", "target", "believe", "likely" and similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information or statements included or incorporated by reference in this document include, but are not limited to, statements with respect to the following: expected earnings/(loss) or adjusted earnings/(loss); expected earnings/(loss) or adjusted earnings/(loss) per share; expected ACFFO or ACFFO per share; expected future cash flows; expected costs related to projects under construction; expected in-service dates for projects under construction; expected capital expenditures; estimated future dividends; adjusted earnings per share guidance; ACFFO per share guidance; expected future actions of regulators; expected costs related to leak remediation and potential insurance recoveries; expectations regarding commodity prices; supply forecasts; expectations regarding the impact of the Canadian Restructuring Plan (or the Transaction); dividend payout policy and dividend payout expectation.
Although Enbridge believes these forward-looking statements are reasonable based on the information available on the date such statements are made and processes used to prepare the information, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Material assumptions include assumptions about the following: the expected supply of and demand for crude oil, natural gas, NGL and renewable energy; prices of crude oil, natural gas, NGL and renewable energy; expected exchange rates; inflation; interest rates; availability and price of labour and pipeline construction materials; operational reliability; customer and regulatory approvals; maintenance of support and regulatory approvals for the Company's projects; anticipated in-service dates; weather; the impact of the Canadian Restructuring Plan and dividend policy on the Company's future cash flows; credit ratings; capital project funding; expected earnings/(loss) or adjusted earnings/(loss); expected earnings/(loss) or adjusted earnings/(loss)per share; expected future cash flows and expected future ACFFO; and estimated future dividends. Assumptions regarding the expected supply of and demand for crude oil, natural gas, NGL and renewable energy, and the prices of these commodities, are material to and underlie all forward-looking statements. These factors are relevant to all forward-looking statements as they may impact current and future levels of demand for the Company's services. Similarly, exchange rates, inflation and interest rates impact the economies and business environments in which the Company operates and may impact levels of demand for the Company's services and cost of inputs, and are therefore inherent in all forward-looking statements. Due to the interdependencies and correlation of these macroeconomic factors, the impact of any one assumption on a forward-looking statement cannot be determined with certainty, particularly with respect to expected earnings/(loss), adjusted earnings/(loss), ACFFO and associated per share amounts, the impact of the Canadian Restructuring Plan on Enbridge or estimated future dividends. The most relevant assumptions associated with forward-looking statements on projects under construction, including estimated completion dates and expected capital expenditures, include the following: the availability and price of labour and pipeline construction materials; the effects of inflation and foreign exchange rates on labour and material costs; the effects of interest rates on borrowing costs; the impact of weather; and customer and regulatory approvals on construction and in-service schedules.
Enbridge's forward-looking statements are subject to risks and uncertainties pertaining to adjusted earnings guidance, ACFFO guidance, operating performance, impact of the Canadian Restructuring Plan, dividend policy, regulatory parameters, project approval and support, weather, economic and competitive conditions, public opinion, changes in tax law and tax rate increases, exchange rates, interest rates, commodity prices and supply of and demand for commodities, including but not limited to those risks and uncertainties discussed in this news release and in the Company's other filings with Canadian and United States securities regulators. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent and Enbridge's future course of action depends on management's assessment of all information available at the relevant time. Except to the extent required by applicable law, Enbridge assumes no obligation to publicly update or revise any forward-looking statements made in this news release or otherwise, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to Enbridge or persons acting on the Company's behalf, are expressly qualified in their entirety by these cautionary statements.
HIGHLIGHTS
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars, except per share amounts)
Earnings attributable to common
shareholders
Liquids Pipelines(1) 36 19 (224) 463
Gas Distribution 46 69 222 213
Gas Pipelines, Processing and
Energy Services(1) 44 185 218 571
Sponsored Investments(1) 297 140 479 419
Corporate (45) (325) (732) (558)
----------------------------------------------------------------------------
Earnings/(loss) attributable to
common shareholders from
continuing operations 378 88 (37) 1,108
Discontinued operations - Gas
Pipelines, Processing and Energy
Services - - - 46
----------------------------------------------------------------------------
378 88 (37) 1,154
----------------------------------------------------------------------------
Earnings/(loss) per common share 0.44 0.11 (0.04) 1.39
Diluted earnings/(loss) per common
share 0.44 0.10 (0.04) 1.37
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted earnings(2)
Liquids Pipelines(3) 64 199 691 858
Gas Distribution 58 68 210 177
Gas Pipelines, Processing and
Energy Services(3) (5) 30 89 136
Sponsored Investments(3) 369 123 859 429
Corporate 8 (11) 17 (26)
----------------------------------------------------------------------------
494 409 1,866 1,574
Adjusted earnings per common
share(2) 0.58 0.49 2.20 1.90
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow data
Cash provided by operating
activities 806 656 4,571 2,547
Cash used in investing activities (2,296) (3,737) (7,933) (11,891)
Cash provided by financing
activities 1,457 3,221 2,973 9,770
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Available cash flow from
operations(4)
Available cash flow from
operations 876 610 3,154 2,506
Available cash flow from
operations per common share 1.03 0.73 3.72 3.02
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Dividends
Common share dividends declared 401 297 1,596 1,177
Dividends paid per common share 0.465 0.350 1.86 1.40
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shares outstanding (millions)
Weighted average common shares
outstanding 853 838 847 829
Diluted weighted average common
shares outstanding 860 849 858 840
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating data
Liquids Pipelines - Average
deliveries (thousands of barrels
per day)
Canadian Mainline(5) 2,243 2,066 2,185 1,995
Regional Oil Sands System(6) 726 725 759 703
Lakehead System 2,388 2,187 2,315 2,113
Gas Pipelines - Average throughput
(millions of cubic feet per day)
Alliance Pipeline Canada 1,481 1,547 1,488 1,556
Alliance Pipeline US 1,642 1,693 1,645 1,682
Gas Distribution - Enbridge Gas
Distribution Inc. (EGD)
Volumes (billions of cubic feet) 117 129 437 461
Number of active customers
(thousands)(7) 2,129 2,098 2,129 2,098
Heating degree days(8)
Actual 1,007 1,261 3,710 4,044
Forecast based on normal weather 1,222 1,218 3,536 3,517
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1 Effective September 1, 2015, Enbridge transferred its Canadian Liquids
Pipelines business and certain Canadian renewable energy assets to the
Fund Group within the Sponsored Investments segment under the Canadian
Restructuring Plan. Losses from the Canadian Liquids Pipelines assets
prior to the date of transfer of $403 million in the year ended December
31, 2015 (2014 - earnings of $320 million; 2013 - earnings of $261
million) and earnings from the Canadian renewable energy assets within
the Gas Pipelines, Processing and Energy Services segment prior to the
date of transfer of $1 million in the year ended December 31, 2015 (2014
- loss of $2 million; 2013 - loss of $55 million), have not been
reclassified into the Sponsored Investments segment for presentation
purposes. Additionally, loss of $29 million and earnings of $6 million
for the three months ended December 31, 2014, related to Liquids
Pipelines assets and Gas Pipelines, Processing and Energy Services
assets, respectively, have not been reclassified into the Sponsored
Investments segment for presentation purposes.
2 Adjusted earnings represent earnings attributable to common shareholders
adjusted for unusual, non-recurring or non-operating factors. Adjusted
earnings and adjusted earnings per common share are non-GAAP measures
that do not have any standardized meaning prescribed by GAAP.
3 Adjusted earnings from the Canadian Liquids Pipelines assets prior to
the date of transfer of $508 million in the year ended December 31, 2015
(2014 - $688 million; 2013 - $631 million) and adjusted earnings from
the Canadian renewable energy assets within the Gas Pipelines,
Processing and Energy Services segment prior to the date of transfer
under the Canadian Restructuring Plan of $6 million in the year ended
December 31, 2015 (2014 - loss of $3 million; 2013 - loss of $4
million), have not been reclassified into the Sponsored Investments
segment for presentation purposes. Additionally, adjusted earnings of
$146 million and $1 million, for the three months ended December 31,
2014, related to Liquids Pipelines assets and Gas Pipelines, Processing
and Energy Services assets, respectively, have not been reclassified
into the Sponsored Investments segment for presentation purposes.
4 ACFFO is defined as cash flow provided by operating activities before
changes in operating assets and liabilities (including changes in
regulatory assets and liabilities and environmental liabilities) less
distributions to noncontrolling interests and redeemable noncontrolling
interests, preference share dividends and maintenance capital
expenditures, and further adjusted for unusual, non-recurring or non-
operating factors. ACFFO and ACFFO per common share are non-GAAP
measures that do not have any standardized meaning prescribed by GAAP.
5 Canadian Mainline includes deliveries ex-Gretna, Manitoba which is made
up of United States and eastern Canada deliveries entering the Canadian
Mainline in western Canada.
6 Volumes are for the Athabasca mainline and Waupisoo Pipeline and exclude
laterals on the Regional Oil Sands System.
7 Number of active customers is the number of natural gas consuming EGD
customers at the end of the period.
8 Heating degree days is a measure of coldness that is indicative of
volumetric requirements for natural gas utilized for heating purposes in
EGD's franchise area. It is calculated by accumulating, for the fiscal
period, the total number of degrees each day by which the daily mean
temperature falls below 18 degrees Celsius. The figures given are those
accumulated in the Greater Toronto Area.
CONSOLIDATED STATEMENTS OF EARNINGS
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars, except per share amounts)
Revenues
Commodity sales 6,074 6,192 23,842 28,281
Gas distribution sales 672 835 3,096 2,853
Transportation and other services 2,168 1,770 6,856 6,507
----------------------------------------------------------------------------
8,914 8,797 33,794 37,641
----------------------------------------------------------------------------
Expenses
Commodity costs 5,878 5,926 22,949 27,504
Gas distribution costs 485 647 2,292 1,979
Operating and administrative 1,232 917 4,248 3,281
Depreciation and amortization 541 426 2,024 1,577
Environmental costs, net of
recoveries (19) (3) (21) 100
Goodwill impairment - - 440 -
----------------------------------------------------------------------------
8,117 7,913 31,932 34,441
----------------------------------------------------------------------------
797 884 1,862 3,200
Income from equity investments 116 117 475 368
Other expense (72) (123) (702) (266)
Interest expense (371) (313) (1,624) (1,129)
----------------------------------------------------------------------------
470 565 11 2,173
Income taxes (94) (249) (170) (611)
----------------------------------------------------------------------------
Earnings/(loss) from continuing
operations 376 316 (159) 1,562
Discontinued operations
Earnings from discontinued
operations before income taxes - - - 73
Income taxes from discontinued
operations - - - (27)
----------------------------------------------------------------------------
Earnings from discontinued
operations - - - 46
----------------------------------------------------------------------------
Earnings/(loss) 376 316 (159) 1,608
(Earnings)/loss attributable to
noncontrolling interests and
redeemable noncontrolling interests 76 (157) 410 (203)
----------------------------------------------------------------------------
Earnings attributable to Enbridge
Inc. 452 159 251 1,405
Preference share dividends (74) (71) (288) (251)
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common shareholders 378 88 (37) 1,154
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common shareholders
Earnings/(loss) from continuing
operations 378 88 (37) 1,108
Earnings from discontinued
operations, net of taxes - - - 46
----------------------------------------------------------------------------
378 88 (37) 1,154
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings/(loss) per common share
attributable to Enbridge Inc.
common shareholders
Continuing operations 0.44 0.11 (0.04) 1.34
Discontinued operations - - - 0.05
----------------------------------------------------------------------------
0.44 0.11 (0.04) 1.39
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diluted earnings/(loss) per common
share attributable to Enbridge Inc.
common shareholders
Continuing operations 0.44 0.10 (0.04) 1.32
Discontinued operations - - - 0.05
----------------------------------------------------------------------------
0.44 0.10 (0.04) 1.37
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars)
Earnings/(loss) 376 316 (159) 1,608
Other comprehensive income/(loss),
net of tax
Change in unrealized gains/(loss)
on cash flow hedges 327 (223) 198 (833)
Change in unrealized loss on net
investment hedges (183) (136) (903) (270)
Other comprehensive income from
equity investees 13 6 30 10
Reclassification to earnings of
realized cash flow hedges (215) 14 (191) 76
Reclassification to earnings of
unrealized cash flow hedges (68) 34 (121) 158
Reclassification to earnings of
pension plans and other
postretirement benefits
amortization amounts (1) 9 21 15
Actuarial gains/(loss) on pension
plans and other postretirement
benefits 51 (191) 51 (191)
Change in foreign currency
translation adjustment 662 551 3,347 1,238
Reclassification to earnings of
derecognized cash flow hedges - - (247) -
----------------------------------------------------------------------------
Other comprehensive income 586 64 2,185 203
----------------------------------------------------------------------------
Comprehensive income 962 380 2,026 1,811
Comprehensive (income)/loss
attributable to noncontrolling
interests and redeemable
noncontrolling interests 17 (175) 292 (242)
----------------------------------------------------------------------------
Comprehensive income attributable to
Enbridge Inc. 979 205 2,318 1,569
Preference share dividends (74) (71) (288) (251)
----------------------------------------------------------------------------
Comprehensive income attributable to
Enbridge Inc. common shareholders 905 134 2,030 1,318
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Year ended December 31, 2015 2014
----------------------------------------------------------------------------
(millions of Canadian dollars, except per share amounts)
Preference shares
Balance at beginning of year 6,515 5,141
Preference shares issued - 1,374
----------------------------------------------------------------------------
Balance at end of year 6,515 6,515
----------------------------------------------------------------------------
Common shares
Balance at beginning of year 6,669 5,744
Common shares issued - 446
Dividend reinvestment and share purchase plan 646 428
Shares issued on exercise of stock options 76 51
----------------------------------------------------------------------------
Balance at end of year 7,391 6,669
----------------------------------------------------------------------------
Additional paid-in capital
Balance at beginning of year 2,549 746
Stock-based compensation 35 31
Options exercised (19) (14)
Issuance of treasury stock - 22
Drop down of interest to Enbridge Energy Partners,
L.P. 218 -
Enbridge Energy Partners, L.P. equity restructuring - 1,601
Transfer of interest to Enbridge Income Fund - 176
Drop down of interest to Midcoast Energy Partners,
L.P. - (18)
Dilution gain on Enbridge Income Fund issuance of
trust units 355 -
Dilution gain on Enbridge Income Fund equity
investment 132 -
Dilution loss on Enbridge Income Fund indirect equity
investment (5) -
Dilution gains and other 36 5
----------------------------------------------------------------------------
Balance at end of year 3,301 2,549
----------------------------------------------------------------------------
Retained earnings
Balance at beginning of year 1,571 2,550
Earnings attributable to Enbridge Inc. 251 1,405
Preference share dividends (288) (251)
Common share dividends declared (1,596) (1,177)
Dividends paid to reciprocal shareholder 22 17
Reversal of cumulative redemption value adjustment
attributable to Enbridge Commercial Trust 541 -
Redemption value adjustment attributable to redeemable
noncontrolling interests (359) (973)
----------------------------------------------------------------------------
Balance at end of year 142 1,571
----------------------------------------------------------------------------
Accumulated other comprehensive income/(loss)
Balance at beginning of year (435) (599)
Other comprehensive income attributable to Enbridge
Inc. common shareholders 2,067 164
----------------------------------------------------------------------------
Balance at end of year 1,632 (435)
----------------------------------------------------------------------------
Reciprocal shareholding
Balance at beginning of year (83) (86)
Issuance of treasury stock - 3
----------------------------------------------------------------------------
Balance at end of year (83) (83)
----------------------------------------------------------------------------
Total Enbridge Inc. shareholders' equity 18,898 16,786
----------------------------------------------------------------------------
Noncontrolling interests
Balance at beginning of year 2,015 4,014
Earnings/(loss) attributable to noncontrolling
interests (407) 214
Other comprehensive income/(loss) attributable to
noncontrolling interests, net of tax
Change in unrealized gains/(loss) on cash flow
hedges 161 (192)
Change in foreign currency translation adjustment 273 146
Reclassification to earnings of realized cash flow
hedges (236) 18
Reclassification to earnings of unrealized cash flow
hedges (83) 77
----------------------------------------------------------------------------
115 49
----------------------------------------------------------------------------
Comprehensive income/(loss) attributable to
noncontrolling interests (292) 263
Distributions (680) (535)
Contributions 615 212
Dilution loss (53) -
Acquisitions - Magic Valley and Wildcat wind farms - 351
Drop down of interest to Enbridge Energy Partners,
L.P. (304) -
Enbridge Energy Partners, L.P. equity restructuring - (2,330)
Drop down of interest to Midcoast Energy Partners,
L.P. - 39
Other (1) 1
----------------------------------------------------------------------------
Balance at end of year 1,300 2,015
----------------------------------------------------------------------------
Total equity 20,198 18,801
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Dividends paid per common share 1.86 1.40
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended Year ended
December 31, December 31,
----------------------------------------
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited; millions of Canadian
dollars)
Operating activities
Earnings/(loss) 376 316 (159) 1,608
Earnings from discontinued
operations - - - (46)
Depreciation and amortization 541 426 2,024 1,577
Deferred income taxes 48 255 7 587
Changes in unrealized
(gains)/loss on derivative
instruments, net (37) (152) 2,373 (96)
Cash distributions in excess of
equity earnings 64 57 244 196
Impairment 80 18 536 18
Gains on dispositions - (22) (94) (38)
Hedge ineffectiveness 31 49 (20) 210
Inventory revaluation allowance 149 170 410 174
Other 28 9 (62) 115
Changes in regulatory assets and
liabilities (12) 11 41 22
Changes in environmental
liabilities, net of recoveries (8) (31) (43) (78)
Changes in operating assets and
liabilities (454) (450) (686) (1,721)
----------------------------------------------------------------------------
Cash provided by continuing
operations 806 656 4,571 2,528
Cash provided by discontinued
operations - - - 19
----------------------------------------------------------------------------
806 656 4,571 2,547
----------------------------------------------------------------------------
Investing activities
Additions to property, plant and
equipment (1,963) (3,127) (7,273) (10,524)
Long-term investments (345) (161) (622) (854)
Restricted long-term investments (15) - (49) -
Additions to intangible assets (12) (55) (101) (208)
Acquisitions - (394) (106) (394)
Proceeds from disposition - 4 146 85
Affiliate loans, net 5 4 59 13
Changes in restricted cash 34 (8) 13 (13)
----------------------------------------------------------------------------
Cash used in continuing operations (2,296) (3,737) (7,933) (11,895)
Cash provided by discontinued
operations - - - 4
----------------------------------------------------------------------------
(2,296) (3,737) (7,933) (11,891)
----------------------------------------------------------------------------
Financing activities
Net change in bank indebtedness
and short-term borrowings 51 99 (588) 734
Net change in commercial paper and
credit facility draws (937) 2,616 1,507 4,212
Southern Lights project financing
repayments - (12) - (1,519)
Debenture and term note issues -
Southern Lights - - - 1,507
Debenture and term note issues 2,213 1,080 3,767 5,414
Debenture and term note repayments (25) (523) (1,023) (1,348)
Contributions from noncontrolling
interests 3 49 615 212
Distributions to noncontrolling
interests (179) (140) (680) (535)
Contributions from redeemable
noncontrolling interests 670 323 670 323
Distributions to redeemable
noncontrolling interests (34) (24) (114) (79)
Preference shares issued - - - 1,365
Common shares issued 10 8 57 478
Preference share dividends (74) (71) (288) (245)
Common share dividends (241) (184) (950) (749)
----------------------------------------------------------------------------
1,457 3,221 2,973 9,770
----------------------------------------------------------------------------
Effect of translation of foreign
denominated cash and cash
equivalents 24 33 143 59
----------------------------------------------------------------------------
Increase/(decrease) in cash and cash
equivalents (9) 173 (246) 485
Cash and cash equivalents at
beginning of period - continuing
operations 1,024 1,088 1,261 756
Cash and cash equivalents at
beginning of period - discontinued
operations - - - 20
----------------------------------------------------------------------------
Cash and cash equivalents at end of
year 1,015 1,261 1,015 1,261
Cash and cash equivalents -
discontinued operations - - - -
----------------------------------------------------------------------------
Cash and cash equivalents -
continuing operations 1,015 1,261 1,015 1,261
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31, 2015 2014
----------------------------------------------------------------------------
(millions of Canadian dollars)
Assets
Current assets
Cash and cash equivalents 1,015 1,261
Restricted cash 34 47
Accounts receivable and other 5,430 5,504
Accounts receivable from affiliates 7 241
Inventory 1,111 1,148
----------------------------------------------------------------------------
7,597 8,201
Property, plant and equipment, net 64,434 53,830
Long-term investments 7,008 5,408
Restricted long-term investments 49 -
Deferred amounts and other assets 3,309 3,208
Intangible assets, net 1,348 1,166
Goodwill 80 483
Deferred income taxes 839 561
----------------------------------------------------------------------------
84,664 72,857
----------------------------------------------------------------------------
Liabilities and equity
Current liabilities
Bank indebtedness 361 507
Short-term borrowings 599 1,041
Accounts payable and other 7,351 6,444
Accounts payable to affiliates 48 80
Interest payable 324 264
Environmental liabilities 141 161
Current maturities of long-term debt 1,990 1,004
----------------------------------------------------------------------------
10,814 9,501
Long-term debt 39,540 33,423
Other long-term liabilities 6,056 4,041
Deferred income taxes 5,915 4,842
----------------------------------------------------------------------------
62,325 51,807
----------------------------------------------------------------------------
Redeemable noncontrolling interests 2,141 2,249
Equity
Share capital
Preference shares 6,515 6,515
Common shares 7,391 6,669
Additional paid-in capital 3,301 2,549
Retained earnings 142 1,571
Accumulated other comprehensive income/(loss) 1,632 (435)
Reciprocal shareholding (83) (83)
----------------------------------------------------------------------------
Total Enbridge Inc. shareholders' equity 18,898 16,786
Noncontrolling interests 1,300 2,015
----------------------------------------------------------------------------
20,198 18,801
----------------------------------------------------------------------------
84,664 72,857
----------------------------------------------------------------------------
SEGMENTED INFORMATION
Gas Pipelines,
Processing
Three months ended December 31, Liquids Gas and Energy
2015 Pipelines Distribution Services
----------------------------------------------------------------------------
(unaudited; millions of
Canadian dollars)
Revenues 308 754 5,616
Commodity and gas distribution
costs (3) (448) (5,408)
Operating and administrative (149) (138) (58)
Depreciation and amortization (71) (78) (38)
Environmental costs, net of
recoveries - - -
----------------------------------------------------------------------------
85 90 112
Income/(loss) from equity
investments 68 - (12)
Other income/(expense) (18) 1 (2)
Interest income/(expense) (78) (42) (24)
Income taxes recovery/(expense) (21) (3) (39)
----------------------------------------------------------------------------
Earnings 36 46 35
Loss attributable to
noncontrolling interestsand
redeemable noncontrolling
interests - - 9
Preference share dividends - - -
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common
shareholders 36 46 44
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 12,541 9,546 7,793
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SEGMENTED INFORMATION
Three months ended December 31, Sponsored
2015 Investments Corporate Consolidated
----------------------------------------------------------------------------
(unaudited; millions of
Canadian dollars)
Revenues 2,236 - 8,914
Commodity and gas distribution
costs (506) 2 (6,363)
Operating and administrative (857) (30) (1,232)
Depreciation and amortization (344) (10) (541)
Environmental costs, net of
recoveries 19 - 19
----------------------------------------------------------------------------
548 (38) 797
Income/(loss) from equity
investments 51 9 116
Other income/(expense) (2) (51) (72)
Interest income/(expense) (277) 50 (371)
Income taxes recovery/(expense) (89) 58 (94)
----------------------------------------------------------------------------
Earnings 231 28 376
Loss attributable to
noncontrolling interestsand
redeemable noncontrolling
interests 66 1 76
Preference share dividends - (74) (74)
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common
shareholders 297 (45) 378
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 50,237 4,547 84,664
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gas Pipelines,
Processing
Three months ended December 31, Liquids Gas and Energy
2014 Pipelines Distribution Services
----------------------------------------------------------------------------
(unaudited; millions of
Canadian dollars)
Revenues 463 948 4,960
Commodity and gas distribution
costs - (646) (4,630)
Operating and administrative (296) (131) (39)
Depreciation and amortization (137) (79) (32)
Environmental costs, net of
recoveries 7 - -
----------------------------------------------------------------------------
37 92 259
Income from equity investments 50 - 25
Other income/(expense) 18 (5) 30
Interest income/(expense) (112) (42) (26)
Income taxes recovery/(expense) 27 24 (103)
----------------------------------------------------------------------------
Earnings/(loss) 20 69 185
Earnings attributable to
noncontrolling interestsand
redeemable noncontrolling
interests (1) - -
Preference share dividends - - -
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common
shareholders 19 69 185
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 27,657 9,320 7,601
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended December 31, Sponsored
2014 Investments Corporate Consolidated
----------------------------------------------------------------------------
(unaudited; millions of
Canadian dollars)
Revenues 2,426 - 8,797
Commodity and gas distribution
costs (1,297) - (6,573)
Operating and administrative (423) (28) (917)
Depreciation and amortization (173) (5) (426)
Environmental costs, net of
recoveries (4) - 3
----------------------------------------------------------------------------
529 (33) 884
Income from equity investments 31 11 117
Other income/(expense) (5) (161) (123)
Interest income/(expense) (162) 29 (313)
Income taxes recovery/(expense) (97) (100) (249)
----------------------------------------------------------------------------
Earnings/(loss) 296 (254) 316
Earnings attributable to
noncontrolling interestsand
redeemable noncontrolling
interests (156) - (157)
Preference share dividends - (71) (71)
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common
shareholders 140 (325) 88
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 23,515 4,764 72,857
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gas Pipelines,
Processing
Liquids Gas and Energy
Year ended December 31, 2015 Pipelines Distribution Services
----------------------------------------------------------------------------
(millions of Canadian dollars)
Revenues 1,730 3,560 20,862
Commodity and gas distribution
costs (8) (2,300) (20,008)
Operating and administrative (1,223) (537) (238)
Depreciation and amortization (520) (308) (178)
Environmental costs, net of
recoveries 4 - -
Goodwill impairment - - -
----------------------------------------------------------------------------
(17) 415 438
Income/(loss) from equity
investments 296 - (13)
Other income/(expense) 11 (1) 20
Interest expense (532) (168) (109)
Income taxes recovery/(expense) 20 (24) (142)
----------------------------------------------------------------------------
Earnings/(loss) (222) 222 194
Earnings/(loss) attributable to
noncontrolling interests and
redeemable noncontrolling
interests (2) - 24
Preference share dividends - - -
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common
shareholders (224) 222 218
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 12,541 9,546 7,793
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sponsored
Year ended December 31, 2015 Investments Corporate Consolidated
----------------------------------------------------------------------------
(millions of Canadian dollars)
Revenues 7,642 - 33,794
Commodity and gas distribution
costs (2,927) 2 (25,241)
Operating and administrative (2,211) (39) (4,248)
Depreciation and amortization (986) (32) (2,024)
Environmental costs, net of
recoveries 17 - 21
Goodwill impairment (440) - (440)
----------------------------------------------------------------------------
1,095 (69) 1,862
Income/(loss) from equity
investments 201 (9) 475
Other income/(expense) (33) (699) (702)
Interest expense (661) (154) (1,624)
Income taxes recovery/(expense) (499) 475 (170)
----------------------------------------------------------------------------
Earnings/(loss) 103 (456) (159)
Earnings/(loss) attributable to
noncontrolling interests and
redeemable noncontrolling
interests 376 12 410
Preference share dividends - (288) (288)
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common
shareholders 479 (732) (37)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 50,237 4,547 84,664
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gas Pipelines,
Processing
Liquids Gas and Energy
Year ended December 31, 2014 Pipelines Distribution Services
----------------------------------------------------------------------------
(millions of Canadian dollars)
Revenues 2,283 3,216 23,023
Commodity and gas distribution
costs - (1,979) (21,921)
Operating and administrative (1,101) (530) (175)
Depreciation and amortization (498) (304) (114)
Environmental costs, net of
recoveries 7 - -
----------------------------------------------------------------------------
691 403 813
Income/(loss) from equity
investments 160 - 136
Other income/(expense) 12 (8) 38
Interest income/(expense) (372) (165) (98)
Income taxes recovery/(expense) (24) (17) (318)
----------------------------------------------------------------------------
Earnings/(loss) from continuing
operations 467 213 571
Discontinued operations
Earnings from discontinued
operations before income taxes - - 73
Income taxes from discontinued
operations - - (27)
----------------------------------------------------------------------------
Earnings from discontinued
operations - - 46
----------------------------------------------------------------------------
Earnings/(loss) 467 213 617
Earnings attributable to
noncontrolling interests and
redeemable noncontrolling
interests (4) - -
Preference share dividends - - -
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common
shareholders 463 213 617
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 27,657 9,320 7,601
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sponsored
Year ended December 31, 2014 Investments Corporate Consolidated
----------------------------------------------------------------------------
(millions of Canadian dollars)
Revenues 9,119 - 37,641
Commodity and gas distribution
costs (5,583) - (29,483)
Operating and administrative (1,438) (37) (3,281)
Depreciation and amortization (642) (19) (1,577)
Environmental costs, net of
recoveries (107) - (100)
----------------------------------------------------------------------------
1,349 (56) 3,200
Income/(loss) from equity
investments 86 (14) 368
Other income/(expense) 5 (313) (266)
Interest income/(expense) (559) 65 (1,129)
Income taxes recovery/(expense) (263) 11 (611)
----------------------------------------------------------------------------
Earnings/(loss) from continuing
operations 618 (307) 1,562
Discontinued operations
Earnings from discontinued
operations before income taxes - - 73
Income taxes from discontinued
operations - - (27)
----------------------------------------------------------------------------
Earnings from discontinued
operations - - 46
----------------------------------------------------------------------------
Earnings/(loss) 618 (307) 1,608
Earnings attributable to
noncontrolling interests and
redeemable noncontrolling
interests (199) - (203)
Preference share dividends - (251) (251)
----------------------------------------------------------------------------
Earnings/(loss) attributable to
Enbridge Inc. common
shareholders 419 (558) 1,154
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 23,515 4,764 72,857
----------------------------------------------------------------------------
----------------------------------------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
Enbridge Inc. - Médias
Graham White
(403) 508-6563 ou sans frais : (888) 992-0997
Courriel : graham.white@enbridge.com
Enbridge Inc. - Relations avec les investisseurs
Adam McKnight
(403) 266-7922 ou sans frais : (800) 481-2804
Courriel : adam.mcknight@enbridge.com
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