Enbridge - Q3 2024

Transcript

Rebecca Morley (VP of Investor Relations)

Good morning and welcome to the Enbridge

third quarter 2024 financial results conference call. My name is Rebecca Morley, and I'm the Vice President of Investor Relations. Joining me this morning are Greg Ebel, President and CEO, Pat Murray, Executive Vice President and Chief Financial Officer, and the heads of each of our business units: Colin Gruending, Liquids Pipelines, Cynthia Hansen, Gas Transmission and Midstream, Michele Harradence, Gas Distribution and Storage, and Matthew Akman, Renewable Power. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session for the investment community. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Note that this conference is being recorded.

As per usual, the call is being webcast, and I encourage those listening on the phone to follow along with supporting slides. We'll try to keep the call to roughly one hour, and in order to answer as many questions as possible, we'll be limiting questions to one plus a single follow-up if necessary. We'll be prioritizing questions from the investment community, so if you're a member of the media, please direct your inquiries to our communications team, who will be happy to help you. As always, our investor relations team will be available following the call for any follow-up questions. On slide two, where I'll remind you that we'll be referring to forward-looking information on today's presentation and Q&A.

By its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We'll also be referring to non-GAAP measures summarized below. And with that, I'll turn it over to Greg Ebel.

Greg Ebel (President and CEO)

Thank you, Rebecca, and good morning, everyone. Thanks for joining us on the call today, and I'm pleased to be here to recap another strong quarter. Before I get into the quarterly update, I want to acknowledge everyone affected by the devastating impacts caused by Hurricane Helene and Milton. We extend our sympathies to our partners, our customers, and the communities impacted and wish to reiterate Enbridge's commitment to support you during this challenging time. While we've seen limited interruption of our operations and no material financial impact, safety remains our number one priority in ensuring communities have the safe and reliable energy necessary for everyday activities. Now, on to the quarter. I'm going to start by sharing some highlights for Q3, then I'd like to spend a minute or so highlighting Enbridge's value proposition and how we are positioned to return capital to shareholders in all market cycles.

I'll then review how Enbridge is ideally situated to serve increasing gas demand stemming from data centers, electric power, LNG, coal retirement, and industrial growth. I'll also provide updates from our business units before turning it over to Pat. Pat will walk you through our third quarter results, key drivers supporting our reaffirmed financial outlook, and our capital allocation priorities. I will then close with a few key messages and highlight some important events coming up on the calendar. Following our presentation, the Enbridge management team will be pleased to answer any questions you may have. Throughout the third quarter, our assets again experienced continued strong utilization across the business, which drove solid financial results. We are well positioned to deliver full-year results near the top end of our EBITDA guidance.

On DCF per share, we continue to expect to be near the midpoint of the range despite fully pre-funding the utilities acquisitions before their closing. Our leverage is within our target range of four and a half to five times debt to EBITDA after closing PSNC, and we expect to trend down over the next few quarters. With the acquisitions closed and the funding completed, we have successfully concluded the acquisition of three U.S. gas utilities, which perfectly fit Enbridge's low-risk business model, and so we have returned to an equity self-funded model. This has been a well-executed major transaction that investors will benefit from for years to come. In liquids, we closed the previously announced acquisition of additional docks and land adjacent to our state-of-the-art crude export facility at Ingleside. We continue to see high utilization and expect to unlock future growth opportunities there.

Across the businesses, we're on track to place $5 billion of secured capital into service in 2024. On growth, the team has done a great job, and I'm pleased to highlight four new accretive investments in growth. In gas transmission, we further executed our Permian strategy by acquiring a 15% interest in the highly contracted DBR gathering system. The assets enhance our natural gas value chain and serve as a key feeder system for the Whistler pipeline. In renewable power, we sanctioned Sequoia Solar, an up to 815 megawatt project in Texas. Sequoia is backed by long-term PPAs with AT&T and Toyota for the vast majority of production. We're also excited to announce participation in the third and final phase of Fox Squirrel Solar, following a successful completion of the second phase during the quarter.

In gas transmission, we also sanctioned offshore oil and gas pipelines to serve BP's new deep-water U.S. Gulf of Mexico development. All in all, we've added $7 billion to our secured growth program so far this year. As you can see, our scale and connectivity continue to provide competitive advantages in sanctioning new opportunities. This growth in our business continues to underpin our stable and growing dividend. At Enbridge, we have built a low-risk business that is designed to succeed in all market cycles. This is how we've been able to deliver growing dividends for 29 years, making us one of the very few Dividend Aristocrats. Looking longer term, we expect to steadily grow the business by 5% annually and will remain financially disciplined to support sustainably returning capital to shareholders. Enbridge offers an attractive dividend yield, which sits above the return of many alternative investments. The Canadian and U.S.

10-year treasuries are sitting at about 3% and 4% respectively, while broad equity indices like the TSX 60 and the S&P 500 are at approximately 3% and 1% respectively. It's worth noting the key drivers that enable us to be considered a Dividend Aristocrat and underpin that 29 years of dividend growth. Our highly contracted cash flows experience minimal volatility, allowing us to predictably pay and grow the dividend. Investment-grade credit ratings across the four major rating agencies highlight the strength of our balance sheet and the low-risk nature of our businesses. We have negligible commodity price exposure, which sets us apart from many of our midstream peers, and on EBITDA growth, we expect that to be higher through the next few years at 7%-9% due to base business performance, new assets entering service, tuck-in M&A, and contributions from the acquired utilities.

Enbridge outpaces Canadian large peers by making up approximately 10% of the total dividends paid by the TSX 60 companies today. All told, our business is designed to succeed in all market cycles and deliver predictable results. Despite a volatile world, Enbridge is seeing increased visibility of our long-term growth, supported by strong energy infrastructure fundamentals and, in particular, rising power demand. Enbridge is well positioned to serve increased gas and power demand over the next decade. S&P is forecasting up to 20 Bcf per day of incremental gas demand growth by 2030. We are ideally situated to participate in new growth opportunities related to this increased demand. Our gas footprint is within 50 miles of approximately 45% of all gas-fired generation in North America today.

Importantly for investors today, we are already sanctioning additional growth opportunities to support natural gas power demand, like our Tennessee Ridgeline project, where we're investing $1.1 billion U.S. to expand our East Tennessee pipeline to support TVA's planned retirement of nine coal-fired units in favor of 1.5 gigawatts of gas fired generation. Our utilities are situated in high-growth power markets, with North Carolina being a top destination for onshoring due to its affordable power and favorable corporate tax rates. In that regard, Enbridge Gas North Carolina is investing $600 million U.S. to expand our gas lines to serve Duke's Roxboro gas fired generation plant, which will have capacity of at least 1.4 gigawatts. We expect that project to be completed in 2027. We also have exciting developments within our renewable segment with over 2 gigawatts in development or under construction across the U.S.

Beyond the electric power sector, we own over 620 BCF of strategically located natural gas storage, and this position is growing. Our portfolio represents 25% of U.S. Gulf Coast deliverability, and we own the only underground natural gas storage facility in British Columbia, which will provide essential flexibility for Canadian LNG operations. Of course, our Great Lakes storage position of 300 BCF at Dawn is a critical hub for North American natural gas users like power generators and utilities, and continues to expand each year. Dawn represents over 20% of deliverability in the region. On the LNG front, our pipelines are strategically connected to more than 30% of existing and announced LNG export capacity and will continue to serve global demand growth.

We also have a preferred interest in Woodfibre LNG, which is expected to be the world's first net-zero export facility through utilizing hydropower and is expected to produce 2.1 million tons per annum. Now let's jump into the exciting updates in each of the business units, starting with liquids. Mainline is on track to exceed our full-year forecast of 3 million barrels per day. The system was in apportionment in July and August, and we continue to see strong customer demand, evidenced by the fact that the Mainline is back in apportionment for November. We're advancing discussions with customers for additional Western Canadian Sedimentary Basin pipeline capacity in 2026 and beyond. You should think of these as brownfield opportunities that will be very capital efficient and provide customers with critical insurance egress to deliver barrels to downstream markets.

As producers grow into available egress out of Western Canada, we've also recently started advancing a number of capital-efficient, low-multiple expansion opportunities on our regional oil sands pipes. In the Permian, we continue to see strong volumes this quarter. At Ingleside, we set a single-day volume record of 2.6 million barrels and a monthly average record of 1.2 million barrels per day. It's noteworthy. Ingleside recently hit 3 billion barrels of volumes exported, underscoring the competitive advantages of the facility and strong customer demand that attracted us to the purchase of the facility in 2021. We are seeing continued growth there with 2.5 million barrels of storage under construction with in-service expected in 2025. We also closed the acquisition of new docks and adjacent lands at Ingleside, which will provide further growth opportunities and allow us to optimize existing dock capacity.

Work is already underway to integrate these new assets. Now let's look a little bit deeper at our gas transmission business. I'm excited to highlight how we are connecting new supply to key demand centers and extending our Permian natural gas value chain. We sanctioned close to $1 billion in offshore pipelines during the quarter to serve BP's new deep-water development plans in the Gulf. These pipelines strengthen and diversify our offshore business while expanding our footprint in the region. Backed by long-term contracts with in-service expected in 2029, adding secured capital to our backlog at the end of the decade. We acquired a 15% interest in the DBR system. It extends our natural gas value chain and further demonstrates the strategic value and growth opportunities being unlocked through the Whistler JV we announced earlier this year.

As a reminder, we also previously announced sanctioning the Blackcomb Pipeline, which will add up to 2.5 million cubic feet per day of egress for our Permian customers and serve growing natural gas demand in the area in 2026. We are progressing in our development of 6.5 BCF expansion at our Tres Palacios gas storage facility, which we acquired in early 2023 at an attractive price. Demand for recontracting continues to increase, and since acquisition, rates have about doubled for the strategically located asset, providing accretion beyond our original model expectations. The Venice Extension project, which serves Venture Global's Plaquemines LNG export facility, is now flowing gas, and we expect it to be fully in service by year-end. So now let's move on to our gas distribution segment. As I mentioned earlier, we have now welcomed all three U.S.

Gas utilities into Enbridge, and I couldn't be more proud of the team's dedication and commitment to execution. We are now the largest natural gas utility in North America, delivering over 9 billion cubic feet per day and serving approximately 7 million customers. The team has been hard at work integrating each of the utilities, and we expect that to continue in the months ahead. With our four utilities now in-house, I thought I'd spend a minute highlighting the key growth drivers across the franchise. In Ontario, we expect new customer hookups and additional power generation to drive growth, including new investment in storage and transmission. The utility has a strong track record of predictable growth and consistent returns.

The Ontario government just released their long-term vision for the province's energy industry and future in response to the IESO's updated demand forecast, which predicts a 75% increase in electricity demand by 2050. We are pleased to see the Minister of Energy acknowledging the vital role natural gas plays in Ontario's first integrated energy resource plan to ensure customer affordability and reliability across industrial, residential, commercial, and agricultural sectors. In combination with the IESO's forecast, we believe that Enbridge Gas Ontario is primed to benefit from major tailwinds of gas demand. The province is procuring up to 1,300 megawatts of new gas-fired generation and have reported that there are over 7,000 megawatts of data center interconnection acquired grids across more than 30 unique sites. In Ohio, growth will largely be driven by pipeline replacement, modernization, and system enhancement under programs such as the Pipeline Infrastructure Replacement Plan.

Over 80% of capital spent in Ohio is expected to be quick cycle under these rider programs and provide attractive risk-adjusted returns. That said, we are also evaluating opportunities to serve new demand related to data centers and natural gas power plant expansions. Growth in Enbridge Gas Utah will be driven by increased population in data center power demand and modernization of the system. We're excited about the data center opportunities we're seeing there so far. We've recently contracted supply to serve 200 megawatts of power for data centers and are evaluating inquiries for another 600 megawatts. Finally, Enbridge Gas North Carolina has a very healthy population growth and will be expanding to serve Duke's 1.4-gigawatt Roxboro gas-fired generation plant, which I mentioned a few minutes ago, and constructing a 2 Bcf LNG facility for system reliability.

North Carolina is also opportunity-rich as the state is positioned to be one of the primary beneficiaries of industrial growth from onshoring and manufacturing in the region. Overall, we see an average of 8% annual rate-based growth across our U.S. gas utilities over the coming years. Now let's turn to the renewables business. Our strategic and disciplined approach has resulted in sanctioning additional growth with blue-chip partners. We're excited to announce that we've completed phase two of Fox Squirrel's solar project. Phase three is under construction and is expected to be in service by year-end. Consistent with the other phases, phase three is backed by a long-term PPA with Amazon for 100% of the energy production. We also sanctioned the approximately 800-megawatt Sequoia Solar Project in Texas with a staggered in-service date expected in 2025 and 2026.

This will be one of the largest solar facilities in North America by capacity and is backed by long-term PPAs with AT&T and Toyota for substantially all of the production. This marks further execution on the opportunities laid out at Investor Day as we develop two gigawatts of renewable projects with in-service dates by the end of 2026. Our customer relationships and disciplined track record of development and contracting should allow us to continue delivering solid growth in this segment with strong risk-adjusted returns. With this, I'll turn it over to Pat to discuss our third-quarter financial results. Thanks, Greg, and welcome everyone. Continued strong demand across our asset base drove record third-quarter EBITDA, and adjusted DCF per share of $1.19, which includes the impact of pre-funding of the U.S. gas utilities.

Liquids EBITDA is up year-over-year, primarily due to the first of our annual OpEx inflation and power cost escalators, which increased the Mainline toll. As a reminder, these take effect on July 1st of each year. Our gas transmission business is up compared to last year, despite the sale of our interest in Aux Sable. This is driven by the acquisition of Morrow RNG, the 19% interest in the Whistler Joint Venture, and our gas storage assets outperforming. We continue to see solid demand for our gas storage and benefit from elevated rates in the contracts we entered into since last year. I'm also happy to announce that we once again have recontracted 100% of our GTM Evergreen contracts, illustrating the high demand for these great assets.

Our gas distribution business includes a full-quarter EBITDA from both Enbridge Gas Ohio and Enbridge Gas Utah, which drove the majority of the step-up from 2023. Our renewables business earned development fees in the third quarter of 2023, which can be lumpy, and their absence this quarter is driving the decrease year-over-year. Below the line, we have higher maintenance capital from the U.S. gas utility acquisitions, as well as higher interest expense and weighted average shares from the associated pre-funding of those same U.S. gas utilities. All in all, our third-quarter results have set us up to achieve our guidance range for the 19th consecutive year. Let's dive a little deeper into that guidance. As a reminder, we recast our financial guidance in the second quarter to include the U.S. gas utilities, and I'm pleased to reaffirm those ranges for both adjusted EBITDA and DCF per share.

In fact, we expect to close 2024 with another quarter of strong operating performance, which would push Enbridge near the top of our EBITDA guidance range. For DCF per share, we expect to finish the year around the midpoint of guidance, which is a great outcome when you consider the pre-funding of the utility acquisition we did this year while not benefiting from a full year of EBITDA. Looking ahead, full-year utility contributions, coupled with continued operational excellence and in-footprint initiatives, should drive growth over the near and medium term. Our balanced and diversified secured backlog sits at CAD 27 billion today, and we expect to place approximately CAD 5 billion of that into service by the end of 2024. Those projects are expected to drive new EBITDA and underpin our near-term growth commitments through 2026. Now let's turn to our capital allocation priorities.

Our capital allocation philosophy is guided by our financial guardrails, which remain firmly in place. Our target leverage of 4.5-5 times is a sweet spot for Enbridge, and the DCF payout of 60%-70% aligns with our cash flow-oriented view of the business. We're proud of our dividend aristocrat status. It's become a hallmark of our value proposition, and growing our dividend annually is a key consideration when deploying our CAD 8-9 billion of annual growth investment capacity. For the next few years, we've earmarked approximately CAD 6-7 billion in the form of low capital-intensity expansion, modernization capital, and rate-based investment. The remaining CAD 2-3 billion of investment capacity can be opportunistically deployed either into new and creative organic projects, patch-ins, or debt reduction. Within that framework, we capitalize on the best available opportunities with our equity self-funding model.

Our outlook and growth will continue to revolve around low-risk, long-life investments that support ratable dividend increases. I want to again thank the teams for the hard work this quarter, bringing in the last of the LDCs and ensuring another great operational and financial showing here at Enbridge. With that, I'll pass it back to Greg to finish off the presentation. Thanks very much, Pat. Enbridge continues to be positioned to succeed in all market conditions with a low-risk business model and visible growth outlook. The scale and diversification of our business is driving key competitive advantages across complementary business franchises. Our businesses are already in front of and will continue to be in front of dramatic secular changes in power demand, both gas and renewables, reindustrialization in the key jurisdictions we serve in North America, and of course, growing energy exports from North America.

Our industry-leading asset footprint and solid track record of execution have allowed us to take advantage of attractive growth opportunities to meet rising global demand for energy. Returning capital to shareholders for a sustainable and growing dividend continues to be a core pillar of our value proposition and positions us as a first-choice investment opportunity. Now, before I turn it over to the operator for questions, I'd like to share the dates of some exciting events coming up on the calendar. We expect to issue a news release for our 2025 financial guidance on December 3rd, 2024, and then on March 4th, 2025, we will be hosting our annual Investor Day in New York, and we hope that you can all join us in person. With that, I'd like to thank you all for listening, and operator, please open the lines for questions.

Operator (participant)

While we stand by, we'll be prepared for the question and answer session. Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from Jeremy Tonet from J.P. Morgan. Your line is open.

Hi, good morning.

Greg Ebel (President and CEO)

Morning.

Just want to start off, I guess, you know, looking down the future, you outlined some of the expansion potential for the Mainline, but it seems like we've filled up pretty quick here. Just wondering, I guess, what's possible on the egress front down the road as it seems like producers are eager to fill any space you can provide.

Colin Gruending (EVP and President of Liquid Pipelines)

Hey, good morning, Jeremy. It's Colin.

Yeah, I think your read is right on this. Production is ramping nicely, and yeah, we're back into apportionment here in November. I don't expect us to be in apportionment every month going forward here, but seasonally, I think you're going to see a lot of demand for the Mainline. And we have commenced commercial discussions with industry. We spent the quarter engineering the expansion. It's really more of an optimization, I think. It's not a trenching or a new path. It's in the right-of-way, in terminals, and quite executable. So I'd say early response from industry is quite positive for obvious reasons, as Greg said in his remarks. And I think, as everybody knows, the last barrel egress price is all 5 million barrels in the base. And so it's very economically important that base is not constrained. So we're continuing to develop that.

I'd say it's trending the right direction. And I don't think we have any capital cost estimates for you at this point, kind of refine those a little bit, but looking at in-service dates in late 2026, 2027.

Greg Ebel (President and CEO)

The other nice thing I'd add to that, Jeremy, is that they'll be very solid from a multiple perspective, a build multiple perspective, which obviously means the returns will be very satisfactory for both us and investors.

That's great to hear. Thank you for that. And then pivoting to the LDC side, now that Enbridge is the largest natural gas LDC in North America that we can tell, just wondering how you think about future growth here. Obviously, a lot of organic initiatives that can be had on your existing platform, but we also see some other LDC assets on the block out there for sale.

How do you think about organic versus inorganic growth going forward?

Hey, just to start, Jeremy, thanks for the question. Michele's here, so I'll let her go at that. In terms of other LDCs, look, we've made some big purchases here with three of what we think are the best ones out there. So I would say our focus is very much on integration of these three and not looking at other LDCs at this point in time. But in terms of the growth, maybe I'll turn it over to Michele.

Michele Harradence (EVP and President of Gas Distribution and Storage)

Yeah, you bet. Thanks, Jeremy. So first, I think what I have to say now, being able to really look under the hood of these beyond what we did through the due diligence period, is these are every bit as good as we thought they were in terms of the utilities.

They're just excellent utilities in great jurisdictions that really are focused on the access to affordable energy driving their economic growth. And that means that they're really well positioned for growth. Certainly, Greg outlined the different ways that we see them growing in terms of population growth, super strong in places like Utah and North Carolina, strong modernization program with quick capital in Ohio. I think we also talked about our projects that we have going on in North Carolina. I'd say all of those we knew as we went in. The big thing that's come up in the last year that really didn't factor in is the data center growth that we're seeing, and that's coming across the board.

I mean, I think last quarter we mentioned 50 megawatts we had signed up in Utah, or at least the gas to produce that 50 megawatts, and that's been increased about another 200 megawatts in terms of the gas to produce that. Lots of inquiries along that, they call it the Wasatch Front, so that Salt Lake Provo area. Similarly, North Carolina, big decarbonization program from Duke, lots of data centers going into that Raleigh tech hub. And even in Ohio, where we thought it was a little further out, we're just seeing that demand for power.

Then, of course, in our original utility in Ontario, as Greg mentioned, 75% growth by 2050. Government and administrative energy that's very clear about the need for all of the above when it comes to energy and the need for natural gas as meeting part of the generation that they're looking for from what's been the largest ever procurement in the Ontario IESO history. So we're feeling very good about that growth.

Greg Ebel (President and CEO)

Yeah. So, Jeremy, the only other thing I'd add is that at 8% rate-based growth we talked about a year ago, remember that did not take into account. We didn't have knowledge or good insight into some of the benefits we're seeing from data centers, power growth, reindustrialization, reshoring. So obviously, I'll be looking for Michele and the team to even do better than what we originally thought.

Got it. That's good to hear. Thank you. Thanks.

Operator (participant)

Your next question comes from Robert Cattelier from CIBC. Your line is open.

Hey, good morning, everyone. I'd like to start with the rate of capital deployment into onshore renewables, particularly in the U.S. We've accomplished a lot in a short period of time, but I'm wondering how much capital is needed to be deployed to meaningfully bridge the gap between EBITDA and the DCF per share growth rate, understanding that these investments stand on their own merits and not just for the tax attributes.

Matthew Akman (EVP and President of Gas Transmission)

Yeah, thanks, Robert. Matthew. We're really, really pleased with our progress, as you noted, on the onshore, and I think our pivot there is really paying off. We've got a lot of great projects. And as I said at Investor Day, especially in solar, there's this rich theme here where panel prices went down quite a lot.

And so companies like ours that had interconnection agreements, ready-to-go projects are capitalizing on the very high demand out there, not only from data centers, but all kinds of blue chip corporates. As you see here, we got AT&T and Toyota and the Sequoia project. And there's lots of great data center conversations going on, as you can imagine. So we're really able to capitalize on that and achieve returns, frankly, above what we even expected on these. We're talking like mid-teens type returns, very solidly accretive right out of the chute, quick cycle capital on these. We're going to be bringing these into service starting in next year. So we're not tying up a lot of capital for a long period. So look, this is really beneficial across the board. And we got a good pipeline behind this.

We've probably got another couple of gigawatts here anyway that we can roll out into the strong demand and strong return environment.

Greg Ebel (President and CEO)

Robert, it's Greg. I wouldn't downplay the tax benefits too, right? I mean, that does get to your per share metrics. So everything that Matthew said is bang on. But we look at it both from an EBITDA perspective, but obviously the bottom line impact as well, right?

Yeah, that's what I was getting at. It seems like there's an opportunity to bridge the gap between your lower DCF per share outlook and what you have on the EBITDA on the EPS front. But the second question I had is maybe for Colin. We've been hearing, reading media reports about potential additional asset sales to indigenous groups, and I wondered if there was any update you had for us there.

Colin Gruending (EVP and President of Liquid Pipelines)

Yeah, thanks, Robert.

So as you know, Enbridge is committed to reconciliation and we've had some success partnering with communities already. I think we have three partnerships working on some other ones. We're early innings on the one that the media picked up, so I'd ask you to be patient with us. We're going to work through it. But you can probably imagine the types of relationships and communities we're dealing with. And there's a capital recycling element to it as well, right? So we're excited about it. We'll keep working it, but please be patient with us.

Okay. Thanks very much.

Thanks, Robert.

Operator (participant)

Our next question comes from Ben Pham from BMO. Your line is open.

Hi, thanks. Good morning. May I just go back to the comment on the solar returns being in the mid-teens? Can you clarify that a bit?

Because we're hearing from industry on the renewable side that returns in solar have been quite challenging within the renewable technologies. I know you referenced panel prices, but is that more exclusive to Enbridge there?

Matthew Akman (EVP and President of Gas Transmission)

Well, thanks, Ben, it's Matthew again. I think it really depends how you're positioned. And it's a couple of things. One is having the interconnection agreements. The other is being able to navigate the supply chain. And companies like ours that are large and the supply chain wants to do business with us, and we get very solid terms and conditions there. And the buyers too. These are the kinds of buyers. This is Enbridge-type customers. These large data center-type customers and blue chip corporates, they're going to want to do business with us. And so we think we get industry best-in-class terms and conditions.

And we also know how to build and operate stuff efficiently. So all that combined, Ben, I'm not sure what you're hearing, but you'll see these are going to be right out of the chute, very cash flow accretive, and kick out great returns over the life of the project. So yeah, I think that mid-teens return level is solidly in sight here.

Okay. That's good to hear. And maybe on the regional pipelines expansion comment, are you thinking that's more lateral connections into Wapiti and Athabasca? Are you thinking more of those two pipes could get potentially expanded?

Colin Gruending (EVP and President of Liquid Pipelines)

Yeah, Ben, Colin here. So generally, I'd say the basin is overpiped. I think there's a lot of competitors up there, but there are a number of bottlenecks in the system. We have seven pipelines in the region, right? You'll recall them.

And these would be, again, horsepower, DRA, lateral, some long-haul pipes in scope there too. But de-bottlenecking, very capital-efficient returns here in short cycles. So that production growth we talked about earlier is showing up on the mainline and downstream, but also at home locally. So it's fairly imminent here. We're looking at this in the next few quarters.

Okay. That's great to hear. Thank you.

Operator (participant)

Our next question comes from Maurice Choy from RBC Capital Markets. Your line is open.

Thank you. And good morning, everyone. Just want to stick with the mainline theme here.

Greg and Colin, you both mentioned that November is an apportionment, but may not be an apportionment every month from here on in.

Maybe if you look at things on an annual basis, can you talk to any factors that would cause you to think this year's volume level wouldn't improve in 2025 and beyond? Whether that be expectations like lower prices, production shut-ins, just keen to hear your thoughts on that.

Colin Gruending (EVP and President of Liquid Pipelines)

Sure, Maurice. Yeah. So last, let's call it 2023's annual volume throughput through the Mainline was basically full. I think it was 3.08, all-time record. This year, we're trending to over 3, probably not 3.80, but over 3. And next year, I think you should think about a comparable number. We'll think we'll have more definition for you in a few weeks, but lots of factors. But each year, there's turnarounds embedded in that. There's outages embedded in that. There's supply growth. There's demand growth.

I think the competitor pipelines are performing well, but generally at a run rate level. We continue to find and optimize our own capacity. Our outage management has gotten a lot better. We have optimizations that we're doing monthly and quarterly to add a little bit of capacity. So we remain pretty bullish on the utilization. The numbers we're talking about are 98%-99% full. So there's some variation around that. I don't want to give anybody the impression that it's locked, but there's a multiplicity of supply sources. We're connected to 40 different refineries. So there's a diversity that stabilizes it generally.

Greg Ebel (President and CEO)

I love the question, Maurice, because it's only a couple of years ago where people worried, "Oh, how are you going to hit 3 million?" And there we are continuing to do that. And as you hear from Colin, yeah, it's 3 million.

Then let's look at other opportunities down the road. So it's a good question because I think a lot of people were dead wrong on this issue. I think we've proven that outcome different cycles, but also even the arrival of TMX.

TMX ramp-up definitely has been much better than anyone in sphere, to be honest. So that's good. Maybe finishing up on a question on the secure growth plan. From the prepared remarks and even from Michele's comments, there seems to be quite a bit of growth in the U.S. and possibly even in Ontario through the integrated energy resource planning. We obviously heard from Matthew's mid-teens return commentary just now on renewables. Greg, as you look across your various businesses you have today, can you speak to the trends maybe since Enbridge Day?

Can you speak to the trends in terms of where you see the greatest opportunity set and separately where the risk-adjusted returns are the most attractive?

Yeah, sure. I mean, look, you're absolutely right. I think the arrival of the U.S. utilities into the portfolio put a new opportunity set, and then as Michele said, you throw on the data center elements of that, and really, it's the electric elements of that. These things need to be powered. I think that allows incremental opportunities on the renewable side. Very careful. Certain jurisdictions, quick cycle, just like GDS. So I see that opportunity there, and then let's not forget GTM. GTM's filling up on the power side, the storage side, all the LNG facilities.

So as I said in my comments, there really are cyclical trends that we are in front of right now, whether it's on the power side, whether it's on the reindustrialization side and nearshoring, or whether it's on the export side, which you heard the numbers and the record numbers on Ingleside. And you're going to see things kick up on the LNG side as well. So I would say to your base question, we have an opportunity-rich environment, and everybody's got to compete for that. Even amongst the utilities, we will invest our capital in the best-returning utilities. If that's Ontario, it's Ontario. If it's Ohio, it's Ohio or Utah. And the same thing on the gas side. Is it going to be BC, or is it going to be the Gulf Coast or the Northeast?

I think we've got the capacity, as Pat has laid out in the past, that CAD 8 billion or CAD 9 billion of capacity each year. I expect we'll use it. It comes down to risk-adjusted returns. How quick can you take that capital, turn it into earnings for shareholders, which allows us to continue to drive the dividend forward? If anything, I would just say the market since investor day, and we look forward to coming back to you all in March, has got even better, both externally for our growth, but internally for competition for capital. I like that dynamic for growth.

Well, that's very good to hear. Thank you very much.

Operator (participant)

Our next question comes from the line of Manav Gupta from UBS. Your line is open.

Good morning, guys. Congrats on a strong quarter.

In early October, you announced a project which adds to your growing pipeline in Gulf of Mexico to support BP operations. Can we get some more details about this project and why it's a good return on investment?

Cynthia Hansen (Special Advisor to the CEO)

Yeah. Manav, it's Cynthia Hansen here. Thanks for the question. We're really excited about the Canyon pipeline supporting the BP Kaskida. So as was noted, it's about $700 million of investment, and that'll be in service in 2029. What we really like is that it ties into our existing infrastructure that we have there. You may know this or may not, that we actually transport 40% of all the natural gas that comes in the Gulf Coast. This particular field, we have a lot of experience and expertise in this area supporting this infrastructure. It's going to tie in the gas pipeline.

That 12-inch is going to tie into our existing field, Magnolia Gas Platform. And then the other oil pipeline ties into the Shell infrastructure. And of course, last year, we'd announced our project there to support the ongoing development for Sparta. So it really does tie in, and we're getting the long-term return with really strong contracts. So the contracts allow us to get that return on our investment in that first 10-year period. So it's really exciting for us to continue to support that build-out in the Gulf of Mexico.

Greg Ebel (President and CEO)

Well, what it really does also, Cynthia, as you said, coming in '29, it's adding to that growth profile beyond our current three or four-year look. Now you're talking about into '29 and beyond, which, filling up that hopper, is important for us, and this really adds to that.

Thank you. I'll turn it back.

Matthew Akman (EVP and President of Gas Transmission)

Thank you.

Operator (participant)

Our next question comes from Rob Hope from Scotiabank. Your line is open.

Good morning, everyone. And I want to kind of follow up on the filling the hopper comment. As you take a look at that CAD 8-9 billion of annual investment capacity, when you take a look at it over the next couple of years, how full are you on that? Do you have a wealth of opportunities in front of you that you are, we'll call it, cherry-picking the best project? And kind of where do you think you have the most room to kind of backfill the capital plan?

Greg Ebel (President and CEO)

Yeah, maybe I'll start, and then maybe Pat will want to add it. Yeah. I mean, we do have a wealth of opportunities. So it goes back to that issue of which there's different elements, right?

So if I look at our projects in Western Canada, we've got some great projects there, but they're a little bit further out. When I look at things like GDS or some of the regional activities that Colin was just talking about or the projects we just announced on the solar side, they're coming in in 2025 and 2026. So I think we've been able to pick off the ones with the best returns soonest additions to EBITDA while still being able to look at, well, let's face it, long-haul pipelines take longer to build. And those are actually filling up the hopper outside of our numbers. So I think when you look at it, Pat, we're in a good spot to be able to fund all that as well as the ongoing maintenance capital to keep the business running reliably and with integrity.

Pat Murray (EVP and CFO)

Yeah, I think we've still got a little bit of capacity in the next few years here to do things like Matthew, to do some of the stuff Matthew or Michele's group's doing within the utilities. I think this third quarter is kind of a microcosm of what we should see over the next little while. The diversity of the opportunities. We've got the quick-turn capital, high-returning capital coming out of Matthew's green power business. We've got the starts of a bunch of real projects within Michele's that's helping to serve the data center and increasing electrification. And then we've got a long-term end-of-decade type of project in Cynthia's business. So I like the fact that it's diverse from a spend profile, diverse from when they come into service, helping to extend our growth and reaffirm the growth over 2026.

So we still got a little bit of capacity in 2025 and 2026 to continue to do stuff and lots in the back part of the decade. So real excited about the opportunities here. And we're going to try and pick the best of the best as we go forward. Rob, if you think about it, it's probably on our website from last year. I think we've got that CAD 8-9 billion capacity slide. We're utilizing CAD 6-7, which leaves us a couple of billion dollars for these opportunities to come along. So that's a good one to refresh, take a look at.

And then maybe to follow up there, as you take a look at the tuck-in and M&A market, could this be an opportunity to get you to that CAD 8-9 billion?

What opportunities are you seeing to be most interesting in the tuck-in market?

Definitely something we're always watching. We're big, so we get to see those. But they got to compete against the organic stuff. So when you've got a couple of billion dollars or more a year of opportunities that come up, again, whether it's distribution, renewables, regional pipes, they're going to have to compete both from an accretion perspective and from a balance sheet perspective, right? So I would argue in 2023, we picked off some really great assets, whether it's storage stuff, whether it's the utility work, or some of the pieces we picked up on the renewable side. That was a good time to make those moves.

We'll be picky going forward because that's helped build up the hopper at really nice multiples relative to what I would suggest you'll see today, which will still be higher multiples as people look at the value of these assets. Some of those secular changes I talk about really make the value of all these assets from liquids right through to renewables more valuable than they were a year ago.

Thank you.

Thanks.

Operator (participant)

Our next question comes from Theresa Chen from Barclays. Your line is open.

Hi. Good morning. Thank you for taking my questions. First, would you be able to provide an updated outlook on the Rio Bravo Pipeline project, given that the D.C. Circuit vacated the FERC authorization for the liquefaction facility in early August? Does this change the timeline for the pipeline project?

What are your general expectations for next steps and timeline to resolve the legal issue?

Cynthia Hansen (Special Advisor to the CEO)

Sure, Theresa. It's Cynthia again. We're extremely disappointed by the D.C. Circuit's vacatur of Rio Bravo's Section 7 certificate. And basically, that Rio Bravo is now held by the Whistler parent JV. So we're supporting that ongoing work through our JV partnership. It's not unprecedented here for the D.C. Circuit to get involved in these kind of permitting processes. And the FERC has had a strong track record of figuring out how to navigate this space in the past. Right now, it's not having a material impact on our Enbridge guidance. Now, the CEO of NextDecade, Matt Schatzman, has said that they're going to continue to focus on keeping that project on track to make sure it's online to be in service in '27.

I think they've recently, both Rio Bravo and Rio Grande, filed petitions for rehearing to make sure that we can go forward with that. There's been strong industry support. A number of amicus briefs, we've supported it. Industry associations have supported that. I think it's really important for us to get that clarity in that regulatory approval process. There's more to come on that, but it's something that we're watching and supporting.

Great. Thank you. Further east in the Gulf Coast, would you be able to provide an update on the Venice Extension project servicing the Plaquemines facility, just given recent concerns of delays for the startup on the liquefaction side? Can you remind us, when do you expect volumes to ramp up more significantly?

When do your commitments begin, i.e., will you be paid regardless of ramp-up with this year-end 2024 timeline?

Yeah. Thanks, Theresa. Well, great news. As of today, we are flowing through our White Castle facility. So that's serving about 0.8 BCF. And we think that the other two stations, New Roads and Larose, will be in service by the end of the year. And so we're already starting to receive some payments associated with those facilities.

Thank you.

Operator (participant)

And your final question comes from Praneeth Satish from Wells Fargo. Your line is open.

Thanks. Good morning. Just going back to solar, so it seems like interconnect agreements, that's the main driver here for moving forward with quick-cycle projects with high returns. I guess, can you talk about how much more interconnection capacity you have that could support more of these types of projects?

And then just to clarify, the mid-teens return for the solar project that you sanctioned, is that for the first year, including the upfront ITC, or is that the IRR over the life of the project?

Matthew Akman (EVP and President of Gas Transmission)

Yeah. Thanks, Prim. It's Matthew again. Just on your last part first, this is actually going to be a PTC project, not an ITC. So it's nice because it's kind of more smooth across a multi-year period. So it'll provide that kind of stable, contracted, reliable cash flow for many years to come. And yeah, it'll be immediately accretive solidly right out of the chute and then for all the years forward. So that's kind of the overall profile. And sure, when we talk about returns, it's always life of project. In terms of what else we have, yeah, we've got a great pipeline.

Some of that was stuff we had been cultivating for a number of years internally. And then just over two years ago, we acquired Tri Global Energy, and they had a bunch of stuff. So we've got probably a couple gigawatts of up to a couple gigawatts of solar with interconnection agreements. We've got great discussions going on with all the data centers, as you can imagine, and other blue chips on that. And then we've got about a gigawatt of wind that's interconnection ready. So overall, we've got a few gigawatts still here that we can roll out. Again, all this stuff has to compete on returns, as we always said on renewable, and we're getting those. And as long as it does continue to compete on returns and the low-risk contracted model, then we look forward to rolling a bunch more of this out in the coming years.

Pat Murray (EVP and CFO)

Yeah. I think we said at Enbridge Days that we might spend $1 billion a year on this. This is probably a bigger year than we said back then. And that has all to do with the returns we're seeing, the quick turn of that capital, and how it competes in the early years here. So I think if Matthew can continue to bring these types of projects with the return and quick turn that we like, we can continue to do more of them.

Got it. No, that's helpful. And then you've highlighted throughout the call opportunities with data centers on the LDC side, renewables business. I guess, what are you seeing along Texas Eastern and the U.S. gas pipeline assets in terms of potential discussions with utilities that are building out gas plants or data centers directly for behind-the-meter solutions?

Maybe if you could just give us an update on that.

Cynthia Hansen (Special Advisor to the CEO)

Yeah. Thanks, Praneeth. We've said this before. We have 45% of all of the North American power generation that's within 50 miles of our Enbridge pipeline. So we are really well situated, and that's not just for data centers, but that's for other power demand. We still have coal-to-gas switching, the onshore industrialization that we're seeing, but specifically for that data center focus, we're seeing inbounds across that region, but also recently in the U.S. Southeast, we have that 0.7 BCF per day of increased demand to support about 4.5 gigawatts of new gas-fired generation. So we're seeing a lot of inbounds. We're working through that. I think we're continuing to be really well positioned to support the data center buildup.

Greg Ebel (President and CEO)

Hey, Praneeth, one thing I'd just add is that it's not just opportunities.

I don't want you to take it. These are actual things that are being done today. I hear a lot about opportunities, which is great. That's building it. But this Duke buildup is happening right now. This data center connection in Utah is happening now. Fox Squirrel with Amazon is happening right now. So yeah, the opportunity is there. But I think uniquely to us versus some others, and that's because of where the assets are, the interconnection of the different businesses, and how we can offer things, that stuff's happening now. So it's both current and opportunity going forward.

Got it. That's helpful. And if I could just sneak one real quick last question in here with the recent flooding in North Carolina with Hurricane Helene, has that had any impact on your PSNC business?

Pat Murray (EVP and CFO)

Well, first of all, most importantly, it's had a terrible impact on people, right?

I'm really proud of the team there and how they've stepped up and helped the community. But operationally and financially, if you go there, no. I mean, yeah, we had things to do, replacement, but all the folks are back online now. If you need gas, we're getting gas. There are some homes that were completely destroyed, but those hooked up, but that's not a large number. But Asheville is back in terms of gas service from PSNC.

Got it. Appreciate it. Thank you.

Any of those costs that do come up would just go into a deferral account. Again, important element of regulatory structure for utilities, right?

Yep. Got it. Thank you.

Operator (participant)

Thanks. And that concludes our question and answer session. I will now turn the call back over to Rebecca Morley for closing remarks.

Rebecca Morley (VP of Investor Relations)

Great. Thank you. And we appreciate your ongoing interest in Enbridge.

As always, our investor relations team is available following the call for any additional questions that you may have. Once again, thanks and have a great day. This concludes today's conference call. Thank you for your participation. You may now disconnect.