TSX Commentary

Enbridge Inc. (ENB) -$47.59 – Clipper Faces a Regulatory Challenge
Outperform, Average Risk, Price Target: $54.00
Suncor recently filed a petition with the Federal Energy Regulatory Commission (FERC) seeking a declaratory order that due to “dramatically changed circumstances,” the rate methodology on the U.S. portion of Alberta Clipper will not result in just and reasonable tolls in the near-term. In essence, Suncor is seeking to delay the toll impact of the project from mid-2010 until a later date when the capacity will be needed. Suncor argues that delays in the ramp-up of new oil sands projects, lower demand from refiners and the delay in new pipeline projects to transport crude further south of the traditional markets for Canadian crude are
some of the reasons why it believes Alberta Clipper will not benefit shippers in the near-term. Suncor filed the petition alone,
although RBC CM understands that broader industry support was not sought prior to the FERC submission. If Suncor is successful, this might spell the end of the common carrier system. With the majority of construction complete, RBC CM stated that it would be surprised if the FERC delays the in-service date. RBC CM believes a negative decision out of the FERC would defer roughly 5% of Enbridge’s 2011E earnings (about $0.15/share). RBC CM continues to view the shares as attractively valued and reiterates its Outperform, Average Risk ranking. RBC CM’s target price of $54.00/share (unchanged) is based on a forward P/E of 19x. Due to its attractive growth and strong defensive characteristics, RBC CM believes that a 19x forward P/E is
reasonable as it is only slightly above the midpoint of the 10-year range.