TSX Commentary

Enbridge Inc. (ENB) – $47.65 – Medium-Term Growth Coming into Focus
Outperform, Average Risk, Price Target: $54.00
New Contracts and Projects Starting to Extend the Attractive and Visible Growth Profile Past 2011. In 2010 and 2011, RBC CM expects earnings to grow on average by 10% each year due to projects that are nearing their in-service dates (i.e., high degree of earnings visibility). For 2012, EPS growth is becoming more visible through the recent announcement of new projects such as the Statoil contract in addition to the recently announced $250 million project to serve the Christina Lake oil sands expansion. Q4/09 Results Broadly in Line with Expectations. Q4/09 normalized EPS was $0.65 compared to RBC CM’s estimate of $0.63 and $0.56 in Q4/08. Outperformance from the Liquids Pipelines segment (Enbridge System, Spearhead and Feeder/Other) was mostly offset by higher Corporate costs. With respect to the petition by certain shippers to delay the economic in-service date of the U.S. portion of Alberta Clipper, Enbridge commented that, based on its initial review, the petition is without merit. However, the company is willing to work with shippers to help minimize the toll impact, although management made it clear that it is not willing to alter the return metrics. New Contract to Serve Statoil Canada’s Leismer Oil Sands Project. The initial contract is for 30,000 bpd in late 2011 and can be accommodated on the existing Waupisoo system. The new contract underscores Enbridge’s competitive advantage in attracting new volumes by using excess capacity to match the ramp-up in customers’ oil sands projects. Following a review of their financial model, RBC CM has modestly increased its 2010 and 2011 EPS estimates to $2.63 and $2.82, respectively (from $2.61 and $2.80, respectively).