TSX Commentary » Enbridge Inc.

Enbridge ENB Enbridge Fires Back in Clipper Dispute

admin — Mon, 22 Feb 2010 22:58:48 +0000

Enbridge (ENB) – $46.37 – Enbridge Fires Back in Clipper Dispute
Outperform, Average Risk, Price Target: $54.00
Enbridge filed a motion to intervene, protest and request for dismissal of a shipper challenge to the Alberta Clipper project.
The company is seeking the dismissal of Suncor’s petition. Some of the reasons include: (1) Enbridge constructed Alberta Clipper based on an unopposed CAPP settlement. (2) Construction is almost finished and costs are within budget. (3) The challenge is late in the day and Enbridge asserts that Suncor had concerns, but did nothing until now. RBC CM’s view on the issue is unchanged and it recommends using any price weakness as news disseminates as an entry point. With the majority of construction complete, it would be surprising for the FERC to delay the in-service date. A negative decision out of the FERC would defer roughly 5% of Enbridge’s 2011E earnings (about $0.15/share), although Enbridge may have other remedies that would partially, or fully, mitigate any negative decision.

Enbridge Inc. ENB Medium-Term Growth Coming into Focus

admin — Thu, 04 Feb 2010 15:16:01 +0000

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).

Enbridge Inc. ENB Clipper Faces a Regulatory Challenge

admin — Thu, 21 Jan 2010 16:50:27 +0000

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.

ENB Positive 2010 Guidance; 15% Increase in the Dividend

admin — Thu, 03 Dec 2009 16:51:39 +0000

Enbridge Inc. (ENB) – $46.30 –
Outperform, Average Risk, Price Target: $50.00 (prev. $49.00)
Management’s EPS guidance range for 2010 is $2.50 to $2.70. This compares to RBC CM’ previous estimate of $2.51 and consensus of $2.55. The midpoint of the guidance range represents a 12% increase over RBC CM’ 2009 estimate. Enbridge increased the annual dividend to $1.70/share (from $1.48). This was modestly higher than RBC CM’ estimated increase to $1.64/share. RBC CM continues to believe that investors should own shares of Enbridge for the following reasons: (1) strong and visible growth from projects currently under construction; (2) good defensive characteristics (minimal direct commodity exposure, minimal throughput exposure, well-funded capex plan); and (3) a reasonable valuation with the shares trading at roughly 18x forward EPS, which is at the midpoint of the 10-year historical range. RBC CM is bumping up its price target to $50.00 (from $49.00).

Enbridge Inc. Joint Funding Agreement For U.S. Segment Of Alberta Clipper

admin — Sun, 26 Jul 2009 22:54:53 +0000

Enbridge and EEP announced a joint funding agreement whereby Enbridge
will effectively fund two-thirds of the US$1.2 billion capital cost of Alberta
Clipper’s U.S. segment. The arrangement allows EEP to avoid a large equity
issue, which in current market conditions would have been dilutive.

Enbridge’s 2008-2012 funding profile now anticipates an equity surplus of
$1.5 billion through 2012 (compared with $1.9 billion prior to incremental
U.S. Alberta Clipper funding) and a new debt funding requirement through
2012 of $4.0 billion (compared with $3.5 billion previously).

Incremental earnings from direct ownership in the U.S. segment of Alberta Clipper
is offset by lower earnings from Enbridge’s 27% stake in EEP and lower general
partner incentive cash distributions