HIGHLIGHTS:
- Enbridge has entered into definitive agreements with Dominion
Energy, Inc. to acquire The East Ohio Gas Company ("EOG"), Questar
Gas Company ("Questar Gas"), and its related Wexpro companies
("Wexpro" and collectively with Questar Gas, "Questar"), and Public
Service Company of North Carolina,
Incorporated ("PSNC") (collectively the "Gas utilities") for an
aggregate purchase price of US$14.0 billion (CDN$19 billion1), comprised of
US$9.4 billion of cash consideration
and US$4.6 billion of assumed debt
(the "Acquisitions").
- Creates North America's
largest natural gas utility platform delivering ~9.3 bcf/d to ~7
million customers across multiple regulatory jurisdictions.
- Historically attractive acquisition multiples, based on 2024
estimate of ~1.3x Enterprise Value-to-Rate Base and 2023 estimate
of ~16.5x Price-to-Earnings.
- Compounded annual growth rate of approximately 8% on the
consolidated rate base is expected to deliver long-term value for
Enbridge shareholders.
- Expected to be accretive to distributable cash flow per share
("DCFPS") and adjusted earnings per share ("EPS") in the first full
year of ownership, increasing over time driven by the addition of
approximately CDN$1.7 billion of
annual, low-risk, quick-cycle rate base investments to Enbridge's
secured growth backlog.
- Financial guidance in 2023, and near-term and medium-term
outlook is maintained; long-term dividend growth profile is
strengthened.
- High-quality, utility cash flows from the Gas utilities further
reduces Enbridge's already industry leading business risk and
balances Enbridge's earnings mix to approximately 50% Natural Gas
and Renewables and 50% Liquids upon closing, expected in 2024.
- Funding plan preserves financial flexibility as Enbridge
expects to maintain leverage within its target range of 4.5x to
5.0x Debt-to-Adjusted EBITDA.
- Enbridge is looking forward to welcoming the Gas utilities'
employees to the Enbridge family and expects to maintain strong
relationships with existing local unions and communities.
______________________________
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1 Translated
at USD/CAD $1.36 (the exchange rate as of September 1,
2023).
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CALGARY,
AB, Sept. 5, 2023 /PRNewswire/ - Enbridge Inc.
("Enbridge" or the "Company") (TSX: ENB) (NYSE: ENB) today
announced that it has entered into three separate definitive
agreements with Dominion Energy, Inc. to acquire EOG, Questar and
PSNC for an aggregate purchase price of US$14.0 billion (CDN$19 billion), comprised of $US9.4 billion of cash consideration and
US$4.6 billion of assumed debt,
subject to customary closing adjustments.
Upon the closings of the three transactions, Enbridge will add
gas utility operations in Ohio,
North Carolina, Utah, Idaho
and Wyoming, representing a
significant presence in the U.S. utility sector. The Gas utilities
fit Enbridge's long held investor proposition of low-risk
businesses with predictable cash flow growth and strong overall
returns. Following the closings, the Acquisitions will double the
scale of the Company's gas utility business to approximately 22% of
Enbridge's total adjusted EBITDA and balance the Company's asset
mix evenly between natural gas and renewables, and liquids. The
Acquisitions will lower Enbridge's already industry-leading
business risk and secure visible, low-risk, long-term rate base
growth. Increased utility earnings enhance Enbridge's overall cash
flow quality and further underpin the longevity of Enbridge's
growing dividend profile.
Following the closings of the Acquisitions, Enbridge's gas
utility business will be the largest, by volume, in North America with a combined rate base of
over CDN$27 billion and about 7,000
employees delivering over 9 Bcf/d of gas to approximately 7 million
customers.
The Company estimates its purchase price for the Acquisitions at
~1.3x Enterprise Value-to-Rate Base (based on 2024 estimates) and
~16.5x Price-to-Earnings (based on 2023 estimates) and expects the
Acquisitions to be accretive to Enbridge's financial DCFPS and
adjusted EPS outlook in the first full year of ownership adding
shareholder value.
"Adding natural gas utilities of this scale and quality, at a
historically attractive multiple, is a once in a generation
opportunity. The transaction is expected to be accretive to DCFPS
and adjusted EPS in the first full year of ownership, increasing
over time due to the strong growth profile," said Greg Ebel, Enbridge President and CEO.
"Following the closings of the Acquisitions, our Gas Distribution
and Storage ("GDS") business will be North America's largest gas utility franchise.
These Acquisitions further diversify our business, enhance the
stable cash flow profile of our assets, and strengthen our
long-term dividend growth profile. The transaction also
reinforces our position as the first-choice energy delivery company
in North America.
"The assets we are acquiring have long useful lives and natural
gas utilities are 'must-have' infrastructure for providing safe,
reliable and affordable energy. In addition, these gas
utilities have each committed to achieving net-zero greenhouse gas
emissions by 2050 and are expected to play a critical role in
enabling a sustainable energy transition. We are very excited by
today's announcement as these businesses align with Enbridge's
business risk model and long-term growth targets. The entire
Enbridge team is committed to working with the EOG, Questar and
PSNC teams and to investing in the communities they serve. We
look forward to serving our customers with dedication and to
providing them with safe, reliable, and affordable energy service
for years to come."
The Gas utilities are domiciled in premier U.S. jurisdictions
with transparent and constructive regulatory regimes that preserve
customer choice to consume natural gas and have attractive capital
growth programs. EOG, Questar and PSNC each have lower-carbon
initiatives that are similarly aligned with Enbridge's ESG
goals.
Each of the Gas utilities have an excellent operating and safety
track record. The experienced operating teams of each business will
be joining the Enbridge team. Keeping with Enbridge's history of
successfully integrating acquired businesses, we expect to be able
to integrate the Gas utilities' businesses smoothly while
continuing to deliver the service our customers expect.
"Today and for the long-term, natural gas will remain essential
for achieving North America's
energy security, affordability and sustainability
goals. Individually and collectively, the Gas utilities are
perfectly complementary to our gas distribution business unit's
current operations and strategy. These utilities operate in
regions with very attractive regulatory regimes, offer diverse,
low-risk growth opportunities, and are capital efficient with short
cycles between capital deployments and earnings generation," said
Michele Harradence, President of GDS
and Executive Vice President at Enbridge. "We are excited to be
welcoming over 3,000 new employees into the Enbridge family.
In addition, we intend to continue the robust social, community and
diversity, equity and inclusion initiatives that each Gas utility
has committed to."
COMMITMENT TO EOG, PSNC AND QUESTAR COMMUNITIES, CUSTOMERS,
AND EMPLOYEES
Following the closings of the Acquisitions, EOG, PSNC and
Questar each will continue to be regulated by the Public Utility
Commission of Ohio, the North
Carolina Utilities Commission, and the Public Service Commissions
of Utah, Wyoming and Idaho, respectively. Enbridge looks forward to
establishing a collaborative and mutually beneficial relationship
with each of these regulatory bodies.
Enbridge's existing natural gas utility has proudly served its
customers for 175 years and has built its business on the key
pillars of safety, reliability, affordability and customer service.
Enbridge actively invests in the communities it serves and looks
forward to continuing the community service legacies of EOG, PSNC
and Questar in their respective states. In addition, Enbridge
offers a competitive and flexible Total Compensation package to its
staff and seeks to maintain strong relationships with local unions
and the local workforce.
FINANCIAL CONSIDERATIONS
Today's equity offering, announced separately, is expected to
fully address the Company's planned discrete common equity issuance
needs to finance this transaction. It ensures the remaining funding
requirements can be readily satisfied through a variety of
alternate sources including hybrid debt securities and senior
unsecured notes, continuing the Company's ongoing capital recycling
program, potential reinstatement of Enbridge's Dividend
Reinvestment and Share Purchase Plan, or At-The-Market equity
issuances. The acquisition of each Gas utility is expected to close
in 2024, upon receipt of the applicable required federal and state
regulatory approvals, which allows Enbridge flexibility to
optimally balance the mix of financing alternatives prior to each
closing. These sources may change, subject to market
conditions and other factors.
Enbridge has obtained debt financing commitments totaling
US$9.4 billion from Morgan Stanley
and Royal Bank of Canada for the
cash consideration component of the Acquisitions in order to
further demonstrate liquidity and the financing capacity to close
the transactions.
The Company is committed to maintaining its financial strength.
The funding program for the Acquisitions is designed to maintain
the Company's balance sheet within its previously communicated
target leverage range of 4.5x to 5.0x Debt-to-Adjusted EBITDA with
the objective of retaining its strong investment grade credit
ratings.
"Acquiring these natural gas utilities makes strong strategic
and financial sense. Enbridge is currently the only major pipeline
and midstream company that owns a regulated gas utility and we've
further strengthened that position today by doubling the size of
our GDS business. After closings, the Acquisitions will extend and
diversify our natural gas footprint and importantly add low-risk,
ratable investments to our growth portfolio" said Patrick Murray, Executive Vice President and
Chief Financial Officer, Enbridge. "The financing plan for the
transaction includes significant equity pre-funding and a suite of
financing options that will be optimized to maximize accretion and
protect our strong investment grade ratings."
FINANCIAL OUTLOOK
The Company reaffirms its 2023 financial guidance, while
planning to raise a significant portion of the financing required
for the Acquisitions this year. After the closings, the
Acquisitions are expected to provide immediate high-quality cash
flow and deliver significant EBITDA growth in their first full
fiscal year of Enbridge's ownership. The Gas utilities have
attractive embedded DCF and earnings growth, strengthening
Enbridge's near-term and medium-term financial outlook. Sustainably
returning capital to shareholders remains a key priority and
Enbridge plans to continue to grow its dividend up to its level of
medium-term distributable cash flow growth.
Collectively, the Company expects the Gas utilities to add
CDN$1.7 billion of average annual
low-risk, long-term capital investment opportunities, with
significant built-in rate rider mechanisms, enabling timely
recovery of capital investments.
TIMING AND APPROVALS
The Acquisitions are expected to close in 2024, subject to the
satisfaction of customary closing conditions, including the receipt
of certain required U.S. federal and state regulatory approvals.
These include clearance from the Federal Trade Commission under
Hart-Scott-Rodino Antitrust Improvements Act of 1976, approval from
the Federal Communications Committee, and approval from the
Committee on Foreign Investment in the
United States as well as approvals from state public utility
commissions that regulate EOG, Questar, and PSNC. Closing of the
purchase of each Gas utility acquisition is expected to occur
following receipt of each regulatory approvals applicable to each
utility, and are not cross-conditioned across all three Gas
utilities.
ADVISORS
Morgan Stanley & Co. LLC and RBC Capital Markets acted as
co-lead Financial Advisors. Sullivan & Cromwell LLP and
McCarthy Tétrault LLP were legal advisors to Enbridge.
CONFERENCE CALL DETAILS
Enbridge will host a conference call on September 5, 2023, at 4:30 p.m. Eastern Time
(2:30 p.m. Mountain Time) to provide an overview of the
Acquisitions. Analysts, members of the media and other interested
parties can access the call toll free at 1-800-606-3040 (conference
ID: 9581867). The call will be webcast live, please register
at https://app.webinar.net/2vM5REDQKoe. A webcast replay will
be available soon after the conclusion of the event and a
transcript will be posted to the website.
The webcast will include prepared remarks from the executive
team. Enbridge's media and investor relations teams will be
available after the call for any additional questions.
FORWARD-LOOKING INFORMATION
This news release contains both historical and
forward-looking statements within the meaning of Section 27A
of the U.S. Securities Act of 1933, as amended, and
Section 21E of the U.S. Securities Exchange Act of 1934, as
amended, and forward-looking information, future oriented financial
information and financial outlook within the meaning of Canadian
securities laws (collectively, "forward-looking statements").
Forward-looking statements have been included to provide readers
with information about the Company and its subsidiaries and
affiliates, including management's assessment of the Company's 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", "believe",
"estimate", "expect", "forecast", "intend", "likely", "plan",
"project", "target" and similar words suggesting future outcomes or
statements regarding an outlook. Forward-looking information or
statements included in this news release include, but are not
limited to, statements with respect to the following: the
Acquisitions, including the characteristics, value drivers and
anticipated benefits thereof on a standalone and combined
post-Acquisitions basis; the Company's strategic plans, priorities,
enablers and outlook; financial guidance and near and medium term
outlooks, including expected distributable cash flow ("DCF") per
share, adjusted earnings per share ("EPS") and adjusted earnings
before interest, taxes, depreciation and amortization ("Adjusted
EBITDA"), and expected growth thereof; expected debt to Adjusted
EBITDA outlook and target range; expected supply of, demand for,
exports of and prices of crude oil, natural gas, natural gas
liquids ("NGL"), liquified natural gas ("LNG") and renewable
energy; energy transition and lower-carbon energy, and our approach
thereto; environmental, social and governance goals, practices and
performance; industry and market conditions; anticipated
utilization of the Company's assets; dividend growth and payout
policy; expected future cash flows; expected shareholder returns
and returns on equity; expected performance of the Company's
businesses after the closings of the Acquisitions, including
customer growth, system modernization and organic growth
opportunities; financial strength and flexibility; expectations on
sources of liquidity and sufficiency of financial resources;
expected strategic priorities and performance of the Liquids
Pipelines, Gas Transmission and Midstream, Gas Distribution and
Storage, Renewable Power Generation and Energy Services businesses;
expected costs, benefits and in-service dates related to announced
projects and projects under construction; expected capital
expenditures; investable capacity and capital allocation
priorities; share repurchases under our normal course issuer bid;
expected equity funding requirements for the Company's commercially
secured growth program; expected future growth, diversification,
development and expansion opportunities, including with respect to
the Company's post-Acquisitions commercially secured growth program
and low carbon and new energies opportunities and strategy;
expected optimization and efficiency opportunities; expectations
about the Company's joint venture partners' ability to complete and
finance projects under construction; our ability to complete the
Acquisitions and successfully integrate the gas utilities without
material delay, material changes in terms, higher than anticipated
costs or difficulty or loss of key personnel; expected closing of
other acquisitions and dispositions and the timing thereof;
expected benefits of transactions, including the Acquisitions;
expected future actions of regulators and courts, and the timing
and impact thereof; toll and rate cases discussions and proceedings
and anticipated timeline and impact therefrom, including Mainline
System Tolling and those relating to the Gas Transmission and
Midstream and Gas Distribution and Storage businesses; operational,
industry, regulatory, climate change and other risks associated
with our businesses; the financing of the Acquisitions, including
the expected sources, timing and use of proceeds; and our ability
to maintain strong investment grade credit metrics.
Although the Company 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, demand for, export of and prices of crude oil, natural
gas, NGL, LNG and renewable energy; energy transition, including
the drivers and pace thereof; anticipated utilization of assets;
exchange rates; inflation; interest rates; availability and price
of labor and construction materials; the stability of the Company's
supply chain; operational reliability; maintenance of support and
regulatory approvals for the Company's projects; anticipated
in-service dates; weather; the timing, terms and closing of
acquisitions and dispositions, including the Acquisitions, and of
the financing of the Acquisitions; the realization of anticipated
benefits of transactions, including the Acquisitions; governmental
legislation; litigation; estimated future dividends and impact of
the Company's dividend policy on its future cash flows; the
Company's credit ratings; capital project funding; hedging program;
expected EBITDA and Adjusted EBITDA; expected earnings/(loss) and
adjusted earnings/(loss); expected future cash flows; expected
future EPS; expected DCF and DCF per share; debt and equity market
conditions; and the ability of management to execute key
priorities, including with respect to the Acquisitions. Assumptions
regarding the expected supply of and demand for crude oil, natural
gas, NGL, LNG and renewable energy, and the prices of these
commodities, are material to and underlie 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. The most relevant
assumptions associated with forward-looking statements regarding
announced projects and projects under construction, including
estimated completion dates and expected capital expenditures,
include the following: the availability and price of labor and
construction materials; the stability of our supply chain; the
effects of inflation and foreign exchange rates on labor and
material costs; the effects of interest rates on borrowing costs;
and the impact of weather and customer, government, court and
regulatory approvals on construction and in-service schedules and
cost recovery regimes.
The Company's forward-looking statements are subject to risks
and uncertainties pertaining to the successful execution of the
Company's strategic priorities, operating performance, legislative
and regulatory parameters; litigation; acquisitions (including the
Acquisitions), dispositions and other transactions and the
realization of anticipated benefits therefrom; the financing of the
Acquisitions; operational dependence on third parties; dividend
policy; project approval and support; renewals of rights-of-way;
weather; economic and competitive conditions; public opinion;
changes in tax laws and tax rates; exchange rates; inflation;
interest rates; commodity prices; access to and cost of capital;
political decisions; global geopolitical conditions; and the supply
of, demand for and prices of commodities and other alternative
energy, including but not limited to those risks and uncertainties
discussed in our filings with Canadian and United States securities regulators. The
impact of any one assumption, risk, uncertainty or factor on a
particular forward-looking statement is not determinable with
certainty as these are interdependent and the Company's future
course of action depends on management's assessment of all
information available at the relevant time.
Financial outlook and future oriented financial information
contained in this news release about prospective financial
performance, financial position or cash flows is based on
assumptions about future events, including economic conditions and
proposed courses of action, based on management's assessment of the
relevant information currently available and is subject to the same
risk factors, limitations and qualifications as set forth above.
The financial information included in this news release, has been
prepared by, and is the responsibility of, management . The purpose
of the financial outlook and future oriented financial information
provided in this news release is to assist readers in understanding
the Company's expected financial results following completion of
the Acquisitions and the associated financings, and may not be
appropriate for other purposes. The Company and its management
believe that such financial information has been prepared on a
reasonable basis, reflecting the best estimates and judgments, and
that prospective financial information represents, to the best of
management's knowledge and opinion, the Company's expected course
of action. However, because this prospective information is highly
subjective, it should not be relied on as necessarily indicative of
past or future results, as the actual results may differ materially
from those set forth in this news release.
Except to the extent required by applicable law, the Company
assumes no obligation to publicly update or revise any
forward-looking statement made in this news release or otherwise,
whether as a result of new information, future events or otherwise.
All forward-looking statements, whether written or oral,
attributable to the Company or persons acting on the Company's
behalf, are expressly qualified in their entirety by these
cautionary statements.
NON-GAAP MEASURES
This news release makes reference to non-GAAP and other
financial measures, including earnings before interest, income
taxes, depreciation and amortization (EBITDA), adjusted EBITDA,
distributable cash flow (DCF), adjusted earnings per share (EPS)
and DCF per share and debt to adjusted EBITDA. Management believes
the presentation of these metrics gives useful information to
investors and shareholders as they provide increased transparency
and insight into the performance of the Company. Adjusted EBITDA
represents EBITDA adjusted for unusual, infrequent or other
non-operating factors on both a consolidated and segmented basis.
Management uses EBITDA and adjusted EBITDA to set targets and to
assess the performance of the Company and its business units.
Adjusted earnings represent earnings attributable to common
shareholders adjusted for unusual, infrequent or other
non-operating factors included in adjusted EBITDA, as well as
adjustments for unusual, infrequent or other non-operating factors
in respect of depreciation and amortization expense, interest
expense, income taxes and non-controlling interests on a
consolidated basis. Management uses adjusted earnings as another
measure of the Company's ability to generate earnings and EPS to
assess the performance of the company. DCF is defined as cash flow
provided by operating activities before the impact of changes in
operating assets and liabilities (including changes in
environmental liabilities) less distributions to non-controlling
interests, preference share dividends and maintenance capital
expenditures, and further adjusted for unusual, infrequent or other
non-operating factors. Management also uses DCF to assess the
performance of the Company and to set its dividend payout
target. Debt to adjusted EBITDA is used as a liquidity
measure to indicate the amount of adjusted earnings available to
pay debt (as calculated on a GAAP basis) before covering interest,
tax, depreciation and amortization.
Reconciliations of forward-looking non-GAAP and other
financial measures to comparable GAAP measures are not available
due to the challenges and impracticability of estimating certain
items, particularly certain contingent liabilities and non-cash
unrealized derivative fair value losses and gains which are subject
to market variability. Because of those challenges, reconciliations
of forward-looking non-GAAP and other financial measures are not
available without unreasonable effort.
The non-GAAP measures described above are not measures that
have standardized meaning prescribed by generally accepted
accounting principles 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. Additional information
on non-GAAP and other financial measures may be found in the
Company's earnings news releases or in additional information on
the Company's website, www.sedarplus.com or www.sec.gov.
Unless otherwise specified, all dollar amounts in this news
release are expressed in Canadian dollars, all references to "CDN,"
"dollars" or "$" are to Canadian dollars and all references to
"US$" are to US dollars.
ABOUT ENBRIDGE INC.
At Enbridge, we safely connect millions of people to the
energy they rely on every day, fueling quality of life through our
North American natural gas, oil or renewable power networks and our
growing European offshore wind portfolio. We're investing in modern
energy delivery infrastructure to sustain access to secure,
affordable energy and building on two decades of experience in
renewable energy to advance new technologies including wind and
solar power, hydrogen, renewable natural gas and carbon capture and
storage. We're committed to reducing the carbon footprint of the
energy we deliver, and to achieving net zero greenhouse gas
emissions by 2050. Headquartered in Calgary, Alberta, Enbridge's common shares trade under
the symbol ENB on the Toronto (TSX) and New
York (NYSE) stock exchanges. To learn more, visit us at
enbridge.com
FOR FURTHER
INFORMATION PLEASE CONTACT:
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Enbridge Inc. –
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Enbridge Inc. –
Investment Community
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Jesse Semko
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Rebecca
Morley
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Toll Free: (888)
992-0997
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Toll Free: (800)
481-2804
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Email: media@enbridge.com
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Email: investor.relations@enbridge.com
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