Enbridge Inc. — FY 2021 Form 10-K
Reporting period: Year ended December 31, 2021; the filing also provides unaudited fourth-quarter results. Unless otherwise noted, amounts are Canadian dollars. Enbridge operates liquids pipelines, gas transmission and midstream, gas distribution and storage, renewable power generation, and energy services.
Financial performance
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Operating revenue | $47.071 billion | $39.087 billion |
| Operating income | $7.805 billion | $7.957 billion |
| Earnings attributable to common shareholders | $5.816 billion | $2.983 billion |
| Diluted earnings per share | $2.87 | $1.48 |
| EBITDA (non-GAAP) | $14.236 billion | $10.692 billion |
| Cash from operating activities | $9.256 billion | $9.781 billion |
| Capital expenditures | $7.818 billion | $5.405 billion |
| Total debt | $75.640 billion | $66.897 billion |
| Net available liquidity at year-end | $6.5 billion | $12.7 billion |
Revenue rose about 20%, principally reflecting higher commodity sales reported gross by Energy Services; management says that business’s net margins are generally a small fraction of gross revenue. Transportation and other services revenue was nearly unchanged at $16.172 billion. Operating income declined modestly despite higher revenue; reported operating margin was approximately 16.6%, versus 20.4% in 2020. The increase in common-share earnings and EBITDA largely reflects the absence of substantial 2020 impairments, including a $1.7 billion impairment of the DCP Midstream investment, as well as a $303 million gain on the Noverco sale. These comparisons are therefore affected by unusual items.
Fourth-quarter 2021 revenue was $12.470 billion, common-share earnings were $1.840 billion, and EPS was $0.91, compared with $10.008 billion, $1.775 billion, and $0.88, respectively, in fourth-quarter 2020.
Segments and material changes
- Liquids Pipelines: EBITDA was $7.897 billion, up from $7.683 billion. Mainline average throughput ex-Gretna increased to 2.8 million barrels per day from 2.6 million; Line 3 Replacement capacity entered service in October. The full-year segment comparison was affected by derivative gains and an interim Mainline toll provision.
- Gas Transmission and Midstream: EBITDA was $3.671 billion versus $1.087 billion, with the comparison heavily affected by 2020 impairments. Excluding unusual and other non-operating factors discussed by management, EBITDA decreased $45 million.
- Gas Distribution and Storage: EBITDA was $2.117 billion versus $1.748 billion, including the Noverco sale gain. Excluding identified unusual factors, EBITDA increased $31 million, supported by higher rates and customer additions; warmer-than-normal weather reduced 2021 EBITDA by about $55 million.
- Renewable Power Generation: EBITDA was $508 million, down from $523 million, partly due to weaker wind resources and the February Texas winter storm.
- Energy Services: EBITDA loss widened to $313 million from a $236 million loss, reflecting compressed location and quality differentials, fewer storage opportunities, and winter-storm effects.
Cash, debt and capital allocation
Operating cash flow was $9.256 billion, below the $9.781 billion reported in 2020. Investing activities used $10.657 billion, including $7.818 billion of capital expenditures and $3.785 billion for acquisitions, primarily the Moda purchase. Financing activities provided $1.236 billion, supported by debt issuance and borrowings; common dividends paid were $6.766 billion. Year-end long-term debt was $67.961 billion, with $6.164 billion of current maturities; total debt including short-term borrowings was $75.640 billion.
Available committed credit facilities were $6.221 billion and cash and cash equivalents were $286 million at year-end. Enbridge reported compliance with debt covenants and Moody’s upgraded its ratings to Baa1 with stable outlook. Management noted negative working capital of $3.1 billion, primarily related to growth-program liabilities, and cited committed facilities as a funding source. A 3% increase in the quarterly common dividend to $0.86, or $3.44 annualized, was announced for payment beginning March 2022.
Outlook, risks and notable items
- Management expects distributable cash flow per share to grow at a 5–7% compound annual rate through 2024, relative to 2021. This is a forward-looking target, not a guarantee.
- The commercially secured capital program was approximately $9 billion through 2024. Management estimated annual self-funding capacity of about $5–6 billion for new organic growth without additional common equity, while maintaining key credit metrics.
- The CER denied Enbridge’s proposed Canadian Mainline contracting application in November 2021. Interim tolls remain in effect while alternatives are discussed; management expected greater toll-framework clarity by 2023. Final tolls and possible adjustments could affect revenue.
- Enbridge acquired Moda for $3.7 billion in cash, plus potential contingent payments of up to US$150 million. It sold its Noverco interest for $1.1 billion and monetized part of its French offshore wind interests.
- Material legal and permitting uncertainty remains around Line 5 in Michigan, including litigation and the Great Lakes Tunnel permitting process, and around DAPL’s vacated easement and required environmental impact statement. Enbridge reported that DAPL was not then subject to a shutdown order.
- Other key exposures include pipeline integrity incidents, severe weather, cyberattacks, regulatory and environmental compliance costs, project delays or cost inflation, energy-transition effects on demand, interest rates, foreign exchange, commodity-price volatility in certain businesses, and access to capital markets.
- The company reported a US$3.3 million commitment for the Clearbrook groundwater matter, including an escrow for potential future monitoring and mitigation. It recorded a $111 million impairment on PennEast after project development ceased.
Most important facts for investors to verify
- Progress, timing, and financial effects of a replacement Canadian Mainline toll framework, including any interim-period adjustments.
- Underlying distributable cash flow, payout coverage, and the assumptions behind the 5–7% per-share growth target; reconcile these non-GAAP measures to audited GAAP results.
- Debt maturities, refinancing needs, liquidity availability, and the effect of higher interest rates on funding costs and dividend capacity.
- Current status and potential operational impact of Line 5 and DAPL litigation, permits, and related project timelines.
- Execution, cost, and in-service-date risks for secured projects, and whether expected returns and self-funding capacity are being achieved.
- How much of 2021 earnings improvement reflects recurring operations versus impairments, asset-sale gains, and derivative fair-value movements.