Enbridge Inc. 2024 Q1 Form 10-Q Summary
Reporting period: Three months ended March 31, 2024. Unaudited interim statements are prepared under US GAAP. Unless noted, amounts are Canadian dollars. Enbridge operates in liquids pipelines, gas transmission, gas distribution and storage, and renewable power generation.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Operating revenue | $11.04 billion | $12.08 billion, down 8.6% |
| Operating income | $2.71 billion | $2.66 billion |
| Earnings attributable to common shareholders | $1.42 billion | $1.73 billion, down 18.1% |
| Diluted earnings per common share | $0.67 | $0.85 |
| EBITDA, non-GAAP | $4.05 billion | $4.43 billion |
| Operating cash flow | $3.15 billion | $3.87 billion |
| Capital expenditures | $1.20 billion | $1.14 billion |
| Cash and cash equivalents at quarter-end | $1.21 billion | $5.90 billion at December 31, 2023 |
| Long-term debt at quarter-end | $81.39 billion, plus $5.86 billion current maturities | $74.72 billion long-term, plus $6.08 billion current maturities at year-end |
| Net available liquidity | $12.9 billion | $23.0 billion at December 31, 2023 |
| Quarterly common dividend paid per share | $0.92 | $0.89 |
Revenue fell mainly as commodity sales and gas distribution sales declined. Operating income increased modestly despite lower revenue. Common-share earnings were affected by substantial non-cash market valuation movements, severance costs and the absence of a prior-year litigation settlement receipt. Other income/expense was a $551 million expense, versus $102 million income a year earlier, including an $858 million unrealized foreign-currency loss.
Management reported a $677 million pre-tax net unrealized derivative fair-value loss in Q1 2024, compared with a $542 million gain in Q1 2023. These marks can make reported earnings volatile and are generally non-cash; management says its hedging program is intended to support more reliable cash flows over time. Operating cash flow less capital expenditures was approximately $1.97 billion, compared with $2.74 billion in Q1 2023; this is a simple subtraction, not a company-reported free-cash-flow measure.
Material changes and business developments
- Enbridge acquired The East Ohio Gas Company on March 6 for $5.8 billion. EOG contributed approximately $105 million in revenue and $25 million in earnings attributable to common shareholders from acquisition through quarter-end. The remaining gas utility acquisitions from Dominion Energy were expected to close during 2024, subject to approvals and other conditions.
- On January 2, Enbridge acquired six operating landfill-gas RNG facilities for $1.3 billion, including deferred consideration. Their Q1 contribution was described as immaterial.
- Investing cash outflow rose to $7.79 billion, primarily reflecting the EOG and RNG acquisitions. Financing included $5.83 billion of net commercial-paper and credit-facility draws; cash and restricted cash decreased by $4.60 billion during the quarter.
- Reported segment EBITDA was $2.40 billion for Liquids Pipelines, $1.27 billion for Gas Transmission, $765 million for Gas Distribution and Storage, and $257 million for Renewable Power Generation. Eliminations and Other recorded a $642 million loss, compared with $17 million income, largely reflecting non-cash valuation losses and severance. Segment presentation changed in 2024; prior-period segment figures were recast.
- On April 1, Enbridge completed the sale of its Alliance Pipeline and Aux Sable interests for $3.1 billion, including approximately $327 million of non-recourse debt. It expects a pre-tax gain of approximately $1.1 billion; this is a subsequent event, not Q1 cash proceeds.
Outlook, liquidity, risks and unusual items
- The filing does not provide a clear numeric full-year earnings or EBITDA guidance figure. Management said the Mainline Tolling Settlement outcome is expected to be in line with previously reported financial results after considering the prior provision, inflationary cost adjustments and increased volumes.
- The CER approved the Mainline Tolling Settlement on March 4. It runs through 2028, with toll terms retroactive to July 1, 2021; management described a performance collar intended to support returns of 11%–14.5% on deemed 50% equity capitalization.
- Enbridge reported $11.7 billion of available committed credit facilities, $1.2 billion of unrestricted cash and compliance with debt covenants. Management said liquidity and financing arrangements are expected to cover anticipated needs for approximately one year without capital-market access. An April 2024 US$3.5 billion, four-tranche senior-note offering followed quarter-end.
- Moody’s downgraded Enbridge senior unsecured debt to Baa2 from Baa1 on March 29, changing the outlook to stable from negative. DBRS, Fitch and S&P ratings were unchanged at BBB (high), BBB+ and BBB+, respectively. Management reported 6% of total debt exposed to floating rates after hedging.
- Key regulatory uncertainty includes Enbridge Gas’s Ontario rate proceedings. Enbridge Gas appealed and sought review of elements of the OEB’s Phase 1 decision; the outcomes were uncertain. The 2024 rate order was approved after quarter-end, with rates effective May 1 and retroactive to January 1.
- Line 5 litigation remains material to monitor. A 2023 district-court order requires Enbridge to cease operating on certain Bad River Reservation parcels without valid rights-of-way by June 16, 2026. Appeals were pending, with a decision anticipated in 2024. The order also requires ongoing payments while the pipeline operates in trespass on the affected parcels.
- Other risks include acquisition integration and closing conditions, project cost and schedule changes, access to capital, interest and foreign-exchange movements, commodity-price exposure, insurance limitations and uncertain tax positions. Management reported no material changes to the risk factors in its 2023 Form 10-K.
Investor verification priorities
- Track the remaining Dominion utility acquisitions, their regulatory approvals, closing dates, financing and effect on leverage.
- Review debt maturities, liquidity after acquisition funding and the implications of the Moody’s downgrade, including future borrowing costs and ratings.
- Assess recurring operating cash generation, capital spending and dividend funding separately from non-cash derivative and foreign-exchange marks.
- Follow the Line 5 appeal and related operating, remediation and potential financial consequences, as well as the Ontario rate proceedings.
- Verify delivery against project schedules and cost estimates, and the realized proceeds and gain from the post-quarter Alliance Pipeline and Aux Sable sale.
EBITDA is a non-GAAP measure and may not be comparable with similarly named measures reported by other companies.