Welcome to the Enbridge Incorporated Fourth Quarter 2018 Financial Results Conference Call. My name is Liz, and I will be your operator for today. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session for the investment community. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Jonathan Gould, Director, Investor Relations. Jonathan, you may begin.

Great. Thank you, Liz. Good morning, and welcome to the Enbridge Inc's Fourth Quarter 2018 Earnings Call. With me this morning are Al Monaco, President and CEO; John Whelen, Chief Financial Officer; Allen Capps, Chief Accounting Officer; Guy Jarvis, President - Liquids Pipelines; and Bill Yardley, President - Gas Transmission and Midstream. As per usual, this call is webcast and I encourage those listening on the phone to follow along on line with the supporting slides. A replay and podcast of the call will be available later today and a transcript will be posted to the website shortly thereafter. In terms of Q&A, we will prioritize call from the investment community only. If you're a member of the media, please direct your inquiries to our communications team who'll be happy to respond directly. We're again going to target keeping the call to roughly an hour, and may not be able to get to everybody. So please try to limit your questions to one and a follow-up, if necessary. And as always, our Investor Relations team is available for your more detailed follow-ups or modeling questions afterwards. Onto Slide 2, where I'll remind you that we will be referring to forward-looking information on today's call. By its nature, this information contains forecasts, assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We'll also be referring to the non-GAAP measures summarized below. So with that, I will now turn the call over to Al Monaco.

Thanks, Jonathan, good morning, everyone. We finished the year strong with another very good quarter. And with that, 2018 is now in the books, and with the number of other accomplishments last year, we're now set up very well for the future. This morning, I'll recap the great progress on our priorities, followed by a business update. John Whelan is here today, but he's lost his voice over the last couple of days. So Allen Capps will review the results and financial outlook later on. I'll wrap up with our priorities heading into '19 and beyond. Slide 4 is the checklist that we established for ourselves at the beginning of last year after completing the integration of Spectra, a major priority, delivered strong results for the first full-year after the deal. Another was to move to pure pipeline-utility business model because that's where we're best at. That meant selling non-core assets and accelerating deleveraging. Another objective was to streamline the business, drive efficiency and simplify our structure. There was a big focus on executing our secured capital program, which is the key to growing cash flow course. At the same time, the goal is to replenish secured growth beyond 2020. So that's what we set out to do. So let's look at the scorecard now starting with the financial results on Slide 5. Our business, no doubt, fired on all cylinders last year, and we delivered record numbers. EBITDA, as you saw, came in at almost $13 billion and distributable cash flow at $7.6 billion. That translates to $4.42 in DCF per share, which is at the high end of the '18 guidance range of $4.15 to $4.45. And that's a 20% increase year-over-year. Q4 came in at $1.3 per share, is very good result. Same strong story on adjusted…

Well, thanks, Al, and good morning, everyone. With the buying of our four sponsored vehicles we have now brought virtually all of our assets under the umbrella of a single publicly traded entity. So I'm going to run through the numbers this morning, and going forward we will focus solely on the consolidated results of Enbridge Inc. I’m taking up here on Slide 17, which summarizes Enbridge's consolidated financial performance for both the fourth quarter and the full year. By almost any measure, 2018 was a very strong year from a financial perspective. Adjusted EBITDA, adjusted earnings and DCF all achieved record levels, driven by strong performance across all of our businesses. Consolidated adjusted EBITDA for the quarter came in at little over $3 billion, about 12% higher than the fourth quarter of 2017. EBITDA for the full year came in just shy of $13 billion, up approximately 25%, when compared to last year. And bottom line adjusted earnings per share was up sharply, about 7% over the fourth quarter and just over 35% on a full-year basis. To be clear, a portion of the very strong full year growth is attributable to the timing of the Spectra acquisition, which as you recall closed in the first quarter of last year. Our 2018 reported results reflect that full-year's contribution from the legacy Spectra assets whereas 2017 only included 10 months of results from the date of acquisition. So there is a little noise between the two comparative periods. However, a very significant component of this year strong performance was the direct result of strong operating performance, ongoing asset optimization and new contributions from over $20 billion of new capital growth projects that we have brought into service over the last two years. Moving up to the top of the slide…

Okay. Thanks, Allen. I’d like to finish up with our strategic priorities on Slide 21. And they are really divided into two phases here. The ongoing ones, of course, are growing cash flow and dividends within our pipeline utility model, maintaining a very strong balance sheet and financial flexibility and continuing to streamline the business as well as some project execution. So that's what is ongoing. You will see us increase emphasis in three areas, enhancing the returns from the core businesses and securing low capital intensity opportunities in each of them, extending the footprint, especially targeted towards energy export infrastructure. We talked about the positive fundamentals there that we see, and Guy and Bill have their priorities, certainly set on this, and ensuring that we allocate capital to the most value-enhancing opportunities through the disciplined capital framework that we took you through at Enbridge Day. This last point is a critical one. So let me summarize that on Slide 22. Allen mentioned we got $5 billion to $6 billion of available capital to invest annually by 2020. Again, that's within the self-funding model. So no common equity required there. We’ve got plenty of attractive accretive organic growth opportunities. In Liquids, there is mainline optimizations, extensions and expansions of the downstream access and the build out of the U.S. Gulf Coast position. On gas, we’re well-positioned to capture market-driven growth, particularly exports, again and modernization capital would be another source of growth. In utilities, we'll grow through annual customer adds, extensions to new communities, there's a number of those on the horizon, in-franchise gas pipeline expansion in the Dawn corridor, which would provide a reliable $1 billion a year of investment for the foreseeable future. So you can see plenty of opportunities here to invest in low risk organic growth combined with the base business should generate that 5% to 7% growth per year. And while our base plan is to grow organically, we will always compare opportunities against alternatives to maximize shareholder value. So wrapping up on Slide 23, let me come back to the bigger picture, in the investor value proposition. The actions we took last year to streamline the business strengthen the balance sheet and refocus on a low risk pipeline utility model, set us up very well for the future, which we are excited about. We have three great franchises with a good balance between gas and oil and a strong U.S. footprint that will spawn a lot of growth. That should allow us to generate that 5% to 7% DCF per share growth well into the future, which we believe is a prudent growth rate for us. In summary, we're very pleased with how we're positioned today and we are confident that the business model we set up will generate strong shareholder value as we continue delivering on our plans. And with that, we'll turn it back to the operator to open up the lines for the Q&A session.

Thank you. [Operator Instructions] Rob Hope is on the line. Rob with Scotiabank, he's online with a question.

First question on Line 3, appreciate the comments on the permitting process there. And just want to delve further into the flexibility of the construction schedule, when would you need crews in the field and when would you need permits to ensure that the project is in service in 2019?

Okay. We'll let Guy talk to that.

Yes, so to the first part, based on the plan that we're looking at right now, to have the line in service by the end of the year, there is really no construction or seasonal issues that we would run into within that timeframe. I think that at the outside, we believe we will need to be in the field sometime in June to achieve that date.

And then just moving over to, I guess, conversations regarding contracts on Seaway and Flanagan. Also want to get a sense of whether or not you're in discussions with shippers regarding the potential to move volumes down Capline and whether or not there is a joint solution there?

Yes, so, it's Guy again. As you're aware, without talking to our customers about the contracting of the Mainline, and certainly some of the feedback that we're getting through that process is an interest in further market access to the Gulf Coast, we are working on a Flanagan South and Seaway expansion that will be part of that process. We've had conversations with shippers and with Capline owners on an ongoing basis. And to the extent that our shippers do want to see what solution we can offer on the mainline that can lineup with a Capline reversal. We will be more than happy to engage with those shippers and with the Capline owners further.

Yes, Rob, maybe I'll just add a little bit on to what Guy said. If you look at the dynamics, you are clearly -- if you’re a Western Canadian producer, you want to get to the Gulf Coast. And right now, as Guy said, there is very strong interest given the mainline priority access that we're working on, and of course, the need for egress, people want to get out as soon as possible. So we’re moving forward with those two expansions in Flanagan and Seaway, obviously, the producers would also like access to the other part of the gulf. And that’s always been our desire as well to provide that additional optionality, particularly for heavy barrels in the Eastern Gulf. But the base case right now is to move forward with those two expansions to the Western Gulf.

Our next question comes from Jeremy Tonet with JP Morgan. Your line is now open.

I wanted to start with the U.S. Gulf Coast here. And it seems like between Colt and Gray Oak that you really have kind of building on that platform nicely there. But I was just wondering if you could speak a bit more about -- if you're seeing more opportunities is this would be kind of a bigger focal point going forward when you think about future growth?

Yes, Jeremy, it's Guy. There is a huge focus of ours in Liquids Pipelines in terms of looking to leverage off of our existing asset base and extend our business in the Gulf Coast. You've mentioned a few of the things that we're working on now. We've got some others in the hopper that were chasing. We are in the mix right now of staffing up our business development and commercial team quite substantially in Houston. So it's something that is going to take on a lot more prominence in our growth efforts.

It’s been a good story, Jeremy, actually. If you think about just the few years ago, when there was no real access into the U.S. Gulf Coast, and obviously, we've been talking about on our view of the fundamentals here around export markets, not just for oil but for gas. So a big straight strategic priority of the company is to get more infrastructure position to export markets for both oil and gas. And so, if you go back to Seaway, of course, Dakota access echo into the Gulf, and now with Gray Oak, we’re really starting to build a meaningful position all the way through into the Gulf. So it would be a big area of focus for us as Guy saying.

And turning to the gas pipes side, it seems like there is a lot of stuff on the drawing board as far as future opportunities there. And obviously, Tetco has a tremendous footprint. I was just wondering, Bill, in the field, talking to people where do you see kind of near-term wins coming as far as converting stuff on the drawing board into kind of the secured backlog project? Where are you having kind of more success, I guess?

Yes, we’re probably having the most robust conversations again in the Gulf, everywhere from South Texas where, as you know, we've recently completed Valley Crossing pretty successfully all the way around to the Louisiana Coast. So I would say as the L&G developers are forming up their own plans and getting their off-take commitments. We're starting to see a lot more productive conversations, I'll say, in that region.

Our next question comes from Linda Ezergailis with TD Securities. Your line is now open.

I’m wondering with respect to your mainline discussions, what sort of pushback, if anything, are you getting for your proposed neutral contract structure. And how might that kind of unfold in the regulatory forum with the NEB?

Yes, Linda, it's Guy. At this stage of the game, we’re not seeing a great degree of pushback from kind of any segment of customer, if you want to call it that. We're engaged with, I believe, in excess of 60 potential shippers on the mainline understanding their situations and their needs. And really our goal through that very massive engagement is to design a number of offerings that make it easy for people to access the system. So we’re dealing with producers, refiners, marketers, we're dealing with the very, very small guy talking about minimum commitments of as low as 4,000 barrels a day to the very largest to -- talking in hundreds of thousands of barrels a day. So we're trying to make this very attractive to all and remove barriers from people to participate.

I think, Linda, the way that Guy and his team are working this, as he said, trying to make sure the offering is great for all of our shippers, is really part of the regulatory outcome as well, we think. And if we get enough support and a variety of support from different segments of shippers, when it gets to the regulatory process, we think that will go very, very smoothly at that point.

That's helpful context. And maybe just as a follow-up for your operations, I'm just wondering how you're seeing Energy Services continuing into Q1. Can we assume that things are still strong right now on that front or are there other dynamics at play?

Well, I'll start off, Linda. No doubt, Q4 was a pretty bang-up quarter with respect to Energy Services and I think everybody understands the dynamics behind that. The basis in various markets for both oil and gas, actually, were very wide and that allowed us to capitalize on some of our arbitrage strategies we have, particularly around location basis. So, I think it was a very strong quarter. That would be unusual, if you look at the context of all of our history on Energy Services. I think we'll have a decent year. We've guided to around $75 million, I believe, in 2019. That's probably a reasonable look at 2019, just given that some of the differentials have closed in, obviously, over the last month or two. So, I think it will be strong. Not as robust a year as 2018, which was quite unusual, but still a very good outcome.

Our next question comes from Dennis Coleman with Bank of America. Your line is now open.

Hi, this is Jasmine for Dennis. Just a quick question on simplification. Can you give some additional color, perhaps quantifying simplification's benefits to ENB's outlook post-2020?

Okay. Well, I think we've covered this in the past but, I guess, at a very high level, Jasmine, the biggest benefit we think is simply the transparency it provides to our cash flows. I think it's fair to say that with the four sponsored vehicles we had out there, it was more difficult for people to appreciate that cash flow transparency and growth. So, I think that's probably the highest-level benefit. Secondly, I would say that, as was mentioned by Allen, eliminating these intervening vehicles and keeping debt issued in one central place, generally at the holding company, will improve our simplicity with respect to structural subordination. And you saw the rating agencies' reaction to that. There's other ancillary benefits, by the way, around the tax horizon, in particular, stepping up the tax basis on the investments. So, I think those are the big ones. Don't forget, too, you have these high-payout vehicles and, obviously, when you take them in, we've normalized the payout to what we think is more conservative levels. So, we retain more cash in the business and that's also helpful from a credit perspective too.

And going back to Line 3 replacement, at Investor Day, management shared that the current guidance assumes a November 1st in-service date. Has that assumption changed?

Well, as we mentioned in the remarks, or maybe it was, I guess, in the Q&A, we believe that Line 3 is still in service by the end of this year. So, I think, for the purposes of our original guidance, we had assumed November 1. So, I don't think it has changed that much in that we still expect it to be in service by the end of the year.

Our next question comes from Robert Kwan with RBC Capital Markets. Your line is now open.

Just starting with the mainline contract offering, I'm just wondering, is there still, though, a formal dual-track process between pursuing what you've laid out here and negotiations with representative shipper group for a CTS-like common carrier extension post-mid-2021?

Robert, it's Guy. We're not negotiating a parallel path right now, based on the strong interest in the path that we're on. We are -- there is a bit of a parallel path within the contracting discussion in that we are negotiating with a group of shippers who have stepped up to kind of represent the spot shipper interest, as there will be capacity reserve for spot shippers. Obviously, there will be a spot toll and issues around the spot toll. So, there is a parallel process that we have under way to tuck those guys in.

And maybe just finishing here on the Midwest pipes, can you give a Line 5 update as it relates to the Bad River negotiations, as well as just any interplay with the new governor in Michigan? And on Line 3, if Minnesota does stall out on the DNR and the PCA permits, is there a remedy to try to get a faster approval, even if that's not a process you want to go at this point?

So, let me take Line 5 first. So, we've been actively continuing our engagement at Bad River and there's really nothing more to report one way or another, other than we've operated there for a long time and we continue to expect we'll operate there for a long time. In terms of Michigan, again, not a lot new to update. We're moving ahead with the plan to construct the tunnel. We've begun to receive some of the early permitting that we needed to do the geo-tech work this year. Obviously, we're aware that the governor has asked the attorney general to look at a few things. We're confident that the tunnel is the right thing and we're going to continue to pursue it. I think, in terms of your question around Minnesota, there may be avenues to go down that path but I think our experience or the experience of others that have tried to do that, I think, oftentimes, it ends up adding time as opposed to saving time. So …

Yes, maybe I'll just add on, Robert, on that point. I mean, for context here, again, the PUC process that we went through was extremely intensive and that really sets the backdrop for this last permitting phase. I think you also have to go back to historical precedent for this. And there's been a number. I mean, we've been in Minnesota for 70 years and a number of times that we've built projects there. So, there is a fairly robust process for how we do permits in Minnesota. So, I think that is clearly the main approach that we're taking and I don't think we're anticipating that we move away from that in this case.

Our next question comes from Shneur Gershuni with UBS. Your line is now open.

A lot of my questions have been asked and answered but a couple of quick follow-ups. I really appreciate all the updates about the Line 3 in-service and so forth. One of the owners of cap line on their conference call a couple of weeks ago talked about the fact that there would be a gap in service from when they could achieve heavy oil service on cap line reversal. And the explanation they gave was that Enbridge was unable to contract additional capacity until late 2021. Can you walk us through the gap in timing when I think about when Line 3 comes online versus when they think that they can actually receive heavy barrels? Is it a contract structure issue? Do you have to wait for some contracts to roll off? I'm just trying to understand the gap.

Well, okay, it's Al here. First of all, I'm uncomfortable speaking for them but I guess maybe I'll make a couple of comments. I think, through today, we've been very clear about our expected timing for Line 3. I suspect, just looking at what they said, it may have something to do with the confusion around when we expect CTS to be concluded, which, as I said earlier, would be mid-2021. But with respect to the disconnect with Line 3, you're going to have to get clarification from them on what they're talking about because I think that we were pretty clear about our expected timing for Line 3.

And another follow-up question on some of the growth projects that you have. Specifically, can you give us an update on the proposed VLCC export facility -- I believe it's with Kinder Morgan and Oiltanking -- how that's proceeding? Is there enough supply for another VLCC loader? I believe there's several competing projects out there. I was just wondering if you can walk us through that process and your thoughts on it.

Yes, so, it's Guy. I think the biggest update from when we spoke at Enbridge Day is that we did file our MARAD application a couple of weeks ago. So, that's in the works. I believe that process is going to take about a year. We got that in because we want to try and preserve the in-service date targets that we have out there of late '21, early 2022. Our sense of the demand in that region is that, in that timeframe that we're targeting, there is room for one and we do know it's a competitive environment. And I guess the biggest update is that we're continuing to compete. We've got a line of sight to some pretty significant customers and we're doing are darndest to get that project to the point where it's a secured investment.

Do you need the Seaway and Flanagan South expansions to come into service to make that whole thing work?

No. Obviously, our goal is to have as much upstream access as possible but, to that specific question, the answer is no.

Our next question comes from Robert Catellier with CIBC Capital Markets. Your line is now open.

I just have a couple follow-up questions on the CTS and the Gulf Coast. I'll start with the CTS. Have the mandatory production curtailments in Alberta impacted those discussions? And is there any market hesitation about recurring production curtailments?

It's Guy. We haven't seen any impact into those discussions on the throughput on the mainline. We're coordinating very closely with the province in that regard because the province and the producing community recognizes that every barrel of oil that can move on a pipeline is a better barrel than either being curtailed or moved by rail. So, there's a tremendous amount of close coordination going on to make sure that, somehow, there's not an unintended consequence that we end up with spare capacity. So, we're not witnessing that at all. In terms of people's views of it longer term and what it may or may not mean through a contracting, there are some people that have raised that in the context of government interventions of one way, shape, or form. So, that's not a specific issue that we're having to necessarily address in the arrangements but, clearly, people are looking at it.

I think, Rob, generally, everybody has agreed, including the Alberta government, that the curtailments are not something that is a long-term plan. In fact, you saw some reduction in the curtailments already. And I think the whole purpose was to try and deal with some of the overhang on inventory. So, I think, in the bigger picture, everyone would agree that these, eventually, will come off. So, I think it shouldn't really impact what we're thinking here on CTS.

And just with respect to the Gulf Coast, you're making some strides here and painting an improvement in the development outlook, in terms of what you can do, Seaway, Flanagan, the Gulf Coast, all of it. So, how important is your success in building your presence in the Gulf Coast to a successful CTS outcome? Stated another way, if you had a full path to tidewater, is that necessary or do you think that leads to a better CTS outcome?

I think, to put some context around it, we're looking at a mainline system that, post-Line 3, is going to have over 3 million barrels a day of capacity. And that's really the big piece of the recontracting effort that we've got going on. Looking at Flanagan South as an example, we think we can expand that by upwards of 250,000 barrels a day, which is not insignificant, but I don't think that you can draw a conclusion that says that 250,000 barrels a day on Flanagan South is going to be a major impact on how you end up tolling the balance of the mainline system.

I guess maybe, Rob, just again, I think Guy's got it covered well. But in the very big picture, if you think about being a western Canadian producer, generally speaking, I think it's been proven out over the last two or three years, the Gulf Coast market has always been and always will be very, very positive and a very good outlet, not just with respect to the export that we're talking about but also just the pure refining capability in the Gulf, both on the western and eastern sides. So, I think the bottom line is CTS is certainly -- or the new CTS, whatever you want to call it, will be helpful in the ultimate goal of making sure more barrels can reach tidewater.

Our next question comes from the line of Alex Kania with Wolfe Research. Your line is now open.

I just wanted to go back to Slide 7, where you give the debt metrics. When you're looking at your leverage hovering down to 4.3 times, I think what the comment on the call was, just, philosophically, how do you think about that relative to the 4.5 times to 5 times level that you've kind of thought about? Is it a good place to be? Do you feel like you want to trend back to that 4.5 times to 5 times level? I'm just kind of curious what you're thinking of long-term?

It's Al here. So, I think maybe the way to look at this is the 4.5 to comfortably below 5 range is something that we think is a very strong long-term target for all of the reasons that you know about. It's the level where we can be very comfortable with that high investment grade rating at BBB-high. It gives us a very good degree of financial flexibility. In fact, if you look at the pipeline-utility model, many of the utilities, as you would know, would imply an even higher debt to EBITDA than we have here. And that's the model that we have. I would say, as far as the amount that's below the 4.5 to 5 range there that pops up in 2020, we look at that as some very nice extra buffer and will give us some additional financial flexibility. So, bottom line is 4.5 to below 5 is the range we feel very comfortable with but, obviously, when you can have some additional flex, if opportunities arise that you can capitalize on, then that's good too.

And then just one last question, just on Texas Eastern and the rate case. I'm just curious what the response has been from shippers. Is there maybe a potential for interim rate implementation and timing on that? And how much do you have baked in, with respect to revenue enhancement, in terms of the long-term plan? Thanks.

Yes. So, as far as what we've got baked in, we probably won't comment on that. I think the phase that we're in with the Texas Eastern rate case is that we're getting a number of interrogatories back from interested parties. So, if you're a party to a rate case, you're allowed to ask a bunch of questions and we're busy formulating answers to those. Really, where we're going to go is we'll wait for what's called the "top sheets" to come out in April and then we've got our first settlement conference in May. So, that's the general progression that we'll be going through.

This concludes the question-and-answer session. I will now turn the call over to Jonathan Gould for final remarks.

Great. Thank you, Liz. We covered a lot of good ground here today. As always, our IR team will be available right away to take any additional follow-ups that you may have. So, thank you, everyone, for your time and interest in Enbridge and have a great day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.