Welcome to the Enbridge, Inc Third Quarter 2021 financial results conference call. My name is Polly and I will be your Operator for today's call. 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. . Please note that this conference is being recorded. I will now turn the call over to Jonathan Morgan, Vice President Investor Relations. Jonathan, you may begin.

Good morning, everyone, and welcome to Enbridge Inc 's Third Quarter 2021 Earnings Call. Joining me this morning are Al Monaco, President and Chief Executive Officer, Vern Yu, Executive Vice President and Chief Financial Officer, Colin Gruending, Executive Vice President, Liquids Pipeline, Bill Yardley, Executive Vice President, Gas Transmission and Midstream, Cynthia Hansen, Executive Vice President, Gas Distribution and Storage, and Matthew Akman, Senior Vice President, Strategy, Power, and New Energy. As per usual, this call will be webcast, and I encourage those listening on the phone to follow along with the supporting slides. A replay of the call will be available later today, and a transcript will be provided on the website shortly after. We will try to keep the call to roughly 1 hour, and in order to get to as many answers to your question as possible, we'll be limiting the questions to 1 plus a single follow-up as necessary. We'll be prioritizing questions from the investment community. So if you are a member of the media, please direct your increase to our communications team who will be happy to respond. As always, our Investor Relations team will be available following the call for any detailed follow-up questions. On to Slide 2 where I'll remind you that we'll be referring to forward-looking information in today's presentation and Q&A and by its nature, this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here. And discuss more fully in our public disclosure filings. We'll also be referring to the non-GAAP measures which are summarized below. And with that, I'll turn it over to Al Monaco.

Okay. Thanks, Jonathan. Hello, everyone. Well, to start off here, what you see in the photo is our new Ingleside Energy Center near Corpus Christi with the VLCC just being maneuvered in the place for loading. It's an important investment force on many fronts, so we'll come back to Ingleside in a few minutes. It's been a strong quarter operationally and financially. So Vern will take you through the results. By the way, Vern was recently appointed CFO. He's held a number of senior financial roles at Enbridge. And most recently headed up our Liquids business, which Colin Gruending has taken over. I'll cover the high points of what's been a catalyst quarter and year for us, followed by a business update. Before I do that, though, let me speak to the current state of the energy markets. And as a reminder, our perspective on this is from a Company that's been focused on the energy transition for years. It's obvious we need to reduce global emissions and that we're moving to a carbon economy. And we think that existing infrastructure is essential to that transition. As you've heard us say before, we see ourselves as a bridge to a cleaner energy future by leveraging our businesses and by achieving our own emissions goals. We're transitioning our asset mix in line with changing fundamentals and building on our early mover advantage. And we end solar, hydrogen and RNG. But it's also very clear that energy demand will continue to grow. And that economic growth will always depend on conventional energy. So squaring these 2 realities comes down to the pace of transition and ensuring we secured low cost, reliable energy supply while that happens. The realities of this careful balance are playing out in energy markets today. Stimulus spending and…

Thanks, Al. And good morning, everyone. As Al mentioned earlier, my 28 years at Enbridge has given me a great view of the business as a whole. And I look forward to leveraging this experience to my new role as CFO. My focus will be sustaining our track record of disciplined investment and value creation. So don't expect to see any big changes from me. Today I'll start off my remarks with an update on our key financial strategies. Our balance sheet and financial flexibility we're in really good shape. We're triple B high across the board. We've bolstered our Balance Sheet capacity by continuing to recycle capital at attractive valuations. Another $1.2 billion this year. And increased our EBITDA through organic growth and continued cost reductions. This EBITDA growth provides even more financial flexibility. The resiliency of our cash flows is very strong, providing highly predictable cash flows year-after-year. This solid base along with execution on our capital program, has us on track to deliver 2021 results within our EBITDA and DCF guidance ranges. And the capital we placed into service this year will drive a lot of free cash flow growth in 2022 and beyond. We expect to have $5 billion to $6 billion of annual investment capacity beginning in 2022, which we'll be deploying in a disciplined manner. I will come back to this later. So our foundation is very strong and Q3, was another solid Enbridge like quarter. All of our 4 key financial metrics are up year-over-year on strong performance across our businesses, and continued cost containment. Adjusted EBITDA and DCF are up about 10% to $3.3 billion and $2.3 billion respectively. EPS is up over 20%. Mainline volumes were about 2.7 million barrels per day in Q3, reflecting strong demand for heavy crude in…

Okay. Thanks Vern. Just a couple of takeaways here. 2021 as you've heard, is a pivotal year for us. The business is performing well and is generating highly predictable results. We're executing the priorities that we laid out at the last Enbridge day. And we're on track to put in $10 billion of capital into service this year that will generate a lot of cash flow as you just heard. So with that, let me hand it back to the Operator for Q&A, we are not a yet all in the same room here. So I'll direct questions as needed. So back to the Operator.

Thank you. We will now begin the question-and-answer session. . And your first question comes from the line of Robert Kwan with RBC Capital Markets.

Great. Good morning. I just wanted to dig into the comments you made to start around at capital allocation. And specifically that $2 billion back up. You had some comments, just around share buybacks, can you see your shares as being undervalued. I'm just wondering whether you -- similar to what you did about a year ago, be willing to rank order those options. And as it relates to dividend growth, I think Vern Yu mentioned up to the underlying growth. I don't know if you can just frame that comment in light of what your friends across the street did this morning.

Okay Robert. I think on the capital allocation, it's really great that we have the capacity to look at all of these different options. Obviously, when we make these decisions, there's a number of pros and cons to each of them. On the share buyback front, it's great that we can invest in Enbridge. As Company continues to grow its DCF and its cash flows, a share buyback lowers our payout. It provides dividend savings, and obviously it's executable. But some of the cons are that it doesn't provide any further organic growth, doesn't add incremental EBITDA and doesn't help us with our long and medium-term cash horizons. So I think what we'd like to do is look at that in concert with all of the other opportunities that that we have. And as we work through 2022 and beyond, we'll make sure that we make the best decision for our shareholders. If we turn to the dividend, obviously, dividend growth is a key component of our value proposition. We plan to continue to grow it, but we have some other competing priorities as well. In the near to medium term, we'd like to get back to the middle part of our policy range. And we're -- at this present time, we don't believe the market's fully valuing the level the dividend that we provide today. So hopefully, that provides some clarity for your question there.

It's great Vern. And if I can just finish with a question on the oil pipeline side with all 3 are done. You've talked in the past about other oil pipeline expansions. Just wondering if there's any update on those now that L-3 are in service and -- are any of these projects somewhat imminent but waiting and being held back pending clarity on the mainline contracting situation?

So I think we will get Colin to respond to that Robert.

Hey Robert. Yeah, we're excited that obviously Line 3 is in service and immediately being useful and well utilized and we do have a batting order of expansions cost-effective ones by the way, lined up as we've talked about for some time. Our system is vast. It's complex and it continually provides creative solutions that we can harness as we have to the last number of years. These range from drug reducing agents, horsepower on existing pipes, potentially some reversals or even repurposing. So the same roster I would say that you're familiar with is being teed up here. It will be dependent on customer interest. And I think in part, industry's emerging need to sustain some excess egress and multiple options to market. I think that's a concept that's being absent for a couple of decades and we'll do our best to fill that need. So we'll talk more about this at Enbridge Day. That's what that day is designed for. But we are excited about the prospects here.

That's great. Thank you very much.

Thank you.

And we also have Jeremy Tonet with JP Morgan on line with a question.

Hi, good morning. Well I just want to start off with the Ingleside acquisition there. I know it's very recent since you guys closed, but just didn't know if you could provide any updated thoughts as far as -- now that you have it, how is it executing versus to your expectations? And I guess more specifically when we think about the crude oil export side, we've seen trends shifting there a bit given where the differentials are. So wondering if you could provide any more thoughts, I guess, and how you see those trending in the near-term.

Colin?

Yeah sure. Hey, Jeremy, yes. So we're pretty excited about this. The market for the Permian barrel is increasingly global as you know, it's large and growing and it's going to play a long-term role in energy export and energy transition. We closed the transaction a few weeks ago. I know, but I would say our Q4 outlook and our '22 outlook is quite encouraging. We're seeing export loadings ratably ramping up quite nicely in line with upstream drilling rig account trajectories. So that's good. And I'd say, it's also very consistent with our purchase economics. We have multiple commercial expansion offerings in-flight to leverage -- the operating leverage that they've talked about and the fixed cost pre -built facility that's there. Some of these offerings are a continuation of commercial offerings that the prior management team and owner had in-flight and some additional ones on our own. We're looking at multiple types of products to export, and with that some good inbound interest I would say, here, right off the bat. So I think it's looking generally pretty positive here, Jeremy,

Maybe just to add Jeremy one point to that. Really in terms of your -- part of your question around differentials and where they have been flow, the way we look at this one is, this is highly contracted facility. So the way the economics work in our model is we've got that base. And then, we look at it as upside if the differentials point our way and in the producers way. And so really, I think good upside here to global dynamics which you know are likely going to look for more low cost, reliable light crude from North America. So that's just how we look at it in a bigger picture.

Got it. That's very helpful there. And then maybe just want to pivot to, I guess, energy transition side a little bit. R&G, it seems like it quite active in Canadian side, just wondering on the U.S. side, if you see opportunities there, or how much capital could be deployed in general?

Well, Bill is probably closest to the U.S. side, given the new opportunity there with Vanguard. So maybe Bill why don't you take that?

Yeah. Jeremy, I think the Vanguard Renewables partnership that we announced is a really good step. We have line of sight to a $100 million worth of projects in the near term. So it's kind of a good place to dip our toe in the water and the model but we're setting up really -- it really gives us line of sight to even more. So, like I said, toe on the water, really good stuff there. I think in addition to that partnership though, we've really got to think about our long-standing relationship with all of the LDC customers. So all of our utilities that, you know are somewhat active in this space and, the relationship there could extend from partnerships, to do some R&G projects together, to just simply we do a project and have a resale to them as they -- as we both strive to meet our emissions target. So I think it's got a lot of potential. I mean, how much is yet to be seen. It's pretty amazing when some -- a place like the AGA comes out with a statement saying, RNG could meet half the heating load, over the next -- I forget the timeline, 10 or 20 years. That's pretty impressive.

Got it. Thanks for that. I'll leave it there.

Thanks, Jeremy.

Your next question comes from the line of Ben Pham with BMO. Please go ahead.

Good morning. I want to understand energy transition and I'm wondering when you look at energy transition opportunities and you put them through your filter, you look at the risk reward. Is there -- would there be any significant difference in how you look at those investments this year existing portfolio? Is it different returns, different risks profiles, different counter price? Will you comments on that?

Okay. It's open. So I would say it's exactly the same as we look at the rest of our business. And as Vern referred to, we'll continue to be very disciplined as we're putting capital to work in the future. So maybe the way to think about this at a high level is if you look at what we have in flight right now. If you look at wind, solar, some initial R&G and hydrogen investments, they are pretty much right in line with the business model that you're used to seeing from us. And in case of hydrogen, for example, with the 2 projects that we're working on in Ontario and then a third one in Quebec, they'll be incubated, if you want to look at it that way, within the existing commercial model where we're sure to return on and return of capital. So I think, that's the way we're looking at it. We've probably got $2 billion in flight now, in terms of energy transition category. And I would say that over the next 5 years, you're probably looking at that same level of call it a a billion dollars a year. I think, what's to be determined though longer term is how fast hydrogen and other areas like CCUS develop. So I think for the next 5 years, we don't see massive amounts capital being deployed there other than these core areas that we're working on right now. So hopefully that provides some context.

Can I make just a quick add on? the other thing that we're doing is, when we look at our traditional investments now, we do add the price of carbon to each of those investments, and we also increased the hurdle rates slightly because of the energy transition risks on some of those opportunities. So with the energy transition assets, obviously, those adders aren't applied.

Yeah. And again, I think you've seen the chart we use for this, Ben. The whole game here for us is to really utilize the existing assets to leverage those assets into low carbon opportunities. So you see it in the utility, you see it in Bill 's business, and you see it with the solar self-power which links right up to our conventional business.

Great. And then my second question on mainline CER decision are around the corner. Do you expect the CER decision that effectively be a yes and no as you've applied applications boundaries? Is there a situation where they can give you a blanket approval subject to conditions on contract levels and totals?

Colin.

Hey, Ben, we're waiting for this eminently, right? And it's unclear, precisely the form of the decision that will come. I think they have an array of choices here, but obviously we strongly believe in the one we filed for with the variety of benefits we included in it that were, as you recall, requested by industry. So we'll look forward to that. And I would say if the decision is acceptable and I would emphasize this next to it, in its totality, we would proceed to the next stage, which would be commercial contracting and then finality by mid '22. If it's not acceptable again, in its totality from a risk reward perspective for our capital providers, we could refile for something else that would be. And I think we've laid out some options there over the last couple of years, so I will have to wait and see Ben.

Okay. Certainly.

Shneur Gershuni with UBS is online with a question.

Good morning, everyone. I was just looking at Slide 23 and where you present the outlook in the preliminary '22 outlook. Although there's no number, I did tried with my ruler to figure it out. But I guess my question here is that you sort of highlighted the -- in terms of the positive benefits and negative benefits, obviously the dollar and energy services, it's headwinds, but you sort of included Moda as well as the benefit of the '21 growth CapEx. I was wondering if you can sort of talk about any other tailwinds that you're seeing in your prepared remarks you talked about, kind of the energy crisis that's going on right now. Are there any inflation escalators tied to PPI and CPI that could potentially benefit Enbridge? Just curious what other tailwinds that we could be thinking about, where you could see some operating leverage within the existing system, not just with respect to the growth CapEx coming online?

Well, maybe I'll just try to go through this quickly. First of all, on your question around inflation, I think, as Vern mentioned, there's a very large majority of our EBITDA and revenue that's driven by indexing of some sort that's off of inflation. So that's a plus. I think in terms of the commodity, part of your question, as you know, we're not hugely driven by commodity prices given our business model, but there are a couple of things around NGL s that we have. For example, at Aux Sable. Maybe there's a little bit of a tailwind with some excess capacity we might have in market gas to capitalize on that. I would say big part of what we've been focused on in last 2-3 years, those years cost management and that's not to be underestimated. Especially since every dollar you save is certainly very helpful from a Balance Sheet perspective. And so those are the general categories of tailwinds beside the bigger ones that Vern mentioned.

Okay, great. Just to clarify before I ask my second question, there isn't line 3 is bringing more volumes and part of your assets else where we'll see benefits as well too or?

I'm sorry. Could you just clarify that Shneur?

It just the fact that like Line 3 replacement is now in service, that there would be more. Volumes flowing through that there could be more operating leverage elsewhere in the system?

Yes, I think, we're probably going to be pretty much at capacity, at least that's the way we've modeled it out so far with Line 3 now in service. I think the benefits -- there may be some marginal benefits with additional volumes here and there probably not huge. The big upside though, of course, is now that we have it in places as was mentioned, there will be some downstream expansion possibility there that looks pretty good. And remember, those are going to be very low capital-intense opportunities. So right down the fairway for us at this part of the cycle. So we'll do well on those.

That makes perfect sense. And for the second question, just to go back to the acquisition of Moda, just kind of wanted to understand your broader strategy with respect to exports. You acquired Moda to change your view on spot, or it's part of a larger strategy? Just given the slide that you would put out, or are you looking to add more connectivity the Corpus now with respect to having Moda in place, and would you be expanding that export strategy to include LNG potentially as well, so.

Well, maybe I'll start it off. Then we'll go to Colin. So this part of the strategy was really all about the second leg, commodity wise. So as you know, we were the first ones to build that path on the heavy barrels into the Gulf Coast over the last several years. This was really about now covering the light oil side and we're so happy about this because of the sheer competitiveness of the Permian and Eagle Ford on global market scale. And so with Moda being the lowest cost infrastructure to market, we really think we're in ideal position here to capitalize on the upside that we think will come from exports. We talked about LNG. I actually see this as an equally powerful strategy where we're located on the Gulf and how we're hooked up to existing LNG and importantly, I talked about $2 billion of LNG projects in development. We're lining up really well with new FID projects potentially in the next little while, where we'll have captured the pipeline capacity that feeds those LNG plants. So that's a real big picture at how we're thinking about exports. Colin anymore to add on Moda.

Yes. Sure. And I think it's reference you back to Slides 10, 13, where we're developing of gradually and I'd say in a disciplined manner. Export maps in both crude oil and LNG, and they're really coming into focus. On crude -- in particularly you can see on slide 10, we've got a number of a diverse roster here in multiple points across the Gulf. And that fits the strategy I was talking about. So primarily a light focus at Corpus. Yes, we're still interested in spot. That would be likely a more medium heavy export market and would feed off our see way path and all the way from Canada. Potentially down the road we could connect Seaway over to Corpus so that you can get a sense of what we're trying to build out here. Does that help?

No, perfect. That was very thorough answer. Really appreciate the color. Thanks a lot and have a great weekend. Okay Shneur. Thanks.

Robert Catellier with RBC Capital Markets is online with a question.

Hi, good morning. You referred a little bit to inflation earlier in your comments, and as you are no doubt aware, some industrial users have been calling for a reduction in LNG exports in order to help mitigate the impact on price. So obviously, that's a reactionary comment, but I'm wondering if the current inflation environment has had any change, any impact on how you look at the LNG fundamentals over the longer-term?

Bill, do you want to comment on what you're hearing on the ground on that one?

Yeah. I mean Rob, we are not hearing that, to be honest. I mean, this is -- I can only say suddenly we're in the market, we're in the market that would hope for. I think, we've seen a number of off-take contracts signed. Come think of 5 very recent ones. Many of them are those projects that we've got our eyes on, that help us build out our infrastructure and we think there's more to come. So I could get into a much longer answer, but the short answer is, I don't see the momentum stopping right now.

Okay. Thank you.

Rob Hope with Scotia Bank is online with a question.

Morning, everyone. Wanted to delve into the mainline volume 2022 outlook. Maybe wonderful presentation as we enter into 2022, like as I understand, have you still under a portion meant there's a bit of a ramp in Line 3 there as well. So is it just seasonality with some outages in the back half of the year? And I guess secondly, if you get a favorable mainline ruling, could we see maybe some DRA expansions providing some upside here?

Hey Rob, it's Colin. Yes, we'll provide some more color on this at Enbridge Day for sure and give you a sense of seasonality as well. There is an average I think, and I think Vern mentioned, we're looking at the next year in the same neighborhood of 2.95 million barrels per day. That's an average. There's seasonality of that, a bunch of factors. It's largely full, so there may be some operating leverage here and there, but that's the gist of it. You mentioned apportionment. We've come down nicely. I think we were in the 40% to 50% apportionment range and now we're down kind of 10 - ish and we'll see where that goes in December. I think all market participants are adjusting to the new dynamic with the step change in Line 3 capacity and cap line as well is coming into service. January 1 is line-filling right now, and by the way, that should be a positive pull through our system and the various pipes like SAX and Mustang as well. I think we feel pretty good about that 2.95 area, I'll kind of blur the specificity of it for now, but generally full I think is how you should think about it.

And I think Colin, to his question around DRA opportunity, I think in terms of how we're looking at the outlook for 22 at this point, we haven't contemplated any of that in additional DRA at this point, but correct me if I'm wrong.

No, that's good clarification. Yeah, that probably bridges back to Robert's question at the beginning so we would think about that as a further of growth down the road.

All right, that's helpful. And then just circling back to your comments on the mainline re-contracting initiative and taking a look at the decision in its totality. A lot has changed through the many years that this has been going on. With the demand of Keystone XL, has the amount of contracts on the system gone down in priority for you, whereas the total level has increased, or kind of maybe puts and takes on how you're thinking about that decision?

Yeah. Again, back to totality, you're right, there are things that have changed, probably some favorable, some unfavorable. It remains industry's general preference to contract the line for all the reasons. Total certainty that's been a historical tenants of all our agency for the last 25 years. Access to capacity following 20 years of egress deficit, and the total we're looking at here is -- as a reminder, it's basically an extension of the toll on -- at the exit of our expiry here and with toll discounts, it's actually lower for many. So I think we would also prefer to contract the line. They're all our vulnerabilities. Out in the planning horizon is Trans Mountain comes on. So again, the concept applies to that balance of risk reward, we're trying to try to optimize. So again, we're going to have to carefully review the decision. And like I said, if it works, we'll proceed. If not, we'll we'll refile something else. Either a fixed tariff tolling arrangement like the ones we've had for 25 years, or a cost-of-service arrangement where cash flows are protected.

And I was just going to mention on that last point, Colin, for Rob. The other way to look at this is what the shippers are actually not very excited about, which we've heard very clearly from them that cost of service is something they'd not prefer. And there's issues with the commercial structure with an exist -- the existing type of arrangement. So I think it's almost when you triangulate what they've really pushed for, which is contracting, we still think that's the best outcome for them and for us and it's been driven home for as Colin said, a long time in discussion with industry.

Thank you.

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

Okay. Great. Thank you. Thank you, everyone for joining us this morning. As always, we appreciate your ongoing interest in Enbridge. Our Investor Relations team will be available following the call to address any follow-up questions you might have. But once again, thank you and have a great weekend.

And thank you. This concludes today's conference. Thank you for your participation. You are appreciated. You may now disconnect.