Mr. Al Monaco reports

ENBRIDGE INC. REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2018 RESULTS

Enbridge Inc. has provided its fourth quarter and full-year 2018 financial results and a quarterly business update.

Fourth quarter and full year highlights

• GAAP (generally accepted accounting principles) earnings of $1,089-million or 60 cents per common share for the fourth quarter of 2018 and $2,515-million or $1.46 per common share for the full year 2018, both including the impact of a number of unusual, non-recurring or non-operating factors;
• Adjusted earnings were $1,166-million or 65 cents per common share for the fourth quarter of 2018 and $4,568-million or $2.65 per common share for the full year 2018, compared with $1,013-million or 61 cents per common share in the fourth quarter of 2017 and $2,982-million or $1.96 per common share for the full year 2017;
• Adjusted earnings before interest, income tax, and depreciation and amortization (EBITDA) were $3,320-million for the fourth quarter of 2018 and $12,849-million for the full year, compared with $2,963-million in the fourth quarter of 2017 and $10,317-million for the full year 2017;
• Cash provided by operating activities was $2,503-million for the fourth quarter of 2018 and $10,502-million for the full year 2018, compared with $1,341-million for the fourth quarter of 2017 and $6,658-million for the full year 2017;
• Distributable cash flow (DCF) was $1,863-million for the fourth quarter and $7,618-million for the full year 2018, compared with $1,741-million for the fourth quarter of 2017 and $5,614-million for the full year 2017;
• Reaffirmed financial guidance for 2019 and 2020, with the midpoint of the DCF-per-share guidance range of $4.45 per share and $5 per share respectively;
• Increased the dividend by 10 per cent for 2019 and reaffirmed expected dividend growth of 10 per cent in 2020; guided to a longer term 5-to-7-per-cent-DCF-per-share compound annual growth rate post-2020;
• Brought $7-billion of new projects into service in 2018, including the $1.5-billion (U.S.) Nexus/Teal gas pipeline projects in October and the $1.6-billion (U.S.) Valley Crossing gas pipeline project in November;
• Reached significant milestones on the Line 3 replacement project, including: regulatory approval by the Minnesota Public Utilities Commission (MPUC), initiated federal and Minnesota state permitting process, and made significant progress on construction in Canada;
• Announced $1.8-billion of secured growth projects in the fourth quarter across both the natural gas transmission and liquids pipelines businesses;
• Announced an additional $300-million of secured growth capital projects consisting of a regulated electricity transmission line in Ontario and a long-term contracted pipeline adjacent to the Nexus pipeline;
• Amalgamated the company's Ontario-based natural gas utilities effective Jan. 1, 2019, following approval of an incentive-based regulatory framework by the Ontario Energy Board;
• Simplified the company's corporate structure with the buy-in of the public interest of Enbridge's four sponsored vehicles;
• Implemented changes to the company's debt financing structure through a series of actions to reduce structural subordination, enhancing the credit profile of the parent corporation and reducing the cost of debt capital;
• Announced $7.8-billion of non-core asset sales, $5.7-billion of which have closed; proceeds used to accelerate planned deleveraging and strengthen balance sheet;
• Suspended the dividend reinvestment program (DRIP) effective with the Dec. 1, 2018, dividend payment, moving Enbridge to a fully self-financed growth model;
• On Jan. 25, 2019, Moody's upgraded Enbridge's senior unsecured debt rating from Baa3 to Baa2 with a positive outlook.

Chief executive officer comment

"It was a strong year for Enbridge, both from a financial and strategic perspective," commented Al Monaco, president and chief executive officer of Enbridge.

"Financially, record operating performance across our natural gas and liquids businesses translated into full-year DCF-per-share results near the top of our guidance range. We are pleased with the 20-per-cent-DCF-per-share increase over last year, which reflects strong contributions from each of our core businesses driven by operating performance, optimization of throughput on existing assets, synergy realization from the Spectra acquisition and successfully bringing $7-billion of new projects into service in 2018.

"Strategically, we achieved the key priorities laid out in our three-year business plan that was rolled out at the end of 2017, ahead of schedule. In addition to delivering strong cash flow and earnings per share growth, we executed significant non-core asset sales, accelerated balance sheet deleveraging and simplified the corporate structure.

"We've received close to $6-billion of proceeds from the $7.8-billion of non-core asset sales announced through 2018. These sales allowed us to fully focus attention on our low-risk pipeline and utility assets. The proceeds were applied to debt repayment so that at year-end, our consolidated debt-to-EBITDA metric was down to 4.7 times, well ahead of our original target of 5.0 times.

"In addition, in the fourth quarter we completed the buy-in of all four of our sponsored vehicles. This now brings all of our core assets together under the Enbridge roof which allows us to retain more cash flow to reinvest in the business and for financial flexibility, as well as significantly enhancing our credit profile.

"It was another successful year for project execution, $7-billion of pipeline and utility assets were brought into service, including the Nexus and the Valley Crossing natural gas pipelines. Both are supported by long-term take-or-pay contracts with strong customers and are perfect examples of our low-risk pipeline and utility model.

"We made great progress on the Line 3 replacement project. Construction is nearing completion in Canada, and with key approvals now received from the MPUC, we've moved into the permitting phase of the project in Minnesota. We continue to expect to bring the full project into service before the end of 2019. This critical integrity enhancement project will support reliable energy supply to local and regional refiners and restore much-needed additional pipeline egress for Western Canadian producers.

"Lastly, the $1.8-billion of new secured growth projects that we announced at our investor conference in December illustrates the types of opportunities available across our businesses. We expect to capitalize on strong global energy fundamentals to extend and expand our networks, particularly in support of North American energy exports. In fact, post-2020 we expect to be able to deploy $5-billion to $6-billion per year on organic growth on a self-funded basis while maintaining prudent debt metrics. However, we'll continue to take a disciplined approach to investment decisions, comparing each to alternative capital allocation options in order to maximize shareholder value.

"In summary, we're pleased with the accomplishments we made on our key strategic priorities in 2018. We ended the year as a much stronger, lower risk and simpler company than where we started the year. We're now well positioned to drive the business forward beyond 2020 as the lowest risk company in our sector with a strong balance sheet, reliable cash flows and a very attractive longer-term growth outlook," concluded Mr. Monaco.

Financial results summary

Financial results for the three and 12 months ended Dec. 31, 2018, are summarized in the attached table.

           (millions of dollars, except per share amounts)  

                                                     Three months            Year
                                                            ended           ended
                                                          Dec. 31,        Dec. 31,        
                                                      2018   2017    2018    2017

GAAP earnings attributable to common shareholders   $1,089   $207  $2,515  $2,529
GAAP earnings per common share                        0.60   0.13    1.46    1.66
Cash provided by operating activities                2,503  1,341  10,502   6,658
Adjusted EBITDA                                      3,320  2,963  12,849  10,317
Adjusted earnings                                    1,166  1,013   4,568   2,982
Adjusted earnings per common share                    0.65   0.61    2.65    1.96
Distributable cash flow                              1,863  1,741   7,618   5,614

GAAP earnings attributable to common shareholders increased by $882-million or 47 cents per share for the fourth quarter of 2018 and decreased by $14-million or 20 cents per share for the year ended 2018 compared with the same periods in 2017. In addition to the factors discussed in adjusted earnings below, the year-over-year and fourth-quarter-over-quarter comparability of GAAP earnings attributable to common shareholders was impacted by a number of unusual, non-recurring or non-operating factors.

Adjusted earnings in the fourth quarter of 2018 increased by $153-million or four cents per share compared with the same period in 2017. The increase was primarily driven by strong operating results and operating cost efficiencies across many of the company's business units, new projects coming into service in the liquids pipelines, gas transmission and mid-stream, green power and transmission, and gas distribution segments since the fourth quarter of 2017 and synergy realization from the Spectra Energy acquisition.

Adjusted earnings for the year ended 2018 increased by $1,586-million or 69 cents per share compared with the same period in 2017. The increase is in large part due to the timing of the merger with Spectra Energy Corp., which closed on Feb. 27, 2017.

DCF for the fourth quarter of 2018 was $1,863-million and for the year ended 2018 was $7,618-million, increases of $122-million and $2,004-million respectively over the comparable prior periods in 2017, driven largely by the same factors noted above.

Project execution update

In 2018, the company completed $7-billion of growth projects, substantially on time and on budget. These comprised almost a dozen projects across all business units, including expansions to the existing Canadian and U.S. gas transmission systems, the company's first European offshore wind project and continuing capital investment to support customer growth within the utility franchises. Most recently in the fourth quarter, the $1.3-billion (U.S.) (Enbridge's share) Nexus and the associated $200-million (U.S.) Teal natural gas pipeline projects were brought into service, providing much-needed export capacity out of the Marcellus and Utica basins into the upper Midwest and Eastern Canadian markets. In addition, the $1.6-billion (U.S.) Valley Crossing natural gas pipeline project entered service on Oct. 31. All of these pipeline projects are underpinned by long-term take-or-pay transportation contracts.

Enbridge continues to make good progress executing the remainder of its secured growth capital program. The company has a $16-billion inventory of secured projects at various stages of execution which are scheduled to come into service between 2019 and 2023. The individual projects that make up the secured program are all supported by long-term take-or-pay contracts, cost-of-service frameworks or similar low-risk commercial arrangements, and are diversified across a wide range of business platforms and regulatory jurisdictions, the largest being the Line 3 replacement project as discussed below.

Line 3 replacement update

The $9-billion Line 3 replacement project is a critical integrity replacement project that will enhance the safety and reliability of the Enbridge liquids mainline system and provide incremental export capacity to Western Canadian producers and increased security of supply for key refining markets along the Mainline system as well as to markets further downstream.

Several important milestones were achieved in 2018. In Canada, the entire 1,100 kilometres of pipeline have now been laid and remaining construction activities on pump stations and terminal tie-ins are on schedule for completion by mid-2019. In the United States, the pipeline replacement work in Wisconsin was completed and has been placed into service.

In Minnesota, the MPUC approved the certificate of need and route permit and denied petitions to reconsider the decisions. All related certificate conditions have been finalized and are being addressed. In addition, agreement was reached with the Fond du Lac Band of Lake Superior Chippewa granting a new 20-year easement for the entire Mainline including the Line 3 replacement project through its reservation. The remaining permit applications have been submitted to the various federal and state agencies, including the U.S. Army Corps of Engineers, the Minnesota Department of Natural Resources, the Minnesota Pollution Control Agency and other local government agencies in Minnesota. The company anticipates that the agencies will process all of these applications in the coming months, and with timely approvals continues to expect an in-service date for the project before the end of 2019.

Other business updates

On Oct. 15, 2018, the company announced that it was moving forward with the amalgamation of Enbridge Gas Distribution Inc. and Union Gas Ltd., its two natural gas utility franchises in Ontario. The amalgamation, under the terms of a new Ontario Energy Board approved incentive rate regulation framework, took effect Jan. 1, 2019. This will enable significant efficiencies in operations benefiting both ratepayers and shareholders while maintaining a focus on the safe and reliable distribution of energy.

On Dec. 11, 2018, the company announced $1.8-billion of new accretive growth capital investments:

• Gray Oak pipeline -- Enbridge will invest $600-million (U.S.) for a 22.75-per-cent interest in the Gray Oak liquids pipeline, which will deliver light crude oil from the Permian basin to Corpus Christi and other markets. Gray Oak, currently under construction, is expected to begin service in late 2019, contribute to the post-2020 growth outlook and is an important component of Enbridge's broader emerging U.S. Gulf Coast liquids infrastructure strategy.
• Cheecham terminal and pipeline -- Enbridge has acquired existing liquids pipeline and terminal assets connected with Athabasca Oil Corp.'s Leismer SAGD (steam-assisted gravity drainage) oil sands assets for $265-million. The assets are synergistic as they are connected with Enbridge's existing terminal and pipeline assets in the region.
• Gas transmission expansions -- Enbridge will invest approximately $800-million on four gas transmission expansion projects coming into service in the 2020 to 2023 time frame. The Vito offshore pipeline will provide service to Shell's offshore Gulf Coast operations. The Cameron lateral expansion project will connect Texas Eastern with Gulf Coast LNG export facilities. In addition, the Gulfstream and Sabal Trail pipelines into Florida will both undergo additional expansion (phase VI and phases 2 and 3 respectively). All of these expansion projects are underpinned by long-term take-or-pay commercial arrangements.

In January, 2019, the company secured an additional $300,000 of attractive and low-risk pipeline and utility growth capital projects:

• East-West tie transmission project (EWT) -- Enbridge has partnered with an industry-leading transmission developer to construct a transmission line that will add capacity between Wawa and Thunder Bay to support electricity supply to Northeast Ontario. The EWT project recently received the exclusive right from the Province of Ontario to proceed to construct and also received the leave to construct approval from the Ontario Energy Board in February, 2019. Enbridge currently has a 25-per-cent equity interest in EWT and plans to invest approximately $200-million for its share of the project. The project is supported by a cost of service framework and is expected to be in service in late 2021.
• Generation pipeline -- Enbridge, through its investment in Nexus, announced an attractive investment to acquire Generation pipeline, a 355-million-cubic-feet-a-day pipeline that will interconnect with Nexus. Enbridge's share of the acquisition is approximately $100-million (U.S.) and the pipeline is fully contracted with long-term arrangements. This acquisition offers additional opportunity to expand the company's footprint to supply natural gas to power generation and industrial customers in northern Ohio.

Simplification of corporate structure

In the fourth quarter, the company acquired, in separate combination transactions, all of the outstanding equity securities of Enbridge Income Fund Holdings Inc. (ENF), Enbridge Energy Partners LP (EEP), Enbridge Energy Management LLC (EEQ) and Spectra Energy Partners LP (SEP) not beneficially owned by Enbridge. The buy-ins are strategically and economically attractive Enbridge shareholders and provide substantial benefits, including:

• Increased ownership in its core businesses and further enhancement of its industry-leading, low-risk profile;
• Significant advancement of Enbridge's strategy to simplify and streamline its corporate structure which further increases the transparency of its strong cash generating assets;
• Higher retention of cash generated from the assets, which will support continued strong dividend coverage and self-financed growth;
• An improved Enbridge credit profile due to the elimination of sponsored vehicle public distributions as well as the reduction of the structural subordination of Enbridge's parent company debt;
• Significant benefits to Enbridge's post-2020 outlook primarily due to tax optimization synergies.

Asset sale and financing update

The company reached agreements to sell over $7.8-billion of non-core assets in 2018, well in excess of the $3-billion targeted in the financing plan. The company has now received proceeds from asset sales of approximately $5.7-billion, with the balance expected by mid-2019. These proceeds will provide the company with significant additional financial flexibility to further strengthen the balance sheet and finance the secured growth program. As of the end of the year, the company's consolidated debt-to-EBITDA ratio was 4.7 times on a trailing 12-month basis. This is in line with its updated long-term target credit metric range of 4.5 times to comfortably below 5.0 times debt to EBITDA.

On Jan. 25, 2019, Moody's Investors Service announced that it had upgraded Enbridge's senior unsecured debt rating to Baa2 with a positive outlook. Each of Standard & Poors, Fitch and DBRS has recently reaffirmed Enbridge's senior unsecured debt rating at BBB+, BBB+ and BBB High, respectively.

Given the progress on leverage reduction, the company announced in the fourth quarter that it would suspend its DRIP (distribution reinvestment plan) effective with the dividend payment on Dec. 1, 2018, which was earlier than originally contemplated. With this action, the company has now moved to a fully self-financed financing model and will no longer require external equity to support its growth program going forward.

The sponsored vehicle buy-ins have also provided an opportunity to simplify the company's debt financing structure and strategy. A number of actions have been taken:

• Completion of a debt exchange on Dec. 21, 2018, whereby $1.6-billion of term debt securities issued by Enbridge Income Fund were exchanged for notes of Enbridge with identical coupons and terms to maturity; the company intends to discontinue external debt financing by the fund;
• The amendment of certain covenants in the EEP and SEP trust indentures and entry into a subsidiary guarantee agreement on Jan. 22, 2019, to implement a cross-guarantee arrangement whereby remaining outstanding senior term debt obligations of EEP and SEP are guaranteed by Enbridge and each of SEP and EEP correspondingly guarantees Enbridge's senior term debt obligations; the company intends to discontinue external debt financing by both EEP and SEP;
• The redemption of $400-million (U.S.) of EEP junior subordinated notes which is expected to be completed by the end of February, 2019;
• The company believes that these changes to its debt financing structure and financing strategy has substantially reduced structural subordination, will further enhance the credit profile of the consolidated Enbridge group and reduce its cost of capital over the longer term.

Guidance and longer-term growth outlook

At its December, 2018, investor conference, Enbridge highlighted that its key strategic priorities for 2019 and beyond remain largely unchanged:

• Focusing on the safety, operational reliability and environmental performance of the systems and ensuring cost-effective and efficient transportation for its customers;
• Ensuring strong execution of the secured capital program that will drive DCF-per-share growth through 2020;
• Concentrating on growth of core businesses through extensions and expansions of the liquids pipeline, natural gas transmission and gas utility franchises to extend growth beyond 2020;
• Maintaining a strong financial position and flexibility as secured growth projects are brought on line;
• Continuing to exercise rigorous capital allocation to maximize shareholder value.

The company further reiterated its guidance for the midpoint of the projected range of 2019 and 2020 DCF per share of $4.45 per share and $5 per share, respectively. With this robust outlook, Enbridge has announced a 10-per-cent dividend increase for 2019 and anticipates another 10-per-cent increase for 2020. The 2019 quarterly dividend of 73.8 cents per share will be payable on March 1, 2019, to shareholders of record on Feb. 15, 2019.

Beyond 2020, Enbridge is targeting to achieve annual DCF-per-share growth in the range of 5 to 7 per cent, driven by an attractive suite of organic growth prospects within its three core businesses that can be self-financed using available cash generated by these businesses and managing leverage within targets designed to maintain strong investment grade credit ratings.

Conference call

Enbridge will hold a conference call and webcast on Feb. 15, 2019, at 9 a.m. Eastern Time (7 a.m. Mountain Time) to provide an enterprisewide business update and review 2018 fourth quarter and year-end financial results. Analysts, members of the media and other interested parties can access the call toll-free at 877-930-8043 or within and outside North America at 253-336-7522 using the access code of 3577747 (pound sign). The call will be audio webcast live at the Media-Server website. A webcast replay and podcast will be available approximately two hours after the conclusion of the event and a transcript will be posted to the website within 24 hours. The replay will be available for seven days after the call toll-free 855-859-2056 or within and outside North America at 404-537-3406 (access code 3577747 (pound sign)).

The conference call format will include prepared remarks from the executive team followed by a question-and-answer session for the analyst and investor community only. Enbridge's media and investor relations teams will be available after the call for any additional questions.

About Enbridge Inc.

Enbridge is North America's premier energy infrastructure company with strategic business platforms that include an extensive network of crude oil, liquids and natural gas pipelines, regulated natural gas distribution utilities, and renewable power generation. The company safely delivers in excess of three million barrels of crude oil each day through its Mainline and Express pipeline; accounts for approximately 62 per cent of U.S.-bound Canadian crude oil exports; and moves approximately 18 per cent of all natural gas consumed in the U.S., serving key supply basins and demand markets.

Dividend declaration

The company's board of directors has declared the quarterly dividends in the attached table. All dividends are payable on March 1, 2019, to shareholders of record on Feb. 15, 2019.

  
Common shares (1)                    $0.73800
Preference shares, Series A          $0.34375
Preference shares, Series B          $0.21340
Preference shares, Series C (2)      $0.25459
Preference shares, Series D (3)      $0.27875
Preference shares, Series F (4)      $0.29306
Preference shares, Series H (5)      $0.27350
Preference shares, Series J        US$0.30540
Preference shares, Series L        US$0.30993
Preference shares, Series N (6)      $0.31788
Preference shares, Series P          $0.25000
Preference shares, Series R          $0.25000
Preference shares, Series 1 (7)    US$0.37182
Preference shares, Series 3          $0.25000
Preference shares, Series 5        US$0.27500
Preference shares, Series 7          $0.27500
Preference shares, Series 9          $0.27500
Preference shares, Series 11         $0.27500
Preference shares, Series 13         $0.27500
Preference shares, Series 15         $0.27500
Preference shares, Series 17         $0.32188
Preference shares, Series 19 (8)     $0.30625

(1) The quarterly dividend per common share 
    was increased 10 per cent to 73.8 cents 
    from 67.1 cents, effective March 1, 2019.

(2) The floating dividend on the Series C 
    preference shares is reset each quarter. 
    The quarterly dividend amount of Series C 
    increased to 22.685 cents from 20.342 cents 
    on March 1, 2018, increased to 22.748 cents 
    from 22.685 cents on June 1, 2018, increased 
    to 23.934 cents from 22.748 cents on Sept. 1, 
    2018, and increased to 25.459 cents from 
    23.934 cents on Dec. 1, 2018.

(3) The quarterly dividend amount of Series D 
    increased to 27.875 cents from 25 cents on 
    March 1, 2018, due to the reset of the annual 
    dividend on every fifth anniversary of the 
    date of issuance of the Series D preference 
    shares.

(4) The quarterly dividend amount of Series F 
    increased to 29.306 cents from 25 cents on 
    June 1, 2018, due to the reset of the annual 
    dividend on every fifth anniversary of the 
    date of issuance of the Series F preference 
    shares.

(5) The quarterly dividend amount of Series H 
    increased to 27.35 cents from 25 cents on 
    Sept. 1, 2018, due to the reset of the annual 
    dividend on every fifth anniversary of the 
    date of issuance of the Series H preference 
    shares.

(6) The quarterly dividend amount of Series N 
    increased to 31.788 cents from 25 cents on 
    Dec. 1, 2018, due to the reset of the annual 
    dividend on every fifth anniversary of the 
    date of issuance of the Series N preference 
    shares.

(7) The quarterly dividend amount of Series 1 
    increased to 37.182 U.S. cents from 25 U.S.
    cents on June 1, 2018, due to the reset of 
    the annual dividend on every fifth anniversary 
    of the date of issuance of the Series 1 
    preference shares.

(8) The quarterly dividend amount of Series 19 
    increased from the first dividend of 26.85 cents 
    payable on March 1, 2018, to the regular 
    quarterly dividend of 30.625 cents, effective 
    June 1, 2018.


  

                   CONSOLIDATED EARNINGS
               (millions of Canadian dollars)  
  
                                                         Three months ended         Year ended
                                                                    Dec. 31,           Dec. 31,
                                                             2018      2017      2018      2017

Liquids pipelines                                            $978    $1,555    $5,331    $6,395
Gas transmission and mid-stream                             1,254    (3,532)    2,334    (1,269)
Gas distribution                                              449       453     1,711     1,390
Green power and transmission                                   83       102       369       372
Energy services                                               374      (252)      482      (263)
Eliminations and other                                       (340)     (149)     (708)     (337)
EBITDA                                                      2,798   (1,823)     9,519     6,288
Depreciation and amortization                                (794)     (775)   (3,246)   (3,163)
Interest expense                                             (661)     (852)   (2,703)   (2,556)
Income taxes                                                  (60)    3,515      (237)    2,697
Earnings attributable to non-controlling interests and
redeemable non-controlling interests                         (99)       226      (451)     (407)
Preference share dividends                                    (95)      (84)     (367)     (330)
Earnings/(loss) attributable to common shareholders         1,089       207     2,515     2,529

We seek Safe Harbor.