Ms. Rebecca Morley reports

ENBRIDGE REPORTS STRONG SECOND QUARTER 2023 FINANCIAL RESULTS AND REAFFIRMS FINANCIAL GUIDANCE AND OUTLOOK

Enbridge Inc. has released its second quarter 2023 financial results and reaffirmed its 2023 financial outlook.

Highlights (all financial figures are unaudited):

• Second-quarter GAAP (generally accepted accounting principles) earnings of $1.8-billion, or 91 cents per common share, compared with GAAP earnings of $500-million, or 22 cents per common share, in 2022.
• Adjusted earnings of $1.4-billion, or 68 cents per common share, compared with $1.4-billion, or 67 cents per common share, in 2022.
• Adjusted earnings before interest, income taxes and depreciation and amortization (EBITDA) of $4-billion, an increase of 8 per cent, compared with $3.7-billion in 2022.
• Cash provided by operating activities of $3.4-billion, compared with $2.5-billion in 2022.
• Distributable cash flow (DCF) of $2.8-billion, an increase of 1 per cent, compared with $2.7-billion in 2022.
• Reaffirmed 2023 full-year financial guidance for EBITDA and DCF, and medium-term outlook.
• Planning construction of the first phase of the Rio Bravo pipeline, which will transport 2.6 bcf (billion cubic feet) per day of natural gas feedstock to supply Rio Grande LNG (liquid natural gas).
• Extended and upsized the Flanagan South pipeline (FSP) binding open season for United States Gulf Coast delivery service.
• Issued $400-million aggregate amount of sustainability-linked bonds (SLB) in Canada, further strengthening Enbridge's commitment to its emissions reduction goals.
• Issued 22nd sustainability report, demonstrating the company's continuing progress toward goals set in November, 2020.
• On schedule to achieve debt-to-EBITDA in the lower half of the target range by year-end, providing financial flexibility and demonstrating commitment to the company's equity-self-financing model.

Chief executive officer comment

"Continuing our strong start to the year, Enbridge's four businesses delivered another solid quarter of financial performance. Our first-choice customer service offering and operating reliability continue to result in high utilization across our systems. We continue to execute on our strategic priorities, and are on track to achieve our full-year EBITDA and DCF per share guidance.

"During the first half of the year, we reached a win-win-win settlement with our customers on the Mainline, which further enhances the utility-like profile of our cash flow. We've seen record Mainline volumes and strong uptake on the Flanagan South open season, and sanctioned the Enbridge Houston oil terminal, which will further strengthen the competitive position of the Mainline.

"We are pleased Rio Grande LNG reached FID [final investment decision] and look forward to starting construction on our Rio Bravo pipeline project after obtaining necessary regulatory approvals. In gas distribution, we are expecting another strong year of customer growth and have negotiated a partial settlement on our rebasing application. Construction of our French offshore wind projects are ongoing, with the first turbines installed at Fecamp. We have more than 4.5 GW [gigawatts] of onshore renewable projects under development and anticipate reaching FID on certain projects by year-end.

"Through the first half of 2023, we also continued to deliver on our capital allocation commitments. We executed on $1.1-billion of accretive tuck-in M&A [mergers and acquisitions] and are on track to place approximately $3-billion of capital into service this year. Our balance sheet is in great shape, with debt-to-EBITDA at the bottom end of our target range. Financial strength remains a key priority as we deploy our $6-billion of annual investment capacity within our equity self-funded model.

"We also published our 22nd annual sustainability report highlighting our long-standing focus on sustainable practices, and our industry-leading performance across environmental, social and governance issues. Across our business we have integrated emission-reduction considerations into our capital allocation process and continue to align executive compensation to performance on our ESG strategies.

"Enbridge's resilient, low-risk business model is supported by our scale, diversification and high-quality cash flows, which positions us to withstand market volatility and deliver predictable results. Looking forward, financial discipline, execution of our secured capital program and deployment of our discretionary investment capacity gives us confidence that we'll generate 4-to-6-per-cent EBITDA growth per year through 2025, and approximately 5 per cent thereafter.

"We believe natural gas and oil will remain critical components of our energy supply mix across a paced energy transition. Our asset network is large, diverse and unmatched, providing conventional energy infrastructure and lower-carbon opportunities, supporting dividend growth and long-term shareholder returns, which positions us as a first-choice investment opportunity."

Financial results summary

Financial results for the three and six months ended June 30, 2023, and 2022, are summarized in the associated table.

GAAP earnings attributable to common shareholders for the second quarter of 2023 increased by $1,398-million, or 69 cents per share, compared with the same period in 2022, primarily due to operating performance factors discussed herein and a non-cash, unrealized derivative fair value gain of $550-million ($422-million after-tax) in 2023, compared with a net loss of $866-million ($663-million after-tax) in 2022, reflecting changes in the mark-to-market value of derivative financial instruments used to manage foreign exchange and interest rate risks.

The period-over-period comparability of GAAP earnings attributable to common shareholders is impacted by certain unusual, infrequent factors or other non-operating factors. Refer to the company's management's discussion and analysis (MD&A) for the second quarter of 2023 filed in conjunction with the second-quarter financial statements for a detailed discussion of GAAP financial results.

Adjusted EBITDA in the second quarter of 2023 increased by $293-million compared with the same period in 2022. This was primarily driven by contributions from increased economic interests in the Gray Oak pipeline and the Cactus II pipeline during the second half of 2022 and early 2023, higher ex-Gretna volumes on the Mainline, and the recognition of a lower provision against the interim Mainline IJT (international joint toll). These factors were partially offset by a decrease in earnings from the compnay's reduced interest in DCP Midstream LLC (DCP), lower commodity prices impacting DCP and Aux Sable, and the timing of gas distribution storage demand and transportation costs.

Adjusted earnings in the second quarter of 2023 increased by $30-million, or one cent per share, primarily due to higher adjusted EBITDA contributions discussed herein, offset by higher financing costs due to higher interest rates, higher depreciation expense from assets placed into service last year and higher earnings attributable to non-controlling interests from the sale of an 11.57-per-cent non-operating interest in seven Enbridge-operated pipelines to Athabasca Indigenous Investments in Q3 2022.

DCF for the second quarter of 2023 increased by $36-million, primarily due to higher adjusted EBITDA contributions, partially offset by the timing of maintenance capital spend, higher financing costs due to higher interest rates and higher distributions to noncontrolling interests as noted herein.

Financial outlook

The company reaffirms its 2023 financial guidance for EBITDA and DCF. Results for the first six months of 2023 are in line with the company's expectations, and the company anticipates that its businesses will continue to experience strong capacity utilization and operating performance through the balance of the year, with normal course seasonality.

Strong operational performance in the first half of the year is expected to be offset by higher financing costs, due to increased interest rates, and a lower toll on the Mainline.

Financing update

In May of 2023, Enbridge issued a three-tranche Canadian debt offering consisting of $600-million of five-year notes, $400-million of 10-year sustainability-linked bonds (SLB) and $500-million of 30-year notes, for an aggregate principal amount of $1.5-billion. The SLB incorporates Enbridge's 35-per-cent emissions intensity reduction target by 2030, further demonstrating Enbridge's continuing commitment to achieving its ESG targets. These debt offerings were hedged at rates favourable to market rates. The company's sustainability-linked financings now total approximately $8-billion.

The company continues to be rated BBB+, or equivalent, by all four of its credit-rating agencies, with stable outlooks, reflecting Enbridge's financial strength and low-risk commercial model. Enbridge anticipates exiting 2023 with its debt-to-EBITDA metric within the lower half of the target range, while continuing to finance its secured capital growth program within its equity self-financing model.

Secured growth project execution update

During the second quarter, the company added $1.8-billion of growth capital to its secured capital program, including the $1.2-billion (U.S.) Rio Bravo pipeline and the addition of $200-million (U.S.) to gas transmission's modernization program.

The company's current secured growth program is now approximately $19-billion, with the company expecting to place approximately $3-billion into service in 2023, inclusive of the gas transmission's modernization and gas distribution's utility growth capital programs. The secured growth program is underpinned by commercial frameworks consistent with Enbridge's low-risk model.

Business updates

Enbridge to proceed with construction of the Rio Bravo pipeline

In July, 2023, NextDecade Corp.'s Rio Grande LNG export facility reached a final investment decision. As a result, the construction on the company's previously announced Rio Bravo pipeline project will proceed after obtaining necessary regulatory approvals. The first phase of the Rio Bravo pipeline will transport 2.6 billion cubic feet per day of natural gas feedstock to NextDecade's Rio Grande LNG export facility in the Port of Brownsville, Texas. The project is expected to achieve commercial operations in 2026.

This project enhances Enbridge's infrastructure to feed LNG facilities in the region and strengthens the company's footprint in south Texas.

Enbridge extends Flanagan South open season

The company extended and upsized an open season for long-term contracted service on the Flanagan South pipeline. FSP provides service from the Enbridge Mainline originating at Enbridge's Flanagan Terminal in Illinois and delivers near Houston, Tex., through the Seaway pipeline. If the open season is successful, FSP will approach 90 per cent term-contracted on its 720,000 bpd (barrel-per-day) nameplate capacity, reinforcing strong utilization on the full pathway through the Mainline.

Mainline tolling agreement

Enbridge has reached an agreement in principle on a negotiated settlement with shippers for tolls on its Mainline pipeline system. The settlement covers both the Canadian and United States portions of the Mainline, and will see the Mainline continuing to operate as a common carrier system available to all shippers on a monthly nomination basis. The settlement is subject to regulatory and other approvals and the term is 7.5 years, through the end of 2028, with new interim tolls effective on July 1, 2023.

The settlement will include:

• An international joint toll (IJT) for heavy crude oil movements from Hardisty to Chicago, composed of a Canadian Mainline toll of $1.65 per barrel plus a Lakehead system toll of $2.57 (U.S.) per barrel, plus the applicable line 3 replacement surcharge;
• Toll escalation for operation, administration, and power costs tied to U.S. consumer price and power indices;
• Tolls will continue to be distance and commodity adjusted, and will utilize a dual-currency IJT;
• A financial performance collar providing incentives for Enbridge to optimize throughput and cost, but also providing downside protection in the event of extreme supply or demand disruptions, or unforeseen operating cost exposure. This performance collar is intended to ensure the Mainline will earn 11-per-cent to 14.5-per-cent returns, on a deemed 50-per-cent equity capitalization, which is similar to the returns earned on average during the previous tolling agreement.

Approximately 70 per cent of Mainline deliveries are tolled under this settlement, while approximately 30 per cent of deliveries are tolled on a full-path basis to markets downstream of the Mainline. The other continuing feature is that the Mainline toll (line 3 replacement surcharge) will flex up or down 3.5 U.S. cents per barrel for 50,000 barrel per day changes in throughput.

The expected financial outcome from this settlement is in line with previously reported financial results after taking into consideration the previously recognized provision. Enbridge expects to file the settlement with the Canada Energy Regulator (CER) by October, 2023.

Normal course issuer bid (NCIB) execution

In the second quarter of 2023, Enbridge repurchased and cancelled approximately 2.5 million of its common shares, equating to approximately $125-million, as part of its 2023 NCIB program.

Enbridge's current NCIB program commenced on Jan. 6, 2023, and expires on the earlier of Jan. 5, 2024, or when the company reaches the approved share repurchase limit of 27,938,163 common shares, to an aggregate amount of up to $1.5-billion.

Enbridge will continue to evaluate opportunities to repurchase shares pursuant to the company's NCIB program, predicated upon maintaining a strong balance sheet, and evaluated against the availability and attractiveness of alternative capital investment opportunities.

Conference call

Enbridge will host a conference call and webcast on Aug. 4, 2023, at 9 a.m. ET (7 a.m. MT), to provide a business update and review 2023 second-quarter results. Analysts, members of the media and other interested parties can access the call toll-free at 1-800-606-3040. The call will be audio webcast live on-line. It is recommended that participants dial in or join the audio webcast 15 minutes prior to the scheduled start time. A webcast replay will be available soon after the conclusion of the event and a transcript will be posted to the website. The replay will be available for seven days after the call: dial toll-free 1-800-606-3040 (conference ID: 9581867).

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.

Dividend declaration

On July 31, 2023, the company's board of directors declared the quarterly dividends as shown in the associated table. All dividends are payable on Sept. 1, 2023, to shareholders of record on Aug. 15, 2023.

About Enbridge Inc.

Enbridge safely connects millions of people to the energy they rely on every day, fuelling quality of life through its North American natural gas, oil or renewable power networks and its growing European offshore wind portfolio. Enbridge is investing in modern energy delivery infrastructure to sustain access to secure, affordable energy and building on two decades of experience in renewable energy to advance new technologies, including wind and solar power, hydrogen, renewable natural gas, and carbon capture and storage. The company is committed to reducing the carbon footprint of the energy it delivers, and to achieving net-zero greenhouse gas emissions by 2050. Headquartered in Calgary, Alta., Enbridge's common shares trade under the symbol ENB on the Toronto and New York stock exchanges.

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