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Operations Update
Enbridge had another excellent year in 2006, delivering strong financial results while also receiving commercial support for a number of major new growth opportunities. Earnings were $615.4 million, compared with $556.0 million in 2005, more than 10 per cent higher than the previous year. As a result, the Company is well positioned to continue its consistent delivery of superior returns to shareholders.
Significant operating factors affecting earnings in 2006 included:
- Enbridge crude oil mainline system earnings were higher primarily due to lower oil loss costs, higher earnings from the Terrace expansion and the Incentive Tolling Settlement (ITS).
- Enbridge Energy Partners’ earnings increased significantly with higher crude oil throughput, strong margins and increased volumes in the natural gas gathering and processing businesses.
- Aux Sable experienced strong natural gas processing margins throughout the year resulting in significant earnings under a sharing agreement.
Organic Growth Projects
We will continue to build on this foundation of success through an exceptional portfolio of new growth opportunities. These include more than $8 billion of liquids pipeline projects now moving forward. We will nearly double our net investment in liquids pipelines as Enbridge embarks on the most intense capital program in our history.
Mainline Capacity Expansion
The Southern Access Expansion (US$1.6 billion) is now under construction, and portions will be phased in from 2006 to 2009.
Preliminary pre-regulatory approval work has already begun on Alberta Clipper, a new pipeline from Hardisty, Alberta, to Superior, Wisconsin, with a projected in-service date by mid-2010.
Upstream Pipeline Development
We have plans to build approximately $2 billion of regional pipeline delivery infrastructure in the oil sands corridor between Fort McMurray and Edmonton. The Long Lake and Surmont Pipeline projects are completed and the Waupisoo Pipeline began construction in June 2007. Plans are also underway to expand the Athabasca system.
New Market Access
The new Spearhead Pipeline began operating in March 2006, and we are already considering expanding the capacity. The Southern Access Extension (US$0.4 billion) to Patoka, Illinois, is scheduled for completion in 2009.
Development of the Gateway pipeline from Edmonton to Kitimat, B.C., is proceeding at a reduced pace as it is now anticipated our customers will not need this capacity until 2012 to 2014.
We are working on several alternatives to expand capacity to the Gulf of Mexico and to move crude farther east from Chicago.
Diluent Supply Project
The Southern Lights diluent return line (US$1.3 billion) is under construction in the United States with a targeted in-service date of 2010.
Terminaling and Storage Infrastructure
We are planning on increasing our investment in contract terminals over the next five years, including the Hardisty Merchant Terminal, the Stonefell Terminal near Fort Saskatchewan, and expansion of the Athabasca Terminal.
Gas Pipeline System Expansions
Our U.S. natural gas gathering, processing and transmission infrastructure continues to expand – particularly in Texas, where Enbridge Energy Partners has good exposure to the prolific natural gas plays in the Anadarko Basin, Barnett Shale and Bossier Sands. Vector Pipeline, in which we have a joint venture interest, is also expanding two compressor stations and considering another potential compressor expansion.
Expanding Ontario Gas Distribution System
Our Enbridge Gas Distribution (EGD) infrastructure in Ontario serves Canada’s fastest-growing metropolitan area. We are encouraged with recent regulatory developments, and we look forward to the introduction of incentive regulation in 2008. EGD continues to be one of the fastest-growing gas utilities in North America, adding more than 40,000 new customers each year.
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