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Enbridge Inc. filed this Form 10-Q on 7/29/2020

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM	10-Q



☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020



☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-10934




ENBRIDGE INC
(Exact Name of Registrant as Specified in Its Charter)



Canada		98-0377957
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

200, 425 - 1st Street S.W.

Calgary, Alberta, Canada T2P 3L8

(Address of Principal Executive Offices) (Zip Code)

(403) 231-3900

(Registrant’s Telephone Number, Including Area Code)

_______________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	ENB	New York Stock Exchange
6.375% Fixed-to-Floating Rate Subordinated Notes Series 2018-B due 2078	ENBA	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The registrant had 2,025,194,406 common shares outstanding as at July 22, 2020.



		Page
	PART I
Item 1.	Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62
Item 4.	Controls and Procedures	63
	PART II
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	67
Item 4.	Mine Safety Disclosures	67
Item 5.	Other Information	67
Item 6.	Exhibits	67
	Signatures	68

GLOSSARY




AOCI	Accumulated other comprehensive income/(loss)
Army Corps	United States Army Corps of Engineers
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Average Exchange Rate	Canadian to United States dollar average exchange rate
CER	Canada Energy Regulator
CPP Investments	Canada Pension Plan Investment Board
DCP Midstream	DCP Midstream, LLC
EBITDA	Earnings before interest, income taxes and depreciation and amortization
EEP	Enbridge Energy Partners, L.P.
EMF	Éolien Maritime France SAS
Enbridge	Enbridge Inc.
Exchange Act	United States Securities Exchange Act of 1934, as amended
FERC	Federal Energy Regulatory Commission
IJT	International Joint Tariff
kbpd	thousands of barrels per day
MATL	Montana-Alberta Tie Line
NGL	Natural gas liquids
OCI	Other comprehensive income/(loss)
SEP	Spectra Energy Partners, LP
Texas Eastern	Texas Eastern Transmission, LP

CONVENTIONS

The terms "we", "our", "us" and "Enbridge" as used in this report refer collectively to Enbridge Inc. unless the context suggests otherwise. These terms are used for convenience only and are not intended as a precise description of any separate legal entity within Enbridge.

Unless otherwise specified, all dollar amounts are expressed in Canadian dollars, all references to “dollars”, “$” or “C$” are to Canadian dollars and all references to “US$” are to United States dollars. All amounts are provided on a before tax basis, unless otherwise stated.

FORWARD-LOOKING INFORMATION

Forward-looking information, or forward-looking statements, have been included in this quarterly report on Form 10-Q to provide information about us and our subsidiaries and affiliates, including management’s assessment of our and our subsidiaries’ future plans and operations. This information may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as ‘‘anticipate”, “believe”, “estimate”, “expect”, “forecast”, “intend”, “likely”, “plan”, “project”, “target” and similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information or statements included or incorporated by reference in this document include, but are not limited to, statements with respect to the following: our corporate vision and strategy, including strategic priorities and enablers; the COVID-19 pandemic and the duration and impact thereof; the expected supply of, demand for and prices of crude oil, natural gas, natural gas liquids, liquified natural gas and renewable energy; anticipated utilization of our existing assets; expected earnings before interest, income taxes and depreciation and amortization (EBITDA); expected earnings/(loss); expected future cash flows; expected distributable cash flow; expected debt-to-EBITDA ratio; financial strength and flexibility; expectations on sources of liquidity and sufficiency of financial resources; expected strategic priorities and performance of the Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation and Energy Services businesses; expected costs related to announced projects and projects under construction; expected in-service dates for announced projects and projects under construction; expected capital expenditures; expected equity funding requirements for our commercially secured growth program; expected future growth and expansion opportunities; expectations about our joint venture partners’ ability to complete and finance projects under construction; expected closing of acquisitions and dispositions and the timing thereof; expected benefits of transactions, including the realization of efficiencies and synergies; expected future actions of regulators and related court proceedings and other litigation; anticipated competition; United States Line 3 Replacement Program (U.S. L3R Program); Line 5 related matters; the status of the Dakota Access Pipeline; estimated future dividends; our dividend payout policy; dividend growth and dividend payout expectation; and expectations on impact of our hedging program.

Although we believe these forward-looking statements are reasonable based on the information available on the date such statements are made and processes used to prepare the information, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Material assumptions and risks include the following: the COVID-19 pandemic and the duration and impact thereof; the expected supply of and demand for crude oil, natural gas, natural gas liquids (NGL) and renewable energy; prices of crude oil, natural gas, NGL and renewable energy, including the current weakness and volatility of such prices; anticipated utilization of our existing assets; exchange rates; inflation; interest rates; availability and price of labor and construction materials; operational reliability; customer and regulatory approvals; maintenance of support and regulatory approvals for our projects; anticipated in-service dates; weather; the timing and closing of acquisitions and dispositions; the realization of anticipated benefits and synergies of transactions; governmental legislation; impact of our dividend policy on our future cash flows; our credit ratings; capital project funding; expected EBITDA; expected earnings/(loss); expected future cash flows; expected distributable cash flow; and estimated future dividends. Assumptions regarding the expected supply of and demand for crude oil, natural gas, NGL and renewable energy, and the prices of these commodities, are material to and underlie all forward-looking statements, as they may impact current and future levels of demand for our services. Similarly, exchange rates, inflation and interest rates impact the economies and business environments in which we operate and may impact levels of demand for our services and cost of inputs, and are therefore inherent in all forward-looking statements. Due to the interdependencies and correlation of these macroeconomic factors, the impact of any one assumption on a forward-looking statement cannot be determined with certainty, particularly with respect to expected EBITDA, expected earnings/(loss), expected future cash flows, expected distributable cash flow or estimated future dividends.

The most relevant assumptions associated with forward-looking statements on announced projects and projects under construction, including estimated completion dates and expected capital expenditures, include the following: the availability and price of labor and construction materials; the effects of inflation and foreign exchange rates on labor and material costs; the effects of interest rates on borrowing costs; the impact of weather and customer, government and regulatory approvals on construction and in-service schedules and cost recovery regimes; and the COVID-19 pandemic and the duration and impact thereof.

Our forward-looking statements are subject to risks and uncertainties pertaining to the successful execution of our strategic priorities, operating performance, regulatory parameters, changes in regulations applicable to our business, acquisitions, dispositions and other transactions, our dividend policy, project approval and support, renewals of rights-of-way, weather, economic and competitive conditions, public opinion, changes in tax laws and tax rates, changes in trade agreements, exchange rates, interest rates, commodity prices, political decisions, supply of and demand for commodities, and the COVID-19 pandemic and the duration and impact thereof, including but not limited to those risks and uncertainties discussed in this quarterly report on Form 10-Q and in our other filings with Canadian and United States securities regulators. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent and our future course of action depends on management’s assessment of all information available at the relevant time. Except to the extent required by applicable law, Enbridge Inc. assumes no obligation to publicly update or revise any forward-looking statement made in this quarterly report on Form 10-Q or otherwise, whether as a result of new information, future events or otherwise. All forward-looking statements, whether written or oral, attributable to us or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENBRIDGE INC.

CONSOLIDATED STATEMENTS OF EARNINGS



	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
(unaudited; millions of Canadian dollars, except per share amounts)
Operating revenues
Commodity sales	2,936		8,416		10,325		15,048
Transportation and other services	4,326		4,092		7,534		8,440
Gas distribution sales	694		755		2,110		2,631
Total operating revenues (Note 3)	7,956		13,263		19,969		26,119
Operating expenses
Commodity costs	2,858		8,129		10,021		14,694
Gas distribution costs	250		312		1,105		1,519
Operating and administrative	1,801		1,695		3,401		3,320
Depreciation and amortization	949		842		1,831		1,682
Total operating expenses	5,858		10,978		16,358		21,215
Operating income	2,098		2,285		3,611		4,904
Income from equity investments	327		413		490		826
Impairment of equity investments (Note 9)	—		—		(1,736	)	—
Other income/(expense)
Net foreign currency gain/(loss)	526		140		(430	)	354
Other	98		65		(93	)	111
Interest expense	(681	)	(637	)	(1,387	)	(1,322	)
Earnings before income taxes	2,368		2,266		455		4,873
Income tax expense (Note 11)	(591	)	(436	)	(42	)	(1,020	)
Earnings	1,777		1,830		413		3,853
(Earnings)/loss attributable to noncontrolling interests	(36	)	2		(5	)	(35	)
Earnings attributable to controlling interests	1,741		1,832		408		3,818
Preference share dividends	(94	)	(96	)	(190	)	(191	)
Earnings attributable to common shareholders	1,647		1,736		218		3,627
Earnings per common share attributable to common shareholders (Note 5)	0.82		0.86		0.11		1.80
Diluted earnings per common share attributable to common shareholders (Note 5)	0.82		0.86		0.11		1.80

See accompanying notes to the interim consolidated financial statements.

ENBRIDGE INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
(unaudited; millions of Canadian dollars)
Earnings	1,777		1,830		413		3,853
Other comprehensive income/(loss), net of tax
Change in unrealized loss on cash flow hedges	(48	)	(235	)	(561	)	(427	)
Change in unrealized gain/(loss) on net investment hedges	340		127		(375	)	221
Other comprehensive income from equity investees	30		5		20		17
Excluded components of fair value hedges	5		—		8		—
Reclassification to earnings of loss on cash flow hedges	48		35		80		46
Reclassification to earnings of pension and other postretirement benefits (OPEB) amounts	4		5		7		43
Foreign currency translation adjustments	(2,701	)	(1,311	)	2,936		(2,602	)
Other comprehensive income/(loss), net of tax	(2,322	)	(1,374	)	2,115		(2,702	)
Comprehensive income/(loss)	(545	)	456		2,528		1,151
Comprehensive (income)/loss attributable to noncontrolling interests	50		51		(95	)	64
Comprehensive income/(loss) attributable to controlling interests	(495	)	507		2,433		1,215
Preference share dividends	(94	)	(96	)	(190	)	(191	)
Comprehensive income/(loss) attributable to common shareholders	(589	)	411		2,243		1,024

See accompanying notes to the interim consolidated financial statements.

ENBRIDGE INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
(unaudited; millions of Canadian dollars, except per share amounts)
Preference shares(Note 5)
Balance at beginning and end of period	7,747		7,747		7,747		7,747
Common shares(Note 5)
Balance at beginning of period	64,760		64,728		64,746		64,677
Shares issued on exercise of stock options	3		4		17		55
Balance at end of period	64,763		64,732		64,763		64,732
Additional paid-in capital
Balance at beginning of period	202		72		187		—
Stock-based compensation	5		17		19		21
Options exercised	(2	)	(6	)	(18	)	(49	)
Change in reciprocal interest	—		—		12		109
Repurchase of noncontrolling interest	—		65		—		65
Other	2		46		7		48
Balance at end of period	207		194		207		194
Deficit
Balance at beginning of period	(7,808	)	(3,640	)	(6,314	)	(5,538	)
Earnings attributable to controlling interests	1,741		1,832		408		3,818
Preference share dividends	(94	)	(96	)	(190	)	(191	)
Dividends paid to reciprocal shareholder	5		4		10		9
Common share dividends declared	(1,641	)	(1,500	)	(1,641	)	(1,500	)
Modified retrospective adoption of ASU 2016-13 Financial Instruments - Credit Losses (Note 2)	—		—		(66	)	—
Other	—		8		(4	)	10
Balance at end of period	(7,797	)	(3,392	)	(7,797	)	(3,392	)
Accumulated other comprehensive income/(loss) (Note 8)
Balance at beginning of period	3,989		1,449		(272	)	2,672
Other comprehensive income/(loss) attributable to common shareholders, net of tax	(2,236	)	(1,325	)	2,025		(2,603	)
Other	—		—		—		55
Balance at end of period	1,753		124		1,753		124
Reciprocal shareholding
Balance at beginning of period	(47	)	(51	)	(51	)	(88	)
Change in reciprocal interest	—		—		4		37
Balance at end of period	(47	)	(51	)	(47	)	(51	)
Total Enbridge Inc. shareholders’ equity	66,626