According to the company’s website press release on May 4, 2023, Enbridge Inc. (TSX: ENB) (NYSE: ENB) (Enbridge or the Company) announced that it has reached an agreement in principle on a negotiated settlement (the settlement) with shippers for incentive tolls on its Mainline liquids system, which moves over 3 million barrels a day of crude oil and liquids from Western Canada to demand markets in multiple provinces and states.
The settlement covers both the Canadian and U.S. portions of the Mainline and will provide customers with a stable, competitive toll relative to competing alternatives. In addition, the settlement will preserve high utilization of the Mainline, and incentivize Enbridge to maximize capacity, benefiting industry egress and customer netbacks. The settlement term is 7.5 years through 2028.
"This settlement continues with Enbridge's track record of working cooperatively with shippers, and industry groups, and builds on a 27-year history of similar incentive deals on the Mainline itself," said Colin Gruending, Enbridge's Executive Vice President and President of Liquids Pipelines. "This settlement is a win-win-win – customers will continue to receive competitive and responsive service; Enbridge will earn attractive risk-adjusted returns; and the Mainline will continue to feed North America and global markets with a long-term source of safe, secure, and affordable energy."
The settlement has been approved by the Enbridge Board of Directors and received overwhelming support from a 37-member industry stakeholder group that includes producers, refiners, integrated companies, industry agencies, and governments.
As part of the settlement, Enbridge will be filing new interim tolls for local Canadian crude movements and cross-border international joint toll deliveries to take effect on July 1, 2023. The settlement also eliminates the need to complete its previously filed Lakehead cost of service application, currently before the United States' Federal Energy Regulatory Commission.
Enbridge expects to jointly finalize the settlement with industry and submit an application for its approval to the Canada Energy Regulator in Q3 2023, with the expectation that the new tolling settlement could be approved and implemented later this year.
Some highlights of the settlement include:
- Establishment of a competitive and stable toll that preserves ongoing high utilization of the Mainline, as well as the profitability of crude oil production in Western Canada
- An International Joint Toll (IJT), for heavy crude oil movements from Hardisty to Chicago, comprised of a C$1.65 per barrel toll plus a US$2.57 per barrel toll, plus the applicable Line 3 Replacement surcharge. Tolls will continue to be distance and commodity adjusted, and will utilize a dual currency IJT that will reduce Enbridge's exposure to foreign exchange fluctuations in respect to the Canadian portion of the toll
- During the term, Mainline IJT tolls will be governed by the terms of the settlement, and for the purpose of calculating tolls, all other previous surcharges are superseded by the settlement
- 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% to 14.5% returns, on a deemed 50% equity capitalization, throughout the term of the agreement, which is similar to the returns earned on average during the previous tolling agreement
- Toll escalation for operation, administration, and power costs tied to U.S. consumer price and power indices
- Certain future expenditures associated with Line 5, including the Wisconsin relocation project and construction of a tunnel under the Straits of Mackinac will be included in rate base. Half the capital will be included in rate base as incurred and collect a new surcharge, while the other half will be backstopped and placed into rate base, for collection via a surcharge, upon project completion
- A structure to manage power costs that allows Enbridge to continue its solar self-power initiatives to reduce emissions
- For additional details, please refer to the Mainline tolling supplemental deck
Approximately 70% of Mainline deliveries are tolled under this settlement, while approximately 30% of deliveries are tolled on a full path basis to markets downstream of the Mainline. The other continuing feature is that the Mainline toll will flex up or down US$0.035 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 and guidance provided, subject to filing and regulatory approval of the definitive agreement and associated rates.
Enbridge is pleased with the customer cooperation and alignment this framework furthers with industry.
"We'd like to thank our customers and stakeholders who worked with us to realize this settlement," said Gruending. "We look forward to continuing that collaboration in the coming months to advance and implement this tolling settlement."
Forward-Looking Information
Forward-looking information, or forward-looking statements, have been included in this news release to provide information about Enbridge Inc. ("Enbridge" or the "Company") and its subsidiaries and affiliates, including management's assessment of Enbridge and its 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'', ''expect'', ''project'', ''estimate'', ''forecast'', ''plan'', ''intend'', ''target'', ''believe'', "likely" and similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information or statements in this news release include statements with respect to the Mainline tolling settlement agreement in principle (the "Settlement"), including the terms and characteristics thereof, the benefits of the Settlement, expected regulatory filings, approvals and process and the timing thereof, finalization and implementation of the Settlement and the timing thereof, and expected financial outcomes of the Settlement.
Although Enbridge believes 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 include assumptions about the following: the expected supply of, demand for and prices of crude oil, natural gas, natural gas liquids (NGL), liquified natural gas (LNG) and renewable energy; anticipated utilization of our assets; exchange rates; inflation; interest rates; availability and price of labour and construction materials; the stability of our supply chain; operational reliability and performance; maintenance of support and regulatory approvals, including with respect to the Settlement; anticipated in-service dates; weather; announced and potential acquisition, disposition and other corporate transactions and projects and the timing and benefits thereof; governmental legislation; litigation; credit ratings; hedging program; expected EBITDA and expected adjusted EBITDA; expected earnings/(loss) and adjusted earnings/(loss); expected earnings/(loss) or adjusted earnings/(loss) per share; expected future cash flows; expected future distributable cash flow (DCF) and DCF per share; estimated future dividends; financial strength and flexibility; debt and equity market conditions; and general economic and competitive conditions. Assumptions regarding the expected supply of and demand for crude oil, natural gas, NGL, LNG 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.
Enbridge's forward-looking statements are subject to risks and uncertainties pertaining to the successful execution of our strategic priorities, including with respect to the Settlement and matters connected therewith; operating performance; regulatory parameters, including with respect to the Settlement; litigation; acquisitions and dispositions and other transactions, and the realization of anticipated benefits therefrom; project approval and support; renewals of rights-of-way; weather; economic and competitive conditions; global geopolitical conditions; political decisions; public opinion; dividend policy; changes in tax laws and tax rates; exchange rates; interest rates; inflation; commodity prices; and supply of and demand for commodities, including but not limited to those risks and uncertainties discussed in this news release and in Enbridge's other filings with Canadian and U.S. securities regulators. The impact of any one assumption, 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 assumes no obligation to publicly update or revise any forward-looking statement made in this news release 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.
None of the information contained in, or connected to, Enbridge's website is incorporated in or otherwise forms part of this news release.
About Enbridge Inc.
At Enbridge, we safely connect millions of people to the energy they rely on every day, fueling quality of life through our North American natural gas, oil or renewable power networks and our growing European offshore wind portfolio. We're 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. We're committed to reducing the carbon footprint of the energy we deliver, and to achieving net zero greenhouse gas emissions by 2050. Headquartered in Calgary, Alberta, Enbridge's common shares trade under the symbol ENB on the Toronto (TSX) and New York (NYSE) stock exchanges. To learn more, visit us at enbridge.com
FOR FURTHER INFORMATION PLEASE CONTACT:
Media
Toll Free: (888) 992-0997
Email: media@enbridge.com
Investment Community
Toll Free: (800) 481-2804
