Enbridge (ENB) Q2 FY25 earnings call: guidance and Q&A

What are the opportunities for natural gas expansion to serve incremental power and data center demand across Enbridge's footprint, and what is the timeline for new projects?

Enbridge sees opportunities across all four business units (GDS, GTM, Renewables) for power demand, with 35+ opportunities on the Gas Transmission side for 11 Bcf of gas, including 10+ specific data center opportunities in late stage. 45% of North American natural gas power generation is within 50 miles of their system, along with 29 new data centers and 78 coal plants. Opportunities are primarily in the U.S., with some emerging in Canada for LNG.

“45% of all natural gas power generation is within 50 miles of our system. And within that area, too, that 50 miles, there's 29 new data centers. And then, of course, we still have the opportunities for coal to gas conversions. There's 78 coal plants in that area.”

asked by Jeremy Tonet · answered by Cynthia Hansen

Could you provide more detail on the drivers of higher cost expectations for Woodfibre LNG and how the low double-digit return is protected?

Capital cost increases for Woodfibre are due to changes in building codes, permitting delays, additional flotilla for housing employees, and site conditions. The contract structure allows Enbridge to earn a low double-digit return on the higher capital amount, with the rate set closer to the in-service date. The partner (70% owner) takes capital cost risk but benefits from LNG commodity sales, balancing interests.

“Our contract structure does allow us to earn that double-digit return on capital as we agree to invest in the project. Fortunately, and through the agreements with departments, we're now going to set that toll on the higher capital amount nearer to the projects in service.”

asked by Jeremy Tonet · answered by Matthew Akman

How does the Ohio rate case order impact Enbridge's strategy on rate cases in general for its U.S. franchises, particularly Ohio?

Enbridge was disappointed with the Ohio rate case but noted it still resulted in a strong ROE (almost 10%) and increased equity thickness. The company filed a rehearing due to perceived errors by the PUC regarding pension asset treatment and retroactive rate making. They remain confident in the Ohio utility's growth and plan to file another rate case by year-end to update numbers. For Utah and North Carolina, rate cases are routine updates every 2-3 years.

“At the end of the day, the fact is we still have really strong ROE amongst the best that you can have. We saw an increase in our equity thickness. We didn't have any material denials into what we submitted as appropriate O&M.”

asked by Robert Catellier · answered by Michele Harradence

The pace of gas pipeline announcements seems slower compared to peers. Is this due to excess capacity, waiting for right returns, or dependencies on associated utilities?

Enbridge believes it is getting significant traction, especially on renewables and utilities. While gas pipeline projects may be smaller, they are numerous and economically built, such as Line 31 and SESH. The company highlights its multi-platform strategy and existing footprint, which allows for economical expansions. They also noted that many utilities are not keen on publicly disclosing data center connections, which might mask some of their activity.

“I'm a big believer that much of this is actually going to be done with utilities on the power utilities. And you will note that in neither the case in Mississippi or the SESH project did we announce which utilities, those are 2. And that's because they're not really keen on actually indicating exactly what we're doing on the data center side.”

asked by Praneeth Satish · answered by Gregory Ebel

How does Enbridge approach contractual frameworks and protections for data center customers, differentiating between utility and behind-the-fence customers?

For large blue-chip customers like Meta, Amazon, and AT&T, they are strong credits. For utilities, which represent 75% of opportunities, they are existing, reliable customers. Both typically sign long-term (10-20 year) take-or-pay contracts. For smaller data center hyperscalers, Enbridge would require careful scrutiny, potentially including Letters of Credit. The company emphasizes that scale matters, and major players prefer working with large, diversified energy providers like Enbridge.

“For a credit perspective, other than -- and you see this on the renewable side, the Googles and Metas and AT&Ts, they're obviously super credits. And that's why we're actually on balance seeing 75% of the opportunities with utilities, who are existing customers today, they're amazing credits, too.”

asked by Rob Hope · answered by Gregory Ebel

Is Enbridge's capital allocation strategy increasingly shifting towards higher-return projects, leading to an increase in the average return on its secured backlog?

Yes, absolutely. Enbridge is prioritizing projects in jurisdictions that offer better returns (lower build multiples), aiming for 6-8x EBITDA multiples for new builds. This disciplined approach allows them to pick and choose the best returns from a plethora of opportunities across the business. The goal is a steady increase in return on capital employed as they move up the value chain in investments.

“I would tell you right now, that's a challenge to do more in a place like British Columbia or even Ontario relative to Ohio or, say, Texas. So we want to keep our builds in that 6 to 8x. And then Colin has tons of stuff that is even on the bottom end, if not below that 6 to 8x. So very competitive.”

asked by Benjamin Pham · answered by Gregory Ebel

How broad are the cooperation discussions with companies like Meta, AT&T, and Amazon, extending beyond individual asset deals, given Enbridge's diverse energy capabilities?

Initially, discussions were with supply chain personnel, but they are moving up to higher levels within these corporations due to the strategic nature of energy. These companies are signaling a desire to do more across Enbridge's platforms, recognizing the need for reliable power. Enbridge's size and diversified footprint (40+ states, multiple countries) make it an attractive partner for major tech players who prefer working with large, established energy providers.

“People want to work with big players. So Meta doesn't want to work with a small-cap energy provider. They want to work with a major player and someone who's in 40-plus states and multiple countries and all the provinces, if you will, if you think in the North American context.”

asked by Maurice Choy · answered by Gregory Ebel