How Enbridge is delivering sustainable growth, year after year
Enbridge's commitment to strong financial performance is part of our commitment to corporate social responsibility. After all, among our stakeholders are our shareholders, who depend on us to deliver strong returns to their pension funds, mutual funds and other investments.
Enbridge had another very strong financial year in 2010, delivering outstanding returns across all of our business units, and simultaneously securing new projects and assets that will extend our enviable rate of growth well into the future.
Our ability to deliver sustainable growth—year after year—is supported by our overarching investment proposition that brings together three desirable characteristics:
- visible growth;
- a growing income stream; and
- a reliable business model.
“Our investment proposition of reliability, income and growth for shareholders has shown excellent results through good economic times and bad economic times,” said Patrick D. Daniel, President and Chief Executive Officer, Enbridge Inc. at Enbridge Inc.’s Annual and Special Meeting of Shareholders in Calgary May 11, 201.
“No matter how you look at our performance, whether it’s over a one-year, a five-year, a 10-year or even a 50-year basis, Enbridge has significantly outperformed our sector peers and the market in general. In fact, we’ve achieved a compound average return to shareholders of 13.7 per cent per year over the past 58 years as a publicly traded entity.” Looking ahead, we expect to continue to build on our strong track record of earnings growth through the middle of this decade. Here’s how our value proposition will help us achieve that:
We have established a clear track record of earnings growth over time. This has been fueled by successfully bringing new assets into service to expand our strategic infrastructure footprint. Further, we have already secured significant future growth opportunities given the ongoing need for energy infrastructure development in North America.
Enbridge has delivered solid income growth for shareholders since its inception in 1953. We have increased the dividend an average of 11 per cent per year over the past 10 years, and in more than 55 years as a publicly traded company we have never reduced the dividend. Enbridge common shares trade on the Toronto and New York stock exchanges under the symbol ENB.
For example, our mainline liquids pipeline system, which spans much of the continent, is poised to be extended further beyond its traditional delivery markets. We also have a growing presence in strategically important regional developments, including the Canadian oil sands, the Bakken Formation, the Midwest Texas and Louisiana shale gas plays, and offshore natural gas and oil. Finally, our emerging platforms in wind, solar and alternative green energy power generation are focused on the growing demand for renewable energy across North America.
Our growth in 2010 was driven by two factors: the strong financial performance of all our businesses and the commencement of operations of $6.5 billion in new projects, including the $3.5-billion Alberta Clipper Project—the single largest project we have ever completed. From 2008 to 2010, we have brought over $12 billion in projects into service.
As a result, our earnings per share (EPS) have grown steadily over time at an attractive rate. In 2010, Enbridge again achieved industry-leading EPS growth. Adjusted EPS rose 13 per cent to $1.33 per common share, which built on a 25 per cent increase in 2009.
Further, given the prospect for additional projects, Enbridge expects to see that growth rate continue. We currently have $6 billion of commercially secured projects coming into service between 2011 and 2014, and we have an additional $30 billion of new opportunities under development across all of our businesses. This full slate of commercially secured and potential investment opportunities all fit within the reliable business model that our investors have come to count on.
As a result, we anticipate that Enbridge’s adjusted EPS will grow at an average annual rate of 10 per cent through the middle of this decade and, with the company’s cash flow anticipated to grow at an even more rapid pace, we expect to continue delivering exceptional dividend growth to our investors.
Growing income stream
Enbridge has increased its dividend an average of 11 per cent per year over the past 10 years, and in more than 55 years as a publicly traded company we have never reduced the dividend. Few North American companies can match this record of accomplishment.
This reliable and growing dividend provides an attractive yield to the investor. We increased the dividend by 15 per cent in both 2010 and 2011, and given the expected growth in earnings and free cash flow, we expect to continue to grow the dividend at least in line with our earnings growth forecast through the middle of the decade.
Reliable business model
We aim to consistently structure our business to reliably deliver steady, visible and predictable results. This is evidenced in our contractual arrangements, our risk management frameworks, and our overall philosophy and approach to business. Highlights of our approach include:
- 85 per cent of Enbridge’s earnings come from rate-regulated businesses
- 60 per cent of the remaining earnings come from long-term take-or-pay contracts
- 90+ per cent of Enbridge’s revenues are generated from investment-grade counterparties
- Minimal exposure to interest rates, foreign exchange and commodity prices ( maximum 5 per cent corporate earnings-at-risk limit)
Enbridge is well positioned to meet its long-term growth objectives. We have an exceptionally strong asset base, a proven ability to develop new businesses, and a track record of on-time, on-budget execution. Enbridge offers investors visible and sustained earnings growth, a substantial and growing dividend and a very reliable business model. The unique combination of these attributes will continue to deliver superior results for our shareholders well into the future.
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