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Topics of Importance Economic Impact & Benefits

2015 Performance

KEY FACTS

We are currently engaged in a $26-billion commercially secured growth capital program through which we’re building the infrastructure that North America needs to address its energy challenges. In 2015, we brought 14 projects with a combined value of $8 billion into service.

In 2015, our annual adjusted earnings were $1,866 million or $2.20 per common share, which is a 16 percent increase and within our guidance range.

The compound annual growth rate of Enbridge’s Total Shareholder Return (TSR) has outperformed the S&P/TSX Composite over the past five and 10 years by an average of 11.4 percent and 8.8 percent over each respective annual period.

In 2015, Enbridge’s operating and administration costs in Canada amounted to approximately $1,800 million. Operating and administration costs in the U.S. amounted to approximately $2,443 million. Enbridge’s total 2015 capital costs were approximately $7,275 million.

In 2015, Enbridge’s total payments to governments were approximately $611 million.

Strategic Growth Projects

We are currently expanding our presence across North America through strategic growth projects in liquids pipelines, natural gas liquids pipelines, and renewable energy projects.

In 2015, we rolled out our five-year (2015-2019) strategic plan, which features a $26-billion growth capital program that is already commercially secured and in execution. In 2015, we brought 14 projects with a combined value of $8 billion into service.

We continued to deliver new market access for our liquids pipelines customers. By the end of 2015, we had completed two of our market access programs:

  • Western Gulf Coast Access, which provides the first large-volume path for Canadian crude to the U.S. Gulf Coast, and
  • Eastern Access, which provides critical capacity for western Canadian and Bakken crude oil producers to access refineries in eastern Canada, the U.S. Midwest and eastern U.S., and provides refineries in those regions access to lower-cost feedstock.

We also made substantial progress in 2015 with our Light Oil Market Access Program, which is expanding access to markets for growing volumes of North Dakota and western Canadian light oil to premium refinery markets in Ontario, Quebec and the eastern portion of the U.S. Midwest.

Together, these three initiatives add 1.7 million barrels per day (bpd) of incremental market access capacity.

In addition, we placed these major projects into service in 2015:

  • expansion of our Canadian Mainline system between Edmonton and Hardisty, Alberta, and
  • our Woodland Pipeline Extension project, which extends the Woodland Pipeline south from our Cheecham Terminal to our Edmonton Terminal and increases available capacity to oil sands shippers by 400,000 bpd.

Also in 2015, we announced:

  • a plan to optimize previously announced expansions of our Regional Oil Sands System in Alberta,
  • that we will build, own and operate the Stampede Oil Pipeline to the planned Stampede development in the Gulf of Mexico,
  • our acquisition of a 24.9 percent interest in the 400 megawatt (MW) Rampion Offshore Wind Farm in the UK, with our total investment in the project expected to be $750 million (£370 million), and
  • our acquisition of the New Creek wind farm in West Virginia, which is expected to be placed into service in late 2016 and to produce 103 MW of power.

For more information on our growth projects, please visit http://www.enbridge.com/DeliveringEnergy/GrowthExpansionProjects.aspx

Earnings Per Share Growth

In 2015, Enbridge’s annual adjusted earnings were $1,866 million or $2.20 per common share, which is a 16 percent increase and within our guidance range. This amount brings our average annual adjusted EPS growth rate over the past five years to 10.7 percent. We are also confident we can extend our impressive growth rate well beyond 2019.

Starting in the first quarter of 2016, we will begin reporting “adjusted earnings before interest and taxes” (adjusted EBIT). In 2016, we expect to achieve adjusted EBIT in the range of $4.4 billion to $4.8 billion enterprise-wide.

Reliable Business Results

Cash Flow Growth

Commencing in 2015, Enbridge began reporting Available Cash Flow from Operations (ACFFO) as the primary metric to assess the performance of our business. Adopting the ACFFO reporting metric and guidance will more clearly convey the cash flow and dividend growth potential that we expect our reliable business model and growth capital program will generate through our five-year (2015 to 2019) planning horizon and beyond. In 2015, ACFFO increased 23.2 percent to $3,154 million, or $ 3.72 per common share, from $2,506 million, or $3.02 per common share in 2014. In 2016, we expect to achieve ACFFO in the range of $3.80 to $4.50 per share. Our strategic plan is expected to generate compound average annual ACFFO per share growth of 12 to14 percent through 2019.

Dividend Growth and Capital Appreciation

We offer investors a unique value proposition that combines highly desirable attributes, including visible growth, a reliable business model and a growing income stream. We credit this unique value proposition for delivering excellent returns to shareholders, year after year.

The shareholders of Enbridge Inc. (TSX:ENB) (NYSE:ENB) realize returns through a combination of dividends and capital appreciation.

Dividend Growth

In 2015, we paid a dividend of $1.86 per common share, up 33 percent from 2014, and representing a total of $1,596 million to Enbridge common shareholders. Over the past 10 years, we have delivered average annual dividend growth of approximately 14 percent. Our dividend payout policy range is 40 to 50 percent of ACFFO. In December 2015, we announced a 14 percent dividend increase. This represents Enbridge’s 21st consecutive annual increase and reflects our confidence in the company achieving strong cash flow growth from our existing assets and the capital projects that will be put into service over our five-year planning horizon. We expect annual dividend per share growth of 10 to 12 percent through 2019.

History of Significant Dividend Growth

Capital Appreciation

The compound annual growth rate of Enbridge’s Total Shareholder Return (TSR) has outperformed the S&P/TSX Composite over the past five and 10 years by an average of 11.4 percent and 8.8 percent over each respective annual period. This strong performance is driven by our reliable business model, our ability to execute on our growth program and the significant dividend income we provide to our shareholders.

Total Shareholder Return

Ongoing support for our share price comes in part from indices and rankings based on information about our environmental, social, ethical and governance policies and practices. These indices and rankings are based on the concept that a company’s commitment to CSR and sustainability will maintain and grow long-term shareholder value. As a result, a certain segment of investors choose to direct their investments toward companies listed on these indices and rankings.

In 2015, the Dow Jones Sustainability Indices named Enbridge to both its World and North America index. The DJSI indices track the performance of large companies that lead the field in terms of sustainability, financial results, community relations and environmental stewardship. Enbridge has been included in the North America Index eight times in the past nine years, and named to the World Index six times, including the past four years running.

The Global 100 Most Sustainable Corporations in the World highlights global corporations that have been most proactive in managing environmental, social and governance issues. In January 2016, Enbridge was named to the Global 100 for the seventh straight year, and 10th time overall. Enbridge is ranked No. 46 worldwide—up from our No. 64 overall ranking in 2015—and third among Canadian corporations. For more information, please see the Awards & Recognition section of this report.

Economic Value Generated and Distributed

In addition to creating value for our shareholders, we also create value for our other stakeholders, including our suppliers (through the operations and capital dollars we spend), community members and organizations (through our community investments), employees (through the salaries we pay) and governments (through the taxes we pay).

As per the table below, in 2015, we spent approximately $4,248 million on operating and administration costs and approximately $7,275 million on capital costs. We also spent about approximately $858 million on employee salaries; invested approximately $19 million in donations and other community investments; and paid approximately $611 million in various types of taxes.

These amounts strengthen the countries and communities in which we do business.

For the Year Ended December 31, 2015 (unaudited; millions of Canadian dollars unless otherwise noted)
Revenues (including income from equity investments)1 34,269
Commodity Costs and Gas Distribution Costs 25,241
Operating and Administration Costs2   4,248
Capital Costs3 7,275
Adjusted Earnings 1,866
Available Cash Flow from Operations 3,154
Payments to Shareholders 1,884
Preference Share Dividends Declared 288
Common Share Dividends Declared 1,596
Payments to Lenders 1,835
Total Base Salaries4 858
Donations and other Community Investments 19
Payments to Governments5 611

Certain amounts in this table have been determined and presented in view of the Global Reporting Initiative 4.0 reporting guidelines and may differ from amounts determined under the U.S. GAAP.

1 Revenues include $475 million of income from equity investments.

2 Operating and administration costs in Canada amounted to approximately $1,800 million. Operating and administration costs in the U.S. amounted to approximately $2,443 million. Operating and administration costs that we incurred through our international activities amounted to approximately $5 million. Total 2015 operating and administration costs were approximately $4,248 million.

3 Capital costs in Canada amounted to approximately $4,097 million. Capital costs in the U.S. amounted to approximately $3,178 million. Total 2015 capital costs were approximately $7,275 million.

4 Total base salaries includes the base pay of permanent and temporary employees, including approximately $631 million for employees in Canada; US$227 million for employees in the U.S. Total base salaries for 2015 amounted to approximately $858 million. We have added Canadian currency amounts with U.S. currency amounts, and have not applied an exchange rate. 

5 Payments to governments (including property taxes, income taxes and other taxes) in Canada amounted to approximately $266 million. Payments to governments (including property taxes, sales and use taxes, income taxes and other taxes) in the U.S. amounted to approximately $341 million. Income taxes paid to other governments amounted to approximately $4 million. Total payments to governments were approximately $611 million.

In addition to tax payments made to governments, Enbridge employs significant resources, including the cost of salaries, technology and control functions to comply with various government-imposed requirements to collect and remit taxes on their behalf. In 2015, Enbridge collected and remitted $1.4 billion in sales, withholding, and payroll taxes on behalf of Canadian and U.S. governments.

Revenues

Enbridge generates revenues from three primary sources: commodity sales; gas distribution sales; and transportation and other services.

Commodity Sales

Commodity sales are generated primarily through our energy services operations. Energy Services includes the contemporaneous purchase and sale of crude oil, natural gas and natural gas liquids (NGLs) to generate a margin, which is typically a small fraction of gross revenue. While sales revenues generated from these operations are impacted by commodity prices, net margins and earnings are relatively insensitive to commodity prices and reflect activity levels that are driven by differences in commodity prices between locations and points in time, rather than on absolute prices. Any residual commodity margin risk is closely monitored and managed. Revenues from these operations depend on activity levels, which vary from year to year depending on market conditions and commodity prices.

Gas Distribution Sales

Gas distribution sales revenues are primarily earned by Enbridge Gas Distribution (EGD) and are recognized in a manner consistent with the underlying rate-setting mechanism mandated by the regulator. Revenues generated by the gas distribution businesses are driven by volumes delivered, which vary with weather and customer composition and utilization, as well as regulator-approved rates. The cost of natural gas is passed through to customers through rates and does not ultimately impact earnings due to its flow-through nature.

Transportation and Other Services

Transportation and other services revenues are earned from our crude oil and natural gas pipeline transportation businesses and also include power production revenues from our portfolio of renewable and power generation assets. For our transportation assets operating under market-based arrangements, revenues are driven by volumes transported and tolls. For assets operating under take-or-pay contracts, revenues reflect the terms of the underlying contract for services or capacity. For rate-regulated assets, revenues are charged in accordance with tolls established by the regulator, and in most cost-of-service based arrangements are reflective of the company’s cost to provide the service plus a regulator-approved rate of return.

For the purposes of presentation for Enbridge’s 2015 CSR & Sustainability Report, we have included Income from Equity Investments in Revenues.

The following table presents Enbridge’s total revenues for the past four financial years: [DJSI 2.3.1]

Year ended December 31 (unaudited; millions of Canadian dollars) 2012 2013 2014 2015
Revenues (including income from equity investments) 24,8551 33,2481 38,0091 34,2691

1 Revenues include $475 million (2014 - $368 million; 2013 - $330 million; 2012 - $195 million) of income from equity investments for the year ended December 31, 2015.

The following table presents Enbridge’s 2015 revenues in percentage terms by main source of revenue as noted above: [DJSI 1.7.1]

Source of Revenue Percentage of total 2015 revenues (unaudited)
Commodity Sales 69.6%
Gas Distribution Sales 9.0%
Transportation and Other Services 20.0%
Income from Equity Investments 1.4%
Total 100

Taxation

Our tax governance principles include our tax mandate, tax code of conduct and tax risk philosophy.

Our tax mandate is to comply with all applicable tax laws in every jurisdiction in which we operate, ensure accuracy and timeliness in our tax accounting and reporting, and enhance shareholder value by effecting all of our business transactions in a tax efficient and legal manner.

Our tax code of conduct upholds our core values and requires that we act with integrity and demonstrate respect for the tax laws, tax authorities and other stakeholders in all jurisdictions where we operate through timely and accurate tax compliance and tax reporting, transparent communication and a spirit of cooperation.

Our tax risk philosophy aligns with our overall low risk tolerance and seeks to minimize tax uncertainty and tax risk through: the development of a strong staff of tax professionals; close monitoring of domestic and global tax developments; timely engagement and collaboration across the organization; seeking tax rulings when required to confirm tax positions; compliance with tax laws in all jurisdictions in which we operate; and timely reporting to senior management and boards of directors.

Enbridge pays income tax, property tax, sales and use tax, business tax and all other required taxes to local, state, provincial and federal governments in Canada, the U.S. and other foreign jurisdictions where we have operations. In 2015, we paid $611 million of income tax, property tax, sales and use tax, business tax and other taxes, primarily in Canada and the U.S.

Additionally, in 2015, Enbridge collected and remitted $1.4 billion of sales, withholding, and payroll taxes on behalf of Canadian and U.S. governments.

Enbridge also publicly reports the following information by geographic region for tax reporting purposes in the notes to our annual financial statements: earnings before income taxes; discontinued operations and extraordinary loss; current tax expense; and deferred tax expense. For more information, please see Enbridge’s 2015 Annual Report.