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.
This growth program, which is almost entirely organic and stems from the strategic positioning of our assets, will drive cash flow and dividend growth through 2019 and beyond. After 2019, we also expect to see growing contributions from our new business platforms, including renewable and gas-fired power generation, power transmission, energy services and international opportunities.
Addressing Investors’ Interests
We actively engage with our investors who, in 2015, expressed interest in the following areas:
How We Will Execute on our $26-billion Commercially Secured Growth Capital Program
We are in the midst of executing a five-year (2015-2019) $26-billion commercially secured growth capital program that will enhance shareholder value through growing cash flows. In 2015, we brought 14 projects with a combined value of $8 billion into service. We expect that the remaining $18 billion of projects that are currently in various stages of execution will be in service by 2019.
We enhance investor value by focusing on completing our capital projects safely, on time and on budget, and to that end we have a dedicated Major Projects business unit (MP) with the requisite project management expertise. MP’s core strengths include proactive supply chain management, robust cost and schedule controls, safety and quality leadership, advanced engineering and construction expertise, and regulatory permitting experience.
On-time execution also requires a robust funding plan. In 2015, directly and through our affiliates, we collectively raised more than $1.7 billion of equity capital and $3.7 billion of term debt capital. We believe that the remaining amount of capital required to support our commercially secured growth program is very manageable given the strong cash generating capability of our assets, our diversified sources of capital, solid investment-grade credit ratings and available liquidity of over $10 billion as of the end of 2015.
How We Will Extend and Diversify our Growth Beyond 2019
Investors want to know that we are positioned to grow over the long term. One of our key priorities is to extend and diversify our growth beyond our current five-year planning horizon, which ends in 2019. While we plan to continue to capture opportunities within our core Liquids Pipelines business segment (LP), we are focused on rebalancing our business mix over time and believe that the strong fundamentals in natural gas and power generation will create opportunities that meet our strict investment criteria.
How We Use our Sponsored Vehicles
Enbridge Income Fund (EIF) and Enbridge Energy Partners, L.P. (EEP), known as our sponsored vehicles, play a key role in supporting the funding of our large and growing set of investment opportunities. Over the long run, our sponsored vehicle strategy will bolster our financial strength and flexibility, expand our access to attractive sources of funding, enhance returns on our invested capital, and improve our ability to generate industry-leading growth through and beyond our planning horizon.
Our Cash Flow Growth and Dividend Growth and Payout Policy
In December 2015, Enbridge’s Board of Directors approved a 14 percent increase to the 2016 dividend, which was the 21st consecutive annual dividend increase and is on top of a 33 percent increase in 2015. These increases reflect the confidence we have in the company’s outlook, underpinned by the strength of our businesses, an industry leading growth program and our sound financial position.
Enbridge has strong cash flow coverage of our dividend of two times Available Cash Flow from Operations (ACFFO), which is reflected in our dividend payout policy of 40 to 50 percent of ACFFO. On the strength of our business model and large inventory of secured growth projects, we expect to continue to deliver strong growth in Available Cash Flow from Operations (ACFFO) of 12 to14 percent per year on average through 2019. This strong cash flow growth supports an expected annual 10 to12 percent dividend per share increase through 2019.
The Impact of Falling Commodity Prices
Our investors value reliable and predictable returns, so naturally they are concerned about volatile commodity prices and the impact these prices may have on our business. We respond by staying focused on our reliable business model, which minimizes our direct commodity price exposure. Key elements of our reliable business model include:
- investing in assets supported by strong long-term fundamentals,
- conservative commercial structures that provide predictable cash flow and minimize downside risk,
- disciplined investment review processes that ensure that opportunities align with our business model and earn attractive returns on a risk-adjusted basis,
- safe, on time and on budget execution of projects, and
- prudent financial policies that limit exposure to financial market risks.
The following organization chart presents the name and the jurisdiction of incorporation of Enbridge’s material subsidiaries as at December 31, 2015. It does not include all of Enbridge’s subsidiaries. The assets and revenues of excluded subsidiaries did not, individually, exceed 10 percent, or, in the aggregate, exceed 20 percent, of the total consolidated assets or total consolidated revenues of Enbridge as at December 31, 2015. Unless otherwise indicated, the company owns, directly or indirectly, 100 percent of the voting securities of all the subsidiaries below.