Jonathan Gould - Enbridge, Inc. Albert Monaco - Enbridge, Inc. John K. Whelen - Enbridge, Inc. William T. Yardley - Enbridge, Inc. D. Guy Jarvis - Enbridge, Inc..

Ben Pham - BMO Capital Markets (Canada) Robert Kwan - RBC Capital Markets Robert Catellier - CIBC World Markets, Inc. Andrew Ramsay Burd - JPMorgan Securities LLC Linda Ezergailis - TD Securities, Inc. Andrew Kuske - Credit Suisse Securities (Canada), Inc Robert C. Hope - Scotiabank David Galison - Canaccord Genuity Corp. Nick S.

Raza - Citigroup Global Markets, Inc. (Broker).

Welcome to the Enbridge, Inc. and Sponsored Vehicles Joint First Quarter 2017 Financial Results Call. My name is Christine and I will be in the operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session for analysts and the investment community.

Please note that this conference is being recorded. I will now turn the call over to Jonathan Gould. You may begin..

Great. Thank you, Christine. Good morning and welcome to the Enbridge, Inc. and sponsored vehicle joint first quarter 2017 earnings call.

With me this morning are Al Monaco, President and CEO of Enbridge, Inc.; John Whelen, Executive Vice President and Chief Financial Officer; Guy Jarvis, Executive Vice President and President-Liquids Pipelines; Bill Yardley, Executive Vice President and President-Gas Transmission and Midstream; and Wanda Opheim, Senior Vice President-Treasury.

As you will have noted, we've modified our call format going forward to be a joint call for all the Enbridge entities including Enbridge, Inc., Enbridge Income Fund, Spectra Energy Partners, and Enbridge Energy Partners. This will allow us to provide a consistent enterprise-wide strategic and financial perspective.

While our primary focus will be on the consolidated view, John will provide specific commentary on the financial performance of each of the sponsored vehicle. We've also enhanced our supplemental information for each vehicle to ensure that we continue to provide full transparent disclosure.

Some of this information is appended to the presentation today and has been posted to the company websites. This call is also webcast and I encourage those listening on the phone line to follow along with the supporting slides.

A replay and podcast of the call will be available later today, and a transcript will be posted to the website shortly thereafter. In terms of Q&A, given the larger agenda and limited time, we will prioritize calls from the investment community only.

If you're a member of the media, please direct your calls to our standard media line and that team would be pleased to address your questions. We're going to target keeping the call to roughly an hour. So, please limit your questions to one and a follow-up as necessary.

And as per usual, we will ensure that our investor relations team will be available for your more detailed follow-up questions after the call. Before we begin, I would like to point out, as usual, that we will refer to forward-looking information in connection with Enbridge and the subject matter of today's call.

By its nature, this information contains forecast, assumptions and expectations about future outcome, so we remind you it's subject to the risks and uncertainties affecting every business, including ours.

This slide includes a summary of the significant factors and risks that could affect Enbridge or could affect future outcomes for Enbridge, which are discussed more fully in our public disclosure filings available on both the SEDAR and EDGAR systems. So, with that, I will now turn the call over to Al Monaco..

to maximize the value of the structure, particularly now with SEP and DCP; by taking MEP private, simplifying DCP and completing the EEP restructure, we've streamlined the operation of the structure. We now have four compelling pure-play value propositions, all comprised of high quality assets, low risk commercial structures and visible growth.

And importantly, they have strong balance sheet, solid distribution coverages, and self-funding capability. So, with that introduction, let me pass it over to John for the financial review..

the timing of the Spectra merger. As Al noted, Spectra typically generates a disproportionate amount of its earnings and cash flow in the first two months of the year, somewhere in the range of 25% to 30% if you look back historically.

So closing the merger transaction at the end of February means we're unable to pick up to two of legacy Spectra's strongest months in our 2017 projections. Secondly, we no longer normalize for the impact of weather on Enbridge Gas Distribution's utility operations. Weather in south-western Ontario, as many of you will know, was warm.

In fact, it was the warmest February on record in the GTA. The impact of this weather was felt in our first quarter results and is expected to carry through the full year. Finally, the shippers' election to defer the startup of the Wood Buffalo Extension from February to December has also negatively impacted the full year outlook for 2017.

So, moving along to slide 14, importantly, the factors I just noted, they will be a drag on 2017 ACFFO, but are not expected to carry over into 2018. This slide provides an illustration of what our 2017 ACFFO would look like.

On an annualized basis, we've adjusted for these items and for the fact that we'll only capture about ten twelfths of our expected year one synergies in calendar 2017.

If you add the combined impact of these effects back to the midpoint of our guidance range, you come to an ACFFO annualized rate around CAD 4 per share, which I mentioned, which is in line with if not a little stronger than we expected to be on a full year basis when the merger was announced.

Slide 15 provides an early view of the visible drivers of ACFFO growth beyond 2017. These include the full year impact of the CAD 13 billion of projects coming into service during 2017. Around 70% of these projects don't actually commence full operations until the second half of the year.

So there will be a significant year-over-year uplift to ACFFO in 2018 as these assets deliver their first full year of earnings and cash flow. We also have another CAD 4 billion of projects scheduled to come into service in 2018, which will provide an additional lift to ACFFO during the year.

As well you can see on the slide, we also expect to benefit in 2018 from additional synergies captured from the merger. As Al noted, by the end of 2017, we expect to have captured 40% to 50% of our estimated total cost synergies on the Spectra deal around CAD 540 million on a full year run rate basis.

In year two, we'll have captured close to 80% of this total and those incremental savings will fall to the bottom line in 2018. Slightly offsetting these factors will be the full year impact of the shares we issue to Spectra and anticipated issuance of common equity through our DRIP program.

The build-up you see on this slide gives us a comfort that the near-term growth outlook for the combined company is robust and in line with our previously published financial projections.

That said it's fair to say that there are a number of potential headwinds and tailwinds that could emerge over the remainder of the year, which could affect 2018 performance up or down. So it's really too early days to be providing more precise guidance for next year.

Moving on now to slide 16 and our actual results for the first quarter and focusing on adjusted EBIT which reflects, as Al mentioned earlier, just a one-month contribution from the assets that we acquired from Spectra back at the end of February.

Total adjusted EBIT was up about CAD 140 million versus the first quarter of last year, but there were a few puts and takes as you can see on the slide. The EBIT contribution from Liquids Pipelines was down a little over CAD 100 million on a quarter-over-quarter basis due to a few factors.

While mainline volumes continue to be strong, lower effective FX rates on hedges used to convert Canadian – or pull revenue rather on the mainline and lower surcharges in North Dakota affected performance quarter-over-quarter.

The quarter-over-quarter performance of the EBIT level was also affected by heavy crude portion on the mainline, which impacted the performance of some of our downstream pipelines, an absence of earnings that resulted from the sale of the South Prairie Region and Ozark pipeline systems, as well as a change in our earnings normalization practice with respect to makeup rights that we implemented at the beginning of the year.

These first quarter impacts were anticipated and have been factored into our 2017 guidance for adjusted EBIT and ACFFO as appropriate. And we do see ongoing improvement in the quarter-over-quarter picture from Liquids Pipelines as capacity optimization efforts help relieve apportionment, effective FX rates improve and new projects come into service.

On moving down a slide, Gas Pipelines and Processing was up significantly as you would expect over the first quarter of last year, reflecting the impact of the one month of earnings from legacy Spectra assets, whose contribution reflected steady performance from its core operating assets and contributions from expansion projects that have come into service over the last year.

The positive quarter-over-quarter performance was also driven by strong performance from the Alliance Pipeline where demand for seasonal firm service continues to be strong as well as improving performance from other legacy Enbridge assets, including Aux Sable and the Gulf offshore pipeline system. Gas Distribution is also up about CAD 29 million.

This mostly reflects the one month of results from Union Gas and offset to a degree by the impacts of warmer weather at Enbridge Gas Distribution, which I spoke to you a little earlier. And finally, Eliminations and Other was down by about CAD 20 million, largely reflecting higher unallocated corporate costs after the merger.

So, moving now to slide 17 and the ACFFO picture, ACFFO was up about CAD 100 million, largely driven by the business-related performance factors that I just discussed.

Higher adjusted EBIT was offset to a degree by higher costs associated with financing a larger asset base and higher distributions to non-controlling interest as a result of both distribution increased and follow-on offerings to the public by both Spectra Energy Partners and Enbridge Income Fund Holdings Inc.

Our per share results were down quarter-over-quarter, largely due to the higher share count from the actions taken in 2016 to strengthen the balance sheet as well as the incremental shares from the merger transaction itself.

As I already mentioned, the timing of the acquisition meant we missed picking up two of Spectra's strongest months, which exacerbated the dilutive effect of the shares issued at closing. Moving on now to slide 18 and the performance of our sponsored vehicles and starting with the Fund Group and ENF, whose results were released earlier this morning.

Fund Group ACFFO was down just over CAD 90 million compared with the first quarter of 2016, largely reflecting the lower residual benchmark toll on the Canadian Mainline that was in effect since Q2 of 2016 and the lower effective FX rate on the hedges used to convert U.S. dollar revenue generated under the CTS toll arrangement.

This was offset to some degree by higher mainline volumes and, as I mentioned earlier, strong demand for the seasonal firm service on the Alliance natural gas pipeline.

The distributions paid by the Fund Group translated into earnings at ENF of about CAD 67 million, which reflected ENF's larger ownership interest in the fund when compared to the first quarter of last year.

We do expect the performance of the Fund Group to improve over the course of the year, given the increase in the liquids mainline IJT Residual Benchmark Toll, which took effect on April 1, improvement in hedge rates, and the impact of close to CAD 2.4 billion of growth capital that will be coming into service over the balance of the year.

Our guidance remains unchanged from that provided in February and the Fund Group remains on track to deliver a consolidated ACFFO of CAD 1.9 billion to CAD 2.1 billion, and maintain an average payout ratio for the full year between 80% and 90%.

Turning now to slide 19 and first quarter results for Spectra Energy Partners or SEP, which announced its results yesterday evening; by way of orientation, while Enbridge only picked up its share of SEP's results for one month during the first quarter, the results we're presenting here are for SEP's full quarter.

Both ongoing EBITDA, distributable cash flow were higher compared to the first quarter of 2016. Expansion projects drove higher EBITDA from Spectra's gas transmission pipelines with ongoing EBITDA up almost a CAD 100 million year-over-year and distributable cash flow up just over CAD 30 million.

The increase in DCF was also driven by higher performance on Spectra's legacy transmission pipelines as noted above, but quarter-over-quarter growth picture was offset somewhat by a one-time dividend catch up that were paid in the first quarter from some of the partnership's equity investments.

SEP also provided additional guidance in its first quarter news release. Full year DCF is expected to be come in between CAD 1.4 billion and CAD 1.48 billion.

DCF is expected to be a little front-end loaded in 2017, primarily due to the timing of maintenance cap in the latter half of the year, and we continue to expect distribution increases of SEP of CAD 0.0125 for 2017 per quarter, and coverage for the full year that will fall within its historic range of 1.05 to 1.15 times.

SEP's debt-to-EBITDA metric stood at 4.1 this quarter, somewhat higher than at the end of the first quarter of last year, given ongoing debt financing of its greenfield program.

But we do expect that metric to improve over the balance of the year as projects are placed into service and begin generating cash as we implement joint venture asset level funding. The CAD 1.6 billion Sabal Trail project is scheduled to be online before the end of the second quarter and will in itself result in a bump in EBITDA and DCF.

Moving along now to Enbridge Energy Partners and turning to slide 20; adjusted EBITDA at EEP was down approximately CAD 50 million compared to the first quarter of 2016.

The quarter-over-quarter decrease reflects the exploration of the Phase 5 and 6 expansion surcharges on the North Dakota system and lower volumes on the non-mainline pipeline assets in North Dakota. Importantly, volumes on Lakehead in the basin of core system remained strong and in line with expectations in the first quarter.

Also impacting period-over-period results this quarter is continuing weakness in the gas gathering and processing business due to the low commodity price environment. The pro forma outlook for 2017 shown in the slide reflects the restructuring actions announced on April 28 as if they were effective on January 1, 2017.

So it reflects the anticipated sale of the Midcoast gas gathering assets and the simplification and deleveraging actions that we're going to take place as part of the restructuring. We expect strong pro forma distribution coverage on both the total and cash basis of around 1.2 and 1.5 times respectively.

We also expect EEP's consolidated credit metrics to improve as a result of the restructuring as some of the proceeds from the sale of Midcoast will be used to pay down debt when the sale closes later in the quarter.

Beyond 2017, EEP's consolidated debt-to-EBITDA metric is expect to decline even further to a longer-term target of approximately 4 times as incremental cash flows generated from jointly fund investments and greenfield projects coming into service.

In fact, to that point, following the restructuring announcement, Moody's announced itself that it removed its negative outlook on EEP's Baa3 rating. So, if you please now turn to slide 21, and I'm going to wrap up with a look at our enterprise-wide funding and liquidity picture.

Al mentioned earlier the significant steps we took last year to further strengthen our consolidated balance sheet heading into the merger with Spectra.

In 2016 alone, we raised over CAD 10 billion of long-term capital, about CAD 6 billion of which was common equity or equity equivalent if you include the common equity follow-on offerings and hybrid equity issuance by the group as well as the equity we created through asset monetizations.

And we've continued to bolster the balance sheet in 2017, raising about CAD 1.4 billion of equity equivalent capital so far this year through our DRIP program, SEP's ATM program, as well as through additional asset monetizations completed during the first quarter. We've also seen great support from our banks as we've gone through the merger.

At the end of the quarter, the combined company had close to CAD 30 billion of committed credit lines and over CAD 14 billion of available liquidity, providing plenty of flexibility to fund our industry-leading growth program.

So with very good access to capital, a strong balance sheet and ample liquidity to back that up, we're very well-positioned to heading into our first full year as a combined company. With that, I'll turn it back to Al..

Okay. Thank you, John. So, to wrap up, this slide that I'm on here 22, illustrates the longer-term outlook for dividend growth. As we promised, we increased the dividend this year by a total of 15% and we expect to generate 10% to 12% on average dividend growth well into the next decade.

Dividend growth through 2019 is highly transparent and really stems from the CAD 28 billion in secured capital projects we're executing right now.

As we described before, we're confident about extending that growth beyond that through embedded growth in existing assets and new projects coming into service between now and 2019, new investments from that big pie of backlog that we looked at earlier, and the room we expect to have in our payout ratio at the end of 2019.

On to slide 23, which are the major investor outreach events that we've got planned in the next couple of months.

As we mentioned on the last call, post-Spectra, we're committed to have first rate IR capability and outreach, and we hope that the additional information and availability of the team around this – first time under this new process is helpful to you.

We'll have our mid-year update on June 8 and 9, where we're looking forward to our business unit heads providing more insight into how they see their businesses, project execution and future growth. And we'll provide more information on the progress at that time on integration and synergy capture.

Between then and December, we'll be working on our combined strategic plan, which we'll roll out at Enbridge Day with our 2018 guidance and longer-term outlook and, of course, there's going to continue to be ongoing outreach through the year on the IR side. Turning to slide 24, as I noted at the beginning, we've had a productive quarter.

We closed the Spectra deal and we're on track for integration and synergy capture. We rolled out the 2017 ACFFO guidance and after the effects of the timing of the closing that deal, we're where we expected to be.

Execution of the program is going well, with CAD 17 billion in new projects coming into service through 2018 and that'll drive growth, of course. We've achieved our goal of greater financial strength and the balance sheet is in good shape. And we'll get even better as the new projects come into service.

And we've streamlined our sponsored vehicles and strengthened EEP through the restructuring of a couple of weeks ago. So, that's the story. We'll now turn it back over to the operator for questions..

Thank you. Our first question comes from Ben Pham from BMO. Please go ahead..

Okay, thanks. Good morning. Just had a question on your slide 15 of your bridge to the 2018 free cash flow; and I'm just wondering on the 2018 exhibit there, are you guys also normalizing for full year contributions from new assets and synergy expectations? I think synergies are about 80% in 2018.

So you're looking out on normalizing that number as well?.

Yeah. Essentially, Ben, we're taking that additional 30% that you see in the bar chart on one of the previous slides at the bottom of the slide, and we're essentially dropping that in and assuming that it happens in 2018. So, it's part of the forecast.

Is that what you're getting at?.

These are the sustainable cost benefits that we'll see continuing out into the future starting in 2018..

Maybe just to add on to those. I was thinking more on 2018 itself.

You have some projects that may not be coming in on a full year basis in that year, and then you've got another 20% of synergies in 2019, are you normalizing for that in the 2018?.

The 2018 outlook would include the impact of the projects that we're expecting to go into service based on the in-service dates that we have. So it will be whatever partial year effect those bring forward. And then, whatever the synergy capture increment is for that period is what we've assumed in the numbers..

Okay. So 2018 isn't adjusted then. Okay.

And then, also, where does Express-Platte fit in your overall structure? Now, I know it's a smaller item at the SEP level, but just looking at your some commentary about being pure liquids, pure gas respectively for both those vehicles, where does that fit in overall?.

Yeah. Well, so the Express business, obviously, fits within Guy's domain from an operational and business and commercial point of view. Yes, you're right, the liquids assets are part of SEP today, the Express system. That's a relatively small piece of the entire SEP pie.

So I think, technically, you're right, it does have oil within SEP, but it's a relatively small amount at this point..

Okay. All right, thanks, Al. Thanks, everybody..

Okay. Thanks, Ben..

Thank you. Our next question comes from Robert Kwan from RBC Capital Markets. Please go ahead..

Good morning. Maybe I'll start with the probability-weighted project inventory on slide 9. I'm wondering did the splits in the chart fall in line with where you want to be versus where you see the best opportunities.

And I guess where I'm going with this is, where do you see the role for acquisitions to kind of bolster your footprint to take advantage of where you think the best opportunities are within this pie chart?.

Okay. Well, that's a good question, because if you go back, this is pre the closing and when we were speaking with Spectra, we got together – both companies and reviewed all of the potential opportunities. And as the chart said, we probability-weighted what we thought was best out of all of that.

And that's how we generated the pie in total and the splits. And so the splits are really based upon what we felt was not just probable, but that fit the investment criteria that we have as a company. And I think you're familiar with that based on the degree of CapEx risk, the level of contractibility for those projects and a number of other factors.

So it's really based on whether or not they'd achieve the value proposition and the returns on a risk-adjusted basis that we target. So I think you could probably take away from that that all of those platforms fit that category and analysis, and that we'd be pursuing all of those categories.

Obviously, depending on where we are in the cycle, it will give us a chance to perhaps high grade some of those projects that come up. With respect to acquisitions, I think in the past, as you know, we would've used asset deals or smaller scale acquisitions to bolster the strategy in any one of those areas.

So I think that continues to be a possibility. So, we'll use acquisitions to fill in the strategy where we can. Obviously, we'd prefer organic opportunities first, but we won't be afraid to pursue asset deals in particular to fill in the strategy..

Okay. If I can just finish just with kind of guidance, obviously, a lot of the focus here has been on 2017 and some of the transient factors.

You had some statements around still being confident in the long term, I guess, very specifically, are you confident in the CAD 5.50 to CAD 6 of share-based ACFFO in the 2019 timeframe or whatever the L3R year is? And then, with some of the sponsored vehicles, you gave the 2017 leverage targets.

I'm just wondering are you still on track for 5.5 times debt-to-EBITDA for 2017? And how do you feel about being sub 5 times for 2019?.

Okay, well, John will handle the last part of the question. I'll take the first part. Essentially, what we're saying, Robert, is that, yes, the guidance that we talked about before the deal and what we see through our 2017 annualized figures that we showed, which accounts for some of these unusual items, are in line with what we thought.

And there is really no change in the outlook for the overall outlook that we have on the business and growth going forward. So I think that's the main takeaway..

I think on the second part of your question, Robert, yeah, I think the long-term glide path that we're trying to achieve with respect to leverage and balance sheet capacity, we're going to be right on track for that..

Okay, and for 2017?.

For 2017, we should be pretty much in track at the end of the day. We'll be updating our forecast as we go through the balance of the year, but I think we're going to be in line..

That's great. Thanks, Al, thanks, John. Oh, yeah..

Robert, getting back to the first part, if you look at the components of that outlook that you talked about, really, it comes down to being able to put the projects into service. And as I said earlier, those look like they are moving on very well.

It also depends on the synergy assumptions that we made and, as we've concluded in the call, we're on track on that front, so those are the big drivers that will drive that outlook..

Great. Thanks, Al. Thanks, John..

Okay. Thanks..

Thank you. Our next question comes from Robert Catellier from CIBC Capital Markets. Please go ahead..

Hi. Good morning. And thanks for the comprehensive overview here. I just wanted to follow up on the acquisition question a little bit here. Knowing that the acquisition you've made with Spectra is going well, it's still an enormous undertaking.

So, in that context, what are the strategic implications having a new partner in Alliance Pipeline? And related to that, the company's ability and willingness at this point to contemplate other strategic acquisitions, maybe not in the scale of Spectra but something smaller, what's your appetite like there?.

Well, let me see if I could answer it this way. We feel very confident in once their transaction closes that Pembina would be a very strong partner in Alliance. They've obviously got a lot of capability and presumably there maybe some opportunities to work together on things. So, I think there will be a good partner in Alliance.

As you know, Alliance is a pretty strategic asset these days when it comes to the basin and particularly in handling liquids-rich opportunities and, of course, it's in great position given the Aux Sable facility and how it's structured. So, I don't see any issues in that partnership going forward.

With respect to acquisitions, which I think is a separate issue, sure, we would look at all opportunities. We wouldn't be doing our job if we didn't continually scour and see what's out there.

Obviously, with this size of deal that we're just chewing through here and making sure we've got it integrated well, which of course you know is a big job, that's a big priority for us. And we need to make sure we're doing that well. We've got a lot of things ahead of us this year and next year.

So, doing a scale of transactions like that one is probably not a priority for us right now. But it doesn't preclude us doing things in a smaller category along the way if they present themselves and if they fit with the overall strategy..

Okay. That's helpful.

And just on the placing those projects into service and the lack of FERC quorum, so really, at what point does the absence of a FERC quorum start to pressure your 2018 outlook?.

2018 outlook, probably not that much, I can get Bill to comment.

We're probably getting close at this point now, given construction windows and the need to get in the field in order to complete for 2017, but frankly, even if it spills over into 2018, it's not really going to have a material impact on the 2018 numbers that we're talking about as far as our outlook.

Bill, do you have anything to add on that?.

No, I think that's right. I think anything we need from the FERC first is NEXUS and that's top priority. Anything else we need is probably much later in the fall..

Okay. Thanks very much..

Okay..

Thank you. Our next question comes from Jeremy Tonet from JPMorgan. Please go ahead..

Hi, good morning. It's Andy Burd for Jeremy.

Regarding the 10% to 12% annual dividend growth after 2020 for ENB, what type of annual investment from the development backlog underlies that forecast? And then maybe also, does that longer-term outlook anticipate a persistent DRIP at ENB or do you see a greater shift to sponsored vehicles in that kind of 2020 plus timeframe?.

Okay. Well, on the first one, actually, that growth is supported not just by what you mentioned, but as I said earlier, the embedded growth within the existing assets, we'll have some room on the payout by that time.

But, specifically, to your question, it's in the CAD 5 billion to CAD 6 billion range of annual investment that is part of the overall math, if you will, to have that outlook beyond 2019. So when you combine it all, we feel pretty good about that – our ability to do that.

If you look at the history, CAD 5 billion to CAD 6 billion, certainly, wouldn't be out of the ordinary. I think the key question is always is the case, as you know, it really depends on the quality of what we're seeing out there around the CAD 5 billion to CAD 6 billion.

So based on what we came up with when we announced this Spectra transaction and that opportunity set, this is quality stuff. It's organic, it fits right within those six platforms, and so we feel pretty good about being able to spend CAD 5 billion to CAD 6 billion going forward.

With respect to the DRIP, I suppose, at the end of the day, there's always an opportunity to turn that off and we're really – I think, John, would tell you that it really depends on what we see at that time, and the sponsored vehicle capital is a very good source, as you know, particularly now that we've got them all set up quite well.

So, it really – I think we just have to be flexible on that depending on where we see our capital needs..

Great. That's good color. Thanks. And the final question is, shifting gears, scale and your non-Canada renewable power asset is growing pretty quickly.

Would Enbridge ever consider a separate vehicle for that portfolio? And if you could briefly touch on the M&A opportunity set in that segment at the moment as well competitiveness there?.

Okay. I think you're right. It's growing if you look at the capital investment, and I think as I mentioned earlier, there are some pretty big opportunities in the European offshore space and they really do fit quite well, the value proposition that we've been espousing for a number of years.

I would say even though that the investment levels are large, if you look at the total pie of Enbridge, it's still a relatively small part of the total ACCFO contribution.

So, we'll continue to invest in it, it's a great place to grow, because it fits the value proposition, but it's probably still going to be limited relative to the massive size of businesses in natural gas and liquids and utilities.

As to the question would we ever consider vehicles? Absolutely, we are constantly focused on ways that we can release value and whether that's a monetization or an asset sale or potentially acquisitions, that's all on the table and, from time to time, those opportunities present themselves. So, we'll be looking for any opportunity to release value.

As far as, I think you had another part of that which was related to acquisitions in that area. I think, at this point, we're more focused on the organic opportunities.

There is quite a slate of these offshore projects in Europe that are strong, they've got the right commercial underpinnings, that's probably our near-term focus as opposed to larger scale acquisition at least for now..

Great. Thanks very much for the questions..

Okay. Thank you..

Thank you. Our next question comes from Linda Ezergailis from TD Securities. Please go ahead..

Great. Thank you. I have a question with respect to your Line 3 Replacement Program.

I see in your release that the Federal Court of Canada has granted leave to appeal to both the Manitoba Métis Foundation and the Association of Manitoba Chiefs with the judicial review of the Government of Canada's decision to approve that Canadian Line 3 Replacement Program.

And then, in your presentation, you comment on everything seems to be on track, et cetera.

Can you comment on kind of whatever the bookends based on precedence of when this leave to appeal process might be resolved and can you still proceed with construction and operation in parallel as this is underway?.

Linda, its Guy. I'll take a crack at that. So I think the answer maybe to the last part of your question is we're fully authorized to begin construction of Line 3 in Canada and we could proceed irrespective of the issue that you've raised.

The way we're looking at drawing up the construction plan for Line 3 in Canada, the element – largely, the elements of it in Manitoba are not going to be the spreads that we pursue first.

So our expectation is, is that this issue will have run its course in the courts and be resolved prior to us beginning construction in Manitoba under our current expectation..

Okay. Thank you. And this is a follow-up. Sometimes it's interesting what you don't say on the call than what you say.

So I was looking at slide 15, your 2018 kind of commentary, and based on the share count, is it reasonable for me to infer that Enbridge, Inc.'s base plan still doesn't really include an equity offering or do I need to wait for some sort of more commentary on your financing plans and relative attractiveness of different options until June or December as another point this year?.

No. You can assume that it doesn't include a follow-on equity offering, Linda..

Yeah. And I think, when we – if you recall, Linda, when we did the equity offering early last year, part of the premise along with the Spectra consideration and how we finance that was that we weren't requiring any equity through the period here, so that was part of the game plan..

Okay.

And will we get a more fulsome update on financing plans in June or December or...?.

Linda, it's John. Yeah, that will come. The more fulsome update will come in December. We'll probably provide a little background at the June mini Enbridge Days, but the more fulsome update will be at the December after we've done all of our planning for the year..

Thank you..

Okay. Thanks, Linda..

Thank you. Our next question comes from Andrew Kuske from Credit Suisse. Please go ahead..

Thank you. Good morning. I know we're still in the early innings of having Spectra into the fold.

But, from just early observations, what are you seeing as far as maybe network effects beyond your initial expectations and there's probably two aspects to this, it's from potential projects that you didn't envision while you're doing the Spectra deal that you now can see when consummation has been done, and then also, on the synergy side, is there any potential upside on synergies?.

Okay. Network effects, first of all, Andrew, we're probably going to get into that a little bit more and give you a glimpse of what those could be at the June conference. I would say, there is a couple of things that are probably more transparent than others.

Certainly, Guy's work around Express-Platte is revealing some opportunities and potential synergy there with our system.

And you can imagine with a very large mainline system and then having another conduit and given the constraints that we see in the upstream side of the business on getting to market, there could be some value there that we see with some additional plumbing that doesn't take too much capital and effort.

So I think that's probably the most transparent thing. I'm not sure we assumed anything like that, but certainly, we're pleasantly surprised that that would be an opportunity. Another thing that maybe we didn't contemplate initially off the bat was – and perhaps we should have was the potential in the Western Canadian business.

The strength of the supply and the ability of producers in Western Canada to find natural gas so cost effectively, given the technology being applied, and so you see the T-South opportunity coming up which is a fairly large one. That's probably something that is going to provide more opportunity than maybe we initially thought.

Around the synergies, commercial or cost, I think we've got to be disciplined about the initial run rate that we've estimated here on the cost side. I think we'll achieve that. We'll obviously search for more. Those probably take a little bit longer, but we wanted to focus on the 2018-2019 period as achieving the CAD 540 million.

So I would say there is opportunities through all of those areas, but they take – some probably take a little bit more time to work through and execute on..

That's helpful. And then maybe just carrying forth on the plumbing commentary, I know there is commentary in the MD&A that talked about EBIT in the liquids division in particular being positively impacted in the back part of the year on throughput optimization and just new projects coming into service.

Is there any kind of directional guide as to the magnitude of optimization versus the new projects?.

Yeah. That's a great question because, given the constraints, you can imagine Guy is very focused on it, so maybe he can explain that..

Yeah. So, Andrew, you would probably understand the history of our system or the heavy side of our system has been full and apportioned for quite some time now.

Our experience is that, on the light side of the system, while it tends to fill up in November, December, January timeframe, we often time experience weakness on the light side of the system in other parts of the year.

So we've been embarking on efforts for more than a year now to identify opportunities to create more of a heavy-based crude slate that can find its way into that light capacity in the summer predominantly. And as we sit here today, we have two specific programs that are underway with individual customers to do that.

We've talked a lot about this medium blend concept. We saw first batches of medium blend in the system in April, and we've got another targeted crude slate that we're going to implement in July.

And kind of overlaying all of that is, we're searching everyday for that last 10,000 barrels a day, 20,000 barrels a day that we can squeeze out of the system in any month through managing our integrity programs, maintenance programs a lot more efficiently.

So, it's really a series of increments that's driving that outlook, and I think the expectation is, is that we're going to try and alleviate some of that summertime weakness that we saw last year on the mainline and keep it full with heavy this summer..

You know, Andrew, as you were asking a question there, bigger picture though, I think Guy and his team are doing a good job on these increments and optimizations, and that means a lot to the customers.

But I think they've also done a tremendous job in putting together some pretty big scale solutions as well with respect to Line 3 and some of the things that come out of Line 3, and that's adding additional increments of capacity the long way here.

So, there is probably in the order of 800,000 to 900,000 barrels in total here when you look at post Line 3 environment that can be added and that's a pretty significant set of options to have..

That's very helpful. Thank you..

Okay..

Thanks, Andrew..

Thank you. Our next question comes from Rob Hope from Scotiabank. Please go ahead..

Yes. Thank you. Just moving to the structure of the company, Spectra does give you a quite a few additional assets at the Enbridge Inc. levels, largely in Canada.

Has there been any contemplation of pushing some of these assets down to either new or existing sponsored vehicles in part to accelerate the leverage reduction at Enbridge Inc.?.

Yeah, and I think you're hitting on a good point here, because the whole – the value of the structure for us is to pull those levers to raise capital where we can optimize the overall cost of capital for the company. So, I think it's an opportunity.

I don't think we have anything immediately in the plans, Rob, to drop down, but once these vehicles are humming. And once they have that capital access capability, obviously, SEP has proven that quite well. I think it's an opportunity, nothing immediate planned, but it's possible..

All right. Thank you..

Okay..

Thank you. Our next question comes from David Galison from Canaccord Genuity. Please go ahead..

Hey. Good morning, everyone.

So just a quick question on your capital projects that are entering service throughout the year this year and then into the next couple of years; how should we think about the ramp of those projects and contributing to earnings and cash flow? Is it going to be, on average, come on right away or will it be a build-up in the contribution over time as these assets ramp up?.

We'd have to go a through each one of them, David. I'm not sure we can put a blanket over it at all and say they all happen at the beginning or at the end. Maybe I'll get Guy and Bill to provide a little bit of color. I think the chart that we have definitely has the key in-service date. I think that's what you go by first.

But may you guys can just give a bit of color around DAPL or Sabal to start with..

Yeah. So, in terms of Dakota Access and [ETCOP] pipelines, we would expect to see some growth in the coming few years off of that asset.

They've recently announced a successful open season that is going to have the contract profile on that pipeline increase, I think, through 2019, so volumes that will be coming on to that system, we have embedded growth already built in..

Probably, the biggest one to talk about on our side would be Sabal Trail. It's on schedule to come into service within a month or so.

And the way that that project ramps is that we have contracts that will come on full for approximately 70% of the overall project with the utilities in Florida right away, and then, within a couple of years, that ramps up to 90% and then a 100%..

Okay, David?.

Yeah. Thank you very much..

Okay..

Thank you. Our next question comes from Nick Raza from Citi. Please go ahead..

Thank you.

Just to re-track on NEXUS, if the project does sort of get delayed a little bit, do you anticipate putting the project into service at a 100% contracted capacity? Could you just provide a little bit more color on that because it's – right now, it stands at about 60% contracted?.

Yeah. So we put the full contract into service with it 60% contracted as soon as we can get it in. We're encouraged, of course, that the two names for the FERC did finally make their way out of the Whitehouse and over to the Senate. So, hopefully, we'll be cobbling something together to get that into service late 2017, early 2018..

I think, Bill, you guys are working away hard on cobbling together other volumes through connections and so forth. So that's additive to the 60%.

But I think the 60% is pretty solid and is that the plan?.

That's right..

Yeah..

Okay. And just to go back to some of the numbers, in terms of the other line item for SEP includes a lot of sort of special items related to the merger.

In terms of going forward, your guidance is 1.4 to 1.48 times now, which is a little bit lower than what was previously disclosed when SEP was standalone of about little over 1.5 times from what I recall.

Could you just talk about some of those charges and how we should be thinking about them?.

It's John. Yeah, the charges there primarily relate actually to – we provide shared services companies into the Spectra Energy Partners as we do into our other sponsored vehicles. So, in connection with the merger, of course, we've undergone some severance across the organization that was part of the synergy at the end of the day.

And what you're seeing there is, if you like an allocation of that into SEP. Having said that, what you will see going forward is the benefit actually of some fairly significant synergies that will flow out to all of the sponsored vehicles, quite frankly, as we go through implement.

So, that will start to feedback if you will into our outlook and our projections going forward..

That's all I had. Thank you, guys..

Thank you. We have reached our time limit and are unable to take any further callers. I will now turn the call back over to Jonathan Gould for final remarks..

Thank you, Christine. That was a lot of material to get through in an hour. So, as always, our IR team will be available right away to take any additional follow-up questions that folks may have. So, again, for reference, that's myself for Enbridge Inc.

related matters, Adam McKnight for Enbridge Income Fund and Enbridge Energy Partners, and Roni Cappadonna for all Spectra Energy Partners follow-ups. So, thank you, everyone, again and have a great day..

Thank you. And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect..