Welcome to the Enbridge Incorporated Fourth Quarter 2019 Financial Results Conference Call. My name is Joelle and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the call over to Jonathan Morgan, Vice President, Investor Relations. Jonathan, you may begin..

Thank you, Joelle. Good morning and welcome to the Enbridge, Inc. fourth quarter 2019 earnings call.

Joining me this morning are Al Monaco, President and Chief Executive Officer; Colin Gruending, Executive Vice President and Chief Financial Officer; Vern Yu, Executive Vice President, Liquids Pipelines; and Bill Yardley, Executive Vice President, Gas Transmission and Midstream.

As per usual, this call is webcast and I encourage those listening on the phone to follow along with the supporting slides. A replay and podcast of the call will be available today and a transcript will be posted to the website shortly after. In terms of Q&A, we will prioritize calls from the investment community.

If you are a member of the media, please direct your inquiries to our communications team, who will be happy to respond immediately. We're again going to target keeping the call to roughly one hour and may not be able to get to everyone. So please try to limit your questions to one and a follow-up as necessary.

As always, our Investor Relations team is available for your detailed follow-up questions afterwards. On to Slide 2, where I'll remind you that we will be referring to forward-looking information on today's call.

By its nature this information contains forecast assumptions and expectations about future outcomes, which are subject to the risks and uncertainties outlined here and discussed more fully in our public disclosure filings. We'll also be referring to non-GAAP measures summarized below. With that, I'll turn it over to Al Monaco..

Thanks, Jonathan, and good morning, everybody. I will start off by kicking the Q4 numbers out and then some development since Enbridge Day, in particularly, Line 3; then our mainline contracting application and since there's a lot of interest in this, I will provide a bit more of our thinking on it.

As you saw as well from our announcements, we will cover off securing longer-term growth. Colin is going to take you through the Q4 and full-year results, the balance sheet and our financial outlook. So moving to Q4 highlights on Slide 3. Operationally, Q4 came in strong capping off a record financial year and we made great progress on our priorities.

The good numbers, the proceeds from asset sales drop down our debt to EBITDA metric to 4.5 at year-end, strong end of our target 4.5x to 5x range. So we're pleased with that.

We delivered on highly capital efficient optimizations and the revenue and cost capture we’ve been talking about namely more throughput delivered on the mainline, and we had a record December. A very good rate settlement on Texas Eastern and then synergies from combining our Ontario utilities.

We put $7 billion of projects into the ground this quarter. That's not an easy feat in this environment, obviously. And we’ve moved our U.S Gulf Coast strategy along by securing new projects. So all-in, we’ve come out of our post Spectra 3-year plan in good shape. That's allowed us to increase our dividend again by 10% for the third year in a row.

On to the financial highlights with Slide 4. EBITDA came in at $13.3 billion for the year and DCF at 9.2, both exceeding our full-year guidance by $300 million. That translates into DCF per share of 4.57 or that’s the top end of our full-year guidance range. This is a great outcome given the headwinds that we experienced.

As you know, we were originally counting on Line 3 to give us cash flow beginning in November of last year and that costs us $0.08 alone. Gas transmission costs were a little bit higher this year and we issued, as you recall, shares to buy in four sponsored vehicles in Q4 2018.

But the rate will offset those in more with exceptional performance in liquids through year, good results in gas distribution and storage and outperformance on energy services. And we have some good cost management along the way. On to slide 5 for project execution in the queue. Gray Oak began service in Q4.

That one fits very nicely into our Gulf Coast strategy, which I'll speak to a bit later. On offshore wind, Hohe See and the adjacent expansion started generating 609 megawatts of capacity, and that's a large wind farm by any measure.

So with our U.K ramping project we're now at about 1,000 megawatts of operating offshore wind and we’ve got four more projects in development by the way. Offshore France with attractive PPAs and we are in execution on one of those right now. Back to North America. We got Line 3 Canada into service as you know, which is a big deal for us.

It immediately enhanced safety and reliability of the system. It gives us good flexibility to help egress, so that's great news for our customers in terms of WCSB volumes and netbacks. And the inner -- interim surcharge gives a cash flow in 2020 before we bring the rest of the line on in the U.S.

On that note, let me turn to the business update and Line 3 in Minnesota. So last week the PUC recertified the EIS and reinstated the certificate of need and route permit. Obviously, it's good to see this process concluded because it sets the next steps in motion for the remaining permits.

We had excellent community support for the project and over the last five years this project has been thoroughly vetted and everybody has had a chance to provide their input. So that's lengthy, the process need this project better. I think it gives people confidence that the environment is protected.

The focus now is on the permitting agencies, so let me outline the big picture steps on Slide 7. So this is the graphic view that we’ve been using to update you and it's divided into the two tracks. And at a high level, you can see a few more items that have been checked off since Enbridge Day.

On the PUC track, now that the EIS, the Certificate of Need and Route are recertified. PUC will issue an order followed by the petition for a reconsideration period. That’s the same process that occurred last time around.

On the agency track, the Department of Natural Resources, The Pollution Control Agency and the Army Corps have been working in parallel through this period where the EIS was being recertified.

The PCA has now updated their schedule, as you saw and we will initiate travel review of the 401 permit next week, followed by public consultation in early March. So they’re moving things along well. The additional public consultation at the Army Corps is already underway, so that's good. And the DNR continues to work on the premise.

Once the state agencies and the Corp complete their work, the PUC will be in a position to issue an authorization to construct. So this is where the two tracks come together. Now we still don't have clarity on specifically when permits will be issued, so our approach is going to be the same as before.

Once we’ve clarity on the final permits, we will be in position to provide an ISP estimate. But as we’ve said before, once we have those permits in hand and are clear to go, then construction should take between 6 to 9 months. So in light of everything, we're pleased with how this is moving along.

So let's now move to the other topic, Mainline contracting on to Slide 8. So we filed our CER application in December. And importantly that included 13 letters of support from shippers representing about 75% of current throughput. Now this is more important than just on the face of it.

These shippers have basically said in their letters that they support the offering, including the tolls and they’re committed to supporting this process in front of the regulator. The application itself speaks to why contracting is in the public interest, which is the CER test here. And we think the offering not just means, but exceed that test.

First, the offering maximizes producer netbacks, because we provide the lowest stable tolls to the very best markets. So it's positive from a WCSB economic perspective. Second, it's good for the basin, because contracted capacity locks in long-term demand for Western Canadian production. That’s also important to producers and the future of this basin.

Third is open access. Everybody will have an equal opportunity to move barrels to the best markets. And two examples of this process, we introduced what we call a requirements contract, so no take-or-pay commitments are needed. I think that requires clarifications well.

And we reached a minimum threshold -- a maximum threshold of 2,000 barrels per day for small shippers. So we're basically inviting any small shippers to participate. And finally this offering provides a commercial framework for future low-cost expansion on the Mainline.

So the point here is that we've gone to great lengths to ensure that the offering works for everybody and that our interests are aligned with producers as they always have been on CTS and previous to that. So let's take a look at what is probably the most important issue here, which is how we balance the offering that we struck. On to Slide 9.

When we began talking about the next rendition of CTS with customers, they told us universally that three things had to be there, because they were frustrated with apportionment, they want guaranteed access to the Mainline.

They want toll certainty to protect their margins and provide clarity over future upstream and downstream investments they need to make. And for us, to continue optimizing our system because it provides the lowest cost incremental capacity and wider services.

And remember, we managed operating and integrity costs, foreign exchange, interest rates and capital exposure on behalf of the shippers. After two years of negotiation and changes to improve the offering, we landed on what is we think a very good balance of benefits for everybody; producers, integrated companies and refiners.

So a few different perspectives on how we balance this. Refiners and integrated producers have historically shipped most of the volumes on the Mainline, about 90%. So for them contracting secures access to Western Canadian barrels that they need at stable and competitive tolls.

Now on the producer end, many producers have been satisfied with selling their barrels to refiners in Alberta. But this offering can change that game. Producers cannot control their destiny by getting their own guaranteed access to our system, which will optimize their netbacks because they can sell barrels to the best markets.

So while many producers haven’t historically been Mainline shippers, this offering allow them the opportunity to control their barrels. Now for those who don't want to participate, we're reserving 325,000 barrels a day of spot. That’s a lot of walk-up capacity, which will increase over time with further optimizations and expansions.

And let me spend a minute now on the toll. So we are on Slide 10. First of all, while you scan this, anyone signing up, including the requirements contracts, that’s the non-take-or-pay contracts. Starts with a base contract toll of $5.70 a barrel. Now if the system is fully utilized going forward, then all shippers, small and large get a $0.35 discount.

So that’s down to $5.35. Shippers who sign up for longer terms are eligible for another $0.10. So even the smaller shippers toll would get down to $5.25. Higher volume shippers would see an added $0.14 discount making the lowest contract toll of $5.11. Now a couple of important things to take away on this.

The discounts that I’m talking about here apply to all shippers, small and large, so everybody is treated fairly. And the extensive negotiation that we undertook over the last couple of years, results in a toll that's lower than what the CTS expansion toll would be.

So in sum, we think this offering provides a very good balance for all parts of the value chain, producers, refiners and integrateds, and its positive for basin netbacks.

Not all that surprising, there's some debate as there are many different perspectives as they usually are in the basin here, the balanced and that's why the regulator will assess it from the public interest lands. Slide 11 is the final one on this topic. It gives a brief outline.

The CER just completed what they call their issues request process, which helps to determine the scope of their review and we filed our response to that last week. Next the CER would typically lay out the scope and timing and then receive submissions by intervenors and ourselves, and the timing around that will be of course up to them.

That would be followed by a hearing and the CER's deliberations likely later this year. We fully support a very thorough proceeding that considers all of the issues based on the evidence. And once the CER makes its decision, we will study it. And if we think it works for us, then we move forward to an open season.

Switching gears now to the future and the U.S Gulf Coast strategy on to Slide 11. This chart provides context as to why U.S Gulf Coast is a very strategic part of North America for us.

We think the Golf will be the epicenter of how North America will prosecute its global energy advantage, which is hinged on ultra low cost supply, feeding growing global energy demand. Gulf Coast refiners as you know are the most competitive in the world and they’re configured to process roughly 4.5 million barrels per day of heavy and medium sour.

But a third of the heavies are actually supplied by Canada, but we see that rising to 50% given the Mexican and Venezuelan declines. Blending heavies with light Premium barrels to create medium sour is also part of the value added here. And then there is low-cost light supply destined for export markets.

On the natural gas side, we're excited about the Gulf Coast LNG Mexican exports and pet can fundamentals, the focus then overall on more inline heavy and growing gas exports drives good infrastructure opportunities for us. Next couple of slides shows what I mean by that. Moving to Slide 13.

Just a few years ago, if you looked at this map, we would've had a zero position is U.S Gulf Coast. Combined with the fundamentals today, our Mainline Flanagan and Seaway pipes create an unparallel heavy system flow path that gives us low capital intensity opportunities.

With those pipes in the ground, we are now creating last mile connectivity to refiners and export facilities on that path. The planned Houston oil terminal will provide 50 million barrels day of storage and connections to Seaway refining and distribution network and existing dock -- docks.

We are developing Deepwater VLCC loading projects with enterprises you know and that comes with ownership in their spot terminal. This is a great low-cost solution for customers here that we’ve come up with because we're leveraging combined assets and limiting new capital.

On to Slide 14, we're also very well positioned with our gas business to capitalize on exports. Texas Eastern and Valley Crossing parallel to Coastline and the Louisiana through Texas to the border with Mexico. The strategy here has been to leverage the footprint and create a set of options to capitalize on the future of LNG.

We are currently connected to three plants and are moving ahead with the Cameron expansion to the Calcasieu Pass Terminal. We've got three other projects in development, including two new committed ones that we announced today. That totaled roughly 2.3 billion of new projects with opportunity to grow from there.

So we are giving you a glimpse at this at Enbridge Day, but now they’re secured. So on Slide 14 -- 15 for bit of a description there, the first project will serve NextDecade's Rio Grande LNG facility at Brownsville.

We reached agreement to buy Rio Bravo pipeline development from NextDecade as you saw, which would connect premium supply to Rio Grande through Agua Dulce. And, of course, they signed a precedent agreement with us. The base investment here is $1.2 billion for the first two trains with good low-cost expansion potential for additional trains.

Secondly, we’ve secured an expansion of Valley Crossing to serve the Annova LNG terminal. That capital will be about $500 million and is underpinned by a long-term take-or-pay contract. In both cases we're using our Valley Crossing footprint. So it's capital efficient and we can manage execution risk well.

The commercial underpinnings of both projects are in the middle of our pipeline utility fairway and well within our equity self-funded envelope. In fact, you can look at it as we are filling up part of the 5 billion to 6 billion per year in organic growth capacity that we have. And both of those LNG plants are subject to final FIDs.

On to Slide 16, another focus of the gas business is modernizing and upgrading the system to reflect regulatory changes like new air emission standards.

These solid organic rate based type growth opportunities totaled about $800 million annually for the next while, system-wide and will recover return on capital through more frequent rate case proceedings. I will shift now to the Gas Utility on Slide 17.

Great progress here on capturing synergies related to the amalgamation of the Ontario utilities, that should drive a strong ROE during our 5-year incentive-based regulatory framework and we're just in year two that now.

We are advancing about $400 million of system expansions and on top of that there is another $500 million or so of core rate base growth annually from the 40,000 to 50,000 per year in customer adds. We are happy with this business and it should continue to generate a very solid return and good growth.

So with that, I'll turn it over to Colin to speak to the financials, the balance sheet and the outlook..

first, 1% to 2% from embedded opportunities in the core business i.e. capital light opportunities. And the second bucket 4% to 5% from newly secured capital investment opportunities, again all within our self equity funded model. So thank you. Al, back to you..

Okay. Thanks, Colin. So, all in, 2019 was financially and operationally strong year. But as they say that's in the past, the team is now focused on building for the future with a keen eye on capital allocation. And by that, I mean executing on the secured projects we have, including the U.S portion of Line 3.

Optimizing the base business through embedded growth within the system and there's plenty of that opportunity. And it mean securing new projects that will expand growth well into the future as you saw with our LNG announcements.

As Colin just covered well, we will be disciplined by investing in low capital intensity organic projects and living within the equity self-funded model. And, of course, the balance sheet and financial flexibility will continue to be the overarching priority. So with that, we will turn it over to the operator for questions..

Thank you. [Operator Instructions] Rob Hope from Scotiabank is on line with a question..

Good morning, everyone.

Just I realize that you're not providing an estimated in-service date for Line 3, but based on what you've seen from the permitting agencies in terms of their proposed progress to date as well as your conversations there, just want to get a sense of everything is unfolding as you would have had expected that would allow construction for the summer?.

Maybe I will just start off and Vern you can take on. I would say from everything we’ve seem, Rob, the agencies have been working diligently through this whole piece. And you mentioned discussions, obviously, we are engaged with them and we’ve good di0scussions on all the work that's being done.

Obviously, we are being quite responsive in terms of information that's required. And at the same time, they've got to work through their process. So -- but everything that we've seen indicates that they’ve been working hard and are on track.

So, I don’t know, Vern, if you’ve anything to add on to that?.

Well, I think the only thing I would add, Al, is that the agencies are very mindful of making sure that their decision records are very strong, that everything is well documented. And so that in the future there's no ground for these things to be returned..

All right.

And then switching over to Line 5, just want to get a sense of your thoughts on rerouting the pipeline on the Southern Edge of Lake Superior as well as when you could -- that would be around the Bad River Band as well as when you think you could actually start doing more fulsome tunnel construction across the straits?.

Okay. Rob, I will take those. First with the Bad River. The tribe has indicated to us that they wanted us off of their reservations. So we've been working with that in mind where we've now filed for our permits to reroute out of their reservation. So we filed with the Wisconsin Public Service Commission, the Wisconsin DNR and the Army Corps.

And we’ve been actively auctioning land for about a 40 mile reroute. So we’ve been doing this to meet their desire of getting off the reservation as quickly as possible. And I think we're well on track for that. But we are still open to have further discussions with them if they do change their mind. On to Line 5 tunnel.

We’ve seen with the recent quarter claims decision that upheld the tunnel authority agreement. That effectively gives us an avenue to pursue the permits to build the tunnel. We completed the geotechnical work in the fall and there are no surprises there. The tunnel authority is up and running now and we expect to start engaging with them very shortly.

And once we’ve done that, we will be in a position to file all the necessary permits to start construction for the tunnel. So we are making all efforts to be on track to meet the early as possible in-service date of 2024..

All right. That’s helpful. Thank you..

Okay..

Thank you. Jeremy Tonet from JPMorgan is on line with a question..

Hi. Good morning..

Good morning..

I just want to pick up on the LNG side here. It seems like some really interesting developments in so far as new projects here.

And just wondering if you could give us kind of your thought process as far as the cost of these pipelines and I guess maybe more specifically with cost you would incur, if any, ahead of FIDs and how do you think about the balance of timing there? And would you have interest to go kind of further upstream there and take stakes in any of these facilities? Just any of these thought process here would be helpful..

I think Bill is going to address..

Sure. Hey, Jeremy. It's Bill. Yes, so really, really good story here. I appreciate the question. We are trying to minimize any cost pre-FID for any of our activities. And so far that's been holding pretty well. So, I think you're well aware of what was done that connect LNG facilities with Cameron Freeport, we go into the Sabine header today.

We’ve got the nice project that we’re working on under construction now that has FID with Venture Global and Calcasieu. And then these -- kind of these three that that are coming down the pike here with Venture Global's Plaquemines, the Annova and Rio Grande announced today. So, pretty minimal dollars up front we will be watching the FIDs closely.

And that’s kind of the beauty of what our strategy has been, which is to simply make sure we're the ones that can connect here. And then if they go, we're in a great position. As far as timing on the pipes go, obviously, we’ve got some work to do with some of them to -- with pre-FERC activities.

Benefit of Rio Bravo is that we're buying a FERC permitted project. That’s pretty impressive. These guys have done a really nice job. So that's a benefit there. Cost we are not seeing anything different than our -- what we typically see in our execution. I think we’ve got these pretty well nailed down, especially where they are.

We’ve got a lot of experience with -- for example, with Valley Crossing in South Texas. As far as interest in upstream, I think it was the last part of your question, not the upstream, but the terminals themselves. Yes, so we have a small stake in Annova, down at Brownsville. Basically we will watch the business model carefully there.

And if that’s something that fits our low-risk business model, then we will continue with that. And not opposed to it, it's probably just not our Plan A, if that makes sense..

I think -- Jeremy, it's Al. Just that at a high level, if you go back to the fundamentals behind the Spectra deal itself, I think this is a great example of how the footprint we were looking for is really giving us an optionality play on a number of projects and I think, Bill and the team has done a good job to set up those low-cost option.

So like he said, whatever happens down there in the Gulf and we know that the Gulf and the US generally is really well-positioned for global LNG, given the supply and obviously the low cost. So we're really well situated there and very happy with these two projects we’ve lined up..

That's helpful. Thanks. And maybe just continuing with natural gas here, I just want to touch on maybe some projects that don't get as much airplay and PennEast and then maybe Israel as well as the Frontier project in BC.

Just wondering if you could provide updates on some of that?.

Yes. So it's Bill again, Jeremy. So, PennEast is -- man, it's a struggle. We -- we’ve a couple of points to make here. First, we've got to go to the Supreme Court if they will take us to hear our objection to the Third Circuits decision.

We -- it's something that breaks precedent with 70 or 80 years of the ability of projects, interstate projects to use condemnation on state owned land. And so, that's going to be a big deal really for the industry and not just for PennEast.

More specifically to the project on PennEast, we filed for a bifurcation where we will go ahead and if they will let us build the Pennsylvania section in the first phase and then go to the second phase in New Jersey sometime later.

Pennsylvania will at least get the Northeast Marcellus producers access to other pipes like Adelphia and Colombia, and then we will figure out what to do in the second phase of anything later on. With Frontier, up in Western Canada with -- basically, we’re kind of on a -- in a holding pattern here.

We are talking to a lot of folks to try to get a solution to the growing issue there, which will become an issue in a few years of liquids in the pipe. And we ran into this in Appalachia.

You may recall this, some six or seven years ago and basically it's an opportunity for the producers to monetize some of the heavier hydrocarbons going into the system. So we really think there's a solution there, but not a lot of updates to give you right now..

That’s great. Thanks for taking my two [indiscernible] questions..

Okay..

Thank you. Robert Kwan from RBC Capital Markets is on line with a question..

Hi, good morning. First question is around on project development/M&A. and Colin, you made the comment that efficiency is kind of a key theme. So I’m just wondering you executed a number of projects where you've bought into later stage developments, whether that’s into a joint venture outright.

Just wondering, I guess, is that a preference? And then, second, as you think about just maybe larger scale acquisitions, you become particularly adapt to asset monetization.

So I’m just wondering what your appetite is to acquire a business that maybe has some assets that you covet, but others that you don't want would you be open to doing that, if it meant hiving off a material part of somebody else's business?.

Yes. Thanks, Robert. It's Colin. I think big picture we're not real focused on larger scale M&A at this time. Even with the possibility of funding it with the sell-down or recycling. I think as we’ve talked about our focus, it's really organically and more efficient projects in our corridor, in our franchise.

So I guess its theoretically possible in the industry, but it's not really something we’re laser focused on right now..

Okay.

And then just the kind of buying into later stage projects, is that kind of almost a core strategy at this point to help derisk the development side of things?.

Well, I think -- as I reflect on the -- some of the projects we’ve been kind of buying into top of mind are our European wind projects, which directionally I think you’re seeing us coming in a little bit earlier on those to capture some more of the value there with strong partner.

So I guess we are marrying together that joint venture wise, I think spot with enterprise is a good example. Perhaps, not later stage, but mid stage and efficient capitalize. So those are a couple of examples where I think we’re trying to team up, use our balance sheet efficiently and stay on strategy..

I think maybe just going back to what Colin said about offshore wind, it's a great example, Robert, of our ability to recycle. And so we got in on those projects when they were developed ahead PPAs. But now I think with a new partner coming in that we’ve just recently brought in, we're in a position now where we can essentially promote the project.

And we obviously like that opportunity because it helps boost what was already a very strong return for us. So if we can chip away at things like that and bring in capital, minimize our own capital deployed and boost our return, that’s all part of our focus on capital allocation and discipline and minimizing capital deployment..

Got it. And maybe if I can finish then on something similar on the wind side, Al. How are sustainability in ESG related topics driving your strategy? And I guess historically renewables was a place where you could leverage your permitting construction and operating expertise when you got into the onshore side of things for growth.

But at the end of the day, it seemed like you were still financially driven first pulling back on onshore wind when it kind of became a cost of capital shootout and then eventually just selling at given the amount of value you could achieve.

How should we think about renewables going forward, especially the offshore platform?.

I think your observation is good around the onshore renewables. I mean, obviously, I think we were probably way ahead of the game on renewables generally and the team did a good job of building up a very good portfolio.

But basically what we saw is that the growth was going to be more limited in North America, particularly for independent renewable projects. And at the same time, as you know, we’ve an opportunity to monetize the assets at pretty good multiples when frankly that the growth wasn't as strong as what we saw in the offshore side of the business.

So recycling that capital into what is very growthy outlook for European offshore wind with PPAs, frankly, that are very, very strong and line up extremely well with the rest of our business. In terms of where it fits ESG wise, I think there's some obvious benefits there.

I mean, if you look at all of the parts of our ESG position, I think you could fairly say that we're leading on just about every count. We tend to -- we intend to kind of keep it that way there, but the renewables really are -- maybe a supplement to the ESG strategy. First and foremost, they’re great projects.

They've got good growth in them and most importantly the risk reward profile lines up extremely well. So it's a part of the ESG story, if you will, but certainly very strong projects on their own. And we've got enough inventory now that we are pretty incredible player I think in this space going forward and with great partners in Europe..

Okay. That’s great. Thank you..

Okay. Thank you..

Thank you. Shneur Gershuni with UBS is on line with a question..

Hi. Good morning, everyone..

Hi..

I’m not sure if you can legally comment on this, but with respect to Mainline contracting, there's been some intervener arguments about them. I was wondering if you can talk about is there any deficiencies in the arguments or some nuances with the ember proposals that make it different and [indiscernible] their arguments.

Just trying to understand if there's some comments that you consider make about how you've changed the process. For example, [technical difficulty] CapEx requirements risk. And then it's a different [indiscernible].

Just curious what you can say?.

guaranteed access to the system and toll stability. And when you look at this from a producer perspective, in particular, and the basin overall, having that certainty over the next 8, 10, 12 or 20 years depending on what they sign up for, that provides a lot of certainty for their investment decision-making.

I think it protects their margins and as we said in the comments that really I think solidifies their netback story, just given the low cost toll. So I think it's unique, but it's built off of a long track record of our customers trusting us to provide excellent service.

I mean, we move multiple different kinds of crude that nobody else can do frankly and we do at an extremely low cost. So we think we've got a great offering here that really is as I said in my comments tries to balance this dichotomy of issues between producers, refiners and integrated.

So I'm not sure if that gets to it, but maybe, Vern, if you want to add anything to that..

Yes, okay. Thanks, Al. I think one of the key things that we should point out is our customer base is very diverse. And the individual interest of all of these companies are going to vary quite dramatically. And you can see that it's extremely hard to get consensus within the basin and all the players in the basin.

You can just look at the recent experience the industry has had with curtailment in Alberta, where there is some very strongly diametrically opposed views. So given that circumstance, for us to have around 75% of the volumes on the system, supportive of this commercial offering is quite an accomplishment.

We think the people who are opposed to this are doing this for a number of reasons. Their own particular commercial circumstance and the timing of the offering and the free optionality that potentially Enbridge system provides to them. There are some who like contracting, but just like to see a different toll outcome.

We have a few customers that want us to perfectly match their upstream and downstream contracts and unfortunately we can't do that in the regulatory format we have. And then finally, there are a whole bunch of smaller producers who've never really used the Enbridge system or any pipeline system, in fact, over their history.

And it's been -- it's our challenge going forward is to continue to educate these customers on the potential benefits of this offering. So I think as we spend more time over the next year as we go through the regulatory process, I think we will be in a good position to build stronger support as we move on..

And just one final comment. We keep saying it, but this offering has been built up over a period of two years. We didn’t just drop a regulatory application on the table.

And if you go through it objectively, you'll see that the team has done a great job of listening to particularly the smaller producers, lowering the threshold for volumes, coming in at a toll that's very cost-effective and lower that would otherwise be, and a myriad of changes in the contracts that have demonstrated that we are listening very carefully.

So I guess at this point, we will have to see what the regulator thinks about it..

That makes sense and really appreciate the color on it. May be pivoting a little bit here. When you look at the pace of declining rig activity in the U.S and I do recognize that you have a $11 billion in capital program for 2020 and beyond.

But do you see a scenario where the overall growth spending slows to a point where you basically pivot to a temporary higher level of return of capital, maybe by through buybacks until activity levels resume? Just kind of wondering what’s your thoughts on how you thinking about it?.

I think at this point, I mean, we’ve to be very disciplined and objective about this. So we're not going to push capital investments just to achieve a growth rate that we may have had in the past. So as you saw at Enbridge Day, we're going to be very clinical about how we deploy this capital.

At this point in time, I would say if you look at Bill's business, Vern's business, Cynthia's business and you throw on the offshore renewables, there is ample amount of opportunity within those core franchises without having to stray too far from what we are really good at and the growth that's embedded in there.

We've also got -- remember, probably 1% to 2% of growth that is already sort of embedded I guess in the growth rate from rate escalators, ramp up of volumes and some of the capital projects that we just talked about in the gas business or customer adds in the utility.

So we’ve got this good pod of 1% to 2%, that's fairly easily achievable and then we'll see where it goes from there. So in the franchise like these opportunities that we just announced today, I think we’ve got plenty of those.

But if it gets to a point where we're running out of those and the returns don't match up to what we need them to be, then for sure, different options will come into play. And I think we said once we get through Line 3 and executing Line 3, then certainly all options are on the table depending on what the organic opportunities are..

All right. Perfect. Thank you very much guys and have a great weekend..

Okay. Thank you..

Thank you. Linda Ezergailis from TD Securities is on line with a question..

Thank you. I’m wondering if you could give us a sense from a capital perspective what the outlook is for the next year in terms of your backlog of opportunities.

I appreciate that there's a lot, but I'm wondering if, for example, with some of the decline in activity on the producer side in the U.S that might be a little bit of a low, may be on the pipeline side.

And are you seeing more perhaps than in Canada or offshore to kind of get to deploying your $5 billion to $6 billion of free cash flows this year and next year. I guess, I'm looking at your $11 billion secured capital bucket and I see about a 2-year backlog.

So I’m just trying to figure out the cadence of securing new projects for the next half year?.

Okay. Maybe I will just start and then Colin will chime in. I think the way to think about this one that at least for the 3-year plan that we have out there through 2022.

So what we have embedded in the business in terms of those items I mentioned earlier around tolls and volume ramps, and some of the other things that we talked about and the $11 billion that is secured through 2020. So I think we're good to go on this 3-year plan as far as achieving the growth that we've talked about in the 5% to 7% range.

I think what we're doing now is tracking on opportunities like the ones we announced that start to contribute beyond that 2022 period and we are working on a number of other opportunities that will help fill that and including some of the offshore ones that you mentioned. So I think that's how to bifurcate it.

It's out through 2022, think the $11 billion gets us there and then beyond that it's a more organic growth to be secured..

Yes -- no, it's a great answer. I think you asked what to do 2020 growth CapEx was -- we disclosed that at Enbridge Day, it's $5.5 billion of growth CapEx to satisfy and execute on the first of the three years to get this $11 billion on the ground.

And as Al said, as we consider new projects where we're really looking to see that, the spend years, if you like, on those newer secured projects fit with this CapEx profile and then our balance sheet can accommodate it handling..

Yes. I guess, I was -- yes, I was asking more in terms of securing new projects, so that it kind of backfills 2 and 3 years out. Maybe I can just follow-up with your existing operations. And maybe this is a question for Bill. I'm wondering what sort of discussions you're having with your producer customers in the U.S.

Northeast? Are they asking for any sort of toll relief, any sort of blend and extend? How are you seeing your volumes even on your secured capacity trending?.

Well, so in my business, Linda, to say we are a long-haul long line FERC regulated, fully contracted pipeline system. And I would say, number one, no, we are not in any discussions with blend and extend or any type of discounting.

I think one reason for that and maybe this is -- may this shouldn’t be hard to get, but these contracts are pretty much in the money, meaning, we get out of -- for example, when you get out of Appalachia as a producer and you hold one of the contracts that that they hold on us, they're getting to places like New York City or all the reversals we did they're getting to the Gulf Coast, right? So those are -- and they’re pretty inexpensive rates, relatively speaking.

So, so far I think they're very heavily utilized and they are very valuable contracts for them. So we just -- we haven't had those. We don’t have G&P, right? We are just the long-haul reservation-based payers and we will get you some more good kind of pipeline system..

Good. That’s good to hear. Thank you..

Thank you. Michael Lapides from Goldman Sachs is on line with a question..

Hey, guys.

Just a question about what’s assumed in guidance around the Mainline toll going forward, kind of the guidance growth rate, not the 2020 guidance? Just curious, do you -- should we assume the $5.70 per barrel or should we assume one that’s kind of the discount rates, or some kind of weighted average when thinking about kind of the average toll that you'll collect on the Mainline starting mid '21 and beyond?.

Yes, what we use for our financial projections is kind of a weighted average toll. So assuming that there's contracted tolls in and around what we've shown on this -- on -- in the presentation today. And that the spot toll would make up the difference..

Meaning, the weighted average would somewhere be between the $5.10 and $5.30 a barrel range? And can you remind us what that spot toll would be?.

The spot toll would be close to the CTS exit toll..

Got it.

So close to the $5.70?.

Yes..

Okay. I appreciate it guys. One last question. You all made the announcement today about Rio Bravo and previously you had made announcements around Annova. Just curious, given how weak global LNG prices were before the beginning of this year and then the massive dip down that’s occurred in the last month or so, especially in the Asia-U.S.

and Asia-Canada spread? How are you thinking about the likelihood of those projects actually going FID in the near future and those pipelines actually getting built?.

Yes. So it's Bill. Certainly the global prices brought about by a number of factors are causing some short-term issues. But these are facilities that are in that next round of FID. So these are entities that are looking for off-take contracts and supply agreements over the course of the next year or so, but not to be in service till 2023, '24, '25.

And that's kind of where that inflection point is. As you get into -- some folks think '21, '22, you get to a point where you get a better -- sort of a rebalancing and a need for global LNG.

And I don’t know, I haven’t seen anything that says that LNG globally or the demand for LNG globally isn't going to be pretty strong over the course of the next couple of decades. So these folks are -- yes, they are beating the bushes, but we have a lot of faith.

We obviously got a really good insight into their activities over the course of our negotiations for the pipes. And I -- I am not going to count any of them out, but that’s our -- right now we hold optionality if they do FID and we have a pretty good view that they’re in good position..

I think competitively those, if I’m right, bill, from a cost -- supply cost perspective, given where those two projects are and how competitive they are proximity wise to markets and so forth. I think we feel pretty good that if projects go these are likely to be them. So that's a good spot to be in and Bill and his team have captured these.

Now let's see what happens from there..

Got it. I appreciate it. Thanks guys..

Okay, Mike..

Thank you. Ben Pham from BMO is on line with a question..

Okay. Thanks. Good morning. On the Annova Rio Bravo project, where do those projects sit in your -- those four buckets of build multiples.

Is Annova 3x to 5x and Rio Bravo a little bit higher than that because you're getting a little bit late in the project?.

Hey, Ben. It's Colin. Maybe Bill to supplement. But I think you’re generally right. I think these -- both of them fit pretty squarely in our traditional built multiple range of 6x to 9x. Annova is a little more efficient..

Yes, that’s right. We’ve negotiated these from a financial standpoint. They’re right down the fairway with our -- with what projects we’ve done in the past..

Okay. And I know there is some questions on the $5 billion to $6 billion in securing that post 2022 and your B [ph] team worked hard on that.

And just looking at your slides, it seems though and you've [indiscernible] Enbridge gas, gas transmission, offshore wind, and it seems like there's an ongoing sustained $1 billion or $2 billion or so that you're seeing in the long-term. But when you put a product like Annova in there, 3x to 5x -- $0.5 billion U.S CapEx.

Is it not like spending or putting like $1.5 billion in that $5 billion to $6 billion? Which would have assumed a higher multiple, Bill? Is that the right way to think about it?.

Yes. I think generally you’re right. I mean not all capital spend is treated equally, right? Indeed, some of the capital efficient projects, punch above their weight, so to speak, in terms of EBITDA contribution. So that's the most important metric, is the EBITDA contribution coming from them and they’re kind of unit of efficiency..

Okay.

And that $5 billion to $6 billion, that's still at just at 8x to 9x, because that's a very theoretical high level assumption you guys are using?.

Yes..

Yes. That’s right. This is actually a very good question, Ben, because we’ve kind of talked around here -- around the organic opportunities in the $5 billion to $6 billion.

But I'd like to think of it as, if you look at the four businesses now, you're probably looking at between $1 billion or $2 billion for each of them per year to fill that $5 billion to $6 billion. And you pointed one out there that is pretty much locked in with the gas distribution business, around a $1 billion.

Certainly, Bill's opportunity set is certainly in that category at least. Vern's and then we’ve got -- as we said earlier, the offshore wind. So it doesn't take long when you look at the four franchises to get to those kinds of numbers in just with organic growth. But obviously, these things don't happen naturally every year.

I mean, it's probably bumping us to this and that's just part of organic base growth. So I think we feel pretty good about the $5 billion to $6 billion and getting there within the core franchise..

All right. Great. Thank you..

Okay..

Thank you. Praneeth Satish from Wells Fargo is online with a question..

Thanks. Good morning. Just what kind of interest are you seeing from shippers to expand Seaway? It seems like there's a lot of capacity now out of Cushing.

So just wondering what the competitive advantages of the project?.

Okay. It's Vern here. So we’ve seen some pretty good interest on the Seaway open season. It's probably one of the lowest tolls for light crude from Cushing to the Gulf Coast. But having said all that, the shippers have come back to us and said they want more flexibility as far as different crude types that could be moved.

And then we have the advantage of being really the primary conduit of heavy crude into the Gulf Coast. So we're going back and amending our TSAs to allow for these different crude types. Allowing shippers to bring heavy crude to the open season.

So we're pretty -- feeling pretty good that with those changes that we will have a good path to move forward..

Thanks.

And then, can you just give us an update on Bakken gas takeaway and just whether there's been a progress on an alliance expansion? Is this something you can tackle in maybe a phased approach?.

Yes. So it's Bill. Yes are still plugging away in the Bakken. I think we're hoping to have something this year for sure as a small project out of there and perhaps take it in phases..

Okay. Thank you..

Thank you. Robert Catellier from CIBC Capital Markets is on line with a question..

Hi. Good morning. You touched on this a little bit through your answer to other questions. But I just wanted to dig down on the Mainline a bit. I don’t want to be dismissive of tolls because I know they’re important to everyone.

But other than tolls, is there a common refrain you’re hearing from shippers that are not immediately supportive of the Mainline contract offering? And is there anything you can do operationally such as enhance connectivity, storage or anything like that to help ameliorate the situation?.

It's Vern. Those are -- that’s a great question because from a producer perspective tolls are obviously important, but having the ability to compete month in and month out with the refineries is also a very important thing for them.

So we are in the background working on additional downstream points for those producers, potentially tankage at Flanagan, potentially longer-term, more access to Patoka, more access downstream refine and again to Cushing in the Gulf Coast, which will ultimately make this more attractive to the producing communities.

So there are many of these little tweaks that are involved with the Mainline, but involved with downstream assets that will potentially make this more attractive to producers as we move forward..

Okay. So, I guess, that’s just going to run in parallel, but not -- it's not possibly part of the -- certainly not part of the hearing, but I guess it runs in ….

Yes, it's not part of the hearing. But it is a way for us in parallel to build more support with the producing community for what we're trying to accomplish here..

Okay.

And then just on the very low interest environment, I’m wondering if there's any opportunity -- further opportunity to take advantage in a way that benefit shareholders or for example more asset sales or ways to bring in partners into existing projects to monetize? I know you’re kind of at the low end of your leverage rate currently, but are you seeking to take advantage of lower rate environment?.

Hey, good morning, Robert. It's Colin. Yes, interesting question. I think we are all observing these low interest rates, generationally low rates. I guess, at a first principals basis we are -- we tend to derisk interest-rate risk.

So we're -- obviously our debt portfolio is significantly termed out and our floating-rate exposure would be sub 10% by design. However, within that bucket, we are being as creative as we can be and we're hustling for every basis point trying to capture it.

We are likely to see some tailwind from this theme on our Canadian rate reset -- preferred shares for example, those are rolling at lower rates than expected. And in a variety of other things like that, that will contribute smaller contributions to our outlook.

You mentioned in a bigger picture, lower interest rates provide a tailwind for a strong PE bid, which I think will support continued asset recycling again on the margin. So those are maybe a couple of barbell examples of how we can participate in this by design..

In fact that's what if you look at the recent asset sale on MATL, that’s exactly what happened. It got two point where we got bids and we decided to capitalize on it for exactly the reason you’re pointing out. Very strong interest at good valuations..

Okay. Fantastic. Thanks..

Thank you. We have reached our time limit and I’m not able to take any further questions at this time. I will now turn the call over to Jonathan Morgan for final remarks..

Thank you, Joelle. As always, our IR team is available to take any additional follow-ups you may have. And thank you to everyone for your time and interest in Enbridge, and have a great day..

Thank you, ladies and gentlemen. We appreciate your participation. This concludes today's conference. You may now disconnect..