Enbridge(NYSE: ENB) has paid dividends for nearly 70 years, increasing them annually for almost three decades. That's a magnificent track record that few in the energy sector can match. The Canadian pipeline and utility operator has grown steadily by expanding its energy infrastructure footprint, increasingly shifting its focus toward lower carbon energy like natural gas and renewables.
That pivot will pay even bigger dividends in the future, given the expected demand growth ahead for this energy. It should give Enbridge plenty of power to continue increasing its dividend in the future.
The coming demand surge
Enbridge's CEO Greg Ebel discussed what lies ahead for the energy market and the company he leads on its third-quarter earnings conference call. He stated, "Enbridge is ideally situated to serve increasing gas demand stemming from data centers, electric power, LNG [liquefied natural gas], coal retirement and industrial growth." These catalysts should fuel demand growth over the next decade.
Ebel noted, "S&Pis forecasting up to 20 Bcf [billion cubic feet] per day of incremental gas demand growth by 2030." Most of this growth will come from two regions (Canada and the U.S. Gulf Coast). It sees Canadian demand rising 30% through 2030, fueled partly by new LNG export capacity, like Woodfibre LNG.
Enbridge is investing in a 30% ownership stake in that $5.1 billion project, which should begin exporting 2.1 million tonnes of LNG per year when it enters commercial service in 2027. Meanwhile, demand growth in the Gulf Coast is on track to rise 38% by 2030, fueled by industrial demand, exports to Mexico, and LNG projects. Enbridge is building the pipe capacity to support over 30% of the existing and announced Gulf Coast LNG projects.
On top of that, industrial growth and electric power demand across much of the U.S. and Canada will fuel additional gas demand. Data centers, in particular, are driving a surge in electricity demand to support the needs of AI applications. Most data center operators desire to power their facilities with cleaner energy sources, like renewable energy and natural gas.
Ideally situated for the coming surge
"We are ideally situated to participate in new growth opportunities related to this increased demand," stated CEO Greg Ebel on the third-quarter conference call. He then ran through how three of its core franchises will benefit from growing energy demand.
He started by discussing the company's extensive gas pipeline network. He pointed out, "Our gas footprint is within 50 miles of approximately 45% of all gas-fired generation in North America today." That's enabling it to already start "sanctioning additional growth opportunities to support natural gas power demand." That includes "Our Tennessee Ridgeline project, where we're investing $1.1 billion to expand our East Tennessee pipeline to support TVA's [Tennessee Valley Authority's] planned retirement of 9 coal-fired units in favor of 1.5 gigawatts (GW) of gas-fired generation."
Ebel then turned to the company's recently expanded gas utilities platform, which it significantly enhanced over the past year by purchasing three gas utilities from Dominion. The CEO noted:
Our utilities are situated in high-growth power markets, with North Carolina being a top destination for onshoring due to its affordable power and favorable corporate tax rates. In that regard, Enbridge Gas North Carolina is investing $600 million to expand our gas lines to serve Duke's Roxboro gas-fired generation plant, which will have a capacity of at least 1.4 GW. We expect that project to be completed in 2027.
The company is also expanding its utilities to support growing demand from data centers. Enbridge has 9 GW of data center opportunities across its footprint. It has already secured some projects to connect data centers to its utilities and has received inquiries for many more opportunities.
Finally, Ebel noted on the call, "We also have exciting developments within our renewables segment with over 2 gigawatts in development or under construction across the U.S." Recent new projects include phase three of ts 577 megawatt (MW) Fox Squirrel Solar project in Ohio (Amazon is buying 100% of the power) and up to 815 MW Sequoia Solar project in Texas. (AT&T and Toyota are buying most of the power from what will be one of the largest solar facilities in North America.) The company is working on over 6 GW of additional onshore renewable energy opportunities across North America.
Tapping into the power surge
Energy demand is on track to surge through the end of the decade, driven by a multitude of catalysts, and should fuel growth for natural gas and renewable energy. Given its gas pipelines, gas distribution, and renewable energy franchises, Enbridge is in an ideal position to capitalize on this growth megatrend. Because of that, it should have plenty of fuel to continue growing its dividend, making it a great long-term investment opportunity.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Matt DiLallo has positions in Amazon and Enbridge. The Motley Fool has positions in and recommends Amazon, Enbridge, and S&P Global. The Motley Fool recommends Dominion Energy and Duke Energy. The Motley Fool has a disclosure policy.
