Enbridge Inc. president and CEO Al Monaco is pictured at the company's annual meeting in Calgary on Thursday, May 11, 2017.Jeff McIntosh/The Globe and Mail
Enbridge Inc. is reinforcing plans to chop debt and fund $22-billion in major projects as the company tries to allay concerns over big spending and tempered dividend growth.
Top executives with the Calgary-based pipeline giant on Tuesday addressed investors and analysts in New York for the first time following a series of financial moves designed to shore up finances.
Chief executive officer Al Monaco has sought to calm jittery investors who balked at the company's ability to fund multibillion-dollar pipeline expansions while supporting steadily rising dividend payments, triggering a rare selloff in the company's shares last month.
In recent weeks, Enbridge and a subsidiary have sold $2.6-billion in preferred and common shares and signalled plans to jettison a minimum of $3-billion in assets next year to help fund big-ticket growth projects.
The company also throttled back annual dividend growth plans to 10 per cent from 10 to 12 per cent previously, while pledging to reduce its hefty debt load by $4-billion in coming years, pushing its overall capital requirement through 2020 to $26-billion.
Mr. Monaco said Tuesday the bulk of that will come from $14-billion of internally generated cash flow, less dividends, with the balance generated by the sale of hybrid securities and other financial options available to the company.
"Bottom line is that the plan allows us to effectively fund our secured program while strengthening the balance sheet," he said at the webcast event.
Enbridge's Toronto-listed shares have climbed about 12 per cent from lows hit last month, a vote of confidence for the company's financing plans. Still, the stock is down roughly 16.5 per cent since last year's $37-billion merger with rival Spectra Energy Corp.
The pricey deal vastly expanded Enbridge's North American network of pipelines, deepening exposure to expanding shale gas regions while lessening dependence on shipping crude from Alberta's oil sands into the United States.
But it has also added to Enbridge's already complicated financial structure.
U.S. rivals, such as Kinder Morgan Inc. and Sunoco Logistics Partners, have sought in recent years to simplify their organizations. Last year, Sunoco bought related entity Energy Transfer Partners LP in a $20-billion (U.S.) deal. That followed Kinder's $70-billion consolidation in 2014.
Mr. Monaco said Enbridge has no plans to put its various units under one roof, but he acknowledged the cost-of-capital upside enjoyed by tax-advantaged master limited partnerships has waned.
"I also acknowledge that, longer term, it's obviously more complexity, and we get the fact that there are some issues with complexity in today's environment," he said. "Right now, we're going to focus on making sure they perform well."
Enbridge, which remains the dominant shipper of Canadian oil, has instead embarked on a multiyear effort to streamline operations, emphasizing that future growth will stick to areas offering predictable, regulated rates of return.
The company has identified $10-billion (Canadian) in assets it deems not crucial to its business, with at least $3-billion targeted for sale next year. They include unregulated onshore renewable energy projects and natural gas processing infrastructure.
The move to sell its renewable business comes as major investors press companies to beef up disclosures about how policies and regulations designed to stem growth in climate-warming greenhouse gases will impact their businesses.
Mr. Monaco defended the decision Tuesday and pointed to continued investments in European offshore wind developments. "We still believe in the notion that we are transitioning to a lower carbon future," he said. The decision "is more a reflection of capital allocation at this particular time."
Despite efforts to diversify, about half of the company's projected earnings before interest, taxes, depreciation and amortization through 2020 are tied to its liquids pipelines division.
That includes its massive Line 3 replacement project, which has seen costs escalate to around $9-billion while the pipeline awaits final clearances from regulators in Minnesota. The company insists oil shipments will commence by 2020.
But Guy Jarvis, executive vice-president of liquids pipelines, said the industry could face a glut of export capacity if all the competing pipelines go ahead, causing volumes to temporarily dip on its key mainline shipping network.