Published
# Enbridge Inc. (ENB) — Business, Risks and Management's Discussion Enbridge reports in Canadian dollars. Every amount below is in US dollars: amounts the company reports in Canadian dollars have been converted at the average exchange rate for the period they cover (results and cash flows) or at the rate on the stated date (balances and transactions), and amounts the company itself states in US dollars are given as stated. Percentage changes are measured in US dollars unless noted. Adjusted EBITDA, adjusted earnings and distributable cash flow (DCF) are the company's non-GAAP measures. ## Business *From the FY2025 Form 10-K (fiscal year ended December 31, 2025), accession 0001193125-26-049810.* Enbridge is a North American energy infrastructure company that earns most of its money moving, storing and delivering oil and natural gas for a fee. It owns the largest crude oil and liquids pipeline network in the world (about six million barrels per day), one of North America's largest natural gas transmission networks, natural gas utilities serving about 7.1 million customer accounts in Ontario, Québec, Ohio, North Carolina, Utah, Wyoming and Idaho, and a portfolio of wind and solar generation in North America and offshore wind in Europe. Its customers are oil producers and refiners, gas producers, utilities, LNG exporters, power generators and homes and businesses on its gas systems. Revenue is underpinned by long-term take-or-pay contracts, regulated cost-of-service tolls, negotiated toll settlements and long-term power purchase agreements, which the company describes as producing predictable, low-risk cash flows through commodity cycles. Its shares trade on the Toronto and New York stock exchanges. The company earns revenue from three sources. In 2025, transportation and other services brought in $14.46 billion; gas distribution sales $7.01 billion; and commodity sales $25.19 billion. Commodity sales come mainly from crude oil, natural gas and power marketing, where the margin is typically a small fraction of gross revenue, and the cost of gas sold by the utilities is passed through to customers. The fee-based pipeline and utility businesses therefore drive earnings, not the commodity line. Enbridge reports four business segments, plus Eliminations and Other: - **Liquids Pipelines** — crude oil and liquids pipelines and terminals in Canada and the US. The core asset is the Mainline System: the Canadian Mainline plus the US Lakehead System, the main route for western Canadian crude into the US. It was effectively full in 2025, delivering 3.1 million barrels per day. About 70% of Mainline deliveries are tolled under the Mainline Tolling Settlement, which runs through the end of 2028. That settlement includes a performance collar meant to keep returns between 11% and 14.5% on a deemed 50% equity base. Other assets include the Regional Oil Sands System, Flanagan South, 50% of Seaway, Gray Oak (68.5% effective interest), the Enbridge Ingleside Energy Center (North America's largest crude export terminal by volume, with 1.6 million barrels per day of export capability), Express-Platte, Southern Lights, and a 27.6% effective interest in the Bakken Pipeline System (Dakota Access). The segment also runs a crude oil marketing business. - **Gas Transmission** — interstate and interprovincial gas pipelines and storage. In the US these include Texas Eastern (12.1 Bcf/d peak capacity), Algonquin, East Tennessee, Maritimes & Northeast, and interests in Gulfstream, Sabal Trail, NEXUS, SESH, Vector and the Permian joint ventures (Whistler 19%, DBR 15%, Matterhorn Express 10%). In Canada the main asset is the Westcoast BC Pipeline (3.6 Bcf/d), plus Aitken Creek storage. The segment also holds offshore Gulf of Mexico pipelines, a 13.2% effective interest in DCP Midstream, and Tomorrow RNG. Most capacity is sold under firm reservation contracts that pay regardless of volumes shipped. - **Gas Distribution and Storage** — rate-regulated gas utilities. Enbridge Gas Ontario has about 4.0 million customers. The US utilities acquired from Dominion Energy in 2024 are Enbridge Gas Ohio (1.2 million), Enbridge Gas Utah/Wyoming/Idaho (1.2 million) and Enbridge Gas North Carolina (0.7 million). The segment also owns the Dawn storage hub in Ontario (about 290 Bcf of working capacity) and Wexpro, which produces gas reserves at cost of service for the Utah, Wyoming and Idaho utilities. Earnings depend on allowed returns on rate base, and in Ontario on weather. - **Renewable Power Generation** — about 4,100 MW of net capacity, mostly North American wind (1,399 MW) and solar (967 MW operating, 1,015 MW under construction), plus European offshore wind (621 MW). Output is mostly sold under long-term power purchase agreements. **Strategy.** Management aims for continued growth in EBITDA and DCF per share. Its stated route is a commercially secured project backlog, which stood at $28.44 billion through 2033 at year-end 2025, plus utility rate-base investment, system optimization and "tuck-in" acquisitions, all within an investment-grade balance sheet. The company highlights demand from LNG exports, gas-fired power for data centers, and coal-to-gas switching, and has raised its dividend for 31 consecutive years. In 2025 it sanctioned Mainline Optimization Phase 1, which adds 250 thousand barrels per day across the Mainline and Flanagan South. It took a 10% stake in the Matterhorn Express Pipeline, reached a final investment decision on the 3.7 Bcf/d Eiger Express Pipeline, and brought in a partnership of 38 First Nations, which invested about $540.38 million for a 12.47% interest in the BC Pipeline. At year-end 2025 it had about 14,800 regular employees. ## Risk factors *From the FY2025 Form 10-K (accession 0001193125-26-049810), as updated in the June 30, 2026 Form 10-Q (accession 0001193125-26-326752).* - **Operational and safety incidents.** Pipeline ruptures, releases, equipment failure and extreme weather can cause environmental damage, injury, outages, fines and litigation, and the losses may exceed insurance. Many assets run near populated areas, and the company has had major incidents in the past. Enbridge self-insures a significant portion of certain risks through a captive insurer. - **Cybersecurity.** The company describes attacks on its systems as increasing and says government agencies warn of growing threats to pipelines and utilities. The US utility acquisitions enlarged the attack surface and the volume of customer data it holds. To date, to the company's knowledge, no attack has had a material adverse impact. - **Utilization and volume risk.** Enbridge is partly exposed to throughput on the Canadian Mainline and on other assets such as the Lakehead System. Gas utility earnings depend on weather, customer growth and the economy matching rate-case forecasts. Renewable earnings depend on wind and solar resource. - **Regulatory and rate risk.** Tolls and utility rates are set or approved by the CER, FERC, the Ontario Energy Board and state commissions. Unfavourable decisions have cut revenue and earnings before: the June 2025 Ohio rate order led to disallowances of $240 million. Permitting is politicized, and approvals for existing operations can be challenged. - **Land rights and Line 5.** Many assets sit on easements and rights-of-way, some across Indigenous lands. Losing them could force shutdowns or reroutes. Line 5 faces the Bad River Band trespass litigation in Wisconsin and Michigan's challenge to the Straits of Mackinac easement (see MD&A). - **Tariffs and trade.** US tariffs, retaliation and the USMCA's future could raise construction and maintenance costs, disrupt supply chains and capital markets, and weaken demand for Canadian energy. The Q2 2026 update adds two developments. In February 2026 the US Supreme Court ruled that the President lacked authority to impose certain "emergency" tariffs, though the administration is pursuing other means. On July 1, 2026, the US began the USMCA formal review by announcing it will not renew the agreement without changes, although the agreement stays in force pending resolution or until 2036. - **Climate and energy-transition risk.** Carbon pricing, methane rules, anti-greenwashing law, investor and insurer retreat from fossil fuels, and long-term demand erosion could reduce demand for its services, raise compliance costs and limit access to capital. Climate-related physical risks increase operational exposure. - **Project execution.** Permitting challenges, protests, supply-chain and labour inflation, tariffs, contractor non-performance and joint-venture complexity have delayed projects and raised costs. - **Financing and credit.** Much of the asset base is debt-financed, and debt maturities do not match asset cash flows. A downgrade below investment grade would raise borrowing costs and could restrict commercial paper access. Interest rate and foreign exchange moves (results are in Canadian dollars but many businesses earn US dollars) are hedged, and the hedges themselves produce large non-cash earnings swings. - **Commodity exposure.** Crude marketing margins, DCP Midstream, Tomorrow RNG and Aitken Creek storage earnings move with commodity prices and spreads. Prolonged low oil prices could defer producer drilling and future liquids projects. - **Integration of the US Gas Utilities.** Failing to integrate the 2024 Dominion utility acquisitions could erode their expected benefits. - **Tax and legal.** Tax rates and laws may change, tax examinations may go against the company, and litigation could exceed reserves. ## Management's discussion — fiscal 2025 *From the FY2025 Form 10-K, accession 0001193125-26-049810.* **Results.** EBITDA rose 18.9% to $14.66 billion. Earnings attributable to common shareholders rose 37.2% to $5.06 billion, or $2.31 per share versus $1.71. Much of the increase was non-operating. It came from a non-cash unrealized derivative fair value gain of $930.39 million (pre-tax) in 2025, against a large unrealized loss in 2024, and from a gain at DCP Midstream on an asset sale. These were partly offset by the absence of 2024's $803.00 million gain on the sale of Alliance Pipeline and Aux Sable, impairments tied to the Ohio rate order ($240 million), and a $171.76 million impairment of non-core Liquids Pipelines assets. Underlying business drivers were: - a full year of the US Gas Utilities; - colder weather and higher storage optimization, distribution margin and customer growth at Enbridge Gas Ontario; - Algonquin and Texas Eastern rate settlements, favourable US gas contracting and the Texas Eastern Venice Extension; - higher Mainline demand and tolls with lower power costs; - a lower US effective tax rate from investment tax credits. These were partly offset by higher interest and depreciation, lower spot volumes on Flanagan South, weaker Tomorrow RNG results from lower RIN prices, lower Fox Squirrel Solar tax-credit equity earnings, and the end of interest income on cash raised to pre-fund the utility acquisitions. **Segment EBITDA, 2025.** Liquids Pipelines generated $6.72 billion, Gas Transmission $3.93 billion, Gas Distribution and Storage $2.73 billion and Renewable Power Generation $443.72 million. - Liquids Pipelines was held back by the asset impairment, offset by higher Mainline contributions and Line 9 volumes. - Gas Transmission lost the prior year's Alliance/Aux Sable gain but grew underlying earnings on rate settlements, Aitken Creek storage spreads and new Permian joint-venture interests. - Gas Distribution and Storage grew most, on the full-year utility contribution and Ontario weather. Ontario weather was a positive versus normal in 2025 after a negative in 2024. - Renewable Power Generation fell on lower Fox Squirrel tax-credit earnings. **Rate cases.** Enbridge Gas Ohio's June 2025 order cut annual revenue by $26.3 million at a 9.79% ROE, later reduced to a $14.3 million decrease on rehearing. The utility has appealed to the Ohio Supreme Court and in December 2025 filed a new case seeking a $163 million annual increase effective in early 2027. North Carolina settled for a $33 million annual increase effective November 1, 2025, and Utah received a $61 million increase effective January 1, 2026. Enbridge Gas Ontario runs under a price-cap framework for 2025–2028 at a 9.21% ROE and 38% equity thickness until rebasing expected in 2029; it is appealing parts of the 2023 Phase 1 decision in court. FERC approved the Algonquin and Maritimes & Northeast US settlements in April 2025, and East Tennessee and Vector filed rate cases in 2025. **Cash flow and financing.** Operating cash flow was $8.78 billion. Capital expenditures were $6.42 billion, with Gas Distribution and Storage and Gas Transmission the largest spenders, and common share dividends paid in cash totalled $5.87 billion. The company issued long-term debt of $3.29 billion (Canadian-dollar issues) plus $4.7 billion (US-dollar issues), and renewed and extended about $16.12 billion of credit facilities. Net available liquidity was $7.88 billion at year-end. About 9% of debt was floating-rate after hedges. In December 2025 the board raised the quarterly common dividend 3%, effective March 1, 2026; Enbridge has paid a common dividend every year since 1953. **Legal.** - **Bad River Band (Wisconsin).** A 2023 federal court ruling found Line 5 in trespass on 12 parcels of the Bad River Reservation. It ordered about $5.15 million for past trespass plus ongoing payments, and ordered the line to stop operating on parcels without valid rights-of-way by June 16, 2026. That order was stayed pending appeal. - **Michigan.** The Attorney General's suit to void the Straits of Mackinac easement was sent back to state court. The US Supreme Court agreed to review that removal question, with a decision expected in 2026. Separately, on December 17, 2025, a federal court ruled for Enbridge in its suit against Michigan state officials; the state appealed, and the Attorney General's case is stayed pending that appeal. The Army Corps issued its final environmental impact statement for the Line 5 tunnel on February 6, 2026. - **Dakota Access.** The Army Corps published a final environmental impact statement for the Dakota Access Pipeline in December 2025 that prefers continued operation. ## Current quarter — second quarter 2026 (three and six months ended June 30, 2026) *From the June 30, 2026 Form 10-Q (accession 0001193125-26-326752) and the second-quarter earnings release furnished on Form 8-K (accession 0001193125-26-326744).* **Headline results.** Q2 earnings attributable to common shareholders fell 35.8% to $1.01 billion, or $0.46 per share versus $0.72. The decline was mostly non-cash: the quarter's unrealized derivative fair value gain was $222.61 million (pre-tax), against $1.01 billion a year earlier. The release also cites a non-cash pre-issuance hedge loss on the medium-term note exchange and an $87.46 million negative crude oil inventory adjustment in Liquids Pipelines. These were partly offset by the absence of the year-earlier Ohio impairment. On management's adjusted basis: - adjusted EBITDA rose 2.9% to $3.45 billion; - adjusted earnings fell 2.5% to $998.87 million ($0.46 per share versus $0.47), as higher depreciation and interest on new debt outweighed higher EBITDA; - DCF rose 1.6% to $2.13 billion; - operating cash flow rose 27.0% to $2.97 billion; - GAAP interest expense rose 18.2% to $1.01 billion on incremental long-term debt. Total operating revenues nearly doubled, up 97.2% to $21.19 billion from $10.75 billion, almost entirely because commodity sales rose to $16.32 billion from $5.87 billion. Commodity costs rose by a similar amount, to $15.96 billion from $5.78 billion, so the revenue increase did not reach earnings. **Segments, Q2.** The GAAP segment picture is dominated by derivatives and one-off items: - **Liquids Pipelines**: EBITDA up 12.6% to $1.90 billion, lifted by a $312.24 million unrealized derivative gain and reduced by the inventory adjustment. Underlying, higher Mainline and Line 9 volumes, optimization benefits and higher Seaway spot volumes offset lower Mainline tolls on Line 9 deliveries and the June 2025 expiry of Southern Lights cost-of-service agreements. - **Gas Transmission**: EBITDA down 0.6% to $1.04 billion. The East Tennessee rate settlement and a previously approved Texas Eastern rate increase raised revenue, while derivative gains were smaller and DCP Midstream equity earnings were lower. - **Gas Distribution and Storage**: EBITDA up 72.3% to $634.60 million, mainly because the 2025 quarter carried the Ohio rate-order impairment, plus higher Enbridge Gas Utah base rates. - **Renewable Power Generation**: EBITDA up 8.3% to $85.29 million, described as comparable year over year; on the adjusted basis new assets added to the result. - **Eliminations and Other**: swung from a large gain to a loss on unrealized foreign exchange derivative marks, while realized hedge-settlement losses narrowed. **Six months.** Earnings attributable to common shareholders fell 29.3% to $2.23 billion ($1.02 per share versus $1.45), including a $315.04 million unrealized derivative loss against a large gain a year earlier. Adjusted EBITDA rose 3.4% to $7.68 billion (1.1% in Canadian dollars) and operating cash flow rose 4.9% to $4.68 billion. - Liquids Pipelines was weaker on higher Mainline earnings sharing, lower Line 9 tolls, the absence of a prior-year litigation-settlement equity gain, and a lower US-dollar translation rate. - Gas Distribution and Storage benefited from Ontario rate escalators, customer growth and storage pricing, and from new base rates in Utah and North Carolina. - Gas Transmission benefited from the East Tennessee and Texas Eastern rates and Aitken Creek storage spreads. The effective tax rate rose to 23.5% from 22.1%, on higher US minimum tax, no US investment tax credits in 2026, and Canada's Bill C-15 accelerated-depreciation rules. **Guidance.** Management reaffirmed 2026 guidance of adjusted EBITDA between $14.6 billion and $15.03 billion and DCF per share between $4.12 and $4.41, both converted at the second-quarter 2026 average rate. It also reaffirmed its outlook for roughly 5% average annual growth in adjusted EBITDA, DCF per share and EPS after 2026. Rolling 12-month debt-to-EBITDA was 5.1x. The company attributes part of that to the June 30 debt balance translating at 1.42 Canadian dollars per US dollar, while EBITDA translated at an average of 1.38. **Growth projects.** The secured backlog reached about $28.86 billion at June 30, 2026, against $28.44 billion at year-end 2025, and about $6.34 billion of new projects had been sanctioned year to date. Developments since the 10-K: - **Line 5 Relocation (Wisconsin)** — sanctioned and under construction: a 41-mile reroute costing about $1.0 billion, with service targeted for early 2027. It will be added to Mainline rate base, and all key permits, including the Army Corps Clean Water Act permit, are in hand. - **T-South Expansion (Sunrise)** — the largest project, $2.82 billion. It received federal Governor in Council approval and a CER certificate in April 2026, with pipeline construction expected to start in the third quarter of 2026 and service in 2028. It is now funded through the Westcoast System Joint Venture with KKR (see Subsequent events). - **USGC Storage Growth Program** — a 25 Bcf expansion of Tres Palacios gas storage was sanctioned, with service ratably from 2028 to 2030. - **Cone** — a 300 MW contracted wind project near Lubbock, Texas, due in 2027. - **Bay Runner Twin** — sanctioned inside the Whistler joint venture: up to 2.6 Bcf/d of Permian gas to the Rio Grande LNG facility under take-or-pay agreements, by 2030. - **TTC Connector** — an exclusive option to buy this 25-mile, 300 MMcf/d pipeline linking Tres Palacios to Freeport LNG once it enters service. - **Project Beacon** — an Algonquin open season in which demand exceeded expectations. - **In service and near completion** — the Enbridge Houston Oil Terminal entered service during the quarter. Tennessee Ridgeline, T-North Aspen Point and the second phase of Sequoia Solar are expected in service later in 2026. **Rate proceedings.** East Tennessee reached a settlement in principle in April 2026 and filed it with FERC on May 29, 2026. FERC approved Vector's settlement on May 26, 2026, with rates effective April 1, 2026. The OEB approved Enbridge Gas Ontario's Phase 3 rate-harmonization settlement in March 2026, which is not expected to affect earnings. The court hearing on its Phase 1 appeal took place in the second quarter, with a decision expected by year-end. Ohio commission staff filed a report on the Enbridge Gas Ohio case that management called constructive, and the company is aiming for a settlement in 2027. **Financing and liquidity.** - **New debt.** In February 2026 the company issued $1.45 billion of five-, ten- and thirty-year medium-term notes, and in March $2.0 billion of five- and ten-year senior notes. - **Redemption and note exchange.** Enbridge Pipelines Inc. redeemed $292.74 million of 3.00% notes on May 11, 2026. On June 16, 2026, all Enbridge Pipelines Inc. medium-term notes were exchanged for identical Enbridge Inc. notes guaranteed by Spectra Energy Partners and Enbridge Energy Partners. - **Liquidity.** Net available liquidity was $7.67 billion at June 30, 2026. **Legal developments in the quarter.** On May 21, 2026, the Army Corps issued its final Record of Decision permitting continued Dakota Access operation, with conditions including groundwater monitoring and leak detection. On June 14, 2026, the Standing Rock Sioux Tribe moved to dismiss its appeal of the separate injunction case. The 10-Q's legal update addresses only the Bad River and Dakota Access matters. ## Subsequent events *Events after June 30, 2026, from the June 30, 2026 Form 10-Q (accession 0001193125-26-326752), the second-quarter earnings release (accession 0001193125-26-326744), and later Forms 8-K and a prospectus supplement as cited.* - **Line 5 – Seventh Circuit ruling (July 30, 2026).** The US Court of Appeals for the Seventh Circuit dismissed the Bad River Band's public nuisance claim, affirmed that Enbridge is in trespass, and sent all remedies back to the district court. The district court's 2023 remedies are therefore reopened, including the order to cease operation on the disputed parcels, which had been stayed. Source: 10-Q, accession 0001193125-26-326752. - **Credit facilities (July 2026).** Enbridge renewed its 364-day extendible facilities to July 2028 (with a term-out from July 2027) and its five-year facilities to July 2031, and extended its three-year facilities to July 2029. Source: 10-Q, accession 0001193125-26-326752. - **Dividend (July 27, 2026).** The board declared a quarterly common dividend of $0.69 per share, payable September 1, 2026. Source: earnings release, accession 0001193125-26-326744. - **Salt Creek Midstream acquisition (announced August 26, 2026; not yet closed).** Enbridge entered into a definitive agreement to acquire Salt Creek Midstream's crude oil gathering business for $600 million in cash. The business comprises 100% interests in the Orla and Wink North systems and a 50% interest in the Delaware Crossing system, with combined throughput capacity of about 420,000 barrels per day, and is expected to extend Enbridge's Permian liquids system to export through the Enbridge Ingleside Energy Center. Closing is expected later in 2026, subject to customary conditions including Hart-Scott-Rodino clearance. Source: prospectus supplement (Form 424B5) filed September 10, 2026, accession 0001104659-26-106571. - **Westcoast System Joint Venture (agreed August 27, 2026; closed September 3, 2026).** Enbridge agreed with KKR to form a joint venture to fund the previously sanctioned Aspen Point and Sunrise expansions of the Westcoast natural gas pipeline system. Capital accounts advised by KKR, in collaboration with funds managed by Apollo, will invest about $1.95 billion, including about $507.91 million of cash Enbridge received at closing on September 3, 2026. The investors' cumulative indirect interest in the Westcoast system is expected to reach about 29% when the Sunrise expansion enters service; Enbridge retains majority ownership and operational control. Source: prospectus supplement (Form 424B5), accession 0001104659-26-106571. - **CEO succession (announced September 8, 2026).** Greg Ebel will retire as President and CEO on December 31, 2026. Michele Harradence, head of Gas Distribution and Storage, succeeds him on January 1, 2027. Source: Form 8-K, accession 0001104659-26-105899. - **Tallgrass crude oil business acquisition (agreed September 9, 2026; not yet closed).** Enbridge agreed to buy Tallgrass Energy's crude oil business for $2.55 billion in cash, about 10–11x forward EBITDA. The main asset is a 75% interest in the roughly 460 thousand barrels per day Pony Express Pipeline from the Rockies to Cushing, which the company says expands its footprint into the US Rockies region. Closing is expected later in 2026, subject to Hart-Scott-Rodino clearance. Management does not expect the deal to materially change 2026 guidance. Source: Form 8-K, accession 0001104659-26-106344. - **Common share offering (closed September 14, 2026).** To partly fund the Tallgrass and Salt Creek acquisitions, Enbridge sold 44,735,000 common shares at $48.42 per share, including the full over-allotment, for gross proceeds of about $2.16 billion. Sources: Forms 8-K, accessions 0001104659-26-106404 and 0001104659-26-107292.