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Enbridge exec takes on investor concerns about growth prospects


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Essential Energy Insights - October 2021

Enbridge exec takes on investor concerns about growth prospects

plans to leverage thedepressed commodity price environment by seizing both traditional and non-traditionalinvestment opportunities, according to one of its senior executives who believesthe opportunity will rebuff investor concerns about the Canadian giant's long-termgrowth prospects.

"We'vehad more opportunities to invest in traditional businesses, seeing the downwardtrend in commodity prices," Vern Yu, chief development officer and senior vicepresident of corporate planning at Enbridge, said during a panel at Bloomberg NewEnergy Finance's Future of Global Energy Summit in New York.

Thosetraditional investments will likely involve scooping up midstream assets that upstreamproducers are looking to off-load, Yu said in an interview. Many producers are lookingto raise cash in addition to other liquidity-preserving measures such as CapEx cutsand in some cases staff layoffs.

"Weare taking advantage of it. We see an attractive IRR in these opportunities as wellas a good exit opportunity potential," Yu said, referring to a growing needfor capital among producers and the ability to cash out such investments in thefuture.

Enbridge'sfuture investments will be along similar lines as its C$538 million of the Tupper Main and TupperWest gas plants and related pipelines in British Columbia from a Canadian affiliateof Murphy Oil Corp., Yusaid in the interview.

The Calgary,Alberta-based company will also work to create synergies between its renewablesportfolio and its existing pipelines business, Yu said at the panel. The biggestsynergy is that "we've got a historical business in building complicated, expensivethings … understanding how construction works, planning for construction … Beingable to write a $2 billion check is not scary to us," he told the audience.

Investorshad questioned Enbridge's quarterly dividend raise in December 2015, wondering about their long-term commitmentto dividend growth.

"We'restill saying we can grow without reducing our distributions," Yu said, addressingthat skepticism during the interview. "We pay out 50% of our cash in the formof dividends. We think [what market participants are saying] is an unfounded thoughtprocess."

Yu notedmarket concerns about Enbridge's C$38 billion growth program, announced in 2015as part of its strategic five-year plan. The company has said that about C$25 billionof the funds earmarked for the growth program are commercially secured and in execution.

"However,the $2.3 billion equity offering should put [those concerns] to rest," Yu said,noting that investor response to Enbridge's public offering of C$2.3 billion in 56,511,000 million common sharesin March has been positive.