恩橋 (ENB) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen, welcome to the Enbridge Inc. fourth quarter 2010 financial results conference call. I would now like to turn the meeting over to Guy Jarvis. Please proceed.

Thank you. Good morning, and welcome to Enbridge Inc.'s 2010 fourth quarter earnings call. With me this morning are Pat Daniel, President and Chief Executive Officer; Richard Bird, Executive Vice President, Chief Financial Officer and Corporate Development; and Colin Gruending, Vice President and Controller. Before we begin, I'd like to point out that we may refer to forward-looking information during this call.By its nature, this information applies certain assumptions and expectations about future outcomes. So we remind you it is subject to the risks and uncertainties affecting every business, including ours.

Our slides include a summary of the more significant factors and risks that might affect future outcomes for Enbridge, which are also discussed more fully in our public disclosures available in both SEDAR and EDGAR systems. This call is webcast and I encourage those listening on the phone lines to view the supporting slides which are available on our website. A replay and podcast of the call will be available later today, and a transcript will be posted to our website shortly thereafter. The Q & A format will be similar to past calls. The initial Q & A session is restricted to the analyst community. And once completed, we will invite questions from the media. I would also remind you that Pat Murray and I will be available after the call for any follow-up questions you have. At this point, would I like to turn the call over to Pat Daniel.

Thank you, Guy. And good morning, everyone. Thank you for joining us. We're very pleased to announce this morning that Enbridge's adjusted earnings for 2010 were CAD2.66 per share representing a 13% increase over 2009. This increase is particularly notable when you recall that the 25% year-over-year increase that we announced at this time last year. So coming off an exceptionally strong year in 2009, we're pleased to continue to deliver outstanding low-risk organic growth across all of the business lines of Enbridge. Richard, of course, is going to walk through the results in more detail in a few moments.

But first, let me summarize our 2010 operating and development performance. For many listening to the call today, 2010 will be remembered for the crude oil leak that we experienced in July at Marshall, Michigan. This was the most significant environmental incident in our company's history, and I'm going to come back to speak to it later in my remarks this morning. To begin, though, 2010 was a year in which we brought into service two of the largest projects in our company's history, and over CAD6.5 billion in projects in total. I'd like to go through the year chronologically.

Beginning in early 2010, Enbridge energy partners brought its CAD140 million expansion of the North Dakota system into service, and that was ahead of schedule. Reflecting the continued growth and expansion of the Bakken play, that expansion has been running at capacity since day one. Moving on, in April of 2010, we brought into service the CAD3.7 billion Alberta clipper project, which increased our main line capacity by 450,000 barrels per day. That, of course, was followed in early July with the first delivery of diluents on our CAD2.3 billion Southern Lights project. Southern Lights, of course, is the first pipeline to provide transportation capacity from Chicago back to Edmonton where the diluent is then mixed with bitumen to enable the crude to be piped back to Chicago.

In September, we began to deliver emissions-free energy from the expanded Sarnia solar facility. This, of course, is a CAD300 million expansion, increased the overall capacity of the solar farm from 20 to 80 megawatts, making it one of the largest operating facilities of its kind in the world. And then finally in late December, both the CAD285 million Talbot wind farm and the CAD140 million Saskatchewan crude oil expansion project were substantially completed and began to add to our ever-growing base of cash flow.

And while our major projects group continued to deliver very solid expertise and execution capability in bringing projects into service in 2010, our business development teams across all of our businesses continue to add to our portfolio of commercially secured projects, sustaining our anticipated growth trajectory through the middle of this decade as we mentioned to you.

During 2010, we secured over CAD4 billion in new project growth projects and in assets. In January of 2010, we announced that we'd be the first of a number of Alberta regional oil sands projects, that was the Cenovus expansion at Christina Lake where we've been contracted at CAD250 million of lateral and terminal facilities for Cenovus. In March, we announced the CAD275 million Greenwich wind power project which will add another 100 megawatts to our green power portfolio by the end of 2011. June was also a busy month as we announced that we had consolidated our interest in the Hardisty Cavern storage assets by acquiring the remaining 50% of that facility.

We also announced the CAD400 million expansion of our Waupisoo pipeline which connects the growing oil sands production area with the Edmonton, Alberta hub. This expansion program will provide approximately 65,000 barrels a day of additional capacity in the second half of 2012, and then a further 190,000 barrels a day when fully in service in the second half of 2013. Also in June we made our first entrance into the US green energy space by securing the rights to the CAD500 million Cedar Point wind power project located east of Denver, Colorado. This project would generate 250 megawatts of green energy by late 2011.

In July of 2010, we announced the largest non-rolldown acquisition in the history of Enbridge energy partners. This was the CAD680 million acquisition of the Elk City gathering and processing system within the panhandle region of Texas and southwest Oklahoma. Then this, of course, is in the same region as our existing Anadarko system and provides us with substantial operating and strategic synergies between the two asset bases. The Granite Wash, of course, has become one of the most attractive gas plays in Texas given its liquid-rich nature. In August, EPP and Enbridge Income Fund announced sufficient long-term commitments to proceed with the Bakken expansion program. This program represents investment opportunity of CAD370 million for EEP and CAD190 million for Enbridge Income Fund.

An open season was subsequently held to permit other shippers to secure capacity on the same terms as the anchor shippers, and we're still finalizing the results of that open season. This project will increase the capacity out of the North Dakota Bakken by 145,000 barrels per day, and it is expandable to over 325,000 barrels per day.

We also announced the CAD370 million Wood Buffalo pipeline which will parallel Enbridge's existing Athabasca pipeline between Athabasca and the Cheechum terminals. This pipeline will accommodate Suncor's growing capacity needs, and it is expected to go into service by mid 2013.

Continuing to move through the year, in September and December we announced expansions of our Athabasca pipeline. We'll be expanding the Athasbasca pipeline to it's full capacity of 570,000 barrels per day to accommodate the increasing shifting commitment from the Christina Lake Oil Sands Project, as well as other commitments that we have received.So, in total this project would cost approximately CAD400 million, with initial capacity coming on-stream in early 2013 and then the balance by 2014.

Also in September, we announced that we have won the right to develop the pipeline and terminaling infrastructure for the Husky BP Sunrise Oil Sands Project. And this is a CAD475 million project which will increase the number of production facilities connected to Enbridge's Alberta regional transportation infrastructure to nine by the end of 2013. And finally, near the end of September we announced a CAD260 million expansion of our Edmonton terminal in order to accommodate the projected increase in volumes associated with the various projects that we've just been discussing.

I'll note that the secured projects did very well with Enbridge's business model with reliable earnings and low to mid-teen equity returns. I'd also like to note that each of these regions, whether that be the Alberta Oil Sands infrastructure, the Bakken, green energy, the gathering of processing gas assets, represents an area where we see continued growth in 2011 and beyond.

And speaking of 2011, we're off to a good start with the announcements over the past few days of growth in our green energy portfolio with the acquisition of another 20 megawatts of solar generating capacity in Ontario. Also the expansion of the capacity of our Venice, Louisiana, condensate processing facility, and that's to accommodate growing production from the ultra deepwater offshore; and then an increased interest in the natural gas distributor, Gaz Metropolitan, to our increased ownership interest in the Noverco. So it's been a busy start to 2011.

We, of course, have also continued to advance the Northern Gateway Pipeline Project. This is a project of national strategic importance and significance that has the potential to diversify and boost Canada's economy and has a very positive social and economic impact on the country.

Last May, we filed our regulatory application. That's the largest ever filed with the NEB, by the way. And in January, the joint review panel tasked with the review of the project, requested additional information from Enbridge on the design and the risk assessment of the pipelines due to the geotechnical aspects and their geographic location. And that work is under way now. As well, over the past few weeks, we've met with aboriginal communities along the proposed right of way to share the details of our 10% equity offering. So far, it's been well received, and we're hopeful that more communities will understand and appreciate the long-term economic benefits of this project.

In conclusion, I'd like to return to the subject of the oil leak that took place in Michigan just over six months ago. That incident tested our company's ability to respond not only to the cleanup of the oil spill but also to the individuals and the communities that were impacted, the regulators, the agencies who were involved in the response effort, and, of course, to customers whose deliveries were disrupted.

We continue to have a very strong presence in Michigan, both in our community center where we continue to work with the communities of Marshall and Battle Creek, and also along the Kalamazoo River on the cleanup. We're nearing the end of our winter work at this point where we've been able to take advantage of frozen ground to reach some of the marshy areas that we weren't able to get to in the summer and the fall. And we anticipate increasing our cleanup and remediation activities, of course, as the ground thaws and we're able to assess the took remains.

As you know, Enbridge has always had a very robust pipeline integrity program and is one of the largest users of in-line inspection technology in the world. Since the restart of line 60, post the Marshall incident, we've actively conducted additional in-line inspections, and we've employed a team of 65 day crews to aggressively excavate and remediate approximately 400 locations along that line. We're encouraged that the results of these investigations are confirming that the in-line tools are characterizing identified features conservatively, and we look forward to wrapping up the bulk of our accelerated program by the end of this quarter, the first quarter of 2011.

All of this work has, of course, impacted the availability of our main line system, and we continue to work very hard with our shippers to minimize the overall impact, and also to thank them for their understanding as we complete this very important work.

So with that recap of the year, I'll turn it over to Richard, who's now going to walk through in more detail the financial results for 2010. Richard?

Thanks, Pat, and good morning, everyone. Picking up on slide 7 for those of you that are following in the slide deck. As Pat mentioned earlier this morning, we released our year-end results, and year-to-date reported net income was CAD963 million or CAD2.60 per share. That's a decrease from 2009 where we reported CAD1.555 million or CAD4.27 per share. This year-over-year decrease in GAAP earnings was due primarily to 2009 including the one-time gain on sale of the investment in the Columbia OCENSA pipeline that was for CAD329 million [net gain], as well as larger mark-to-market gains in the prior year on our US hedging program.

This is further compounded in 2010, including the CAD125 million negative impact from costs associated with our cleanup efforts on lines 6b & 6a. Excluding the one-time and non-operating factors, our adjusted earnings per share for the fourth quarter was relatively flat to the prior year, but up 13% on a year-to-date basis for the full year. This places us in the upper half of our original 2010 guidance, and that's consistent with our revision to guidance that was communicated during the Q2 call. As noted in our December guidance call, our financial segmentation has been adjusted based on the management changes made back at the beginning of the fourth quarter.

And I'll now take a few minutes to walk you through the main drivers within each segment moving on to slide 8. Liquids pipelines adjusted earnings for the quarter decreased CAD24 million from the fourth quarter of 2009 but improved by CAD58 million on the full year. The full-year improvement was primarily a result of placing both the Alberta Clipper and Southern Lights project in service, which not only increased our year-over-year earnings but marked a sharp increase in cash generation. The Spearhead pipeline also had a strong year due to higher volumes as a result of the expansion placed into service in 2009, as well as make-up rights which expired during the year. These increases were somewhat offset and primarily in the fourth quarter by increased operating costs and taxes on the regional oil sands system.

Decreased earnings from our Toledo pipeline due to the line 6b outages, decreases on the other small assets within this segment, as well as increased business development costs in the quarter. Another significant factor affecting the quarterly pattern of the Enbridge systems earnings year-over-year was the interim incentive tolling settlement in place during 2010, which resulted in a more even distribution of earnings over the year in 2010, compared with the backend loading of 2009. Our newly separated gas distribution segment improved by CAD13 million year-to-date but was slightly lower in the fourth quarter.

Full-year results benefited from strong returns at Enbridge gas distribution in Toronto as a result of incentive regulation, as well as growth at Enbridge Gas New Brunswick. Declines in the fourth quarter were primarily due to timing of expenditures and taxes. Within gas pipelines, processing and energy services, adjusted results were higher by CAD7 million for the year and CAD9 million for the quarter. Energy services had a strong quarter when compared to 2009 as a result of margin opportunities in natural gas and liquids marketing, which rebounded from a lack of opportunities earlier in 2010.

Aux Sable had a strong quarter and a year due to enhanced plant performance and stronger fractionation margins. The improved performance within the other sub-segment was a result of decreased business development costs but also reflects three months of contribution of the full 80 megawatts of the Sarnia Solar Project. These improvements were somewhat offset by a decreased contribution from the offshore assets due to volume declines as a result of the temporary suspension of deepwater drilling.

In addition, the 2009 offshore results included approximately CAD8 million of insurance proceeds, CAD2 million of that in the fourth quarter. Those were resulted to business interruption, lost revenues, and operating expenditures associated with Hurricane Ike in 2008. Sponsored investments continued its strong 2010 performance. Full-year results increased by CAD58 million and the Q4 contribution increased by CAD9 million. This performance was primarily a result of increased incentive income earned by Enbridge as a result of the combined CAD0.075 distribution increase announced by EPP in the first and second quarters of 2010 .

Enbridge is now entitled to 50% of this increase as a result of the partnership distribution level now being in the high split range. Year-to-date earnings at the partnership level are also stronger after adjusting for the costs associated with the two incidents. This is due to increased transportation rates as a result of the completion of phase two of the Southern Access expansion in 2009, as well as three-quarters of earnings from the Alberta Clipper project and the impact of the phase 6 expansion of the North Dakota feeder system, which was placed into service in January of 2010. Alberta Clipper US also positively impacted earnings as the US portion of this project was also placed into service on April 1 of this year.

Year earnings within the quarter and the full year reflect Enbridge's 67% of the after-tax earnings from Alberta Clipper US, as well as our share of the AEDC booked in the first quarter. And finally, corporate costs increased for the year as a result of higher financing costs and lower foreign exchange gains partially offset by favorable income tax recoveries and higher business unit financing recoveries primarily in the fourth quarter.

Before I turn back to Pat, I want to make a few last remarks. First I should remind those listening on the call that in December Enbridge announced the second straight 15% increase in our dividend, bringing our ten-year average dividend growth rate to 11%, which is unparalleled in our peer group.

Turning to slide 9, and in regards to our long-term growth outlook, back at Enbridge Days based on our updated strategic plan, we confirmed that we expect to see an average annual growth rate in earnings per share of about 10% through the middle of the decade, and that's even off of our very strong 2009 base of CAD2.35 per share. There's been no change to this expectation.

The world has been unfolding pretty much as expected with new investment opportunities that will contribute incremental earnings per share in 2014 and beyond being secured according to plan. In fact, the average growth rate from 2009 to the mid-point of our 2011 guidance is exactly 10%. So we're on track, we are well positioned to achieve the expected 2014 EPS level. If anything, we are better positioned than we were at the time of Enbridge Days. And with that, I'll pass the call back to

Thank you, Richard. So to very quickly summarize, I think it's fair to characterize 2010 as the year of accomplishment and also as a year of humility for Enbridge. On the one hand, we're proud of our continued strong performance across all of our businesses over the course of 2010. We're able to place into service a very large suite of growth projects, while at the same time, we continue to line up a number of new projects to help extend our very enviable growth rate going forward. So 2010 sets this up very well to meet our long-term growth objectives, as Richard has just summarized.

On the other hand, we're not proud of the pipeline leak that we experienced, the most significant in our company's history. But I do take great pride in Enbridge's employees and the commitment they've demonstrated to responding to those incidents, the environmental remediation, the response to affected residents, and to applying the learnings to ensure that incident never happens again or anything like it. So with that, let's move over to the Q & A session. Guy?

Operator, we're ready for the Q & A, please.

Thank you.

(Operator Instructions)

Your first question comes from the line of Carl Kirst with BMO Capital

Good morning. Thank you for the time everybody. Just a couple of quick questions if I could, maybe focusing on just the year-over-year dynamics on the liquids side, Richard. You'd mentioned the higher operating cost, particularly on the regional oil sands system. I just wanted to get a sense of -- was that cost-increase expected and kind of embedded within the guidance? Was that unexpected? Should we continue to pay closer attention to that going forward in 2011? I was just hoping for a little bit of color there. Also just to make sure I've got the magnitude understanding the interim toll on the broader system seasonally shifted some of the earnings around. How much of an impact is it possible to say that had on the fourth quarter?

Okay. Well let me take those in the order that you raised them. So was the cost pattern consistent with our expectations and guidance? Yes, yes, it was. The years worked out pretty much exactly as we expected that it would, consistent with our revised guidance in the middle of the year. And pretty well, all the components, although there's always ups and downs, were in line with that as well.

And we do have, typically, variations over the course of the year in the loading quarter-by-quarter of when certain expenses and expenditures are undertaken. So we happen to be a little light during the first three quarters of the year in some of the segments on their costs, but we did expect that that would rectify itself by the full year with higher costs in the fourth quarter, so that's pretty much as expected.

On the impact of the change in the quarterly pattern from the interim incentive tolling settlement that's applicable in 2010 or was applicable in 2010, the main difference there was the fact that the interim arrangement no longer had the performance incentives associated with batch quality that the prior agreement did.

Those incentives were always based on the full-year measure, and so they couldn't be fully measured and taken up in earnings until the fourth quarter. So what we typically saw during each of the prior five years was a big bump in the fourth quarter. The interim agreement didn't have that feature effectively. It had our earnings and returns being earned evenly over the course of the year so that when you do that quarter-to-quarter comparison for the fourth quarter, you get that variation. That was a fairly significant impact by itself that would have run CAD10 million plus in terms of the quarter-over-quarter behavior.

Great. Very much appreciate the color. And if I could just sneak one other in with respect to Noverco, with the exit of GDF Suez, was that principally just GDF looking to exit and you guys in trend cap were the obvious fillers, or does this in any way signal perhaps more investment going over to that side of the ledger?

I think your first description of it is accurate, Carl. I think from a strategic point of view, GDF was looking to exit and have mused about it off and on over the years, and it was just logical that the existing participants, both of whom are very happy with the investment, were wanting to increase their interest.

Great. Thanks so much, guys.

Thank you.

Your next question comes from the line of Juan Plessis with Canaccord Genuity .

Thanks very much.My question is in regard to the Alberta Clipper. You have extended the suspension of the NEB hearings on the Canadian portion. I am just wondering if you can, perhaps, update us on the progress of the talks with shippers or provide a sense of timing as to when you might see this being completed.

At the time that we agreed with Suncor and IOL to suspend that, Juan, we concluded that we would discuss principles around it during the comprehensive toll settlement discussions. And at this point, there's really nothing specific to the original claims before the NEB that we're working on. I think you'll find that the comprehensive toll settlement addresses any and all issues that would have been involved in there.

Okay. Thank you. Just a housekeeping question. With regard to the feeder pipelines, your release had mentioned the three factors that caused the swing in earnings. There was higher business development costs and then lower earnings from Olympic and Toledo Pipelines. I'm wondering if you can break down the impact for each of those ones?

Oh, I don't know that we want to get into intimate detail on that. Those were the principal causes and roughly equal magnitude. A number of the other smaller pipelines also were down in the fourth quarter.

Okay. Thank you very much.

Your next question comes from the line of Pierre Lacroix with Desjardins Securities. Please proceed.

Yes, thanks very much. The first question is maybe, Richard, you could give me an update on your hedging program on the currency side, on the US dollar side. I know that you have a pretty attractive rate going into 2012, 2013, but beyond that time frame, what does it look like?

We've haven't significantly changed our hedge position since Enbridge days, so I don't think there's anything new to add there. We've got most of our floating rate debt hedged through 2013 and 2014 at relatively attractive rates, and most of our forward projected term debt issuances rate locked as well. So no real change in that. Pretty much completely locked in through 2014.

2014? Okay. That anywhere between $1.15 and $1.20?

You are referring to the currency? I was referring to interest rates just now.

No, currency.

The currency, likewise, is hedged through 2013 and a bit into 2014, and I think generally our rates are a little better than what you described. We're generally close to about $1.20 on most of that hedge program.

Okay. Thank you. And on the cash flow side, I know that the fourth quarter we always see a huge contribution from the future income tax on the cash flow from operations. This quarter was CAD100 million, CAD117 million. Can you describe me a little bit what we find in there and what are the drivers of this amount?

I think what you're likely referring to, Pierre, is the fact that on a cash tax basis, we don't pay that much taxes. That'll be due to accelerated deductions available on a variety of the different assets. Certainly some other renewable assets have very attractive CCA rates but a number of the other assets have rapid write-offs as well. So, I don't have that detailed by individual assets. But it would be that -- that's what's driving the phenomena.

Okay. It's mostly related to that. Okay. Perfect. And going into the corporate expense, you know, you've been running at CAD10 million, CAD15 million a quarter in 2010. Is it the same kind of run rate we'll be looking for in 2011?

I think we're doing a little better on corporate expense as we move forward. Certainly over time it will tend to move upwards as we expand and carry more debt at the corporate level, although we do charge the business units for their fair share of that debt. But generally, I think we're probably in -- at your quarterly run rate is the best way to look at it. Generally, I'd rather stick with annual guidance. But we're probably looking at more like CAD30 to CAD40 million on annual basis for the corporate, net corporate expense.

Okay. One final question, if I may, on the insurance costs following the spill. I know that it's related to EEP more. But have you got any sense of any increase from the insurance companies who insure yourself going forward?

Well, we're actually -- this is Guy Jarvis. We're just in the very early stages of kicking off the renewal of our insurance program. In talking to our brokers and on our strategy, and at this stage while, I think we said before, we do expect our premiums will go up, we don't have an indication as to exactly what that's going to look like yet.

Okay. Thank you very much.

Sure.

Your next question comes from the line of Andrew Kuske of Credit Suisse. Please proceed.

Thank you. Good morning. I think this first question is a question for Richard. And it's just in the context of your cost expectations on pipeline integrity, on the EEP results that came out last Friday and then on the call on Monday. There's a considerable amount of discussion around the integrity costs and how they were really rising into '11 from the past years. Do you have a breakdown of past integrity costs at the Inc. level and then what you expect them to be in the future?

I don't have that kind of detail right at hand, so maybe that's something we could follow up with you on, Andrew.

Sure. Is it fair to say, though, that your costs are rising at the Inc. level, or are they holding pretty firm from where they were in the past?

Andrew, I think probably the best way to describe it as more as a compression of costs because using 6b as an example, as you may know, we had planned a two and a half year integrity dig-and-repair program, and as a result of the Marshall incident, the regulatory requirement was that we condense that into a six-month period.

So we're really not doing anything now that we didn't intend to do over two and a half years, but it's really just more condensed. So I don't think we will see a significant change in the overall integrity and inspection program, maybe up slightly as new tools become available over time, but mainly a condensing of that into a six-month period from a two-and-a-half year period.

Okay. So just a collapsing of the schedule more than anything else?

Right.

And then just a bigger, broader question in your renewable power business. You have managed to grow this business in a pretty big fashion over the last few years. I'm just curious, how do you think about capital allocation in this business with your governments becoming a little bit more reluctant to give out longer data projects, or at least that possibly decelerating? PUCs in the US are obviously interested in having contracts, but that's a little bit of a different capital risk and the counterparty risk. And then how do you see it morphing beyond the PUCs and just utilities in the US? Do you see yourself taking on effectively merchant-type renewable power exposure?

No. You got to the part of the question that's easiest for me to answer in that, no, we don't really intend to get into the merchant power business on renewables. And maybe just coming back to the top of your question, we do like the business. We like it in large part because the business model as we have the deal structured is so very similar to the business model for our distribution business, our liquids pipeline business, and it revolves around the 20-year power purchase agreements with very credit-worthy parties and very little capital or operating cost risk on the projects.

So, really, the only significant variable is the amount of sun we get or the amount of wind we get. Those are fairly easily forecast. So we like the business model, and we will continue to build out and expand the renewables business every opportunity we get as long as you're able to sustain that business model. We haven't really, Andrew, set a target with regard to any limit, you know. I think right now it's a little less than 1% of earnings, probably will be around 3% by the middle of the decade. That's still well within any limit that we might put on it for strategic or other reasons.

So there's a lot of potential and room to grow the business, and we continue to look for opportunities that meet the criteria that I've described. Also, I think it's fair to say that although in some countries in Europe the level of renewables have reached almost a saturation point where they're starting to have a fairly significant impact on end user power costs, we've not seen that in North America. I just had some fresh data done for me over the last few days to show that we still, using Ontario as an example, the cost of power's gone up only, CAD0.01 per kilowatt hour as a result of the renewables. So, there's a lot of renewable that can come on stream without really impacting that. Hence, we expect the subsidization to continue for some period of time. So, very long answer to your question, but we like the business as long as we're able to sustain that business model that we've got.

That's very helpful. Thank you.

Your next question comes from the line of Robert Kwan with RBS Capital Markets. Please proceed.

Good morning. Can you just come back to ITS. Just wondering if there is any update you can give as to the timing of that longer agreement and if there's any other color as well as to whether it's moving more towards the costs of service like you have for 2010 or whether it's going to be a little bit more incentive driven like the past agreements?

Sure. I can touch on that. And I think we're still a little bit too early to be able to be definitive on any of that, but discussions are progressing. We're more or less on the rails in terms of reaching an agreement in the not too far distant future. It will have a different structure to it, one that is designed to address shippers' desire to see our system be an attractive system for them to continue to ship their crude on and at the same time achieve our financial objectives. So, no specific news, but the progress being made.

Sorry. Every time you say different structure, are you talking about different structure from 2010 or something different then what we've seen, whether it's 2010 or the previous agreements?

It'll be different in structure from both 2010 and the previous agreements.

Is there any kind of higher level, directional comments about what types of things would be different from the previous agreements?

No. I don't think I can talk about that just yet. When we reach that agreement, as soon as we can, we'll come out with the full detail and explanation.

Okay. My last question on the Alberta regional system. Just wondering if there's some specific things you can talk about with respect to future growth? You've done, obviously, a lot of announcements, but anything you can talk about with respect to Fort Hills. I know that's not sanctioned yet, but certainly moving in the right direction based on what Suncor and Total have been talking about, and then the other specific situation anything new on a potential condensate pipeline going north?

So, two, -- both of those very active areas of working development within the company right now, Robert. And it is still too early on Fort Hills. I think as a result of some of the announcements that Suncor has made it's becoming a little clearer as to where and what the timing will be around Fort Hills, but there's some parts of the way in which they are configuring particularly their new arrangement with Total that may result in a different configuration. We'll work with them and come up with whatever pipeline solution works best to get their product market. So very early stage. And, Guy, you may want to comment as well. But nothing really at this point that we can say further than the fact that we'll be working closely with them.

Yes, I don't think there's anything more to add to that.

And the condensate opportunity is one we continue to work on, basically an opportunity to extend Southern Lights north, and we're very encouraged by some of the early indications of potential shippers on a condensate line further north.

Okay. Perfect. Thank you very much.

Thanks, Robert.

(Operator Instructions)

Your next question comes from the line of Ted Durbin with Goldman Sachs.Please proceed.

Thank you. If you look at the WTI in the Cushing market, you really have the differentials to say brent blow out a lot, if you look at your project to build, you know, pipeline down to the Gulf Coast or maybe potentially adding storage in Cushing, how are you thinking about the opportunities around that?

Getting better every day, and for exactly the reason you've indicated with the CAD8 to CAD10 WTI to Brent. The large part of that is as a result of the bottlenecking of light in that Cushing market, and our Monarch pipeline project going south from there is attracting more attention every day.

We just need to get the level of producer support such that we are able to proceed with the project, and I'm sure if we -- I know if we had it there today and opened the tap, there'd be a lot of crude oil flowing through it. So, we're just trying to move forward as quickly as we can with industry participants to get the kind of level of support we need for the long-term operation of that pipeline, but certainly, that has become a real bottleneck, that Cushing market for producers.

Okay. Great. And then if I could just ask about, I know we talked a little about the feeder pipeline. You just talk about operationally a lot of the backups that we've had over the last few months, when you see those cleaning up. Was that an impact on the feeder pipelines earnings being done for the quarter? I'm just trying to understand a little better.

So, yes, the backup as you know, came as a result of initially the downtime at Marshall, Michigan, and then the downtime that we had at Romeoville as a result of those two incidents. And then the fact that we ended up with this condensed pipeline integrity and dig program, coupled with the fact that we were able to gain access to two new in-line inspection tools that we've run through the system in the fall and then have gone in to do dig and remediation associated with any indications of potential problems that came from those tool runs. So it's been a very condensed period of time and has resulted in more downtime than we've ever experienced on our system.

We feel now that we're largely through that. We do have two more periods of downtime that we've indicated industry, one next week as a result of some work downstream with Stockbridge. One, I think, that comes about two weeks after that, and then we'll also have some potential tie-in time when we complete the St. Clair River crossing replacement. But those will be relatively small compared to what we've had in the past.

Apportionment as a result has come down quite significantly for the month of February, and we feel we've largely resolved and got the bottleneck of crude oil moved through the system now and shouldn't have a significant going-forward impact. Obviously, the amount of downtime we had in the fall did back up crude all the way up to the feeder systems. I'm not in a position to be able to quantify the impact that that's had on shippers, though, Ted

Okay. Those are my questions. Thank you.

Thank you.

Your next question comes from the line of Linda Ezergailis with TD Securities. Please proceed.

Thank you. Just a follow-up question on your regional oil sands system and feeder pipelines. What would you consider to be the magnitude of events that would be more one-time in nature in the Q4 versus something systemic that we could expect to see going forward?

Richard?

Like for example, business development. You know, I would assume that Toledo would be more one-time in nature, et cetera, et cetera. That would be helpful just to get a little bit more of an understanding if that's Enbridge's view as well.

Yes, yes. Well, I would say that if you took the annual figures for all of those systems, those are probably indicative of the go-forward annual rates. The distribution over the year was a little unusual, and in some cases there were, as Pat just mentioned, impacts on some of the feeder systems, Toledo, in particular, that were specific to the operational issues on the main line. For the most part, the annual run rate should be indicative.

Excluding Toledo specifically?

Yes. With Toledo there will be a bit of a depression for the full year because of it.

Okay. And then can you comment on energy services, what your expectations for that business might be going forward with 2010 be kind of a reasonable assumption of what your contracts and margins might be like?

Yes, there is a little more volatility on that business than other segments just because opportunities come and opportunities go, and we're not going to get into guidance of individual segments, but I think probably 2010 is reasonably representative.

Okay.

If you look at the year as a whole.

Okay. That's great. Thank you.

Thanks Linda.

Your next question comes from the line of Jeff Jones with Reuters. Please proceed.

Thank you very much. I have two questions. The first relates to the Cushing situation, as you mentioned earlier. I just was wondering about the timing of this Monarch project, and would there be any reason in absence of such a project for that WTI differential to narrow; and, secondly, you mentioned a little bit about your discussions with the original people in British Columbia regarding Northern Gateway and they seem to be a little bit -- your comments seem to be a little bit different from what we read and what we hear from other sources. I'm just wondering if you can kind of characterize the difference there.

A very good point. What I'll ask, first of all, is ask Guy Jarvis to speak to the Cushing, the timing with regard to Monarch, and any potential for Brent WTI changes in the interim and then I'll come back and address the question on the brigde. Go ahead, Guy.

I think in terms of Monarch pipeline, I think the timing that we're heading on right now would be focused on a desire to achieve the required level of commercial certainty, hopefully, by the end of the second quarter of this year that would allow us to kind of move forth into the execution phase of that project. I think the time line had been for possibly late in 2012, but it'll be a function ultimately of the point in time when we secure the support.

I'm sorry, so there would be presumably an open season sometime in the second quarter?

I think there were likely only be an open season as part of a regulatory requirement to move the project forth. The plan we're on would be to have enough commercial support lined up to proceed with the projects prior to entering into any open season.

Okay.

Just to come back and speak to the issues surround the equity offering on Gateway that the first nations and aboriginal people realize that along the Gateway right of way, we have dozens of first nations that we're dealing with from Edmonton through to Kitimat and then also on the coast. And when I speak to the fact that the offering has been well received, I am speaking to what I consider to be the response from the majority of those first nations groups along the way.

That does not mean that everyone is wildly embracing the concept of the Gateway Pipeline project, even in light of the equity offering and the economic benefits and jobs and opportunities associated with it. We have committed to -- and I know you've heard me say this before -- working very closely with those that are not yet convinced to try to turn their no to a yes with regard to Gateway, because we truly do want very broad, general, and thorough support for the project because of its huge strategic value and interest to this country. So don't expect that we will suddenly get everybody on side. Those that are opposed, of course, are very vocal, and you'll continue to hear that. But we have made progress and expect to continue to make progress in bringing more and more people on side with the concept and opportunities around Gateway.

Just as supplementary to that, do you have sort of a minimum level of support that you believe you need to move forward?

No, we don't, and our commitment and obligation is to consult with, to work with, and to cooperate with all groups. We haven't set any particular target where we say we have to have x-number of people on board. That will be a determination that's made by the National Energy Board. If there is not universal and unanimous support for the project, they will have to determine that day and what is in the national best interest in light of those that are for, those that would be against.

Thank you.

Thank you.

Your next question comes from the line of Sam Kanes with Scotia Capital. Please proceed.

Pat, is there any regulatory reason you are aware of -- and this is a hypothetical question. If you were to have the opportunity, if [the case] was to back away from its interest in Noverco and ultimately leave you an opportunity to acquire, if you so chose to, with your right framework, Gaz Metropolitan, is there anything that would preclude you from doing so, hypothetically?

Not really, Sam. We really like the investment, but also we really like the partner. So, you know, the scenario that you presented, we loved the Noverco investment. We would have taken more of it had we had the opportunity, right now more than our pro-rata share. On the other hand, we very much like doing business with the Caisse. They are an excellent partner and the Trencap partners and would hope to be maintaining them in the project.

Okay. The 10%, switching back to Gateway again, you've stated you now offered 10% equity position to the aboriginals in B.C. I presume that's at no cost, or is it some form of financial arrangement that you offered?

It really is at no cost to the aboriginal groups.

Okay. Richard, to you last question. You've given us kind of a profile. It's interesting how financing has dropped off even as a topic now that you've gone through the bulk of your big program for now. Where would you be at the moment roughly in terms of what you used to show us as excess equity or equity for opportunity acquisition expansion such as this incremental piece lying in Noverco?

Okay. Well, you're right, the profile, that's dropped away to the point where we don't even look at it on a very regular basis ourselves. But we always measured that over the five-year period of our plan, and I think it's running, and we've measured it relative to secured opportunities. So as we secure additional opportunities, we eat into that. But I think it's running close to CAD2 billion over the full period of the five-year plan.

Thanks, Richard. Thank you.

Your next question comes from the line of Justin Amoah with Argus Media. Please proceed.

Thank you for taking my call. I was wondering if you anticipate lower volumes on the main line and Lakehead System as a result of the Keystone Pipeline ramping up throughputs and now providing service to cushion?

Justin, I think it's fair to say that as the ConocoPhillips Wood River expansion and conversion is complete, which I believe is anticipated towards the end of the year, that there is an expectation that volumes on the Keystone system will go up to meet that increased need in Wood River, but beyond that, no, we don't. We still feel very strongly that our system is most competitive and into the best market in order to provide the maximum netback for shippers.

The second question I had was I know there's been some dispute with uncommitted shippers due to FERC and NEB on the Southern Lights tolls. Can you just update us where you are with that process and how that's going?

Well, I believe that the discussions right now, Justin -- and, Guy, please update me on this -- but I believe the discussions right now are between those opposed to the tolls and the founding shippers. And we're not directly involved in those. Guy?

Yes, certainly, what you mentioned, Pat, is a critical part of it.As the pipeline owner, we are involved in terms of the process in that it is our tolls that are being challenged at FERC. So, I think the process is ongoing. FERC has a settlement process. If that doesn't work, then you head to a hearing process. So we're just working our way through that process.

It's Richard Bird I think the main point to understand on that is it's a shipper versus shipper issue, and we want to meet the needs of all of our shippers. But there really is minimal financial impact to Enbridge because the vast bulk of the revenue on that system is contractually determined and doesn't have to do with the toll that's charged on uncommitted volumes. ,It's just a very small part of the toll on uncommitted volumes that is to our benefit that would be impacted by however this might end up.

And finally, I wanted to ask, where do you stand with the St. Clair River replacement projects, and when will that kick off?

Well, we're right now preparing to do the directional drill under the St. Clair River, and I believe we're still on target to have that complete by mid-year this year.

So will it involve some downtime of the 6B system?

Justin, at this point, we expect there'll be very little downtime associated with it. It'll be primarily just the time to tie in. In other words, we'll drill the new line under and then it will just be tie in times, so it will be very little. It's not that the line will be down, for example, during the directional drill under the river. It'll just be as we tie in the new pipe once it's complete. So it'll be very minimal down time.

Thanks for your time.

Thank you.

At this time, we have no further questions. I would now like to turn the call back over to Mr. Guy Jarvis for any closing remarks.

I don't think we have any closing remarks from this end. So thank you very much.

Ladies and gentlemen, this concludes the presentation. You may now disconnect. Thank you, and have a great day.