恩橋 (ENB) 2011 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Enbridge Inc. fourth-quarter 2011 financial results conference call. I would now like to turn the meeting over to Jody Balko.

Thank you, Deanna. Well, good morning and welcome to Enbridge Inc.'s fourth quarter of 2011 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 John Whelen, Senior Vice President and Controller.

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 the same as always. The initial Q&A session is restricted to the analyst community and once completed, we will invite questions from the media.

I will also remind you that Jonathan Gould and I will be available after the call for any follow-up questions that you may have.

Before I begin, I would like to point out that we may refer to forward-looking information during the call and 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.

This slide includes 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 disclosure filings available on both SEDAR and EDGAR systems. With that, I would like to turn the call over to Pat Daniel.

Thank you, Jody and good morning, everyone. Thank you for joining us for a review of our fourth-quarter and our full-year results. Most of you are likely wondering why our 2011 results are being released on an unaudited basis, so I'll just explain that upfront before I move on to the more substantive matters.

Those of you who follow Enbridge Energy Partners will know that they announced a few weeks ago that they had identified a misstatement of earnings from their NGL trucking and marketing business accumulating to CAD17 million over multiple years. That operation, of course, is just a small part of EEP's overall business, which sells and distributes EEP's NGL volumes. It provides less than 2% of EEP's recurring operating income.

The misstatement did not affect EEP's cash flow and it is not expected to have any impact on future earnings, cash flow or distributions to EEP's unitholders and to Enbridge. We have taken a CAD3 million non-cash charge for our share of EEP's estimated prior-period adjustment that is expected to book in its fourth quarter.

We are comfortable that we have identified the appropriate magnitude of the misstatements and reflected the appropriate correcting entry in Enbridge's consolidated financial statements. Our external auditors are just now finalizing their detailed review.

We decided that we should release our results now as originally planned rather than awaiting the formal conclusion of the audit and of course, we will file our complete financial statements and disclosure documents upon receipt of the audit opinion.

So let me move on now to the results themselves and as I am sure you are aware, earlier today, we were very pleased to announce that our adjusted earnings for the fourth quarter were CAD275 million, or CAD0.37 per share. So on a full-year basis, that puts us at CAD1.11 billion of adjusted earnings, our first time over CAD1 billion or CAD1.48 per share. And this is an increase of 11% relative to 2010 adjusted earnings per share. So a very strong year.

This was again in line with our guidance, finishing right at the top end of our original range of CAD1.38 to CAD1.48 per share, highlighting not only just the year-over-year growth of 11%, but the reliability of the earnings from our business.

From a shareholders' perspective, it was, of course, a very strong year. Enbridge Inc. was the largest positive point contributor to the TSX Composite Index in 2011 on the strength of our 40% total shareholder return and of course, the sizable market capitalization at the Company.

We are equally proud though of our long-term performance relative to the market as it again highlights the reliability of our business model and we have a 17% total shareholder return over both a 5 and 10-year period. Continuing to deliver that long-term shareholder return is going to be driven by our ability to grow our business through the development of attractive new energy infrastructure projects and 2011 was a banner year in that regard.

The table that you are seeing on your screens summarizes our CAD8 billion plus of new investment opportunities enterprisewide that were commercially secured during the year, all of which are expected to contribute to earnings by 2015.

So let me just touch briefly on those we secured in the fourth quarter of 2011, starting off with our Liquids Pipeline segment. There were certainly several high-profile announcements this past quarter. Firstly, the acquisition of a 50% interest in the Seaway Pipeline from Conoco and then, of course, the subsequent announcement with Enterprise of our intention to reverse the flow to the Gulf Coast starting as early as June of 2012.

This was followed shortly thereafter by the announcement that we are going to proceed with our Flanagan South pipeline project and that is to increase capacity from Chicago to Cushing to then facilitate greater access for Bakken and Canadian crude to reach the Gulf.

These US Gulf Coast access projects are important to help reduce the glut of crude oil trapped in the Mid-Continent. Moreover, they are going to enable Canadian and US producers to gain access to the Gulf Coast refinery market and should thereby reduce the discount that they are currently receiving relative to global pricing. And I think you are all aware those discounts are very significant right now.

You are likely aware that we are also in the process of concluding our open season to secure additional long-term contractual commitments on Flanagan South and potentially a twinned Seaway Pipeline. We just recently extended the Flanagan South open season for an additional week to accommodate shipper interest in the 20-year commitment, which wasn't initially offered and as a result, we have extended for that one week.

What we can say, by the way, at this point, even though the open season is not complete, is that we are very pleased with the responses that we have received through this process.

We had already announced our intention to proceed with Flanagan South in December based on the results of the first open season and we will now be looking at the potential upsizing of the pipeline, as well as potential mainline expansion to accommodate the more recent commitments. We will also be working with Enterprise, our partner on the Seaway Pipeline, to determine the size of the looping or twinning required to accommodate the new ex-Flanagan and ex-Cushing commitments that we've received through the open season.

I should also note that we announced two smaller projects to support our eastern access initiative, again referring back to the fourth quarter, including an expansion of capacity on our Line 5 to Sarnia and a reversal of this segment of our Line 9 to Westover, Ontario. We continue to have very strong shipper interest in getting greater access to Eastern PADD II and further into Ontario, especially for light crude oil. So we are optimistic that we will be in a position to speak further on that topic a little later in the year.

We are also very busy on the gas processing and pipeline side of the business in the fourth quarter, announcing our entrance into the gas midstream business in Canada with the CAD1.1 billion securement of a 71% interest in the Cabin Gas Plant development in the northeast British Columbia. We are extremely pleased with this new platform for growth as it fits really well with our overall business model.

The project offers good stable returns on a low-risk long-term commercial framework with the potential for longer-term organic growth opportunities as development continues in the very prolific Horn River gas shale. So first gas is expected to flow through the initial plant later this year.

On the renewable energy front, we were also very pleased to have initiated a new partnership with EDF for the development of the Lac Alfred wind farm in Quebec at an expected Enbridge investment of CAD330 million. This is a 300 megawatt facility and it is going to diversify our renewable holdings geographically into this very attractive market. And we look forward to expanding the relationship also with this world-class renewable energy project developer in the future. So excellent upside from there.

Lastly, in the quarter four, Enbridge also closed the transaction to acquire all of the outstanding common shares of Tonbridge Power Inc. and on that front, we have assembled our project team now. We are in the process of re-commencing work on the Montana-Alberta Tie-Line project. We expect to have the first phase operational in the second half of this year.

So with that very impressive slate of growth projects from 2011, will serve us very well over the coming years, what is not listed here, but is equally significant for future growth, is our 10-year competitive tolling settlement on the mainline, which, of course, took effect in last July. We feel that that agreement will benefit shippers by providing a very competitive and predictable toll for the coming years and we believe that it will also be a benefit to Enbridge as we experience strong growth in Western Canada and the Bakken crude supply over the upcoming 10-year horizon.

Currently -- further, we are currently using the international joint toll framework embedded in the CTS to facilitate further market extension projects and you have heard us speak to that many times. These projects either to the Gulf or east of Chicago as I mentioned earlier.

This next slide is one that we have shown several times since rolling it out at our Enbridge Day investor conference. It highlights the vast opportunity set that we are currently working on, as well as shows how we are tracking relative to our originally forecast success rates. The only change here is that the green colored wedge representing secured projects continues to grow at a fast pace with an additional CAD4.5 billion secured since Enbridge Day. So significant success on that front. We now have over CAD13 billion of secured capital projects in the current five-year planning window, all of which should be in service by the end of 2015.

Now for the time being, we have not revised upward our total growth assumption of CAD20 billion over the five years, but it is appearing increasingly conservative now, of course, based on our recent business development success. And Richard is going to talk shortly on how we plan on addressing the financing requirements for this outstanding growth story.

You've likely heard me speak a great deal over the past year about our renewed commitment to safety and integrity. And I have said this many times before, but it is the safety and reliability of our assets that provides us with the foundation for future growth. And it is an absolute prerequisite for us maintaining our social license to build and operate our infrastructure.

This slide just gives you a few statistics highlighting the significant work that we did in 2011 with continued efforts to come in 2012 in this regard. Our operational risk management plan charts the course for our safety and integrity-related programs and is an area to which we have dedicated a great deal of focus again this year, as well as last year.

The plan, which really becomes a companion to our strategic business plan, encompasses each of the six key areas, which are listed on this slide. It is our goal to ensure that we remain at or attain at least top quartile performance in all critical program areas in the near term with being best-in-class the objective overall.

Looking to the future, we expect another year of strong earnings growth in 2012 with the midpoint of our guidance range of CAD1.58 to CAD1.74, representing a 12% increase in EPS over 2011. Then looking even further into the future, we remain very confident in achieving a long-term average growth rate in EPS of 10% through 2015 still based on conservative business development success and mainline throughput assumptions. And the period beyond 2015 is also looking increasingly robust.

So with that, I will now just ask Richard to walk through a more detailed year-over-year analysis of the 2011 results before we go to the Q&A portion of the call. Richard?

Okay, thanks Pat. Good morning. Picking up the story at slide 14 of the slide deck, I will walk through the notable details of the fourth quarter, which unfolded largely as expected. Liquids Pipelines continued to contribute to earnings growth and our regional oil sands system was the primary driver in the fourth quarter and for the full year with higher volumes and higher tolls kicking in on that system and additional facilities coming online, as well as extended asset depreciation lives.

Mainline earnings were off from the level in the prior quarter and last year. Volumes and revenues remained strong under the CTS, but operating and admin expenses bunched up in the fourth quarter with a full-court press on integrity spending programs. We will see some quarterly variability in that O&A expense going forward, but our third quarter would be more indicative of what we would expect for a running rate.

The effective current tax rate booked on mainline earnings was also high in Q4 due to timing of expenditures and year-end true-ups. Again, the Q3 rate would be more indicative of what we would expect for a full-year run rate.

All in all, the mainline full-year results were better than expected at the time of our original guidance due to stronger volumes under the CTS than we had expected at that time and that is contributing to Enbridge reaching the top end of our adjusted earnings per share guidance range and also setting the stage for the strong contribution to 2012 earnings growth, which is reflected in our guidance for this year.

For Gas Distribution in Q4, we gave back a portion of the third-quarter year-to-date strength as I indicated we expected to on our third-quarter call. Like Liquids Pipelines, this was partially a matter of integrity programs' spending timing and also lower other income associated with EGD's demand management incentive program.

Gas Pipelines, Processing and Energy Services maintained its steady pace for the year in Q4. Offshore continued to be weak as expected and as previously discussed.

Aux Sable had a strong finish as expected again at the time of our third-quarter call and Energy Services had another strong quarter, just a little less than the third quarter. Again, pretty much as expected, but not something we are likely to see to the same extent in 2012.

And the other subsegment in Gas Pipelines, Processing and Energy Services might look like it lost a little ground in Q4, but that is because of the renewable assets that were dropped down into the Enbridge Income Fund with their earnings now reported in Sponsored Investments. Sponsored Investments then finished with a strong fourth quarter at Enbridge Energy Partners. We had both the Liquids Pipelines business and the Gathering and Processing business reflecting the benefits of increased volumes and asset-based growth and magnified through the general partner incentive distribution structure.

And at the Income Fund, we had the benefit of the Saskatchewan system expansion and the renewables asset drop-down and again, with the uplift from its incentive distribution structure.

There is nothing very remarkable in the Corporate segment. Adjusted earnings for the fourth quarter, we are seeing the expected benefits of our increased interest in Noverco and we are seeing slightly increased unallocated corporate costs reflecting the overall growth in the business.

There are two unusual adjusted items in the Corporate segment fourth quarter to reconcile to the GAAP earnings. The first is a foreign exchange loss on an intercompany loan balance. The loan relates to the proceeds of the OCENSA disposition back in 2008, which were loaned back to Enbridge by the subsidiary, which held the investment. Because of a technical GAAP requirement, we have been recording unrealized foreign exchange gains on this loan ever since then, even though you would normally expect them to eliminate on consolidation.

And of course, as you track back through our historical disclosures, we have always adjusted out those unrealized intercompany foreign exchange gains when we look at our adjusted earnings because those gains have nothing to do with sustainable earnings or cash flow. So in the fourth quarter, that loan was substantially repaid and hence, you see most of the prior gains being reversed back through GAAP earnings and likewise being adjusted out of adjusted earnings.

And the other unusual item relates to the renewable asset drop-down to the Income Fund. There was an economic gain on that transaction, as well as a book gain and a taxable gain associated with the drop-down. There was also a current tax expense associated with that taxable gain. Because we consolidate the Income Fund, the book gain is eliminated on consolidation. However, again, because of a technical GAAP requirement, the current tax expense associated with the transaction is not eliminated.

Moving on to slide 15, you can see that Enbridge's strong earnings growth performance is also mirrored in strong cash flow growth. In fact, as we remarked in the past, we are in a period when cash flow will tend to grow a little faster even than earnings.

Moving on to slide 16, the fourth quarter and early part of this year have been active on the funding and liquidity action front with over CAD500 million in equity raised through our sponsored vehicles. We sourced another CAD125 million of term funding through the issuance of MTNs and continue to bolster the equity side of the balance sheet with another CAD450 million preferred share issue in the fourth quarter following our successful offering in September and yet another CAD500 million of preferred shares just recently issued here in January.

In the fourth quarter, we upsized an existing US dollar bank facility by $0.5 billion and in early February, we closed a new three-year committed US dollar bank credit facility of $1.25 billion. Both of these will provide additional liquidity in support of our Gulf Coast access initiative. This brings, by the way, our total committed general-purpose facilities enterprisewide to over CAD10 billion with over CAD6.5 billion of unutilized available liquidity.

My last slide, slide 17, is an update to our standard five-year funding perspective and there is a lot of detail on the chart. Not much has changed since the version from our December guidance call. So there is just a few comments I will make pertaining to this perspective. The first, as Pat mentioned, at present, we have not revised upward our five-year capital expenditure assumptions even though our securement success rate continues to exceed that, which was assumed in our plan. We have continued to stick for the time being with the conservative growth investment assumptions of our 2011 plan on which we based our confidence in achieving that average earnings-per-share growth rate of 10% through the middle of the decade.

Even though as you may have gleaned from Pat's comments, these growth assumptions are looking increasingly conservative as we make our way into 2012. That is why we have now built up the significant equity surplus that you would see on the bottom right-hand side of that chart, as well as a CAD6.5 billion liquidity pool that I mentioned just a moment ago.

The reality is we are building enough flexibility into our financial capability to accommodate a significant upsizing of our five-year growth capital plan. We haven't crossed that bridge yet, but there is a good chance that we will and our finance team intends to be ready for it. So don't be surprised to see further equity-bolstering actions from our tool bag of supplementary sources or further liquidity-bolstering actions. And with that, I will pass the line back to Pat for wrapup comments.

Great, thanks, Richard. So maybe I can just very quickly summarize. We are firstly very pleased with our results for 2011 with an 11% increase over 2010 and right at the top end of our original range. Secondly, we have had exceptional success in securing new projects across all of our business units in the latter part of 2011 and therefore, we are positioning ourselves for funding capabilities accordingly as Richard has just summarized. At the same time, we continue to attach the highest priority to operational safety and integrity of our existing systems.

And lastly, we remain very confident that we can achieve an annual growth rate in EPS averaging 10% through 2015 based on conservative mainline volume and project development assumptions. So that concludes our prepared remarks for this morning. I will now ask Deanna to open the phone lines to take questions.

(Operator Instructions). Paul Lechem, CIBC.

Thank you, good morning. Just a question on the Spearhead Pipeline and the implications for volumes on the mainline. In Q4, the volumes through Spearhead were, I think, on averaging 54,000 barrels a day. It has picked up significantly since then. Does that mean -- should we imply from that that the mainline volume that is pulling through should be up by the same amount? And what is the outlook for the balance of the year?

Richard, obviously, the implication is very positive, but in terms of pullthrough, I think that is a pretty fair assumption that Paul has made.

Yes, yes. There is not necessarily a one-to-one relationship between volumes on any downstream pipe, but generally directionally that pullthrough effect should pull additional volumes through the mainline and we have seen pretty strong mainline volumes coming into the early part of the year.

Okay, and just maybe a follow-up. Pat, your comments on Flanagan South, what is the CAD1.9 billion project? What volume would that -- or capacity would that imply and if you are thinking about upsizing, where could an upsize go to?

Well, the CAD1.9 billion, if I've got the right number that you are looking at, Paul, would relate to the expectation that we would build a 30-inch twin of Spearhead South. And what we now will look at as a result of this open season, whether we have sufficient commitment to upsize that to 36 inch and of course, depending on the power associated with the line and the pumping station capacity would determine what the ultimate capacity would be. So we are looking at whether we upsize it to a 36 from 30.

Okay, thank you very much.

Linda Ezergailis, TD Securities.

Thank you. Congratulations on a great 2011.

Thanks, Linda.

Just wanted to follow-up with Paul's question and ask it maybe in a little bit of a different way. What sort of volumes are you seeing on your mainline ex-Gretna right now? And given that Q1 is half done, what might we look for for the quarter generally? And are you still assuming a flat volume 2012 versus 2011 given the strong start to the year?

So ex-Gretna volumes, I don't know whether any of us -- Richard, do you got that number?

Yes -- well, I don't have that specific number, but in the fourth quarter when our MD&A is released and we include the detail on the [CPS] -- (multiple speakers).

Linda, we are looking up some numbers for you here.

You are going to see fourth-quarter throughput ex-Gretna of a little higher than the third quarter. And contrary to normal patterns where we see a significant drop-off as we roll into the first quarter, those volumes have continued on pretty strong through January. So we are not going to get into specific guidance on quarter-by-quarter volumes ahead of time, but suffice it to say that the volume picture exiting the year and into 2012 has been quite strong.

So there would be an upward bias for the year generally given the unusual seasonality that you are seeing in Q1, but you don't want to go there yet?

Yes, I think that is a good way of putting it. A little too soon to be thinking about changing anything on our full-year picture just yet.

Okay, great. Thank you.

Juan Plessis, Canaccord Genuity.

Thank you. With respect to the Canadian mainline, you mentioned that there were some higher pipeline integrity inspection costs. Just wondering if you could break out the increase in this expense in the quarter. And I know you are continuing the integrity program in 2012, but going forward beyond 2012, do you see these costs as more recurring in nature or would you expect these costs to decline?

So Juan, I think I would probably just come back to the comment that I made earlier, which is that the costs that we incurred in the third quarter across the board on O&A are more consistent with what we would see on our running rate than the ones in the fourth quarter. So when we break out the detail for you in the MD&A on Q4 versus Q3, you will see an uptick in overall O&A. But if you look at the difference between fourth quarter and third quarter, that is roughly the magnitude of greater than run rate costs that we experienced in the fourth quarter.

Okay, and beyond 2012, you think that is going to continue?

Generally, as we move into the future, we will see an increasing component of costs associated with integrity. In that mainline, of course, we will also see increasing revenues as well.

Right, of course. Great, thanks very much.

Ted Durbin, Goldman Sachs.

Thank you. You talked a little bit about this, but you just did finish your Seaway open season I believe. How likely are you thinking that you will twin the pipeline and then what is the timing of when you might bring an expansion like that online?

I think the likelihood is very good at this point, Ted, but we will formalize that for you over the next few weeks as we conclude the open season and then it may take us a few days after the formal close of that open season to go through the commitments that have been made and determine how to best design. But I think it is fair to say that it is quite likely and the timing, as you know, is to have the reverse Seaway volumes flowing first in about June of this year, ramping up to 400,000 plus by the end of the year, the first part of 2013. But the twinned line I believe we are targeting late 2014.

Thank you. And then just as follow-up on that, are you tying your Flanagan South sort of contracting to the Seaway piece as well or should we think about that as two separate projects and two separate sets of commitments?

I think it is fair to say that those that are committing to Flanagan South are looking at being able to move their volumes all the way through to the Gulf. So therefore, although they have been run as two separate open seasons and of course, they are two separate ownership structures because we are in a 50/50 joint venture with Enterprise south of Cushing, that effectively the commitments are to move the crude all the way to the Gulf.

Got you. And then if I could just ask one more, how are you thinking about the offshore business? Do you expect to continue to make losses there? Kind of the timing of when the base business might turn around, realizing that you have Walker Ridge and Bigfoot coming down the road, but just thinking about the base business here.

Yes, the base business is, of course, very dependent on increased drilling activity and development drilling in the Gulf and as you know, that had gone through significant delays. We do expect a recovery. It is hard to forecast exactly when that will occur, but we are not anticipating a really strong year through 2012, but growing volumes going forward.

Okay, great. Thank you. That is it for me.

Thanks, Ted.

Carl Kirst, BMO Capital.

Thanks, good morning, everybody and great 2011 as well. I am not sure if we can kind of bookend, but, Pat, you gave some great color as far as this is on the Gulf Coast access, the Flanagan South, starting with the 30-inch twin and maybe going up to as high as 36 inches, adding pumping and the like. Is there any way to sort of bookend what the incremental investment potential could be above the CAD1.9 billion if you did all of that or are you guys not prepared to go there just yet?

Well, we are probably not prepared to go there with any precision yet, Carl, because I believe the number, for example, in upsizing is around CAD600 million, but, of course, that has to be then matched upstream and downstream. There will be mainline capital associated with that. So it will take us a little while to work through what the overall capital plan would be and investment opportunities as a result of the upsizing. It is not just a matter of increased diameter, but it has got to be matched upstream and downstream. But we will be able to put that in place for you shortly after we get through analysis of the open season.

Great, that's helpful. And one follow-up, if I could and this kind of goes more to opportunities like Cabin Gas that was kind of sort of a nice mix of both buying and organic. Given where gas prices are today, do you see any either additional or even growing opportunities for more midstream assets like that to shake loose from some of the E&Ps or how do you see that in the context of today's commodity market?

Well, we do see more opportunity and as you -- I think we mentioned in a prior call, we have already looked at and have bid on other assets to further supplement that. We are not successful in that, but, as you know, even though the gas, the dry gas business right now is not really strong, the liquids-rich gas business is very strong. And as these LNG projects off the West Coast gain momentum, I think the confidence in the Canadian gas and midstream business will grow. And obviously, the producers in Western Canada are wanting to free up capital by turning plants such as Cabin over to companies like us in the midstream business. So we think there is good potential there and that it will continue to grow.

Great. Thanks, guys.

Matthew Akman, Scotiabank.

Hey, guys. Reference on regional oil sands pipeline to increased toll, which pipeline is that in reference to? Would that be Athabasca or Wapasu?

John, do you --?

Wapasu pipeline I believe is what --.

Just wondering if you could provide some color around that. I guess -- I know the volumes are obviously rising there, which takes revenue higher, but what is the reference to increased tolls?

We will have to doublecheck that, Matthew. We think it is the -- just thinking through the various contracts on the various lines. A number of them have provisions in for gradual toll escalation and we think it is primarily the Wapasu line that that references in relationship to.

My expectation would be that the upside in earnings would be primarily from volume flow rather than tolls. Is that kind of your feeling as well, Richard?

Yes. I think that would be the main driver.

Okay, thanks for that. There is a reference, a separate question and I am not sure if this is for Pat or Richard, but there is a reference to Noverco monetizing shares in Enbridge. Obviously, Enbridge would get money in the door. The return on Noverco is kind of a fixed-type return, so -- which is kind of a modest type return. So is your expectation then that this would be an accretive transaction for Enbridge once the funds are redeployed into the business?

Yes, I think that is a good assumption, Matthew and there will be a significant flowback to Enbridge because, as you know, through Noverco, we effectively own a portion of our (inaudible) through the Enbridge shares held within Noverco.

Okay. All right, thanks, guys. Those are all my questions.

Okay, thanks, Matthew.

Andrew Kuske, Credit Suisse.

Thank you, good morning. I guess the question really relates to Noverco and when you think about that asset and how it is held by yourselves and really by the partner, obviously, they are doing a portfolio management activity on a broader basis. But we have seen a lot of pension fund interest in long-dated assets and really going directly investing in those types of assets whether they be pipelines or real estate. So is this really just a one-off portfolio management activity by the Caisse.

And if that is yes on that answer, the second part, are you seeing a lot of interest from pension funds approaching you wanting to take direct interest in underlying assets?

So I think the answers are yes, yes, Andrew. This is really a portfolio-trimming exercise by the Caisse and we have had just an excellent relationship with them through Noverco and we -- as you have heard us speak on many occasions before, as we look at various structures for financing new initiatives going forward, that the concepts around partnering up with the pension funds is something certainly not new to us and something that we are counting on as Richard described earlier in his bag of tools with regard to equity and financing of the great projects suite that we have got in front of us. So I think it is fair to say yes to the second part of your question as well.

So then just as a follow-up to that, do you see an opportunity in the current low interest rate environment and with pension fund interest in these types of assets of doing a more radical restructuring of Enbridge into sort of a GPLP structure at a macro level to really accelerate the growth, the size and really the returns to Enbridge common shareholders?

Well, I will let Richard respond to that in a little more detail. That hasn't been a discussion at the more macro level. And I give Richard a hard enough time, Andrew, about the complexity of the corporate structure already that he is probably afraid to think about it, but I will ask him to comment.

Yes, so I think Pat has pretty well covered it. The way that we are playing that capital market arbitrage that is behind your comment is really in how we manage our various sponsored vehicles in Noverco and the assets that we look to drop into those vehicles and potential other sidecars, which could involve pension funds as you are suggesting, as opposed to completely changing the structure of the parent itself.

Okay, that's great. Thank you.

Thanks, Andrew.

Robert Kwan, RBC Capital Markets.

Good morning. Just on the mainline and CTS, I am just wondering if there is an update or some additional color on what ongoing discussions are with shippers on the potential reopener?

Really there haven't been any discussions, Robert. You are referring to the potential reopener in the event that Keystone XL is not approved by January of 2013, I assume.

Yes, that is right, Pat.

Yes. No, we haven't had any further discussion. I think the industry continues to be, if not optimistic at least hopeful that Keystone XL will get approval and it will be a nonissue going forward. But no, we haven't had any significant discussions in that regard.

Okay. Just another question. Coming off of a good year, you had previously guided for the potential to move through the high end of the range. Just wondering if you can give some color as to what types of things didn't materialize and maybe more importantly, are some of these items timing issues that might better set you up for 2012?

Okay, well, I'll maybe ask Richard to comment on that. Recognize we provide a guidance range and when you hit the top end of it, we don't want to apologize too much for having not gone through the top end of it and maybe just to take you up on the words, Robert, we are not coming off of a great year. We are going forward to another great year in 2012 and expect to be up from that. But Richard, could you maybe comment why we didn't add a couple more pennies over the top end of the guidance range?

Sure. Yes, well, of course, there are many small amounts and to be clear, our third-quarter guidance was that we expected to be near to the top end of the range or slightly above. So we pretty well hit bang in the middle of that expectation. We thought we might have seen a little more strength in Energy Services in that fourth quarter that we might have hung on to the great arbitrage opportunities to a slightly greater extent than we did. I think the slightly higher O&A in both Liquids Pipelines and Gas Distribution, some of that we expected, some of it was a little more than what we expected. So it's really a variety of small things and no one of which I think has got particular predictive value going into the future.

Okay, that's great. Thanks very much.

Thanks, Robert.

Steven Paget, FirstEnergy.

Good morning. You mentioned mainline expansion. So if you could detail a bit how would the mainline be expanded and what would the schedule be for proposing this expansion? Could the application be in front of the relevant authorities within the next year?

Well, I guess you are referring to the mainline expansions that I was referring to in order to accommodate expanded volumes south of Flanagan. And relatively straightforward, Steven, because we do have spare capacity on the system, but it will be primarily pumping capacity and minimal regulatory approvals associated with that.

Thank you. My second question relates to Aux Sable. We are seeing -- your partner in the Seaway, Enterprise, look at putting together a very large pipeline system that would move ethane down to the Gulf Coast. Could that significantly improve netbacks on Conway and by extension your earnings from Aux Sable?

Oh, we should have Al Monaco here to respond to that. I don't know whether --.

I think that is directionally correct, Steven, bearing in mind that BP really manages the commercial side of that business on our behalf and we share in the upside that they generate. But I think directionally the fundamentals that you are describing, if additional capacity was put into the Gulf Coast, it should tighten up the differentials that are available to that business.

Excellent. Thank you. Those are my questions.

Thanks, Steven.

(Operator Instructions). Curt Launer, Deutsche Bank.

Good morning and thank you. I thought you were putting me into the media for a second. That wasn't my goal. But I would like to ask two quick questions if I could. One is to just get some additional information relative to the Bakken expansion program, the status of the mainline relative to it being full. There has been a lot of discussion in and around the basis differentials at Clearbrook recently. If you could comment on that and anything else that would give us additional information relative to the timing of capacity additions in and around your Bakken expansion program.

Well, Curt, there is a fair bit of detail in that. I don't know -- in that question. I don't know whether we have got -- because you are looking for a comment on both Bakken expansion, the associated mainline. You mentioned the differentials around Clearbrook. Maybe that is something we can get back to you on and provide a little bit of follow-up and detail.

As you know, we have got a big capacity expansion underway on both the Canadian and US side of the Bakken and are in the process right now through business development of looking at an even further expansion because of the rapid growth out of the Bakken. So it has been in a state of flux, but we could put in front of you what we have got underway right now in a follow-up call if that would work.

Yes, that would certainly work, but if I could just make it one specific question for today, we are looking at capacity that is in and around 162,000 barrels a day now. Is there any kind of a number that you would share in terms of a target or what you would be looking for happening here over the next 12 months?

Well, why don't I take a stab at that? So our capacity out of the Bakken on the existing mainline system is larger than what you just indicated. I think we are running at about 200,000 barrels a day on the mainline and we do have the front end of the Bakken expansion program, which I think has got about another 25,000 on top of that. The full Bakken expansion program is 145,000 barrels a day as I recall and that is targeted to be in schedule in the early part of next year. So we will be running about 350,000 of capacity out of the Bakken at that point in time.

Right, thank you. Those are the numbers I was looking for and we know you canceled the segregated sour program, which got to the 200,000. I missed that in my note from before.

One follow-up question if I could. You talked about stronger volumes under the CTS and is there any other incremental information you can give us in that regard to help us model our way through it for 2012 and '13?

Well, I think in our standard IR book, we have got both the disclosures on what the starting point is and what our forecasts are for growth out of the basin. So we can certainly spend some more time on you with that, Curt.

Okay, we will look forward to that. Thank you.

Thanks, Curt.

Winfried Fruehauf, Fruehauf Consulting Ltd.

Good morning. Regarding Northern Gateway pipeline, does Enbridge currently own or has an option to own to acquire docklands at Prince Rupert? And if so, why did Enbridge not choose Prince Rupert in the first place as a terminal for Northern Gateway?

Win, at this point, I don't believe we have any options at Prince Rupert. And the reason why we -- and as you probably recall, we went through very extensive routing studies before we chose Kitimat. And the main reason why we preferred Kitimat versus Rupert was the requirement to run parallel to the Skeena River for about 50 miles going into Rupert on what would be a very narrow right-of-way space. And hence, we felt, from an operational point of view, that we would be much better off going into Kitimat and of course, the harbor is an outstanding harbor in Kitimat.

Recently, I have indicated that we will re-examine that to see whether there is another way to get to Prince Rupert, but all of our engineering and environmental studies continue to point in the direction of Kitimat being the best alternative. We want to make sure that we have thoroughly evaluated any and all routing opportunities.

Okay, thanks very much.

Thanks, Win.

David Brandt, Moody's.

Good morning. I wondered if you could maybe comment a little on the Line 9 reversal in terms of timing, expected cost and the volume that it will move.

Okay, well, we're -- Line 9 reversal we are looking at in a couple of phases, at least a couple of phases, David. As you know, we are well on the way to planning the first phase of that, which would be reversal to Westover Junction in order to be able to access the Nanticoke refinery. And then we, at the same time, we continue to work with producers in order to get sufficient support to reverse the line all the way to Montreal to be able to move Canadian crude into the Montreal market and those discussions are underway.

It is difficult to know when we will get the level of support that we need to proceed with that, but it is a relatively straightforward program then to turn around and reverse the line in order -- because, of course, it originally operated in a west to east mode. We also have to work through a regulatory process that we are feeling is unduly burdensome with regard to re-reversal. We felt that having operated the line in a west to east mode that that should be a fairly straightforward process. It sounds like the regulator is looking at a longer process than we had required, but we are working to see what we can do to shorten that. So a little hard to be predictive with regard to dates at this point in time.

I could add to that, the reversal to Westover is a pretty minimal capital expenditure. It is about CAD20 million, so it is really in conjunction with our Line 5 expansion project and that piece is fairly small.

Okay.

Thanks, David.

And this concludes the question-and-answer portion for today. I would now like to turn the call back to Jody Balko for closing remarks.

Well, thanks, Deanna. We have got nothing else to add at this time, but I will just remind you that Jonathan Gould and myself are available for any follow-up questions. So thanks, everyone and have a good day.

Ladies and gentlemen, this concludes today's conference. You may now disconnect and have a great day.