Enbridge Inc. (TSX: ENB) reported its third-quarter 2024 results, toplined by GAAP earnings of $1.3 billion, or $0.59 per share, a significant increase from $0.5 billion, or $0.26 per share, in the same period last year. This 143% growth in GAAP earnings was largely driven by a $112 million gain from non-cash derivative valuations, a sharp reversal from last year’s $782 million loss in this area.
However, adjusted earnings fell to $1.2 billion, or $0.55 per share, down from $1.3 billion, or $0.62 per share, in the third quarter of 2023. This decline suggests that underlying operational gains did not fully offset the increased costs associated with Enbridge’s recent acquisitions, as well as higher debt servicing costs.
The company’s strategic acquisitions, while bolstering its position in the U.S. utility sector, have added substantial financing burdens, leading to higher depreciation and interest expenses this quarter. Specifically, financing costs rose by over 40% compared to the previous year, primarily due to debt assumed for Enbridge’s expansion into the U.S. utility market. The incremental depreciation expenses from these acquisitions have similarly weighed on adjusted earnings, reflecting the cost of integrating new assets without immediate high-margin returns.
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Adjusted EBITDA for Q3 2024 reached $4.2 billion, up from $3.9 billion in Q3 2023, showing an 8% year-over-year increase. However, comparing quarter-over-quarter performance, this segment growth appears less pronounced, suggesting that while the year-over-year gains are positive, Enbridge’s growth trajectory may be moderating.
Liquids Pipelines posted EBITDA of $2.3 billion, up only modestly from $2.2 billion in the previous quarter and from the same quarter last year. This stability reflects steady demand but limited growth in North American oil transport capacity, as increasing oil production faces infrastructure constraints. Mainline volumes, while high, remain at the upper end of their capacity, indicating that Enbridge’s existing assets are nearly fully utilized, with limited room for expansion without significant new infrastructure investments.
Gas Transmission saw its quarterly EBITDA rise to $1.15 billion from $973 million last year. This 19% gain primarily reflects increased storage revenues and contributions from newly acquired assets in the Gulf Coast region. The Gas Distribution and Storage segment recorded substantial year-over-year growth, with EBITDA jumping to $522 million from $271 million, fueled by the addition of new U.S. utility assets that position Enbridge as North America’s largest natural gas distributor.
While this acquisition has expanded Enbridge’s footprint and customer base to over seven million, the increase in EBITDA is tempered by the long-term rate base growth of approximately 8%, which is robust but unlikely to deliver immediate high-margin returns.
Renewable Power Generation, a smaller but fast-growing segment for Enbridge, recorded a significant year-over-year EBITDA jump to $102 million from $30 million. This improvement reflects the second phase of Fox Squirrel Solar entering service and underscores Enbridge’s investment in renewable energy.
From a cash flow perspective, Enbridge generated $3 billion in operating cash flow in Q3 2024, slightly lower than $3.1 billion in the same period last year. Additionally, distributable cash flow (DCF) was $2.6 billion, roughly level with last year’s $2.57 billion.
Looking forward, Enbridge has reaffirmed its full-year 2024 financial guidance, expecting to close the year near the top end of its projected EBITDA range. However, the underlying results this quarter indicate that the company’s growth strategy, while bolstering revenue, also presents significant financing challenges.
Enbridge last traded at $56.24 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
