Content
David A. Arledge
Chair of the Board of Directors
Patrick D. Daniel
President and Chief Executive Officer
Letter to Shareholders
All of our businesses performed strongly in 2008. Enbridge is fortunate to have managed well through the crisis in the financial markets and slump in energy prices due to our strong business model. We also expect strong earnings in 2009, and on that basis Enbridge’s Board of Directors has increased the 2009 annual dividend by 12%.
Our medium-term financial prospects are equally robust. We expect to grow annual earnings per share by more than 10% throughout our current planning horizon as we continue to bring our commercially secured crude oil pipeline projects into service. We remain confident of delivering 20% growth in 2009 alone.
Every aspect of our business today is strategically well positioned for growth.
Throughout 2008 we remained on schedule and on budget with the construction of our $12 billion of crude oil pipeline projects to serve growth in oil volumes.
We completed construction, and put into service the 350,000 barrels-per-day Waupisoo Pipeline, which links oil sands producers to their upgraders and refineries in Edmonton. The project was completed one month ahead of schedule and on budget, in an environment of tight labour markets and escalating costs.
And we have “shovels in the ground” on our remaining commercially secured projects that are scheduled to come into service over the course of 2009 and 2010, including mainline expansion projects Alberta Clipper, Line 4 and Southern Access Expansion; and, the Southern Lights diluent pipeline and the Hardisty Terminal Project.
These projects carry little or no volume risk nor commodity price risk which means returns are predictable.
We also made progress in 2008 on proposals to deliver a new stable and reliable source of Canadian crude oil to U.S. Gulf Coast markets. We entered into an agreement with BP Pipelines (North America) Inc. to develop a new delivery system between Illinois and Texas. We also continued to work with Exxon Mobil Corporation to develop the proposed Texas Access Pipeline.
While we now anticipate delays in a number of the heavy oil projects that drive our long-term development, we fully expect that all of the projects ultimately will proceed once crude oil prices recover and capital costs decrease.
As part of the cost structure for our customers, we are very much aware of the need to carefully manage the cost of our services across all aspects of our energy delivery business. We have a long track record of successfully managing costs, improving productivity and sharing the savings with our customers, and this has become an even more important success factor for Enbridge right now.
Opportunities abound for well-financed and geographically well-positioned companies like Enbridge.
We expect to see significant new natural gas infrastructure developments over the next five to 10 years in North America. Some of this growth will be driven by the increasingly important shale gas plays in British Columbia, Saskatchewan, North Dakota, Texas and Louisiana, as well as growing production from the U.S. Rockies and anticipated development in the deep-water in the Gulf of Mexico. Enbridge is strongly positioned to consider any and all opportunities that meet our criteria for safety, income and growth. We have the financial strength to be a valued partner in many of these developments.
Our existing gas assets all stand to benefit from these opportunities—the Alliance and Vector pipelines that move Western Canadian natural gas to the U.S. Midwest and Ontario; our substantial natural gas gathering, processing and transmission infrastructure in the Gulf of Mexico; and Enbridge Energy Partners, in which we increased our ownership stake to approximately 27% from approximately 15% in 2008.
Enbridge Gas Distribution (EGD) celebrated its 160th anniversary in 2008 with another year of improved results on the strength of continuing growth in residential and commercial customers as well as the new incentive regulation program. EGD is Canada’s largest natural gas distribution utility, with approximately 1.9 million customers.
Internationally in 2008, our investment in Colombia again performed well, and we sold our 25% stake in CLH in Spain for $1.38 billion. We applied proceeds from the CLH sale toward funding our North American pipeline expansion projects.
Enbridge is one of the world’s most sustainable corporations, and one of the ways we achieve this is through our investment in renewable and clean energy initiatives:
- In 2008, we completed construction of a 190 megawatt Ontario wind project, the second largest wind farm in Canada.
- We are leading the Alberta Saline Aquifer Project (ASAP), which now includes 38 partners working to develop the long-term sequestration of CO2. ASAP is the largest project of its kind in North America. We expect to begin construction on the pilot project this year, with injections of carbon dioxide beginning in 2010. We are participating in a similar initiative in Saskatchewan.
- We officially launched the world’s first hybrid fuel cell, which produces 2.2 megawatts of environmentally preferred, ultra-clean electricity, or enough power for approximately 1,700 residences. Enbridge has exclusive North American distribution rights for the hybrid fuel cell technology.
Ensuring the safety of our employees, contractors and the public is always a top priority for Enbridge. We are deeply saddened to report that one of our valued colleagues, Henri St. Pierre, died in 2008 in an electrical accident at our Kerrobert, Saskatchewan, station. We have intensified our efforts to live up to our commitment of protecting the health and safety of all individuals affected by our activities.
Robert W. Martin will be retiring from the Board of Directors effective May 2009. A Board member since 1992, Bob was President and Chief Executive Officer of The Consumers’ Gas Company Ltd. (now Enbridge Gas Distribution) from 1984 to 1992. The Board extends its warmest thanks to Bob for his years of dedicated service.
Enbridge is fundamentally in great shape. Our success in issuing $500 million of long-term debt in late 2008 in the midst of very uncertain capital markets is a testament to the Company’s financial strength. We entered 2009 with approximately $3 billion of liquidity, which provides us with the flexibility we need to capitalize on our many growth opportunities.
Most notably, we are achieving these results at a time when both financial and commodity markets are facing unprecedented challenges. While we at Enbridge are proud of our results and our continuing ability to deliver value to our shareholders, we are mindful and respectful of the impact of current economic conditions on our customers, our business partners and the communities in which we do business.
Our more than 6,000 employees are committed to the task of safely delivering energy, and we wish to thank them for their outstanding achievements in 2008.
Over its 60-year history, Enbridge has been a very good investment for shareholders, consistently providing safety, income and growth. The best is yet to come over the next four years as shareholders reap the benefits of strong growth, increasing dividends and a safe haven during uncertain times.
David A. Arledge
Chair of the Board of Directors
Patrick D. Daniel
President and Chief Executive Officer
March 4, 2009