Enbridge on Its Robust Growth Outlook

• Enbridge’s extensive asset footprint and capabilities allow it to offer data centers a variety of solutions for their power needs.
• Enbridge has a $40 billion secured backlog, with another $50 billion in potential opportunities, and plans to greenlight $10–20 billion in projects over the next two years.
• The company’s capital allocation priorities include maintaining a strong balance sheet, returning cash to shareholders with an impressive dividend track record, and pursuing growth projects.

Plugged In is a short-form video series from the Energy Infrastructure Council and VettaFi featuring candid one-on-one interviews with energy infrastructure executives. Today’s note marks the last installment of the video series leading up to the 23rd Annual Energy Infrastructure CEO & Investor Conference in Aventura, Florida next week. VettaFi’s typical research will resume next Tuesday with our quarterly dividend recap.

The note below includes key takeaways from a recent conversation with Allen Capps, senior vice president, strategy, and president, power, at Enbridge (ENB). The discussion covered Enbridge’s robust growth opportunities, EBITDA outlook, and capital allocation priorities. To view the full, 6-minute interview, click here.

Enbridge’s asset base is well positioned to capitalize on growing power demand for natural gas being driven by industrial growth, coal-to-gas conversions, and AI data center needs. The company has an extensive large-diameter natural gas pipeline network, predominantly in the U.S., but also in Canada, as well as significant natural gas storage capacity. Enbridge also owns three local distribution companies (LDCs) in the U.S. and one LDC in Canada.

Enbridge’s natural gas network connects into some of the best basins in North America, representing a compelling option for data centers. Additionally, the company is able to provide integrated power solutions, with several projects supporting data centers. As one example, Capps mentioned the Clear Fork solar project in San Antonio, which will have 600 megawatts of capacity to provide power to Meta. Enbridge is able to offer data centers a variety of solutions, given its footprint.

Within midstream, Enbridge stands out for the sheer size of its project backlog. Capps discussed the company’s $39 billion secured capital program across 25 projects, but note that ENB’s backlog was raised to $40 billion with its earnings results on Friday. Most of the opportunities tend to focus on enhancing their existing system. Roughly 70% of the backlog is focused on natural gas, including large pipelines and LDCs. Enbridge plans to spend CAD $10 billion in British Columbia and another $1 billion annually on its Ontario LDC.

In the U.S., Enbridge has several natural gas projects underway. One example is the Ridgeline Expansion Project in Tennessee, which is expected online later this year and will support the conversion of a power plant from coal to natural gas. Enbridge also has gas storage capacity expansions on deck for the Gulf Coast and in Canada. The company plans to spend $1.5 billion annually on its LDCs in the U.S. Another ~$6 billion each is earmarked for its liquids and renewables business. Investments in its liquids business are headlined by its Mainline optimization, which will move more Canadian crude into the U.S. On the renewables side, Enbridge remains focused on solar, while also investing in European wind. The company’s asset base and its backlog reflect its “all of the above” energy strategy, which is bearing fruit in the current market environment.

With its robust opportunity set, Enbridge is targeting ~5% annual EBITDA growth beyond 2026. Capps explained that the current backlog should underwrite 4% growth, and the balance of growth comes from optimizing assets. In terms of the cadence, Enbridge expects to place ~$8 billion of projects into service this year, followed by another $13 billion in 2027 and $9 billion in 2028. Additionally, the company is pursuing another $50 billion of opportunities and expects to greenlight $10–20 billion in projects over the next two years. In short, there should be plenty of growth projects to maintain the targeted 5% growth rate beyond the decade.

For Enbridge’s capital allocation priorities, Capps highlighted three key items. First, the company wants to protect its strong, investment-grade balance sheet and maintain 4.5–5x debt-to-EBITDA. As a dividend aristocrat, Enbridge is also focused on returning capital to shareholders, boasting 31 years of consecutive dividend growth. Typically, the company returns ~60–70% of distributable cash flow back to shareholders each year. The other key pillar is pursuing growth projects with efficient financing, given cash retained by the business. As discussed above, Enbridge is largely pursuing brownfield growth projects (i.e., enhancements to existing assets) with low multiples, which imply solid returns.

To view the full, 6-minute interview, click here.

Enbridge (ENB CN) is a key constituent in Alerian Midstream Indexes, which underlie ETFs in the U.S. and Europe. As of May 8, ENB was the top holding in the Alerian Energy Infrastructure ETF (ENFR ) and the third-largest holding in the Alerian Midstream Energy Dividend UCITS ETF (MMLP.LN). ENB was also the top holding of the ALPS ǀ Alerian Energy Infrastructure Portfolio (ALEFX), which is a variable insurance trust.

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