enbridge income fund holdings
Investment Community April 2012 John Whelen President
FORWARD LOOKING STATEMENTS
This presentation includes certain forward looking information (“FLI”) to provide Enbridge Income Fund Holdings Inc. (“EIFH”) shareholders and potential investors with information about EIFH and its investee, Enbridge Income Fund (the “Fund”), management's assessment of their future plans and operations, which may not be appropriate for other purposes. FLI is typically identified by words such as "anticipate", "expect", "project", "estimate", "forecast", "plan", "intend", "target", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Although we believe that the FLI in this presentation is reasonable based on the information available today and the processes used to prepare it, such statements are not guarantees of future performance and you are cautioned against placing undue reliance on FLI. FLI inherently involves a variety of assumptions, known and unknown risks, uncertainties and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied in our FLI and the FLI relating to the Fund. Material assumptions include: expected supply and demand for crude oil, natural gas and natural gas liquids; prices of crude oil, natural gas and natural gas liquids; expected exchange rates; inflation; interest rates; availability and price of labour and pipeline construction materials; operational reliability; customer project approvals; maintenance of support and regulatory approvals for the Fund’s projects; anticipated in-service dates and weather. Our FLI is subject to risks and uncertainties pertaining to operating performance, regulatory parameters, project approval and support, construction schedules, weather, economic conditions, exchange rates, interest rates and commodity prices, including but not limited to those discussed more extensively in our filings and the filings of the Fund with Canadian securities regulators. The impact of any one risk, uncertainty or factor on any particular FLI is not determinable with certainty as these are interdependent and the future course of action of EIFH and the Fund depends on management's assessment of all information available at the relevant time. Except to the extent required by law, neither EIFH nor the Fund assumes any obligation to publicly update or revise any FLI, whether as a result of new information, future events or otherwise. All FLI in this presentation is expressly qualified in its entirety by these cautionary statements. This presentation may make reference to certain financial measures, such as cash available for distribution, which are not recognized under GAAP. Reconciliations to the most closely related GAAP measures are included in the MD&A filings and/or Supplementary Financial Information available on our website or in the slides that accompany this presentation, if applicable.
2
ENBRIDGE INCOME FUND HOLDINGS Designed and Managed for Strength and Stability Capital Preservation, Yield & Measured Growth
Defensive Energy Infrastructure Play; Low Beta Attractive 5.5% Yield Increased Dividend in 8 of 9 years since inception, 4.1% CAGR Negligible Financial Risk – all CDN$ assets, no commodity price risk Managed by Enbridge – long track record of creating shareholder value ENF’s purpose is to hold mature assets
3
ENBRIDGE INCOME FUND HOLDINGS - ENF Designed and Managed for Strength and Stability
• Diversified Asset Base • Low Risk Business Model • Predictable Cash Flows • Strong Sponsor 4
ENBRIDGE INCOME FUND HOLDINGS Designed and Managed for Strength and Stability
Core Strategies Remain Unchanged
• Optimize operations and value of existing assets – Maximize revenue, improve efficiencies , minimize costs
• Grow organically – Extend or expand existing assets
• Acquire complimentary infrastructure – From third party; from Enbridge Inc.
– Target energy infrastructure with risk-return characteristics in keeping with the Fund’s current profile
• Maintain diversified asset base over long-term
5
DIVERSIFIED ASSET BASE
Business Segment
Capacity/ Production
Revenue Generation
Primary Contract Term
Gas Transmission
1.6 Bcf/day (1.325 Bcf/day firm service)
Cost of Service
2015
Crude Oil & Liquids Transportation
255,000 barrels/day 145,000 barrels/day
Cost of Service Fixed Price
Cost of Service 2023
Green Power
405 MW/Day
Fixed Price PPA’s
2017 - 2031
6 6
LOW RISK BUSINESS MODEL Designed and managed to provide stable and predictable cash flows
• Solid underlying fundamentals – Compelling long-term supply and demand drivers
• Strong contractual support – Cost of service regulatory constructs; long-term contracts with downside protection
• Disciplined growth – Strict investment criteria
• Prudent financial policies – Conservative distribution payout and debt leverage – Minimal market price and credit risk 7
DIVERSIFIED SOURCES OF CASH FLOW
Cash Available for Distribution* 300
250
Millions $
Green Power 200 Saskatchewan System 150
Alliance Canada (distributions)
100
50
2007
2008
2009
2010
2011
2012**
• Distributions and income after maintenance capex and before corporate charges ** Forecasted full year of distributions
8
NATURAL GAS TRANSMISSION Alliance Canada
Take or Pay contracts currently in place for 98.5% of Alliance’s Firm Service capacity, through 2015. 9
NATURAL GAS TRANSMISSION Fundamentals drive investment thesis Export Supply bolstered by shale exploration
Breakeven (US$/mmbtu)
7
Montney breakeven is compelling
6 5
Growing Midwest demand
Alliance/Vector Tolls are competitive $2.29/GJ
Rich Gas Dry Gas
4
$1.42/GJ 3 2 1 0
TCPL Interim Tolls
Alliance/Vector
2012 Tolls to Dawn, Ontario
10
CRUDE OIL & LIQUIDS TRANSPORTATION Saskatchewan Pipeline Systems System
Toll Methodology
Regulator
Westpur
Cost of Service Formula
NEB
Saskatchewan Gathering
Cost of Service Formula
Saskatchewan
Weyburn
Market Based
Saskatchewan
Virden
Market Based
Manitoba
BEP
Long - Term Contract
NEB
Recent & Planned Expansion Capacity Increase
Capital Costs
In-Service
Phase 1
98,000 bpd
$36 M
2007
Phase 2
125,000 bpd
~$158 *M
2010
BEP
145,000 bpd
~$190* M
2013
*estimated costs
Bakken Expansion Program (BEP)
11 11
CRUDE OIL & LIQUIDS TRANSPORTATION Fundamentals are strong SE Saskatchewan & Manitoba Production Forecast
Transportation alternatives are expensive $16.00 $14.00
('000 Barrel s per Day)
$12.00 ($CAD per Barrel)
SE Saskatchewan Bakken
Light Sour Blend
$10.00 $8.00 $6.00 $4.00 $2.00
Medium/Midale
$0.00
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
North Dakota Production Forecast
EPSI
New Pipe
Truck
EPSI tolls are low Mainline to Chicago Market
EPSI to Cromer
('000 Barrel s per Day)
Rail
North Dakota Bakken WTI less Transport
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
12
GREEN POWER GENERATION Operating Assets Southern Ontario
Western Canada
Project
Capacity* (MW)
Off-take Price
PPA /Hedge Expiry**
Ontario Wind
190
Fixed
2029
Talbot Wind
99
Fixed
2031
Sarnia Solar
80
Fixed
2030
SunBridge
6
Fixed
2022
Magrath
10
Fixed
2024
Chin Chute
10
Fixed
2017
NR Green
10
Fixed
2026 – 2028
*EIF Interest **Primary Term
13
GREEN POWER GENERATION Fundamentals support stability of cash flows
• Power Price Risk - Eliminated through long-term PPA’s • Demand Risk - Eliminated through long-term PPA’s • Supply Risk - Substantially mitigated through • Pre-development energy resource studies • Diversified portfolio of generation assets
2011 Earnings Sensitivity Asset
Location
Capacity
Capacity Factor (P50)
Capacity Factor (P75)
Pre-Tax Cash Flow Impact (P75)
Ontario Wind
Ontario
190 MW
30%
28%
~ $3 MM
Talbot Wind
Ontario
99 MW
35%
33%
~ $2 MM
Sarnia Solar
Ontario
80 MW
17%
16%
~ $3 MM
Magrath Wind*
Alberta
30 MW
36%
34%
Immaterial
Chin Chute Wind*
Alberta
30 MW
38%
36%
Immaterial
Sunbridge Wind**
Saskatchewan
11 MW
39%
37%
Immaterial
Diversification Adjusted Total *EIF owns 33% interest * *EIF owns 50% interest
~6.5 MM
14
DISCIPLINED GROWTH Recent examples
Bakken Expansion
Whitecourt
• Bakken Expansion Project
• Windfall Compressor Station
– Capital cost ~ $190 M
– Capital cost ~ $32 M
– 145,000 bpd of initial capacity
– 14 MW/H of clean energy
– Low cost expansion potential
– Take or pay contracts
– Take or pay contracts
– Fixed price PPA with escalator
– Pass through of operating costs
– In-service Q3 2013
– In-service Q1 2013
15
PRUDENT FINANCIAL POLICIES Designed and Managed for Defense and Sustainability
• Target Fund (EIF) Payout: ~ 80% – After reserving for contingencies and debt amortization – Smoothed dividend payout at EIFH
• Appropriate Use of Leverage – Target Leverage approximately 50% – Target DEBT/EBITDA: 3.5x - 4.5x
• Focus on Financial Flexibility – Enhanced access to capital – Maintenance of strong credit ratings: BBB(H) & Baa2
• Avoid/Minimize Financial Risk – Negligible exposure to market price and counterparty credit risk
16
PRUDENT FINANCIAL POLICIES Access to capital Equity and Debt Liquidity Expanding with Fund Growth Investable Equity Float $800
Green Asset Acquisition Bakken Expansion Green Asset 2013 Acquisition Bakken Expansion 2013
$700
Public Debt Float $1,100 $1,000 $900
2011
$600
$800
2003 IPO Original Acquisition
$700 millions $
millions $
$500 $400 $300
Bakken Expansion 2013
Pre-2011
$200
$600 $500 $400 $300 $200
$100
$0
2011/2012
Pre-2011
$100 $0 1
*Excludes funding for unidentified growth projects
17
PRUDENT FINANCIAL POLICIES Minimize financial risk Minimal Exposure to Market Price (FX, Interest Rate, Commodity) and Counterparty Risks
Market Price Risk
Counterparty Credit Risk
(as at December 31, 2011)
(as at December 31, 2011)
$200
< 1% CFaR
$180 $160 $140 $120 $100
Investment Grade
$80
Security Received
$60 $40 $20 $0
Cash flow at Risk (CFaR*)
*CFaR – Measures the maximum cash flow loss that could result from adverse market price movements over a 12 month period within 97.5% confidence level (1.96 std. deviations) under normal market conditions .
Receivable by Counterparty Credit Quality
18
PREDICTABLE CASH FLOWS Steady growth Long-Term Track Record of Positive Cashflow Generation
$1.30 $1.20 $1.10 $1.00 $0.90 $0.80
$0.70 $0.60 $0.50 $0.40
2003
2004
2005
- EIF Taxable distributions
• Indicative annualized dividend
2006
2007
2008
2009
2010
2011
2012*
ENF Eligible dividends
19
STRONG SPONSORSHIP Enbridge is aligned, involved and supportive Enbridge Income Fund Holdings benefits from Ownership and Sponsorship by Enbridge Inc.
• Economic and Strategic Alignment – Enbridge Inc. retains a 69% economic interest in Enbridge Income Fund
• Operational Expertise – Asset operations – Risk management systems and processes
– Project construction management
• Infrastructure Development and Investment Expertise – Enbridge is one of North America’s most successful developers of energy infrastructure – Over $35B in consolidated assets; $13B+ in secured projects (2011 – 2015) 20
ENF
Enbridge Income Fund Holdings Inc. 21
APPENDIX
22
CORPORATE STRUCTURE
Through its investment in Enbridge Income Fund Holdings and its common and preferred interest in Enbridge Income Fund, Enbridge Inc. owns 69% economic interest in the Fund.
23
ENF/ENB Investment Differentiators
ENF
ENB
Payout
~80%
60-70%
Yield
6%
3%
Growth
FORWARD LOOKING STATEMENTS
This presentation includes certain forward looking information (“FLI”) to provide Enbridge Income Fund Holdings Inc. (“EIFH”) shareholders and potential investors with information about EIFH and its investee, Enbridge Income Fund (the “Fund”), management's assessment of their future plans and operations, which may not be appropriate for other purposes. FLI is typically identified by words such as "anticipate", "expect", "project", "estimate", "forecast", "plan", "intend", "target", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Although we believe that the FLI in this presentation is reasonable based on the information available today and the processes used to prepare it, such statements are not guarantees of future performance and you are cautioned against placing undue reliance on FLI. FLI inherently involves a variety of assumptions, known and unknown risks, uncertainties and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied in our FLI and the FLI relating to the Fund. Material assumptions include: expected supply and demand for crude oil, natural gas and natural gas liquids; prices of crude oil, natural gas and natural gas liquids; expected exchange rates; inflation; interest rates; availability and price of labour and pipeline construction materials; operational reliability; customer project approvals; maintenance of support and regulatory approvals for the Fund’s projects; anticipated in-service dates and weather. Our FLI is subject to risks and uncertainties pertaining to operating performance, regulatory parameters, project approval and support, construction schedules, weather, economic conditions, exchange rates, interest rates and commodity prices, including but not limited to those discussed more extensively in our filings and the filings of the Fund with Canadian securities regulators. The impact of any one risk, uncertainty or factor on any particular FLI is not determinable with certainty as these are interdependent and the future course of action of EIFH and the Fund depends on management's assessment of all information available at the relevant time. Except to the extent required by law, neither EIFH nor the Fund assumes any obligation to publicly update or revise any FLI, whether as a result of new information, future events or otherwise. All FLI in this presentation is expressly qualified in its entirety by these cautionary statements. This presentation may make reference to certain financial measures, such as cash available for distribution, which are not recognized under GAAP. Reconciliations to the most closely related GAAP measures are included in the MD&A filings and/or Supplementary Financial Information available on our website or in the slides that accompany this presentation, if applicable.
2
ENBRIDGE INCOME FUND HOLDINGS Designed and Managed for Strength and Stability Capital Preservation, Yield & Measured Growth
Defensive Energy Infrastructure Play; Low Beta Attractive 5.5% Yield Increased Dividend in 8 of 9 years since inception, 4.1% CAGR Negligible Financial Risk – all CDN$ assets, no commodity price risk Managed by Enbridge – long track record of creating shareholder value ENF’s purpose is to hold mature assets
3
ENBRIDGE INCOME FUND HOLDINGS - ENF Designed and Managed for Strength and Stability
• Diversified Asset Base • Low Risk Business Model • Predictable Cash Flows • Strong Sponsor 4
ENBRIDGE INCOME FUND HOLDINGS Designed and Managed for Strength and Stability
Core Strategies Remain Unchanged
• Optimize operations and value of existing assets – Maximize revenue, improve efficiencies , minimize costs
• Grow organically – Extend or expand existing assets
• Acquire complimentary infrastructure – From third party; from Enbridge Inc.
– Target energy infrastructure with risk-return characteristics in keeping with the Fund’s current profile
• Maintain diversified asset base over long-term
5
DIVERSIFIED ASSET BASE
Business Segment
Capacity/ Production
Revenue Generation
Primary Contract Term
Gas Transmission
1.6 Bcf/day (1.325 Bcf/day firm service)
Cost of Service
2015
Crude Oil & Liquids Transportation
255,000 barrels/day 145,000 barrels/day
Cost of Service Fixed Price
Cost of Service 2023
Green Power
405 MW/Day
Fixed Price PPA’s
2017 - 2031
6 6
LOW RISK BUSINESS MODEL Designed and managed to provide stable and predictable cash flows
• Solid underlying fundamentals – Compelling long-term supply and demand drivers
• Strong contractual support – Cost of service regulatory constructs; long-term contracts with downside protection
• Disciplined growth – Strict investment criteria
• Prudent financial policies – Conservative distribution payout and debt leverage – Minimal market price and credit risk 7
DIVERSIFIED SOURCES OF CASH FLOW
Cash Available for Distribution* 300
250
Millions $
Green Power 200 Saskatchewan System 150
Alliance Canada (distributions)
100
50
2007
2008
2009
2010
2011
2012**
• Distributions and income after maintenance capex and before corporate charges ** Forecasted full year of distributions
8
NATURAL GAS TRANSMISSION Alliance Canada
Take or Pay contracts currently in place for 98.5% of Alliance’s Firm Service capacity, through 2015. 9
NATURAL GAS TRANSMISSION Fundamentals drive investment thesis Export Supply bolstered by shale exploration
Breakeven (US$/mmbtu)
7
Montney breakeven is compelling
6 5
Growing Midwest demand
Alliance/Vector Tolls are competitive $2.29/GJ
Rich Gas Dry Gas
4
$1.42/GJ 3 2 1 0
TCPL Interim Tolls
Alliance/Vector
2012 Tolls to Dawn, Ontario
10
CRUDE OIL & LIQUIDS TRANSPORTATION Saskatchewan Pipeline Systems System
Toll Methodology
Regulator
Westpur
Cost of Service Formula
NEB
Saskatchewan Gathering
Cost of Service Formula
Saskatchewan
Weyburn
Market Based
Saskatchewan
Virden
Market Based
Manitoba
BEP
Long - Term Contract
NEB
Recent & Planned Expansion Capacity Increase
Capital Costs
In-Service
Phase 1
98,000 bpd
$36 M
2007
Phase 2
125,000 bpd
~$158 *M
2010
BEP
145,000 bpd
~$190* M
2013
*estimated costs
Bakken Expansion Program (BEP)
11 11
CRUDE OIL & LIQUIDS TRANSPORTATION Fundamentals are strong SE Saskatchewan & Manitoba Production Forecast
Transportation alternatives are expensive $16.00 $14.00
('000 Barrel s per Day)
$12.00 ($CAD per Barrel)
SE Saskatchewan Bakken
Light Sour Blend
$10.00 $8.00 $6.00 $4.00 $2.00
Medium/Midale
$0.00
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
North Dakota Production Forecast
EPSI
New Pipe
Truck
EPSI tolls are low Mainline to Chicago Market
EPSI to Cromer
('000 Barrel s per Day)
Rail
North Dakota Bakken WTI less Transport
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
12
GREEN POWER GENERATION Operating Assets Southern Ontario
Western Canada
Project
Capacity* (MW)
Off-take Price
PPA /Hedge Expiry**
Ontario Wind
190
Fixed
2029
Talbot Wind
99
Fixed
2031
Sarnia Solar
80
Fixed
2030
SunBridge
6
Fixed
2022
Magrath
10
Fixed
2024
Chin Chute
10
Fixed
2017
NR Green
10
Fixed
2026 – 2028
*EIF Interest **Primary Term
13
GREEN POWER GENERATION Fundamentals support stability of cash flows
• Power Price Risk - Eliminated through long-term PPA’s • Demand Risk - Eliminated through long-term PPA’s • Supply Risk - Substantially mitigated through • Pre-development energy resource studies • Diversified portfolio of generation assets
2011 Earnings Sensitivity Asset
Location
Capacity
Capacity Factor (P50)
Capacity Factor (P75)
Pre-Tax Cash Flow Impact (P75)
Ontario Wind
Ontario
190 MW
30%
28%
~ $3 MM
Talbot Wind
Ontario
99 MW
35%
33%
~ $2 MM
Sarnia Solar
Ontario
80 MW
17%
16%
~ $3 MM
Magrath Wind*
Alberta
30 MW
36%
34%
Immaterial
Chin Chute Wind*
Alberta
30 MW
38%
36%
Immaterial
Sunbridge Wind**
Saskatchewan
11 MW
39%
37%
Immaterial
Diversification Adjusted Total *EIF owns 33% interest * *EIF owns 50% interest
~6.5 MM
14
DISCIPLINED GROWTH Recent examples
Bakken Expansion
Whitecourt
• Bakken Expansion Project
• Windfall Compressor Station
– Capital cost ~ $190 M
– Capital cost ~ $32 M
– 145,000 bpd of initial capacity
– 14 MW/H of clean energy
– Low cost expansion potential
– Take or pay contracts
– Take or pay contracts
– Fixed price PPA with escalator
– Pass through of operating costs
– In-service Q3 2013
– In-service Q1 2013
15
PRUDENT FINANCIAL POLICIES Designed and Managed for Defense and Sustainability
• Target Fund (EIF) Payout: ~ 80% – After reserving for contingencies and debt amortization – Smoothed dividend payout at EIFH
• Appropriate Use of Leverage – Target Leverage approximately 50% – Target DEBT/EBITDA: 3.5x - 4.5x
• Focus on Financial Flexibility – Enhanced access to capital – Maintenance of strong credit ratings: BBB(H) & Baa2
• Avoid/Minimize Financial Risk – Negligible exposure to market price and counterparty credit risk
16
PRUDENT FINANCIAL POLICIES Access to capital Equity and Debt Liquidity Expanding with Fund Growth Investable Equity Float $800
Green Asset Acquisition Bakken Expansion Green Asset 2013 Acquisition Bakken Expansion 2013
$700
Public Debt Float $1,100 $1,000 $900
2011
$600
$800
2003 IPO Original Acquisition
$700 millions $
millions $
$500 $400 $300
Bakken Expansion 2013
Pre-2011
$200
$600 $500 $400 $300 $200
$100
$0
2011/2012
Pre-2011
$100 $0 1
*Excludes funding for unidentified growth projects
17
PRUDENT FINANCIAL POLICIES Minimize financial risk Minimal Exposure to Market Price (FX, Interest Rate, Commodity) and Counterparty Risks
Market Price Risk
Counterparty Credit Risk
(as at December 31, 2011)
(as at December 31, 2011)
$200
< 1% CFaR
$180 $160 $140 $120 $100
Investment Grade
$80
Security Received
$60 $40 $20 $0
Cash flow at Risk (CFaR*)
*CFaR – Measures the maximum cash flow loss that could result from adverse market price movements over a 12 month period within 97.5% confidence level (1.96 std. deviations) under normal market conditions .
Receivable by Counterparty Credit Quality
18
PREDICTABLE CASH FLOWS Steady growth Long-Term Track Record of Positive Cashflow Generation
$1.30 $1.20 $1.10 $1.00 $0.90 $0.80
$0.70 $0.60 $0.50 $0.40
2003
2004
2005
- EIF Taxable distributions
• Indicative annualized dividend
2006
2007
2008
2009
2010
2011
2012*
ENF Eligible dividends
19
STRONG SPONSORSHIP Enbridge is aligned, involved and supportive Enbridge Income Fund Holdings benefits from Ownership and Sponsorship by Enbridge Inc.
• Economic and Strategic Alignment – Enbridge Inc. retains a 69% economic interest in Enbridge Income Fund
• Operational Expertise – Asset operations – Risk management systems and processes
– Project construction management
• Infrastructure Development and Investment Expertise – Enbridge is one of North America’s most successful developers of energy infrastructure – Over $35B in consolidated assets; $13B+ in secured projects (2011 – 2015) 20
ENF
Enbridge Income Fund Holdings Inc. 21
APPENDIX
22
CORPORATE STRUCTURE
Through its investment in Enbridge Income Fund Holdings and its common and preferred interest in Enbridge Income Fund, Enbridge Inc. owns 69% economic interest in the Fund.
23
ENF/ENB Investment Differentiators
ENF
ENB
Payout
~80%
60-70%
Yield
6%
3%
Growth
