Enbridge Layers in New Growth Opportunities While Reaffirming Financial Targets at Analyst Day

Enbridge’s ENB Analyst Day revealed that it was actively layering new growth opportunities around renewables into its portfolio while maintaining its financial targets. The firm targeted 5% annual EBITDA growth at the midpoint and 3% growth in the dividend payout through 2025, which matches our expectations and model. Our CAD 52 and $39 fair value estimates are unchanged, as is our narrow moat rating.

In our view, the biggest takeaway from the Analyst Day was the agreement to acquire 10% of Divert, for $80 million, with a pipeline of renewable natural gas projects over $1 billion supported by take-or-pay contracts. Divert is a food management waste firm adding renewable natural gas projects to help its customers manage their food waste more sustainably. Renewable natural gas, being a “drop-in fuel” that can be used in existing gas pipeline networks, is a solid growth opportunity for Enbridge.

Enbridge also sees good results from its existing wind and solar efforts. Its renewables business contributed about CAD 520 million in EBITDA in 202 (about 3% of overall EBITDA). Still, the acquisition of onshore renewable developer Tri Global Energy last year has accelerated its efforts to grow its platform. One key area the deal is helping is finding transmission connections for new projects because it can take up to six years to finalize an interconnection permit. The value add is positioning the project in a location where the transmission system requires minimal upgrades to connect the renewable project to the grid, shortening the turnaround times.