Enbridge: Cost of MATL jumps to US$400m

Enbridge (NYSE:ENB) said the total expected cost for the Montana-Alberta tie line (MATL) has increased to approximately US$400m.

The revised figures were included in a single paragraph about the project, contained in a management document released in conjunction with the company’s 2Q12 earnings call on Aug 2.

The document offered few specifics about the reasons for the increased cost: “The total expected cost for both the first 300-MW phase of MATL and the expansion for an additional 250-MW to 300-MW has been increased to approximately US[$400m] (C$402.9m), with expenditures to date of approximately US[$300m] (C$302.2m),” the document said.

Calls seeking additional details from Enbridge were not returned by press time on Aug. 2.

The document noted that progress continues on the 345-kilometer (214-mile), 230-kV transmission line that will extend from Great Falls, Mont., to Lethbridge, Alberta. While the permits required for construction have been obtained, the Alberta Utility Commission’s (AUC) approval in Canada is currently being updated to reflect a number of design modifications and on-going consultation with landowners, according to company documents.

Subject to the AUC’s approval, the system’s northbound capacity, which is fully contracted, is expected to be placed in service in 4Q12, with the expansion expected to be completed by the end of 2014, the company said.

The MATL, however, represents only a small portion of the company’s total investments. Overall, the company reported 2Q12 adjusted earnings as C$277m (US$274.9m), an increase of 7% over the adjusted earnings of C$258m (US$256.1m) in 2Q11.

Earnings for the first six months of the year were C$653m (US$648.1), an 11% increase over earnings of C$588m (US$583.6m) for the first six months of 2011. Earnings attributable to common shareholders were C$11m (US$10.9m), and six-month earnings were C$275m (US$272.9m), primarily due to the recognition of net unrealized fair value losses on financial derivatives used to manage risk.

“Over the first half of 2012, Enbridge has continued to deliver steady performance, keeping us on track with our full year adjusted earnings per share guidance,” Pat Daniel, Enbridge CEO, said during the company’s Aug. 2 earnings call.

“The second quarter was expected to be soft, but it actually turned out to be stronger than we had expected,” added Richard Bird, Enbridge executive vice president and CFO.

“Based on this performance, we continue to be well on track to achieve adjusted earnings … consistent with the 10% per share growth rate that we’re confident of achieving through the middle of the decade,” Daniel said.

The majority of the company’s earnings came from its liquids pipeline, natural gas pipeline, and gas distribution operations; accordingly, the majority of the discussion on the earnings call focused on the company’s oil and gas operations – including discussion of the July 27 leak of crude oil near Grand Marsh, Wis., from a pipeline owned by a subsidiary company.

In addition to the progress made on the MATL, the company noted other achievements in the electricity sector, including the launching of two renewable energy facilities during 2Q12. The 50-MW Silver State North Solar Project (Silver State) in Clark County, Nev., was acquired in March at an estimated cost of US$200m and a grand opening was celebrated on May 7. On June 15, a grand opening was held at the 99-MW Greenwich Windfarm in Ontario.

“We’re pleased to continue to advance our growth strategy in renewable and alternative energy generation, creating environmental benefits while generating stable and reliable cash flows,” Daniel said.

“Since 2002, Enbridge has invested nearly C$3bn (US$ 2.98bn) in its growing North American portfolio of renewable and alternative energy technologies which now includes eight wind farms, four solar projects, a geothermal installation, a hybrid fuel cell and four waste heat recovery facilities,” he continued.