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ACQUISITIONS AND DISPOSITIONS | 9 Months Ended
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Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
ACQUISITIONS AND DISPOSITIONS | ACQUISITIONS AND DISPOSITIONS BUSINESS COMBINATIONS We accounted for each of the acquisitions discussed below using the acquisition method as prescribed by ASC 805 Business Combinations. In accordance with valuation methodologies described in ASC 820 Fair Value Measurement, acquired assets and assumed liabilities are recorded at their estimated fair values as at the date of acquisition. The fair values of regulatory assets and liabilities, which are subject to rate-setting and cost recovery mechanisms under ASC 980 Regulated Operations, are equal to their carrying values at acquisition. The recognition of regulatory assets and liabilities is based on the actions, or expected future actions, of the regulator. To the extent that the regulator's actions differ from our expectations, the timing and amount of recovery or settlement of regulatory balances could differ significantly from those recorded at acquisition. Public Service Company of North Carolina, Incorporated On September 30, 2024, through a wholly-owned US subsidiary, we acquired all of the membership interests of Fall North Carolina Holdco LLC, which owns 100% of Public Service Company of North Carolina, Incorporated (PSNC), for cash consideration of $2.7 billion (US$2.0 billion) (the PSNC Acquisition). PSNC is a public utility primarily engaged in the purchase, sale, transportation and distribution of natural gas to residential, commercial and industrial customers in North Carolina. PSNC operates under rates approved by the North Carolina Utilities Commission. The following table summarizes the estimated preliminary fair values that were assigned to the net assets of PSNC:
| September 30, 2024
(millions of Canadian dollars) |
Fair value of net assets acquired: |
Current assets (a) | 351 |
Property, plant and equipment (b) | 4,113 |
Long-term assets (c) | 203 |
Current liabilities | 292 |
Long-term debt (d) | 1,529 |
Other long-term liabilities (e) | 667 |
Deferred income tax liabilities | 365 |
Goodwill (f) | 868 |
Purchase price: |
Cash | 2,682 |
a) Current assets consist primarily of cash, trade and other accounts receivable, regulatory assets and inventory. The fair value of trade receivables from customers approximates their carrying value of $50 million due to the short period to maturity. A provision for credit and recovery risk associated with accounts receivable has been made through the expected credit loss, which totaled $2 million. b) PSNC's property, plant and equipment constitutes an integrated system of rate-regulated natural gas transmission, distribution and storage assets. For these rate-regulated assets, fair value was determined using a market participant perspective. Given the regulated nature of, and fixed return on the assets, the fair value of property, plant and equipment acquired is equal to its carrying value. c) Long-term assets consist primarily of $128 million of regulatory assets expected to be recovered from customers in future periods through rates and equity interests in a liquefied natural gas (LNG) storage facility in North Carolina and in an intrastate natural gas pipeline. d) The fair value of long-term debt was determined based on the current underlying US Treasury interest rates on instruments of similar yield, credit risk and tenor, as well as an implied credit spread based on current market conditions. We recorded a fair value adjustment to reduce long-term debt by $156 million with no corresponding regulatory offset. e) Other long-term liabilities consist primarily of regulatory liabilities expected to be refunded to customers in future periods through rates. f) Goodwill is primarily attributable to the existing assembled assets and workforce of PSNC that cannot be duplicated at the same cost by a new entrant and the enhanced scale and geographic diversity of our regulated natural gas distribution business, which provides a platform for future growth and optimization with existing assets. The goodwill balance recognized has been assigned to our Gas Distribution and Storage segment and is not tax deductible. Upon completion of the PSNC Acquisition, we began consolidating PSNC. Our supplemental pro forma consolidated financial information for the three and nine months ended September 30, 2024 and 2023, including the results of operations for PSNC as if the PSNC Acquisition had been completed on January 1, 2023, are as follows:
| Three months ended September 30, |  | Nine months ended September 30,
| 2024 | 2023 |  | 2024 | 2023
(unaudited; millions of Canadian dollars) |  |  |  |  |
Operating revenues | 15,010 |  | 9,949 |  |  | 37,921 |  | 33,038 |
Earnings attributable to common shareholders 1 | 1,276 |  | 506 |  |  | 4,655 |  | 4,173 |
1 Includes adjustment for pro forma interest expense on debt financing for the PSNC Acquisition of $12 million and $48 million (after-tax of $9 million and $37 million) for the three and nine months ended September 30, 2023, respectively. Questar Gas Company On May 31, 2024, through a wholly-owned US subsidiary, we acquired all of the membership interests of Fall West Holdco LLC which owns 100% of Questar Gas Company (Questar) and its related Wexpro companies (Wexpro) for cash consideration of $4.1 billion (US$3.0 billion) (the Questar Acquisition). Questar is a public natural gas utility providing distribution, storage and transmission services to residential, commercial and industrial customers in Utah, southwestern Wyoming and southeastern Idaho. The Public Utilities Commissions of Utah, Wyoming and Idaho have granted Questar the necessary regulatory approvals to serve these areas. Wexpro develops and produces cost-of-service gas reserves for Questar and operates under agreements with the states of Utah and Wyoming. The following table summarizes the estimated preliminary fair values that were assigned to the net assets of Questar and Wexpro:
| May 31, 2024
(millions of Canadian dollars) |
Fair value of net assets acquired: |
Current assets (a) | 464 |
Property, plant and equipment (b) | 5,921 |
Long-term assets (c) | 191 |
Current liabilities | 407 |
Long-term debt (d) | 1,343 |
Other long-term liabilities (e) | 948 |
Deferred income tax liabilities | 522 |
Goodwill (f) | 751 |
Purchase price: |
Cash | 4,107 |
a) Current assets consist primarily of cash, trade and other accounts receivable and inventory. The fair value of trade receivables from customers approximates their carrying value of $201 million due to the short period to maturity. A provision for credit and recovery risk associated with accounts receivable has been made through the expected credit loss, which totaled $9 million. b) Questar's property, plant and equipment constitutes an integrated system of rate-regulated natural gas transmission, distribution and storage assets. Wexpro's property, plant and equipment consists of cost-of-service gas and oil properties developed and produced for Questar. For these rate-regulated assets, fair value was determined using a market participant perspective. Given the regulated nature of, and fixed return on the assets, the fair value of property, plant and equipment acquired is equal to its carrying value. c) Long-term assets consist primarily of funds collected from Questar by Wexpro and held in trust to fund future asset retirement obligations (ARO), as well as regulatory assets expected to be recovered from customers in future periods through rates. d) The fair value of long-term debt was determined based on the current underlying US Treasury interest rates on instruments of similar yield, credit risk and tenor, as well as an implied credit spread based on current market conditions. We recorded a fair value adjustment to reduce long-term debt by $301 million with no corresponding regulatory offset. e) Other long-term liabilities consist primarily of regulatory liabilities, expected to be refunded to customers in future periods through rates, as well as ARO. The fair value of the ARO liability was determined using a discounted cash flow approach. f) Goodwill is primarily attributable to the existing assembled assets and workforce of Questar and Wexpro that cannot be duplicated at the same cost by a new entrant and the enhanced scale and geographic diversity of our regulated natural gas distribution business, which provides a platform for future growth and optimization with existing assets. The goodwill balance recognized has been assigned to our Gas Distribution and Storage segment and is not tax deductible. Upon completion of the Questar Acquisition, we began consolidating Questar and Wexpro. For the period beginning May 31, 2024 through to September 30, 2024, operating revenues and earnings attributable to common shareholders generated by Questar and Wexpro were immaterial. Our supplemental pro forma consolidated financial information for the three and nine months ended September 30, 2024 and 2023, including the results of operations for Questar and Wexpro as if the Questar Acquisition had been completed on January 1, 2023, are as follows:
| Three months ended September 30, |  | Nine months ended September 30,
| 2024 | 2023 |  | 2024 | 2023
(unaudited; millions of Canadian dollars) |  |  |  |  |
Operating revenues | 14,882 |  | 10,040 |  |  | 38,471 |  | 33,885 |
Earnings attributable to common shareholders 1 | 1,293 |  | 501 |  |  | 4,695 |  | 4,153 |
1 Includes adjustment for pro forma interest expense on debt financing for the Questar Acquisition of $18 million and $70 million (after-tax of $14 million and $52 million) for the three and nine months ended September 30, 2023, respectively. The East Ohio Gas Company On March 6, 2024, through a wholly-owned US subsidiary, we acquired all of the outstanding shares of capital stock of The East Ohio Gas Company (EOG) for cash consideration of $5.8 billion (US$4.3 billion) (the EOG Acquisition). EOG is a public natural gas utility providing distribution, storage and transmission services to residential, commercial and industrial customers in Ohio and is regulated by the Public Utilities Commission of Ohio. The following table summarizes the estimated preliminary fair values that were assigned to the net assets of EOG:
| March 6, 2024
(millions of Canadian dollars) |
Fair value of net assets acquired: |
Current assets (a) | 641 |
Property, plant and equipment (b) | 7,253 |
Long-term assets (c) | 1,647 |
Current liabilities | 670 |
Long-term debt (d) | 2,612 |
Other long-term liabilities (e) | 993 |
Deferred income tax liabilities | 1,036 |
Goodwill (f) | 1,608 |
Purchase price: |
Cash | 5,838 |
a) Current assets consist primarily of cash, trade and other accounts receivable, prepaid expenses, regulatory assets and inventory. The fair value of trade receivables from customers approximates their carrying value of $376 million due to the short period to maturity. A provision for credit and recovery risk associated with accounts receivable has been made through the expected credit loss, which totaled $3 million. b) EOG's property, plant and equipment constitutes an integrated system of rate-regulated natural gas transmission, gathering, distribution and storage assets. For these rate-regulated assets, fair value was determined using a market participant perspective. Given the regulated nature of, and fixed return on the assets, the fair value of property, plant and equipment acquired is equal to its carrying value. c) Long-term assets consist primarily of overfunded pension plan assets of $395 million and $1.2 billion of regulatory assets expected to be recovered from customers in future periods through rates. Pension plan assets attributable to the workforce acquired from EOG were transferred in cash to an Enbridge-sponsored pension plan based on their fair value as at December 31, 2023, subject to closing adjustments. The fair value of plan assets was determined using unadjusted quoted market prices for identical investments. d) The fair value of long-term debt was determined based on the current underlying US Treasury interest rates on instruments of similar yield, credit risk and tenor, as well as an implied credit spread based on current market conditions. We recorded a fair value adjustment to reduce long-term debt by $478 million with no corresponding regulatory offset. e) Other long-term liabilities consist primarily of regulatory liabilities expected to be refunded to customers in future periods through rates. f) Goodwill is primarily attributable to the existing assembled assets and workforce of EOG that cannot be duplicated at the same cost by a new entrant and the enhanced scale and geographic diversity of our regulated natural gas distribution business, which provides a platform for future growth and optimization with existing assets. The goodwill balance recognized has been assigned to our Gas Distribution and Storage segment and is not tax deductible. Upon completion of the EOG Acquisition, we began consolidating EOG. For the period beginning March 6, 2024 through to September 30, 2024, EOG generated $751 million of operating revenues and $170 million of earnings attributable to common shareholders. Our supplemental pro forma consolidated financial information for the three and nine months ended September 30, 2024 and 2023, including the results of operations for EOG as if the EOG Acquisition had been completed on January 1, 2023, are as follows:
| Three months ended September 30, |  | Nine months ended September 30,
| 2024 | 2023 |  | 2024 | 2023
(unaudited; millions of Canadian dollars) |  |  |  |  |
Operating revenues | 14,882 |  | 10,131 |  |  | 37,568 |  | 33,375 |
Earnings attributable to common shareholders 1 | 1,296 |  | 625 |  |  | 4,614 |  | 4,266 |
1 Includes adjustment for pro forma interest expense on debt financing for the EOG Acquisition of $26 million and $100 million (after-tax of $20 million and $77 million) for the three and nine months ended September 30, 2023, respectively. The purchase price allocations for the PSNC Acquisition, Questar Acquisition and EOG Acquisition (together, the Acquisitions) were prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair values of the pension, ARO and regulatory balances and their tax bases. Any adjustments to the purchase price allocations will be made as soon as practicable, but no later than one year from the date of each acquisition. The Acquisitions further diversify, and are complementary to, our existing gas distribution operations. Acquisition of RNG Facilities On January 2, 2024, through a wholly-owned US subsidiary, we acquired six Morrow Renewables operating landfill gas-to-renewable natural gas (RNG) production facilities (Tomorrow RNG) located in Texas and Arkansas for total consideration of $1.3 billion (US$1.0 billion), of which $584 million (US$439 million) was paid at close and an additional deferred consideration is payable within two years with a fair value of $757 million (US$568 million) (the RNG Facilities Acquisition). The acquired assets align with and advance our low-carbon strategy. The following table summarizes the estimated preliminary fair values that were assigned to the net assets of Tomorrow RNG:
| January 2, 2024
(millions of Canadian dollars) |
Fair value of net assets acquired: |
Current assets | 31 |
Intangible assets (a) | 925 |
Property, plant and equipment (b) | 174 |
Current liabilities | 5 |
Goodwill (c) | 223 |
Purchase price: |
Cash | 584 |
Deferred consideration (d): |
Current portion of long-term debt | 550 |
Long-term debt | 207 |
Other adjustments | 7 |
| 1,348 |
a) Intangible assets consist of long-term gas supply agreements with the respective facility's landfill owner. Fair value was determined using an income-based approach, specifically the multi-period excess earnings method, by estimating the present value of the after-tax cash flows attributable to the gas rights. The intangible assets will be amortized on a straight-line basis over the term of the respective agreement, inclusive of extension options, which range from 13 to 42 years. b) Tomorrow RNG's property, plant and equipment constitutes specialized landfill gas plant and equipment which collects gas produced by waste decomposition, treats and compresses the gas to pipeline specifications. The direct method of replacement cost was used to determine the majority of the fair value of property, plant and equipment. Adjustments were then applied for estimated physical deterioration. c) Goodwill is primarily attributable to expected future returns from a portfolio of both operating and scalable RNG assets, furthering the diversity of our renewable projects portfolio and accelerating progress toward our energy transition goals. The goodwill balance recognized has been assigned to our Gas Transmission segment and is tax deductible over 15 years. d) We entered into six non-interest bearing promissory notes due to Morrow Renewables, the total value of which represents deferred payments of $808 million (US$606 million) due within two years. The first and second payments are due on January 2, 2025 and December 31, 2025, respectively. The $757 million (US$568 million) recognized in the purchase price represents the fair value of deferred consideration at the date of acquisition using the imputed interest rate method over the terms of the notes. Upon completion of the RNG Facilities Acquisition, we began consolidating Tomorrow RNG. For the period beginning January 2, 2024 through to September 30, 2024, operating revenues and earnings attributable to common shareholders generated by Tomorrow RNG were immaterial. The impact to our supplemental pro forma consolidated operating revenues and earnings attributable to common shareholders for the three and nine months ended September 30, 2024 and 2023, as if the RNG Facilities Acquisition had been completed on January 1, 2023, was also immaterial. ASSET ACQUISITION Tres Palacios Holdings LLC On April 3, 2023, we acquired Tres Palacios Holdings LLC (Tres Palacios) for $451 million (US$335 million) of cash. Tres Palacios is a natural gas storage facility located in the US Gulf Coast and its infrastructure serves Texas gas-fired power generation and LNG exports, as well as Mexico pipeline exports. We allocated assets with a fair value of $790 million (US$588 million) to Property, plant and equipment, net, of which $254 million (US$189 million) relates to storage cavern right-of-use assets, and recorded the related lease liabilities of $7 million (US$5 million) and $248 million (US$184 million) to Current portion of long-term debt and Long-term debt, respectively, in the Consolidated Statements of Financial Position. The acquired assets are included in our Gas Transmission segment. DISPOSITION Disposition of Alliance Pipeline and Aux Sable Interests On April 1, 2024, we closed the sale of our 50.0% interest in the Alliance Pipeline, our interest in Aux Sable (including a 42.7% interest in Aux Sable Midstream LLC and Aux Sable Liquid Products L.P., and a 50.0% interest in Aux Sable Canada LP) and our interest in NRGreen Power Limited Partnership (NRGreen) to Pembina Pipeline Corporation for $3.1 billion, including $327 million of non-recourse debt, subject to customary closing adjustments. A gain on disposal of $1.1 billion before tax, which is net of $1.0 billion of the goodwill from our Gas Transmission segment allocated to the disposal group, is included in Gain on disposition of equity investments in the Consolidated Statements of Earnings for the nine months ended September 30, 2024. Our equity investments in the Alliance Pipeline and Aux Sable were previously included in our Gas Transmission segment. Our equity investment in NRGreen was previously included in our Renewable Power Generation segment. EQUITY INVESTMENT TRANSACTION Joint Venture with WhiteWater/I Squared and MPLX On May 29, 2024, through a wholly-owned US subsidiary, we formed a joint venture (the Whistler Parent JV) with WhiteWater/I Squared Capital (WhiteWater/I Squared) and MPLX LP (MPLX) that will develop, construct, own and operate natural gas pipeline and storage assets connecting Permian Basin natural gas supply to growing LNG and other US Gulf Coast demand. The Whistler Parent JV is owned by WhiteWater/I Squared (50.6%), MPLX (30.4%) and Enbridge (19.0%) and is accounted for as an equity method investment. In connection with the formation of the Whistler Parent JV, we contributed our 100% interest in the Rio Bravo Pipeline project and $487 million (US$357 million) of cash to the Whistler Parent JV. In addition to our 19.0% equity interest in the Whistler Parent JV, we received a special equity interest in the Whistler Parent JV which provides for a 25.0% economic interest in the Rio Bravo Pipeline project. This interest is subject to certain redemption rights held by Whitewater/I Squared and MPLX. After the closing on May 29, 2024, we accrued for our share of the post-closing mandatory capital expenditures of approximately US$150 million for the Rio Bravo Pipeline project. Additional capital expenditures to complete the Rio Bravo Pipeline project will be proportionate to our economic interest. The contribution of our interest in the Rio Bravo Pipeline project to the Whistler Parent JV in exchange for the equity interests discussed above represents a non-cash transaction in Cash Flows from Investing Activities and does not have an effect on our Consolidated Statements of Cash Flows. This component of the transaction resulted in a reduction of $321 million (US$235 million) to Property, plant and equipment, net and a corresponding increase to Long-term investments in the Consolidated Statements of Financial Position. The cash component of the transaction, as well as subsequent cash payments made for post-closing mandatory capital expenditures, have been reflected as contributions in Cash Flows from Investing Activities.

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