Feb 3, 2010
Executives
Vern Yu – VP, IR and Enterprise Risk Pat Daniel – President and CEO Richard Bird – EVP, CFO and Corporate Development Colin Gruending – VP and Controller
Analysts
Robert Kwan – RBC Capital Markets Linda Ezergailis – TD Newcrest Carl Kirst – BMO Capital Markets Andrew Kuske – Credit Suisse Bob Hastings – Canaccord Adams Matthew Akman – Macquarie Petro Panarites – CIBC World Markets Ted Durbin – Goldman Sachs Steven Paget – FirstEnergy Robert Catellier – Clarus Securities Jeff Jones – Reuters
Operator
Good morning, ladies and gentlemen. Welcome to the Enbridge Inc.
fourth quarter 2009 financial results conference call. I would now like to turn the meeting over to Mr.
Vern Yu. Sir, you may proceed.
Vern Yu
Thank you. Good morning and welcome to our fourth quarter earnings call.
With me this morning are Pat Daniel, President and Chief Executive Officer; Richard Bird, Executive Vice President, Chief Financial Officer and Corporate Development; and Colin Gruending, Vice President and Controller. Before we begin I would like to point out that we may refer to forward-looking information during this call.
By its nature this information applies certain assumptions and expectations about future outcomes, so we remind you it is subject to risks and uncertainties affecting every business including ours. Our slide includes a summary of the most significant factors and risks that may affect future outcomes for Enbridge, which are also discussed more fully in our public disclosures found on both SEDAR and EGGAR.
We would like to remind everyone that the call is webcast and I encourage those listening on the phone line to view the supporting slides available on our website on the investor tab. A replay and podcast for the call will be available later today and a transcript will also be posted to the website shortly thereafter.
The Q&A format will be our standard format where the initial Q&A is restricted to the analyst community. Once we have completed that we would be happy to entertain questions from the media.
I would like to remind everyone that Pat Murray and I are available after the call if you have any more detailed follow-up questions. And with that quick intro, I would like to turn the call over to Pat Daniel.
Pat Daniel
Great. Thanks, Vern, and good morning, everyone.
Thank you again for joining us this morning. So, earlier today we were very pleased to announce fourth quarter adjusted results of $239 million, an increase of 18% over this quarter last year.
On a year-to-date basis adjusted earnings increased 26% to $855 million or $2.35 per share. This, as you know places, us at the top end of our 2009 guidance range which we had already revised upwards at our Q3 earnings call in November, and it puts us in great shape for 2010.
In early December, we announced a 15% increase to our quarterly dividend effective March 1st, which represents Enbridge's 15th consecutive dividend increase. Richard is going to review the details of our 2009 financial performance in a few minutes, but let me summarize by saying that 2009 has been the best year yet.
2010 will be equally noteworthy as this year we are going to place into service two of the largest projects in the Company's history, Alberta Clipper and Southern Lights. These two projects will allow us to continue to grow our earnings and cash flow in 2010.
Alberta Clipper, of course, is a $3.7 billion expansion project, which will add 450,000 barrels per day of capacity to our mainline system and the $2.3 billion Southern Lights return line will provide diluent capacity from Chicago to Edmonton. Both projects are backed by long-term agreements with no volume risk.
We recently announced that both the Canadian and US segments of the Alberta Clipper expansion project are expected to be placed into service on April 1, 2010, with tariffs filed with the appropriate regulators to be effective on that date. You are probably also aware that in the last few weeks two shippers have made filings to the FERC requesting that the tolls associated with Alberta Clipper expansion be delayed until such time as the capacity is required.
We believe that these applications are without merit. The Alberta Clipper's toll methodology was approved by FERC with the full support of the Canadian Association of Petroleum Producers, CAPP as they are known, with no objecting parties.
Construction is essentially complete. We of course, are going to work with shippers to effectively manage the impact of current and planned capacity expansions.
While we have focused in recent years on the expansion of our mainline system and going forward one of the key growth areas over the next few years will be regional oil sands pipeline projects and we are pleased what we are seeing in terms of new and renewed oil sands development. Enbridge was very happy to announce last week our agreement with the Cenovus and ConocoPhillips partnership to provide additional pipeline and terminal facilities to support expansion of their Christina Lake enhanced oil project.
This approximately $250 million project combined with today's announcement that Statoil Canada will become another shipper on our Waupisoo Pipeline are more signs that oil sands development is back on the front burner. The Statoil agreement is currently for the initial phase of 30,000 barrels per day.
Production from four Statoil project leases is expected to reach an ultimate production capacity of 220,000 barrels per day. These two developments come on the heels of news from ConocoPhillips and total who have announced plans for a major expansion of their Surmont project in Northern Alberta.
Also from Husky Energy and BP who will be advancing their $2.5 billion Sunrise Project and from CNRL which expects to move forward with an expansion of their Horizon Project and potential sanctioning of their Kirby Lake projects this year. Of course, the Imperial Oil Exxon Project announced last summer that they are going to move ahead with their Kearl mine north of Fort McMurray.
So Enbridge is exceptionally well positioned to capture a good portion of this regional infrastructure opportunity. We are the largest operator in the region.
We have a well-established track record for development and construction in this geography. As well, as you know, both the Athabasca and Waupisoo Pipelines have very low cost expansion capacity so this enables us to offer an attractive bridging solution to new projects as they come along.
In effect this enables producers to take a temporary ride on existing infrastructure during the initial phases of projects and then when volumes are sufficient move forward with their own dedicated transportation and storage facilities. It's these competitive advantages that have enabled us to secure the Woodland Pipeline to serve Imperial Oil and Exxon's Kearl project and also Fort Hills.
On January 1 of this year we placed into service the $147 million Phase VI North Dakota Pipeline expansion and we are also currently working on the $120 million Phase II expansion of the Enbridge Saskatchewan System. Both of these assets sit right on top of the Bakken play and give the capital investment being dedicated to these plays by the producers, we believe that even after these sizable projects are placed into service there will be substantial opportunities for further expansion and actively discussing a various solutions with our customers.
2010 we’ll also see continued growth in our green energy business with two projects announced in the fourth quarter of 2009 coming into service by the end of the year. The 100 megawatt Talbot Wind Energy Project is expected to begin commercial operations in late 2010, along with an additional 60 megawatt of capacity from our expanded Sarnia Solar Project.
We are aggressively pursuing growth opportunities in green power generation and we have successfully replicated our low-risk business model within that sector. On the gas side of the business, we continue to actively work on a number of projects.
The deepwater Gulf of Mexico is an area where upstream development activity remains strong. These are primarily oil plays, but they do have associated gas that must be produced.
Our existing gas infrastructure moves 40% of the offshore gas production and 50% of the deepwater production, and will utilize the economies of scale provided by this system, as well as our strong technical and execution track record, to secure the gas transportation opportunities and to expand our footprint in the offshore. Our Enbridge Energy Partners gathering and processing assets are well located in the Anadarko, the Barnett, and the Bossier plays, as well as being on the edge of the Haynesville Shale gas basin.
We are pursuing a number of potential projects in this area including the LaCrosse long-haul pipeline where we continue to confirm customer interest. Our cross continent gas transportation system, effectively the Alliance and Vector pipeline, has the lowest cost toll out of the basin and is well-positioned to take advantage of new volumes from northeast BC shale gas developments particularly in the Montney.
We expect to see significant production growth from the Montney Basin, and this gas is liquids rich and it fits well with the operational characteristics of the Alliance Pipeline. We, of course, are also able to extract additional value for our shippers by stripping off the NGLs at our Aux Sable gas processing plant which is located downstream of Alliance in Chicago.
Finally, I am very pleased with the progress that we have made at Enbridge Gas Distribution. Through incentive regulation we have been able to improve our return by approximately 120 basis points and providing lower costs for our consumers as well, and we anticipate even stronger performance from the utility in 2010.
So, with that, I will now pass it off to Richard to review the quarterly financial results in more detail. Richard?
Richard Bird
Thanks, Pat. Good morning, everyone.
As Pat mentioned, earlier this morning we released our fourth-quarter and full-year results. Our full-year reported net income was $1.555 billion or $4.27 per share; that’s an increase of 18% over 2008 earnings.
As I noted in previous quarter, our 2009 and 2008 results both included large one-time gains on sales related to the sale of our international investments and that was same as in 2009 and COH in 2008. 2009 earnings were also increased by large mark-to-market gains on derivatives used to lock in foreign exchange interest rates and commodity prices, as well as the impact of tax rate changes in the fourth quarter.
2009 was further increased by strong performance within each of the operating segments of the Company offsetting the loss of earnings as a result of our international divestitures, and the news release provides all the details of those various adjustments to obtain our adjusted earnings. Excluding one-time and non-operating factors, our adjusted earnings for the year and fourth quarter increased by 26% and 18%, respectively.
Our adjusted earnings per share of $2.35 represents a 25% growth rate, and as Pat mentioned, placed us near the top of our upwardly revised guidance range. Before I walk you through the performance of the segments, I will just remind you as laid out on, if you are following on the charts, on chart number 13, that these results have been presented under our various revisions to the segment and reporting that we are going to follow through 2010.
This change was necessitated by the exit from our two international investments and better reflects how we manage the business. The change should simply be cosmetic as we have chosen to merge gas pipelines, gas distribution and services, and historic international information into a single segment named natural gas delivery and services.
However, the level of detail provided has not changed, so let's go through the earnings in a little more detail. Moving to slide 14, liquids pipelines adjusted earnings rose $35 million in the fourth quarter of 2009 to $141 million, and it increased to $122 million for the full year to $454 million, a 37% increase.
As has been the case all year, this was due to the recognition of AEDC within the Enbridge system from Alberta Clipper and our Southern Lights Project. In addition, Southern Lights earnings included contributions from the LSr line, which was placed into service in the first quarter of 2009.
The Spearhead Pipeline increase was a direct result of the expansion of that system, which was placed into service in May of 2009. These positive results were only marginally offset in the full year by increased business development costs.
Moving next to the new combined segment, natural gas delivery and services. Results were slightly lower in the fourth quarter and for the full year, but that’s primarily as a result of the sale of our investment in CLH in the second quarter of 2008 and the sale of OCENSA in the first quarter of 2009.
After removing the impact of international earnings, our results improved in this segment on a year-over-year basis. This improvement was led by our offshore assets, which benefited from contributions from the Shenzi lateral, which was placed into service in April 2009, and higher throughput from BP's Thunder Horse platform, which is now producing at levels that exceeded our original volume expectations.
Recall that Offshore's 2008 earnings were negatively impacted by Hurricane Ike. Our Energy Services business also performed better year-over-year as a result of higher margins and volumes from the Contango oil market and low-risk transportation arbitrage opportunities.
That was primarily in the first half of 2009. Finally, fourth-quarter and full-year earnings improved at Enbridge Gas Distribution as we continued to work on cost savings under the incentive regulation framework, as Pat mentioned.
In 2009 we were able to increase our return by approximately 120 basis points and return savings to our customers of $19 million. We feel that in 2010 we should be able to earn well in excess of 200 basis points over the regulated rate of return that’s embedded in the agreement.
This increase will be a combination of continued efficiencies at the utility as well as the impact of the recently announced Ontario Energy Board decision, which determined that a significant increase in the generic formula-based regulated return was called for. The OEB established a new base level return on equity of 9.75%.
Under incentive regulation we are allowed to earn 100 basis points over this level, so 10.75% before the equal sharing with customs kicks in. So we’ll have the compound benefit of higher growth productivity savings plus greater retention in the savings.
Sponsored investments; earnings continue to be very strong. Enbridge Energy Partners contribution increased by 65% year-over-year from 60 million to just shy of 100 million.
That strong performance was primarily due to the increased ownership of EEP that we have as a result of the US$500 million capital injection made in the fourth quarter of 2008. Results within EEP also improved as a result of stronger performance within its liquids business due to the assets placed into service throughout 2008 and 2009.
These results were further enhanced by our US dollar hedging program and higher general partner incentive income. Alberta Clipper US also impacted earnings more noticeably in the fourth quarter of 2009 as the US portion of this project hit its peak spending during this time period.
The earnings you see in the quarter on that asset reflect 67% of the after-tax earnings from AEDC booked within the partnership and converted to Canadian dollars. Lastly, Enbridge Income Funds contribution again increased as a result of the two distribution increases announced by the fund in 2008.
And to conclude the review of our segmented results, corporate costs for the quarter were basically in line with prior years and the full-year results continue to benefit from favorable realized foreign exchange gains primarily which occurred in the second quarter. Before I hand it back to Pat, I thought I would just reiterate that this strong finish to 2009 puts us in great shape to meet our 2010 guidance.
The midpoint of which represents a further 11% increase over these exceptional 2009 results. Back to you, Pat.
Pat Daniel
Great. Thanks, Richard.
So just to very quickly summarize, we look forward to a very busy year in the oil sands in 2010 as we continue to strengthen our competitive position in that area. 2010 will also be a very strong year for earnings growth as we place into service Alberta Clipper, Southern Lights, and our Talbot and Sarnia green power projects.
We continue to work very actively on securing new projects in the Gulf of Mexico and in the shale plays of North America. On top of that our Green Energy business not only had a very strong growth year in 2009, but has numerous opportunities in front of it for 2010.
And the gas distribution franchise is being propelled by improving returns and excellent performance under incentive regulation. So, the outlook looks very bright on all fronts.
With that maybe we can move forward to the Q&A session.
Operator
(Operator Instructions) And your first question comes from the line of Robert Kwan with RBC Capital Markets. Please proceed.
Robert Kwan – RBC Capital Markets
Good morning. You mentioned, Pat, in the news release about growth from all three platforms being about equal.
Can you just talk about your expectations with respect to how you think that component growth will come through, whether you break it down between organic/embedded growth within the business? Secondly, Greenfield or Brownfield projects and then, third, acquisitions?
Pat Daniel
Are you referring to earnings growth in 2010 or going forward, Robert?
Robert Kwan – RBC Capital Markets
The go-forward, medium to longer term.
Pat Daniel
For longer term, okay. I am going to just recall back to the preparation of our long-range plan which calls for I believe by 2015 we end up with about 40% of our – I am sorry, 60% of our earnings from liquids pipelines, 37% from gas, and 3% for renewables which would imply the liquids business continues to grow at this 10% plus rate.
Gas probably slightly less than that and renewables slightly better than that. Does that kind of answer your question?
Robert Kwan – RBC Capital Markets
Yes. And then, just the second part of that, there being, how do you see that growth playing out within the businesses?
Whether it's embedded growth within the business, whether that is how the contracts are shaped versus Greenfield and Brownfield, and then the third being acquisitions?
Pat Daniel
The vast majority of that is organic and Greenfield. About 75% is true Greenfield.
About 25% of that is an improvement in existing businesses and extensions. We don't have any M&A in that plan.
That doesn't mean to say we won't do any M&A, but the growth projections that we have put forward have been based on organic alone.
Robert Kwan – RBC Capital Markets
So, on the renewable you expect to be undertaking pure development?
Pat Daniel
Yes, pure development, we will also look at M&A opportunities or M&A with expansion associated with it. For example, as you know on something like Sarnia we came in and effectively purchased the first 20 MW as they were near completion and now have announced an incremental 60.
So maybe, small M&A to get the position, and then organic growth from that base.
Robert Kwan – RBC Capital Markets
Great, thank you.
Pat Daniel
Okay, thanks Robert.
Operator
And your next question comes from the line of Linda Ezergailis with TD Newcrest. Please proceed.
Linda Ezergailis – TD Newcrest
Thank you. With the Statoil agreement now when do you envision the need to expand either Waupisoo or Athabasca and what sort of cost ballpark ranges are you looking at?
Pat Daniel
That as it turns out is a complex question, Linda. But let me try to give you a quick snapshot.
We are working on a number of opportunities to bring additional shippers into the Waupisoo and Athabasca infrastructure. If we proceed with Statoil alone and don't have any other additions, it would be about $170 million capacity expansion.
And that production I believe is due to come on 2013
Richard Bird
No, for late 2011.
Pat Daniel
For late 2011. Sorry, Richard.
So that is if that goes stand-alone. We happen to think that there will be other opportunities there and we probably will do a bigger expansion that will accommodate other players as well.
But that is currently under development right now.
Linda Ezergailis – TD Newcrest
Okay. And I guess, you're probably quite busy right now on the ITS negotiations.
How is that coming along and has the petitions with the FERC by I guess, Suncor and Imperial Oil affected those discussions?
Pat Daniel
I will maybe give a quick comment on incentive tolling and then the FERC filing, and then I'm going to come back and have Richard add to my answer with regard to the Statoil, Linda. So, with regard to incentive tolling discussions are going very well.
We are in the middle of those discussions right now, so it's too early to be able to know exactly how they are going to conclude but we are favorably inclined with the direction that is being taken. I think we have got a good, strong cooperative working environment between the cap team that is negotiating and our team, and I am sure we are going to be able to reach a mutually agreeable point on those negotiations and fairly soon.
With regard to the FERC filing, there is not an awful lot that I can say beyond what we said in our press release. We had an Alberta Clipper term sheet negotiated with CAPP in 2007 and filed and approved by FERC in August of 2008.
We viewed the filings really to be without merit in our belief. So that’s really what all I can say at this point.
We will continue to look at it further, Linda.
Linda Ezergailis – TD Newcrest
Okay, thank you.
Pat Daniel
Let me just come back to Richard had wanted to add to my response on Waupisoo.
Richard Bird
Yes. I was just going to clarify that the Statoil volumes are expected to commence late 2011, but there wouldn't be any expansion required at that point in time.
We could carry those volumes for at least a year before we would start to run into need for expansion. So you wouldn't see any expansion until probably at least a year after that.
Linda Ezergailis – TD Newcrest
So other than pumping there is no cost to the Statoil deal?
Richard Bird
During the first year we can carry those volumes with existing capacity, but by late 2012 we would be needing to add capacity.
Linda Ezergailis – TD Newcrest
And that’s the $147 million expansion that Pat was referring to?
Richard Bird
I think he said –
Pat Daniel
Yes, $170 million is our Board-approved capital associated with it, Linda. If that in fact, is the only volume that we get – we happen to think we will do a bigger expansion if we are able to get some additional customers in.
Linda Ezergailis – TD Newcrest
Great, thank you.
Operator
And your next question comes from the line of Carl Kirst with BMO Capital. Please proceed.
Carl Kirst – BMO Capital Markets
Thank you. Good morning, everybody.
Actually, Pat, Richard, if I could just clarify the last question with Linda there. So with respect to the $170 million of pumping coming in late 2012 that would be to continue holding the 30,000 barrels of Statoil because I guess there is going to be incremental volumes coming from other sources?
So initially it comes on without capital but we will need $170 million of capital come late 2012?
Pat Daniel
Yes, with the build of other committed volumes that’s right.
Carl Kirst – BMO Capital Markets
Perfect. Okay, I am so sorry.
I just wanted to make sure I understood that. The question just from a green investment standpoint – and, Pat, you mentioned the long-term plan and the 3% of earnings – you guys have been very successful, of course, through the fourth quarter of getting additional projects.
Should we be thinking of the overarching goal of the neutral carbon footprint? Is that kind of the end target or should we be thinking of that as more of a floor, if indeed we continue to see the type of return profile that is mimicking your pipelines?
Pat Daniel
Really, Carl, I would like you to kind of disassociate in your mind this commitment to a neutral carbon footprint and our investments in renewables. The investments in renewables are done strictly as good business and they fit very well with the risk model and provide good returns to Enbridge.
The neutral footprint commitment is a broader commitment that involves right-of-way and also, yes, renewables. But it's more a projection as to where we expect we will be in terms of power in the Company.
We certainly would never undertake a renewables project just to meet some kind of a neutral footprint goal, but we happened to believe that, that is about where we will be by 2015. So these are good solid investments than meet the risk profile of Enbridge.
Carl Kirst – BMO Capital Markets
Understood. And, lastly if I could, just with respect to the MLPs coming back to very strong life here.
Obviously, there was a restructuring by another company a couple of weeks ago. As you, guys look at EEP and I guess the Alberta Clipper of the US portion that had come out last year, and not whipsaw assets around, but given where EEP is, is there any thoughts or discussion of placing that back into EEP and taking back equity?
Pat Daniel
Not at this point, Carl. We did indicate at the time that we structured the deal, and because of the challenges in accessing the market in the US, that at some point in the future if we got to the point where the overall cost of capital of the MLP was lower than that of Enbridge, and it made sense for the MLP to go to the market to raise the equity required to take their interest that we could consider rolling it down.
But we have got to see a period of stability in the markets to make sure that, that was in the good long-term interest of both the partnership and Enbridge.
Carl Kirst – BMO Capital
Great, thank you.
Pat Daniel
Thank you.
Operator
And your next question comes from the line of Andrew Kuske with Credit Suisse. Please proceed.
Andrew Kuske – Credit Suisse
Thank you; good morning. Pat, as you try to grow your renewable business, I am just curious as to what your thoughts are on the recent deal between Samsung and the Province of Ontario because it's a meaningful amount of megawatts in the market?
Pat Daniel
Well, we are in the process of trying to assess exactly what that deal means to us longer term, Andrew, and so it's a little bit early for me to comment. We are in the midst of going through it and have been looking at it internally over the last week or so since the deal was announced.
We think it could offer some opportunities to work with Samsung, who most likely will be looking for local partners. We would hope they would be looking for local partners with the deal that they have structured with the government.
But there is room under prior commitments, the feed-in tariff arrangement of the provincial government and prior commitments to work on renewables in Ontario outside of the Samsung deal to a certain extent. So we will look at both discussions with them to see whether we can partner with them and the opportunities for us outside that.
And, again, I would like to remind you that we also are looking outside of Ontario at renewable projects. But it will change the landscape in Ontario and we are just trying to determine how best we work within that.
Andrew Kuske – Credit Suisse
Well, I guess, just in that context how sustainable do you think the feed-in tariffs are at this point in time given the strain on a lot of provincial balance sheets across the country?
Pat Daniel
I am sorry, can you just repeat the last part of it, Andrew, you faded off a little bit?
Andrew Kuske – Credit Suisse
Sorry, I guess given just the strain on a lot of provincial balance sheets at this point of time, how sustainable do you think the feed-in tariffs are, and not for existing contracts that are out there but for really new developments. Do you think it's a sustainable model for development for provincial power authorities?
Pat Daniel
Well, that is a very interesting and broad question, and again, one that we spend a fair bit of time on. As you have indicated with regard to existing deals, we don't feel that there – well, that there will not be an issue.
Whether it’s sustainable is going to be hard to tell. Obviously, the cost of renewables will come down over time and therefore result in less subsidy, and less of a burden on the taxpayers in the province in providing that subsidization.
I think that’s going to take some time. Right now, the burden is as I understand, it is relatively light and I think it adds less than $0.1 a kilowatt hour to the cost of power in the province.
As the amount of renewables grows that will become more noticeable, but I think at the same time we are going to have the countering effect of lowering costs in the renewables business. So I am sure that’s an important consideration.
It would appear as though the Ontario government, in particular, is committed to this green energy plan, and we anticipate it will continue.
Andrew Kuske – Credit Suisse
Okay. That is helpful, thank you.
Operator
And your next question comes from the line of Bob Hastings with Canaccord Adams. Please proceed.
Bob Hastings – Canaccord Adams
Thank you. The offshore is doing real well these days and it’s good to see.
Can you give us sort of any kind of guidance looking forward of the kind of run rate we should expect given the current level of business?
Pat Daniel
Sorry, the offshore did you say, Bob?
Bob Hastings – Canaccord Adams
Yes, I did.
Pat Daniel
So, Colin, can you take that?
Colin Gruending
Sure, Bob. So, the quarter wasn’t pretty strong and that’s probably a little higher than our run rate, as you can see in the accompanying remarks in the news release, it does include a couple of – the 10 million reported in the quarter, its couple of million dollars of insurance proceeds that are still in there.
So, in the prior year that minus two obviously reflects downtime from '08 hurricanes. So the run rate is in between there.
I would suggest it's somewhere in the middle depending on the new attachments and the windstorm. So I think we reported about 29 million for the full year, and we are assuming something near that in 2010 if the plan plays out.
Bob Hastings – Canaccord Adams
Okay. Thanks, I will get back in the queue.
Pat Daniel
Thanks Bob.
Operator
And your next question comes from the line of Matthew Akman from Macquarie. Please proceed.
Matthew Akman – Macquarie
Thank you. On corporate there is a comment on page 10 of the release that the full-year improvement in adjusted loss is a result of foreign exchange gains realized on hedge settlements.
Is it fair to assume that you are including that in the ongoing adjusted earnings because the hedges go out for a multi-year period?
Richard Bird
That is correct, Matthew.
Matthew Akman – Macquarie
So how many years forward do you have visibility on that now?
Richard Bird
To 2014.
Matthew Akman – Macquarie
Okay, thanks. Second question is bigger picture, and I guess for Richard.
Relating to your cash flow and how you are going to use cash and generate cash this year, you have kind of broken the back of the massive CapEx program you have been through for the last few years, still a fair bit of spend but, do you see – is Enbridge going to have free cash after dividends this year or is it sort of in balance? How does it look in 2010?
Richard Bird
Are we going to have free cash after dividends? Well, we are certainly going to continue to do some financing in 2010.
I haven't really thought about that question explicitly, so I think the answer to that is, no, we’ll still be net in a financing position rather than a cash throw-off position in 2010. As we have indicated as you move through the relative time, we relatively quickly reach the point where we are throwing off more than we are generating but still have plans to be able to reinvest that.
Matthew Akman – Macquarie
I am carrying right now sort of a CapEx budget for 2010 of 1.5 billion to 2 billion in that range. Is that where you guys are?
Richard Bird
Yes, that sounds about right.
Matthew Akman – Macquarie
Okay. Thanks, those are my questions.
Operator
And your next question comes from line of Petro Panarites with CIBC. Please proceed.
Petro Panarites – CIBC World Markets
Thank you. Pat, with growth opportunities becoming a bit more challenging in North America, are you looking at any international opportunities in your long-range plan?
And if so, could you give us a little color as to what you are looking at?
Pat Daniel
Sure, and by the way, I will answer the question without agreeing with the first part. What I mean by that, Petro, is that I don't think I have ever been more confident of the growth opportunities in front of Enbridge than I am today, in large part because of the diversity of those.
We got excellent opportunities in the liquids business, in that corridor of Fort McMurray to Edmonton. We have got the Bakken underway.
We have got the gas pipeline opportunities in the Montney and with Alliance and Vector. We have got the shale play opportunities in the US.
The offshore has come alive in a big way for us and the gas distribution business, not only in terms of an increase in base-level returns but also incentive tolling looks very bright. But to answer your question, yes, I think we probably will re-look at international in 2010.
As you know, we have always taken a different approach at Enbridge. We don't just go out and say, we are going to do international, let's go establish a bunch of offices here, there, wherever.
We go out and look for good investment opportunities and often some of those are international. So, we feel that we have such tremendous success in using that very disciplined approach internationally that we probably will look at some opportunities in 2010.
Whether we bring anything in the door, it's hard to say. It's a pretty difficult screening process that we put the projects through, but, yes, we will look more broadly than North America.
Petro Panarites – CIBC World Markets
Care to identify any regions?
Pat Daniel
No, it's a little too early to do that. I think you can probably tell from the risk profile of the Company approximately where we would be.
We look for things that replicate the business model that we use in North America. We were very successful in doing that in Spain and Columbia, so you can probably imagine where we wouldn't go.
But at this point we haven't got any projects worked far enough along to give you any guidance as to where we might be.
Petro Panarites – CIBC World Markets
Okay. One more question, this time for Richard.
$30 billion in long-term growth projects, first, how should we be risking that from Enbridge's standpoint, and also over what kind of timeframe would you amortize the projects from within that portfolio?
Richard Bird
Sure. Well, a derivation of that 30 billion is our extended long-term plan which ran out 10 years including last year, so it's through about 2018 I think, and that 30 billion is the gross unrisked amounts in the plan.
It's not what we necessarily expected we will be successful in achieving. It's in addition to the 5 billion that is secured that falls into the 2012 and thereafter period of time, so it's over and above that 5 billion.
I think that we can generate that 10%-plus growth rate well into the second half of the decade, i.e., into that 2018 kind of timeframe, off of about a 50% secure rate on that 30 billion.
Petro Panarites – CIBC World Markets
That is great, thank you.
Operator
And your next question comes from the line of Ted Durbin with Goldman Sachs. Please proceed.
Ted Durbin – Goldman Sachs
Hello. I just wanted to ask about your thoughts on timing of filing for the regulatory approval for Gateway as you go forward and just thinking about the different obstacles you have and then the process from there.
Pat Daniel
Ted, our intention at this point is to file in the first quarter, probably towards the end of the first quarter of this year and we then expect it will probably be a couple of year regulatory process as the joint review panel goes through their work. We're going to have about a three-year construction program .So we are talking five years out at the earliest before Gateway would be up an operating.
That is the approximate schedule at this point in time. Still pretty early to tie that down precisely but you should expect a filing towards the end of the first quarter this year.
Ted Durbin – Goldman Sachs
Okay, great. Next question is just in terms of the demand for diluent coming back up to Alberta.
As you are seeing the different projects that are in the queue, do you see a need for more diluent capacity?
Pat Daniel
We will be bringing about 180,000 barrels a day of capacity online when Southern Lights starts up at midyear this year. I don't know whether Richard or Vern whether you have got any forecast for further diluent requirements beyond that?
Richard Bird
Yes.
Pat Daniel
So I think the 180 should be sufficient for some time to come for what we see with the one caveat that as with the crude oil pipelines it's not always about capacity. Sometimes it's about where you can source the diluent from at lowest cost.
And so the diluent line associated with the Gateway project, for example, could be called into play even in a circumstance where there is sufficient capacity within the system already to handle the diluent requirements. I guess maybe just to add further to that, Ted, there have been a couple of recent announcements or one recent announcement that indicated there may be another upgrader built in Alberta.
Of course, the shippers have always got the option of using either synthetic or diluent and that can change the dynamics. We'll have to see whether that capital investment proceeds because that can change the demand for diluent as well.
Ted Durbin – Goldman Sachs
Okay, great. And then just the last thing is actually on natural gas in the Bakken and the natural gas liquids there.
Is there need for NGL sort of take away capacity there? Do you think you can – will there be room on Alliance and Aux Sable, so, how are you thinking about – as you are looking at the drilling activity in the Bakken the natural gas and NGL story?
Pat Daniel
Yes, there very definitely is going to be need for some rich gas take-away capacity, and beautifully the Alliance Pipeline runs right through the middle of the Bakken play, and I will probably leave it at that because we are working on some opportunities right now.
Ted Durbin – Goldman Sachs
Okay, great. Thank you very much.
Operator
Steven Paget – FirstEnergy
Good morning, everyone. On the Alliance Pipeline, the Montney gas could either go west to Kitimat LNG or possibly along Alliance, which as you said has toll less than a $1.
Could Alliance be expanded along the main line to take some of the gas out of the Montney?
Pat Daniel
Yes, it could and in fact the next expansion of the Alliance Pipeline is a relatively cost-effective addition of compression capacity. Therefore, we feel pretty confident that it will be the next logical ex-Alberta expansion project, Steven.
I think, to your original point, the potential is definitely going to be there for some of that gas to move west to an LNG facility but also for some to move down Alliance.
Richard Bird
Maybe just to add to that, the Montney gas is wet, the Horn River gas is dry and so it probably makes more sense if gas is going to move west that it would be Horn River gas than Montney gas.
Pat Daniel
Yes, and similarly it makes more sense for that wet gas, of course, to move on Alliance because of the downstream extraction capability that we have got with Aux Sable.
Steven Paget – FirstEnergy
Thank you. My next question is on Southern Lights.
You have got 180,000 barrels of capacity and I understand enough is contracted to make your base return, but there is space for additional volumes to be shipped. Have – is there been additional interest in shipping volumes now that Kearl Lake has become a commercial project and is under construction in the past year?
Has that resulted in further contracts for shipments on Southern Lights?
Pat Daniel
At this point, Steven, we are not aware of there being any further interest in that regard, probably in part because of the general slowdown in the oil sands. But with a number of projects being re-announced or renewed now, the potential is definitely there for further interest in that.
Recognizing that a good part of the capacity is contracted, but you are right there is some available capacity. So we will see now with the renewed interest in the oil sands whether there is further indications of support for that volume.
Steven Paget – FirstEnergy
Thank you. Those are my questions.
Pat Daniel
Okay, thanks Steven.
Operator
Soon we will be taking questions from the media. (Operator Instructions) And your next analyst question comes from the line of Robert Catellier.
Robert Catellier – Clarus Securities
Yes, can you discuss the unexpected outage at the Aux Sable facility? Maybe you can comment on the nature of the outage, its duration, and financial impact?
Please.
Pat Daniel
Sure, Robert. I am going to ask Vern Yu to speak to that.
Vern Yu
Hi, Robert. The plant had some unexpected maintenance done in the fourth quarter.
In total, it was running at partial capacity for about 18 days and on a volume basis it was about 10% below our expectations in the quarter.
Robert Catellier – Clarus Securities
And the financial impact of the maintenance was it significant?
Vern Yu
The maintenance cost itself was not significant. Obviously we did not – weren't able to earn the frac spread when the maintenance was happening.
Robert Catellier – Clarus Securities
Okay, thanks very much.
Pat Daniel
It cost us, what, couple million dollars?
Richard Bird
In earnings, yes.
Pat Daniel
The earnings impact a couple million dollars.
Robert Catellier – Clarus Securities
And that is net to Enbridge, not 100% basis?
Vern Yu
Yes, net to Enbridge.
Robert Catellier – Clarus Securities
Thanks.
Pat Daniel
Thank you.
Operator
And your next analyst question comes from the line of Bob Hastings with Canaccord Adams. Please proceed.
Bob Hastings – Canaccord Adams
Thank you. Just getting back to the Alberta Clipper and the toll dispute with a couple of the shippers, I guess one of the points that they are trying to make is that maybe the new line isn’t used and useful.
In regulatory methodology that becomes important in terms of whether it can go in or whether – when does it come in to rate base, what do you say to that? And do you see any risk that maybe that that can get delayed and you get just a capitalized return or something as we have seen before in other circumstances?
Pat Daniel
Well, Robert, as I indicated, we feel that really the filing is without merit. We don't think there is any basis for the action that you have described as a potential outcome.
The project was approved by CAPP, it was approved by FERC and with full support, and hence we just don't see that there is any likelihood of that occurring.
Bob Hastings – Canaccord Adams
So has this not been filed under the normal rate base methodology at all?
Pat Daniel
Yes, it has been just – it’s a normal filing both with the FERC in the US and with the NEB, and goes back to 2007 when CAPP support was granted and approved August of 2008 by FERC. So it’s been some time.
Bob Hastings – Canaccord Adams
Okay, thank you.
Pat Daniel
Thank you.
Operator
And we do have a follow-up question from an analyst, Steve Paget from FirstEnergy. Please proceed, sir.
Steven Paget – FirstEnergy
Just a slightly more detailed question on Alberta Clipper. With measures that could help mitigate any toll increase or change, could you comment on what some of those measures are for shippers?
Pat Daniel
Well, it’s hard to comment specifically, Steven, other than the fact that we are and always are prepared to roll up our sleeves and work with our producers to do whatever we can to optimize the use of the system. Whether that means a re-alignment, and in fact, as you probably know, as part of Alberta Clipper and Southern Lights coming on, we are going through a re-alignment of our existing pipeline infrastructure.
In the six lines we can shuffle products from one line to the other depending on what the overall capacity is to reduce power costs. So it will be – and power costs, by the way, is the biggest part of the operating costs that we have got.
So, we continue to work with producers based on the slake of products that they have got coming forward to ensure that the operating costs are kept as low as we possibly can.
Steve Paget – FirstEnergy
Thank you. That was the detail I was looking for.
Pat Daniel
Okay. Thank you.
Operator
And your next question comes from a media member, Jeff Jones from Reuters. Please proceed, sir.
Jeff Jones – Reuters
Yes, my question relates to a subject that you have mentioned briefly and that is the recent number of expansions that have been announced or restarting of projects in the oil sands. I am wondering how that affects your plans, I mean, is there any way to quantify your potential moves as a result of it or were all of these announcements expected?
Thanks.
Pat Daniel
Jeff, I think it’s fair to say that all of the – well, everything that we have press released we have been working on for some time. Obviously, we continue to work on a number of projects, as I indicated.
We think we will be able to bring incremental volumes to what we have announced to date on the Waupisoo, but that’s under development, so we’ll just have to see how it pans out. I think it's fair to say that with each and everyone of the announcements that have come along, we have been working with the parties well in advance of their announcements to try to ensure that we are able to secure their business and bring them into our infrastructure.
So none of them have really caught us by surprise by any means, and we think we have got a very good chance because of the competitive position that we have got, to bring a lot of this volume on.
Jeff Jones – Reuters
Just as a follow-up, could you say that you – if they haven't caught you by surprise, has the timing been maybe quicker than you had expected?
Pat Daniel
Possibly a little bit. Yes.
On the other hand, if you look at the relatively strong crude oil prices that we have got and the apparent stability in those crude oil prices, I guess we shouldn't be too surprised. But, yes, it was of course led off last summer with Imperial Oil Exxon Mobile announcing they were proceeding with Kearl, and there has been a pretty steady stream of announcements recently so it probably – the recovery probably did come a little quicker than we might have thought a year ago when it seemed to be a pretty gloomy forward outlook.
Jeff Jones – Reuters
Thank you very much.
Pat Daniel
Thank you very much.
Operator
And we do have a follow-up analyst question from the line of Robert Kwan with RBC Capital Markets.
Robert Kwan – RBC Capital Markets
Thank you. Just follow-up on Steven's question, if I am understanding your answer in terms of managing the toll, you had worked to optimize either the various operating cost components.
But is it – are you trying to say that you are not willing to alter the return parameters to Enbridge?
Pat Daniel
That is right.
Robert Kwan – RBC Capital Markets
Okay. And are you willing to alter the earnings versus cash collection to help shippers out in terms of timing?
Pat Daniel
That we really haven't entertained at this point so we wouldn't really anticipate any change from the plan that we have going forward, the announced plan, Robert. That hasn't been suggested to us.
Robert Kwan – RBC Capital Markets
Okay. Is that something you would be – because it sounds like fundamentally you are against altering the return metrics, fundamentally though.
Is that something where you would potentially play around with the cash collection profile?
Pat Daniel
Richard would like to give a comment on that, Robert.
Richard Bird
Yes. The one thing, Robert, that maybe would fall into that general bailiwick is we have been having discussions for quite some period of time with shippers on the potential to take some portion of the main line into a contract system as opposed to a common carrier system.
And so, the terms of that contract could be somewhat negotiable in terms of trying to find a win-win for both parties, but that’s probably the only thing that would fall into that, in that particular area. The other initiative, of course, that we continue to indicate that we are interested in working with the industry on is a potential industry solution on export capacity that would involve a change to the configuration of Keystone XL.
Robert Kwan – RBC Capital Markets
Okay, great. Thank you very much.
Pat Daniel
Thanks Robert.
Operator
And this does conclude the question and answer portion of today’s conference, I’d now like to turn the call back over to Mr. Vern Yu for closing remarks.
Please proceed sir.
Vern Yu
Well, thank you everyone, and I’d just like to remind you that both Pat Murray and I can take any of your detailed questions after the call. Thank you.
Operator
We appreciate your participation in today's conference. This does conclude the presentation.
You may now disconnect, and have a great day.