Enbridge: The toll-road, read honestly.

The note · Principal

The note

A pipeline is not an oil bet. Owning Enbridge is closer to owning a turnpike with a thirty-year toll structure than it is to owning a barrel of crude. The thesis has always lived in that distinction. The corridor between the Western Canadian Sedimentary Basin and the U.S. Midwest and Gulf Coast does not get rebuilt every cycle, and the company that runs the largest piece of it earns a fee whether the underlying barrel sells for forty dollars or ninety. Thirty consecutive years of dividend raises is the receipt for that arithmetic. The honest question is not whether the toll-road still works. It is whether management is going to keep treating it like one.

The business, in one paragraph

Enbridge runs four segments. Liquids Pipelines is the headline asset: the Mainline system that carries roughly three million barrels a day of Canadian crude into the U.S., plus regional oil-sands gathering and the Gulf Coast and offshore extension. Gas Transmission & Midstream moves natural gas across roughly thirty thousand kilometres of pipe, principally in the U.S. Gas Distribution & Storage serves about seven million customers across Ontario, Ohio, North Carolina, Utah, Wyoming, and Idaho, the last three of which were added in 2024 through the US$14B acquisition of three Dominion gas utilities. Renewable Power is the smallest segment, anchored by European offshore wind. Roughly 98% of group EBITDA is take-or-pay, cost-of-service, or otherwise structurally insulated from commodity price. That number is not an accident. It is the entire point.

What FY 2025 actually said

Adjusted EBITDA of approximately C$19.7B, a fresh record, with the year's growth coming roughly two-thirds from the first full year of the Dominion utilities and one-third from organic in-service capital across Liquids and Gas Transmission. Distributable cash flow per share landed near C$5.65, supporting the December 2025 dividend raise to a 2026 annualized C$3.89, which extends the streak to roughly thirty-one consecutive years. The capital backlog cleared C$28B of secured projects, weighted toward U.S. gas transmission expansions tied to LNG demand, Gulf Coast offshore tie-backs, and rate-base utility investment.

The print itself is rarely the news on a name like this. The news is in the composition. In 2025 the composition kept tilting toward U.S. gas. That matters because gas is where contracted demand is genuinely growing, between LNG export terminals on the Gulf and data-centre power load in the Mid-Atlantic and Midwest, while the Liquids segment is in a maturing demand environment. The story Enbridge wants to tell over the next five years is not really about pipelines for crude. It is about being the boring infrastructure layer underneath the U.S. gas-and-power decade.

Three things we are reading carefully

1. The Mainline tolling structure

The Mainline is the largest single asset in Canadian energy infrastructure, and the way shippers pay to use it is being renegotiated on a multi-year cadence. The current incentive tolling settlement, approved by the Canada Energy Regulator, runs through the late 2020s and replaces the long-running competitive tolling proposal the company had earlier sought. It preserves cost-of-service economics with upside for utilization, which is the right risk profile for a regulated corridor. The deeper question is what the next settlement looks like in a world where Trans Mountain Expansion now offers shippers a real, if smaller, second egress to the Pacific. We are watching apportionment, throughput, and shipper commentary every quarter; we are not assuming that the Mainline gets to set its own terms forever.

2. The Dominion gas-utility integration

In 2024 Enbridge closed on three U.S. gas distribution utilities purchased from Dominion Energy: East Ohio Gas, Public Service of North Carolina, and Questar in the Mountain West. The total deal was roughly US$14B, financed with a mix of equity and debt and immediately accretive to distributable cash flow. The strategic logic was straightforward: take an over-indexed Liquids pipeline mix and rebalance it toward regulated gas distribution earnings in growing U.S. states. The execution question is rate-base growth, regulatory relationships in three new state utility commissions, and unit-cost capture against the underwriting case. Year one came in at or modestly ahead of plan. We want two to three more rate cases under Enbridge ownership before we are confident we know what the steady-state ROIC on this transaction is.

3. Capital discipline on the energy-transition pivot

Enbridge has been deliberately measured on energy transition. Renewables are roughly three percent of EBITDA. Offshore wind in the North Sea and France contributes most of it; low-carbon hydrogen and carbon-capture pilots remain pilots. The discipline is the right discipline. Where we want to keep reading carefully is at the margin: every dollar deployed into renewables is a dollar not deployed into a U.S. gas pipeline expansion or a utility rate base, and the historical ROIC on the latter is well-understood while the former is still being priced. So far Ebel's team has chosen what we would call patient, partnered exposure rather than headline-grabbing capital deployment. We expect that to continue. We will be uncomfortable if it stops.

What we are watching into FY 2026

• Mainline apportionment. Sustained zero-to-low apportionment in a post-TMX world is the cleanest signal that the corridor is still demand-saturated.
• Dominion utilities rate-case outcomes in Ohio, North Carolina, and the Mountain West. Allowed ROE and rate-base growth are the plumbing of the thesis.
• U.S. gas transmission backlog conversion. Specifically the LNG-tied projects on the Gulf and the data-centre-tied expansions in the Mid-Atlantic.
• Net debt trajectory. Debt-to-EBITDA glide back inside management's range as the Dominion EBITDA fully consolidates is a precondition for sustained dividend growth.
• Capital-allocation discipline on transition. Renewable and low-carbon spend remaining a single-digit share of total capital, and partner-funded where possible.

Enbridge is not a bet on the price of oil. It is a bet on the things that move oil staying necessary, and on the things that own them staying boring. The boring is the asset.