Morningstar DBRS Confirms Credit Ratings on Enbridge Inc. and Enbridge Energy Partners, L.P. at A (low) With Stable Trends
EnergyDBRS Limited (Morningstar DBRS) confirmed its Issuer Rating on Enbridge Inc. (ENB or the Company) and the Senior Unsecured Notes credit rating at A (low) with Stable trends. Morningstar DBRS also confirmed Enbridge Energy Partners, L.P.'s (EEP) Senior Unsecured Notes credit rating at A (low) with a Stable trend based on ENB's guarantee; EEP in turn guarantees ENB's Senior Unsecured Notes. ENB also guarantees the Senior Unsecured Notes of Spectra Energy Partners, L.P., which in turn guarantees ENB's Senior Unsecured Notes. The full list of credit rating actions is available at the end of this press release.
KEY CREDIT RATING CONSIDERATIONS
The credit ratings are underpinned by (1) ENB's strong business risk profile, supported by its pure regulated pipeline and utility businesses backed by the Company's portfolio of secured growth projects (as at March 31, 2025, approximately $23 billion remained to be funded on its $28 billion of projects through 2028), all of which are supported by regulatory and/or long-term contractual arrangements; (2) relatively supportive financial risk profile with cash flow-to-debt of around 14%; and (3) significant liquidity, with approximately $12.6 billion of consolidated availability as at December 31, 2024, from various credit facilities, in support of an active debt issuance program providing funding support for both new project financing and debt refinancing.
The Stable trends incorporate Morningstar DBRS' expectation that any incremental investments in new projects would be consistent with maintaining a strong overall business risk profile and key credit metrics near current levels.
The operating environment for ENB's liquid pipelines and gas transmission business remains constructive. Despite the start-up of the Trans Mountain Pipeline Expansion Project, the Enbridge/Lakehead System (the Mainline; 25% of ENB's segment EBITDA in Q1 2025) was effectively fully utilized in 2024 and Q1 2025, and Morningstar DBRS believes that the lower tolls under the Mainline Toll Settlement (MTS) have improved the Mainline's competitiveness. ENB intends to spend up to $2 billion on projects to improve system reliability and add approximately 150,000 barrels per day of capacity, recovering it through the MTS. Morningstar DBRS expects the Company's natural gas transmission business (24% of ENB's segment EBITDA in Q1 2025) to benefit from projected growth in liquefied natural gas driven by long-term growth in exports and industrial demand. ENB successfully completed its acquisition of the U.S. regulated gas utilities (12% of ENB's segment EBITDA in Q1 2025) over the last year, which was the catalyst for the credit rating upgrade in June 2024. The integration of the acquired utilities is proceeding to plan and all of them are currently in the middle of their rate review applications, with decisions expected in H2 2025 and F2026.
CREDIT RATING DRIVERS
Morningstar DBRS may take a positive credit rating action if there were a successful resolution of the Line 5 dispute and the Company maintained its consolidated cash flow-to-debt ratio consistently at 17.5%. Although unlikely, Morningstar DBRS could downgrade the credit ratings if the Company's consolidated cash flow-to-debt ratio stays consistently below 12.5%.
EARNINGS OUTLOOK
Morningstar DBRS expects higher Adjusted EBITDA in 2025 compared with 2024, in line with management guidance of 9% growth, driven by $7 billion in growth capital spend as well as higher utilization in the Liquids Pipelines segment and a full year of contribution from the recently acquired U.S. gas utilities.
FINANCIAL OUTLOOK
Morningstar DBRS expects higher cash flows in 2025 and 2026 compared with 2024, based on organic capital investment supported by the Company's growing secured backlog of $28 billion in capital projects with $5 billion spent as at March 31, 2025. ENB's management guidance outlined $7 billion in growth capital spend for 2025.
CREDIT RATING RATIONALE
Comprehensive Business Risk Assessment (CBRA): A
ENB's CBRA of "A" reflects the Company's strong contractual and regulatory position, adequate access to energy supply, strong end-user demand and a regionally diversified asset portfolio. The business risk score also factors in a positive 1.5-notch adjustment for the benefit from the ownership of highly regulated gas distribution utilities as well as a negative 0.5-notch adjustment for the Line 5 litigation uncertainty.
Comprehensive Financial Risk Assessment (CFRA): AL
ENB's CFRA of AL reflects adequate financial metrics for the current credit rating category. Morningstar DBRS expects the Company's debt levels to increase modestly over the near and medium term to support ENB's secured capital program and expects the Company to maintain its cash flow-to-debt of around 14%.
Intrinsic Assessment (IA): A
The IA midpoint of "A" is within the Intrinsic Assessment Range and is based on the CBRA and CFRA. It also takes into consideration the current credit rating trend and peer comparisons, among other factors.
Additional Considerations: Parent-Subsidiary Relationships
ENB's credit rating includes a negative 0.5-notch adjustment for structural subordination. Morningstar DBRS notes that ENB's consolidated capital structure is composed of financial instruments issued (1) directly by ENB, (2) by consolidated subsidiaries subject to cross guarantees, and (3) by the Company's consolidated subsidiaries not subject to cross guarantees. Morningstar DBRS estimates that approximately 36% of ENB's consolidated debt resides at subsidiaries not subject to cross guarantees and is hence structurally superior. However, the impact of structural subordination is partially mitigated by our assessment that approximately 50% of ENB's consolidated EBITDA is generated at ENB and consolidated subsidiaries subject to Cross Guarantees. Furthermore, most of the structurally superior debt is at regulated entities with strong business risk profiles and that generate stable cash flows.
Further details on the Issuer's Intrinsic Assessment can be found at https://dbrs.morningstar.com/research/457473.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196.
Notes:
All figures are in Canadian dollars unless otherwise noted.
Morningstar DBRS applied the following principal methodology:
Global Methodology for Rating Companies in the Oil and Gas, Oilfield Services, Pipeline and Midstream Energy Industries (May 06, 2025), https://dbrs.morningstar.com/research/453396.
Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.
The following methodology has also been applied:
Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196
The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.
A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.
The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.
Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.
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