Enbridge and TransCanada’s Business Segments

With the completion of the merger with Spectra Energy in February 2017, Enbridge’s business mix has become more diversified.

Rekha Khandelwal, CFA - Author

Sep. 27 2017, Updated 2:48 p.m. ET

uploads///trps enbs earnings by segment

Enbridge’s businesses

Enbridge (ENB) operates through five segments—Gas Pipelines and Processing, Gas Distribution, Green Power and Transmission, Liquids Pipelines, and Energy Services. Before the merger with Spectra Energy, Enbridge’s business mix was concentrated. The Liquids Pipelines segment contributed nearly 80% to Enbridge’s earnings. With the completion of the merger with Spectra Energy in February 2017, Enbridge’s business mix has become more diversified. Now, the Liquids Pipelines segment contributes nearly 60% of Enbridge’s earnings.

As the above graph shows, Gas Pipelines and Processing is Enbridge’s second-largest segment. It contributes ~30% to Enbridge’s earnings. The Energy Services segment reported an EBIT (earnings before interest and tax) of -18 million Canadian dollars for 2Q17.

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TransCanada segments

TransCanada operates through five segments—Canadian Natural Gas Pipelines, US Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines, and Energy. TransCanada’s Energy business includes power generation and natural gas storage. TransCanada sold its US northeast power business in 2Q17. The Energy segment’s earnings in the above chart include 492 million Canadian dollars in net gains on the sale of the US northeast power business. Excluding this, the Energy segment’s contribution to TransCanada’s earnings is nearly 20%.

Natural Gas Pipelines segment

The US Natural Gas Pipelines segment is the second-largest contributor to TransCanada’s earnings. The business is primarily regulated by the Federal Energy Regulatory Commission. The segment’s earnings increased by 113 million Canadian dollars for 2Q17 compared to 2Q16 primarily due to contributions from Columbia Pipeline Group acquired in 2016 and higher transportation revenues.

TransCanada’s Canadian natural gas business is regulated by Canada’s National Energy Board. The segment’s earnings fell 11% in 2Q17—compared to 2Q16.

TransCanada’s Mexico Natural Gas Pipelines segment’s earnings rose by 79 million Canadian dollars year-over-year in 2Q17, primarily driven by contributions from two new natural gas pipelines—Topolobampo and Mazatlán. The segment’s earnings rose 193% YoY (year-over-year) in 2Q17.

Liquids pipelines

TransCanada’s liquids pipeline infrastructure connects Alberta’s crude oil supplies to US refining markets in Illinois, Oklahoma, and Texas. It also connects US crude oil supplies from Cushing, Oklahoma, to refining markets in the Gulf Coast. The segment’s earnings grew 27% YoY in 2Q17 mainly due to higher volumes.


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