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Enbridge Inc. Reports Second Quarter 2017 Results – Part 3


Enbridge's forward-looking statements are subject to risks and uncertainties pertaining to the impact of the Merger Transaction, operating performance, regulatory parameters, dividend policy, project approval and support, renewals of rights of way, weather, economic and competitive conditions, public opinion, changes in tax laws and tax rates, changes in trade agreements, exchange rates, interest rates, commodity prices, political decisions and supply of and demand for commodities, including but not limited to those risks and uncertainties discussed in this news release and in the Company's other filings with Canadian and United States securities regulators. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent and Enbridge's future course of action depends on management's assessment of all information available at the relevant time. Except to the extent required by applicable law, Enbridge assumes no obligation to publicly update or revise any forward-looking statements made in this news release or otherwise, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to Enbridge or persons acting on the Company's behalf, are expressly qualified in their entirety by these cautionary statements.

ABOUT ENBRIDGE INC.

Enbridge Inc. is North America's premier energy infrastructure company with strategic business platforms that include an extensive network of crude oil, liquids and natural gas pipelines, regulated natural gas distribution utilities and renewable power generation. The Company safely delivers an average of 2.8 million barrels of crude oil each day through its Mainline and Express Pipeline, the majority of which accounts for approximately 65 percent of United States-bound Canadian crude oil exports, and moves approximately 20 percent of all natural gas consumed in the United States serving key supply basins and demand markets. The Company's regulated utilities serve approximately 3.5 million retail customers in Ontario, Quebec, New Brunswick and New York State. Enbridge also has a growing involvement in electricity infrastructure with interests in more than 2,500 megawatt hours of net renewable generating capacity in North America and an expanding offshore wind portfolio in Europe. The Company has ranked on the Global 100 Most Sustainable Corporations index for the past eight years; its common shares trade on the Toronto and New York stock exchanges under the symbol ENB. Life takes energy and Enbridge exists to fuel people's quality of life. For more information, visit www.enbridge.com. None of the information contained in, or connected to, Enbridge's website is incorporated in or otherwise part of this news release.

DIVIDEND DECLARATION

On August 2, 2017, the Enbridge Board of Directors declared the following quarterly dividends. All dividends are payable on September 1, 2017, to shareholders of record on August 15, 2017.

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---------------------------------------------------------------------------- Common Shares $0.61000 Preference Shares, Series A $0.34375 Preference Shares, Series B(1) $0.21340 Preference Shares, Series C(2) $0.18600 Preference Shares, Series D $0.25000 Preference Shares, Series F $0.25000 Preference Shares, Series H $0.25000 Preference Shares, Series J(3) US$0.30540 Preference Shares, Series L US$0.25000 Preference Shares, Series N $0.25000 Preference Shares, Series P $0.25000 Preference Shares, Series R $0.25000 Preference Shares, Series 1 US$0.25000 Preference Shares, Series 3 $0.25000 Preference Shares, Series 5 US$0.27500 Preference Shares, Series 7 $0.27500 Preference Shares, Series 9 $0.27500 Preference Shares, Series 11 $0.27500 Preference Shares, Series 13 $0.27500 Preference Shares, Series 15 $0.27500 Preference Shares, Series 17 $0.32188 ---------------------------------------------------------------------------- 1 The quarterly dividend amount of Series B was reset to $0.21340 from $0.25000 on June 1, 2017, due to reset on every fifth anniversary thereafter. 2 The quarterly dividend amount of Series C was set at $0.18600 on June 1, 2017, due to reset on a quarterly basis thereafter. 3 The quarterly dividend amount of Series J was reset to US$0.30540 from US$0.25000 on June 1, 2017, due to reset on every fifth anniversary thereafter.

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NON-GAAP MEASURES

This news release contains references to adjusted EBIT, adjusted earnings, adjusted earnings per common share, ACFFO and ACFFO per common share. Adjusted EBIT represents EBIT adjusted for unusual, non-recurring or non-operating factors on both a consolidated and segmented basis. Adjusted earnings represents earnings attributable to common shareholders adjusted for unusual, non-recurring or non-operating factors included in adjusted EBIT, as well as adjustments for unusual, non-recurring or non-operating factors in respect of interest expense, income taxes, noncontrolling interests and redeemable noncontrolling interests on a consolidated basis. These factors, referred to as adjusting items, are reconciled and discussed in the financial results sections for the affected business segments in the Company's MD&A.

ACFFO is defined as cash flow provided by operating activities before changes in operating assets and liabilities (including changes in environmental liabilities) less distributions to noncontrolling interests and redeemable noncontrolling interests, preference share dividends and maintenance capital expenditures, and further adjusted for unusual, non-recurring or non-operating factors.

Management believes the presentation of adjusted EBIT, adjusted earnings, adjusted earnings per common share, ACFFO and ACFFO per common share gives useful information to investors and shareholders as they provide increased transparency and insight into the performance of the Company. Management uses adjusted EBIT and adjusted earnings to set targets and to assess the performance of the Company. Management also uses ACFFO to assess the performance of the Company and to set its dividend payout target. Adjusted EBIT, adjusted EBIT for each segment, adjusted earnings, adjusted earnings per common share, ACFFO and ACFFO per common share are not measures that have standardized meaning prescribed by generally accepted accounting principles in the United States of America (U.S. GAAP) and are not U.S. GAAP measures. Therefore, these measures may not be comparable with similar measures presented by other issuers.

NON-GAAP RECONCILIATION - EBIT TO ADJUSTED EARNINGS

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Three months ended Six months ended June 30, June 30, ----------------- ----------------- 2017 2016 2017 2016 ---------------------------------------------------------------------------- (millions of Canadian dollars) Earnings before interest and income taxes 2,099 731 3,728 2,907 Adjusting items(1): Change in unrealized derivative fair value (gain)/loss(2) (461) 98 (877) (834) Assets and investment impairment loss - 187 - 187 Unrealized intercompany foreign exchange (gain)/loss 7 (5) 14 55 Hydrostatic testing - - - (12) Make-up rights adjustments(3) - 48 - 115 Northeastern Alberta wildfires pipelines and facilities restart costs - 21 - 21 Leak remediation costs, net of leak insurance recoveries 4 1 8 16 Warmer/(colder) than normal weather(4) - (9) - 8 Project development and transaction costs 50 3 203 3 Employee severance and restructuring costs 79 8 208 8 Other (65) 6 (56) (11) ---------------------------------------------------------------------------- Adjusted earnings before interest and income taxes 1,713 1,089 3,228 2,463 Interest expense (565) (369) (1,051) (781) Income taxes (293) (10) (491) (427) (Earnings)/loss attributable to noncontrolling interests and redeemable noncontrolling interests (241) 20 (465) (41) Preference share dividends (81) (71) (164) (144) Adjusting items in respect of: Interest expense (23) 6 (2) 24 Income taxes 99 (121) 153 120 Noncontrolling interests and redeemable noncontrolling interests 53 (88) 129 (95) ---------------------------------------------------------------------------- Adjusted earnings 662 456 1,337 1,119 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1 The above table summarizes adjusting items by nature. For a detailed listing of adjusting items by segment, refer to individual segment discussions in the Company's MD&A. 2 Changes in unrealized derivative fair value gains and losses are presented net of amounts realized on the settlement of derivative contracts during the applicable period. 3 Effective January 1, 2017, the Company no longer makes such an adjustment to its EBIT. For further details refer to Financial Results - Liquids Pipelines in the Company's MD&A. 4 Effective January 1, 2017, the Company no longer makes such an adjustment to its EBIT. For further details refer to Financial Results - Gas Distribution in the Company's MD&A.

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NON-GAAP RECONCILIATION - ADJUSTED EBIT TO ACFFO

To facilitate understanding of the relationship between adjusted EBIT and ACFFO, the following table provides a reconciliation of these two key non-GAAP measures.

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Three months ended Six months ended June 30, June 30, ----------------- ----------------- 2017 2016 2017 2016 ---------------------------------------------------------- ----------------- (millions of Canadian dollars) Adjusted earnings before interest and income taxes 1,713 1,089 3,228 2,463 Depreciation and amortization(1) 868 555 1,540 1,114 Maintenance capital expenditures(2) (374) (144) (556) (295) ---------------------------------------------------------------------------- 2,207 1,500 4,212 3,282 Interest expense(3) (631) (363) (1,110) (757) Current income taxes(3) (42) (34) (83) (81) Distributions to noncontrolling interests (195) (178) (386) (362) Distributions to redeemable noncontrolling interests (63) (53) (117) (95) Preference share dividends (81) (71) (164) (144) Cash distributions in excess of equity earnings(3) 68 43 55 21 Other non-cash adjustments 61 24 132 118 ---------------------------------------------------------------------------- Available cash flow from operations 1,324 868 2,539 1,982 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1 Depreciation and amortization: Liquids Pipelines 385 336 741 682 Gas Pipelines and Processing 250 75 386 149 Gas Distribution 157 84 269 164 Green Power and Transmission 50 47 101 95 Energy Services 1 1 1 1 Eliminations and Other 25 12 42 23 ---------------------------------------------------------------------------- 868 555 1,540 1,114 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 2 Maintenance capital expenditures: Liquids Pipelines (54) (28) (105) (72) Gas Pipelines and Processing (153) (12) (192) (23) Gas Distribution (131) (84) (195) (166) Green Power and Transmission - (1) (2) (1) Eliminations and Other (36) (19) (62) (33) ---------------------------------------------------------------------------- (374) (144) (556) (295) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 3 These balances are presented net of adjusting items.

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NON-GAAP RECONCILIATION - ACFFO

The following table provides a reconciliation of cash provided by operating activities (a GAAP measure) to ACFFO.

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Three months ended Six months ended June 30, June 30, ----------------- ----------------- 2017 2016 2017 2016 ---------------------------------------------------------------------------- (millions of Canadian dollars, except per share amounts) Cash provided by operating activities 2,033 1,370 3,710 3,231 Adjusted for changes in operating assets and liabilities(1) (219) (87) (460) (209) ---------------------------------------------------------------------------- 1,814 1,283 3,250 3,022 Distributions to noncontrolling interests (195) (178) (386) (362) Distributions to redeemable noncontrolling interests (63) (53) (117) (95) Preference share dividends (81) (71) (164) (144) Maintenance capital expenditures(2) (374) (144) (556) (295) Significant adjusting items: Weather normalization - (7) - 6 Make-up rights adjustments 29 46 42 113 Project development and transaction costs 47 3 199 3 Realized inventory revaluation allowance(3) - (15) - (283) Employee severance and restructuring costs 79 8 206 8 Other items 68 (4) 65 9 ---------------------------------------------------------------------------- Available cash flow from operations 1,324 868 2,539 1,982 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Available cash flow from operations per common share 0.81 0.95 1.81 2.21 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1 Changes in operating assets and liabilities include changes in environmental liabilities, net of recoveries. 2 Maintenance capital expenditures are expenditures that are required for the ongoing support and maintenance of the existing pipeline system or that are necessary to maintain the service capability of the existing assets (including the replacement of components that are worn, obsolete or completing their useful lives). For the purpose of ACFFO, maintenance capital excludes expenditures that extend asset useful lives, increase capacities from existing levels or reduce costs to enhance revenues or provide enhancements to the service capability of the existing assets. 3 Realized inventory revaluation allowance relates to losses on sale of previously written down inventory for which there is an approximate offsetting realized derivative gain in ACFFO.

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