COMPANY UPDATE | COMMENT

125 WEEKS 19SEP08 - 02FEB11

150.00
Rel. S&P/TSX COMPOSITE INDEX HI-20FEB09 154.59
LO/HI DIFF 54.59%
FEBRUARY 4, 2011
135.00
120.00
CLOSE 130.72 Enbridge Inc. (TSX: ENB; NYSE: ENB)
105.00
2008 2009 2010
SO N D J F M A M J J A S O N D J F M A M J J A S O N D J F
LO-19SEP08 100.00
Q4 Earnings Mildly Short of Expectations; Longer-Term
HI-04FEB11 59.03

55.00
LO/HI DIFF 78.34%
Outlook Intact
50.00

45.00 CLOSE 58.51

40.00 Outperform
35.00
LO-17OCT08 33.10
Average Risk
12000
Price: 57.68 Price Target: 62.00
8000 PEAK VOL. 15017.6
VOLUME 1782.0 Implied All-In Return: 11%
4000
Shares O/S (MM): 383.9 Market Cap (MM): 22,143
Dividend: 1.96 Yield: 3.4%
Float (MM): 347.0
RBC Dominion Securities Inc. Debt to Cap: 64%
Strategic Ownership: Noverco - 9.5%
Robert Kwan, CFA (Analyst)
(604) 257-7611; robert.kwan@rbccm.com
Event
Danny Hung, CA (Associate)
(604) 257-7064; danny.hung@rbccm.com Enbridge reported Q4 results.

Nelson Ng, CFA (Analyst) Investment Opinion

(604) 257-7617; nelson.ng@rbccm.com
• Q4/10 Results Mildly Short of Expectations. Normalized Q4/10 EPS was
$0.64 compared to our estimate of $0.66 and $0.64 in Q4/09. During the
FY Dec 2009A 2010A 2011E 2012E
quarter, weaker-than-expected results from Feeder & Other in the Liquids
EPS (Op) - Basic 2.35 2.65 2.82 3.07
Prev.
Pipelines segment (a number of small items) and Enbridge Gas Distribution
2.67 2.86
Div. Yield 2.6 2.9 3.4 3.7
(lower incentive earnings) were the main drivers.
P/E 24.5x 21.8x 20.5x 18.8x • Longer-Term Outlook Intact. There was nothing new during the quarter that
EPS (Op) - FD 2.33 2.63 2.80 3.04 changes our view that the company is likely to grow EPS at an 8% CAGR
Prev. 2.65 2.84 through 2014 based on already secured projects with a potential to reach 10%
P/E 24.8x 21.9x 20.6x 19.0x annual growth through additional projects and/or acquisitions. We continue to
Annual Div. 1.48 1.70 1.96 2.15 see the potential for mid-decade growth from the core Liquids Pipelines
Payout Ratio- Basic 63% 64% 70% 70% segment with potential projects including a connection to the Fort Hills oil
Payout Ratio - FD 64% 65% 70% 71% sands project, connections for other oil sands projects, extensions of the
EPS (Op) - Basic Q1 Q2 Q3 Q4
existing system to new markets and an extension of Southern Lights to Fort
2009 0.74A 0.54A 0.42A 0.64A McMurray.
Prev. 0.65A • New Incentive Tolling Settlement (ITS) Could Be Announced in the
2010 0.86A 0.63A 0.51A 0.64A Coming Months. The company could announce a new ITS by mid-year for the
Prev. 0.66E
2011 0.86E 0.63E 0.57E 0.76E
Enbridge System. As negotiations are ongoing, specifics are not yet available.
Prev. 0.87E 0.64E 0.77E However, management noted on the call that the new ITS is likely to take a
different form from both the current cost-of-service based agreement (in 2010)
EPS (Op): Amounts are normalized and may not be consistent and the two previous 5-year incentive-based settlements (the last of which
with GAAP. expired at the end of 2009).
All values in CAD unless otherwise noted.
• Moderating 2011 Outlook. We have reduced our 2011 EPS estimate to $2.82
(from $2.86) to primarily reflect lower incentive earnings at EGD in addition to
a slower-than-forecast ramp in volumes for Enbridge Offshore Pipelines.
• Valuation. Our price target of $62.00/share (unchanged) is based on a forward
P/E of 20x. Reflecting visible and attractive near-term growth and the low
prevailing interest rate environment, we believe that a 20x forward P/E is
reasonable as it is within the 10-year historical range of 14x to 22x. We see
support for a multiple that is in the upper half of the historical range due to the
stock's strong total return profile, which we believe will be viewed as attractive
in the current market environment.

Priced as of prior trading day's market close, EST (unless otherwise noted).
For Required Non-U.S. Analyst and Conflicts Disclosures, see page 6.
February 4, 2011 Enbridge Inc.

Q4/10 Results Slightly Short of Expectations

Enbridge’s Q4/10 normalized EPS was $0.64 compared to our estimate of $0.66 and $0.64 in Q4/09. The modest variance was
primarily due to lower earnings from the Liquids Pipelines segment (lower-than-forecast Feeder Pipelines and Other results) and the
Gas Distribution segment (lower-than-expected Enbridge Gas Distribution results), partially offset by stronger earnings from the
Sponsored Investments segment (higher-than-forecast Alberta Clipper U.S. results) and lower Corporate Costs.

Exhibit 1: Normalized Results (In $MM except per share figures)

RBC CM
Q4/10 Q4/10E Q4/09 2010 2009 Comments for Q4 Results
Liquids Pipelines
Enbridge System $84 $81 $92 $327 $296
Enbridge Regional Oil Sands System 15 20 20 73 72 Unusual timing issues -- operating costs; booking of tax payments
Spearhead 6 5 6 29 17
Southern Lights 20 16 14 82 58 Appears to be slightly higher than the annual run-rate
Feeder Pipelines and Other (8) 4 9 1 12 Unusual items -- Olympic (op costs timing); Toledo (Line 6B related); high bus dev exp
$117 $126 $141 $512 $454

Gas Distribution
Enbridge Gas Distribution $46 $58 $53 $135 $129 Lower-than-expected incentive earnings
Other Gas Distribution 8 5 7 29 26
$54 $63 $60 $164 $155

Gas Pipelines, Processing & En. Serv.

Enbridge Offshore Pipelines $2 $5 $10 $23 $29 Lower volumes impacted by drilling moratorium
Alliance Pipeline US 6 7 7 25 27
Vector Pipeline 4 5 4 15 16
Aux Sable 10 8 4 37 26
Energy Services 6 1 0 20 29 Good quarter due to stronger margins for storage and transportation
Other 3 2 (10) 10 (12)
$31 $28 $15 $130 $114

Sponsored Investments
Enbridge Energy Partners $27 $25 $22 $117 $99
Alberta Clipper U.S. 10 7 6 42 8 We expected a modest reversal from the strong Q3/10 results
Enbridge Income Fund 11 11 11 45 45
$48 $43 $39 $204 $151

Corporate and Other ($12) ($16) ($16) ($31) ($20) Favourable tax recoveries

Normalized Earnings $238 $245 $239 $979 $855

Wtd. Avg. Shares (MM) 373 373 371 370 364
Normalized EPS (Basic) $0.64 $0.66 $0.64 $2.65 $2.35

Source: Company reports; RBC Capital Markets estimates

• Liquids Pipelines Short of Forecast, Mostly Due to Feeder Pipelines and Other. Earnings from the segment in Q4/10 were
$117 million compared to our estimate of $126 million. The weaker-than-forecast earnings were mostly attributable to the Feeder
Pipelines and Other segment due to a decrease in earnings from the Olympic Pipeline (timing of operating costs) and the Toledo
Pipeline (negative impact of Line 6B shutdown), as well as higher business development costs (greater level of activity). Lower-
than-forecast earnings in Q4/10 on the Regional Oil Sands System (due to timing issues such as higher operating costs and booking
of tax payments) were mostly offset by stronger earnings at Southern Lights (partially due to timing differences).
• Gas Distribution Segment Results Lower Due to EGD. Results from the Gas Distribution segment were negatively impacted by
lower-than-expected incentive earnings for Enbridge Gas Distribution.
• Gas Pipelines, Processing and Energy Services Segment Higher Than Expectations. The better-than-expected results were
mainly due to higher earnings from the Energy Services segment as a result of stronger margins for storage and transportation in
Q4/10, partially offset by the negative impact of the deep water drilling moratorium on Enbridge Offshore Pipelines.
• Sponsored Investments Benefitted from EEP and Clipper. The segment performed modestly better than forecast due to slightly
higher earnings from Enbridge Energy Partners and the U.S.-portion of Alberta Clipper.
• Corporate Costs Positively Impacted by Recoveries. Lower-than-forecast corporate costs in Q4/10 were partially due to positive
income tax recoveries in Q4/10. The Corporate segment included Noverco’s results, which were in line with our estimates in
Q4/10.

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February 4, 2011 Enbridge Inc.

Outlook and Project Highlights

• New ITS Could Be Announced in the Coming Months. The company could announce a new Incentive Tolling Settlement (ITS)
by mid-year for the Enbridge System. As negotiations continue, specifics are not yet available. However, management noted on the
call that the new ITS is likely to take a different form from both the current cost-of-service based agreement (in 2010) and the two
previous 5-year incentive-based settlements (the last of which expired at the end of 2009). There are a number of different
possibilities for a new agreement, although we think it is possible that the new ITS could consist of a combination of incentives
(e.g., batch quality) and a degree of volumetric risk in an attempt to drive increased availability of capacity in light of the downtime
experienced in 2010 (both spills and integrity work). We have assumed that earnings on the system will be re-based in 2011 (hence
the decline in our forecast for the Enbridge System), but in return it is possible that the company will move to indexed-based tolls,
which could add an organic growth profile by de-coupling tolls from rate base.
• Focus in 2011 Remains on Growth. Enbridge will continue to focus on growth in all of its business segments with key focus areas
including the expansion of oil sands infrastructure, developments in the Bakken and Three Forks formations, new renewable
energy projects and growth opportunities in its natural gas businesses.
• Ownership in Noverco Increased to 38.9% for $145 Million. Enbridge announced that it will acquire an additional 6.8% interest
in Noverco for $145 million. Following the closing date later this year pending regulatory approvals, Enbridge will own a 38.9%
stake in Noverco and will become one of the two sole shareholders.
• $90 Million Acquisition of 20 MW of Solar Projects. On February 1, 2011, Enbridge announced that it entered into agreements
to acquire two new solar projects with a total generation capacity of 20 MW in Ontario for roughly $90 million. The 5 MW Tilbury
solar project was completed in December 2010 while the 15 MW Amherstburg II project is expected to be completed in Q3/11. The
generation output of both facilities will be sold to the Ontario Power Authority under 20-year PPAs.
• $150 Million Expansion of U.S. Gulf Coast Facility. On January 31, 2011, Enbridge announced that it plans to expand the
condensate processing capacity of its facility in Venice, Louisiana, to accommodate additional natural gas production from the
recently sanctioned Olympus offshore oil and gas development. Natural gas production from Olympus will move to the facility at
Venice via Enbridge’s Mississippi Canyon offshore pipeline. The cost of this expansion, which will more than double the facility’s
capacity to approximately 12,000 bpd, is roughly $150 million. The expansion is expected to be in service in late 2013 with
economics consistent with recent agreements signed for the offshore segment (e.g., minimum base ROE in the 10% range that
protects against hurricanes and other disruptions plus upside based on volumes).
• Further Expansion of the Athabasca System. On December 16, 2010, Enbridge announced that it will expand its existing
Athabasca pipeline that transports oil sands production to Hardisty, AB to its maximum capacity of 570,000 bpd. The expansion
cost will be $200 million, which is in addition to the $185 million for the expansion announced in September 2010. Subject to
regulatory approval, the expansions are expected to be completed in early 2014.

Modest Revision to 2011 Estimate

We have reduced our 2011 EPS estimate to $2.82 (from $2.86) with some of the primary drivers as follows:
• Lower EGD Incentive Earnings. We have reduced our forecast incentive earnings for EGD to 150 bps (from 200 bps), which
appears to be more in line with the amounts earned in 2010.
• Reduced Earnings for Offshore. The segment has been hit harder than we had previously forecast by the drilling moratorium in
the Gulf. As such, we have reduced our 2011 estimates to reflect a slower improvement in volumes through 2011.
Although we have made some changes to the various segments, we remain comfortable with our overall 2012 EPS estimate of $3.07.
As shown in Exhibit 2, the major changes that we see through 2012 include:
• Rebasing of the Enbridge System: As previously noted, we expect Enbridge System’s earnings to be re-based downward in 2011
as part of a potential new ITS.
• Continued Growth on the Regional Oil Sands System Due to Higher Volumes: The Athabasca and Waupisoo systems will
benefit from increased volumes as production in the oil sands continues to build. We have reflected higher earnings from the
increased volumes in addition to the Christina Lake expansion, which is expected to come into service in Q3/11.
• Southern Lights Expected to Decrease: In 2010, Southern Lights benefited from non-cash AEDC that was calculated at a
higher/contract ROE compared to the expected return upon initial commissioning due to lower volumes shipped. In addition, the
segment also booked earnings related to a portion of the system that was “leased” to the Enbridge System (i.e., earnings were
booked in Southern Lights and an equal cost was booked in the Enbridge System), which is not expected to continue in 2011 and
beyond. As this was an intercorporate transaction, there was no impact on overall consolidated earnings.

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February 4, 2011 Enbridge Inc.

• Renewables Should Begin to Meaningfully Contribute to Earnings: Consistent with Enbridge’s current reporting, our estimate
for the green energy business is included in the “Other” line item under Gas Pipelines, Processing & Energy Services. We expect
earnings to grow in 2011 and 2012 due to the Sarnia Solar and Talbot Wind projects (in service in late 2010), Greenwich Wind
(Q3/11 in service), Amherstburg II solar (Q3/11 in service) and Cedar Point Wind (Q4/11 in service).
• Enbridge Energy Partners to Continue to Grow: We forecast a higher earnings contribution from EEP due to a full-year from
the Elk City acquisition, and additional liquids and gas infrastructure expansions, coupled with higher distribution incentive
earnings for Enbridge Inc. as the general partner.
• Corporate Should Benefit from Noverco Acquisition and Hedges: Although costs should rise modestly, we expect the overall
segment’s “expense” to decrease slightly due to a greater contribution from Noverco (incremental interest) in addition to FX and
interest rate hedges at rates that are more favourable in the coming years than in 2010.

Exhibit 2: Summary Financial Forecast (In $MM except per share figures)
Old
Liquids Pipelines 2009 2010 Q1/11E Q2/11E Q3/11E Q4/11E 2011E 2012E 2011E 2012E
Enbridge System $296 $327 $82 $76 $79 $80 $317 $323 $317 $323
Enbridge Regional Oil Sands System 72 73 19 22 22 22 84 101 84 101
Spearhead 17 29 5 5 5 5 20 20 20 20
Southern Lights 58 82 18 18 18 18 73 73 73 73
Feeder Pipelines and Other 12 1 3 3 3 3 12 20 15 22
$454 $512 $128 $124 $127 $127 $505 $537 $508 $540

Gas Distribution
Enbridge Gas Distributio n $129 $135 $70 $23 $0 $46 $139 $150 $148 $156
Other Gas Distribution 26 29 13 9 4 6 32 36 28 30
$155 $164 $83 $32 $4 $52 $170 $186 $176 $186

Gas Pipelines, Processing & En. Serv.

Enbridge Offshore Pipelines $29 $23 $4 $5 $8 $9 $26 $32 $33 $35
Alliance Pipeline US 27 25 6 6 6 6 25 24 25 24
Vector Pipeline 16 15 4 4 4 4 16 16 16 16
Aux Sable 26 37 10 10 10 10 40 35 40 35
Energy Services 29 20 8 3 2 7 20 20 15 15
Other (12) 10 6 4 7 17 34 69 34 64
$114 $130 $38 $32 $37 $53 $161 $196 $163 $189

Sponsored Investments
Enbridge Energy Partners $99 $117 $39 $39 $39 $39 $156 $185 $158 $182
Alberta Clipper U.S. 8 42 11 11 11 11 45 47 45 47
Enbridge Income Fund 45 45 12 12 12 12 47 47 47 47
$151 $204 $62 $62 $62 $62 $249 $280 $251 $277

Corporate and Other ($20) ($31) $10 ($13) ($14) ($5) ($22) ($18) ($23) ($18)

Normalized Earnings $855 $979 $321 $237 $216 $290 $1,063 $1,181 $1,075 $1,174

Wtd. Avg. Shares (MM) 364 370 375 377 379 381 377 384 376 382
Normalized EPS (Ba sic) $2.35 $2.65 $0.86 $0.63 $0.57 $0.76 $2.82 $3.07 $2.86 $3.07

Dividend Per Share $1.48 $1.70 $1.96 $2.15 $1.96 $2.15

Payout Ratio 63% 64% 70% 70% 69% 70%

Source: Company reports; RBC Capital Markets estimates

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February 4, 2011 Enbridge Inc.

Valuation
Our price target of $62.00/share is based on a forward P/E of 20x. Reflecting visible and attractive near-term growth and the low
prevailing interest rate environment, we believe that a 20x forward P/E is reasonable as it is within the 10-year historical range of 14x
to 22x. We see support for a multiple that is in the upper half of the historical range due to the stock's strong total return profile, which
we believe will be viewed as attractive in the current market environment.
Price Target Impediment
Our price target is based on the assumption that Enbridge can complete the list of projects that it is pursuing on attractive economic
terms and that the company will continue to announce new projects that will help drive future annual EPS growth in the 10% range.
Our price target further assumes that the company's risk profile does not materially change.
Company Description
Enbridge is involved in energy transportation and distribution in North America and internationally. The company owns and operates
the world's longest crude oil and liquids transportation system, which primarily transports crude oil from the Western Canada
Sedimentary Basin to markets in eastern Canada, the U.S. Midwest and Mid-Continent. In addition, Enbridge owns and operates
Canada's largest natural gas distribution company. The company also has interests in two sponsored investments: Enbridge Energy
Partners (26% interest) and Enbridge Income Fund (72% interest).

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February 4, 2011 Enbridge Inc.

Required Disclosures
Non-U.S. Analyst Disclosure
Danny Hung and Nelson Ng (i) are not registered/qualified as research analysts with the NYSE and/or FINRA and (ii) may not be
associated persons of the RBC Capital Markets, LLC and therefore may not be subject to FINRA Rule 2711 and NYSE Rule 472
restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Conflicts Disclosures
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including total
revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated by
investment banking activities of the member companies of RBC Capital Markets and its affiliates.

A member company of RBC Capital Markets or one of its affiliates received compensation for investment banking services from
Enbridge Inc. in the past 12 months.

RBC Dominion Securities Inc. makes a market in the securities of Enbridge Inc. and may act as principal with regard to sales or
purchases of this security.

Royal Bank of Canada, together with its affiliates, beneficially owns 1 percent or more of a class of common equity securities of
Enbridge Inc..

A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from Enbridge Inc. during the past 12 months. During this time, a member company of RBC Capital
Markets or one of its affiliates provided non-securities services to Enbridge Inc..

RBC Capital Markets is currently providing Enbridge Inc. with non-securities services.

RBC Capital Markets has provided Enbridge Inc. with investment banking services in the past 12 months.

RBC Capital Markets has provided Enbridge Inc. with non-securities services in the past 12 months.

The author is employed by RBC Dominion Securities Inc., a securities broker-dealer with principal offices located in Toronto, Canada.

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An analyst's 'sector' is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned to
a particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to the analyst's
sector average.
Ratings
Top Pick (TP): Represents best in Outperform category; analyst's best ideas; expected to significantly outperform the sector over 12
months; provides best risk-reward ratio; approximately 10% of analyst's recommendations.
Outperform (O): Expected to materially outperform sector average over 12 months.
Sector Perform (SP): Returns expected to be in line with sector average over 12 months.
Underperform (U): Returns expected to be materially below sector average over 12 months.
Risk Qualifiers (any of the following criteria may be present):
Average Risk (Avg): Volatility and risk expected to be comparable to sector; average revenue and earnings predictability; no
significant cash flow/financing concerns over coming 12-24 months; fairly liquid.
Above Average Risk (AA): Volatility and risk expected to be above sector; below average revenue and earnings predictability; may
not be suitable for a significant class of individual equity investors; may have negative cash flow; low market cap or float.
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Sector Perform and Underperform most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same
because our ratings are determined on a relative basis (as described above).

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February 4, 2011 Enbridge Inc.

Distribution of Ratings
RBC Capital Markets, Equity Research
Investment Banking
Serv./Past 12 Mos.
Rating Count Percent Count Percent

BUY[TP/O] 693 50.70 187 26.98

HOLD[SP] 612 44.70 134 21.90
SELL[U] 63 4.60 8 12.70

Rating and Price Target History for: Enbridge Inc. as of 02-02-2011 (in CAD)

04/01/08 10/17/08 02/17/09 07/30/09 10/07/09 12/03/09 01/05/10 07/29/10 10/06/10

OP:50 OP:44 OP:46 OP:47 OP:49 OP:50 OP:54 OP:57 OP:62

64

56

48

40

32

24
Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1
2008 2009 2010 2011

Legend:
TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperform; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage; NR: Not Rated; NA: Not Available;
RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date a security was removed from a recommended list.

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February 4, 2011 Enbridge Inc.
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