Enbridge (ENB 1.57%) has quietly done a magnificent job of growing value for its shareholders over the long term. The Canadian energy infrastructure giant has increased its dividend annually for nearly 30 straight years. The company's high-yielding, steadily rising dividend has helped give it the fuel to produce an 11% average annual total shareholder return over the last 20 years.
The pipeline and utility company should have plenty of power to continue growing its dividend and shareholder value in the future. One emerging catalyst that could become a powerful long-term growth driver is artificial intelligence (AI). Here's a look at all the ways it could cash in on AI's insatiable need for energy.
NYSE: ENB
Key Data Points
AI-powered energy growth
AI and the data centers that house these applications and the computing power needed to run them will require a lot of energy in the coming years. Enbridge's CEO Greg Ebel highlighted this opportunity on the first-quarter earnings conference call. He stated: "The build out of data centers and generative AI is forecasted to require a material increase in power generation. This new power generation will be fed by a combination of natural gas and renewables, and supports our view that the world needs all forms of energy."
He noted that there are a lot of predictions about how much more power AI and data centers will need in the coming years. He said that while it's early to know how big it will be, "it's going to be positive from a power and gas demand perspective."
Ebel threw out some numbers, noting that some forecast power demand growth of 0.5% to 1.5% annually through 2030. Meanwhile, he's seen numbers for incremental gas demand "from 5 billion cubic feet (bcf) up to 16 bcf." These are big numbers in the context of the North American power sector. Growing energy demand should drive the need for more infrastructure to produce, transport, and store this energy in the coming years.
Many ways to capitalize on the opportunity
Ebel believes "Enbridge is well-positioned to serve this increased demand through the vast footprint of our assets connected to key supply basins." Its unrivaled platform spans natural gas transmission pipelines, natural gas distribution utilities, and renewable power operations. That diversified platform is "a competitive advantage that we have to offer in jurisdictions throughout North America." While he expects it will take time for data center power demand to ramp up, Enbridge is "ready to serve our customers and their energy needs through our integrated infrastructure network."
Several other Enbridge management team members chimed in on the call, highlighting how Enbridge could capture AI-related opportunities. Cynthia Hansen, president of gas transmission and midstream, commented, "We are excited by this opportunity, obviously, to help build out the supporting infrastructure for the natural gas generation to support AI data centers."
Hansen noted that Enbridge has strategically located gas transmission assets, adding, "We're within 50 miles of 45% of all the natural gas power generation in North America, so we are going to be in a position to build that out." She noted that the company could see some incremental expansion opportunities in the near term and that the longer-term outlook "seems to be really positive."
Enbridge also expects AI-powered demand to benefit its gas utilities, especially those it's acquiring in the U.S. from Dominion. As companies build data centers in the regions Enbridge serves, its utilities should see incremental gas demand growth, since data centers require reliable and affordable electricity, which gas provides. That should drive volume growth in its distribution networks.
Meanwhile, Matthew Akman, president of Enbridge's power segment, commented on AI's impact on renewables. He noted that "demand for renewables is already very strong." However, he believes that "the data center stuff just enhances that. Large tech companies are really our kind of customers, and I think we're their kind of developer."
Enbridge is a reliable and large-scale developer, which is what large tech companies require to ensure they have the power to meet their needs. "So, it just adds another tailwind for our renewable business," Akman said.
Finally, CEO Ebel noted on the call that "we didn't mention storage." Enbridge has a massive and growing gas storage business, allowing it to supply utilities with reliable gas volumes. Because of that, this business should also benefit from AI's need for more energy.
AI-powered demand
Enbridge has delivered magnificent total returns over the last couple of decades, fueled by the continued growth in energy demand. The company expects energy demand to keep rising, partly driven by power-hungry AI data centers. Enbridge's integrated platform puts it in a strong position to benefit from AI's need for energy, which could drive growth across several of its businesses. Because of that, Enbridge looks like a great stock to buy to ride the AI growth wave.
