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Spectra Energy 2011 Annual Report

2011 Annual Report


Spectra Energy's Businesses and Assets

U.S. Transmission & Storage
  Algonquin Gas Transmission
  Big Sandy Pipeline
  Bobcat Gas Storage
  East Tennessee Natural Gas
  Gulfstream Natural Gas System
    (in partnership with Williams)
  Maritimes & Northeast Pipeline
    (in partnership with Emera
    and ExxonMobil)
  Market Hub Partners
  Ozark Gas Transmission
  Saltville Gas Storage
  Southeast Supply Header
    (in partnership with CenterPoint Energy)
  Steckman Ridge
    (in partnership with NJR)
  Texas Eastern Transmission



Western Canada Transmission & Processing
  BC Pipeline
  BC Field Services
  Natural Gas Liquids (Empress facility)

  Union Gas
    Dawn Hub Storage Facility

Field Services
  DCP Midstream
    (in partnership with
    ConocoPhillips/Phillips 66)

Spectra Energy Profile

Spectra Energy Corp (NYSE: SE), a Fortune 500 company, is one of North America's premier natural gas infrastructure companies serving three key links in the natural gas value chain: gathering and processing, transmission and storage, and distribution. For more than a century, Spectra Energy and its predecessor companies have developed critically important pipelines and related infrastructure connecting natural gas supply sources to premium markets. Based in Houston, Texas, the company's operations in the United States and Canada include more than 19,000 miles of transmission pipeline and approximately 305 billion cubic feet of storage, as well as natural gas gathering and processing, natural gas liquids operations and local distribution assets. The company also has a 50 percent ownership in DCP Midstream, one of the largest natural gas gatherers and processors in the United States. Spectra Energy is a member of the Dow Jones Sustainability World and North America Indexes, and the U.S. S&P 500® Carbon Disclosure Project's Carbon Disclosure Leadership Index. For more information, visit www.spectraenergy.com.

Natural gas fuels North America's economy – creating the jobs, revenue and industrial growth needed to move us toward renewed prosperity.

At Spectra Energy, we're doing our part: In 2011, we invested more than $1 billion in expansion growth. Between now and the end of the decade, we plan to invest up to $15 billion in needed natural gas pipeline and related infrastructure. That ongoing investment creates tens of thousands of direct jobs – and even more indirect jobs in supporting sectors.

The product we deliver stimulates the economy in other ways as well. Vast new shale supplies have pushed natural gas prices down, to half of what they were just five years ago. That means lower feedstock costs for petrochemicals... lower energy costs for industrials, manufacturing and electric power generators significant savings for families and a healthy kick-start to North American competitiveness. Good news on all fronts – delivered by natural gas.

Spectra Energy delivers the bottom-line results that investors seek – attractive, sustainable earnings and dividend growth. Over the past three years, we've provided investors with a 125 percent total shareholder return. We did that by employing the power of our diverse business and asset portfolio, investing more than $1 billion a year in growing our business, and more than $700 million a year to maintain our pipelines and other assets. Importantly, we fund a significant portion of that growth through internally-generated cash.

Another advantage investors realize comes from DCP Midstream, our high-performing partnership with ConocoPhillips (soon to be Phillips 66). DCP Midstream funds its own growth, and last year paid Spectra Energy almost $400 million in distributions. We also utilize two master limited partnerships, Spectra Energy Partners and DCP Midstream Partners, which expand our financial flexibility even more.

As we've grown earnings, we've grown our dividend. Last year we increased our quarterly cash dividend by almost 8 percent, to 28 cents per share. And we plan to continue that level of dividend growth, which will result in significant and sustained total shareholder value.

Spectra Energy is committed to leading our sector in the all-important measure of customer responsiveness. In 2011, our metrics around compression reliability and processing exceeded 99 percent, we achieved an average contract renewal rate of 98 percent on our Texas Eastern and Algonquin systems, and we set record volume peaks and overall throughput deliveries across our system.

We're committed to the long-term success of our customers and continue to expand our assets to serve their evolving needs. In 2011, we brought six new projects into service – projects like TEMAX/TIME III, which delivers supplies of Rocky Mountain gas to the Northeast U.S.; the Northeastern Tennessee project, which provides firm transportation services to a new gas-fired power generation plant; and the Bissette Pipeline, which expands transportation capacity from British Columbia's Montney shale basin.

We strive every day to be a good steward and neighbor, and we give back to the communities where we live and work by operating safely and responsibly and providing wages, taxes, philanthropic giving and active volunteerism. Our spirit of community engagement was evident during Union Gas' centennial year, which we celebrated by making 100 grants of $1,000 each to support charitable projects focused on the environment, community safety and education in Ontario.

There is no margin for error when it comes to the safety of those we serve – and those who work on our behalf. Appropriately, Spectra Energy has set the bar high, with a goal of achieving a zero injury and work-related illness culture. Sadly, we fell short of that goal in 2011 when three of our contractor colleagues lost their lives. We honor their memory by recommitting ourselves to ensuring that every member of the Spectra Energy team returns home safely at the end of each day.

We did make progress in 2011, reducing our employee recordable injury frequency rate by 14 percent.

We champion pipeline safety at the national level as well. In the U.S., we were active in our support of the recently passed Pipeline Safety, Regulatory Certainty and Job Creation Act, and in Canada we have been a key proponent of the important national 'one-call' system aimed at reducing the risk of third-party excavation damage to pipelines – the leading cause of natural gas pipeline incidents.

Homegrown energy is good for us all, and Spectra Energy is proud to gather, process, store, transport and deliver North American natural gas.

The U.S. and Canada hold the world's wealth of natural gas – enough to serve our energy needs for generations. Bountiful shale reserves in both countries point to a long-term and secure supply outlook for natural gas. And Spectra Energy's assets are uniquely positioned in the midst of abundant producing basins like the Marcellus, Utica, Fayetteville, Montney, Horn River, Denver-Julesburg, the Permian and Eagle Ford.

The shale gas revolution is profoundly reshaping market dynamics. Just a few short years ago, North America readied itself to import liquefied natural gas, or LNG. Today, the tide has turned, and we have more than a century's worth of domestic natural gas supply. That's good news from an investment standpoint, and from the perspective of energy independence and economic competitiveness. Greater reliance on domestic natural gas reduces our dependence on foreign oil, advances national security and preserves market and price stability.

Natural gas is the cleanest foundational fuel available today. It burns cleanly, emitting half of the carbon dioxide of coal, 30 percent less than fuel oil – and essentially no mercury, nitrogen oxide or particulates. Not only does this mean cleaner air for our families to breath, it also makes natural gas the natural choice for electric power generation. Electric utility operators seeking to convert older coal- and oil-fired units to cleaner-burning natural gas have a ready and able partner in Spectra Energy. Our vast network of assets is ideally positioned to serve that growing need, and in 2011 we attached 1,500 additional megawatts through new connections like our Northeastern Tennessee and Hot Spring Lateral projects.

An added benefit is the protection of valued land and habitat resources, since natural gas-fired power plants have a much smaller physical footprint than coal, hydro, wind or solar facilities.

Natural gas is an essential partner to the development of renewable energy sources as well, providing clean, reliable power when the sun doesn't shine and the wind doesn't blow. A cleaner energy future is within our reach – today.