STOCK OPTION AND STOCK UNIT PLANS

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

We maintain four long-term incentive compensation plans: the ISO Plan, the Performance Stock Options (PSO) Plan, the PSU Plan and the RSU Plan. In 2019, Enbridge adopted a new Long Term Incentive Plan with an effective date of February 13, 2019. The 2019 plan replaced several of Enbridge's prior incentive award plans and no additional awards were made or will be made under the prior plans as of the effective date. A reserve of 50 million was approved and established for the 2019 ISO Plan. Awards of PSUs and RUSs are notional units as if a unit was one Enbridge common share and are payable in cash.

Prior to the Merger Transaction, Spectra Energy had a long-term incentive plan providing for the granting of stock options, restricted and unrestricted stock awards and units, and other equity-based awards. Upon closing of the Merger Transaction, Enbridge replaced existing Spectra Energy share-based payment awards with awards that will be settled in shares of Enbridge. Spectra Energy's cash-settled phantom awards were included in the fair value of the net assets acquired (Note 8).

Total stock-based compensation expense recorded for the years ended December 31, 2019, 2018 and 2017 was $117 million, $106 million and $165 million, respectively. Disclosure of activity and assumptions for material stock-based compensation plans are included below.

INCENTIVE STOCK OPTIONS

Key employees are granted ISOs to purchase common shares at the market price on the grant date. ISOs vest in equal annual installments over a four-year period and expire 10 years after the issue date.



December 31, 2019	Number		Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
(options in thousands; intrinsic value in millions of Canadian dollars)
Options outstanding at beginning of year	34,387		43.47
Options granted	6,777		48.32
Options exercised¹	(4,519	)	34.19
Options cancelled or expired	(1,598	)	50.62
Options outstanding at end of year	35,047		47.73	6.2	157
Options vested at end of year²	20,581		47.67	4.7	92


1	The total intrinsic value of ISOs exercised during the years ended December 31, 2019, 2018 and 2017 was $58 million, $42 million and $62 million, respectively, and cash received on exercise was $1 million, $15 million and $17 million, respectively.


2	The total fair value of ISOs vested during the years ended December 31, 2019, 2018 and 2017 was $32 million, $36 million and $44 million, respectively.

Weighted average assumptions used to determine the fair value of ISOs granted using the Black-Scholes-Merton option pricing model are as follows:



Year ended December 31,	2019		2018		2017
Fair value per option (Canadian dollars)¹	4.37		3.86		6.00
Valuation assumptions
Expected option term (years)²	5		5		5
Expected volatility³	19.9	%	21.9	%	20.4	%
Expected dividend yield⁴	6.1	%	6.4	%	4.4	%
Risk-free interest rate⁵	2.0	%	2.2	%	1.2	%

Options granted to United States employees are based on NYSE prices. The option value and assumptions shown are based on a weighted average of the United States and the Canadian options. The fair values per option for the years ended December 31, 2019, 2018 and 2017 were $4.04, $3.75 and $5.66, respectively, for Canadian employees and US$4.09, US$3.30 and US$5.72, respectively, for United States employees.


2	The expected option term is six years based on historical exercise practice and three years for retirement eligible employees.


3	Expected volatility is determined with reference to historic daily share price volatility and consideration of the implied volatility observable in call option values near the grant date.


4	The expected dividend yield is the current annual dividend at the grant date divided by the current stock price.


5	The risk-free interest rate is based on the Government of Canada’s Canadian Bond Yields and the United States Treasury Bond Yields.

Compensation expense recorded for the years ended December 31, 2019, 2018 and 2017 for ISOs was $32 million, $28 million and $40 million, respectively. As at December 31, 2019, unrecognized compensation expense related to non-vested stock-based compensation arrangements granted under the ISO Plan was $18 million. The expense is expected to be fully recognized over a weighted average period of approximately two years.

PERFORMANCE STOCK UNITS

Under PSU awards for certain key employees, cash awards are paid following a three-year performance cycle. Awards are calculated by multiplying the number of units outstanding at the end of the performance period by the Company's weighted average share price for 20 days prior to the maturity of the grant and by a performance multiplier. The performance multiplier ranges from zero, if our performance fails to meet threshold performance levels, to a maximum of two if we perform within the highest range of its performance targets. The performance multiplier is derived through a calculation of our Risk Adjusted Total Shareholder Return (in 2017) and Total Shareholder Return (commencing in 2018) percentile rank, in each case relative to a specified peer group of companies and our distributable cash flow, adjusted for unusual, non-operating or non-recurring items, relative to targets established at the time of grant. To calculate the 2019 expense, a multiplier of one was used for each of the 2017, 2018 and 2019 PSU grants.



December 31, 2019	Number		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
(units in thousands; intrinsic value in millions of Canadian dollars)
Units outstanding at beginning of year	1,069
Units granted	1,093
Units cancelled	(65	)
Units matured¹	(25	)
Dividend reinvestment	117
Units outstanding at end of year	2,189		1.5	111


1	The total amount paid during the years ended December 31, 2019, 2018 and 2017 for PSUs was $19 million, $18 million and $28 million, respectively.

Compensation expense recorded for the years ended December 31, 2019, 2018 and 2017 for PSUs was $40 million, $15 million and $5 million, respectively. As at December 31, 2019, unrecognized compensation expense related to non-vested PSUs was $55 million. The expense is expected to be fully recognized over a weighted average period of approximately two years.

RESTRICTED STOCK UNITS

Under RSU awards, cash awards are paid to certain of our employees following a 35-month maturity period. RSU holders receive cash equal to our weighted average share price for 20 days prior to the maturity of the grant multiplied by the units outstanding on the maturity date.



December 31, 2019	Number		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
(units in thousands; intrinsic value in millions of Canadian dollars)
Units outstanding at beginning of year	1,213
Units granted	1,087
Units cancelled	(96	)
Units matured¹	(706	)
Dividend reinvestment	126
Units outstanding at end of year	1,624		1.6	82


1	The total amount paid during the years ended December 31, 2019, 2018 and 2017 for RSUs was $34 million, $41 million and $39 million, respectively.

Compensation expense recorded for the years ended December 31, 2019, 2018 and 2017 for RSUs was $41 million, $32 million and $46 million, respectively. As at December 31, 2019, unrecognized compensation expense related to non-vested RSUs was $47 million. The expense is expected to be fully recognized over a weighted average period of approximately two years.