STOCK OPTION AND STOCK UNIT PLANS

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

We maintain three long-term incentive compensation plans: the ISO Plan, the PSU Plan and the RSU Plan. Total stock-based compensation expense recorded for the years ended December 31, 2022, 2021 and 2020 was $260 million, $157 million and $145 million, respectively. Disclosure of activity and assumptions for material stock-based compensation plans are included below.

INCENTIVE STOCK OPTIONS

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


December 31, 2022	Number	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
(options in thousands; weighted average exercise price in Canadian dollars; intrinsic value in millions of Canadian dollars)
Options outstanding at beginning of year	34,017	49.28
Options granted	3,430	49.58
Options exercised1	(8,684)	44.55
Options cancelled or expired	(1,139)	51.32
Options outstanding at end of year	27,624	48.46	5.7	133
Options vested at end of year2	17,631	49.20	4.4	84

1The total intrinsic value of ISOs exercised during the years ended December 31, 2022, 2021 and 2020 was $66 million, $24 million and $13 million, respectively, and cash received on exercise was $3 million, $2 million and $4 million, respectively.

2The total fair value of ISOs exercised during the years ended December 31, 2022, 2021 and 2020 was $21 million, $25 million and $30 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,	2022		2021		2020
Fair value per option (Canadian dollars)1	5.07		4.10		4.01
Valuation assumptions
Expected option term (years)2	6		6		6
Expected volatility3	21.9	%	25.5	%	18.3	%
Expected dividend yield4	6.5	%	7.6	%	5.9	%
Risk-free interest rate5	1.8	%	0.7	%	1.3	%

1Options granted to US employees are based on the New York Stock Exchange prices. The option value and assumptions shown are based on a weighted average of the US and the Canadian options. The fair values per option for the years ended December 31, 2022, 2021 and 2020 were $4.78, $3.91 and $3.75, respectively, for Canadian employees and US$4.62, US$3.65 and US$3.62, respectively, for US employees.

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

3Expected 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.

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

5The risk-free interest rate is based on the Government of Canada’s Canadian bond yields and the US Treasury bond yields.

Compensation expense recorded for the years ended December 31, 2022, 2021 and 2020 for ISOs was $15 million, $16 million and $24 million, respectively. As at December 31, 2022, unrecognized compensation expense related to non-vested stock-based compensation arrangements granted under the ISO Plan was $12 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 Enbridge'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 2.0 if we perform within the highest range of the performance targets. The performance multiplier is derived through a calculation of our Total Shareholder Return percentile rank, in each case relative to a specified peer group of companies and our distributable cash flow per share, adjusted for unusual, infrequent or other non-operating factors, relative to targets established at the time of grant. To calculate the 2022 expense, a multiplier of 1.25 was used for 2022 PSU grants, 1.25 for 2021 PSU grants and 2.00 for the 2020 PSU grants.


December 31, 2022	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	3,429
Units granted	1,467
Units cancelled	(131)
Units matured1	(1,700)
Dividend reinvestment	184
Units outstanding at end of year	3,249	1.1	261

1The total amount paid during the years ended December 31, 2022, 2021 and 2020 for PSUs was $90 million, $70 million and $14 million, respectively.

Compensation expense recorded for the years ended December 31, 2022, 2021 and 2020 for PSUs was $169 million, $56 million and $76 million, respectively. As at December 31, 2022, unrecognized compensation expense related to non-vested PSUs was $72 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 vesting in equal installments on each of the first, second and third anniversaries of the grant date. Share-settled awards are given to certain senior management employees following a three year maturity period. RSU holders receive shares or 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, 2022	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	2,705
Units granted	1,400
Units cancelled	(134)
Units matured1	(602)
Dividend reinvestment	196
Units outstanding at end of year	3,565	1.0	185

1The total amount paid during the years ended December 31, 2022, 2021 and 2020 for RSUs was $32 million, $72 million and $27 million, respectively.

Compensation expense recorded for the years ended December 31, 2022, 2021 and 2020 for RSUs was $76 million, $85 million and $44 million, respectively. As at December 31, 2022, unrecognized compensation expense related to non-vested RSUs was $35 million. The expense is expected to be fully recognized over a weighted average period of approximately two years.