En­bridge signs $4.3B deal to sell as­sets

Fort McMurray Today - - LOCAL NEWS - DAN HEAL­ING

A $4.31-bil­lion deal to sell Western Cana­dian nat­u­ral gas pro­cess­ing plants and gath­er­ing pipe­lines is ex­pected to ad­vance En­bridge Inc.’s strate­gic makeover and pay down debt while fund­ing am­bi­tious growth plans.

News of the sale to a part­ner­ship led by Brookfield In­fra­struc­ture on Wed­nes­day fol­lowed word last week that En­bridge’s big­gest growth pro­ject, the $9-bil­lion Line 3 re­place­ment pipe­line, cleared its last ma­jor reg­u­la­tory hur­dle in Min­nesota and is ex­pected to be in ser­vice by late 2019.

With $7.5 bil­lion in as­set sales an­nounced this year, the com­pany has more than dou­bled its tar­get set in Novem­ber to raise $3 bil­lion in 2018, chief executive Al Monaco said.

“When com­bined with as­set mon­e­ti­za­tions an­nounced in May, the sale … sig­nif­i­cantly ad­vances our strate­gic pri­or­ity of mov­ing to a pure play reg­u­lated pipe­line and util­ity busi­ness model,” he said in a news re­lease.

The deal Wed­nes­day in­cludes En­bridge as­sets in the Mont­ney, Peace River Arch, Horn River and Liard basins in north­west­ern B.C. and north­east­ern Al­berta.

“This in­vest­ment rep­re­sents an ex­cit­ing op­por­tu­nity to in­vest in scale in one of North Amer­ica’s lead­ing gas gath­er­ing and pro­cess­ing busi­nesses,” Brookfield In­fra­struc­ture CEO Sam Pol­lock said in a state­ment.

“The busi­ness is strate­gi­cally po­si­tioned for the con­tin­ued devel­op­ment of the pro­lific Mont­ney Basin.”

The as­sets in­clude 19 nat­u­ral gas pro­cess­ing plants and liq­uids han­dling fa­cil­i­ties, with a to­tal op­er­at­ing ca­pac­ity of 3.3 bil­lion cu­bic feet per day, and 3,550 kilo­me­tres of nat­u­ral gas gath­er­ing pipe­lines.

An­a­lyst Matthew Tay­lor of Tu­dor Pick­er­ing Holt & Co. said En­bridge is get­ting a good price for the pack­age, adding the as­sets are well-placed to ben­e­fit from ex­pan­sion if the lon­gawaited West Coast liq­ue­fied nat­u­ral gas ex­port in­dus­try takes off.

“These as­sets do have some up­side to LNG that maybe right now aren’t be­ing uti­lized,” he said.

He said the gas plants are run­ning at high rates but their re­turns are “com­mod­ity ex­posed” be­cause they don’t have take-or-pay con­tracts with clients. In other words, re­turns can vary in the fu­ture and the as­sets there­fore don’t fit En­bridge’s pref­er­ence for pre­dictable re­turns.

In May, En­bridge sold a 49 per cent stake in most of its wind and so­lar power as­sets for $1.75 bil­lion to the Canada Pen­sion Plan In­vest­ment Board and agreed to sell its U.s.-based Mid­coast Op­er­at­ing LP for $1.44 bil­lion to an af­fil­i­ate of private eq­uity firm Ar­clight Cap­i­tal Part­ners LLC.

En­bridge has said it will con­tinue to hold its long-haul reg­u­lated nat­u­ral gas trans­mis­sion as­sets.

That in­cludes the Westcoast trans­mis­sion sys­tem in Bri­tish Co­lum­bia that it ac­quired through its takeover of Hous­ton-based Spec­tra En­ergy Corp. last year, and the Al­liance pipe­line that car­ries nat­u­ral gas from Western Canada to the Chicago mar­ket.

The deal Wed­nes­day is ex­pected to close in two phases, with the sale of fa­cil­i­ties sub­ject to pro­vin­cial reg­u­la­tion to close this year and the sale of those un­der fed­eral rules an­tic­i­pated to close in mid-2019.

Brookfield In­fra­struc­ture’s cur­rent en­ergy busi­nesses in­clude nat­u­ral gas trans­mis­sion and pipe­lines in the U.S., gas and propane dis­tri­bu­tion op­er­a­tions in Aus­tralia, gas stor­age in Al­berta and the U.S., and district heat­ing and cool­ing sys­tems in all three coun­tries.


En­bridge pres­i­dent and CEO Al Monaco pre­pares to ad­dress the com­pany's an­nual meet­ing in Calgary on Wed­nes­day, May 9, 2018.

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