Enbridge looks to transfer Cdn liquids pipeline biz to Enbridge Income Fund

CALGARY – Enbridge Income Fund (TSX:ENF) says it has received a formal proposal that would see the transfer to the fund of the Canadian liquids pipelines business of Enbridge Inc. (TSX:ENB) along with some renewable energy assets.

The liquids business is owned by Enbridge Pipelines Inc. and Enbridge Pipelines (Athabasca) Inc.

“If completed, the transaction would be transformational for the fund, significantly increasing its business scale and scope as well as providing a highly transparent source of long-term growth,” the company said in a release issued Tuesday after markets closed.

“Based on Enbridge’s financial assumptions and projections, the company’s dividend could be increased by approximately 10 per cent on closing of the transaction and by a further 10 per cent in 2016 and each year thereafter through 2019.”

It said dividend growth is expected to be driven by a combination of “substantial organic growth” within the liquids pipelines business and by the company increasing its ownership in the fund over time.

“This is an important step forward for a transaction that will transform the fund into a premier Canadian energy infrastructure investment vehicle,” said company present Perry Schuldhaus

The proposed transaction, first disclosed by Enbridge in early December, is subject to shareholder and regulatory approval.

The boards have formed a joint special committee comprised of independent directors and independent trustees of Enbridge Commercial Trust to review and the proposal and negotiate terms of a definitive agreement.

Enbridge’s Canadian Liquids Pipelines business consists of its Canadian mainline system held through EPI and its regional oilsands system held through EPA, both of which would be transferred from direct ownership by Enbridge to ownership by the fund.

The combined carrying value of the Canadian Liquids Pipelines business held in these corporations is approximately $16 billion with an associated secured growth capital program of approximately $15 billion, according to the Enbridge statement issued in December.

The Canadian mainline system includes a number of large diameter crude oil, natural gas liquids and refined products pipelines connecting various locations in Western Canada and to the U.S. mainline system near Gretna, Man.

The Western Canada portion of the system includes the Canadian segment of the Alberta Clipper pipeline, currently undergoing an expansion to its ultimate capacity of 800,000 barrels per day; the Canadian segment of the Line 3 Replacement Program; the Edmonton to Hardisty expansion program and the Canadian mainline system terminal flexibility and connectivity program. The Canadian mainline system also includes a number of pipelines in Eastern Canada.

The regional oilsands system includes a number of trunk line and lateral pipelines collecting synthetic crude oil and diluted bitumen from eight different producing oilsands projects as well as Enbridge’s 70 per cent interest in the Norlite diluent pipeline currently under development.

Its growth capital program also includes the Norealis Pipeline, the Surmont phase 2 expansion, the Woodland pipeline extension, the Athabasca pipeline twining project and the Wood Buffalo extension.