UPDATE 2-Enbridge foots more of bill for Canada-US pipeline
* Enbridge to fund 2/3 of partnership's segment
* Alberta-Wisconsin line to be in service by mid-2010
* Enbridge keeps 10 pct-plus EPS target
* Enbridge Energy Partnership units up 3 percent (Adds executive, analyst comments; in U.S. dollars unless noted)
CALGARY, Alberta, July 20 (Reuters) - Enbridge Inc (ENB.TO), Canada's largest oil pipeline operator, said on Monday it will fund two-thirds of its U.S. affiliate's $1.2 billion commitment for a new cross-border line, saving it from issuing stock in weak market conditions.
The move allows Enbridge to keep its earnings target while bringing the C$3.7 billion ($3.3 billion) Alberta Clipper pipeline, an artery for moving more Canadian oil to U.S. refineries, to fruition.
The deal prompted a gain of more than 3 percent in shares of Houston-based Enbridge Energy Partners (EEP.N), Enbridge's 27 percent-owned master limited partnership and operator of much of the company's U.S. operations.
"Under normal circumstances, we would have preferred to see EEP fund the entire project in the public market," Enbridge Chief Executive Pat Daniel told analysts.
"However, under the current financial market environment, especially for MLPs, and with Enbridge's strong financial position, it's become clear that Enbridge would need to assist EEP with its funding in some fashion or other."
Depressed financial markets have not changed Enbridge's bullish long-term view of oil markets, nor its aim to get the 1,000-mile (1,600 km), 450,000 barrel a day pipeline in service by mid-2010, Daniel said.
The oil industry has said it expects Canadian oil sands production to climb by 1 million barrels a day to 2.2 million by 2015, even after a spate of project deferrals and cancellations over the past year as the recession took hold.
Enbridge already moves about 2 million barrels a day of conventional and unconventional crude on its pipelines to the U.S. Midwest and southern Ontario.
The Canadian portion of Alberta Clipper will run to the Manitoba-North Dakota border from Hardisty, Alberta, a major transport and storage hub for growing supplies of oil sands-derived crude.
From there, the line will run adjacent to its other pipelines to Superior, Wisconsin, where Enbridge can route the oil to refineries in Illinois and on to Cushing, Oklahoma, the huge storage hub.
The Canadian portion has a price tag of C$2.4 billion and the U.S. segment is expected to cost $1.2 billion.
"For EEP, (the funding deal) avoids the significant dilution of existing units that would result from a large equity offering," Daniel said.
Enbridge Energy Partners units were up $1.41 at $43.42 on the New York Stock Exchange after the companies detailed the funding plans. Enbridge Inc was off 3 Canadian cents at C$40.23 on the Toronto Stock Exchange.
BMO Capital Markets said the deal should benefit both entities, as the parent has the balance sheet to foot the extra C$925 million bill, and the partnership avoids the equity offering whose potential had been pressuring the units.
For Enbridge, the additional investment will mean more earnings per share than without the pipeline moving forward, but that will be offset by a smaller contribution from the partnership, Chief Financial Officer Richard Bird said.
"So, the net result reinforces our 10 percent-plus average growth rate through 2012," Bird said.
Some of Enbridge's extra financial capability is due to the delay by Petro-Canada PCA.TO in proceeding with its Fort Hills oil sands project, for which the company has agreed to build and operate the pipelines, Bird said.
($1=$1.11 Canadian) (Additional reporting by Scott Anderson in Toronto; editing by Rob Wilson)
