Enbridge to buy Encana's stake in Cabin gas plant

(Reuters) - Enbridge Inc ENB.TOENB.N said it would buy a majority stake in the Cabin gas plant in British Columbia's Horn River Basin from Encana Corp ECA.TO and some other sellers for C$250 million, as it looks to strengthen its Canadian midstream business.

The pipeline operator will buy a 57.6 percent interest in phases 1 and 2 of the Cabin Gas plant, which together will be capable of processing 800 million cubic feet per day (Mmcf/d) of natural gas.

Enbridge’s total investment in the plant is expected to be about C$900 million, after phases 1 and 2 are completed.

“Phases 1 and 2 of Cabin will generate an attractive return and provide a significant and growing earnings contribution for years to come,” Enbridge’s Al Monaco, president, gas pipelines, Green Energy & International, said.

The plant is under construction and is expected to be in-service in the third quarter of 2012, while phase 2 would be ready in the third quarter of 2014, Enbridge said.

Earlier this week, Enbridge expressed interest in liquefied natural gas projects being developed in British Columbia, and said it was in talks to export LNG from Canada to Asia, as it looked to tap into more lucrative markets.

In a separate statement, Encana said it would sell its 52 percent stake in the plant to Enbridge for C$220 million.

“When we divest midstream assets such as this Cabin plant, we recoup the upfront infrastructure capital that is necessary to bring emerging natural gas developments such as Horn River into commercial production,” said Renee Zemljak, Encana’s executive vice president midstream, marketing & fundamentals.

Encana, one of North America’s largest natural gas producers, had planned to sell $1-$2 billion worth of non-core assets, to cut back on spending and cope with weak natural gas prices.

Last month, it sold some U.S. midstream assets in Colorado for $590 million.

With Cabin, Encana has received C$1.1 billion from these midstream asset sales.

Reporting by Gowri Jayakumar in Bangalore; Editing by Viraj Nair