Enbridge hits debt target with $2.5 billion pipeline, renewables sale

(Reuters) - Enbridge Inc ENB.TO will sell a U.S. gas pipelines business and part of its renewable energy portfolio for a combined $2.5 billion, the Canadian pipeline operator said on Wednesday, achieving the first step in its debt reduction plan.

File Photo: Pipelines run to Enbridge Inc.'s crude oil storage tanks at their tank farm in Cushing, Oklahoma, March 24, 2016. Picture taken March 24, 2016. REUTERS/Nick Oxford/File Photo

The Calgary-based company is continuing to shop its Canadian midstream assets and has received initial bids valuing the portfolio as high as C$4.5 billion ($3.5 billion), people familiar with the situation told Reuters.

Enbridge Chief Executive Officer Al Monaco told reporters on Wednesday that the company has not received any formal bids for the Canadian midstream assets and declined to comment on indications of interest.

Enbridge has been under pressure to sell non-core assets since its $28 billion takeover of U.S.-based Spectra Energy last year. Its long-term debt pile of $60.87 billion as of Dec. 31 has also caused alarm at credit rating agencies. []

The company said in November it expected to raise upwards of C$3 billion from divestments in 2018, the first sales from a pool of non-core assets worth C$10 billion.

The deals announced on Wednesday brought Enbridge close to that goal. The company said it had sealed a C$1.75 billion deal with the Canada Pension Plan Investment Board (CPPIB) for a 49 percent stake in wind and solar power assets in North America and Germany.

The company will also sell Midcoast Operating LP, its U.S. gas pipelines unit, to an affiliate of private equity firm ArcLight Capital Partners LLC for $1.12 billion. Midcoast operates facilities to process and treat natural gas and natural gas liquids.

“This transaction, in addition to our other funding actions taken, accelerates funding for our secured capital program and gives us increased financial flexibility,” Monaco said in a statement announcing the CPPIB deal.

Enbridge said it may yet monetize or sell the remaining renewable stake. Banking sources suggested that Enbridge had offered all its renewables assets for sale to begin with, asking potential buyers to propose the best deal.

The company separately said Wednesday that it had filed a formal response to a Minnesota judge’s recommendation that its Line 3 pipeline replacement go ahead but follow the existing right-of-way through the state instead of Enbridge’s preferred route.

Enbridge said that if it were to follow the recommended route, the existing pipeline would need to be shut down for nine to 12 months, “negatively impacting Minnesota’s energy supply.”

The C$8.2 billion Line 3 replacement would double capacity on the pipeline, which extends from Alberta to Wisconsin, providing much needed relief to Canada’s oil producers who are struggling with a lack of transportation capacity to get their crude to market.


In an interview with Reuters, Bruce Hogg, head of power and renewables at CPPIB, said its longstanding history with Enbridge and the fund’s desire to grow its renewables exposure led to the agreement.

“We were having conversations about a broader arrangement and the ability to grow value over time, which was a much more sellable package (to Enbridge) than they initially envisaged,” he said.

The pension fund will also provide C$500 million of capital to help finance outstanding construction related to the German offshore wind scheme, and it signed a 50-50 joint venture with Enbridge to invest in future European offshore wind projects.

CPPIB also purchased U.S. utility NextEra Energy Partners' NEP.N wind and solar assets in Ontario last month for about $582 million.

CIBC Capital Markets and law firm Dentons advised Enbridge on the renewables deal, the statement said. RBC Capital Markets and Citigroup advised CPPIB, sources familiar with the matter said. Citi, along with Norton Rose Fulbright LLP, worked with Enbridge on the U.S. midstream sale.

Enbridge’s Toronto shares closed up 2.65 percent at C$41.48.

($1 = 1.2922 Canadian dollars)

Reporting by Anirban Paul in Bengaluru, David French in New York and John Tilak in Toronto, Additional reporting by Rod Nickel in Calgary and Julie Gordon in Vancouver; Editing by David Gregorio, Sai Sachin Ravikumar and Cynthia Osterman