Enbridge makes proposal to transfer Canadian pipeline business

Enbridge Inc. announced that the company delivered a formal proposal to the Boards of Enbridge Commercial Trust (ECT) and Enbridge Income Fund Holdings Inc. (EIFH) to transfer Enbridge's Canadian Liquids Pipelines business, comprised of Enbridge Pipelines Inc. (EPI) and Enbridge Pipelines (Athabasca) Inc. (EPA), along with certain renewable energy assets, to Enbridge Income Fund (the Fund).

The formal proposal follows the 3 December, 2014, announcement of the proposed Canadian restructuring plan. The general terms and projected financial outcomes of the proposed transfer are substantially consistent with those originally described in that announcement.

The transaction is anticipated to provide Enbridge with an alternate source of lower-cost funding through which to support enterprise-wide growth initiatives and is expected to be accretive to Enbridge earnings per share by approximately 10% per year on average from 2015 - 2018. It would also be transformational for the Fund, significantly increasing its business scale and scope, providing a highly transparent source of long-term growth.

Based on Enbridge's planning and financing assumptions, EIFH's dividend is expected to be increased by approximately 10% on closing of the transfer in mid-2015, and by a further 10% at the beginning of 2016 and each year thereafter through 2019. The dividend growth subsequent to the initial transfer would be driven by a combination of the substantial organic growth within the business being transferred, and by EIFH increasing its ownership in the Fund over time.

"This is an important step forward in the execution of the Canadian restructuring plan," said Al Monaco, Enbridge Inc. President and Chief Executive Officer. "Our program to optimise our cost of capital for the benefit of our investors is on track."

The proposed transfer was approved in principle by Enbridge's Board of Directors in December 2014 but remains subject to finalisation of internal reorganisation steps and a number of internal and external consents and approvals, including all necessary shareholder and regulatory approvals and final approval of definitive transfer terms by the Enbridge Board.

The transfer also remains subject to approval by the Boards of ECT and EIFH, following a recommendation by a joint special committee. The joint special committee has been established and is comprised of independent directors of EIFH and independent trustees of ECT and has engaged independent financial, technical, and legal advisors to support its assessment of the proposed transfer.

Assuming all necessary consents and approvals are obtained, the transfer and initial investment by EIFH are targeted for completion by mid-2015. However, there can be no assurance that the planned restructuring will be completed in the manner contemplated, or at all, or that the current market conditions and Enbridge's future forecast, based on such market conditions, will not materially change.

Update on US restructuring plan

Enbridge is also in the process of reviewing a potential parallel US restructuring plan which would involve transfer of its directly held US Liquids Pipelines assets to its US affiliate, Enbridge Energy Partners, LP (EEP). This review has not yet progressed to a conclusion.

Adapted from press release by Hannah Priestley-Eaton

Read the article online at: https://www.worldpipelines.com/business-news/01042015/enbridge-makes-proposal-to-transfer-canadian-pipeline-business-to-enbridge-income-fund/