Enbridge announces financial restructuring plans

Enbridge Inc. has announced a 33% increase to its next quarterly common share dividend as well as a Canadian restructuring plan and corresponding new dividend payout policy range. These actions are intended to enhance the value to investors of the company's record organic growth capital programme and enhance the competitiveness of its funding costs for new organic growth opportunities and asset acquisitions. Enbridge also announced 2015 adjusted earnings per share (EPS) guidance of CAN$2.05 to CAN$2.35.

Enbridge's quarterly common share dividend will increase 33% to CAN$0.465 per share with the next dividend payable 1 March 2015 to shareholders of record on 16 February 2015. Enbridge plans to transfer its Canadian Liquids Pipelines business, comprised of Enbridge Pipelines Inc. (EPI) and Enbridge Pipelines (Athabasca) Inc. (EPA), and including certain renewable energy assets, to its Canadian affiliate, Enbridge Income Fund (EIF or the Fund). Enbridge Income Fund Holdings Inc. (EIFH or Holdings) is expected to acquire an increasing interest in the assets through investments in the equity of EIF over a period of several years in amounts consistent with its equity funding capability. Based on Enbridge's current planning and financing assumptions, EIFH's resulting dividend growth rate is expected to average about 10% per year from 2015 through 2018 through a combination of the organic growth of the assets and its increasing interest in the assets.

Enbridge's Board of Directors has approved a revised dividend payout policy range of 75% to 85% of adjusted earnings. The previous payout policy range was 60% to 70%. The payout rate is expected to rise from the lower end of the new range in 2015 to the higher end by 2018 as the funding of Enbridge's current record organic growth capital programme progresses. Enbridge's resulting annual dividend growth rate is expected, based on Enbridge's current planning assumptions, to average between 14% and 16% from 2015 to 2018. Enbridge's adjusted EPS guidance for 2015 of CAN$2.05 to CAN$2.35 is before reflecting accretion resulting from the transfer of its Canadian Liquids Pipelines business, which is expected to be approximately 10% on an annualised basis.

The Canadian restructuring plan has been approved in principle by Enbridge's Board of Directors but remains subject to finalisation of preliminary internal reorganisation steps and a number of internal and external consents and approvals, including final approval of definitive transfer terms by the Enbridge Board and by the Boards of Holdings and the Fund following a recommendation by an independent committee of the Fund and Holdings, and the receipt of all necessary shareholder and regulatory approvals that may be required. Assuming all necessary consents and approvals are obtained, the transfer and initial investment by Holdings are targeted for completion 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 the Corporation's future forecast, based on such market conditions, will not materially change.

Enbridge also has under review 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, L.P. (EEP). This review has not yet progressed to a conclusion. An independent committee of the Board of Directors of EEP is currently considering the terms of the previously announced proposed transfer to EEP of Enbridge's 67% interest in the US segment of the Alberta Clipper pipeline, which is expected to be completed by the end of 2014.

Commenting on today's announcement, Al Monaco, President and Chief Executive Officer, Enbridge Inc., noted the following: "The 33% increase in our dividend that we announced today and 14% to 16% expected annual average dividend growth rate through 2018 reflects Management's confidence in the strength and embedded cash flow growth from the existing assets and the capital projects that will be put into service over the next four years. The change in our dividend policy range to 75 - 85% of adjusted earnings is supported by the excellent progress we've made on our enterprise-wide funding programme, raising some CAN$16 billion in debt and equity capital over the last two years; the expected increase in free cash flow through 2018; and reliable access to effective sources of equity funding including from our sponsored vehicles.

"Our plan to transfer the Canadian Liquids Pipelines business to Enbridge Income Fund comes after an extensive review of the potential to further enhance the value of our CAN$44 billion growth programme and lower the cost of funding for that programme and for new investment opportunities. We believe that the drop down of our Canadian Liquids Pipelines business into the Fund will transform it into a high growth vehicle and be beneficial for shareholders of both Enbridge and Enbridge Income Fund Holdings, while continuing to assure the funding of our organic growth programme.

"The combination of accelerated dividend growth and further capitalising on the use of our premium sponsored vehicle in Canada (EIF/EIFH) will increase shareholder value and positions Enbridge to deliver industry leading earnings and dividend growth beyond 2018. Although we are focused on optimising our cost of capital for the benefit of our customers and investors, our first and most important priority will continue to be ensuring the safety and operational reliability of our systems. Enbridge will continue to manage the operations and strategic development of the liquids pipelines business as it does today to ensure cost effective market access for producers and reliable supply sources for refiners," Monaco said.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.worldpipelines.com/business-news/04122014/enbridge-announces-financial-restructuring-plans-1086/