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Enbridge announce final scope and cost estimate for L3R

World Pipelines,

Enbridge Inc. and Enbridge Energy Partners, L.P. have announced the final scope and cost estimate for their Line 3 Replacement (L3R) Programme is approximately US$ 7.5 billion. The L3R Programme was announced on 3 March 2014, following receipt of shipper support, and involves replacement of all segments of Line 3 between Hardisty, Alberta and Superior, Wisconsin with new pipe using the latest available high strength steel and coating technology.

Enbridge Inc. also announced that it has entered into an agreement with RBC Capital Markets and Credit Suisse (the Underwriters), to issue 7.86 million treasury common shares (the Common Shares), on a bought deal basis, for gross proceeds of approximately CAN$ 400 million (the Offering), to support the additional funding required for its capital programme.

The agreement between Enbridge and its mainline shippers includes an international joint tariff (IJT) surcharge to provide return on and of the capital investment. The IJT surcharge will be adjusted to reflect 75% of the increase in the incremental investment required. Substantially all of the increase in the final estimate applies to the Canadian portion of the L3R Programme, estimated to cost approximately CAN$ 4.9 billion. The US portion of the programme is estimated to cost approximately US$ 2.6 billion. The US programme will be funded jointly by Enbridge and EEP at participation levels to be finalised and approved by a special committee of the Board of Directors of EEP.

Guy Jarvis, President, Liquids Pipelines for Enbridge, said, "The Line 3 Replacement Programme is Enbridge's largest ever capital programme. It will improve the reliability of our system for the benefit of our shippers and Enbridge. The IJT surcharge is designed to provide Enbridge with a solid return on its incremental investment, expected to be in the low double digits range."

Mark Maki, President of EEP, said, "The US Line 3 Replacement Programme will provide a large, attractive investment opportunity for EEP. Our plans to release capital from our natural gas processing business through drop downs of additional interests to Midcoast Energy Partners is anticipated to enable EEP to undertake a significant participation in the Programme while minimising the need for external equity funding."

Enbridge has entered into an agreement with RBC Capital Markets and Credit Suisse to issue 7.86 million Common Shares, on a bought deal basis, at CDN$ 50.90 per share for distribution to the public in both Canada and the US Closing of the Offering is expected to occur on or about 24 June. Pursuant to the agreement, the Underwriters have an option to purchase an additional 15% of the Offering, at the offering price, at any time up to 30 days following closing.

Commenting on the Common Share issue, J. Richard Bird, Executive Vice President, Chief Financial Officer and Corporate Development of Enbridge, said, "The final cost estimate for the Line 3 Replacement Programme brings our enterprise wide growth capital program to US$ 42 billion to be in service by 2017, of which US$ 37 billion is commercially secured with good progress on the remaining US$ 5 billion. This ratchets up our equity funding requirement by CAN$ 400 million and we've de-risked our funding plan by filling in this amount now.

After the Common Share issue and recent preferred share issues, our remaining equity requirement through 2017 stands at CAN$ 2.3 billion, which we expect to accommodate through a combination of additional preferred share issues and sponsored vehicle asset drop downs. The expansion in our growth capital programme will contribute to our expected 10 - 12% average annual earnings per share growth rate through 2017, and further support a continuation of industry leading growth well beyond 2017."

Adapted from press release by Hannah Priestley-Eaton

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