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Spectra Energy Corp. (SE - Analyst Report), Enbridge Inc. (ENB - Snapshot Report) and DTE Energy (DTE - Analyst Report) together have signed a Memorandum of Understanding (MoU) to develop the NEXUS Gas Transmission (NGT) system. The development is estimated to cost around $1.2 billion to $1.5 billion.

The proposed pipeline system – NGT - will carry natural gas from Ohio Utica shale to the markets in the U.S. Midwest, including Ohio and Michigan as well as Ontario, Canada. Starting from northeastern Ohio, the project will consist of about 250 miles of large diameter pipe and have a capability of transporting one billion cubic feet of natural gas daily.

The pipeline will utilize the existing Vector Pipeline system to gain access to the Ontario market, trailing the existing utility corridors to an interconnect in Michigan. Spectra Energy will obtain a 20% interest in the Vector Pipeline – a joint venture between DTE Energy and Enbridge – once the project is completed.

The new pipeline, scheduled to be commissioned by November 2015, is expected to supply gas to local distribution companies, power generators and industrial users in the Ohio, Michigan and Ontario markets. It will include links with Michigan Consolidated Gas Company, Consumers Energy and, via the Vector Pipeline, the Enbridge Tecumseh Gas Storage facility and Union Gas’ Dawn Hub, both in Ontario.

The project has received an enormous level of interest for a considerable level of firm capacity and the partners are intent on holding an open season for the project in the fourth quarter of 2012.

Spectra Energy is one of North America’s premier natural gas infrastructure plays and has strong business positions in the growth markets. Though we believe commodity price concerns remain for the near term, the company’s core fee-based businesses of storage, transmission, distribution and Canadian gathering and processing have the potential to move the needle toward solid earnings and cash flow growth in the long run.

Spectra Energy holds a Zacks #3 Rank, which translates to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock.

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