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Enbridge (ENB)-Led Consortium Eyes Brazil's TBG Pipeline

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Enbridge Inc. (ENB - Free Report) along with its two partners in a consortium has put forward a non-binding offer for the largest natural gas import pipeline in Brazil, per Reuters. Enbridge has private equity firm EIG Global Energy Partners and Belgium-based gas infrastructure operator Fluxys as partners in the consortium.

Last December, Brazilian state-run energy major PetróleoBrasileiro S.A. or Petrobras (PBR - Free Report) put its interest in the TBG pipeline that imports natural gas from Bolivia up for sale. Moreover, the smaller TSB pipeline was listed for divestment along with the 1,611-mile TBG pipeline. Non-binding offers were expected to come by April-end, which can raise billions of dollars. The consortium led by Enbridge is expected to present a binding offer by Jul 5.

The deal can support Petrobras’ plan of divesting non-core assets to decrease debt burden and focusing more on deepwater resources. It has already divested its stake in the TAG pipeline. The company has a 51% and 25% interest in the TBG and TSB pipelines, respectively. Notably, TBG is the Brazilian portion of the large Gasbol pipeline.

Formation and completion of the deal will likely mark Enbridge’s first footprint in South America. In Canada, the company is touted to be the largest natural gas distributer. Moreover, it transports around 25% of crude oil produced in the North America region. With significant portion of its assets being contracted by shippers for the long term, the company’s business model is less exposed to volatility in oil and gas prices owing to the coronavirus pandemic. Underpinned by long-term contracts, Enbridge’s business model has considerably lower volume risk exposure.

Price Performance

Enbridge’s shares have gained 22.7% in the past year compared with 29.4% growth of the industry it belongs to.

Zacks Rank & Key Picks

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Braskem S.A. (BAK - Free Report) and PHX Minerals Inc. (PHX - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Braskem’s bottom line for 2021 is expected to rise 231.3% year over year.

PHX Minerals’ bottom line for 2021 is expected to surge 40% year over year.

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