Enbridge Inc.’s (ENB - Free Report) indirect subsidiary —Enbridge (U.S.) Inc — has inked a definitive agreement with AL Midcoast Holdings, LLC (AL Midcoast), an affiliate of ArcLight Capital Partners, LLC, for sale of Midcoast Operating, L.P. and its subsidiaries (Midcoast) for $1.120 billion in cash.
Subject to regulatory approvals and satisfaction of other customary closing conditions, the transaction is projected to close in the third quarter of 2018.
The Midcoast Operating, L.P. and its subsidiaries (Midcoast) carry out the company's U.S. natural gas and natural gas liquids (NGL) gathering, processing, transportation and marketing businesses along with supplying to renowned basins in Texas.
The natural gas gathering, treating, processing and transportation as well as NGL transportation assets located in the East Texas, Western Anadarko and Barnett shale plays comprise the Midcoast business. It also includes about 11,200 miles of natural gas gathering and transportation pipelines, 2,075 million cubic feet per day (MMcf/d) of natural gas processing capacity and 1,330 MMcf/d of treating capacity.
Other assets include a NGL logistics and marketing business (comprising ELTM, L.P. and Enbridge Marketing (U.S.) L.P.), as well as a 35% interest in Texas Express Pipeline, including a 594-mile, 20-inch NGL pipeline and a 35% interest in Texas Express Gathering. This also includes115 miles of NGL pipelines and other NGL infrastructure comprising the company's Texas Express NGL pipeline system.
The sale includes its 100% owned gathering and processing assets in Texas and Oklahoma.
In another announcement, Enbridge entered into an agreement with the Canada Pension Plan Investment Board (“CPPIB”) to monetize a 49% interest in a few North American onshore renewable power assets as well as 49% of Enbridge's interests in two German offshore wind projects —Hohe See and related expansion— through a newly-formed joint venture with CPPIB for about CAD$1.75 billion.
Enbridge is expected to contribute all of its Canadian renewable power assets, held through Enbridge Income Fund, as well as two U.S. assets—the Cedar Point Wind Farm in Colorado and the Silver State North Solar Project in Nevada. However, interests in some other U.S. renewable power assets are expected to be retained by the company. The interests in these assets might be monetized or sold at a later date.
Per the terms of the agreement, CPPIB will fund its 49% pro-rata share of the remaining construction capital necessary for completion of the Hohe See projects, offshore Germany. It is projected to be operational by 2020. The additional capital commitment is estimated at about CAD$0.5 billion, taking CPPIB's total commitment to about CAD$2.25 billion.
Enbridge and its affiliates will continue to manage, operate and provide administrative services for the renewable power assets. The transaction is expected to close during the third quarter of 2018.
These transactions are in sync with Enbridge’s strategy to move towards a pure regulated pipeline and utility model as well as achieve its target of selling non-core assets worth CAD$3 billion in 2018. The proceeds from the sale will be used to strengthen its balance sheet and boost the financial flexibility to fund its secured growth program of CAD$22 billion.
Over the last three months, Enbridge’s shares lost 7.5% compared with the industry’s 4.8% decline.
Zacks Rank & Stocks to Consider
Enbridge currently carries a Zacks Rank #4 (Sell).
A few better-ranked players in the same sector are Nine Energy Service, Inc (NINE - Free Report) , BP plc (BP - Free Report) and CVR Refining, LP (CVRR - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nine Energy Service is engaged in delivering onshore completion and production services to unconventional oil and gas resource development. The company pulled off a positive earnings surprise of 6.25% in the preceding quarter.
BP is among the leading integrated energy players in the world. The company delivered an average positive earnings surprise of 29.6% in the trailing four quarters.
Sugar Land, TX-based CVR Refining is an independent downstream energy partnership with refining and associated logistics properties in the Midcontinent United States. The company delivered average positive earnings surprise of 7.05% in the last four quarters.
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