Enbridge Inc. announced on Thursday evening that an affiliate of Enbridge Income Fund Holdings Inc. has reached an agreement with Tundra Energy Marketing Ltd. (TEML) for the sale of liquids pipelines assets in the South Prairie Region.
The deal includes Enbridge’s assets in southeast Saskatchewan. According to the news release, all employees currently working for Enbridge in the southeast are expected to be asked to join Tundra.
“The monetization of these non-core assets at an attractive valuation provides a low-cost funding source for the Enbridge group and further supports Enbridge Inc.'s industry leading cash flow and dividend growth outlook from our secured organic growth platform,” said Enbridge executive vice-president and chief financial officer John Whelen.
“The transaction is accretive to the Fund Group's available cash flow from operations on a per unit basis.”
“In conjunction with the proposed Spectra Energy merger, we announced our intention to divest of approximately $2 billion of non-core assets over the next year to further strengthen Enbridge Inc.'s consolidated balance sheet and provide for additional financing flexibility,” said Whelen. “The sale of these regional gathering pipelines by the Fund not only provides an efficient source of financing for the Fund's organic growth program, but also immediately addresses about one-half of our monetization target while displacing equity that we would otherwise need to raise through the issuance of new capital.”
“To ensure the continued safe and reliable operation of these assets, our South Prairie Region team will be transitioning to TEML following close of the transaction,” said Guy Jarvis, Enbridge executive vice-president for liquids pipelines and major projects. “We thank the team for their important contribution to the safe operation of these assets and will continue to work closely with TEML to facilitate a smooth transition of those team members.”
The assets are liquids pipelines and related facilities in southeast Saskatchewan and southwest Manitoba, and include the Saskatchewan gathering and Weyburn gathering systems, as well as the Westspur trunk line. The assets do not include the Bakken Expansion Pipeline, which enables delivery of crude oil production in North Dakota to the mainline system at Cromer, Manitoba.
As part of the purchase and sale agreement, shipper commercial arrangements and contracts are expected to remain in place and it is expected that crude oil and NGL volumes delivered from the assets will continue to flow onto the Enbridge Mainline at Cromer.
Closing of the transaction is expected to occur around the end of the fourth quarter of 2016, and is subject to customary closing conditions, including the Canada Transportation Act and Canadian Competition Act approvals.
