Enbridge Inc will sell a U.S. gas pipelines business and part of its renewable energy assets for a total of about $3.2 billion (US$2.5 billion), the Canadian pipeline operator said on Wednesday, as it seeks to shed secondary assets and reduce its massive debt load.
Investors have pressured Enbridge to sell assets that are not integral to its main oil and natural gas pipelines business since its US$28 billion purchase last year of U.S.-based Spectra Energy Corp. Enbridge’s long-term debt pile of US$60.87 billion as of December 31 has also caused alarm at credit rating agencies.
To address the concerns, Enbridge said in November it would raise upwards of $3 billion (US$2.33 billion) from divestments in 2018, the first sales from a pool of non-core assets it had identified worth $10 billion.
On Wednesday, Enbridge said it had sealed a $1.75 billion (US$1.35 billion) agreement with Canada Pension Plan Investment Board (CPPIB) to sell a 49 percent stake in wind and solar power assets in North America and Germany.
The Calgary-based company will also sell Midcoast Operating LP, its U.S. gas pipelines unit, to an affiliate of U.S. private equity firm ArcLight Capital Partners for US$1.12 billion. Midcoast operates facilities to process and treat natural gas and natural gas liquids.
“This transaction, in addition to our other funding actions taken, accelerates funding for our secured capital program and gives us increased financial flexibility,” Enbridge Chief Executive Officer Al Monaco said in a statement announcing the CPPIB deal.
Enbridge said it may yet monetize or sell its remaining stakes in U.S. renewable power assets that were not included in the CPPIB agreement.
Banking sources indicated that Enbridge had offered all its renewables assets for sale to begin with, asking potential buyers to propose the best deal.
In an interview with Reuters, Bruce Hogg, head of power and renewables at CPPIB, said its longstanding history with Enbridge and the fund’s desire to grow its renewables exposure led to the agreement.
“We were having conversations about a broader arrangement and the ability to grow value over time, which was a much more sellable package (to Enbridge) than they initially envisaged,” he said.
The pension fund will also provide $500 million of capital to help finance outstanding construction related to the German offshore wind scheme, and signed a 50-50 joint venture with Enbridge to invest in future European offshore wind projects.
CPPIB has been investing in renewable power assets since it established a standalone unit in December to look at the space, outside of its infrastructure business. It also purchased U.S. utility NextEra Energy Partners LP’s wind and solar assets in Ontario for $741 million (US$582 million).
CIBC Capital Markets and law firm Dentons advised Enbridge on the renewables deal, the statement said. RBC Capital Markets and Citigroup advised CPPIB, sources familiar with the matter said. Citi, along with Norton Rose Fulbright LLP, worked with Enbridge on the U.S. midstream sale.
(Reporting by Anirban Paul in Bengaluru, David French in New York and John Tilak in Toronto; Editing by David Gregorio and Sai Sachin Ravikumar)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
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