Energy pipelines are in vogue

Pipelines are all the rage in North America.

2011 has seen decisions around big projects like building the Pacific Trail Pipeline to ship liquified natural gas out of Kitimat, B.C., as well as TransCanada Corp.'s Keystone XL pipeline, come to a head. And sorting through stock market returns, you'll find that companies with pipeline assets have put up solid numbers.

It makes sense then that two Canadian organizations, Enbridge and Caisse de dépôt et placement du Québec, jumped at the chance to buy stakes in two U.S. pipelines that are being sold by ConocoPhillips Co.

Enbridge is coughing up $1.5-billion (U.S.) for a 40-per-cent stake in the Seaway crude pipeline, which brings crude from Texas to Cushing, Oklahoma, and the Caisse will pay $850-million for a 16.55-per-cent stake in Colonial Pipeline Company, which runs the Colonial Pipeline.

Both assets come out of ConocoPhillips, which has set out on a plan to divest $15 to $20-billion of non-core assets from 2010 to 2012. In July the company announced that it was splitting into two independent companies, one that focuses on refining and marketing, and another that focuses on exploration and production, and the company doesn't want to devote any attention to assets that don't tie into its new game plan. Once the two new pipeline deals close, the company's recent assets sales will total $10.5-billion.

The announcement helps to make sense of Enbridge's recent equity raises. The firm has sold $800-million of preferred shares in the past two months, even though the company didn't specify any specific use of proceeds. (Though it should be noted that the new 50 per cent pipeline stake will be purchased out of the U.S. subsidiary.)

As for the Caisse, it needs assets with long-term profitability with stable returns, and pipelines provides just that. The firm has also said that it knows this sector well because of similar investments in Enbridge and Gaz Métro.

However, the Caisse has stressed that this isn't a done deal. Other shareholders of the Colonial Pipeline have a right of first refusal on the stake that has been put up for sale.