Enbridge Inc. moved forward with a sweeping restructuring plan as it seeks to accelerate dividend growth and finance billions in new pipeline projects.
The Calgary-based company said Friday that Enbridge Income Fund would buy $18.7-billion in assets, including the Canadian portion of its mainline oil-shipping network and a patchwork of regional oil sands lines, as well as some renewable energy assets. The deal, known as a drop-down, also includes the assumption of $11.7-billion of debt associated with the assets, Enbridge said.
The move will lower the company's cost of capital as it advances a $44-billion portfolio of new projects over the next decade, Enbridge said.
It follows an announcement by the company, last December, that it would transfer ownership of $17-billion of assets to the fund and boost its quarterly dividend by 33 per cent. Enbridge expects per-share dividend growth to average 14 to 16 per cent annually from 2016 to 2018.
Investors drove Enbridge shares up 3.2 per cent to close at $57.31 on the Toronto Stock Exchange Friday. Shares in Enbridge Income Fund, meanwhile, rose 3 per cent to $34.70.
However, Standard & Poor's lowered its credit rating on the pipeline giant and some of its affiliates. The ratings agency downgraded Enbridge to triple-B-plus from single-A-minus, citing "weak forecast financial metrics" tied to its multibillion-dollar growth plans.
"We view Enbridge's financial risk profile as aggressive," the Standard & Poor's said. "The continuing large capital program to expand existing and build new liquids pipelines will continue to pressure financial metrics for the next several years."
Enbridge Income Fund is controlled by Enbridge. Under the deal, which is expected to close in August, Enbridge said it would continue to operate and manage the assets being transferred.
The company is backing the $7.9-billion Northern Gateway pipeline to the Pacific Coast as well as a series of expansions to its Canadian mainline system, which transports the bulk of Alberta oil exports to U.S. markets.
Enbridge is also eyeing growth opportunities tied to natural gas-export developments on Canada's West Coast, power transmission and generation, and potential international investments, chief executive officer Al Monaco said on Friday.
This week, an export plant proposed by Royal Dutch Shell PLC received environmental clearance from the British Columbia government. It followed a conditional final investment decision for a rival development planned by Malaysia's Petronas.
"The fundamentals around B.C., we believe, are very strong long-term. Obviously, the gas prices at this point are problematic, but, longer-term, we feel that the Canadian midstream space certainly needs a lot of development in terms of infrastructure to support the drilling that's going to happen there over time," he said.