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Enbridge will keep financing to fund growth

Oil pipelines feed into storage tanks at the Enbridge Inc. terminal in Cushing, Okla.


Enbridge Inc. hasn't quite finished its equity-raising spree. The pipeline company has already raised $850-million, and a further $200-million (U.S.), through preferred share issuances this year.

But it's not done. On Wednesday, the company said it is growing faster than expected, and will need another $400-million to $600-million in equity, in addition to another $11.4-billion in debt, between now and 2015.

And don't count on it waiting long to grab the extra equity, chief financial officer Richard Bird said.

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"I liked the picture that we had before, where we didn't have an equity requirement in front of us. So it's something we would expect to try and address soon," he said.

Enbridge is facing a slate of projects that is rapidly expanding, as oil companies seek new routes to new markets in the Gulf Coast and eastern North America. During a conference call to discuss first-quarter earnings of $264-million ($376-million on an adjusted basis), chief executive Pat Daniel said Enbridge has "increased the total of our commercially secured and risked projects from $20-billion to $26-billion."

Part of that comes from the more than $2-billion the company is now earmarking to move more oil to eastern Canada. Enbridge is moving to change up its entire Line 9, which currently runs from Montreal to Sarnia. Reversing that pipe could bring 250,000 barrels a day of western crude to refiners in Ontario and Quebec. The company is bullish on an initial reversal to Westover, Ont., saying it should being delivering oil by next spring. That project has stirred substantial landowner concern in Ontario.

Beyond organic growth, Enbridge also hinted at potential acquisition activity, in particular for gaining more access to the U.S. Gulf Coast.

The company is interested in buying in to the Capline, a massive 1.2-million barrel a day line that runs 1,017 kilometres between St. James, Louisiana and Patoka, Ill. Capline's owners, Marathon Petroleum Corp., have discussed reversing that pipeline to bring south the surge of new oil from Canada and the northern U.S. Such a plan is not a foregone conclusion – Marathon, for example, has worried publicly about how it could feed its 212,000 barrel per day refinery in Kentucky.

But Enbridge's Mr. Daniel said Enbridge would "definitely" be interested in potentially buying in to the line to reverse it.

"Allowing access of Canadian crude to the eastern Gulf is something that we have looked at on a number of occasions," he said.

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Enbridge has already bought into a similar project, with its $1.15-billion (U.S.) acquisition last November of the ConocoPhillips interest in the Seaway pipeline between Freeport, Texas and Cushing, Okla. The company has raced to reverse that line, in hopes of alleviating a glut of oil at Cushing that has suppressed North America's benchmark West Texas Intermediate crude price, relative to the international Brent standard.

On Wednesday, Enbridge said it expects oil to start flowing through the 150,000 barrel-a-day reversal May 17. It expects to begin pumping crude through an expansion of that pipeline, to 400,000 a day, "by year end," president Al Monaco said. That's ahead of previously announced plans to launch the expansion by early 2013.

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