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Enbridge to off-load C$3B in assets; gathering, onshore renewables are on block

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Enbridge to off-load C$3B in assets; gathering, onshore renewables are on block

Enbridge Inc. plans to shed noncore assets it values at C$3 billion this year as the company pivots to a "pure pipeline utility model," CEO Al Monaco said.

The company plans to sell U.S. and Canadian gathering and processing assets, and the remains of its onshore renewable power business, Monaco told investors on a conference call. The company will continue to grow its liquids pipelines and terminals, natural gas transmission networks and natural gas utilities, which have more predictable cash flows and offer better opportunities for growth, he said.

When Enbridge bought Spectra Energy Corp in early 2017, Spectra brought along plenty of gathering and processing assets, either directly, through its control of Spectra Energy Partners LP or its stake in DCP Midstream LP. Enbridge now directly owns more than 77,000 miles of gathering lines and 11.4 Bcf/d of processing capacity, according to its website.

At the company's annual meeting in May, 2017, Monaco touted gas and NGL processing as the "sleeper" in North America's growing export opportunities and a growth area for Enbridge.

"We will monetize non-core assets, which include U.S. and Canadian gathering and processing and our onshore renewables, [C]$3 billion of which is targeted for this year," Monaco said on the Feb. 16 call. "Although no longer core, these are strong businesses that would be very attractive to the strategic and financial buyers. We've kicked off the process, and we have seen a lot of interest right out of the gate."

Enbridge is working to reduce its debt level to 5x EBITDA, a process that will be helped by the sale of assets and a "prudent funding plan," Monaco said. The company has C$22 billion of secured projects in its capital program and is working to wring more cost savings out of the Spectra acquisition.

"We will be disciplined on how we allocate capital," Monaco said. "That means investing and growing our three core businesses because that's where our competitive advantage lies and where we can turn the best return."

Growing output from the oil sands in Western Canada, along with capacity expansions and the unexpected outage of a competing pipeline, helped propel Enbridge to a December record on its crude mainline. The network of pipes connected to oil sands terminals delivered an average 2.73 million barrels per day to the company's Canadian border terminal in Gretna, Manitoba. Crude at Gretna is pumped across the border to North Dakota, where it is mostly destined for Enbridge's Midwest hub in Superior, Wisconsin.

"January and February volumes look pretty strong as well, and we expect that the system will essentially be full for the rest of the year," Monaco said. "In fact, we expect that to be the case through 2020, including our Line 3, given growing supply and a lack of the pipeline capacity before that."

Oil sands operators were left clamoring for available pipeline space after a rupture on TransCanada Corp.'s Keystone pipeline in South Dakota in November. That removed almost 600,000 bbl/d of shipping capacity while the line was down. It has since resumed operating at reduced pressure and volumes. Monaco expressed confidence Enbridge's C$8.3 billion Line 3 expansion that would double the operating capacity of the conduit linking the oil sands with the Midwest would be completed by the end of 2019. The Canadian segment is under construction and work has been completed on the short Wisconsin stretch. The project continues to be bogged down with regulators in Minnesota.

"In Minnesota, the project has undergone, I would say, the most extensive and inclusive review of any pipeline project," Monaco said. "In January, the PUC [Public Utilities Commission] reconfirmed a regulatory time line, which was a good outcome."

Enbridge expects the PUC to present a recommended route and rule on the need for the project in April, with a final decision to come in June. "We continue to expect the project to be in service in the second half of [2019]," he said.

Separately on Feb. 16, Enbridge reported fourth-quarter 2017 adjusted earnings of C$1.01 billion, or 61 cents per share, an increase from C$522 million, or 56 cents per share, in the year-ago quarter. The S&P Global Market Intelligence consensus normalized EPS estimate for the most recent quarter was 58 cents.