Calgary-based Enbridge Inc. on Wednesday announced that it has agreed to sell its Midcoast Operating, L.P. (Midcoast) midstream unit and related subsidiaries to AL Midcoast Holdings, LLC (AL Midcoast), an affiliate of ArcLight Capital Partners, LLC., in an all-cash deal for US$1.12 billion.
The transaction is expected to close in the third quarter. For Enbridge, the deal marks a shift toward “a pure regulated pipeline and utility model” and positions the company to achieve its goal of “selling C$3 billion in non-core assets in 2018,” CEO Al Monaco said.
The Midcoast unit includes 11,200 miles of natural gas gathering and transportation pipelines, nearly 2.1 Bcf/d of natural gas processing capacity and about 1.3 Bcf/d of treating capacity in East Texas, the western Anadarko Basin and the Barnett Shale. The business also includes a natural gas liquids (NGL) logistics and marketing unit and a 35% interest in the Texas Express Pipeline. That system consists of a 594-mile, 20-inch NGL pipeline, and a 35% interest in Texas Express Gathering, which includes 115 miles of NGL pipelines and other infrastructure comprising Enbridge’s Texas Express NGL pipeline system.
Proceeds from the sale will be used to “accelerate the strengthening of our balance sheet and enhance the financial flexibility to fund our industry-leading C$22 billion secured growth program,” Monaco said.
ArcLight in February expanded its midstream business on the Gulf Coast and Southwest when its affiliate, Amphora Gas Storage USA LLC, purchased natural gas storage operator Enstor Gas LLC, from Avangrid Renewables Holdings Inc., a unit of Avangrid Inc. Enstor has a total storage capacity of 88.5 Bcf and a net working gas storage capacity of 67.5 Bcf.
Also on Wednesday, Enbridge said it has entered into a joint venture (JV) agreement with the Canada Pension Plan Investment Board (CPPIB) for select North American onshore renewable power assets, as well as the company’s interests in two German offshore wind projects for approximately C$1.75 billion.
The assets being contributed by Enbridge to the JV include all of its Canadian renewable power assets, held through Enbridge Income Fund, as well as two U.S. assets, namely the Cedar Point Wind Farm in Colorado and the Silver State North Solar Project in Nevada. Enbridge expects to retain its interests in other U.S. renewables, which may be monetized or sold at a later date.
Under the terms of the agreements, CPPIB will fund its 49% pro-rata share of the remaining construction capital required to complete the Hohe See projects, which are located offshore Germany and are scheduled to come into service at the start of 2020. This additional capital commitment is estimated at approximately C$0.5 billion, bringing CPPIB's total commitment to approximately C$2.25 billion.
Enbridge and its affiliates will continue to manage, operate and provide administrative services for the renewable power assets.
"The monetization of $1.75 billion of renewable assets through our newly formed joint venture with CPPIB is an important step in achieving the objective we set when we rolled out our three-year plan and strategic priorities in December," Monaco said.
The deal puts Enbridge a step closer to meeting its $3 billion asset sales target for the year and will also eliminate $500 million of equity capital requirements that the company had previously included in its funding plan. “This transaction, in addition to our other funding actions taken since April, accelerates funding for our secured capital program and gives us increased financial flexibility,” Monaco said.
Enbridge and CPPIB are also partnering in a 50/50 JV for the pursuit of future European offshore wind projects.
Enbridge is scheduled to discuss its first quarter 2018 earnings on Thursday.