Enbridge to Increase Dividend 33%, Raise Up to $703 Million Via Affiliate

By Chester Dawson 

CALGARY, Alberta--Pipeline operator Enbridge Inc. said Wednesday it plans to increase its dividend by 33% and transfer ownership of its Canadian pipelines to affiliates in a bid to lower funding costs for future expansion and new projects.

The Calgary-based company said it would shift ownership of its Canadian pipeline assets to a subsidiary known as Enbridge Income Fund and then raise up to 800 million Canadian dollars ($703 million) in equity over the next three years through yet another affiliate that is publicly listed, called Enbridge Income Fund Holdings Inc. The complex maneuver, dubbed a "drop down," is designed to allow Enbridge to funnel money from one fund to another without diluting its own shares.

"Our plan to transfer the Canadian Liquids Pipelines business to Enbridge Income Fund comes after an extensive review of the potential to further enhance the value of our [C]$44 billion growth program and lower the cost of funding for that program and for new investment opportunities," Chief Executive Al Monaco said in a statement.

Enbridge said it would boost its dividend in the first quarter of next year to 46.5 Canadian cents a share, up from C$0.35 in the fourth quarter of 2014. It also projected adjusted earnings per share next year of C$2.05 to C$2.35, up from its 2014 full-year estimate of C$1.84 to $2.04.

The combined value of the pipeline assets involved in the financial re-engineering plan totals C$17 billion and includes the Canadian segment of the Alberta Clipper pipeline, the company said. That pipeline, also known as Line 67, is awaiting U.S. government approval of a planned expansion to 800,000 barrels a day.

Enbridge said it also is considering a similar move to restructure its U.S. assets by transferring them to an affiliate called Enbridge Energy Partners L.P.

In September, the company forecast 10% to 12% average annual growth in adjusted earnings per share over the next four years, which is below the 14% average annual adjusted EPS it has reported over the past four years.

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