Enbridge to Acquire Spectra, Likely Creating Largest Pipeline Company in North America

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Researched by Industrial Info Resources (Sugar Land, Texas)--Enbridge Incorporated (NYSE:ENB) (Calgary, Alberta) will buy Spectra Energy Corporation (NYSE:SE) (Houston, Texas) in an all-stock deal valued at about $28 billion, possibly creating the largest energy-infrastructure company in North America. The companies said in a joint statement that the deal will give Enbridge and Spectra shareholders about 57% and 43% of the new company, respectively. Industrial Info is tracking more than $34 billion in active projects from the two companies.

The deal gives both companies an opportunity to work in a more diversified environment; Enbridge currently focuses on crude-oil transportation, while Spectra specializes in natural gas. Both companies have faced economic obstacles in attempting to build new pipelines amid the persistently low commodity prices that have shaken the normally secure foundations of the midstream industry. Last week, Enbridge announced that it was putting one of its most widely anticipated projects, the Sandpiper Pipeline, on hold. For more information, see September 6, 2016, article - Enbridge's Sandpiper Pipeline Deferred, but Maybe not Quite Dead.

But in recent years, Canada has seen record levels of crude-oil exports to the U.S., partly because of Enbridge's cross-border pipeline system. Enbridge has proposed replacing almost all of its existing, 34-inch-diameter pipeline running from Hardisty, Alberta, to Superior, Wisconsin, with 36-inch-diameter pipe. If approved, it would be the largest project in Enbridge's history.

According to Enbridge, the replacement program "will address integrity requirements, improve the reliability and safety of Enbridge's Mainline system, and restore pipeline capability." It will increase capacity from 760,000 to 830,000 barrels per day. The current completion date is in fourth-quarter 2019, although, as with any such project still in its planning phase, numerous factors could push the competion date back by months or years. The major segments of the project include:

• $750 million: 180-mile segment running from Hardisty, Alberta, to the Alberta-Saskatchewan border
  For more information, see Industrial Info's project report.
• $1.89 billion: 450-mile segment running from the Alberta-Saskatchewan border to the Saskatchewan-Manitoba border
  For more information, see Industrial Info's project report.
• $840 million: 200-mile segment running from the Saskatchewan-Manitoba border to the Manitoba-North Dakota border
  For more information, see Industrial Info's project report.
• $1.35 billion: 285-mile segment from the North Dakota-Minnesota state line to the Minnesota-Wisconsin state line
  For more information, see Industrial Info's project report.

For more information in Line 3 and other Canadian pipeline projects, see July 15, 2016, article - Western Canada's Pipeline Mega Projects: Where are They Now?.

Spectra has faced its own challenges amid the long-running slump in commodity prices. Its plans to expand its existing network across New England hit a wall last month, when the Massachusetts Supreme Judicial Court blocked power utilities that would have been Spectra's customers from passing along additional costs to homeowners and businesses, according to The Wall Street Journal. Also last month, DCP Midstream (Houston, Texas), a 50:50 joint venture between Spectra and Phillips 66 (NYSE:PSX) (Houston), announced in a quarterly earnings report that it planned to continue reducing capacity and selling off non-strategic assets. For more information, see August 9, 2016, article - DCP Midstream Slashes Spending Amid Market Woes, Delays Projects in Niobrara, Permian, Eagle Ford.

Still, Spectra has proposed pipelines in some of the busiest U.S. energy markets. It currently is proposing a $1.5 billion natural gas pipeline in Texas, running 168 miles from Nunces to Brownville, with a capacity of 2.6 billion cubic feet per day; a $450 million natural gas pipeline in Ohio, running 200 miles from Wayne County to Fulton County, with a capacity of up to 2 billion cubic feet per day; and a $220 million natrual gas pipeline in Maryland, running 175 miles with a capacity of up to 1 billion cubic feet per day. For more information, see Industrial Info's project reports on the Texas pipeline, Ohio pipeline and Maryland pipeline.

Enbridge and Spectra executives expect the acquisition to close in first-quarter 2017, assuming shareholder and regulatory approvals are met. The new headquarters will be in Calgary, Alberta, currently Enbridge's home.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.