Enbridge has proposed to transfer its 66.7% interest in the US segment of the Alberta Clipper Pipeline to its affiliate, Enbridge Energy Partners (EEP), for around $900m.
EEP holds the remaining 33.3% interest in the 36in-diameter, 325-mile-long crude oil pipeline running from the US border near Neche, North Dakota, to Superior, Wisconsin.
EEP will pay $300m in cash and $600m in equity to Enbridge for the pipeline interest.
The initial capacity of the pipeline is 450,000bpd and it was built under a joint funding agreement.
Enbridge funded two-thirds of the capital costs in return for a corresponding economic interest in the earnings and cash flow from the investment.
The line is currently being expanded to a capacity of 800,000bpd by adding increased pumping horsepower.
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By GlobalDataThe required expansion investments are subject to separate joint funding arrangements between Enbridge and EEP.
If the deal is approved by the company’s board, the transfer is expected to be completed by the end of 2014.
Enbridge executive vice-president, CFO and corporate development officer Richard Bird said: "This is the latest in a series of actions that Enbridge has taken to enhance EEP’s distributable cash flow and restore its effectiveness as one of the sources of low-cost funding for Enbridge’s organic growth opportunities and, through drop-downs such as this one, for Enbridge’s broader growth capital programme.
"Following these actions, EEP’s valuation has improved to the point where a drop-down is now accretive to both EEP’s distributable cash flow and to Enbridge’s earnings, and we are able to accelerate this aspect of our financial strategy."
