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Enbridge Inc. (ENB.TO) is embarking on a $17-billion restructuring plan and jacking up its dividend as part of a sweeping reorganization aimed at boosting shareholder returns.
The Calgary-based pipeline company said late Wednesday it plans to shift or “drop down” its Canadian liquids pipeline business, which includes its massive mainline oil-shipping system and a regional oil sands network, into Enbridge Income Fund. Enbridge is also raising its quarterly payout starting March 1 next year by 33 per cent. The company said it expects its annual dividend growth rate to average between 14 per cent and 16 per cent from 2015 to 2018.
The move is aimed at increasing shareholder value and improving funding costs for new projects and potential acquisitions, Enbridge said in a statement.
It comes with rival TransCanada Corp. under pressure by U.S. hedge fund Sandell Asset Management to boost returns by accelerating so-called drop downs of assets into its U.S. affiliate, TC PipeLines LP. Sandall has also pushed TransCanada to spin off its power generation unit.
A spokesman for Enbridge declined to say whether the moves were the result of conversations with activist investors. Graham White deferred questions to a conference call with company executives scheduled for Thursday morning.
“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 $44-billion growth program and lower the cost of funding for that program and for new investment opportunities,” Enbridge chief executive officer Al Monaco said in a statement.
“We believe that the drop down of our Canadian liquids business into the fund will transform it into a high growth vehicle and be beneficial for shareholders of both Enbridge and Enbridge Income Fund Holdings, while continue to assure the funding of our organic growth program.”
Enbridge’s decision contrasts with a move by Kinder Morgan Inc. earlier this year to consolidate its web of limited partnerships under a single corporate structure. Enbridge also said it is studying a parallel restructuring that would involve transferring its directly held U.S. pipeline assets into its U.S. affiliate, Enbridge Energy Partners LP.
The company said it expects to complete the transfer of its Canadian business by mid-2015, subject to certain approvals.