Oil & Gas News

Enbridge Inc. agrees to deal with private equity group ArcLight Capital Partners

Private Equity

Enbridge Inc. took its first steps in efforts to reduce the load of debt it took on with its $28.6 billion purchase of Spectra Energy Corp. in 2017, announcing the sale of a U.S. natural gas business and its interests in some renewable-energy assets.  Last Wednesday Enbridge Inc. agreed to a deal on its Midcoast Operating LP gas midstream unit to the private equity midstream group ArcLight Capital Partners, for $1.12 billion. The pipeline giant also said it’s conveying its Canadian renewable-power assets, a wind project in Colorado, a solar project in Nevada its shares in two German offshore wind projects to a joint venture with the Canada Pension Plan Investment Board for $1.36 billion.

With the divestitures, Enbridge is making good on a goal of selling at least $2.33 billion in assets this year to whittle down the $14.5 billion in borrowings from the Spectra deal, which diversified the company into North American gas pipelines. That debt load has weighed on Enbridge shares, sending them down 18 percent this year through Tuesday, the fourth-worst performance in the S&P/TSX energy index.

More sales may be on the horizon as Enbridge also is said to have hired Royal Bank of Canada to sell a group of Canadian gathering and processing assets that could fetch more than $1.56 billion. The assets, located in British Columbia and Alberta, were owned by Spectra.  Longer-term, Enbridge has identified $7.76 billion in non-core assets that it plans to unload. Still, the debt remains a concern, with Moody’s Investors Service Inc. in December downgrading Enbridge’s rating, saying the divestiture plan was “insufficient to improve the financial profile of the company in a timely manner.

The Midcoast assets Enbridge is selling include gas and natural gas liquids gathering, processing, transportation and marketing operations in Texas, Oklahoma and Louisiana. ArcLight is a Boston-based private equity firm focused on energy infrastructure assets.

Add this to the growing list of private equity funded energy operations in the last few years.  Private firms completed 33 new investments in the oil and gas industry in the first quarter of 2018.  Firms chose to only disclose the size of 17 investments, and those totaled $8.3 billion according to Houston adviser Petroleum Listing Service, or PLS Inc.  By comparison, oil companies raised $6.1 billion in 24 public offerings.  That’s down from almost $15 billion in 40 offerings in the previous quarter – a sign of Wall Street’s waning interest in the energy sector.

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