8-K

ENBRIDGE INC 8-K Report (Sep 6, 2016)

Filed September 6, 2016For Securities:ENBENBMFEBBGFEBRGFEBRZFENBGFENBRFENFFFEBGEFENBFFENBHFENBNFENBOFENBSFEBBNFENNPF

Summary

Enbridge Inc. announced a significant merger agreement with Spectra Energy Corp. on September 6, 2016, creating North America's largest energy infrastructure company with a pro-forma enterprise value of C$165 billion. This strategic combination is designed to enhance scale, asset diversity, and financial flexibility for the combined entity. The transaction, structured as a stock-for-stock merger, is expected to close in the first quarter of 2017, subject to shareholder and regulatory approvals. The merger is poised to deliver substantial benefits to shareholders, including an anticipated 15 percent dividend increase in 2017 followed by annual dividend growth of 10-12 percent through 2024. The combined company will boast a robust, diversified asset base across liquids, natural gas, and renewables, underpinned by a strong commercial structure with 96% of cash flow generated from cost-of-service, take-or-pay, or fee-based contracts. This business model minimizes commodity price risk and ensures stable, long-term cash flow visibility. Furthermore, Enbridge anticipates achieving approximately C$540 million in annual run-rate cost synergies.

Key Highlights

  • 1Enbridge Inc. and Spectra Energy Corp. to combine in a stock-for-stock merger, creating the largest energy infrastructure company in North America with a C$165 billion enterprise value.
  • 2The transaction is expected to result in an anticipated 15% annualized dividend increase in 2017, followed by 10-12% annual dividend growth through 2024.
  • 3The combined company will possess a highly diversified asset base including liquids pipelines, natural gas transmission and midstream, a regulated utility portfolio, and renewable power generation.
  • 4Approximately 96% of the combined company's cash flow is projected to be generated from stable, low-risk sources such as cost-of-service, take-or-pay, or fee-based contracts.
  • 5A significant secured project pipeline of C$26 billion (US$20 billion) and a development project inventory of C$48 billion (US$37 billion) will support future growth.
  • 6The merger is expected to yield annual run-rate cost synergies of C$540 million (US$415 million) and approximately C$260 million (US$200 million) in tax savings.
  • 7Al Monaco will continue as CEO of the combined company, with Greg Ebel serving as non-executive Chairman of the Board.

Frequently Asked Questions

The merger aims to create North America's premier energy infrastructure company by combining complementary assets, enhancing scale, diversifying the business, and increasing financial flexibility. This strategic move is designed to drive significant shareholder value through robust growth opportunities and a strong dividend policy.

Investors can anticipate an anticipated 15% dividend increase in 2017, followed by a projected 10-12% annual dividend growth rate through 2024. The merger also brings significant cost synergies of C$540 million annually and tax savings, along with a strong pipeline of growth projects expected to enhance future earnings and cash flow.

The combined entity will have a highly stable revenue profile, with approximately 96% of its cash flow generated from low-risk, long-term commercial agreements like cost-of-service, take-or-pay, and fee-based contracts. This structure significantly mitigates direct exposure to commodity price volatility, offering predictable cash flows.

The transaction is expected to close in the first quarter of 2017, contingent upon receiving necessary shareholder approvals from both Enbridge and Spectra Energy, as well as various regulatory and government approvals.