Enbridge has completed a C$2.7 billion financing deal with KKR and Apollo for expanding its Westcoast natural gas pipeline system in British Columbia. This agreement will fund two approved projects, Aspen Point and Sunrise, which are important for improving the region's gas transportation capacity.
Key Details
KKR and Apollo will provide capital that represents a 29% indirect interest in the Westcoast system once the Sunrise project starts operating. Enbridge will keep majority ownership and control. The company will receive about C$700 million in cash when the deal closes. The investors will begin receiving payments as each expansion project is completed. Aspen Point is expected to be operational by 2026, while Sunrise is targeted for late 2028.
This financing structure allows Enbridge to grow while reducing the capital burden on its balance sheet. The company noted that this deal fits its capital-recycling strategy, which has brought in C$19 billion since 2014. Enbridge can buy back the investors’ interest between the seventh and fourteenth years after closing. Both projects have received regulatory approval and are backed by long-term take-or-pay contracts, which help reduce risks from changes in natural gas prices.
Background
The Westcoast pipeline system currently has a capacity of 3.6 billion cubic feet per day (Bcf/d). This capacity is expected to rise to about 3.9 Bcf/d with the Sunrise expansion. The network covers over 2,900 kilometers across British Columbia, connecting production areas in northeastern B.C. and near the Alberta border to markets in the Lower Mainland and the U.S. Pacific Northwest.
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The expansion of the Westcoast pipeline may affect natural gas supply dynamics in Western Canada, potentially impacting regional prices and market access. Investors will look for updates on the Aspen Point and Sunrise projects as they near their operational dates.
Based on reporting by: oilprice.com