Enbridge-Spectra Merger

Pipeline company buys energy provider for $28 billion

“I knew I should’ve gotten in the pipeline business.” — the motif being uttered by executives all around the world this week.

“No thanks, I don’t need the controversy involved.” — the stubborn response backed by convenient current events.

Neither statement swivels on pinpoint accuracy, but rather both are shades of an industrial sector that often stays under the radar despite providing integral, infrastructural services throughout the country.

Enbridge, Inc., a pipeline company based in Calgary, and Houston-based Spectra Energy (who also structure pipelines) announced September 10th of plans to merge in a stock-for-stock deal that values Spectra at $28 billion (some say as high as $48 billion when including future projects) and will create the largest energy infrastructure company in North America.

The new combined range of Enbridge/Spectra covers nearly all points in the U.S. and Canada. —Endbridge/Spectra PDF

The new combined range of Enbridge/Spectra covers nearly all points in the U.S. and Canada. —Endbridge/Spectra PDF

The deal, already approved by both companies’ boards, will still need shareholder approval and will face regulatory scrutiny. The companies say they expect the merger to be completed in the first quarter of 2017. Once completed, the merger of the two oil and gas infrastructure companies would create a combined entity with an enterprise value of about $127 billion. Reuters called it “the most significant energy deal since oil and natural gas prices crashed in mid-2014.”

The takeover “comes amid a wave of consolidation in the pipeline industry”, according to Bloomberg markets, after lower oil and natural gas prices have diminished demand for shipments and as building new projects becomes increasingly difficult because of local opposition. Protesters disrupted hearings on a proposed TransCanada Corp. pipeline in Montreal last week. Several arrests were made last week at a site in North Dakota where Energy Transfer Partners is trying to build a line to Illinois. Earlier this week, up in Michigan’s Upper Peninsula near the Straits of Mackinac, the Grand Traverse Band of Ottawa and Chippewa Indians has objected to a deal that calls for Enbridge to pay a $61 million fine for its 2010 Michigan oil spill and spend $110 million on safety upgrades across its North American pipeline network.

Enbridge’s pipelines mainly send Canadian oil sands to refiners on the U.S. Gulf Coast, while Spectra’s network ships natural gas to the U.S. East Coast.

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