NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER U.S. NEWSWIRE SERVICES
Enbridge Income Fund Holdings Inc. (the "Company") (TSX:ENF) and Enbridge Income
Fund (the "Fund") announced today that indirect wholly-owned subsidiaries of the
Fund have entered into an agreement to acquire entities which own crude oil
storage and renewable energy assets (the "Assets") from Enbridge Inc. (TSX:ENB)
(NYSE:ENB) and certain of its indirect wholly-owned subsidiaries (collectively,
"Enbridge") for approximately $1.164 billion (the "Transaction"). The Company
also announced that to finance its equity investment in the Fund pursuant to the
Transaction, it has entered into a bought deal agreement led by RBC Capital
Markets and CIBC World Markets Inc. for the sale of an aggregate of 9,597,000
subscription receipts of the Company ("Subscription Receipts") at a price of
$23.15 per Subscription Receipt, for gross proceeds of $222.2 million.
As Enbridge is a related party to the Fund and the Company, the Company will
seek the approval of the Transaction by its shareholders at a special meeting to
be held on December 7, 2012. Subject to completion of the financing and receipt
of regulatory and third party approvals, the Transaction is expected to close
shortly after receipt of the requisite approval of a majority of the
shareholders of the Company.
Assets to be Acquired
The Assets consist of five distinct facilities, comprised of crude oil storage
assets in Alberta and renewable power generation assets in Ontario.
The Hardisty Contract Terminals and the Hardisty Storage Caverns provide
approximately 11 million barrels of total crude oil storage capacity located
above and below ground, representing one of the largest contract crude oil
terminals in North America. The crude oil storage facilities are currently
operating under long term take-or-pay storage contracts with creditworthy
counterparties for the full storage capacity. The storage contracts have
weighted average remaining terms of approximately 22 years and generate a stable
cash flow stream as revenue generated by these storage contracts is mostly
derived from fixed fees charged for a specified amount of storage capacity.
The renewable energy assets consist of the Greenwich Wind Project, an on-shore
wind project with an installed capacity of 98.9 MW, and the Amherstburg Solar
Project and Tilbury Solar Project, both ground mount solar projects with
installed capacities of 15 MW and 5 MW, respectively. The renewable energy
assets are currently operating under long-term, fixed price power purchase
agreements ("PPAs") with the Ontario Power Authority ("OPA") and have full
service operating and maintenance contracts with third parties. The weighted
average remaining terms of the PPAs exceed 18 years for all three renewable
energy assets.
Enbridge, through its affiliates, will continue to manage the crude oil storage
and renewable energy assets pursuant to management and administrative services
agreements.
Collectively, the Assets are expected to generate within the Fund earnings
before interest, taxes, depreciation and amortization (EBITDA) of approximately
$97 million per year on average over a long term planning horizon. Certain of
the Assets are expected to have tax pools available for accelerated deductions,
providing further early-year cash benefits to the Fund.
Benefits of the Transaction
"The prospect of acquiring this portfolio of assets is exciting," noted John
Whelen, President, Enbridge Income Fund Holdings Inc. "We believe that these
facilities would be a great fit for the Fund. They are all underpinned by
long-term fixed price contracts and none have direct exposure to commodity price
or foreign exchange fluctuations. If approved by shareholders, the Transaction
would substantially scale up and further diversify the Fund's sources of low
risk cash flow, reinforcing its value to investors seeking a steady and
predictable payout of cash flow from low-risk energy infrastructure assets. On a
pro-forma basis, after giving effect to the Transaction, the percentage of total
distributable cash flow generated by our Crude Oil Transportation and Storage
business would be approximately 40%, while Green Power and Gas Transmission
would be approximately 40% and 20%, respectively.
"The Transaction is expected to be accretive to the Company's distributable cash
flow immediately and by approximately 4% per share on a sustainable basis," said
Mr. Whelen.
Financing of the Transaction by the Fund
The Fund intends to finance the Transaction through a combination of debt and
equity, as set out in the table below.
Fund Sources of Financing
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(millions of Canadian dollars)
Fund trust units issued to the Company (11,983,000 units at $23.15 per
unit) $ 277
ECT preferred units issued to Enbridge (13,159,000 units at $23.15 per
unit) 305
Loan from Enbridge 582
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1,164
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Equity financing for the acquisition of the Assets is expected to be provided
through the issuance of trust units of the Fund to the Company and preferred
units of Enbridge Commercial Trust ("ECT") to Enbridge immediately prior to
closing. All of the Fund trust units and the ECT preferred units will be issued
at a price of $23.15 per unit. In addition, Enbridge will provide the Fund with
a $582 million unsecured, subordinated 10 year loan at a fixed interest rate of
5% per annum. The loan may be prepaid at any time without penalty or bonus.
Financing of the Transaction by the Company
The Company will finance its subscription for Fund trust units through the
issuance of $222.2 million of Subscription Receipts pursuant to a public
offering and the issuance of $55.2 million of common shares of the Company
("Common Shares") to Enbridge on a private placement basis, which will enable
Enbridge to maintain its 19.9% interest in the Company. The 2,385,000 Common
Shares will be issued to Enbridge immediately prior to the closing of the
Transaction at a price of $23.15 per Common Share.
The Company has agreed to sell an aggregate of 9,597,000 Subscription Receipts
to a syndicate led by RBC Capital Markets and CIBC World Markets Inc. on a
bought deal basis at a price of $23.15 per Subscription Receipt for gross
proceeds of $222.2 million (the "Offering").
If the Transaction proceeds and upon satisfaction of certain escrow release
conditions, immediately prior to the closing of the Transaction, each holder of
Subscription Receipts will automatically receive one Common Share for each
Subscription Receipt held, without further action or additional consideration on
the part of the holder, together with an amount equal to any dividends paid to
holders of the Common Shares pursuant to a record date occurring on or after the
date of the underwriting agreement in respect of the Offering and the day
immediately prior to the closing of the Transaction, net of any applicable
withholding taxes. Any dividend declared but not yet paid on the day prior to
the closing of the Transaction will be paid to such Subscription Receipt holders
at the time of the payment of such dividend to shareholders of the Company.
The proceeds from the sale of Subscription Receipts will be held by an escrow
agent and invested in short-term obligations of, or guaranteed by, the
Government of Canada (and other approved investments) until the earlier of the
closing of the Transaction and February 28, 2013 (the "Termination Date"). If
the closing of the Transaction does not occur on or before the Termination Date,
or is terminated at any earlier time, the Subscription Receipts will be
terminated and cancelled, and the full purchase price of the Subscription
Receipts will be returned to holders of Subscription Receipts, together with
their pro rata portion of any interest earned thereon.
The Subscription Receipts will be offered in all of the provinces of Canada
pursuant to a short form prospectus. Closing of the Offering is subject to
certain conditions, including receipt of the approval of the Toronto Stock
Exchange and all other necessary regulatory approvals.
Effect of the Transaction on Ownership of the Fund and the Company
If the Transaction is completed, the Company's holdings of Fund trust units will
increase from 80.7% to 84.5% of the issued and outstanding Fund trust units and
Enbridge's holdings of Fund trust units will be reduced from 19.3% to 15.5%.
Enbridge will continue to own all of the issued and outstanding ECT preferred
units, which are convertible at any time and from time to time into Fund trust
units on a 1:1 basis. Enbridge's economic interest in the Fund as a whole,
represented by its direct ownership of Fund trust units and ECT preferred units,
as well as its 19.9% interest of Common Shares, will be reduced from 69.2% to
67.8%.
Special Committee and Board Recommendation
As the acquisition of the Assets would constitute a "related party transaction"
under applicable securities laws, a special committee consisting of independent
trustees of ECT ("Special Committee") was formed to review the Assets and
determine if it was feasible to acquire the Assets from Enbridge. The Special
Committee retained independent technical, legal, tax and financial advisors,
including BMO Capital Markets ("BMO") to provide a valuation of the Assets and a
fairness opinion, which concluded that the consideration payable for the Assets
is fair, from a financial point of view, to the Fund, ECT and the Company.
Based upon, among other things, its evaluation and advice from its advisors, the
Special Committee negotiated the terms of the Transaction with Enbridge and
recommended the board of trustees of ECT ("the ECT Board") approve the indirect
acquisition by the Fund of the entities which own the Assets and the related
transactions contemplated by the purchase and sale agreement. The ECT Board
(with trustees who are also directors or officers of Enbridge abstaining)
considered the recommendation of the Special Committee, the BMO valuation and
fairness opinion, and the advice of the independent advisors retained by the
Special Committee, and concluded that the Transaction is in the best interests
of the Fund, ECT, and their respective unitholders (other than Enbridge) and
unanimously approved the Transaction.
The board of directors of the Company (the "Board") then considered the
Company's participation in the Transaction, the Special Committee
recommendation, the ECT Board approval and the BMO valuation and fairness
opinion. The Board (with directors who are also directors or officers of
Enbridge abstaining) concluded that the Transaction is in the best interests of
the Company and fair to the Company, and unanimously recommended approval of the
Transaction by its shareholders.
Special Meeting of Shareholders
The Company will seek the approval of its shareholders excluding Enbridge and
certain of its affiliates which are related parties or joint actors at a special
meeting (the "Meeting") called to consider the Transaction, which will be held
on December 7, 2012. Shareholders of record on November 8, 2012 will be entitled
to attend and vote at the Meeting. Subject to receipt of regulatory and third
party approvals, it is anticipated that the Transaction will close as soon as
practicable following the requisite approval of the Transaction.
To assist shareholders in their assessment of the Transaction, the BMO valuation
and fairness opinion, which were among a number of factors taken into
consideration by the Board in recommending approval of the Transaction, will be
summarized and published in the Management Information Circular ("Circular") to
be mailed in respect of the Meeting. Shareholders are encouraged to carefully
review and consider the Circular. The Circular, valuation and fairness opinion
will be filed on SEDAR at www.sedar.com concurrent with the mailing of the
materials for the Meeting.
Asset Profiles
Hardisty Contract Terminals
Location - Hardisty, Alberta, adjacent to Enbridge's Mainline System
operational terminal and the junction of various regional
receipt and export pipelines
Capacity - 19 above ground tanks, approximately 7.5 million barrels of
storage capacity
In Service - 2009
Storage - Fully contracted take-or-pay contracts, with approximately
Contracts 80% of revenue from fixed fee contracts, with remaining
terms ranging from 17 to 24 years, the remainder of the
revenue is derived from tank injection and pump out fees
which are also stable.
Land Rights - Lands owned
Operator - Enbridge
Hardisty Storage Caverns
Location - Hardisty, Alberta, adjacent to the Hardisty Contract
Terminals
Capacity - Four below ground storage caverns and two above ground
buffer tanks, approximately 3.5 million barrels of storage
capacity
In Service - 2003
Storage - Fully contracted take-or-pay contracts with a remaining
Contracts term of approximately 23 years, virtually all revenue is
from fixed fee contracts.
Land Rights - Three caverns on owned lands, West cavern under lease which
expires May 2, 2031
Operator - Enbridge
Greenwich Wind
Location - North shore of Lake Superior near Thunder Bay, Ontario
Capacity - 98.9 MW
Technology
(turbines) - 43 Siemens Energy SWT 2.3-101
In Service - October 2011
Energy
Purchaser - OPA (PPA)
PPA Term - 20 years from In Service, terminating October 2031
Land Leases - 25 year Crown lease expiring December 31, 2036 with 15 year
renewal option
O&M Contract - 5 year fixed price agreement with Siemens
Operator - Enbridge
Amherstburg Solar
Location - 89 miles south of Sarnia, Ontario
Capacity (AC) - 15 MW (10 MW and 5 MW facilities)
Technology - Cadmium telluride thin film PV modules (First Solar)
In Service - August 2011
Energy
Purchaser - OPA (RESOP Agreements)
PPA Term - 20 years from In Service, terminating August 15, 2031
Land Leases - 25 year lease with option to renew for 4 further terms of 5
years
O&M Contract - First Solar - 10 year agreement with option to renew for a
further 10 years
Operator - Enbridge
Tilbury Solar
Location - 65 miles south of Sarnia, Ontario
Capacity (AC) - 5 MW
Technology - Redeployed cadmium telluride thin film PV modules (First
Solar), with 25 year annual energy output guarantee
In Service - December 22, 2010
Energy
Purchaser - OPA (RESOP Agreement)
PPA Term - 20 years from In Service, terminating December 20, 2030
Land Rights - Lands owned by Tilbury LP
O&M Contract - First Solar - 10 year agreement, with an option to renew
for a further 15 years
Operator - Enbridge
ABOUT ENBRIDGE INCOME FUND HOLDINGS INC.
Enbridge Income Fund Holdings Inc. is a publicly traded corporation. The
Company, through its investment in Enbridge Income Fund, has an interest in high
quality, low risk energy infrastructure assets. The Fund's assets include a 50%
interest in the Canadian segment of the Alliance Pipeline, a 100% interest in
the various pipelines comprising the Saskatchewan System, and interests in more
than 400 megawatts of renewable and alternative power generation capacity in
Alberta and Ontario. Information about Enbridge Income Fund Holdings Inc. is
available on the Company's website at www.enbridgeincomefund.com.
FORWARD LOOKING INFORMATION
Certain information provided in this news release constitute forward-looking
statements, and in particular, statements regarding the performance of the Fund,
the performance of the Assets and the benefits of the Transaction. Forward
looking statements are typically identified by words such as "contemplate",
"anticipate", "expect", "project", "estimate", "forecast" and similar words
suggesting future outcomes or statements regarding an outlook. Although the
Company believes that these statements are based on information and assumptions
which are current, reasonable and complete, these statements and assumptions are
necessarily subject to a variety of risks and uncertainties pertaining to
operating performance, regulatory parameters, weather, economic conditions and
commodity prices. You can find a discussion of those risks and uncertainties in
our Canadian securities filings. While the Company makes these forward-looking
statements in good faith, should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results,
including with respect to expected earnings and associated per share amounts, or
estimated future dividends, may vary significantly from those expected. Readers
are cautioned against placing undue reliance on forward-looking statements.
Except as may be required by applicable securities laws, the Company assumes no
obligation to publicly update or revise any forward-looking statements made
herein or otherwise, whether as a result of new information, future events or
otherwise.
NON-GAAP MEASURES
This News Release contains references to the expected EBITDA to be generated by
the crude oil storage and renewable energy assets. EBITDA is defined as earnings
before interest, taxes, depreciation and amortization. Management believes that
EBITDA is a useful supplemental measure as it provides an indication of the
crude oil storage and renewable energy assets' operating results prior to
consideration of how those activities may be financed or how the results may be
taxed. This measure has been described in this document to provide shareholders
and potential investors with additional information regarding the expected
contribution of the crude oil storage and renewable energy assets to the Fund's
operating results. EBITDA is not a measure that has standardized meaning
prescribed by Canadian Generally Accepted Accounting Principles (GAAP) and is
not considered a GAAP measure. Therefore, this measure may not be comparable
with similar measures presented by other issuers.
This press release shall not constitute an offer to sell, or the solicitation of
an offer to buy, any securities in any jurisdiction. The Subscription Receipts
being offered have not been and will not be registered under the U.S. Securities
Act of 1933 and state securities laws.
FOR FURTHER INFORMATION PLEASE CONTACT:
Enbridge Income Fund Holdings Inc.
Jennifer Varey
Media
(888) 992-0997 / (403) 508-6563
jennifer.varey@enbridge.com
Enbridge Income Fund Holdings Inc.
Teri Majer
Investment Community
(403) 508-3185
teri.majer@enbridge.com
www.enbridgeincomefund.com
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