Enbridge to enter into JV connecting Permian Basin natural gas supply to growing LNG and US Gulf Coast demand

Highlights

• Acquiring a meaningful, strategic equity interest in the JV.
• Immediately accretive to DCF per share, with ~90% contracted cash flows.
• Receiving immediate, recurring, and growing cash flow from operating assets with minimal commodity exposure.
• Optimises balance sheet by increasing EBITDA and reducing Enbridge's share of future Rio Bravo pipeline project CAPEX proportional to its economic interest in that project.
• Embedded organic expansion opportunities provides attractive growth options and diversifies offtake.
• The JV will be owned by WhiteWater/I Squared (50.6%), MPLX (30.4%), and Enbridge (19%) and will include the following assets:
  • 100% interest in Whistler pipeline, a ~450-mile, 42-in. intrastate pipeline transporting natural gas from an interconnect with the Waha Header in the Permian Basin to Agua Dulce, Texas, near the starting point of the proposed Rio Bravo pipeline.
  • 100% interest in the Rio Bravo pipeline project, ~137-miles of new 42-in. and 48-in. pipelines transporting natural gas from the Agua Dulce supply area to NextDecade's Rio Grande LNG project in Brownsville, Texas.
  • 70% interest in ADCC pipeline, a ~40-mile, 42-in. proposed intrastate pipeline designed to transport 1.7 billion ft³/d of natural gas from the terminus of the Whistler pipeline in Agua Dulce, Texas to Cheniere's Corpus Christi LNG export facility (the pipeline is expected to be in-service in 3Q24 and is expandable up to 2.5 billion ft³/d).
  • 50% interest in Waha Gas Storage, a ~2 billion ft³ gas storage cavern facility, with additional topside facilities capable of injection and withdrawal.

Approximately 98% of capacity is contracted under long-term, take-or-pay contracts with an average contract length greater than 10 years. Approximately 90% of counterparties are investment grade and include leading operators in the Permian Basin.

Upon closing of the transaction, Enbridge will contribute its wholly-owned Rio Bravo pipeline project and ~US$350 million in cash to the joint venture, and will fund the first ~US$150 million of the post-closing capex to complete the Rio Bravo pipeline project. Enbridge will receive a 19% equity interest in the joint venture and retain a 25% economic interest in the Rio Bravo pipeline project (subject to certain redemption rights of the joint venture partners).

“Acquiring a meaningful equity interest in an integrated Permian natural gas pipeline and storage network that is directly connected to our existing infrastructure at Agua Dulce through this JV with WhiteWater/I Squared and MPLX is very exciting. This is a great way to enhance our super-system approach, bringing energy supply to places where it is needed most and providing last mile connectivity to domestic and export customers,” said Cynthia Hansen, EVP and President, Gas Transmission and Midstream of Enbridge.

Enbridge will be contributing its Rio Bravo pipeline project, which will extend the joint venture's current infrastructure to serve LNG and other customers on the USGC. Enbridge's share of the post-closing CAPEX to complete the Rio Bravo pipeline project will be 100% of the first ~US$150 million and, thereafter, proportionate to its aggregate economic interest in that project.

This transaction is expected to unlock future growth opportunities for Enbridge to connect sustainable natural gas production to export markets as part of its USGC strategy.

“The transaction optimises our investment capacity by increasing the efficiency of our capital. We will begin receiving immediate cash flow and will share in future growth opportunities,” added Pat Murray, EVP and Chief Financial Officer of Enbridge. “Having access to new Permian natural gas infrastructure enhances and increases the visibility of our medium-term growth outlook, while being accretive to our balance sheet.”

Closing is expected in 2Q24, subject to receipt of required regulatory approvals and satisfaction of other customary closing conditions.

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/29032024/enbridge-to-enter-into-jv-connecting-permian-basin-natural-gas-supply-to-growing-lng-and-us-gulf-coast-demand/