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TORONTO (miningweekly.com) – Oil and gas infrastructure giant Enbridge this week announced that it had finalised the $7.5-billion cost estimate for its largest capital project ever, the Line 3 Replacement (L3R) programme.
The L3R project entails replacing all segments of Line 3 between Hardisty, Alberta, and Superior, Wisconsin, with new pipe using the latest available high-strength steel and coating technology.
Enbridge also announced that it had entered into an agreement with RBC Capital Markets and Credit Suisse (the underwriters) to issue 7.86-million treasury common shares on a bought deal basis, at a price of C$50.90 each, for gross proceeds of about C$400-million, to support the additional funding required for its capital programme.
The final cost estimate for the L3R programme brought the company’s enterprise-wide growth capital programme to $42-billion to be in service by 2017, of which $37-billion was commercially secured with “good progress” being made on the remaining $5-billion, executive VP and CFO Richard Bird said.
The company had in March secured support from its mainline shippers to levy an international joint-tariff (IJT) surcharge to cover the investment. The IJT surcharge would be adjusted to reflect 75% of an increase in the project’s costs, mainly on the Canadian side.
The Canadian portion of the L3R programme was estimated to cost about C$4.9-billion and the US portion was estimated to cost about $2.6-billion. The US programme would be jointly funded by Enbridge and Enbridge Energy Partners (EEP) at participation levels to be finalised and approved by a special committee of EEP’s board.
“The L3R programme is Enbridge's largest-ever capital programme. It will improve the reliability of our system for the benefit of our shippers and Enbridge. The IJT surcharge is designed to provide Enbridge with a solid return on its incremental investment, expected to be in the low double-digits range,” Enbridge president for liquids pipelines Guy Jarvis said.
EEP president Mark Maki added that the US L3R programme would provide a large, attractive investment opportunity for the company. “Our plans to release capital from our natural-gas processing business through drop downs of additional interests to Midcoast Energy Partners is anticipated to enable EEP to undertake a significant participation in the programme while reducing the need for external equity funding,” he said.
On Tuesday, the Canadian federal government accepted an independent panel’s recommendation to approve the C$6.5-billion Enbridge Northern Gateway project, subject to 209 conditions.