Author Topic: ENB - Enbridge  (Read 13987 times)

JRM

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Re: Enbridge - ENB
« Reply #20 on: March 15, 2018, 03:57:11 PM »
I guess it took Mr. Market a little bit of time to realize that Kinder Morgan isn't an MLP anymore.

But KMI still competes with MLPs. How can they charge more for regulated assets just because they have to pay tax and other entities don’t. This does not make sense.

The advantage is how they are allowed to spend their DCF.  They are able to more optimally allocate capital compared to an MLP like Enbridge. 


Spekulatius

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Re: Enbridge - ENB
« Reply #21 on: March 15, 2018, 04:05:25 PM »
I guess it took Mr. Market a little bit of time to realize that Kinder Morgan isn't an MLP anymore.

But KMI still competes with MLPs. How can they charge more for regulated assets just because they have to pay tax and other entities don’t. This does not make sense.

The advantage is how they are allowed to spend their DCF.  They are able to more optimally allocate capital compared to an MLP like Enbridge.

ENB is not an MLP either - they own and sponsor MLPs. They can and do allocate their capital either in an MLP umbrella or with the C-Corp mothership.

KMI and other C-Corp directly compete with MLPs for new projects. My guess is that this decision to adjust pricing for new projects based on taxes (which are often theoretical and non- cash anyways) has so many unintended and negative consequences, they it will not stand, or that the incorporation will change. Theoretically and MLP example could run a C-Corp sub to new projects to house, so they can charge more, since taxes are paid for by the customer. If this makes any sense, I will rest may case.
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Uccmal

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Re: Enbridge - ENB
« Reply #22 on: March 16, 2018, 06:39:47 AM »
Enbridge Statement:

Enbridge Inc. does not expect a material consolidated financial impact as a result of FERC Revised Policy Statements



https://www.enbridge.com/media-center/news/details?id=123500
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Viking

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Re: Enbridge - ENB
« Reply #23 on: March 16, 2018, 03:00:00 PM »
Very interesting to see the reaction in ENB stock today to the press release. The stock started higher and then sold off later in the day to end roughly flat to yesterday’s closing price.

Does Mr Market not believe management? (That the recent FERC ruling will not be material)
Or is the issue rising interest rates? The utility sector is under pressure and this may continue if rates continue higher. ENB also carries a very large debt load.

gokou3

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Re: Enbridge - ENB
« Reply #24 on: March 16, 2018, 03:19:16 PM »
Very interesting to see the reaction in ENB stock today to the press release. The stock started higher and then sold off later in the day to end roughly flat to yesterday’s closing price.

Does Mr Market not believe management? (That the recent FERC ruling will not be material)
Or is the issue rising interest rates? The utility sector is under pressure and this may continue if rates continue higher. ENB also carries a very large debt load.
I think ENB is helped by this news:

Minnesota regulators OK environmental review for Enbridge pipeline
https://seekingalpha.com/news/3339981-minnesota-regulators-ok-environmental-review-enbridge-pipeline


Not an approval per se, but it gives a more certain timeline on the final approval decision.  Note also ENF in which the Line 3 business is housed rose even more.

Uccmal

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Re: Enbridge - ENB
« Reply #25 on: March 17, 2018, 05:52:13 AM »
Very interesting to see the reaction in ENB stock today to the press release. The stock started higher and then sold off later in the day to end roughly flat to yesterday’s closing price.

Does Mr Market not believe management? (That the recent FERC ruling will not be material)
Or is the issue rising interest rates? The utility sector is under pressure and this may continue if rates continue higher. ENB also carries a very large debt load.

As a shareholder in Enbridge my major concern is the dividend being maintained and increased at the promised rate of 10%.  Same applies to ENF which I have recently bought. 

Therefore I want to see the following:

1) The debt come down.  There is no need to rush.  I would like to see the floating rate debt reduced and the nearest term maturities pushed out further.  The debt is manageable today but may not be manageable in a significantly higher rate environment.

2) All permitting and construction started on Line 3.  The faster they get shovels in the ground the less likely it is that they can be sued out of operation. 

3) A continuation of their buildout program without incurring too much additional debt (most of these projects are within the Spectra portfolio). 

A comment on higher interest rates.  We are all assuming interest rates will go higher and higher to some mythical number, perhaps 4 to 6% on ten year treasuries.  Personally, I think these worries are overblown.  I dont think rates can go much higher without tipping everything into a recession.  I think worry about rates is the primary reason why the utilities, in general, are selling off.  There is also a lag time.  Rates could go way up and come all the way back down before Enbridge and others use up their interest rate hedges and have to issue more debt. 

I think my concerns are the same concerns that the 'market' has about the stock.  The interest rate concern is affecting the entire utility sector. 

As an aside.  1/3 of Enbridge investors are enrolled in the DRIP.  The actual divdends payed out are 3.0 B. not 4.5 B which is what is used to calculate the payout ratio.  i.e. the cash payout ratio is lower than the accounting payout ratio. 

If we can stand to wait for the debt to be reduced and Line 3 to be permitted and begin construction in Minnesota then the stock should reward us.  In the meantime a 6% return on my purchase price, or 8.3 %  in the case of ENF is bearable.

« Last Edit: March 17, 2018, 06:02:05 AM by Uccmal »
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Spekulatius

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Re: ENB - Enbridge
« Reply #26 on: March 17, 2018, 06:03:22 AM »
The EBITDA/EV ratio is going to come down (and has already come down) when all these assets that they have been building start to flow product and cash.  It is pretty much a given that their debt ratios will improve. Most of their fees are index to inflation as well. There will be some lag, but I think they are well covered when inflation (and interest rates) rise. Same with utilities.

I also think they will fold back EEP into ENB with an exchange in units for stock. EEP after the last tax ruling from the FERC cannot play their role as a funding vehicle any more and folding it back in a C-Corp would be directly acreditive. This would also serve the simplification narrative.
« Last Edit: March 17, 2018, 06:05:56 AM by Spekulatius »
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Uccmal

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Re: ENB - Enbridge
« Reply #28 on: April 24, 2018, 02:59:12 PM »
https://www.theglobeandmail.com/business/industry-news/energy-and-resources/article-enbridges-proposed-line-3-pipeline-route-through-minnesota-rejected/

A bit misleading.  The alternate route was rejected.  The judge favoured the route that Line 3 presently goes through.  This may present some obstacles in terms of downtime but these guys have been building pipe for generations.  I am sure they will find a way to minimize downtime.  This sort of solidifies the final acceptance from Minnesota.  The Minnesota Public Utilities Commission will approve one route or other in June and construction will begin.  It will require Enbridge to negotiate a payoff to two native groups for the timespan beyond 2029. 
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Ghost

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