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Enbridge Inc. (NYSE:ENB) penned a definitive deal with WhiteWater/I Squared Capital and MPLX LP (NYSE:MPLX) to form a joint venture to construct and operate natural gas pipeline and storage assets connecting Permian Basin natural gas supply to growing LNG and U.S. Gulf Coast (USGC) demand.
The joint venture, which will be owned by WhiteWater/I Squared (50.6%), MPLX (30.4%), and Enbridge (19.0%), includes a 100% stake in Whistler pipeline, Rio Bravo pipeline project, 70% interest in ADCC pipeline and 50% interest in Waha Gas Storage assets.
Around 98% of capacity is contracted under long-term, with an average contract length of over ten years, and about 90% of counterparties are investment grade and include leading operators in the Permian Basin.
The deal is expected to be immediately accretive to Enbridge’s DCF per share, with ~90% contracted cash flows.
The joint venture is projected to optimize its balance sheet by boosting EBITDA and reducing Enbridge’s share of future Rio Bravo pipeline project capex proportional to its economic interest.
The transaction is projected to close in the second quarter of 2024, subject to receipt of required regulatory approvals and other customary closing conditions.
Poat deal-closure, Enbridge will contribute its wholly-owned Rio Bravo pipeline project and ~$350 million in cash to the joint venture and will fund the first ~$150 million of the post-closing capital expenditure to complete the Rio Bravo pipeline project.
Read: Pipeline Giant Enbridge Backs 2024 Guidance Post Q4 Results: Details
Enbridge will get a 19% equity stake 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,” commented Cynthia Hansen, EVP and President, Gas Transmission and Midstream of Enbridge.
Also Read: Enbridge Doubles Down On Gray Oak Pipeline Expansion In Texas: Report
Price Action: ENB shares are down 0.43% at $35.78 on the last check Tuesday.
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