Canadian midstream company Enbridge announced a CA$3.1 billion ($US2.29 billion) agreement to sell its interests in the Alliance pipeline and Aux Sable, which operates NGL fractionation facilities in Canada and the U.S., to fellow Canadian pipeline company Pembina on Dec. 13.

Enbridge owns 50% of the Alliance pipeline, a 2,391-mile natural gas line that runs from Northwestern Canada to Illinois. The line has a capacity of about 1.7 Bcf/d. Enbridge owns a 42.7% stake in Aux Sable, which has extraction rights on the Alliance pipeline.

Pembina is the operator of the Aux Sable facilities and will become the operator of the Alliance pipeline when the deal is approved. The deal has an effective date of Jan. 1, 2024. Closing is expected in the first half of 2024, Enbridge said.

"From an asset standpoint, the assets are highly contracted and highly utilized, with ARC Resources and Ovintiv as the largest customers on Alliance and total utilization remaining above 90%" over the past three years," TPH Analyst Zack Van Everen wrote in a Dec. 14 commentary. "On a macro level, sustained WCSB supply growth resulting from TMX and LNG Canada projects, coupled with higher U.S. demand from upcoming projects in the USGC LNG corridor, Alliance should remain highly utilized in the foreseeable future." 

The cash portion of the deal will be funded through the net proceeds of a CA$1.1 billion offering of subscription receipts, amounts drawn under Pembina’s existing credit facilities and cash on hand, Pembina said, adding that the deal is “leverage neutral” to its balance sheet.

Pembina stated the deal was in line with the company’s strategic goals, as it consolidated several assets of “critical and highly differentiated North American energy infrastructure,” according to the release. It also strengthens the company’s position in the Western Canadian Sedimentary Basin.

“Alliance and Aux Sable are world-class energy infrastructure assets and increasing our ownership in them will further strengthen our growing franchise,” said Scott Burrows, Pembina’s President and CEO.

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