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Enbridge (ENB) Acquires Interest in E.ON's Wind Portfolio

Zacks Equity Research

Enbridge Inc. (ENB) announced that it has acquired an 80% interest in a portfolio of two wind farms in the U.S. from European power and gas company, E.ON. Total purchase consideration for the acquisitions was approximately $650 million.

Per the transaction, Enbridge acquired interests in the 203-megawatt (MW) Magic Valley 1 wind farm near Harligen, TX and the 202-MW Wildcat 1 wind farm near Elwood, IN. Both farms are operational and came into service in 2012. These are located in areas with favourable wind regimes and when combined, provide enough clean power to more than 120,000 households.

Under the terms of the agreement, E.ON retained a 20% interest and remains the operator of the wind farms. E.ON currently operates more than 2,700 MW of renewable capacity in the U.S. and is a leader in the American wind industry. The acquisition expands Enbridge’s renewable platform in the U.S., complements its existing wind presence in Texas and strengthens its foothold in Indiana’s renewable market.

Enbridge has invested approximately $3 billion in renewable energy assets over the past five years. The acquisition of these two wind farms brings Enbridge's total net generating capacity of green power projects to more than 1,600 MW. This comes in good stead with the company’s plans to double its existing capacity by 2018.

Canada-based Enbridge Inc. is a leading energy transporter and distributor company. As a transporter, Enbridge operates the world's longest crude oil and liquids pipeline system in Canada and the U.S. The company is also involved in natural gas transmission and midstream businesses in other countries. As a distributor, Enbridge owns and operates Canada's largest natural gas distribution company. It provides distribution services in Ontario, Quebec, New Brunswick and New York.

We remain apprehensive about the company’s midstream natural gas business, which is sensitive to changes in natural gas supply-demand fundamentals and commodity cycles associated with gas processing margins.

Enbridge currently carries a Zacks Rank #4 (Sell). Better-ranked players in the energy sector include Cheniere Energy Partners LP. (CQP), Murphy USA Inc. (MUSA) and Sandridge Mississippian Trust II (SDR). All these stocks sport a Zacks Rank #1 (Strong Buy).

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