Could ENB shift its business model...for shits and giggles ENB is faced with 3 political decisions in the coming days and months that have very little or nothing to do with actual business:
1) The outcome of a Line 3 Appeal expected shortly of a decision made by the MPCA that environmentalists say should be overturned for various reasons that are as frivolous as all the other appeals that have been swept aside
2) The CER decision on ENB's Mainline request for fixed contracts like TMPL
3) Gretchen's crusade against that dirty oil Canadian company
The outcome of 1) is pretty much in the bag in favour of ENB. The outcome of 2) is actually the most important decision imo as long term contracts for 90% of the volume for 20 years sets up my theory that it could launch ENB in a new direction. No matter what happens with the decsion ENB is going to have demand for capacity that will likely outstrip supply for years to come. 3) The recent Colonial Energy hack and the fact that Biden didn't mention Gretchen's name when he recently Michigan pretty much tells us the outcome for Line 5.
The potential for a shift in ENB business going forward
Let's assume for the sake of arguement that Line 3 gets completed without a hitch, ENB is allowed to employ "fixed contracts" as a denial would be very prejudicial against ENB and the CER has never made such a ruling in the past, and ENB gets approval to start on the tunnel under the Strait of Mackinac (or ENB has to wait until Gretchen gets bounced from office late next year while the issue remains tied up in court).
Armed with the certainty of future cash flows from the decisions, I have to wonder if ENB might consider selling it liquids pipeline business.
The sale last week of ENB's stake in Noverco to the Caisse for 29x earnings sheds light on the fact that the market is clearly not giving ENB credit for its assets. In 2018, ENB sold off $8 billion of assets at prices that ENB was very happy with.
Let's say ENB does want to focus on alternative fuels, which includes natural gas. Would they consider selling off their liquids pipelines?
While the market for liquid pipelines won't generate the kind of multiples that the Noverco gas distribution deal provided, if ENB was armed with 20 year fixed contracts for the Mainline and the political barriers were removed (especially if the assets were sold to an American company), it is not difficult to envision a strong market for the Mainline.
Private equity firms have a nose for numbers. Of course they would take ESG issues into consideration, but 20 year fixed contracts as a minimum starting position would provide for busy calculators.
Blackrock is the biggest dog on the street, but they probably wouldn't be interested as Laurence Fink is a leader in the push for ESG. ENB is working the ESG angle pretty hard, but probably not enough for Fink.
That leaves a couple of monster sized leveraged buyout specialists in The Carlyle Group and KKR. Pipelines can be leveraged in a big way because the returns are regulated and guaranteed. Carlyle and KKR wouldn't be overly concerned with political pressure as they would just quietly go about their business...and pay ENB a pantload of money.
ENB has committed to spend $4 billion annually on CAPEX in the coming years and none of that money is targeted to liquid pipelines. That in and of itself tells me where ENB is headed.
With the value of pipe in the ground escalating due to it becoming virtually impossible to build interstate pipelines, it seems like a logical move for ENB to sell the Mainline and redeploy the funds into nat gas and renewables.
ENB could set up as an American business entity and receive fair treatment rather than getting abused by America like both ENB and TRP have been in the past.
If ENB could pull this off, I expect shareholders would be incredibly well rewarded.
I have never heard or read one word about this idea from ENB so this is just me having fun with figures which is similar to me working on the idea of an Eichel for Marner trade.