Enbridge Inc equity offering seen as catalyst

Enbrige Inc.’s $2.3 billion equity offering has been viewed as a sensible move during challenging times for many energy-related companies.

The company also reduced its dividend growth forecast to Ten to twelve per cent between 2015 and 2019, from 14 to 16 per cent previously, an expression of their more cautious outlook.

Calling the offering a “key catalyst,” J.P. Morgan analyst Jeremy Tonet noted it can serve as an essential step to de-risk Enbridge’s balance sheet.

He also considers the revised dividend outlook prudent, as it now only incorporates commercially secured projects.

Tonet added the stock to J.P. Morgan’s analyst focus list like a top growth pick, highlighting its de-risked outlook, discounted full-cycle valuation, along with a 4.5 per cent yield that’s “paying investors to wait.”

The analyst noticed that the equity offering removes near-term financing needs for Enbridge and its family of companies.

These concerns were reflected in Enbridge Energy Partners L.P.’s 14 per cent yield and also the sharp decline Enbridge Income Fund Holdings Inc. continues to be digesting from 2015.

Following the offering, Enbridge expects to fufill the family’s equity funding requirements through 2017.

“The dimensions and timing of issuance came larger and earlier than we expected, de-risking near-term equity financing requirements in a highly uncertain capital markets environment for many participants,” Tonet told clients,

He also noted that Enbridge retained alternative financing and joint venture-level financing levers for any “rainier day.”