Update on Infrastructure

Merger Proposed by Enbridge Inc & Spectra Energy Corp.

September 9, 2016

Hopefully you have heard about our long-term thesis of Infrastructure as an asset class through our seminars or from a previous blog Why Infrastructure Makes Sense. This theme continues to expand as this week it was announced that Enbridge Inc agreed to buy Houston’s Spectra Energy Corp in an all-stock deal valued at about $28 billion. Thereby creating North American’s largest energy-infrastructure company.

Your Exposure:

We access Infrastructure in your portfolios directly through a variety of high conviction investment managers. One of which, The Russell Global Infrastructure Pool had exposure to both Enbridge and Spectra and saw both stocks move higher as a result of the news.

Russell Global Infrastructure: Top Holdings

Russell Global Infrastructure

Source: Morningstar

Some thoughts from Nuveen Asset Management, a sub-advisor on the Russell Pool:

  • There is sound strategic rationale for the deal. Strong overlap of secondary businesses between the companies should facilitate benefits from consolidation and scale. Some cost savings and additional optionality by bringing in Spectra’s Express-Platte crude system into ENB’s dominant liquids franchise as well.
  • In the short-term, there are no doubt incremental buyers as index weights are increased and the size/scale of combined entity increases demand from US investors who may not have looked at ENB before.
  • Longer-term, the size, scale, quality of assets, and yield growth will make this a sticky core holding and one which deserves a core place in the portfolio.

We continue to see this asset class as a key piece of your portfolio going forward for its growth, income potential added diversification properties.

Sincerely, Pete & The Wooding Group