Highlights: Magnetar Capital's Position Increases from 4Q14 13F (Part 7 of 7)
(Continued from Part 6)
Magnetar and Enbridge
In the fourth quarter, Magnetar increased its position in Enbridge (ENB) by purchasing 1.1 million shares in the company. It represents 1.6% of the fund’s 4Q14 portfolio.
Overview of Enbridge
Enbridge transports and distributes crude oil and natural gas. It’s also engaged in natural gas gathering, transmission, midstream businesses, and power transmission. It mainly operates in Canada and the US. It has five segments:
- Liquids Pipelines
- Gas Distribution
- Gas Pipelines, Processing, and Energy Services
- Sponsored Investments
- Corporate
Executed $3 billion in drop downs
In September 2014, Enbridge announced transfers of natural gas and pipeline interests worth $3 billion to two of its affiliates. First, it transferred 66.7% of its interest in the Alberta Clipper Pipeline to Enbridge Energy Partners (EEP) in a cash-equity deal valued at ~$1 billion.
The other drop down entailed transferring ~$2 billion in natural gas and pipeline interests to Enbridge Income Fund Holdings (ENF). According to the deal, Enbridge received $421 million in cash upfront, $461 million as preferred shares in a trust of Enbridge Income Fund Holdings, and the balance in the form of long-term notes payable. Both transactions are considered to benefit Enbridge and its affiliates.
Restructuring plans
In December 2014, Enbridge announced that it would transfer its Canadian Liquid Pipelines business and some of its renewable energy assets worth $32 billion—carrying value of $17 billion—and related commercially secured growth capital program of $15 billion to Enbridge Income Fund Holdings. While Enbridge is expected to retain control of these assets, the deal is expected to create value primarily through lowering Enbridge’s risk profile and cost of capital.
4Q14 performance
In 4Q14, revenue was up 6% YoY (year-over-year) to $8.8 billion—driven by higher transportation revenue. Canadian Mainland deliveries averaged 2,066 thousand barrels per day versus 1,827 thousand barrels per day in 4Q13. Due to higher revenue and lower commodity costs, Enbridge clocked a net profit of $88 million—compared to a loss of $267 million in 4Q13.
Enbridge forms 5.15% of the Alerian Energy Infrastructure ETF (ENFR) and 2.02% of the First Trust North American Energy Infrastructure Fund (EMLP). Enbridge has the highest weight in ENFR. ENFR’s other top holdings are TransCanada (TRP), Kinder Morgan (KMI), and Plains Group Holdings (PAGP). They account for 4.83%, 4.62%, and 4.59% of ENFR, respectively.
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