Enbridge: CAD 400 Million in Additional Natural Gas Storage Makes Room for LNG Opportunities

Enbridge ENB announced it plans to acquire Aitken Creek Natural Gas Storage for CAD 400 million. The size of the deal means that it is immaterial to our CAD 52 and U.S. $39 fair value estimate and narrow moat rating for Enbridge. With the location of the assets in the Montney production region, plus connections to all three major long-haul gas pipelines in Western Canada (including two of Enbridge’s), we think the assets are exceedingly well located. Gas storage assets are increasingly becoming valuable as batteries for intermittent renewables energy, and to handle increases in LNG volumes.

Broadly, we would expect FortisBC Holdings (the seller) to have extracted a fair price for the assets, given the healthy prospects for Canadian gas production and LNG production over the next few years, so we doubt Enbridge obtained a discount. However, Enbridge has been highly creative in developing the Enbridge Ingleside Energy Center (U.S. oil export terminal and storage) since it was acquired, likely adding new revenue streams that the original seller did not consider, making it a good deal for Enbridge. We wouldn’t be surprised if there are similarly attractive incremental investment opportunities here for Enbridge, offering upside for investors over time.