Enbridge to Expand Clean Energy Investment as Incentives Wane

Enbridge Inc., known more for pipelines than solar panels, will increase investments in renewable energy, undeterred by wavering political support for wind and solar power in North America.

Enbridge, Canada’s largest pipeline operator, has a “huge number of renewable opportunities” and plans to add wind farms and other low-carbon technologies in Quebec, California and Colorado, said Chief Executive Officer Patrick Daniel in an interview at Bloomberg headquarters in New York.

“We’re not done by any means” expanding the renewable- energy business, Daniel said on Wednesday. “We will be a big renewables company 50 or 60 years down the road.”

Enbridge, based in Calgary, invested $1.5 billion in clean energy projects last year. Daniel declined to provide an investment target for this year or next.

The renewable expansion comes amid uncertainty for low- carbon power generation, which largely relies on government-mandated quotas and prices. A new government in Canada’s largest province and a possible end to stimulus programs for renewable power in the U.S. may favor investments by large energy companies like Enbridge with their strong balance sheets, said Ethan Zindler, head of North American research at Bloomberg New Energy Finance.

“The bigger companies will be in a better position if capital dries up and they may even gobble up some smaller companies,” said Zindler in an interview from Washington, D.C.

More Renewable Capacity

In the U.S., tax-based incentives for renewable energy development, including the 1603 renewable grant program, are set to expire this year. The U.S. awarded $8.5 billion worth of funding to 18,798 projects as of Sept. 1, according to the Treasury grants program.

Enbridge’s installed renewable energy capacity has grown to more than 850 megawatts at the end of March, enough to power 290,000 Canadian homes, from 41 megawatts at the end of 2005. The company owns wind farms, a solar power plant as well as biomass and geothermal operations.

“It’s not as good a return as the crude-oil pipeline business or maybe some other aspects of our business, but it does clear the cost of capital,” said Daniel. “So we’re adding shareholder value by investing in the projects.”

Long-Term Contracts

Enbridge spun off its two Ontario wind farms and solar station to affiliate Enbridge Income Fund Holdings for $1.23 billion, the company said on Sept. 8. The assets are expected to generate earnings before interest, tax, depreciation and amortization of $111 million per year over a 10-year period, Enbridge said at the time. Enbridge retains control of the operations.

“They don’t make renewable investments unless they have long-term contracts,” said Juan Plessis, an analyst at Canacord Genuity in Vancouver who rates the shares “hold” and doesn’t own any. “They’re not in business to lose money. I like the fact though that they’re keeping it a small part of their business.”

Enbridge shares have gained 18 percent this year, outperforming the 38 percent decline for the MSCI North American Energy Index, which includes Exxon Mobil Corp., Chevron Corp. and Suncor Energy Inc.

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