Enbridge Income Fund Enters Into $1.76 Billion Transaction With Enbridge Inc. for Natural Gas and Diluent Pipeline Interests - Seite 2

The Transaction

The Fund has owned a 50 percent interest in the Canadian segment of the Alliance Pipeline since 2003. Acquiring a 50 percent interest in the U.S. segment of the Alliance Pipeline will result in the consolidation of ownership in the Alliance Pipeline, with Veresen Inc. (TSX: VSN) owning the remaining 50 percent interest.

Wholly-owned subsidiaries of the Fund will subscribe for Class A Units in Enbridge SL Holdings LP, which indirectly owns the Canadian segment of the Southern Lights Pipeline, and purchase Class A Units in Southern Lights Holdings, L.L.C., which indirectly owns the U.S. segment of the Southern Lights Pipeline. Enbridge Pipelines Inc. and Enbridge Energy Company, Inc., both indirect wholly-owned subsidiaries of Enbridge, will own the Class B Units in Enbridge SL Holdings LP and Southern Lights Holdings, L.L.C., respectively. The Class A Units are non-voting and do not confer any governance rights or ownership rights in the Southern Lights Pipeline. They entitle the holder to receive scheduled and fixed quarterly distributions until June 30, 2040 in priority to the holder of Class B Units, comprising a return on and of capital. The distributions represent the equity cash flows attributable to the core rate base pursuant to the terms of the current transportation service agreements for the Southern Lights Pipeline. The distributions are subject to certain risks, including shipper default, force majeure and regulatory risks.

The holder of the Class A Units has the right to extend the term of the investment beyond June 30, 2040 for two consecutive additional 10 year terms and the Fund has the right to participate in up to 100 percent of the equity returns from future capacity expansions, if any, on the Southern Lights Pipeline for a term of 30 years commencing on the in-service date of such expansion through the purchase of additional units.

Financing of the Transaction by the Fund

The Fund intends to finance the Transaction through a combination of debt and equity, as set out in the table below.

Fund Sources of Financing
(millions of Canadian dollars)
Fund trust units issued to the Company (13,860,000 units at $30.35 per unit)	$420.7
Preferred Units of ECT issued to Enbridge. (15,200,000 units at $30.35 per unit)	461.3
Loan from Enbridge	878.0
	$1,760.0

Equity financing is expected to be provided through the issuance of Fund trust units to the Company and preferred units of Enbridge Commercial Trust ("ECT") to Enbridge immediately prior to closing. All of the Fund trust units and the ECT preferred units will be issued at a price of $30.35 per unit. In addition, Enbridge has agreed to provide the Fund with an $878 million unsecured, subordinated 10 year loan at a fixed interest rate of 5.5 percent per annum. The loan may be prepaid at any time without penalty or bonus. It is anticipated that the Company will opportunistically access the capital markets to repay the loan after the closing of the transaction.