Morningstar | Spectra Energy Partners Consolidation With Enbridge Set to Close By Year End
We are cutting our fair value estimate for Spectra Energy Partners to $52 per unit from $54 after incorporating a cut in our fair value estimate for parent company Enbridge.Our fair value estimate continues to be based on Enbridge's proposed all-stock acquisition at a 1.111 unit-exchange ratio and our new $47 per share fair value estimate for Enbridge. We assume the deal will close by year-end, in line with management's plans. We are reaffirming our wide moat and stable moat trend ratings for Spectra.
Spectra's performance continues on track with our full-year expectations after reporting $561 million of ongoing EBITDA and $364 million of distributable cash flow in the third quarter. We expect an acceleration of earnings and cash flow growth in the next few quarters now that NEXUS is in service and Atlantic Bridge is nearing completion.
The market is valuing Spectra in line with the implied acquisition price as of Nov. 2.
Spectra raised its distribution $0.0125 per share in the third quarter, up 7% from the third quarter of 2017, to $3.105 per unit annualized, representing the 44th consecutive quarterly distribution increase.
Spectra Energy Partners is a partnership holding company. Through its subsidiaries and equity affiliates, the company is engaged in the transmission, storage and gathering of natural gas, and the transportation and storage of crude oil, through interstate pipeline systems in the U.S. and Canada. The company's operations and activities are managed by its general partner, Spectra Energy Partners (DE) GP, LP. The company manages its business in two reportable segments: U.S. Transmission, which provides transmission, storage, and gathering of natural gas in northeastern and southeastern U.S.; and Liquids, which provides transportation and storage of crude oil in central U.S. and Canada.
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