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Summary

Enbridge's Power and Utilities business is the kind of regulated low-risk opportunity that many shareholders are looking for.

Strategically speaking, Enbridge is looking to build synergies from their Spectra merger while laying the foundation for growth.

Investments are laying the groundwork for future expansion in their Canadian and Northeastern US markets.

Since the completion of the merger between Spectra Energy and Enbridge (ENB) in February 2017, there has been tremendous change for the company in what has been anything but a smooth transition. The deal, which shareholders had thought would boost shareholder value, has been a bit of a disappointment. The high level of debt, the issuance of new shares diluting shareholder value, and the confusion surrounding their ownership structure led to a very bumpy 2017 and 2018 as share prices tanked.

However, what a difference a new year can make. 2019 sees the company with a simplified ownership structure, it has sold off $5.7 billion of non-core assets and in turn reduced its level of debt to a far more manageable 4.7x below their target level of 5. It seems the company is finally started to turn things around, which has been reflected in its recent recovery in the stock price. In recent articles, I discussed the current value proposition Enbridge presents and the state of their gas business, so today, I am going to take a deeper look into their Power and Utility business and how this part of the company is contributing to their current and future success.

A Single Regulated Low-Risk Business

As part of the Spectra deal, Enbridge acquired Union Gas and their utility business. This is the kind of business that Enbridge likes and the kind of business that shareholders seeking steady, increasing dividend payments enjoy. In their most recent investor presentation, CEO Al Monaco talked about Enbridge post 2020. In this discussion, he discussed a company capable of self-funding future capital expansions while delivering dividend increases in the 5-7% range. Exactly what their utility business is capable of delivering.