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Enbridge Inc. (ENB) announced Thursday it has filed commercial terms to its application to the National Energy Board regarding the Alberta Clipper mainline expansion project. The filing sets out tolling principles and risk sharing parameters agreed to by shippers regarding Enbridge's $2-billion Canadian section of the expansion.

The terms of the tolling principles include a 45 per cent equity, 55 per cent debt capital structure with a floating return on equity equal to the National Energy Board's multi-pipeline rate plus 2.25%. The NEB's ROE in 2007 was 8.46%.

Enbridge's affiliate, Enbridge Energy Partners, L.P. will file a similar set of toll principles with the Federal Energy Regulatory Commission for the US$1-billion U.S. section of the project in 2008. The equity component in the U.S. is 55%.

RBC Dominion Securities analyst Robert Kwan told clients he expected an equity component of 40% and an ROE of 12% for Alberta Clipper, but the impact to the company's earnings per share should be minimal. "The EPS impact from the difference with our assumed equity component is essentially offset by a lower ROE (10.71% assuming the current multi-pipeline rate of 8.46% plus the actual premium of 2.25%)," Mr. Kwan wrote.

He maintained his "sector perform" rating on the stock and left unchanged his target price of $38, which represents upside of roughly 6% on the current share price.

ENB 1-yr chart:
enb july 07

Source: Enbridge Files Terms For Clipper Pipeline Expansion