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: