Fixed Income Quarterly—Pipelines
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approximately $2.55 billion in public debt in 2014 (or approxi- mately 63% of the $4.1 billion of total expected remaining issuance in the year – $3.5 billion if you include Pembina’s recent $600 million 30-year notes). Our issuance expectations do not account for additional drop-down activities (and cor- responding issuance) at Enbridge Income Fund, which we believe are highly probable.
Cash Flow Growth – The need for incremental pipeline infra- structure required to expand the geographical and pricing scope of Canada’s vast natural resources bodes well for the Pipeline issuers in our coverage universe. All of the Pipeline issuers we cover – Alliance Pipeline, Enbridge Pipelines, En- bridge Inc., and TransCanada Pipelines appear well positioned to benefit from this need for further infrastructure. In addi- tion, we believe the midstream/energy infrastructure issuers in our coverage universe, including AltaGas, Enbridge Income Fund, Inter Pipeline, Pembina, and Westcoast are well suited to provide regional support for oil sands, power generation, natural gas processing and LNG export initiatives.
Curve Steepness – During the year, the Pipeline 2s-5s curve flattened by 1 bp to 21 bps, the 5s-10s curve steepened by 1 bp to 36 bps, and the 10s-30s curve flattened by 9 bps to 32 bps. In light of the relative steepness, we see better value in the middle part of the curve.
Credit Ratings – There were no rating changes in Q1/14 in the pipeline sector.
Table 3 sets out the credit ratings for the Pipeline corporate credit universe.
Table 3: Corporate Credit Ratings – Pipelines
Table 1: Pipeline New Issuance Q1 2014
Note: Includes all investment grade Pipeline issuance with settlement dates in Q1/14, excluding Maples
Source: BMO Capital Markets
Table 2: Pipeline New Issuance - 2014E
Maturity
13-Mar-2017 11-Mar-2021 11-Mar-2044 28-Mar-2064
Issuer Size Issue Date Coupon (C$ mm)
Enbridge Inc. Enbridge Inc. Enbridge Inc. Enbridge Inc.
$500 11-Mar-2014 $400 11-Mar-2014 $500 11-Mar-2014 $130 28-Mar-2014
3M BA + 45 3.160% 4.570% 4.560%
Total Issuance $1,530
Capex Issuer Maturities Funding
2014 Expected Issuance ($mm)
YTD 2014 Issuance ($mm)
2014E Remaining Issuance ($mm)
($mm) ($mm)
Alliance Pipeline LP Enbridge Inc.
Enbridge Income Fund Enbridge Pipelines Inc.
$0.0 $0.0
$0.0 $1,530.0 $290.0 $10.0 $0.0 $550.0
$0.0 $0.0 $0.0 $1,530.0 $1,530.0 $0.0
$300.0 $0.0 $550.0 $0.0
$300.0 $550.0
Inter Pipeline Ltd. $288.6 $711.4 $1,000.0 $0.0 $1,000.0
Inter Pipeline (Corridor) Inc. Maritimes & Northeast Pipeline Pembina Pipeline Corp.(1)
$0.0 $0.0
$0.0 $0.0 $175.0 $425.0
$0.0 $0.0 $0.0 $0.0 $0.0 $0.0
$600.0 $0.0
$600.0
TransCanada Pipelines $875.0 $125.0 $1,000.0 $0.0 $1,000.0
TransQuebec and Maritimes Pipeline Veresen Inc.
Westcoast Energy
$75.0 $0.0 $200.0 $0.0
$0.0 $350.0
$75.0 $0.0 $200.0 $0.0 $350.0 $0.0
$75.0 $200.0 $350.0
Total $1,903.6 $3,701.4 $5,605.0 $1,530.0 $4,075.0
Source: BMO Capital Markets, Company Reports
Senior Unsecured Credit Ratings - Pipelines Universe
DBRS
S&P Moody's Outlook Rating Outlook
Issuer Rating
Outlook Rating
Alliance Pipeline Limited Partnership1 Enbridge Inc.
Enbridge Income Fund
Enbridge Pipelines Inc.
Inter Pipeline (Corridor) Inc.
Inter Pipeline Ltd.
Maritimes & Northeast Pipeline L.P.1 NOVA Gas Transmission Ltd. Pembina Pipeline Corp.
Trans Quebec & Maritime Pipeline Inc. TransCanada PipeLines Ltd. Westcoast Energy Inc.
Veresen Inc.
AL Stable BBB+
AL Stable A- BBBH Stable nr A Stable A- A Stable A
BBBH Stable BBB+ A Stable A AL Stable A- BBB Stable BBB
AL Stable BBB+ AL Stable A- AL Stable BBB
BBBH Stable BBB
Stable Stable
A3 Stable
Baa1 Stable
Baa2 Stable
Stable nr
Stable
Stable nr
A2 Stable
Stable
Stable
Stable nr Stable nr
A2 Stable
A3 Stable
Stable
Stable nr Stable nr
A3 Stable
As at March 31, 2014
Note: (1) Senior Secured
Source: DBRS, Standard and Poor’s and Moody’s