Brookfield continues buying spree with midstream acquisition

After closely monitoring what Brookfield Infrastructure chief executive Sam Pollock described as “market dislocation in the North American energy sector”, the Canadian fund manager has agreed to acquire 100 percent of Enbridge’s natural gas gathering and processing business in Western Canada for an enterprise value of C$4.3 billion ($3.3 billion; €2.8 billion).

Brookfield Infrastructure’s equity commitment will be around C$500 million ($382.4 million; €325.0 million), the firm said, which represents an approximately 30 percent interest in the business. According to one source, 100 percent of the equity is being financed through Brookfield Infrastructure Fund III, the firm’s latest vehicle, which closed on $14 billion in July 2016.

Enbridge’s Canadian midstream business includes 19 natural gas processing facilities with total operating capacity of 3.3 billion cubic feet per day and 3,550 kilometres of gathering pipelines, with connectivity to major demand markets including the US Pacific Northwest, the US Midwest and Western Canada, according to a statement. “Cash flows from the business are anchored by a firm contract profile with a weighted average life of 10 years,” Pollock added.

The transaction, which is expected to close in two phases in 2018 and mid-2019, does not include the Westcoast transmission system in British Columbia and the Alliance pipeline, which Enbridge will continue to own.

The deal comes less than a month after Brookfield agreed to acquire 31 data centres from New York-listed telecoms provider AT&T. Under the terms of the $1.1 billion agreement – the equity portion of which is also being funded through BIF III, according to our source – fixed assets, leased and owned facilities, customer contracts and colocation operations staff will transfer to Brookfield.

According to an AT&T statement, Brookfield is establishing a wholly owned company to own and operate the assets and intends to appoint Tim Caulfield, currently chief executive at IT management consultancy Antara Group, as chief executive of the new company. This transaction is expected to close by late 2018 or early 2019, AT&T said.

Also in June, Brookfield completed the add-on acquisition of Gas Natural Colombia, the second largest gas distribution network in the country and a subsidiary of Spain’s Gas Natural Fenosa. As at 1 June, Brookfield acquired an additional 41.9 percent in the company for 1.13 trillion Colombian pesos ($393.2 million; €334.0 million), adding to the approximately 20 percent interest the firm had acquired last year. The equity portion of this transaction was also funded through BIF III, our source said.

Asked what percentage of BIF III has been deployed to date, Brookfield declined to comment. As of May 2017, the firm had invested 45 percent of the vehicle. At the time, Bruce Flatt, chief executive of the firm’s parent company, Brookfield Asset Management, had said in a letter to shareholders, that Brookfield would be raising a new infrastructure fund this year.