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Enbridge to sell stakes in seven pipelines to Indigenous groups for $1.12 billion

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Calgary-based Enbridge Inc. has signed an agreement with 23 First Nation and Metis communities to sell an 11.57-per-cent interest in seven pipelines located in the Athabasca region of northern Alberta for $1.12 billion.

The deal is the largest energy-related Indigenous economic partnership transaction in North America to date, the pipeline company said Wednesday.

A newly created entity called Athabasca Indigenous Investments (AII) will be responsible for the investment.

“The deal is significant because it gives all 23 Indigenous communities that are directly impacted by these assets a direct stake,” said Justin Bourque, AII president. “It positioned the communities for long-term impact now and for future generations.”

He said the deal will be funded from a mix of non-recourse financing and an equity loan of $250 million backed by a guarantee from Alberta Indigenous Opportunities Corp., a group that finances Indigenous communities seeking commercial partnerships.

Frog Lake First Nation Chief Greg Desjarlais described the deal as “historic” for communities in the region.

“In addition to an opportunity to generate wealth for our people, this investment supports economic sovereignty for our communities,” he said.

Robert Merasty, executive director of the Indigenous Resource Network, said the agreement was “great news” for Indigenous communities.

“We still have more work to do,” he said. “We need a national program, like the AIOC, so that agreements like this can take place all over Canada.”

The agreement is part of Enbridge’s Indigenous reconciliation action plan, which tries to boost its relationships with native communities and employees. It also fulfils the company’s goal to “recycle capital at attractive valuations,” it said.

“We believe this partnership exemplifies how Enbridge and Indigenous communities can work together, not only in stewarding the environment, but also in owning and operating critical energy infrastructure,” Al Monaco, the company’s chief executive, said in the press release.

Pipelines included in the deal are the Athabasca, Wood Buffalo/Athabasca Twin and associated tanks, Norlite Diluent, Waupisoo, Wood Buffalo, Woodland and the Woodland extension. Enbridge said these assets provide “highly predictable cash flows.”

The size of the transaction is not “particularly material” to Enbridge, Royal Bank of Canada analyst Robert Kwan said in a note to clients after the deal was announced, but he described the deal as positive because it advances the company’s engagement with Indigenous communities.

Bank of Nova Scotia analyst Robert Hope expects more deals of “this nature” from Enbridge in the future, and said the agreement is a “slight positive” for the pipeline company.

“The transaction does not materially move our per share estimates,” he said in a note Wednesday. “We view this agreement as an example of Enbridge’s efforts to support and deepen its relationships with Indigenous communities in Canada.”

The deal is expected to close within the next month.

The agreement comes at a time when Enbridge is looking to resolve environmental issues raised by the Bad River Band of the Lake Superior Chippewa in northern Wisconsin connected to its Line 5 pipeline.

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