December 4, 2014 / 7:44 PM / 3 years ago

UPDATE 1-Enbridge shares surge on restructuring, dividend hike

(Updates trading, adds record high, analyst quote)

By Julie Gordon

VANCOUVER, Dec 4 (Reuters) - Shares of Enbridge Inc surged more than 12 percent to a record high on Thursday, a day after the company outlined plans to transfer ownership of its Canadian pipelines to an affiliate and boost its dividend by 33 percent.

Canada’s largest pipeline operator said late Wednesday it will move C$17 billion ($15 billion) worth of assets to its subsidiary, Enbridge Income Fund.

The plan will allow Calgary-based Enbridge to accelerate dividend growth and improve funding costs for new projects, reinforcing its growth past 2018, Chief Executive Al Monaco said on a conference call on Thursday.

“The optimization should enhance our ability to compete for new organic and asset acquisition opportunities,” he said.

Enbridge’s decision will also trim its debt and help it maintain control of its assets.

Investors lauded the plan, sending shares up 19.6 percent Thursday to a record high of C$65.13 shortly after market opened on the Toronto Stock Exchange. The stock was up 12.6 percent at C$61.29 in afternoon trading.

“The company is trying to do what they can to unlock hidden value, and the Street is pretty pleased with that,” said Colin Cieszynski, chief market strategist at CMC Markets. “It’s another attempt to remove the conglomerate discount by streamlining its businesses.”

The move comes as rival TransCanada Corp faces mounting pressure from activist investors to overhaul its business, including accelerating drop downs into its U.S.-based affiliate and a spinoff of its power business. TransCanada shares rose 3.2 percent to C$57.33, pushed up by Enbridge’s gains.

Enbridge, which operates crude oil and natural gas pipelines in North America, is mulling a similar “drop down” for its U.S. pipeline assets, though Monaco said the idea was still being evaluated.

1 US dollar = 1.1374 Canadian dollar Additional reporting by John Tilak in Toronto; Editing by Phil Berlowitz and Bernadette Baum

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