Enbridge Inc of Canada announced plans to invest C$3.3 billion ($2.4 billion) in natural gas and liquids infrastructure and renewable power this year, and said there were better investment opportunities in the U.S. due to green energy subsidies.
The Calgary-based company said the Biden administration's Inflation Reduction Act, a $430 billion clean energy subsidy program, has made the United States more competitive in attracting capital.
"Right now in the United States there are some more attractive elements when it comes to covering capital costs, and then operating costs on an ongoing basis," Chief Executive Greg Ebel said at a new conference following Enbridge's investor day.
Enbridge, which transports approximately 20% of all gas consumed in the United States, will invest C$2.4 billion in gas transmission modernization and has announced plans to acquire U.S. Gulf Coast gas storage assets for $335 million to strengthen its liquefied natural gas (LNG) export business.
The Tres Palacios assets include 35 billion cubic feet of gas storage, and the acquisition seeks to tap into growing demand for North American LNG exports following Russia-Ukraine war that disrupted global gas supply.
Enbridge will invest $240 million in the construction of the 2.5 million barrel Enbridge Houston Oil Terminal, and will launch a binding open season in March to acquire shipper commitments to pump an additional 95,000 barrels of oil per day on its Flanagan South system.
The company also spent $80 million to purchase a 10% stake in Divert Inc, a company based in the United States that converts food waste to energy. This is the latest in a series of investments by major energy companies in biogas, which can replace traditional natural gas but is more expensive to produce.
The agreement includes additional investment opportunities to expand wasted-food-to-RNG projects throughout the United States, which Enbridge said will result in more than $1 billion in new capital growth supported by long-term contracts.
Enbridge anticipates a 400% increase in its renewable portfolio by 2028. The company also projects an annual core earnings growth rate of 4%-6% through 2025.
Last August, President Joe Biden signed into law the $430 billion Inflation Reduction Act of 2022 to catalyze investments in domestic manufacturing capacity and increase energy production at home. The bill includes $37 billion in clean energy and climate investments. The EU regards the bill as contrary to fair competition, as it may encourage manufacturers to relocate their production to the U.S.
The bill will not only impact the bloc but also Canada, the neighboring country of the U.S. While Canada and Mexico could benefit from the tax credit for electric vehicles offered by the IRA, investors and developers may shift business to the U.S. due to subsidy if the Canadian government did not introduce similar act. Moreover, the IRA is expected to create more than 9 million jobs in the renewable energy sector, which could trigger a flight of human capital out of Canada and into the U.S.