As previously reported, Wells Fargo analyst Praneeth Satish downgraded Enbridge to Equal Weight from Overweight with a price target of C$50, down from C$58, following the company’s announced acquisition of 3 gas utilities for C$19B. While Enbridge paid a reasonable price and the deal has long-term merits, the firm believes high leverage and a funding gap could act as overhangs. While it remains to be determined how the rating agencies view the deal and whether they raise Enbridge’s triggers, Wells believes the company would need up to C$4.5B of hybrids, DRIP, ATM, and/or asset sales to right size leverage.
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